Over the last few years, courts in Europe have heard several important climate-related cases, and some of them have ruled in favour of the plaintiffs resulting in international attention. Shell has seen its fair share of such cases. In May last year, a lower court in the Netherlands ruled that it needed to do more to reduce emissions resulting from the production and use of oil and gas sold internationally. This includes emissions across the entire value chain, including as a result of the use of fossil fuel-based energy (known as scope 3).  This case has attracted special attention because it deals with corporate responsibility outside of the direct control of companies, as well as whether a court can make a ruling affecting matters outside of a country’s own jurisdiction. Shell appealed the ruling at a higher court last summer. The winner of the case against Shell, Milieudefensie, indicated to 29 multinational companies the impacts they believe this judgment will have on their climate efforts.

In March, a new climate-related case against Shell gained attention when the environmental organisation ClientEarth sued 13 Shell UK directors for breaching the UK’s Companies Act. The basis of the case is that ClientEarth, as a Shell shareholder, believes that Shell management has not made an adequate assessment of the climate risks facing the company when presenting a strategy that is not in line with the goals of the Paris Agreement. ClientEarth is arguing that its intention is to protect Shell and the long-term interests of its shareholders.

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– This is a big day for carbon capture in the waste management industry. The project at Klemetsrud will serve as a vital technological contribution in efforts to meet climate goals. I am proud that we have been able to do with under the auspices of the Longship project, says Terje Aasland, Minster of Energy, quoted in a press release.

Will make significant contribution to reducing emissions

Operating period of 10 years

The Klemetsrud project is part of the wider Longship project, one of the Norwegian state’s focus areas for reducing greenhouse gas emissions. The total costs to the government are estimated at NOK 3.4 billion. This includes the costs of investment and operation for ten years, as well as grants for the purchase of transportation and storage capacity. Furthermore, the state will provide an additional subsidy for non-ETS carbon captured corresponding to the quota price less the carbon tax. Scheduled to come on stream in 2026, this sum will provide for an operating period of 10 years.

Source: Funding for carbon capture at Klemetsrud secured – regjeringen.no

In March, US-based Occidental Petroleum published a Memorandum of Understanding to sell 1 million barrels of “net zero oil” over five years to a Korean refinery from 2024. The announcement should be seen in light of Occidental’s 2020 announcement of their goal of being climate-neutral by 2050. Their stated strategy is to continue focusing on oil and gas production combined with significant use of CCUS and DACCS in order to offset their customers’ emissions (known as scope 3). The strategy is in line with the oil and gas industry standard published by the IIGCC investor group last autumn, which outlines the use of international credits or DACCS to achieve climate-neutrality. Compared with other carbon credits (such as afforestation), buying credits from a DACCS project is likely more expensive, but may be viewed as more measurable and credible, and not to mention more scalable.

The cost of DAC is uncertain

The contract with the Korean refinery involves Occidental offsetting the buyer’s carbon emissions by storing atmospheric CO2 at a DACCS facility, which will be built using technology from Carbon Engineering in Texas. The facility will have a capacity of 1 million tonnes of CO2 per year and be ready by 2024. Airbus has also agreed to buy carbon storage from the project. The costs associated with large-scale carbon capture using DAC are uncertain. The most relevant technology suppliers have announced their expectation that costs will fall to $100 per tonne of captured CO2, but a recently published report from IEAGHG estimates that a cost of around $200 per tonne of CO2 is more realistic. Credits are currently sold in a range of markets, which may justify these costs. One such example is California’s Low Carbon Fuel Standard (LCFS). Carbon Engineering stated last year that the energy consumption needed to capture one tonne of CO2 from the air could fall to 8.81 GJ. In comparison, one barrel of oil contains an equivalent of around 6 GJ and leads to emissions of around 430 kg of CO2 during combustion.

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The IPCC’s latest special report deals with climate initiatives in various parts of society and what effects these may have on the climate and other sustainable development goals. The report suggests some areas of opportunity, but does not provide concrete policy proposals. It points to positive developments over the last ten years regarding the lower rate of increase in greenhouse gas emissions and a broader involvement of society for climate action. Nevertheless, it emphasises that the gap between policy and the need for emission cuts is widening, and the window of opportunity to achieve climate goals can only be kept open through more vigorous and immediate measures, otherwise there will be significant negative emissions later on.

According to the IPCC, current policies will lead to a temperature increase of 3.2°C by 2100, and even with all announced climate ambitions, the target of 1.5°C will not be met. According to the IPCC, global emissions must be halved by 2030 to realistically meet 1.5°C target. This should be possible for a maximum cost of $100 per tonne of CO₂e, of which around 1/3 of the measures can be implemented without additional costs. In particular, renewable energy, electrification, adjusted transport habits and new technology for energy efficiency are the most affordable initiatives. CCS is also included in the IPCC list of necessary measures up to 2030, though on the more expensive end. The extent of CCS adoption up to 2050 will depend on which decarbonisation strategies deployed. CCS is most important in scenarios where initiatives are delayed and carbon negative measures become necessary, and less important in scenarios involving a rapid transition in consumption and more renewable energy.

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In February, the U.S. Department of Energy (DoE) announced a proposal for a comprehensive strategy to develop four geographic hubs for the production and use of hydrogen manufactured from electricity or fossil fuel-based energy.

General focus areas

The strategy covers the period 2022-26. The proposal is part of the $1.2 trillion infrastructure package that was approved by the Senate last year and is divided into several general focus areas, including “energy and industry”. The hubs will focus on energy use from either renewable, atomic or fossil fuel-based energy (coal or gas), but all other forms of energy will also be included.

Demand for CCS

Requirements state that greenhouse gas emissions for hydrogen produced from fossil fuel-based energy must not exceed 2 kg CO2e per kg hydrogen, something demanding the use of CCS. There is also a requirement for hubs to concentrate on different areas of application for hydrogen. One aim of this is to bring the cost of green hydrogen production down to $1 per kilogram before 2030 – an almost 80% reduction from current prices. The response deadline for the strategy is the end of March.

Increasing interest in environmentally friendly investments

The reason behind the new roadmap is that investors are showing increasing interest in environmentally friendly investments, while the EU is also working hard to achieve its climate goals, and a growing market for sustainable investments is the perfect arena for harmful “greenwashing”. Greenwashing could result in derailing climate efforts and weakens the incentive for companies to make serious cuts to their greenhouse gas emissions through CCS, for example. As a result of this, ESMA states that the EU will improve its own understanding of current developments and introduce the necessary market oversight in the areas of greatest significance to investors.

Serious about the climate

This shows the EU’s seriousness about its 2050 climate goals as well as the importance of its Strategy on Sustainable Finance, including the EU taxonomy, as a tool for achieving them. There is also increasing awareness in the USA around this issue, especially since President Biden announced more ambitious climate goals last year. To this end, the Chair of the U.S. Securities and Exchange Commission (SEC) announced in February that tougher regulations are on the way.

A report on the scope of greenwashing in large international organisations, ‘Corporate Climate Responsibility Monitor 2022’, was published by two companies based in Germany and Belgium. The report features a review of 25 organisations that have made high-profile statements about their climate goals of reaching “net zero” emissions. The total emissions of the companies assessed were 2.7 Gt CO2, including scopes 1, 2 and 3. The energy companies Enel and E.ON were included.  The companies were assessed according to criteria such as actual emissions recorded and published, how concrete and binding their climate goals are, whether emissions have actually been reduced, and other climate-related measures. The report concludes that only half of the companies explicitly outline what “net zero” means, and that the emission-reducing measures of half of the companies only involve a 40% reduction – not 100% as “net zero” would suggest. None of the 25 companies in the report achieved a “high integrity” grade and only Maersk achieved the second highest grade of “reasonable integrity”.