Shell has avoided paying compensation for nearly 2 million sham carbon credits it supported in China, as registry Verra has been unable to hold the world’s largest offsets buyer to account for the scandal. Verra told Climate Home the case is “unprecedented”, but it raises questions over the leading carbon standard’s ability to enforce its rules and guarantee integrity in the ailing voluntary carbon market – especially when critical decisions concern a dominant player like Shell.
The energy giant was closely involved in ten carbon offsetting programmes that aimed to slash methane gas released from rice paddies across eastern China. But, as Climate Home previously revealed, the carbon credits – which Shell partly used to justify sales of “carbon neutral” liquefied natural gas (LNG) – failed to cut planet-heating emissions as claimed.
After identifying serious issues and cancelling the projects in late August 2024, Verra informed a Shell subsidiary in China that the meaningless credits would need to be compensated.
So far, however, the carbon standard has been unable to claw back any of the 1.8 million credits generated by the ten projects, which were primarily used by Shell to offset real greenhouse gas emissions created by its vast fossil fuel operations. Other users of the phantom rice-farming credits include Chinese state-owned fossil fuel firm PetroChina, Singapore-based DBS Bank and UK energy supplier OVO Energy.
Hit-and-run
While the projects were originally set up by a small Chinese agritech firm called Hefei Luyu, Shell acted as their “authorised representative” in dealings with Verra, assuming “all applicable rights and responsibilities” equivalent to those of the project developer. Climate Home understands that both Hefei Luyu and Shell should have been on the hook for paying back the over-issued credits.
One of the agreements between Hefei Luyu and Shell
But on September 11 last year – less than two weeks after Verra’s compensation order – Hefei Luyu and Shell ended their agreement, enabling the fossil fuel multinational to abruptly abandon the projects.
Verra told Climate Home that “any business arrangements between the representative and the project proponent fall outside Verra’s purview to oversee or enforce”.
How Shell greenwashed gas with sham Chinese carbon credits
Commenting on the case, Danny Cullenward, a lawyer and climate economist at the University of Pennsylvania, said exiting the agreement does not relieve Shell of its past obligations. Those include being responsible for any potentially “false, fraudulent or misleading statements” made to Verra in the course of Shell’s work as the proxy project proponent, added Cullenward who analysed the project documents.
But, as yet, Verra has taken no action against Shell. In contrast, the carbon credit registry sanctioned Hefei Luyu after the Chinese company failed t
