Shell supports offsetting projects all over the world, including schemes in Peru, Indonesia and Scotland. Photo: Vuk Valcic/SOPA Images/LightRocket via Getty Images

Doubts over Shell’s ‘drive carbon neutral’ claim

A new investigation shows that offsetting projects supported by the oil giant struggle to demonstrate climate benefit

Shell supports offsetting projects all over the world, including schemes in Peru, Indonesia and Scotland. Photo: Vuk Valcic/SOPA Images/LightRocket via Getty Images

Doubts over Shell’s ‘drive carbon neutral’ claim

A new investigation shows that offsetting projects supported by the oil giant struggle to demonstrate climate benefit

Shell supports offsetting projects all over the world, including schemes in Peru, Indonesia and Scotland. Photo: Vuk Valcic/SOPA Images/LightRocket via Getty Images

Shell claims customers filling up at its petrol stations in the UK can opt to ‘drive carbon neutral’ by paying to offset their emissions. But an investigation by Unearthed and Source Material has found that two prominent offsetting projects backed by the company do not demonstrate a clear benefit to the climate.

Among the offsetting schemes the oil giant supports are projects that claim to cancel out emissions by planting trees and protecting forests. ‘Drive carbon neutral’ is part of Shell’s ‘Go+’ loyalty card system. Cardholders can gain rewards for fuelling their cars more frequently and opt to have their emissions offset through purchases of carbon credits while businesses can use the scheme to offset the emissions of their fleets.

Unearthed and Source Material examined the carbon reduction claims of three forestry projects promoted by Shell in Peru, Indonesia and Scotland and found that in at least two cases the climate benefit purchased by consumers to ensure “neutrality” was hard to prove. In a third case changes in the conservation status of the region threaten the calculated benefit of the project in future. 

This investigation follows a recent ruling by a Dutch advertising watchdog, which found that Shell’s claim that customers in the Netherlands can offset their emissions through fuel purchases is misleading. Shell has said it will appeal the decision. The company has also insisted that the ‘drive carbon neutral’ campaign is not a way for the firm to keep selling more fuel into the future.

Responding to our story, Gilles Dufrasne from Carbon Market Watch said: “I think it’s very misleading for Shell to brand its fuel as ‘carbon neutral’. The burning of fossil fuels is not equivalent to the planting of trees or conserving forests. They are taking some very safely stored carbon, burning it and then trying to replace it with some very unstable sinks we don’t know how long they will stay there.”

A Shell spokesman said the company “expects to build low-carbon businesses of significant scale over the coming decade. But offsets are a vital solution for balancing emissions that cannot yet be abated.”

He added: “We aim to use them in line with the philosophy of avoid emissions, reduce emissions and only then to mitigate them, with any offsets we use being of the highest independently verified quality.” The firm noted that its press release for ‘drive carbon neutral’ advocated electric cars over offsets.

Planting trees in Scotland

Shell is the sole funder for the £5m Glengarry project, which is being developed by Scottish government agency Forestry and Land Scotland. The project isn’t up and running yet but Shell hopes it will generate credits in future.

Shell confirmed that it will claim the credits for the scheme in Scotland – as part of the offers it puts forward to its customers when the credits start from the project. The company’s website also discusses using the scheme as part of the ‘drive carbon neutral’ offer. The project aims to plant or regenerate one million trees over five years an extension of Glengarry forest in the Highlands. Around 180,000 have been planted since March, alongside some peatland restoration that also sequesters carbon.

In contrast to forestry protection which depends on counterfactual scenarios for what would happen without intervention, often known as ‘avoided deforestation’ tree planting is a simpler way of generating offsetting credits. But it can still be problematic.

Shell is advertising this project as one of multiple schemes enabling customers to offset their future emissions. But the Scottish government is also counting the trees towards its tree-planting targets, designed to offset UK wide emissions.

These annual targets were increased last year to 12,000 hectares rising to 18,000 hectares by 2025 and committed to by the SNP ahead of the last election. Meanwhile, the UK government, which represents Scotland at the global level, is counting the Glengarry project as part of its legally-binding climate mitigation efforts. 

As a result, Shell looks set to offer drivers in the UK the opportunity to offset their emissions using credits which are also being counted by the UK government as part of its national climate commitments. In effect, drivers are helping to fund that pledge. 

The UK government is obligated under the Paris climate agreement to take action to mitigate climate change. This means that if the Glengarry project fails, it will have to find other ways to reduce carbon emissions. Shell, which as a corporation is not obligated to reduce emissions under Paris, does not face the same commitments.  

Lambert Schneider, a carbon market expert who works as research coordinator for international climate policy at Oeko-Institut in Germany, said: “The issue is that Shell’s consumers may think that they are funding something that goes beyond existing climate pledges or obligations. But if this project had not happened, the UK would have to achieve its obligation in another way. Therefore it is questionable for Shell to promise its consumers that this is climate neutral.”

Credits from the Glengarry project will be certified as part of Forestry Scotland’s Woodland Carbon Code. A spokesperson for Forestry Scotland said that to be accredited for the code any investment must be additional to money allocated by the government. He also suggested that the UK’s commitments under the Paris agreement were not legally binding and that the Treaty merely obligated the UK to set climate targets.

A spokesperson from the Department for Business, Energy and Industrial Strategy told us that the government understands the need for environmental integrity in nature based carbon markets and works to ensure that projects in the Woodland Carbon Code and Peatland Code are meeting the principle of additionality. They added that the units generated through these projects are tracked through the UK Land Carbon Registry to ensure no double counting or claiming. 

However, there may well be no legal barrier to both Shell and the UK using the credits, as they are accounted for differently. Dufrasne, from Carbon Market Watch, told us: “It is quite clear that action is needed [under Paris], not just targets”. He added:It’s a problem if companies count reductions which countries are already counting. The maths can still add up at inventory level, but basically the claims by companies are put into question. You don’t know if the credits have displaced other national efforts, and hence the company can’t be sure that its purchase of credits has made the atmosphere better off.”

Shell informed us that the credits from the Glengarry project will not materialise for several years, by which time the company believes that the rules around carbon accounting, as set out in Article 6 of the Paris agreement, will be much clearer. 

The work of finalising Article 6 is one of the key areas of negotiation at the upcoming UN climate conference to be held in Glasgow. 

Shell is advertising the Glengarry tree-planting project in Scotland as one of multiple schemes enabling customers to offset their future emissions. Photo: David Campbell / Flickr

Rainforest in Peru

Scottish forests do not tend to be prominently displayed in Shell forecourts, however. Instead the firm uses projects like Cordillera Azul in Peru to market its ‘drive carbon neutral campaign’, with the region’s famous blue mountains featuring on billboards and online adverts. 

As with all avoided deforestation credits, the firm’s claims depend on assumptions about what would have happened if money had not been channeled into protection, creating a “baseline”.

CIMA, the organisation behind the project, has claimed that in the absence of an offsetting project to protect it, the area would be under grave threat from an influx of immigrants from surrounding areas and loggers. 

But, as Unearthed has previously reported, the area was already a national park that had enjoyed protected status for seven years by 2008 when it started claiming credits. CIMA wrote in 2012 that “no illegal logging activities have been observed by park guards in or immediately around the project area since 2006”. 

In May this year, Deyvis Huamán, a REDD+ official in Peru’s ministry for the management of protected areas, told Unearthed that he didn’t think Cordillera Azul would have suffered high rates of deforestation if the REDD project was not in place to protect it. He noted how difficult the calculations such schemes carry out are to verify. 

“You put yourself in the worst-case scenario, mining might come in or illegal loggers, and it could be a problem. It’s a Pandora’s box when you do those calculations because it’s in the formulas where you can manage those numbers, and decide whether to generate more or fewer credits… It’s kind of arbitrary sometimes. You can put values on drivers of deforestation, highways, the price of gold, the price of wood. So you put a value on the strongest driver and it might exist or it might not.” 

CIMA’s executive director Gonzalo Varillas said that his organisation is “not involved in the development of the Shell campaign or any other of Cordillera Azul carbon credits buyers.” He added: “The project was built to support sustainability for the park. It must be said that in general, the REDD+ project produces VCUs [carbon credits], independently from the buyers.”

In response to our story with the Guardian, published in May, CIMA told us that, according to its understanding, the Peruvian government “is very pleased with the contributions made by the early initiatives working on protected areas in Cordillera Azul and elsewhere, as it is providing funding and has given invaluable experience for the next steps to come, as a result of the Paris agreement.”

Shell said that the projects it supports are verified and checked by third party auditors.

Protecting carbon stores in Indonesia

In Indonesia, Shell supports the Katingan Peatland Restoration and Conservation project, which claims to protect an area of peatland forest that would otherwise be ravaged by timber plantations and the palm oil industry. As with most forestry offsetting — or REDD+ — projects, the Katingan project also aims to foster economic development, while protecting a vital carbon store and habitat for rare wildlife. 

Under the project’s baseline — the hypothetical scenario that REDD+ projects typically judge themselves against — without the scheme there to protect it, much of the project area would have been turned into a vast acacia tree plantation. To support this, project documentation notes that in 2008 an Indonesian timber company applied for an industrial acacia plantation concession in the project area covering 50,000 hectares, a third of the overall project size. PT Rimba Makmur Utama (PT RMU), the organisation behind the Katingan project, states that without its project, this concession would have been granted. Going on from there, PT RMU claims that acacia plantations would have expanded across the project area until 77% of the area was covered with trees grown for the pulp and paper industry releasing carbon from the forest and from the peat.

But the scheme faces challenges in future thanks to changes in the legal status of the peat it is supposed to be protecting.

Forest and peatland conservation in Indonesia became a major issue after fires ravaged the country in 2015 and covered much of southeast Asia with smoke and haze. Scientists blamed rapid deforestation and peatland drainage linked to the timber and palm oil sectors for helping cause these blazes. Partly in response to this, the Indonesian government moved to increase protections for its forests and peatland and, in 2019, a new law came into force placing areas of Indonesia’s peatland forests into protected areas. As a result, the majority of the Katingan project is now located in a protected area. 

According to Nick Mawdsley, an expert on peatland who has worked in Indonesia for decades, this new law “greatly reduces Katingan’s additionality and would lead to the project needing to update its methodology”. 

Additionality, in carbon offsetting, refers to the added benefit a project is bringing to an area. To properly cancel out emissions, offsetting projects must demonstrate that they are providing an additional carbon benefit to an area. 

For now though the project developers are standing by the validity of the credits they have already issued.

Dharsono Hartono, CEO of PT RMU defended the project and insisted it had stopped the forest being converted to logging concessions. He told Unearthed: “The baseline scenario analysis shows with a high degree of certainty that other acacia plantations would have made applications for the site had the Katingan project not intervened.” 

The firm noted that concession licenses obtained prior to the 2019 moratorium would be exempt from the restrictions, meaning if acacia plantations had already been granted, they could have continued. The project documentation predicted they would have started by this time.

The developers are currently producing a new assessment of how many carbon credits they can claim going forwards. Their current crediting period, from which the Shell offsets will have been generated, expired in December 2020. 

Shell said it would work with those behind the Katingan project to understand the impact of the new law. 

Mawdsley added that any change to the baseline that took into account the 2019 law change could see the project’s profitability reduced.  “It will be interesting to see what those behind the project do when they update its methodology,” he said.

The Katingan project is not the only Shell-backed scheme facing concerns over its future. 

We reported in May that Cordillera Azul is one of a number of projects that may have to adjust its baseline to match more conservative estimates from Peru’s government based on assessing deforestation nationally, rather than on a case by case basis.

“With Cordillera Azul’s methodology you say, ‘I can verify 1.5 million credits per year,’” noted Huamán, from Peru’s ministry for the management of protected areas. Huamán added that, once CIMA had updated the project’s methodology, the new amount of credits would likely be much lower. 

Varillas, CIMA’s executive director, told us that “all early initiatives will have to adjust to the national reference level, once it is enacted” and that talks with the government were ongoing.

He explained: “REDD+ has been evolving over the years. It must be understood that the Cordillera Azul REDD+ project started to be designed before 2008, and at the time, there was a scarcity of data and methodologies; yet the project was verified within VERRA standards, and the government supported the submission of the project.”

Increased scrutiny

With concern about climate change never higher, the carbon offsetting industry is facing unprecedented levels of scrutiny on the robustness of claims about project baselines, the hypothetical scenarios that dictate how many credits a scheme can claim.

The former Governor of the Bank of England set up a Taskforce on Scaling Voluntary Carbon Markets (TSVCM).

Unearthed and Source Material have learned that, as part of its role as an observer on Carney’s taskforce, Permian Global, a London-based company that helped write the baseline and methodology for the Katingan project, has lobbied against a proposal to have baselines be drawn up by independent bodies.

The taskforce had proposed that baselines be drawn up “by external third parties with no financial or commercial interests in the project.” 

If adopted back when the Katingan project was being put together, this proposal would have excluded firms such as Permian from playing a role in calculating its baseline. Permian wrote that it “strongly disagreed” with the move, arguing it was not practical due to the expense involved in producing baselines and could, in fact, undermine efforts at forestry protection.

Thales West, a fellow at the New Zealand Forest Research Institute and former REDD+ project auditor, said: “There is certainly room for project developers to develop flawed methodologies that could later financially benefit them.” He added he would support the proposal to avoid “the approval of flawed methodologies”.

After being asked to comment on this story, Permian Global published a blog post including a strongly worded critique of Greenpeace’s public position on carbon offsetting. Greenpeace, which funds Unearthed, recently called for an end to offsets, and its executive director Jennifer Morgan has described the concept as “pure greenwash”. 

Permian said there was no conflict of interest in the current process, whereby forestry offsetting projects like Katingan create their baselines noting that it is “transparent at all stages and audited by independent qualified auditors”. The company added: “We have helped set up the project and we are also responsible for securing its funding – this is how most businesses and organisations operate.”

The firm reiterated that it “strongly disagrees” with TSVCM’s move on project baselines and claimed that is not “possible or practical for an independent party” to draw up these hypothetical scenarios, owing to the complexities involved in this process.

When approached to comment on this story, a TSVCM spokesperson acknowledged that there had been “differences of opinion” among those involved, but described these as “expected and natural”. They added that the taskforce was now moving ahead with its plans for new regulations of the carbon market.