Shell calls for national carbon offset rules
Shell has broken ranks with the energy industry with a call for national implementation of controversial carbon offset rules.
Energy giant Shell has broken ranks with the industry by calling for controversial carbon offset rules floated by Western Australia to be implemented on a nationwide level, while also flagging plans for a major acquisition as it weighs up an entry into Australia’s electricity market.
WA caved to growing pressure from the oil and gas industry last week by pulling rules which would have required all major industrial projects in the state to fully offset their entire greenhouse gas emissions.
While the regulatory push by the state’s Environmental Protection Authority triggered immediate warnings that billions of dollars of major projects could be at risk, Shell said the EPA was right to kick-start the conversation.
“This discussion is live everywhere, so I don’t imply any criticism of anybody who has been involved in this so far,” Shell’s integrated gas and new energies director Maarten Wetselaar said at a Bloomberg event in Sydney today.
“It is a necessary discussion, so credit to whoever started it.”
While the Shell gas chief said targeting just one state would invariably put that jurisdiction at stake, an Australia-wide carbon rule may hold merit.
“Trying to get regulations that are at least in Australia nationwide is always a better idea than doing it for smaller areas because it’s more equitable and you get to more optimal outcomes,” Mr Wetselaar said.
Shell also confirmed Australia is a major target market for its global push to become the biggest power company in the world by the 2030s.
“Australia would be in the list of markets where we would like to grow our position,” Mr Wetselaar said. “It’s true that from the starting point that we have, we will need initially to grow quite a bit by acquisition because we just don’t have the platforms and the people.
“I would be very disappointed if we don’t have an integrated power business in Australia over the course of a decade. And if we’re going to have it, it may as well be substantial.”
While Shell’s earnings are currently dominated by oil and gas, it wants to gradually shift the weight of its investment dollars to lower-carbon sources to reflect its prediction the energy system will rely much more on electricity rather than fossil fuels for its generation.
“You as a retail customer may today still fill your car at Shell and we thank you for it,” Mr Wetselaar said. “But in 20 or 25 years the only source of energy that you will be using will be electricity.”
The call for a national carbon standard puts pressure back on the federal government to rethink its approach to carbon, but it may also delay any regulations given the lack of political appetite to weigh into such a politically sensitive area before an election.
Shell last month reignited climate tensions between big business and Canberra after its call for the reintroduction of a carbon price was slammed by the federal government, which warned the move may threaten jobs and hike power prices.
Shell, one of Australia’s top foreign investors and top LNG exporters, said the government needed to consider lower emissions targets and pursue carbon pricing to ensure energy producers continue to invest in the industry.
Shell’s call for action on carbon pricing backs up similar demands from Woodside Petroleum, Rio Tinto and BHP, which argue that having such a mechanism would clarify the marginal cost of reducing emissions across business sectors.
Still, it appears companies including Shell are treading carefully on how quickly any transition to a carbon offset scheme occurs.
“There is very strong directional alignment around where we need to go,” Shell Australia chairman Zoe Yujnovich said at the event. “I think in this particular case it was more in the details about how practically we could get to net zero, in what time horizon and using what offsets. The market in offsets in WA is quite limited and our advocacy is definitely around working with government about how we set up a more national framework.”
Western Australia’s EPA has agreed to enter into a new consultation period with the industry likely to last several months, meaning there is unlikely to be any new changes announced until after the upcoming federal election.
Shell cautioned any move to introduce offset rules would require a significant carbon credit scheme.
“You need to think about the enabling system around it: rules, regulations and tax treatment,” Mr Wetselaar said. “You need to work through quite a complex set of issues in order to come up with a policy that actually works.”
The EPA, an independent body that makes recommendations to the state government on whether major projects should go ahead on environmental grounds, said in a statement that it would withdraw the new guidelines until consultation with industry and stakeholders is “more fully complete”.