Shell is selling ‘carbon neutral’ fossil fuels again

TAIPEI – Emboldened by new industry guidelines, natural gas companies are renewing their efforts to sell “carbon neutral” fossil fuels, a controversial practice of offsetting a shipment’s emissions to shrink its environmental impact.

Shell delivered roughly 70,000 tonnes of liquefied natural gas (LNG) to Taiwan in a deal announced last week, the first shipment certified as “greenhouse gas neutral” under a new standard developed by the International Group of Liquefied Natural Gas Importers (GIIGNL). 

In practice, that means Shell and the purchaser, CPC Corp, bought carbon credits to offset the 190,000 tonnes of carbon dioxide emissions generated by the LNG from production to combustion – similar to what the company did when it first marketed “carbon-neutral” LNG in 2019.  

Putting a carbon-neutral label on fossil fuels is appealing for obvious reasons: It allows both buyers and sellers to assert that the transaction has no negative environmental impact, contributing to net-zero goals and reassuring ecologically minded investors.

But after a flurry of enthusiasm, those shipments all but disappeared when gas prices spiked in 2022 and when it became clear there was no standard way for fuel companies to measure emissions or purchase credits. The industry also came under fire for using cheap, low-quality credits that represent little if any environmental benefit. 

The GIIGNL framework, which was released in 2021, now adds standards for documentation and transparency. To comply, companies must calculate and report greenhouse gas and methane emissions, the name and type of offsets they use and plans to reduce emissions from drilling to consumption.

To call a shipment greenhouse gas neutral, the buyer and seller must also have a stated commitment to decarbonisation and a verified plan to reduce emissions in the short and medium term, said GIIGNL general delegate Vincent Demoury.

GIIGNL declined to set standards for acceptable offsets in order to reflect “the diverse needs of members” and evolving carbon market rules, according to the framework.

Shell’s latest shipment used credits primarily from a project which prevents deforestation. Climate scientists at the United Nations-backed Science Based Targets initiative and elsewhere say these kinds of offsets do little to extract additional carbon from the air and should not contribute to net-zero claims.

Shell declined to comment. CPC declined to comment on the specifics of the deal and referred to its 2022 ESG (environmental, social and governance) report, which sets a net-zero target for 2050.

The deal followed GIIGNL’s standards, the industry group said, and was verified by the British Standards Institution.

Mr Ben Cahill, an energy analyst at the Centre for Strategic and International Studies in Washington, called it “a good step forward”, adding that “there was essentially zero transparency about the early carbon-neutral LNG trades”.

Despite the new standards designed to boost transparency, the companies revealed few details about the shipment, such as price and the exact breakdown of how many credits were purchased from each project, making it challenging to verify the authenticity of the statements. 

“We still don’t really have any information about the cargoes and emissions at each stage,” said Professor Jonathan Stern, distinguished research fellow at the Oxford Institute for Energy Studies.

“We need a lot more granularity, else the industry runs the risk of being accused of greenwashing.” BLOOMBERG

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