Shell & EKI Energy Services launch joint venture for carbon credit

Shell Overseas Investments, a unit of Royal Dutch Shell, and EKI Energy Services will set up a joint venture (JV) focused on developing nature-based solutions (NBS) for carbon capture in India.

According to an EKI statement, the JV will work on conserving, enhancing, and restoring natural ecosystems such as forests, agriculture, grasslands, wetlands, and blue carbon.

This will prevent emissions or lower concentrations of greenhouse gases in the atmosphere.

Explaining the focus areas of this JV, Manish Dabkara, chairman and managing director and chief executive officer at EKI Energy Services, told Business Standard: “We would be putting nature-based solution projects on the ground. This means those projects that help sequester carbon from the atmosphere. There is no highly viable commercial technology which is available in the carbon sequestration space, so nature-based solutions are the only best solution we have if we want to remove carbon dioxide from the atmosphere.”

Kazeem Khan, Shell general manager (Asia Pacific, Nature-Based Solutions), said: “Shell has set a target to become a net-zero emission energy business by 2050. Through this joint venture and the collaboration with EKI, we look forward to help unlock nature’s climate change mitigation potential.”

Dabkara said: “The carbon credits that will be generated from these NBS projects will be used either by Shell for its internal consumption or to sell them in the open market.”

A carbon credit is a certificate signifying that one tonne of carbon dioxide emission has been reduced from the atmosphere. This can be done through nature solutions, such as planting trees, or through industrial applications such as using carbon-reducing agents at emission points. These carbon credits can be traded to help more polluting entities meet increasingly stringent carbon-emission norms.

Shell and EKI have signed on the exclusivity clause in contract to form the JV.

“Shell has committed itself to investing all funds they earmark for this purpose (carbon capture through NBS) through this JV and we have signed a similar exclusivity,” Dabkara said.

Commenting on the utilisation of these credits, Dabkara said: “Shell may be having its own internal consumption since its operations are highly carbon-intensive.”

The carbon credits generated from the projects the JV undertakes will be shared in proportion to the investment Shell or EKI makes. If Shell invests 80 per cent of the capital in a project, it will get 80 per cent of the carbon credits generated from it, he said.

The development has generated enthusiasm for the EKI Energy Services share price, which was locked in the upper circuit during trade on Friday.

The scrip closed 5 per cent higher at Rs 6,095.30 on Friday. The stock has multiplied manifold since its listing, which was in April this year.

Commenting on the share price rally, Dabkara said: “We had not anticipated the current price at the red herring prospectus stage. It was Rs 102 a scrip on the listing day, next day it was Rs 140 and now it is around Rs 6,000.”

Positive sentiment driving this share is due to the growth of net-zero commitments being made as the world focuses on lowering the carbon footprint.

Commenting on the size of the carbon credits market, Dabkara said: “As of now, the global voluntary carbon market size is around $1.5 billion and we would be able to see more than two to three times growth in a few years. After that Article 6 of the Paris Climate Change Agreement, which will create the new carbon market, is going to generate an immense carbon credit requirement. The market size will grow by $10-15 million annually.”