Shell Scraps Its $100M Carbon Offset Plan

Shell PLC, the largest oil company in Europe, clandestinely abandoned its $100 million annual investment in carbon credits, marking the most extensive program of its kind implemented by corporations. This decision was made shortly after Wael Sawan assumed the role of Chief Executive Officer, only six months into his tenure.

In the month of June, Sawan made a significant revelation regarding Shell's plan - they intend to keep their oil production at the present level until 2030, contrary to their original intention of downsizing. However, they aim to bring down expenses and boost profits for shareholders.

The information that was left undisclosed by the CEO was concerning the energy company's intentions to invest in projects related to carbon credits. These credits play a significant role in Shell's program to balance out its carbon emissions, aligning with their aim to achieve zero net emissions by 2050.

High-Quality Carbon Offsets: How To Find Them

Shell has pledged to decrease greenhouse gas emissions caused by their own operations (Scope 1) and the electricity they purchase (Scope 2) by half by 2030. Additionally, they aim to achieve a state of zero net emissions by the year 2050. Recent progress shows that Shell successfully lowered their overall emissions, including those from their own operations, the electricity they purchase, and other indirect emissions (Scope 1, 2, and 3), in 2022 compared to levels recorded in 2016.

Initially, let's take a quick look at Shell's summary of climate goals and the tangible accomplishments made in the year 2022.

A significant portion of the oil company's plan to reduce carbon involves utilizing carbon credits as a means to balance out emissions.

Initially, Shell had the objective of allocating a budget of $100 million annually towards carbon offsets. Additionally, the oil corporation set a goal of producing 120 million carbon credits per year by 2030 through projects focused on natural carbon sequestration. Accomplishing these aims would have effectively counterbalanced roughly 10% of Shell's carbon emissions.

However, following the company's recent announcement, they have confirmed that they are discontinuing those plans. Nonetheless, the company has not disclosed any fresh initiatives concerning carbon credits or their revised strategies to achieve their climate goals.

Shell states that the previous objectives were unachievable because of the absence of carbon offsets that meet their standards of quality.

Nature-based projects that offer carbon offsets have faced criticism for failing to deliver the environmental advantages they originally claimed to offer.

Shell’s previous plan to create a strong pipeline of carbon credits was sparked by studies indicating that natural methods of capturing and storing carbon can effectively control the increase in global temperatures. This discovery, combined with the increasing urgency for companies to lower their carbon emissions, led Shell to contemplate the implementation of carbon offsets.

At the same time, other big corporations and Shell's competitors in the oil industry are also depending on carbon credits to neutralize their growing emissions. Predictions indicate that the market for voluntary carbon offsetting could reach a staggering $950 billion by 2037, which is a significant rise from its current value of $2 billion.

According to Flora Ji, an experienced individual managing the company's nature-centered solutions (NBS), the market did not prioritize quality in the past. Additionally, she stated that:

The essential factors for guaranteeing the trustworthiness and durability of carbon markets are the standards, honesty, and sensible utilization of credits.

In recent times, major carbon standard institutions have released a basic structure that outlines carbon credits of superior quality.

Shell Achieves Net Zero Goal

Shell is renowned for implementing rigorous criteria in the creation and backing of climate solutions centered around nature. The prominent oil company has been actively endorsing a variety of NBS endeavors, encompassing initiatives aimed at mitigating deforestation, afforestation endeavors, and conservation efforts in grasslands.

Although Shell strongly advocates for carbon offsets, there are other significant players in this arena as well. Other major oil companies have also begun their own initiatives in carbon credit projects and pipelines. Chevron, TotalEnergies, BP, Equinor, and Eni are among the prominent corporations that are actively investing in carbon offset credits.

On the other hand, the French oil giant TotalEnergies managed to acquire fewer than 7 million credits in the previous year. The company aims to produce 45 million carbon credits by the conclusion of the next ten years. This amount is just approximately one-third of what Shell's outdated offset objective is.

Even though Shell has decided to abandon its carbon offsets objective, the company still remains dedicated to achieving its net zero emissions goal. In fact, a representative from the company stated that their "sustainability and climate objectives continue to be a priority".

As Ji has additionally verified, Shell's approach to reducing carbon emissions and achieving net zero aligns with the goals set by the Science-Based Targets initiative. This involves prioritizing the avoidance and reduction of emissions before considering the use of carbon offsets.

According to an analysis conducted by BloombergNEF, Shell will inevitably require carbon offsets in the future, even if it remains committed to achieving net zero emissions. These offset credits will be necessary to neutralize any remaining carbon emissions during Shell's journey towards net zero.

In fact, Shell is not completely giving up on its carbon offset endeavors; just the goals of $100 million and 120 million credits. Ji pointed out that the large oil company might acquire carbon credits from the VCM to enhance its reserves of offsets.

While it is currently focusing on ensuring maximum profits, the company has not yet revealed any future strategies for addressing climate targets in the long run.

This surprising announcement raises an important concern for many people - what will Shell do next to reduce its carbon emissions? Will the company shift its focus towards technological carbon removal instead? That's something that observers should pay close attention to.