The trade of carbon-offset LNG
Carbon-offset LNG flourished in 2021, with 28 cargoes announced, a five-fold increase compared to 2020, and we know that additional, but unannounced cargoes have been traded. Momentum was particularly strong in H2 2021, with nearly half of all carbon-offset cargoes delivered in the final 6-months of last year. The industry also expanded with the first carbon-offset deliveries into Europe and the Americas, the inclusion of carbon offsets in long-term contracts and the launch of a comprehensive framework for emissions reporting, sponsored by GIIGNL.
The emergence of carbon-offset LNG: deliveries as of December 2021
Number of cargoes delivered
Loading Port
Discharge Port
WoodMac estimated emissions offset
(kt CO2e, cumulative)
Estimated emissions offset using DEFRA
(kt CO2e, cumulative)
Estimated offset value (US$)**
Wood Mackenzie estimated emissions offset
(kt CO2e, cumulative)
Wood Mackenzie estimated emissions offset using DEFRA
(kt CO2e, cumulative)
Wood Mackenzie estimated
offset value (US$)*
Companies involved:
Supermajors
Traders
Utilities & NOCs
IOCs
Infrastructure & Industrials
The DEFRA emissions factors for LNG underestimate emissions for some LNG cargoes and overestimate for others.
The DEFRA emissions factors were never intended to be used for the calculation of emissions related to specific LNG cargoes.
5.5 million tonnes CO2e
is equivalent to around
5 million trees
1,716 football pitches or 3,020 acres
That in turn would cover
"Offset" Cargo Emissions Intensity vs DEFRA Emissions Factors
*Full information is not available for all cargoes. Where detail is missing assumptions are based on WM assumptions/best intelligence
Source: Wood Mackenzie Research, Wood Mackenzie LNG Emissions Tool
Notes: (1) Assumes offset cost of US$5/t CO2e. (2) Three cargoes agreed for delivery over Q4 2021 and Q1 2022. Estimated emissions for all three cargoes.
Source: Wood Mackenzie Research, Wood Mackenzie LNG Emissions Tool
Source: Wood Mackenzie Research, Wood Mackenzie LNG Emissions Tool
Number of delivered cargoes:
To Asia
To Europe
25
4
Source: Wood Mackenzie Research, Wood Mackenzie LNG Emissions Tool
*Destination of 1 cargo remains Unknown; WM assumes delivery into Asia
**Assumes offset cost of US$5/t CO2e
5,542
5,458
$27.7 mn
The LNG Carbon Emissions Tool provides a transparent, independent and comprehensive assessment of carbon emissions along the LNG value chain.
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December 2021
But carbon-offset LNG’s initial lustre is fading. Only two cargoes have been publicly announced since October. Buyers have possibly been reluctant to pay an additional premium at times of record-high LNG spot prices. But perhaps it has also been the consequence of increased criticism to what had started to be seen as a ‘greenwashing’ practice because of the quality and costs of offsets.
Nonetheless, this may turn out to be a good thing for the LNG industry. The industry’s initial ‘green rush’ has had merit in recognising that a cost needed to be associated with the industry’s carbon footprint. But priority must shift to the ultimate goal of material CO2 reduction across the value chain, with offsets deployed for only unavoidable emissions and some companies are already moving in this direction.
1
To Americas
1
Unknown*
25
4
To Asia
To Europe
Number of term carbon-offset deals
Number of term carbon-offset deals
1
Carbon offsets
Companies involved:
Infrastructure & Industrials
