As the reality of climate change has become undeniable, companies have realised that demonstrating a clean track record in terms of greenhouse gas emissions—carbon neutrality or “net zero“— has become a necessity. Many have readily embraced the purchase of carbon offsets. But this much-criticised scheme is coming under increasing scrutiny, with recent studies suggesting that many of these offsets provide no real benefit.
In 1997, the Kyoto Protocol established flexible mechanisms to facilitate adaptation to emissions reductions, in addition to the obligation to respect caps and offset the excess through the mandatory purchase of carbon credits. One of these was the Clean Development Mechanism: financing emission reduction projects in poorer nations to offset their own emissions. This system is a voluntary option for companies that already meet the caps but wish to achieve a net-zero balance on paper, and its credits are cheaper than the mandatory ones.
Projects include initiatives related to renewable energy, energy efficiency, methane capture, switching to clean fuels and land use. This last option focuses on sequestering carbon in soils and vegetation, or minimising emissions from agriculture and livestock. Many relate to forest management: reforestation—although the benefits of planting trees are controversial—or avoiding deforestation. Non-profit organisations such as Verra, Gold Standard, Climate Action Reserve and American Carbon Registry calculate and certify credits, one credit representing one tonne of CO2 equivalent.
The REDD+ projects scandal
Carbon offsets have not escaped criticism from those like Greenpeace, who call them a “scam”, a “licence to keep polluting” that “distracts us all from the real work of cutting emissions”; like papal indulgences, as Dan Becker of the Sierra Club said back in 2007. Other experts call them a “failure in market experimentation” or that they offer “a fantasy of capitalism without crises“. Activists have used climate summits to protest against a system they accuse of greenwashing, arguing that more than 130 countries have committed to the goal of net zero by 2050, but all are relying on offsets.
Particular concerns have been raised about voluntary offsets from REDD+ projects (reducing emissions from deforestation in developing countries and sustainable forest management), which conserve forests to avoid the emissions that would otherwise be released. Previous studies have questioned the validity of these credits, not only because of their futuristic nature, but also because of the possibility that deforestation will simply be shifted to other regions, as well as accusations of harming local communities by not taking their needs into account.
Then, in January 2023, the wheels fell off: an investigation by the British newspaper The Guardian, the German weekly Die Zeit and the investigative journalism organisation SourceMaterial, supported by three scientific studies, revealed that 94% of the REDD+ credits certified by Verra do not represent real emissions reductions, but are “phantom credits” with no value. Verra approves three-quarters of all voluntary offsets and its credits are purchased by major companies such as Disney, Shell, Gucci, Samsung, United Airlines, Air France, Chevron, Ben & Jerry’s, Netflix and others, including the rock band Pearl Jam.
The three studies focused on Verra-certified projects in the rainforest, which amount to 95 million credits—40% of those approved by Verra—theoretically enough to offset the annual emissions of 25 coal-fired power plants or 220 million barrels of oil, according to SourceMaterial, which concludes: “A $2 billion market, predicted to expand rapidly, is widely based on exaggerated claims”. Of the 29 projects analysed, only eight offered real emissions reductions.
The studies on which the research is based have been published in Science, PNAS and Conservation Biology. “Results suggest that the accepted methodologies for quantifying carbon credits overstate impacts on avoided deforestation and climate change mitigation”, the PNAS study summarises. “Most projects have not significantly reduced deforestation. For projects that did, reductions were substantially lower than claimed”, said the Science paper.
The danger of the voluntary offset system
Reactions were heated and prompted investigations by other media outlets. Following the publication of the report, The Guardian reported that the voluntary market was already losing steam in 2022 because companies were reluctant to continue buying bad credits. In June 2023, the US regulator issued a warning about misconduct in the voluntary carbon markets. According to the British newspaper, carbon credit speculators could lose billions.
Meanwhile, Verra’s CEO resigned and the organisation announced it would reform its programme in 2025, but at the same time claimed to have tried unsuccessfully to collaborate with The Guardian and has called the investigation an “attack”, accusing the paper of going “dangerously off track when it comes to reporting on the voluntary carbon market in general”.
But The Guardian has doubled down on its allegations, publishing a new investigation in collaboration with watchdog Corporate Accountability with even more serious findings: of the 50 projects that have sold the most credits—accounting for almost a third of the entire global voluntary carbon market—39 were deemed likely to be junk or useless, and a further eight problematic. There was insufficient public data for the remaining three. This adds up to $1.16 billion in worthless carbon credits and a further $400 million in dubious credits. More alarmingly, the projects are not limited to REDD+, but also include renewable energy, waste management and energy efficiency initiatives.
Among experts, opinions are divided between those who favour moving beyond the voluntary offset system and those who think it can still work if it is subjected to more rigorous standards to improve the credibility of credits. For Julia Jones, co-author at Bangor University of one of the studies that originated The Guardian report, and her colleague Neal Hockley, the latter also means that credits should be more expensive and only considered as a last resort: “A higher price would reduce the perception that offsetting is an easy option and should encourage more focus on reducing emissions”.