Updated on 2022-02-23 by Adam Hardy

Houston, we have a problem. With the governments of the world aiming for “Net Zero by 2050” to rescue our climate but not providing a convincing set of policies to get there, and with big corporations desperate to show their co-operation, some real nonsense is starting to kick off and it’s not bringing anyone’s CO2 emissions down.

Shell is the multi-national megacorp that has stuck its neck out furthest on carbon offsetting with its international “Drive Carbon Neutral” marketing campaign. Shell claims that their large carbon offsetting programme allows their customers to burn their tank of petrol safe in the knowledge that the CO2 will be re-absorbed somewhere else on the planet.

While their overall CO2 emissions did drop last year mostly due to the pandemic^[1], their “Drive Carbon Neutral” campaign immediately came under attack for being flagrant greenwashing. Their accusers though were unable to sway the British Advertising Authority that Shell’s claims were misleading. The large, growing and to advertising authorities, respectable carbon offsetting industry allows an effective CO2 cycle from tailpipe release to forest capture.

There is though still a massive problem. The idea of being “carbon neutral” to Shell, the carbon offsetting industry and dangerously governments, is completely different from the science and data surrounding what’s needed to halt global warming and climate change. Why? To put it in the language of the social sciences, support for carbon offsetting “relies on the mobilisation of supportive discourses and knowledge-claims to retain a sense of credibility”, rather than progress in tackling actual CO2 emissions.

Carbon offsets “remove, replace or avoid” CO2 emissions – and it is only actually the first option – “remove” – which does any good, and even then it’s difficult to prove that you really are doing “removal” of CO2 from the atmosphere. But nevertheless you can buy your carbon credits from a whole range of offsetting activities, often just worthy development projects in poorer countries that have only tenuous connections with emissions reduction, such as providing wells for drinking water – see the carbon offsetting broker Gold Standard^[2] or any of the dozen or so other voluntary carbon offsetting platforms for the wide range of unfortunately legitimate offsetting activities.

With such a large carbon offsetting program, Shell was an obvious target for investigation^[3][4]. Many of Shell’s purchases on the voluntary offsetting markets were carbon credits earned years ago under outdated and insecure offsetting schemes^[5], and the credits based on actual forests in Peru, Ghana and Indonesia were compromised by deforestation due to either fire or indigenous agriculture. Another investigation by University College London demonstrated how damaging the whole industry is in the fight against climate change, draining funding and resources and raising false hopes.

There are multiple ways that carbon offsetting projects can legally generate carbon credits under the “remove, replace or avoid” rules. Some of the projects started out years ago when the rules originally allowed renewable energy generation to count as an offset – on the basis that it would encourage the transition away from fossil fuels in developing nations. The rules have changed for the better over the years and you can’t start an offsetting project like that any more – but you can still run an existing one! The carbon offsetting platforms like Gold Standard promise to do what they can with the best of intentions but at the end of the day, their activities are all based on their own voluntary standards. Their priority is to stay in business, rather than maintain standards at all costs.

Even with the newest “Gold Standard” standards and direct carbon drawdown/capture projects like tropical rainforest protection or reforestation, the voluntary standards do not create a robust framework to cope with the risk of natural impacts (fires, droughts and diseases) and human-caused impacts (illegal agriculture, timber extraction and mining) that can prevent an offsetting project from delivering on the forecast CO2 emissions reduction targets. To add to that, with climate change itself causing the environment to deteriorate, the average emissions reductions expected are decreasing year-by-year. The offsetting projects and platforms are always behind the curve, with their naturally optimistic outlook for profitable offsetting opportunities.

Carbon Offsetting, Carbon Credits and the Carbon Markets

So thanks to Shell’s marketing, many people are filling their tanks up in the blissful but false knowledge that they are doing their bit for the climate. The carbon offset markets were for a while shunned for what they were, but now over the last couple of years with demand, like real fur on the Milan catwalks, they are making an unwelcome reappearance. The United Nations recruited former Bank of Canada and Bank of England chief Mark Carney to try to sort this mess out.

The problem is though that it’s entirely voluntary, and the only people who can really do CO2 emissions removal charge US$1,000 per tonne, which is around 100 times more expensive than what Shell pays – Shopify are paying millions for the mechanical extraction of CO2 from the air^[6]. Meanwhile oil companies like Shell and Total are able to deliver supertankers loaded with fossil fuels declared to be carbon-neutral^[7].

Hopefully something will occur to Mark Carney as he tries to figure out how nation states can possibly buy and sell their CO2 obligations for COP26 in Glasgow later this year – the dreaded Article 6 of the Paris Climate Agreement. There is a way of doing this – it’s called Universal Carbon Credits as a Carbon Currency^[8] – which is primarily designed to ration fossil fuel production and share it out fairly to the population, but which also has a facet in its design ideally suited to solving this issue.

In this framework, the universal carbon credits are administered by a central carbon bank, replacing the current multitude of voluntary schemes. The central carbon bank allows the creation of universal carbon credits under transparent, verifiable and robust terms, whether by Direct Air Capture machines, forests belonging to indigenous people, peatland restoration in Germany, or seagrass protection in the Mediterranean. A big ask in terms of the changes it would invoke, but it is a framework equivalent in size to the challenge of climate change.

[1] Shell article on Reuters: Shell’s 2020 carbon emissions fall on the back of fuel sales drop

[2] One of the top carbon offsetting platforms: https://www.goldstandard.org/

[3] Is the ‘Legacy’ Carbon Credit Market a Climate Plus or Just Hype?

[4] Shell, BP, and Easyjet: The Big Polluters Designing the Rules for Voluntary Carbon Offsets

[5] Carbon offset market needs radical reform

[6] Shopify Purchases More Direct Air Capture (DAC) Carbon Removal Than Any Other Company

[7] Reliance gets world’s first ‘carbon-neutral’ oil from US – transaction is a first step in the creation of a new market for climate-differentiated crude oil.

[8] Universal Carbon Credits as a Carbon Currency