Shell, one of the world’s largest oil companies, has scrapped its plans to invest in carbon offsetting projects and buy nature-based carbon credits, as doubts grow over the environmental integrity and effectiveness of such schemes.
Shell’s climate ambitions diluted
In June 2023, Shell announced that it had revised its climate strategy and targets, following a landmark court ruling in the Netherlands that ordered the company to cut its emissions by 45% by 2030 compared to 2019 levels. Shell said it would appeal the decision, but also acknowledged that it needed to accelerate its transition to a low-carbon future.
As part of its revised strategy, Shell abandoned its previous commitments to invest up to $100m a year in carbon offsetting projects and purchase 120m nature-based carbon credits a year by 2030. Nature-based carbon credits are generated by projects that protect or restore forests, wetlands, grasslands and other ecosystems that absorb and store carbon dioxide from the atmosphere.
Shell said it still supported carbon credits and welcomed efforts to improve their quality, but also admitted that they were not enough to achieve its net-zero emissions goal by 2050. Instead, the company said it would focus more on reducing its own emissions and helping its customers do the same, by expanding its renewable energy portfolio, developing low-carbon fuels and technologies, and promoting energy efficiency and electrification.
Carbon offsetting under scrutiny
Shell is not the only company that has pulled back from carbon offsetting amid growing criticism and controversy. Several other major firms, such as Gucci, Leon, Nestlé and others, have also moved away from offsets in recent months, as evidence mounts that many of them have little or no environmental impact.
A Guardian investigation published earlier this year found that vast numbers of rainforest carbon offsets were worthless, as they did not prevent deforestation or protect biodiversity. The investigation also revealed that many of the projects were plagued by corruption, fraud, human rights abuses and lack of transparency.
Carbon offsetting is based on the idea that emissions can be cancelled out by paying for projects that reduce or remove an equivalent amount of carbon dioxide elsewhere. However, critics argue that this approach does not address the root causes of the climate crisis and allows polluters to continue with business as usual, while shifting the burden of action to developing countries and vulnerable communities.
Carbon market still alive
Despite the mounting challenges and criticisms, the voluntary carbon market, which allows companies and individuals to buy and sell carbon credits, is still alive and growing. According to Barclays, the market was worth $2bn in 2021, but slumped to $500m this year due to the Covid-19 pandemic. However, some forecasts suggest that the market could reach tens of billions of dollars in the next decade, as more countries and sectors adopt net-zero targets and carbon pricing mechanisms.
The voluntary carbon market also received strong support at this week’s Africa Climate Summit in Nairobi, where several African leaders and officials expressed their interest in tapping into the potential revenue stream from selling carbon credits. The US climate envoy, John Kerry, also endorsed the market and urged for more standards and guidelines to ensure its environmental integrity.
The African Carbon Markets Initiative, announced at Cop27 last year, aims to produce 300m carbon credits annually by 2030, unlocking $6bn in revenue for African countries. The initiative focuses on nature-based solutions, such as forest conservation and restoration, as well as renewable energy and clean cooking projects.
