Shell’s salad years are over

Recently, the oil giant Shell has made headlines following its announcement that it would invest $300 million in tree planting projects and offer its clients a chance to buy forestry offsets to achieve “carbon neutral driving”. Sounds good? In reality, this approach is problematic for various reasons.

Shell declared that it would invest $300 million in “natural ecosystems”, a move to deliver on its objective of reducing the company’s net carbon footprint by 2-3% over the next three years. This follows from a series of recent climate-related announcements by the oil giant. These include tying its executives’ pay to its climate targets, ending its support to certain industry lobby groups over “misaligned” positions on climate policies, and producing a long-term climate scenario aiming for net decarbonization in 2070 (the so-called “Sky scenario”).

All this has led some commentators wondering whether Shell is the climate leader of the oil and gas industry. Perhaps it is. Just as McDonald’s first move to serve salad to its customers in 1986 turned it into the healthy-diet leader we know today.

The risky forest projects

As part of its plan, Shell announced that it would finance reforestation projects in Spain and The Netherlands, and allow its customers to buy credits from forestry projects in developing countries.

Of course, protecting forests is a key part of climate action, but banking on forestry based carbon offsets to compensate the emissions from fossil fuel extraction and burning is problematic for several reasons and certainly not the right approach to protecting the climate.

First, it is extremely difficult to accurately measure the quantity of CO2 that is absorbed and stored as a result of planting trees or protecting forests, even setting aside the fact that these two types of activities have very different impacts in terms of absorbing and storing carbon.

It is very difficult to know what would have happened if the forestry project never took place (perhaps the trees would not have been cut down anyway?), and it is at least as difficult to avoid that deforestation is not simply relocated (i.e. if someone is going to pay me not to cut down this tree, I will accept the payment… and will cut down this neighboring tree instead). These are called baseline setting and indirect land use change problems.

In addition, buying credits from afforestation and reforestation projects is  based on the assumption that the planted trees will continue to absorb and store carbon over a very long period, most often 100 years, which is a very optimistic assumption to make. Emissions from burning fossil fuels today immediately go up into the atmosphere, while it takes years for the pollution to be absorbed by trees. What is more, it can be re-released at any point if the tree dies (from manmade or natural causes). This is called the “permanence” problem.

Dangers of offsetting

Shell wants to offer its clients the opportunity to enjoy “carbon neutral driving” by purchasing carbon offsets. This demonstrates a fundamental problem related to the nature of offsets: offsetting doesn’t reduce emissions and can actually increase them if consumers are offered a cheap way out from any potential moral dilemma they might have had from driving their car. There are ways to achieve zero-carbon driving in the future, but it certainly does not involve the extraction and burning of more fossil fuels.

Of course, one might think that making consumers pay for the cost of their carbon emissions could incentivize some drivers to reduce their fuel consumption. However, besides the fact that the purchase of carbon offsets is voluntary, the cost of purchasing them is 1 euro cent/litre (and is even free for certain types of fuel). This translates into a carbon price of less than €5/tCO2e (euros per tonne of CO2 equivalent). As a point of comparison, a price of $40-80/tCO2e in 2020 would be necessary to set our economies on track to meet the Paris Agreement’s objectives.

Lobbying hard against climate action

For all of Shell’s grand claims about awakening to the need for climate action, it has not yet moved enough to walk the talk. While investing in planting trees around the world, Shell will also continue to fight against any meaningful climate action. In 2018 alone, Shell spent $49 million in climate-related lobbying.

Its announced annual $100 million investment in forestry projects over the next three years is neither a donation – since moving into the voluntary carbon market is also seen as a business opportunity – nor a game-changing sum. Indeed, it is only a mere 0.47% of its 2018 profits.

This is the root of the problem: as long as oil and gas extraction continues to be so highly profitable, it is unlikely that these companies will decide to diversify into clean and renewable energy solutions. Oil and gas majors are making record profits, but fail to invest these into the low carbon transition.

In addition, banks are financially supporting fossil fuel companies in ways which are completely incompatible with the Paris Agreement. Since its adoption in 2015, banks have invested $1.9 trillion in fossil fuels (thats 1,900,000,000,000 with 11 zeros at the end).

This money could be spent in developing low-carbon alternatives to oil and gas, yet the vast majority of oil companies’ investments goes to oil and gas infrastructure. Forecasted investments for 2019 (aka “Capex expenditures”) for Shell, BP, Exxon Mobil, Chevron and Total sum up to $110.4 billion for oil and gas projects, versus $3.6 billion for low-carbon activities.

In 1986, The Washington Post reported on McDonalds’ salad business: “I don’t like fast food,” a customer said. “But I can get a salad and get fewer calories and better nutrition”. Today, as Shell customers fill up the tank of their urban SUVs with “carbon neutral” fuel, they are probably thinking “I don’t like fossil fuels. But through cheap carbon credits, I can reduce emissions and restore biodiversity”. As it turned out, McDonalds’ salad is actually more harmful than its burgers.