Oil companies such as BP and Shell are feeding nature as a source of future income, betting on an expected rise in carbon credit prices as their fossil fuel profits decline.
Last year, BP invested $ 5 million in Finite Carbon, a company that connects forest owners with companies seeking to offset their global warming emissions by planting trees.
The California-based company expects to generate $ 1 billion for landowners over the next 10 years, after a 20-40% reduction in proceeds, its chief executive Sean Carney said.
And while companies and countries have rushed over the past year to pledge new promises of net zero global warming, that forecast may be too conservative, Carney said.
“When you put it next to all the announcements and all the talk, it’s a very small number. We may be thinking too low here given the commitments, ”he told Reuters news agency.
The climate change targets, agreed in Paris in 2015, have fueled a growing, but still immature, market for carbon offsets as companies and countries seek to align.
European oil majors say investing in projects to create more credit is just good business, offering new sources of income at a time when oil prices have collapsed and the appetite for further exploration is growing. evaporates.
“Investing in carbon sequestration at a time when the world is increasingly carbon constrained will over time make good business and commercial sense,” Duncan van Bergen, head of carbon-based solutions, told Reuters. nature at Shell.
The involvement of the big oil companies has divided environmentalists.
Sarah Leugers of the nonprofit Gold Standard Registry praised the interest of major emitters in nature conservation, but added:
“I’m concerned that they are launching projects into a market that they can take advantage of that is trying to solve a problem that they have largely created,” Leugers said.
Others note that the money is intended for projects of universal interest.
“Why would it be okay to make money extracting fossil fuels, but not saving the planet?” said Renat Heuberger, CEO of leading developer of climate projects South Pole, which typically takes a 10% cut in the credits it develops and sells.
Although some industries are covered by legally enshrined carbon trading systems, such as those in the European Union, California and Australia, most countries in the world do not. no such government-backed markets.
This leaves most emitters with only a handful of small voluntary carbon offset markets launched in the past 15 years.
And as more and more people look for credits, the price is expected to rise.
Shell’s budgets, for example, are based on a carbon price of 70 euros ($ 85) per tonne by 2050, more than double the current price of just under 30 euros ($ 36) on the EU carbon trading system.
Although each ‘registry’, or voluntary market, has its own entry rules, they typically work by certifying credits for carbon reduction projects that preserve forests or wetlands or help replace wood stoves or stoves. charcoal by stoves using cleaner fuels.
Last year’s entire voluntary carbon offset market was worth around $ 300 million, trading offsets for around 104 million tonnes of carbon dioxide equivalent (CO2e), according to Ecosystem Marketplace, the main aggregator of these. data.
However, that compares to the 33 billion tonnes of CO2e emitted by the energy sector alone in 2019, of which 2.1 billion tonnes came from products made by European energy giants, according to calculations by the International Energy Agency and Reuters.
Long way to go
A November report by an investor and issuer task force led by former Bank of England Governor Mark Carney said the voluntary market would need to grow 15-fold to meet the target of ” avoid catastrophic climate change.
Oil majors are playing a growing role in this arena as they seek to gain a foothold in the new carbon-neutral world order, with the French total earmarking $ 100 million per year for nature-based solutions, including an amount not specified for credit creation.
Shell plans to spend an average of $ 100 million over the next year or two on nature-based carbon offsets and van Bergen expects emissions reductions from nature-based solutions or sinks. of carbon are “significant” by 2030 or 2035.
In August, he bought Select Carbon, which helps Australian farmers change their land use and certifies credits to be used in a program run by the government or sold on the secondary market.
BP’s investment in Finite Carbon has been geared towards software that allows landowners to monetize planting new trees or preserving existing forests.
Using machine learning, remote sensing and digital payments, the software is aimed at landowners with plots as small as 40 acres, too small to participate in many carbon markets.
For BP CEO Nacho Gimenez, the Finite Carbon investment is part of the responsibility to limit emissions.
“As long as someone invests in something positive, that’s the base,” Gimenez told Reuters.
Such nature-based offsets could eliminate up to 12 billion tonnes of emissions per year thanks to the spending of $ 120 billion to $ 360 billion by issuers, estimates UK bank Barclays.
But without a global standard for assessing the carbon impact of a project or for pricing credits, a loan from the same project can fetch a higher price in one sale than in another.