Shell signals retreat from carbon offsetting

Oil company is latest firm to act amid indications that carbon credits do nothing to mitigate global heating

Shell has become the latest large company to pull back from carbon offsets amid concerns many have no environmental impact, it has emerged, as the Carbon Trust discontinues its “carbon neutral” labelling scheme based on offsetting.

The FTSE 100 oil company, one of the leading proponents of carbon offsetting, abandoned targets to invest up to $100m (£80m) a year in carbon credit schemes and purchase 120m nature offsets a year by 2030 in June, the oil major has confirmed. This is part of a broader watering down of Shell’s climate ambitions.

The decision, first reported in Bloomberg, means Shell joins Gucci, Leon, Nestlé and other firms in moving away from offsets amid repeated indications that huge numbers of carbon credits do nothing to mitigate global heating. Earlier this year, the Guardian published an investigation that found that the vast numbers of rainforest carbon offsets were worthless.

Shell said it still supported carbon credits and welcomed efforts to improve their quality.

The move comes as the Carbon Trust, one of the leading environmental certification schemes, discontinued its “carbon neutral” labelling scheme based on offsets. A director of the trust acknowledged that consumers may have been inadvertently misled by the label due to poor quality offsets.

Despite growing scientific evidence that indicates many offsets have no environmental worth the unregulated voluntary carbon market received strong support at this week’s Africa Climate Summit in Nairobi.

The Kenyan president, William Ruto, said African countries got nothing for the carbon sinks that serve the world, unveiling new carbon market regulations in his country before the summit. The US climate envoy, John Kerry, told the conference that Africa and the global south would benefit from a growing carbon market.

“This market has to become a market in the billions in order to work effectively. For that, we need to ensure the environmental integrity of this market. This is critical, not only to protect the climate, but also to create a thriving market because people won’t take the risk either of getting involved in a market that doesn’t have the right standards and guidelines,” he said.

The African Carbon Markets Initiative, announced at Cop27 last year, aims to produce 300m carbon credits annually by 2030, unlocking $6bn (£4.75bn) in revenue, and more than a dozen times that by 2050. At the summit in Kenya, Cop28 hosts the United Arab Emirates (UAE) committed to buying $450m (£360m) of carbon credits from Africa, amid reports the a UAE company is striking deals for large areas of land in anticipation of country to country carbon trading under the Paris agreement.

But there is significant concern in Nairobi among environmental campaigners about scaling up carbon markets, and there were protests outside the summit, many raising questions about whether they help local communities or store the carbon they claim.

“Rather than providing real and public funding into African renewables and adaptation, this week rich countries pledged money to prop up carbon markets that have never worked, neither in Africa nor elsewhere. They are wasting money that should be spent on real solutions,” said Mohamed Adow, the director of the climate thinktank Power Shift Africa.

The unregulated voluntary carbon market, which grew to $2bn in 2021 has since slumped to $500m this year, according to Barclays, but forecasts say the market could reach tens of billions of dollars in the years to come to fund climate change mitigation.

In an analyst note this week, the US investment bank Morgan Stanley said the market was facing a reckoning over quality concerns but said the situation would improve as schemes to improve carbon credit integrity had an impact.

Speaking to the Guardian, the Carbon Trust director, John Newton, said there was growing regulation on corporate climate change claims around the world, which had prompted the organisation to replace its current labels.

“Consumers want more clarity, better explanations, clearer claims and more evidence. We have looked at best practice round the world to help our customers to make sure they are ready for future regulations. That’s the driver [behind dropping the carbon neutral labelling],” he said.

“I’ve had lots of conversations with companies. Generally, companies are quite cautious and nervous about the impacts of [offsets]. But they were certainly bought with good intentions. The people we’re working with definitely didn’t go out there thinking these are controversial. I think there was a lot of confidence in the fact that we’re doing the right thing because they come from credible organisations.

“I’m not an expert on which offsets are bad and which are good. But obviously, if an offset is found to be not helpful, then yes, I think consumers have been misled. If somebody has an offset that’s not credible, then yes, I recognise that. I can’t speak on behalf of every company but from my experience none of the companies we work with intentionally went and looked for the ones that were risky,” he said.

When contacted by the Guardian, a spokesperson for Shell said: “Shell’s position on carbon credits, including from nature-based solutions, remains unchanged. Carbon credits remain a valuable and additional decarbonisation lever in our portfolio, including from nature-based solutions.

“The carbon market may not be perfectly functioning everywhere yet, however there are ongoing discussions of how it can be improved which we welcome; that is how markets progress.”

 This article was amended on 11 September 2023 to clarify that Shell itself did not say that abandoning targets to invest up to $100m a year in carbon credit schemes and purchase 120m nature offsets a year by 2030 were part of a programme to water down Shell’s climate ambitions.

Photograph: Chris J Ratcliffe for Greenpeace/Getty Images - A Greenpeace billboard as part of a protest outside Shell’s headquarters in London. Shell said it still supported carbon credits and welcomed efforts to improve their quality.