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The Colombian president recently said that the country had exported one million barrels of carbon-neutral or offset oil. But in an unregulated carbon market, such a claim is pure greenwashing.
BOGOTÁ - In March this year, various national and corporate leaders met in Houston, Texas, for CERAWeek, an annual conference to discuss the world's energy challenges. Colombia's President Iván Duque took the opportunity to remind participants that his country produced just 0.6% of the world's carbon emissions even as it had raised crude production to one million barrels a day.
He said oil should not be seen as an enemy, since the fight was really against greenhouse gas emissions. He also revealed at the event that the country's national oil firm, Ecopetrol, had sold the Asian market its first million barrels of carbon-neutral or offset crude, consisting of the entire extraction, production and exportation chain.
Carbon compensation or offsetting may sound like a half-baked idea, but expect to hear it increasingly in the context of measures to tackle the climate crisis. The idea is to capture the same amount of CO2 emitted in your production process through a compensatory project, like preserving a stretch of forest. But with oil production, can you really curb the emissions of one of the economy's most polluting sectors? Is compensation the right strategy or response to the climate crisis?
Beyond carbon offsetting
Ecopetrol told El Espectador that the million barrels cited by the president were the Castilla Blend sold to PetroChina and shipped from the port of Coveñas in northern Colombia in February. The country specifically compensated for 32,000 tons of CO2 (or a fraction of Colombia's total emissions of around 258.8 million tons).
Ecopetrol's head of crude production, Juan Carlos Fonnegra, says the firm committed itself in 2021 to reaching zero net emissions by 2050, which he said would make it the first Latin American oil and gas firm to set this target. This is part of its sosTECnibilidad y cambio climático, or sustainable transition plans. He did point out that the offsetting cited covered the Scopes 1 and 2 emissions generated throughout the million barrels' value chain.
What does this mean? The IDEAM, a state technical and environmental agency, divides carbon offsetting into three stages. Scope 1 emissions are those generated inside the firm, say, by a gas heater in your factory.
Second scope emissions, which Ecopetrol also offset, are those generated through a purchase and not inside the firm. They might be generated by the electricity used by the firm.
It's time to start extracting carbon from the atmosphere.
Scope 3 emissions, which were not offset by Ecopetrol, are outside a firm's control. IDEAM gives the example of emissions from the decomposition of a firm's waste at a skip. Waste-related emissions are the biggest emissions in most productive processes. Which is why, as the Carbon Trust organization points out, there are mounting calls on firms to offset this stage of emissions. This would be of greater urgency when it comes to oil as 90 to 95% of emissions from its entire life cycle are Scope 3 emissions, according to data from S&P Global.
Felipe Corral, an energy transition researcher at the Berlin Technical University in Germany, says we are past the point of offsetting, and must start extracting carbon from the atmosphere.
Colombia's President Iván Duque attending CERAWeek annual conference to discuss the world's energy challenges in March 2022
Renewables or bust
Another point to consider with Iván Duque's claims concerns the project to offset emissions from the Castilla Blend shipment. The tradeoff is typically done through forestry projects to capture carbon from the air. Thus, one firm (Ecopetrol) buys from another (a forestry firm) carbon credits equivalent to the tons of carbon not being emitted. There is usually a third firm to certify that the purchase of five carbon credits did indeed entail non-emission of five tons of carbon.
How were Ecopetrol's 32,000 tons offset? The firm says this was done through a renewable energy project in the department of Antioquia (in central Colombia). Which project, and how did it work? Ecopetrol did not give details and since April 4, El Espectador has sought out details from SGS, the certifying firm, without success.
Corral explains that while details are pertinent, the deal broadly is that if "a firm installs a solar park in Antioquia with absolute certainty that in its absence there would have been a power station there, then it can sell carbon credits as it is potentially avoiding greater emissions." Corral sees this as very weak offsetting.
Some would call this greenwashing, says Juan José Guzmán Ayala, a finance and climate specialist. He says Ecopetrol can act this way as the Colombian government has yet to create an obligatory and regulated carbon market.
In 2018, the government of former Colombian president Juan Manuel Santos passed the Climate Change Law (Law 1931/2018) that required among its stipulations a regulated carbon market within three years. It had to be ready in 2021 in other words.
But Guzmán Ayala says "not only were the deadlines not met, but the Duque government... is now coming out [abroad] and speaking of oil compensation measures, when it has not carried out this task." The carbon market in Colombia remains voluntary for now, and firms merely have to show that they offset emissions in order to avoid paying the carbon tax. In voluntary trading markets, says Guzmán, "costs are very low, like standards, which could mean an advantage" for the industry.
The firm insists its carbon purchase met the "highest international certification standards (known as Verra)." Colombia's deputy environment minister, Nicolás Galarza, told the daily in turn that the law underestimated the complexities of this process and that with progress made so far, the government was now working on the regulations themselves. By 2023, he said, it should have readied the institutional bases the market would need before it could start functioning between 2023 and 2025. It is a "matter that requires time," he said, citing Mexico, which passed a climate law in 2012 and only began to test its regulated market in 2020.
Colombia passed a Climate Action Law in 2021, which created a national register of emissions known as ROE or Obligatory Emissions Report, and a Carbon Markets Experts Commission, which will both aid it in forging regulations. Galarza says Colombia is the only South American state actually "developing" offsetting measures as cited on the carbon markets' ICAP ETS map, ahead of Chile and Brazil.
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