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How French Energy Traders Sold "Carbon Neutral" Natgas To China That Doesn't Exist 

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by Tyler Durden
Thursday, Aug 12, 2021 - 04:15 AM

French energy giant TotalEnergies SE orchestrated a "carbon-neutral" liquified natural gas shipment with China National Offshore Oil Corp (Cnooc) last September. The math behind the carbon-neutral fuel "involved googling and guesswork," according to Bloomberg

An insider who spoke with Bloomberg said junior traders at Total learned about carbon-neutral cargos from a client who had already purchased two from Royal Dutch Shell Plc. They said the inexperienced traders were able to figure out how to neutralize the emissions of LNG through internet searches of green projects they could fund. 

The traders were able to find a project thousands of miles away in Zimbabwe that allowed them to fund a carbon-neutral deal that allocated money to brush clearing to reduce wildfires. Bloomberg called the deal "complicated new math." There was limited evidence to support how Total's brush clearing in southern Africa would offset natural gas carbon emissions. 

But to make it work, Total's pioneers of carbon neutrality first needed to find green projects capable of meeting two requirements: generate carbon credits backed by an international organization, without costing too much. After struggling to come up with an answer, the team set up a meeting with South Pole, a project developer based in Zurich that came recommended by rival traders. That's how $600,000 from a $17 million LNG transaction ended up, in part, paying for forest protection in Zimbabwe.

Source: Bloomberg

The resulting trade looks like a win for everyone. Total kept its promise to investors to shrink its carbon footprint. Impoverished communities received financial support. And the buyer, China National Offshore Oil Corp., cited the shipment as one of the steps it's taking to "provide green, clean energy to the nation."

But climate experts and even a crucial organizer behind the deal say it will do virtually nothing to decrease carbon dioxide in the atmosphere, falling far short of neutral. -Bloomberg

Danny Cullenward, a Stanford University lecturer and policy director at CarbonPlan, a nonprofit group that analyzes climate solutions for impact, called Total's carbon-neutral gas shipment a sham:

"The claim that you can market the sale of fossil fuels as carbon neutral because of a meager few dollars you put into tropical conservation is not a defensible claim," Cullenward said.

He said efforts to prevent wildfires in Zimbabwe could prevent large burns and deforestation. Though villagers in the country have zero interaction in reducing pollution from natural gas - the carbon-neutral gas shipment is merely for governments, energy companies, and consumers to feel good about supporting green causes. 

The use of "carbon neutral" and "net-zero" is a marketing ploy and is meaningless in Total's carbon-neutral fuel to Cnooc. Cullenward believes that avoiding deforestation isn't the same as removing greenhouse gases. "This paradigm," he warns, "is encouraging a fictitious engine that doesn't help advance our net-zero goals."

Renat Heuberger, co-founder of the South Pole, the company that helped develop the Zimbabwe project and sold carbon credits to Total, doesn't believe the project in the South African country will offset pollution from natural gas. "It's such obvious nonsense - even my 9-year-old daughter will understand that's not the case. You're burning fossil fuels and creating CO₂ emissions." 

Total's natural gas first began releasing emissions when it was extracted off the Australian coast. Then the gas was piped 553 miles with the risk of leakage. Chilling the gas into a liquid form for shipping to China involves additional emissions. Then loading LNG onto a vessel and crossing the waters to Shenzhen in southern China releases even more emissions. 

Source: Bloomberg 

Once the shipment arrived, the traders also had to figure out the natural gas emissions burned at Shenzhen powerplants into the electricity grid serving more than 12 million people. Total and Cnooc determined the shipment's emissions were at 240,000 metric tons of CO₂, or about 30,000 U.S. households in a year.

Fauziah Marzuki, an analyst at research group BloombergNEF, said the estimate was fuzzy at best, and there are too many variables to claim Total's LNG shipment to China was carbon-neutral: "No one has convincingly produced an accurate calculation." 

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