Shell sold millions of carbon credits for carbon that was never captured, according to the | report CBC News

Shell sold millions of carbon credits to reduce greenhouse gas emissions that never materialized, allowing the company to turn a profit on its fledgling carbon capture and storage project, according to a new report from Greenpeace Canada.

Under an agreement with the Alberta government, Shell received two tonnes worth of emissions reduction credits for every tonne of carbon it actually captured and stored underground at its Quest plant near Edmonton.

This took place between the years 2015 and 2021 through a grant program for carbon capture, utilization and storage projects (CCUS), which are championed by the oil and gas industry as a way to reduce their greenhouse gas emissions.

At the time, Quest was the only CCUS facility operating in Alberta. The grant program ended in 2022.

During this period, Shell was able to sell 5.7 million tons of what Greenpeace describes as “ghost” credits, earning more than $200 million for the company. Those credits were sold to other oil sands companies in Alberta’s carbon market, Greenpeace said.

Those sales would not have been illegal, but they amounted to a “hidden subsidy” within the program that reduced the effectiveness of industrial carbon pricing, says Keith Stewart, senior energy strategist at Greenpeace and author of the report.

“The carbon capture projects that have been touted as a solution to oil sands pollution have been almost entirely paid for by the public,” he said.

Shell has received $777 million from the federal and provincial governments and $406 million in carbon offset revenue, according to company records cited by Greenpeace.

In total, taxpayer funding has covered 93 percent of Shell’s Quest project costs so far, Greenpeace said.

Since 2015, the Quest project has stored nine million tons of CO2. (By comparison, emissions from the oil and gas sector totaled just over 158 million tons in 2022, the most recent federal data available.)

‘field work’

Carbon offsets are bought and sold under a trading system, with governments putting a price on carbon dioxide emissions to force companies to fight climate change.

Since 2007, Alberta has had a mandatory carbon offset system for large emitters such as oil and gas companies. If they produce more than the allocated levels of carbon dioxide, they will have to buy credits to offset these emissions.

Ryan Fournier, a spokesman for Alberta Environment Minister Rebecca Schulz, called the report “a work to discredit Greenpeace.”

Fournier acknowledged in an email that the Alberta government previously offered “significant credits to help accelerate the development of CCUS.”

But he described the program as a “targeted incentive to help drive CCUS investments at a time when this was still an unproven technology.”

The Quest facility is operated by Shell Canada and owned by Canadian Natural Resources, Chevron and Shell Canada.

In response to the report, Shell Canada spokesman Stephen Doolan said carbon capture technology is critical to meeting international climate goals.

He said that “as a result of innovative tax and regulatory frameworks, nine million tonnes of CO2 have been captured at Shell’s Quest facility that would otherwise have been released into the atmosphere.”

Neither the province nor Shell denied selling the additional credits.

Doolan later added that the incentive had previously been publicly announced by the Alberta government and was in place “only until project costs break even.”

Very dependent on subsidies

Pierre-Olivier Pineau, professor and researcher in energy policy at HEC Montreal, said the Greenpeace report illustrates “a key underlying problem” for carbon capture and storage, that “the economic environment still it’s not there to make them a solid business.”

“It has to depend on subsidies, which become problematic because the government ends up subsidizing polluters,” he said, adding that it also demonstrates the need for a higher carbon price.

“The CCUS can only be properly incentivized through a [higher] penalty on carbon emissions,” he said.

Without a high enough price, Pineau says CCUS projects will be canceled because “they’re not as profitable as dumping CO2 directly into the atmosphere,” unless, as in Shell’s case, they’re heavily subsidized, he said.

Last week, Edmonton-based Capital Power Corp. announced it was abandoning plans to build a $2.4 billion carbon capture and storage project at its Genesee natural gas power plant in southwest Edmonton.

The facility would have captured up to three million tons of carbon dioxide per year.

The Pathways Alliance, a consortium of Canada’s largest oil sands companies, is still trying to move forward with a $16.5 billion carbon capture pipeline project, but is looking to have about two-thirds of that amount covered by grants .

Looking for loopholes

Found federal data released last week Alberta was lagging behind lagging behind other provinces in reducing emissions, with the oil and gas sector still the biggest contributor to greenhouse gas emissions.

A spokesman for Natural Resources Minister Jonathan Wilkinson said “the oil and gas sector needs to move forward to achieve absolute emissions reductions”.

“It’s time for the industry to spend money and put in place solutions that reduce carbon pollution and ultimately strengthen the industry’s long-term competitiveness,” said Carolyn Svonkin.

Referring to the Greenpeace report, Svonkin noted that the federal government updated its national carbon pricing benchmark in 2021 “to ensure that all provincial and territorial pricing systems are comparable in terms of rigor and effectiveness “.

“This ended processes that could have rewarded industry for emissions reductions that are not real,” the statement said.

The federal government is expected to announce details of its oil and gas emissions cap in the coming months. Stewart said he wants to make sure there aren’t similar “loopholes” built in in obscure ways that undermine the policy’s effectiveness.