Shell was the leading player in the $1.4 billion global carbon credits market last year, as oil and gas companies reduced their investments in clean energy and increasingly relied on offsets to meet their climate commitments, more so than any other industry.
Carbon credits represent a reduction, removal, or preservation of a tonne of CO₂ or other greenhouse gases and serve as a cost-effective means for companies to fulfill climate-related promises made to investors.
In 2022, UK-listed oil companies Shell and BP scaled back their clean energy investments. Additionally, Shell adjusted its climate targets.
The voluntary carbon market operates alongside larger and more costly government-run trading systems, like the EU’s Emissions Trading System, where polluters buy permits to emit.
Shell utilizes carbon credits to support some of its climate commitments, including a pledge to reduce emissions per energy unit sold by 15 to 20 percent by the end of the decade compared to 2016 levels.
To serve as offsets, carbon credits must be “retired,” so they cannot be traded again and can only be counted once towards emissions reduction.
Preliminary data from MSCI Carbon Markets for last year indicates that Shell removed 14.9 million carbon credits from global trading in 2024, significantly more than Eni, the second-largest user of credits.
Further analysis shows that Shell retired nearly three times the amount of credits as Microsoft, the next leading user, according to data from Allied Offsets, which covers 99 percent of the market.
Shell stated, “We retire credits to offset emissions, including those linked to the energy our customers use in transportation, residences, production, and service provision.” The company emphasized that while decarbonization should begin with reducing emissions, carbon credits can help mitigate emissions when transitioning to zero-emission technologies cannot happen quickly enough.
The voluntary carbon market has faced issues related to fraud, double counting, exploitation of indigenous rights, and problematic methodologies. Following these challenges, some energy firms paused new purchases of credits associated with environmentally friendly initiatives, like reforestation or underground CO₂ storage.
However, these firms have been utilizing their existing credit stock to meet climate targets.
In contrast, technology companies like Microsoft have continued to forge new agreements to offset emissions attributed to their AI operations in the coming years. According to industry insights, while technology firms have increased their activity, the oil and gas sector has pulled back.
European oil companies, including Shell, BP, TotalEnergies, Eni, and Equinor, remain committed to net-zero emissions by 2050, indicating a need for investments in carbon credits to avoid substantial operational changes.
Overall, the fossil fuel industry accounted for more than 40 percent of the credits utilized last year, three times more than any other sector, reflecting a slight increase from 2023.
Shell has cumulatively retired more credits than any other company, with a significant portion associated with projects designed to prevent hypothetical emissions, such as the preservation of forests. A source close to Shell highlighted that its portfolio of credits is tied to a diverse array of global projects.
photo credit: www.ft.com
