Back in January, the Financial Times wrote that oil and gas companies would have to get their act together and move up a gear in the Voluntary Carbon Market (VCM) if they are to keep their 2030 climate targets in sight. Recently, two major oil multinationals made landmark decisions, with Shell and TotalEnergies both announcing that they will collectively purchase hundreds of millions of tonnes of carbon credits by 2030 and retire them permanently. More specifically, Shell recently announced that it plans to remove a total of 120 million credits from its emissions balance by 2030. TotalEnergies has officially announced that it will double its carbon credit spending in the first quarter of 2025 compared to the previous year, has signed a $100 million agreement for 300,000 hectares of reforestation, and has pledged to invest at least $100 million each year in carbon reduction projects. Together, these two amounts are almost comparable to the current annual global voluntary carbon market trading volume and cover around 30% of the expected Scope 1 GHG emissions of the two companies! Altogether, this is very big news.
TotalEnergies' 120-page More Energy, Less Emissions report aligns closely with some of the details in Shell's nearly 500-page 2024 report, but what is even more striking in the latter document is the number of times (86 in total!) that the term "carbon credit" appears in various contexts. Shell's efforts are understandable, of course: it also “lost out” because, despite being the biggest buyer in the VCM last year, it used more than half of the 14.1 million carbon offsets purchased in December alone. According to several interpretations, this fit the pattern of previous periods in which Shell was accused of greenwashing from time to time. Just as it did in 2021 — and again, nothing changed in 2023.
Of course, the credibility deficit of the VCM was not negligible, as I have already discussed in a previous article. Thankfully, the fraud, double-counting, and other abuses and flawed methodologies exposed on the platform are now largely a thing of the past, and the market’s self-defence mechanisms have worked well. According to a recent annual analysis by carboncredits.com, the transformation of the VCM last year was most evident in the fact that while the volume of traditional carbon offsets (VERs) fell by a quarter, the volume of so-called removal credits (CDRs) — based on the amount of carbon removed from the atmosphere and stored in long-term carbon sinks — almost quadrupled in just one year.
It is precisely the huge size of Shell and TotalEnergies' current announcements, or the positive sample of Microsoft, which I also recently discussed in an article1 , that indicate that with the rapid expansion of removal credits, VCM is now able to offer a sufficiently favourable perspective for credit buyers seeking high volume and quality. As Rich Gilmore, climate finance expert and head of Carbon Growth Partner in Australia, wrote in response to the news: an excellent start, as this now represents a globally visible offset volume! So the real question is not whether the above news is good for the reputations of Shell and TotalEnergies, but rather what comes next. According to Gilmore, these indications will only lead to the desired breakthrough in the VCM if the credit volumes announced now are followed by further, more specific announcements. So, if these 100 million-plus credits are used as a milestone, a kind of turning point, to mark the first step. For Shell, for Total — and for all other similarly affected oil giants such as ExxonMobil, PetroChina, or Aramco — this is also a call to account. So there you have it, the opening stakes. What will your move be? And good old Freddie shouts into the ether: it's time for the (final?) breakthrough!
This article was first published on the 8th of July, by Levente Tóth, CEO of mitigia, on their personal LinkedIn profile.
