The fossil fuel firm Shell has set aside more than $450m (£367m) to invest in carbon offsetting projects, and plans to spend the equivalent of half the current market for nature offsets every year, the Guardian can reveal.
But a joint investigation by the Guardian, Die Zeit and Source Material into Verra, the world’s leading carbon standard for the rapidly growing $2bn voluntary offsets market, has found, based on analysis of a significant percentage of the projects, that more than 90% of their rainforest offset credits – among the most commonly used by companies – are likely to be “phantom credits” and do not represent genuine carbon reductions.
Shell, one of the five largest oil companies in the world, has said it plans to ramp up spending on measures to counterbalance its polluting activities in an effort to decarbonise.
Its strategy is to have a “philosophy of avoid, reduce and only then mitigate”, in theory putting nature-based carbon credits at the back of the queue in its efforts to decarbonise.
But it appears that the company has, in fact, built offsetting into its climate strategy. The scale of Shell’s plans is striking, with a target of using nature-based solutions (NBS) – its term for the projects which generate carbon offsetting credits – to “mitigate emissions of around 120m metric tonnes of CO2 equivalent (MtCO2e) per year by 2030”. That figure is roughly half the size of the current entire annual market for nature offsets, which is about 227.7m MtC02e.
Shell has set targets to reduce its scope 1 and 2 emissions by at least 27m tonnes, from 68m in 2021 to 41m in 2030, through a number of strategies including the use of renewable power and improvements in efficiency. The company expects NBS to account for between 2m and 7m tonnes of this reduction, underlining its importance to Shell’s decarbonisation plans.
In 2020, Shell invested about $90m in nature-based projects and bought an Australian company that works on developing and monitoring carbon sequestration projects. The following year, Shell announced ambitions to invest about $100m a year in nature-based projects, although it said these plans were being slowed by the Covid-19 outbreak. That year, it allocated more than $480m to various projects – more than $456m of it for NBS projects – to be deployed across the length of the contracts.
The company has also referred to offsetting as part of its carbon-reduction strategy in its appeal against the landmark judgment by a Dutch court last year that Shell must reduce its emissions by 45% by 2030.
And it has been intimately involved in the development of the carbon market, with staff sitting in key advisory posts. At least three Shell staff sit on advisory groups for Verra, a US non-profit that operates the world’s leading carbon standard.
Verra’s former director of programmes is a carbon offsetting manager at Shell, while the oil major’s former head of nature-based solutions has just co-founded a new carbon credits rating agency that helps companies find supposedly high-quality credits with a Verra advisory group member.
Global carbon offsetting markets have grown rapidly, with many companies turning to them as part of their net zero plans and emphasising the benefits they can offer. Mark Carney, the ex-governor of the Bank of England, headed a plan to make offsets work, describing them as a way of helping companies get to net zero and “an incredibly important market”, although cautioning that they could not be “a silver bullet that removes responsibility from anyone for reducing absolute emissions”.
But there have also been significant concerns raised about whether all offsets really work. The Guardian investigation analysed the findings of three scientific studies that used satellite images to check the results of a number of forest offsetting projects, known as Redd+ schemes, and found that, based on the results of two of the studies, about 94% of the credits the projects produced should not have been approved.
Verra strongly disputes the findings and argues that the methodology used by the scientists means that the results are incorrect. They also point out that their work since 2009 has allowed billions of dollars to be channelled to the vital work of preserving forests.
A Shell spokesperson told the Guardian: “As part of our efforts to become a net-zero energy business by 2050, we are investing billions of dollars in lower-carbon energy, including investments in low-carbon fuels, renewable power and hydrogen.