* Carbon offset market must boom to fulfil Paris accord
* Barclays sees potential market value at $120-$360 bln
* Shell, BP, Total invest hundreds of millions in offsets
* Revenue ambitions dwarf investment: https://tmsnrt.rs/37q2mks
* The voluntary carbon offset market: https://tmsnrt.rs/3fWjORA
By Shadia Nasralla
LONDON, Dec 8 (Reuters) - Oil companies such as BP
and Shell are nurturing nature as a future revenue
stream, betting on an expected rise in carbon credit prices as
their fossil fuel profits ebb.
BP last year put $5 million into Finite Carbon, a company
that connects forestry owners with companies seeking to offset
their climate-warming emissions via-tree planting.
The Californian firm expects to generate $1 billion for
landowners over the next 10 years, after a 20-40% cut of the
proceeds, its chief executive Sean Carney said.
And as companies and countries have rushed over the last
year to pledge new net-zero global warming pledges, that
forecast may be too conservative, Carney said.
"When you put it next to all the announcements and all the
talk, it's a really small number. We might be thinking too low
here given the commitments," he told Reuters.
Climate change goals, agreed in Paris in 2016, have fuelled
a growing, but still immature, market for carbon offsets as
companies and countries seek to fall in line.
European oil majors say investing in projects to create more
credits is simply good business, offering new revenue streams at
a time when oil prices have collapsed and appetite for new
exploration evaporates.
"Investing in carbon sequestration, at a time when the world
is increasingly carbon constrained, over time will prove to make
good commercial, business sense," Duncan van Bergen, Shell's
head of Nature Based Solutions, told Reuters.
Big oil's involvement has split environmentalists.
Sarah Leugers at the non-profit Gold Standard Registry
welcomed interest from large emitters in nature conservation,
but added:
"I do worry that they're initiating projects in a market
that they can profit from that's attempting to solve a problem
that they've largely created," Leugers said.
Others note the cash is going toward projects of universal
benefit.
"Why would it be OK to make money with digging out fossil
fuels, but not with saving the planet?" said Renat Heuberger,
CEO of the leading climate project developer South Pole, which
typically takes a 10% cut from credits it develops and sells.
CARBON KLONDIKE
Although some industries are covered by carbon-trading
schemes enshrined in law, such as in the European Union,
California and Australia, most of the world has no such
government-backed markets.
That leaves most emitters with only a handful of small,
voluntary carbon offset markets launched over the last 15 years.
And as more seek credits, the price is expected to rise.
Shell's budgets, for example, are based on a carbon price of
$85, or around 70 euros, a tonne by 2050 which is more than
twice the current price of just under 30 euros on the EU
carbon-trading scheme.
While each "registry", or voluntary market, has its own
rules for entry, they generally work by certifying credits for
carbon-reducing projects which preserve forests or wetlands or
help swap out wood or coal burning stoves with ones using
cleaner fuels.
The entire voluntary carbon offset market last year was
worth around $300 million, trading offsets for around 104
million tonnes of carbon dioxide equivalent (CO2e), according to
Ecosystem Marketplace, the main aggregator of these data.
However, that compares with the 33 billion tonnes of CO2e
emitted by the energy sector alone in 2019, of which 2.1 billion
tonnes came from products made by European energy majors,
International Energy Agency and Reuters calculations show.
A November report by a taskforce of investors and emitters
led by former Bank of England Governor Mark Carney said the
voluntary market would have to grow 15-fold to meet the goal of
avoiding catastrophic climate change.
Oil majors are playing a growing role in this as they seek
to establish themselves in the new carbon neutral world order,
with France's Total earmarking $100 million a year for
nature-based solutions, including an unspecified amount toward
creating credits.
Shell plans to spend $100 million on average over the next
year or two on nature-based carbon offsets and van Bergen
expects emissions cuts from nature-based solutions or carbon
sinks will be "material" by 2030 or 2035.
In August it bought Select Carbon which helps farmers in
Australia modify their land use and certifies credits for use in
a government-managed scheme or sold on the secondary market.
BP's investment in Finite Carbon went toward software that
allows landowners to monetise the planting of new trees or
preservation of existing woodlands.
Using machine learning, remote sensing and digital payments,
the software is aimed at landowners with parcels as small as 40
acres, too small to take part in many carbon markets.
For BP's head of ventures Nacho Gimenez, the Finite Carbon
investment fits with a responsibility to rein in emissions.
"As long as someone is investing in something positive,
that's the baseline," Gimenez told Reuters.
Such nature-based offsets could remove up to 12 billion
tonnes of emissions a year on the back of $120-$360 billion
spending by emitters, British bank Barclays estimates.
But with no global standard for evaluating the carbon impact
of a project or for pricing credits, a credit from the same
project can fetch a higher price in one sale than in another.
(Reporting by Shadia Nasralla; Editing by Katy Daigle and
Alexander Smith)
BP (BP.)
