Shell PLC, Europe’s largest oil company, has quietly abandoned its plan to spend $100 million per year on carbon credits, which was the largest offset program among corporations. The decision was made after Wael Sawan took over as the new CEO. In June, Sawan announced a shift in Shell’s strategy to maintain its current level of oil production until 2030, rather than reducing it as initially planned. However, he did not disclose the company’s plans for investing in carbon credit projects at the time.
Shell has committed to cutting Scope 1 and 2 emissions by 50% by 2030 and reaching net zero emissions by 2050. The company managed to reduce total emissions from all scopes in 2022 compared to 2016 levels. Carbon credits were a significant part of Shell’s carbon reduction strategy, with the company originally aiming to spend $100 million each year on offsets. They also targeted generating 120 million carbon credits annually by 2030 through natural carbon sequestration projects. These targets would have offset about 10% of Shell’s carbon emissions. However, the company has now confirmed that it is abandoning these plans without publicly revealing any new strategies to meet its climate targets.
Shell cited the lack of carbon offsets that meet its quality standards as the reason for abandoning its previous goals. Carbon offsets from nature-based projects have faced criticism for not delivering the promised environmental benefits. Shell’s decision to pursue carbon offsets was influenced by research suggesting that nature-based sequestration could help limit global temperature rise. However, finding high-quality carbon offsets has proven challenging for the company.
While Shell has been a strong supporter of carbon offsets, other major oil companies, such as Chevron, TotalEnergies, BP, Equinor, and Eni, have also started developing their own carbon credit projects. It remains unclear if they will pursue offsetting on the same scale as Shell’s original plans. For example, French oil major TotalEnergies aims to generate 45 million carbon credits by the end of the decade, significantly less than Shell’s obsolete target of 120 million.
Despite abandoning its carbon offsets goal, Shell remains committed to its net zero emissions target. The company’s spokesperson emphasized that their sustainability and climate targets remain intact. Shell’s long-term approach to carbon reduction follows the Science-Based Targets initiative, prioritizing emissions avoidance and reduction before considering carbon offsets. However, BloombergNEF analysis suggests that Shell will eventually need carbon offsets to achieve its net zero goal.
While the company has not disclosed its new plans for long-term climate targets, it may consider technological carbon removal as an alternative to carbon offsets. Speculators are eager to see what steps Shell will take next in its carbon emission reduction strategy.