'Charismatic carbon'? Navigating the 'net' in net zero

Michael Holder
clock • 17 min read

Offsetting emissions, at least in the short term, is crucial for many hard to decarbonise industries to reach net zero - but the market for woodland and peatland projects remains a nascent one

A key part of 'net zero', as is often pointed out, is not just the 'zero', but the 'net'.

For while rapidly cutting emissions is obviously crucially important, there is no credible decarbonisation pathway which eradicates anthropogenic greenhouse gas emissions altogether. The economy will almost certainly continue to generate emissions into mid-century and beyond, and one way or another - be it via nature or technology - those emissions will therefore need to be offset to deliver net zero emissions and halt the risk of runaway climate change.

Technological solutions exist of course - various forms of carbon capture utilisation and storage (CCUS), for example - but as these approaches remain both costly and a long way from scaling up, in the short term nature-based solutions such as woodland and peatland restoration are coming to the fore.

So, with increasingly climate-aware consumers breathing down their necks, a slew of companies have recently been turning to carbon offsets or 'nature-based solutions' to mitigate their climate impact, starting them on the path to net zero emissions in the immediate term while they develop more robust carbon reduction strategies in the medium to long-term. Household appliances firm Bosch, luxury fashion giant Kering, plant-based 'milk' brand Rebel Kitchen, industrial lubricants manufacturer FUCHs, and Aldi stores in the UK and Ireland are just a few to have announced 'carbon neutral' status through the offsetting of their emissions in recent months.

Yet if credibly offsetting emissions is challenging for any company, the issues associated with sourcing sufficient volumes of high value offsets and convincing customers of their merits are particularly acute for those carbon intensive industries, which are coming under particularly intense pressure from consumers to clean up their businesses as quickly as possible.

Such challenges were at the forefront of lively discussions during BusinessGreen's latest roundtable lunch earlier this month, hosted in association with Shell's Powering Progress Together campaign, which saw senior figures from corporates such as Shell, Heathrow Airport, and British Airways owner IAG explain how they are looking to integrate nature based solutions into their wider clean technology strategies. Also on hand were experts from the Confederation of British Industry (CBI), Carbon Tracker, The Nature Conservancy, Policy Exchange, Wood Mackenzie, and the Confederation of Forest Industries to offer probing questions and alternative analysis.

A reinvigorated CO2 offsetting industry?

Kicking off the discussion, Shell's UK country chair Sinead Lynch set out the energy giant's evolving decarbonisation strategy, which has been developing rapidly over the past two years.

"It is crystal clear in our minds that the world needs to fundamentally change this system and reduce fairly dramatically in the years and decades ahead its dependence on fossil fuels, and we also agree that that needs to happen a lot faster than current policy and political agendas allow," she acknowledged. "We also think that's achievable."

Two years' ago Shell unveiled an overarching ambition to reduce the carbon intensity of the products it sells to its customers by 20 per cent by 2035, and in half by 2050, in what was a major move for an oil and gas firm. "When you produce about three per cent of the world's energy, that's a really bold ambition," Lynch argued. "And it will be transformative in terms of the company we will be in the 2030s and by 2050."

And it will need to be transformative, if Carbon Tracker's recent analysis is anything to go by. Earlier this month the think tank assessed that in order for the oil and gas sector to be aligned with the Paris Agreement, it will need to cut combined production by a third over the next two decades. For Shell individually, which has been making moves to beef up its clean energy offer in recent years, it is somewhat less of a mountain to climb, with a 10 per cent cut in production needed by 2040, according to the think tank. Yet it nevertheless demonstrates the scale of transformation needed at the company, and indeed all carbon intensive industries, explained Carbon Tracker analyst Mike Coffin, "There are some pretty big, challenging numbers to contend with," he said.

It is this overarching challenge and the stark reality of the oil industry's continued expansion plans that provides the 'elephant in the room' during any discussion of the fossil fuel industry's net zero ambitions. It is also an 'elephant' that attendees at the roundtable declined to ignore, with one representative of a green NGO arguing that for all the increased investment in clean technologies by Shell and others, continued investment in new fossil fuel exploration has made oil majors 'toxic' in the eyes of many environmental campaigners.

It is a criticism Lynch is happy to engage with, arguing that the manner in which production levels decline in existing oil and gas fields means some investment in new assets is essential to meet demand that is going to continue in the coming decades, even under the most ambitious Paris Agreement compatible scenario. As such, the challenge for the industry, she argues, is identifying the lowest cost and lowest risk projects that will be required to meet future demand, while simultaneously stepping up efforts to curb emissions from existing assets and develop the cleaner energy systems that can serve to bring demand down and ultimately deliver net zero emissions.  

Shell's decarbonisation strategy, then, divides into three areas, Lynch explained. Firstly and most obviously it is to reduce emissions from its own business by improving the energy management and the efficiency of its operations. That only makes up around 15 per cent of the firm's total CO2 emissions, however, so the second strand is reshaping its portfolio to provide low carbon products, the use of which is responsible for the remaining 85 per cent of emissions. Here the company has been shifting its green gears up several notches in recent years, investing in renewables and clean tech companies such as EV charging firm NewMotion, home battery specialist Sonnen, and clean power supplier First Utility - which has since been rebadged as Shell Energy - as well as in low carbon technologies such as biofuels and hydrogen. Within days of our roundtable Shell had revealed further clean tech investments, announcing plans to acquire French floating turbine outfit EOLFI, a deal to purchase a stake in off-grid solar specialist d.light, and a partnership with ViaVan to launch an electric mobility services pilot project in Amsterdam.

However, the third pillar of Shell's strategy focuses on sectoral collaborations with other crucial industries. Among other areas, this broad approach takes in exploring negative emissions technologies such as CCUS to mitigate hard to abate sectors such as heavy industry, aviation and shipping, and working more closely with those industries to enhance efficiency and develop greener fuels. But it also includes ambitious plans to build a business in nature-based solutions. To that end, Shell has committed to investing up to $300m over the next three years in natural ecosystems such as forests and wetlands, but as Lynch explained, "there are a number of challenges in this space".

"This is not a no-risk area for a company like Shell to step into, bluntly," she admitted. "There are challenges in the reputation in some of the projects of the past. You need to have access to high quality projects that are internationally certified and independently audited by third parties, so we have found it surprisingly difficult to spend $300m on projects of considerable quality."

Launched earlier this year, the $300m programme has seen the company invest in a number of major forest-based projects across Europe, while debuting a new service in the Netherlands that allows motorists using Shell petrol stations to offer their emissions. In the UK the company has also started trialling allowing petrol customers with a Go+ account the choice to 'drive carbon neutral' through offsetting at no extra cost.

Lynch said the feedback from customers to date had been broadly positive, with significant numbers taking advantage of the new offsetting service. However, a number of challenges remain in sourcing the credits that underpin the scheme. First up, initial evidence from Shell's trials suggested customers wanted to see that the offsets they directly or indirectly purchased were located close to home. To Lynch's surprise, that sentiment has tailed off slightly of late, which she said could be due to the prominance of Amazon fires in the news this year enhancing awareness of the global picture. Even so, the general trend towards UK-based carbon credits is one which has also been noted by Heathrow and BA. And, due to a paucity of domestic supply, very few of Shell's carbon credits come from the UK at present, although that is set to change in the near future. The firm sources its carbon credits by investing in a number of projects, including woodland creation efforts in Overkirkhope in the Scottish Borders, Longwood in Cumbria, and a recent partnership with Forestry Land Scotland which will see it establish one million trees over the next five years, thereby significantly increasing its capacity to offer UK-based credits. 

In the future, Lynch foresees significant growth in the nature-based offsetting industry, and ponders whether the recent controversy over widespread fires in the Amazon has perhaps helped boost public awareness and interest in forestry protection and woodland creation efforts overseas.

But in the meantime, there is a risk that demand for local projects could start to outstrip supply, with relatively few projects available domestically that meet the quality criteria Shell requires. Meanwhile, Lynch concedes that despite the company's focus on offsets that meet a wide range of demanding standards there remain "challenges around customer understanding and trust". Shell has been ramping up its carbon trading business but the market for offsets remains nascent, fractured and not hugely transparent, which makes it difficult to communicate to customers whey they should pay for Shell to mitigate the emissions from the fossil fuels they buy.

Still, Lynch explains Shell sees nature-based carbon offsetting projects as a key part of its strategy as "it allows us to start to build a bigger business now, engage customers in the whole concept of offsetting and to start thinking about taking action".

Aviation challenges

It is a set of challenges that are familiar to the aviation sector, as it too faces increasing consumer and regulatory pressure to decarbonise, which have resulted in the same balancing act of marrying credible offsetting with investment in greener flight technologies.

Also taking part in the discussion, Heathrow Airport's head of sustainability Matt Prescott pondered whether growing public engagement with climate change and the burgeoning desire for urgent action risked sowing seeds of division when high carbon industries increasingly needed to work closely with politicians and society in order to deliver deep decarbonisation.

"The need to change gear very rapidly is something we would all recognise, but we need the will of the consumer, politicians and industry to all come together to achieve that," he said. "We have to find a way of bridging that."

Jonathan Counsell, head of sustainability at International Airlines Group (IAG), agreed, highlighting the 'flight shame' movement as a potential future risk for the aviation industry, as growing numbers of corporates opt for staff train travel where possible in order to reduce carbon footprints.

However, he insisted low carbon alternatives to current jet fuels were "very close" to taking off across the industry, and as such he remained optimistic of achieving zero carbon flight in the coming decades, probably through a mix of technologies. While developing low carbon aviation is capital intensive, once the first large scale green jet fuel plants come online the "floodgates will open up" for investment, Counsell predicted. At the same time, early stage projects to demonstrate how electric aircraft could meet demand for short haul flights is delivering encouraging results.  

"We're starting to see the question all around the world now: 'how can we make this quicker?' he said of the growing interest in low carbon jet fuels. "But the answer we get from every investor is: 'Show me one that works'." The hope is that the required demonstration projects will materialise within the next five years.

In the meantime, though, the aviation industry is heavily reliant on carbon offsets, both from a reputational and regulatory standpoint. On an international level, the sector has agreed a market-based measure - dubbed CORSIA or the Carbon Offsetting and Reduction Scheme for International Aviation to give the scheme its full name - which aims to stem increases in emissions from 2020, although negotiations over offsetting details and ensuring China's participation continue to cloud its full implementation.

Some critics have argued the scheme remains underpowered and badly flawed, especially during its first phase of operation, but while Counsell conceded CORSIA could definitely be improved, he argued that across the industry "we're starting to see that this could actually work".

"It's a start and it's global - I can't stress how important it was to get 195 UN member states to agree something on climate change - that's an achievement," he said. "It's still very delicate and the Chinese aren't in yet - but it's important to take that first step, because it's much easier to get it in and then build on it."

The hope is that CORSIA could follow the path of the EU Emissions Trading Scheme: flawed at first, but improved over time to reach a point where it is starting to shape low carbon investment decisions and drive clean technology adoption.

Meanwhile, airlines have already been offering their customers the option to offset the emissions from their flights for many years, to mixed success. IAG first set up a carbon offsetting scheme 15 years ago, but while customer feedback has been positive, the actual proportion of passengers ticking the box and agreeing to add an extra few pounds onto their flight to mitigate the carbon impact remains close to just one per cent.

Part of the problem - echoing some of the challenges outlined by Shell - has been the historical lack of transparency in the market and the small number of UK-focused projects to build trust among consumers, according to Heathrow's Prescott. But he said with consumer and political interest rising, the time was now ripe to try and create a market mechanism with proper governance in the coming years to spur growth of a domestic carbon offset market.

"We've got a nascent market, there's a lot of potential to grow it, there's a lot of enthusiasm, it speaks to the climate and biodiversity emergency, and people hold it in high regard, so it feels like there's an opportunity in this space," he said. "It feels like a next-decade opportunity."

Nature-based solutions

For its part the government has begun making tentative moves in this regard, recently launching a new £50m 'woodland carbon guarantee' to provide farmers and landowners with long term incentives to plant and sustain woodland. And there are also hopes the next government will make carbon offsets and nature-based solutions a core part of its diplomatic efforts in the run up to COP26 in Glasgow next year. Indeed, suggestions emerged during the roundtable for clusters of "COP copses" to help raise awareness of the benefits of natural carbon sinks both at home and abroad.

But if there is widespread agreement on the need for greater focus on carbon sequestration through woodland, soil and peatland restoration, how can the fledgling market demonstrate its effectiveness and scale faster?

For Chris Webb, director for climate markets at The Nature Conservancy in Europe, part of the issue is about framing the benefits. "Nature solutions clearly have a significant role when you look out beyond a 2040 to 2050 negative emissions space, but actually one of the things we've been really excited about is raising the opportunity of nature here and now today," he said at the event. "Somewhere around a third of the climate mitigation that we need globally between now and 2030 can be cost-effectively delivered by nature, yet only around two per cent of public climate finances are directed towards nature, and about one per cent of the conversation."

Things have moved on a lot since the "wild west days" which saw only a fraction of money spent on offsetting actually go towards the projects themselves, garnering controversy and undermining public trust, said Webb. But having focused on improving standards over the past 10 years, public communication around the benefits of offsetting has stalled. "The science underpinning the system, along with the robustness accuracy and accounting is much better now," he explained. "I think it's a perception and reality gap."

Consequently, concerns that offsets fail to deliver promised emissions reductions and provide carbon intensive firms with a means of 'greenwashing' their emitting activities remain widespread, especially amongst some green groups.

Perceptions are further complicated by the way in which some of the forest based projects that deliver the fastest emissions reductions do not adhere to the biodiversity-focused rewilding models that have become popular in some green circles. 

Stuart Goodall, chief executive of the Confederation of Forest Industries, argued that the carbon benefits associated with woodland that is commercially managed to deliver sustainable timber are considerable. Such projects create timber that can be used for building materials that lock up carbon for decades, if not centuries, and could also eventually serve biomass power stations with carbon capture systems, resulting in negative emissions.

He also insisted that the idea commercial forests are bad for biodiversity is based on outdated perceptions of how such forests are managed drawn from the conifer plantations of the 1970s. In contrast, modern managed forests are much more diverse and bring in more light, which is good for biodiversity and nature.

"One of the things that really strikes me is that the climate emergency and nature emergency are being grouped together and conflated, and when that then enters into forestry, that word 'nature' seems to take over," he said. "Everyone thinks trees are some holy thing that are the essence of the environment, but a tree can be a product as well as something to venerate."

Others insisted that it was critical that nature-based solutions did help to tackle the nature climate emergency, as well as the climate emergency.

But Goodall countered that progress on both fronts was still possible using modern forest management techniques. But he warned investors in nature-based CO2 sequestration projects frequently look for strong stories of nature restoration, and that projects with more effective carbon sequestration benefits can end up being seen as less attractive, even if they can still off nature restoration co-benefits as well.

"We've got a perception problem that perhaps undermines the UK's ability to tackle carbon from tree planting," he said. "If we could tackle that problem and have it based on evidence rather than perception, we would see much more tree planting, lock up more carbon, and we'd have more nature."

It was a concern acknowledged by delegates at the roundtable event, prompting a coining of the phrase "charismatic carbon projects" - an echo of the "charismatic wildlife" dilemma where high profile species monopolise all the media and philanthropic attention at the expense of less glamorous but crucially important parts of the biosphere. There is a risk, Goodall argued, that the expanding offset sector will focus on projects that deliver the best story, potentially at the expense of projects that can benefit industry, climate, and nature.

Clearly, decarbonising hard to abate sectors such as oil and gas, heavy industry, and aviation is a hugely complex challenge - perhaps the greatest humanity faces. But with public clamour for action becoming more vociferous, and both market realities and regulatory pressures closing in on high carbon industries, nature-based solutions and offsetting are becoming an ever greater necessity in both the short and long term.

The good news is that understanding and certification of woodland, peatland and soil restoration projects has come on leaps and bounds over the past decade, and major companies such as Shell, IAG, Heathrow, and others are now putting more energy and investment behind them. However, the question as to whether carbon offset projects - be they "charismatic" or more commercially focused - can address legitimate concerns about their efficacy, win over their detractors,  and become a key component of the net zero transition remains to be seen.


This article is part of the Powering Progress Together Hub, hosted in association with Shell.

More on Offsets

Inside Microsoft's Panama tropical forest carbon offtake deal

Inside Microsoft's Panama tropical forest carbon offtake deal

Eight months of due diligence and tens of millions in early-stage financing will help restore 10,000 hectares of tropical forest in Panama

Margaret Morales, GreenBiz.com
clock 14 June 2024 • 5 min read

Seven carbon credit methodologies accredited as aligned with Core Carbon Principles

Approved methodologies mean 'high integrity CCP label' can be used on an estimated 27 million carbon credits

Cecilia Keating
clock 07 June 2024 • 4 min read
In focus: What do businesses need to know about 'beyond value chain mitigation'?

In focus: What do businesses need to know about 'beyond value chain mitigation'?

BusinessGreen Intelligence dissects what the Science Based Target initiative's latest jargon-heavy addition to its corporate sustainability handbook means for business

Stuart Stone
clock 30 May 2024 • 15 min read