Shell said on Tuesday that it had temporarily stopped building a large biofuels facility in the Netherlands. This was done to make sure that it could still compete in the market when a lot of sustainable fuels come from the U.S.
The London-based company first promised to build the 820,000-tonne-per-year biofuels factory in September 2021. This was in line with its plans, which it first announced in 2020, to become a business with net-zero carbon emissions by 2050.
The Biden administration passed the Inflation Reduction Act in 2022. This law promises to help the U.S. biofuel industry by giving it different kinds of subsidies and tax breaks. The goal is to make more sustainable fuels.
The company said in a statement that it has decided to “temporarily pause on-site construction work” at its planned facility in Rotterdam to make sure that it will be “future competitiveness given current market conditions.”
Huibert Vigeveno, director of downstream, renewables, and energy solutions at Shell, said, “Pausing construction on-site for now will give us time to figure out the best way to move forward with the project from a business point of view.”
Shell SHEL, 1.10% SHEL, +0.96% shares on the London stock exchange were up 1% on Tuesday. They had gone up 21% in the past year.
Once it’s finished, the plant at the Shell Energy and Chemicals Park Rotterdam will be one of the largest biofuels factories in Europe. It will be second only to the 1.4 million-tonne-per-year Neste Oyj 0O46, +2.78% of Finland factory in Rotterdam.
Shell had said before that the planned 820,000-tonne-per-year Rotterdam facility would make more than half of its output from sustainable aviation fuels and the other half would be renewable diesel.
The International Air Transport Association says that in 2023, the world only made 500,000 tonnes of sustainable aviation fuels. A report from Strategy& shows that 325 million tonnes of carbon will need to be removed from the atmosphere every year in order to fully decarbonise air travel.
The International Energy Agency says that in 2022, about 2% of all greenhouse gas emissions came from aviation. Sustainable aviation fuels are expected to be very important in getting the aviation industry to use less carbon.
“Biofuels” are all fuels that are made from organic materials that can be used over and over again, like food waste or by-products from farming. They are used instead of fossil fuels.
After Russia invaded Ukraine in February 2022, the prices of crude oil and natural gas went through the roof. As a result, the world’s biggest oil and gas companies have been making record profits in recent years. In March of this year, Shell lowered its short-term climate goals.
Because of this, Shell changed its 2030 goal and now says it wants to cut its business’s emissions by 15-20%, down from the 20% it had promised. The oil giant also got rid of its 2035 goal. Shell kept its promise to become a carbon-neutral business by 2050.
Vigeveno said, “We are committed to our goal of achieving net-zero emissions by 2050. Low-carbon fuels are a key part of Shell’s strategy to help us and our customers decarbonise in a way that makes economic sense.” “We will also keep using shareholder capital in a smart and controlled way that gives more value with less pollution.”
