Shell Stops Work On Rotterdam Biofuels Facility

In 2021, Shell started constructing a major biofuels facility in Rotterdam. In 2024, it suspended work on the project. This week, it announced that construction would not resume and that it is abandoning the project. When it was first announced, it was going to be one of the largest biofuel facilities in Europe, with much of its output dedicated to sustainable aircraft fuel and biodiesel.

What happened? According to the Wall Street Journal, the market for biofuels in general and SAF in particular has not developed as expected, probably because the fuel costs more than fossil fuel equivalents. Everyone agrees flying around on SAF would be better for the environment, but business is business. Airlines like to talk up their “green” intentions, but balk at the higher costs.

“As we evaluated market dynamics and the cost of completion, it became clear that the project would be insufficiently competitive,” Machteld de Haan, Shell’s downstream renewables and energy solutions president, told the press on September 3. “This was a difficult decision, but the right one, as we prioritize our capital towards those projects that deliver both the needs of our customers and value for our shareholders.”

She added that the company continued “to believe that low carbon molecules, including biofuels, will underpin the future energy system” and that Shell was “one of the world’s largest traders and suppliers of biofuels, including sustainable aviation fuel.”

According to the Brussels Signal, the biofuel refinery in Rotterdam was part of plans to help the European Union meet internationally binding emissions reduction targets, but Shell and other companies such as BP have been busy walking back their climate objectives and focusing more on oil and gas production to fatten their bottom lines. Although their actions have drawn criticism from environmental groups, after Shell announced it would terminate the biofuels refinery project, its shares rose nearly 1 percent.

Shell & Indirect Subsidies

And that is the problem in a nutshell. Fossil fuels enjoy an enormous advantage in the form of an indirect government subsidy because they are allowed to sell their products with no provision made for the costs of the pollution they create. In the arcane world of economics, this is known as an untaxed externality — a cost that does not get paid by those responsible for it but instead gets passed along to others to pay.

The International Monetary Fund has pegged the costs associated with fossil fuel extraction, refining, distribution, and use at $6 trillion a year. Some of those costs involve sickness and early deaths for humans. Others are associated with record temperatures, stronger storms, and droughts. The IMF actually has a solution — end untaxed externalities so fossil fuel producers pay the costs for the damage they do to people and the Earth.

It claims a carbon fee is “the single most powerful and efficient tool” because pricing mechanisms “make it costlier to emit greenhouse gases and allow businesses and individuals to choose how to conserve energy or switch to greener sources through a range of opportunities. People and firms will identify which changes in behavior reduce emissions — for example, purchasing a more efficient refrigerator versus an electric car — at the lowest cost.”

Under its plans to address global overheating, the EU requires airlines to gradually increase the amount of such fuel they use to power planes. The airlines, however, complain that it is not widely available and too expensive. If a carbon fee as suggested by the IMF were in effect, the price difference between conventional Jet A and SAF would be much less.

Fossil Fuel Deaths

The greedheads who control those fossil fuel companies shrug off reports like the one recently by a team of researchers who found fossil fuel use is directly responsible for 90,000 premature deaths in the US alone each year. In that study, the researchers said:

“The United States has one of the world’s largest oil and gas industries, yet the health impacts and inequities from pollutants produced along the oil and gas life cycle remain poorly characterized. Here, we model the contribution of major life cycle stages (upstream, midstream, downstream, and end-use) to air pollution and estimate the associated chronic health outcomes and racial-ethnic disparities across the contiguous US in 2017. We estimate life cycle annual burdens of 91,000 premature deaths attributable to fine particles, nitrogen dioxide, and ozone.”

But because there are no costs associated with fossil fuel pollution, people continue to die before their time and no one gives it another thought. It is hard to explain why people celebrate profits for polluters and ignore the harm their activities do.

Bye-Bye, Biofuels

The Guardian reports that the decision to scrap the project in Rotterdam marks another setback for the company’s biofuel ambitions. That facility was originally intended to produce up to 820,000 tons of biofuels each year, beginning in 2024, with plans to bring it online in April 2024. About half of the biofuels from the plant in Rotterdam were expected to be used for SAF, made from waste cooking oil and animal fat.

Shell also cancelled a sustainable aviation fuel project on Singapore’s Bukom Island in March of 2023. The cancellations come amid a wider shift away from renewable energy projects in the oil and gas sector as fossil fuel companies pursue higher profits, The Guardian said.

Last year, Shell watered down a key emissions target — reducing the carbon emissions intensity of the energy it sells by 15-20% by the end of the decade. Previously it had targeted a 20% reduction.

Proponents of SAF believe it could be crucial for airlines to cut their carbon emissions in line with global climate targets, although critics argue it is not a realistic alternative given the limited timescale to prevent rising emissions from creating a climate disaster. The aviation industry accounts for about 3% of the world’s carbon emissions, according to the International Energy Agency.

Led by the full frontal assault on renewable energy led by the current US administration, the industrialized nations of the world have turned away from the promises made to each other in Paris a decade ago. It is clear that fossil fuel interests now hold sway in many national capitals and legislatures and are using their political muscle to continue with their business as usual approach for as long as they can get away with it.

They would never admit they are the beneficiaries of enormous indirect subsidies all because of a distortion in the economic model that allows them to escape paying for the harm they do. Perhaps a million years from now, the next species to dominate the Earth will look back and wonder how such a skewed system was allowed to exist. It’s a question that deserves an answer, although it is unlikely the humans of today will ever find the courage to ask it.