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Carbon Market Watch Newsletter – October 2020

Green Commitment Or Greenwashing?

Since last year, Shell has been offering European motorists “carbon neutral” driving and recently Total announced that it is now selling “carbon neutral” liquified natural gas. Are the fossil fuel giants going green? No, we are not talking about electric car charging stations or renewable fuels. Both Shell and Total are buying carbon credits from offset (including forestry) projects to compensate for the continued use of climate heating fossil fuels. Companies around the world are announcing climate pledges, which is certainly welcome. But we don’t necessarily know what lies behind the “climate-neutrality” claims. The pledges usually include offsetting, and often through forestry credits. Forests must be protected, but they cannot be used as an excuse to continue polluting. Companies should focus on counting and reporting on their emissions, and reducing them as much as they can. On top of that, more funding for projects that protect forests and boost biodiversity is urgently needed. But the two should not be mixed.

The European Commission has published its final guidelines for providing state aid to heavy industry to compensate for higher electricity prices due to the power sector having to buy emission allowances from the EU carbon market. This is called indirect cost compensation, basically a subsidy scheme for industries. In a telling example of industry influence on policymakers, the final rules have been significantly watered down from a draft version. New sectors such as oil refineries and plastic producers have been added onto the list and climate conditions have been either weakened or completely dropped. Making access to public support conditional on reducing emissions could trigger some of the necessary investments into a clean transition of European industry. In their current form, these rules simply award the highly polluting status quo. EU governments should refrain from using this scheme; the billions worth of taxpayer money to be shovelled into the industry coffers would be much better spent on climate action that benefits society at large.

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