Shell sold millions of carbon credits for carbon that was never captured, report finds

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

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

This took place between 2015 and 2021 through a subsidy program for carbon, capture, utilisation and storage projects (CCUS), which are championed by the oil and gas sector as a way to cut its greenhouse gas emissions.

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

During this period, Shell was able to sell 5.7 million tonnes of what Greenpeace describes as "phantom" credits, making more than $200 million for the company. These credits were sold to other oilsands companies on the Alberta carbon market, Greenpeace alleged.

Such sales would not have been illegal, but amounted to a "hidden subsidy" within the program which undercut the effectiveness of industrial carbon pricing, says Keith Stewart, senior energy strategist at Greenpeace and the author of the report.

"Carbon capture projects that have been advertised as a solution to pollution in the oilsands 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 revenue from carbon offsets, according to company records cited by Greenpeace.

In all, taxpayer funding has covered 93 per cent of the costs of Shell's Quest project to date, Greenpeace said.

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

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

Since 2007, Alberta has run a mandatory carbon offset system for large emitters, such as oil and gas companies. If they produce more than their allotted levels of carbon dioxide, they must purchase credits to offset those emissions.

Ryan Fournier, a spokesperson for Alberta's Environment Minister Rebecca Schulz, said the report is a "smear job by Greenpeace."

Fournier acknowledged in an email that the Alberta government previously offered "important credits to help accelerate CCUS development."