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23 Jan 2023

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Phantom Carbon Offsets Have No Value

Posted with permission from ESG Impact Zone.

Contrary to what your gym membership wants you to believe, you can’t out-exercise a poor diet – you are what you eat at the end of the day. The same can probably be said for carbon offsets and climate change.

To clarify: It’s all very well compensating for polluting practices by investing in carbon offsets in parallel, but the effectiveness of this extensively popular net-zero strategy in measurably reducing emissions and mitigating global warming in reality, is increasingly being drawn into question.

It’s certainly not going to solve the core problem.

That’s not to say however, that the individuals, organisations and brands who obtain voluntary carbon offsets are necessarily doing so in vain – any contribution to emissions reduction is worthwhile.

But where the problem lies, is in the false sense of security these carbon neutral solutions inspire, as well as the difficulties faced in quantifying the tangible downstream impact they actually have on the environment and climate.

That’s where organisations such as Verra come in – “the world’s most widely used greenhouse gas (GHG) crediting program” – who provide verification that the carbon credits companies can invest in to offset their impact (e.g. forest protection initiatives) do in fact achieve measurable reduction and removal of emissions from the atmosphere.

Verra has grown rapidly since its foundation in Switzerland in 2007, now accounting for three out of every four offset approvals worldwide through their “Verified Carbon Standard” (VCS) program, announcing the sale of their 1 billionth carbon offset credit during COP27 last year. 

It’s safe to say that the voluntary carbon offset market is nothing less than booming.

Big corporations such as Netflix, Disney, Shell, Gucci, Salesforce and easyJet are some of the many companies that have purchased rainforest offset credits from the VCS Program, and 88 countries across the world rely on Verra’s guidance to define national climate change mitigation projects. 

Purchasing these credits often forms a large part of companies’ net zero strategies, because in doing so they are able to don the lucrative “carbon neutral” label. 

As such, billions of dollars are channeled through Verra and equivalent organisations in the offset industry to fund projects that claim to counter greenhouse gas emissions through carbon sequestration and deforestation prevention, with the overarching intention of helping curb climate change.

All the way down the supply chain, big corporations and consumers alike are therefore encouraged to continue business as usual, producing, shipping, buying, selling – and realistically polluting – with a clear climate conscience. 

However, a recent investigation conducted jointly between journalists at the Guardian, the German newspaper, Die Zeit, and the investigative journalism non-profit, SourceMaterial, just lit this concept, as well as the entire voluntary carbon offset market (an industry worth $2 billion), on fire.

Their analysis reveals that more than 90% of the rainforest carbon offsets sold by Verra (their most commonly bought credits, accounting for 40% of the total 1 billion sold) are “worthless,” and that the organisation’s climate claims are “significantly at odds with reality.”

The investigative reporting trio have coined the credits sold by Verra as “phantom credits;” purchasable offsets that in reality do not constitute real carbon reductions, and in fact possibly exacerbate planetary warming.

These findings could stand to invalidate the net-zero strategies of the many multinational corporations relying on Verra’s offsets to reach climate targets entirely, as well as the good intentions of consumers trying to make greener choices. An unprecedented reality that will likely cause widespread distrust and confusion as both parties realise their climate conscience is far from clean after all.

“The implications of this analysis are huge… Companies are making false claims and then they’re convincing customers that they can fly guilt-free or buy carbon-neutral products when they aren’t in any way carbon-neutral,” says the head of the University of California, Berkeley’s Carbon Trading Project, Barbara Haya.

The analysis

The analysis was carried out over a nine month period and was largely based on the findings of three scientific studies of Verra’s rainforest carbon offset projects, as well as countless interviews with experts, “industry insiders” and indigenous communities. 

The studies analysed satellite imagery from dozens of Verra-approved projects that operate under the UN’s REDD+ framework (Reducing Emissions from Deforestation and Forest Degradation), and attempted to determine the true effectiveness of such projects in curbing emissions. 

The goal of the studies was to to elucidate how far from reality Verra’s offset predictions really were.

The REDD+ framework was created at ​​COP19 in Warsaw in 2013, and forest projects launched under these guidelines can be submitted to Verra for emission reduction assessment.

If accepted, each project’s estimated emissions savings are then converted into credits for corporations to buy through the VCS offset program, canceling out their impact and providing consumers with the comfort they’re not contributing to climate change.

Though the exact methodology, time period, limitations and project sample-size analysed by each study group differed, the resounding conclusion of all three reports was that Verra has significantly over-estimated the effectiveness of these approved projects in measurably reducing carbon emissions.

When comparing Verra’s predictions with the scientists’ results, the journalists found that around 94% of the credits generated from validated projects had no climate benefit at all, and should never have been approved in the first place.

They also found that on average, Verra’s predicted deforestation rates – forecasts which allow emission saving calculations when compared to their projects’ present levels of forest protection – have been inflated by around 400% in the best case scenario, and at worst it could be as much as 900%. 

The journalists therefore concluded that Verra has been consistently and substantially over-issuing carbon offset credits, and on the whole these credits have much less climate change curbing ability than is claimed by the organisation.

Furthermore, and most concerningly, the journalists also concluded that the overall operation may even have the reverse effect, and could be contributing to climate change instead. 

Verra’s response

Verra have expressed disappointment at the publication of an analysis they deem “massively miscalculate[s] the impact of REDD+ projects.” 

They attribute the discrepancy found between their own predictions and that of the scientists to the limitations of the studies’ synthetic modelling methods generating conclusions that misrepresent the onsite reality.

“Although these studies provide data that is a useful contribution to the wider work on optimizing methodologies for forest carbon projects, they have limited utility for assessing the impact of REDD+ projects because they do not consider site-specific drivers of deforestation,” stated Verra in their official response.

“It is absolutely incorrect to say that 90% of Verra-certified REDD+ credits are worthless. The article bases this false claim on extrapolations of three reports by two different groups, who assessed a small number of projects using their own methodologies,” said Verra’s Chief Legal, Policy, and Markets Officer, Robin Rix, in his response to the Guardian. 

Verra have stated they will publish their own assessment to counter the claims made by the journalists shortly.

The path ahead

This investigation shines a terrifying spotlight on the voluntary carbon offsets industry, because out of the millions of carbon credits sold by Verra and its equivalents, only a fraction have a realistic effect on emissions reductions.

We are at a critical point in climate action and mitigation, and as setbacks like this continue to keep pulling the chair out from beneath us, it’s clear that standardisation and continual assessment of what’s working and what’s not is required. Consistent recalibration is the only way to keep climate action effective, and the only way we can maintain the trust of the corporations, investors and consumers whose financial contributions keep the forest protection efforts going. 

One of the scientists who was part of one of the study groups, David Coomes‬, Professor of forest ecology at the University of Cambridge, has suggested the path ahead will require a global standard of carbon offset verification to be applied across all REDD+ sites.

“I think in the longer term, what we want is a consensus set of methods which are applied across all sites,” said Coomes‬.

Urgent action is clearly needed to close the gap between the climate benefit these carbon standard organisations claim their programs are achieving, and the revealed possibility that they are in fact contributing to the problem. 

Editor’s Note: The opinions expressed here by the authors are their own, not those of Photo Credit: Arnaud Mesureur/Unsplash

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