Oil and gas giant Shell is counting discredited carbon credits towards its climate goals, drawing accusations of “bad faith” and “malintent”.
Last month, Shell used rice farming carbon credits to offset a chunk of its annual emissions, claiming to reduce the “carbon intensity” of its fossil fuel products.
But experts have long argued that the sellers of these offsets are over-counting their emissions reductions and using accounting tricks to evade checks, as a Climate Home investigation showed last year.
These accusations led leading carbon standard Verra to suspend the projects early last year and launch an investigation. Shell took them off its website as a result.
But, although Verra’s review continues, on January 9 Shell quietly retired over a million credits produced by the suspended projects, meaning it counts the claimed emissions reductions towards its climate targets.
Rachel Rose Jackson, director of climate policy at Corporate Accountability, said Shell’s actions were “shameful, dubious and reckless against the backdrop of a deadly climate emergency”.
“To retire over one million offsets from projects actively under investigation reeks of bad faith and malintent”, she added.
Carbon Market Watch’s Jonathan Crook said Shell should have at least waited until Verra’s review had ended to see if there were problems with the offsets.
If the offsets do have problems then, he added, they “have no value from a climate perspective and using them towards net carbon intensity targets is totally inappropriate”.
Shell did not reply to detailed questions on these particular offsets. But a spokesperson said that the credits the company buys are “certified in accordance with independent standards and further screened through our due diligence process”.
Claiming to lower rice emissions
The idea behind the projects is that emitters like Shell pay for Chinese rice farmers to take measures to reduce their emissions that they wouldn’t otherwise be able to afford.
Rice is traditionally grown in flooded fields known as paddies. These have more bacteria than dry fields and the bacteria breaks down decaying plants, turning them into a potent greenhouse gas called methane.
To reduce the damage to the climate and save water, the project developers claimed they would pay farmers to periodically drain their fields. With less standing water, there are fewer bacteria and less methane.
A rice field irrigated with alternate wetting and drying methods
But opinions from experts and scientific literature suggest that lots of farmers already employ this technique across China, encouraged by the central government. So they do not need incentives from carbon credit to do so.
Carbon credit rating agency BeZero Carbon has given a Chinese rice cultivation project similar to Shell’s its lowest possible score.
Its assessment says there is a “significant risk” that the emissions reduction measures are not additional to what would happen without the carbon credit money “due to the high level of government support for the project activities”.
A Climate Home investigation last year found that the project developers artificially divided up fields across several projects to pass them off as small-scale and avoid stricter checks.
Quality issues
These activities were initially given the green light by leading carbon standard Verra. But early last year, in response to concerns, it identified “quality issues”, launched a review and stopped the projects from producing any more credits.
But the suspension did not prevent offsets already in circulation from being sold or used to offset emissions.
When Climate Home approached Shell last year, the company said it was aware of Verra’s review and “would look carefully at the results when they are published”.
The company took the offsets off a webpage dedicated to its portfolio of carbon credits offered to external clients, with a spokesperson saying this was “pending Verra’s review”.
Nearly a year later, the results of the review have still not been published and the projects remain on hold. But Shell retired 1.23 million carbon credits issued by those projects, offsetting emissions equivalent to three gas-fired power plants running for a year.
A Shell spokesperson said the company had “recently retired a number of carbon credits as part of our net carbon intensity target”.
Finding a way out
Shell’s involvement in these projects is not just as a buyer. The schemes were originally set up by a Chinese firm but four years later Shell signed a series of agreements to become its exclusive agent.
The role granted Shell the right to either claim the credits against its emissions or sell them to other companies, potentially profiting from their sale.
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Before Verra suspended the projects, only a quarter of the credits issued by the projects had been used, primarily by Chinese state-owned oil company PetroChina.
Shell retired the vast majority of the remaining credits on January 9. Carbon Market Watch’s Crook says it would appear Shell “had sunk money into the projects and had these credits sitting on their books”.
“Perhaps they have not been able to find any buyers since the projects were put on hold”, he added. “Or perhaps they are doubting that the review will be positive and it will be difficult to sell or trade any of these credits in the future. So they went ahead and used them themselves”.
Shell involved in rule-making
While Verra probes the credits, it has taken the rare step of banning any further use of the rice farming methodology under which the projects were developed.
The register is now working on a new rulebook for future rice farming offsets. It says it will allow project developers “to credibly achieve emission reductions and generate high-quality credits”.
To advise them on this, Verra has appointed an Indian company which is part of Shell, raising concerns about conflict of interests.
Crook described this as a “recurring issue” in the carbon credit world. He said: “You have actors who wear all these different hats. They can sometimes develop methodologies, transact carbon credits and/or use them towards their own targets, potentially based on rules they helped develop. It raises real questions around conflicts of interest and integrity.”
A Shell petrol station. Photo credit: Tomcat MTL/Flickr
A Verra spokesperson told Climate Home it “takes potential and actual conflicts of interest very seriously” and that methodologies “undergo an extensive review process before they are finalised” and at each stage “all stakeholders, including the public, have an opportunity to evaluate and comment”.
They said: “This process is designed to promptly identify any issues with the methodology, including the opportunity to identify any perceived conflicts of interest”.
Investigation ongoing
The spokesperson said Verra does not comment on specific projects under review to avoid influencing the outcome of the investigation.
“The steps in a review, as well as the timeline for completing the review, depend on the underlying facts and circumstances, the complexity of the issues, the cooperation of third parties and other factors”, they said.
“A review may take several weeks or months to complete,” they added, “while every review is different, Verra aims to conduct an appropriately scoped review as expeditiously as possible.”
A spokesperson for Shell said: “We retire credits to compensate emissions, including those associated with the energy our customers use in transport, homes, producing goods and providing services. This approach complements our activities to avoid and reduce emissions from our own operations”.
The post “Shameful”: Shell uses carbon credits under investigation to meet climate targets appeared first on Climate Home News.
“Shameful”: Shell uses carbon credits under investigation to meet climate targets
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With the U.S. bombing Iran and the Strait of Hormuz closed, energy experts say countries transitioning to renewables will be more resilient in the “face of the shock.”
The United States’ war on Iran could fundamentally alter how countries consume and generate energy and hamper international progress in combating climate change, a panel of energy experts said today.
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One month into the US and Israel’s war on Iran, at least 60 countries have taken emergency measures in response to the subsequent global energy crisis, according to analysis by Carbon Brief.
So far, these countries have announced nearly 200 policies to save fuel, support consumers and boost domestic energy supplies.
Carbon Brief has drawn on tracking by the International Energy Agency (IEA) and other sources to assess the global policy response, just as a temporary ceasefire is declared.
Since the start of the war in late February, both sides have bombed vital energy infrastructure across the region as Iran has blocked the Strait of Hormuz – a key waterway through which around a fifth of global oil and liquified natural gas (LNG) trade passes.
This has made it impossible to export the usual volumes of fossil fuels from the region and, as a result, sent prices soaring.
Around 30 nations, from Norway to Zambia, have cut fuel taxes to help people struggling with rising costs, making this by far the most common domestic policy response to the crisis.
Some countries have stressed the need to boost domestic renewable-energy construction, while others – including Japan, Italy and South Korea – have opted to lean more on coal, at least in the short term.
The most wide-ranging responses have been in Asia, where countries that rely heavily on fossil fuels from the Middle East have implemented driving bans, fuel rationing and school closures in order to reduce demand.
‘Largest disruption’
On 28 February, the US and Israel launched a surprise attack on Iran, triggering conflict across the Middle East and sending shockwaves around the world.
There have been numerous assaults on energy infrastructure, including an Iranian attack on the world’s largest LNG facility in Qatar and an Israeli bombing of Iran’s gas sites.
Iran’s blockade of the Strait of Hormuz, a chokepoint in the Persian Gulf, is causing what the IEA has called the “largest supply disruption in the history of the global oil market”.
A fifth of the world’s oil and LNG is normally shipped through this region, with 90% of those supplies going to destinations in Asia. Without these supplies, fuel prices have surged.
Governments around the world have taken emergency actions in response to this new energy crisis, shielding their citizens from price spikes, conserving energy where possible and considering longer-term energy policies.
Even with a two-week ceasefire announced, the energy crisis is expected to continue, given the extensive damage to infrastructure and continuing uncertainties.
Asian crunch
Carbon Brief has used tracking by the IEA, news reports, government announcements and internal monitoring by the thinktank E3G to assess the range of national responses to the energy crisis roughly one month into the Iran war.
In total, Carbon Brief has identified 185 relevant policies, announcements and campaigns from 60 national governments.
As the map below shows, these measures are concentrated in east and south Asia. These regions are facing the most extreme disruption, largely due to their reliance on oil and gas supplies from the Middle East.
Nations including Indonesia, Japan, South Korea and India are already spending billions of dollars on fuel subsidies to protect people from rising costs.
At least 16 Asian countries are also taking drastic measures to reduce fuel consumption. For example, the Philippines has declared a “state of national emergency”, which includes limiting air conditioning in public buildings and subsidising public transport.
Other examples from the region include the government in Bangladesh asking the public and businesses to avoid unnecessary lighting, Pakistan reducing the speed limit on highways and Laos encouraging people to work from home.
Europe – which was hit hard by the 2022 energy crisis due to its reliance on Russian gas – is less immediately exposed to the current crisis than Asia. However, many nations are still heavily reliant on gas, including supplies from Qatar.
The continent is already feeling the effects of higher global energy prices as countries compete for more limited resources.
At least 18 European nations have introduced measures to help people with rising costs. Spain, which is relatively insulated from the crisis due to the high share of renewables in its electricity supply, nevertheless announced a €5bn aid package, with at least six measures to support consumers.
Many African countries, while also less reliant on direct fossil-fuel supplies via the Strait of Hormuz than Asia, are still facing the strain of higher import bills. Some, including Ethiopia, Kenya and Zambia, are also facing severe fuel shortages.
There have been fewer new policies across the Americas, which have been comparatively insulated from the energy crisis so far. One outlier is Chile, which is among the region’s biggest fuel importers and is, therefore, more exposed to global price increases.
Tax cuts
The most common types of policy response to the energy crisis so far have been efforts to protect people and businesses from the surge in fuel prices.
At least 28 nations, including Italy, Brazil and Australia, have introduced a total of 31 measures to cut taxes – and, therefore, prices – on fuel.
Even across Africa, where state revenues are already stretched, some nations – including Namibia and South Africa – are cutting fuel levies in a bid to stabilise prices.
Another 17 countries, including Mexico and Poland, have directly capped the price of fuel. Others, such as France and the UK, have opted for more targeted fuel subsidies, designed to support specific vulnerable groups and industries.
These measures are all shown in the dark blue “consumer support” bars in the chart below.
Such measures can directly help consumers, but some leaders, NGOs and financial experts have noted that there is also the risk of them driving inflation and reinforcing reliance on the existing fossil fuel-based system.
Christine Lagarde, president of the European Central Bank, spoke in favour of short-term measures to “smooth the shock”, but noted that “broad-based and open-ended measures may add excessively to demand”.
Measures to conserve energy, of the type that many developing countries in Asia have implemented extensively, have been described by the IEA as “more effective and fiscally sustainable than broad-based subsidies”.
So far, there have been at least 23 such measures introduced to limit the use of transport, particularly private cars.
These include Lithuania cutting train fares, two Australian states making public transport free and Myanmar and South Korea asking people to only drive their cars on certain days.
Clean vs coal
At least eight countries have announced plans to either increase their use of coal or review existing plans to transition away from coal, according to Carbon Brief’s analysis. These include Japan, South Korea, Bangladesh, the Philippines, Thailand, Pakistan, Germany and Italy.
These measures broadly involve delaying coal-plant closure, as in Italy, or allowing older sites to operate at higher rates, as in Japan – rather than building more coal plants.
There has been extensive coverage of how the energy crisis is “driving Asia back to coal”. However, as Bloomberg columnist David Fickling has noted, this shift is relatively small and likely to be offset by a move to cheap solar power in the longer term.
Indeed, some countries have begun to consider changes to the way they use energy going forward, amid a crisis driven by the spiralling costs of fossil-fuel imports.
Leaders in India, Barbados and the UK have explicitly stressed the importance of a structural shift to using clean power. Governments in France and the Philippines are among those linking new renewable-energy announcements with the unfolding crisis.
New renewable-energy capacity will take time to come online, albeit substantially less time than developing new fossil-fuel generation. In the meantime, some nations are also taking short-term measures to make their road transport less reliant on fossil fuels.
For example, the Chilean government has enabled taxi drivers to access preferential credit for purchasing electric vehicles (EVs). Cambodia has cut import taxes on EVs and Laos has lowered excise taxes on them.
Finally, there have been some signs that countries are reconsidering their future exposure to imported fossil fuels, given the current economics of oil and gas.
The New Zealand government has indicated that a plan to build a new LNG terminal by 2027 now faces uncertainty. Reuters reported that Vietnamese conglomerate Vingroup has told the government it wanted to abandon a plan to build a new LNG-fired power plant in Vietnam, in favour of renewables.
The post Iran war analysis: How 60 nations have responded to the global energy crisis appeared first on Carbon Brief.
Iran war analysis: How 60 nations have responded to the global energy crisis
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