How middlemen carbon brokers take a cut from money meant to help offset CO2 emissions
Many airlines like to encourage their passengers to buy carbon offsets, so they can hope the impact of the carbon their flight puts into the atmosphere is somehow reduced. There are many arguments against the uses of offsets, and reasons why they are ineffective – what is needed is preventing the CO2 being emitted today, not hopes of it being removed in several years. But now joint research by Greenpeace’s Unearthed, and others, has found that much of the money that is paid for a carbon offset – in the hope it will go to some project that is attempting to reduce carbon – in practice is ending up in the hands of brokers and middlemen. The carbon offset market is booming, with many new schemes – and money to be made by those working in finance, who themselves do nothing to reduce carbon emissions. There is a serious lack of regulation and transparency in the carbon markets, and that needs to change. The research found cases where brokers bought carbon credits from forestry projects in poorer countries, and sold them on to consumers and companies, including airlines and oil firms, at much higher prices – making a huge profit.
How middlemen carbon brokers take a cut from money meant to help offset emissions
By Luke Barratt and Joe Sandler Clarke @lukewbarratt @JSandlerClarke
Our new investigation gives a rare insight into the booming carbon market, leading to calls for greater transparency
Payments for carbon offsets routinely end up in the hands of middlemen instead of the conservationists they are designed to fund.
A joint investigation by Unearthed and SourceMaterial found brokers buying carbon credits from forestry projects in poorer countries and selling them on to consumers and companies, including airlines and oil firms, at inflated prices.
“The idea that you’re just paying a large airline to enrich an investment fund is probably not what the customer booking a holiday had in mind.”
– Kelsey Perlman, Fern
Carbon markets are notoriously opaque and prices are secret but estimates by intelligence firm Allied Offsets, shared with Unearthed and SourceMaterial, identified almost 250 projects where brokers resold credits for at least three times the purchase price.
In one example, leaked emails show a broker claiming to a potential buyer that “typically 85-95%” of any purchase price goes to the project owner. But in the same exchange, the broker offered credits at a price seven times higher than they had originally paid. The broker rejected the suggestion that it was making “large and unfair margins at the expense of project developers” when contacted by Unearthed and SourceMaterial.
A consequence of the lack of transparency in the market is that consumers, who think they are paying to offset their emissions, are often sending the bulk of their payments to companies that do nothing to combat climate change.
“The idea that you’re just paying a large airline to enrich an investment fund is probably not what the customer booking a holiday had in mind,” said Kelsey Perlman, a forest and climate specialist at Fern, a campaign group.
Offsetting is seen by many policymakers as a vital tool to slow climate change and trade is flourishing. Transactions for 2021 are estimated at a record-breaking $1bn and Mark Carney, a former Bank of England governor and a UN climate envoy, has led a task force looking to expand the sector. Commodities giants Vitol, Glencore, and Trafigura all opened carbon trading desks last year.
Opacity and under-regulation mean the conservation projects that should benefit most from the boom are often missing out, according to Gilles Dufrasne of Carbon Market Watch, a non-profit that analyses the offsetting sector.
“We still cannot trust that money used to purchase carbon credits really is used to finance extra climate action,” he said. “This investigation shows again why transparency must be improved.”
Despite its rapid expansion, the carbon market “still operates like a cottage industry”, said Adrian Rimmer, an offsetting specialist at Finsbury Glover Hering, a public relations consultancy. “Prices are all over the place.”
Leaked emails show that one French broker, EcoAct — whose clients include Natwest, easyJet, Air France and Coca-Cola — was in late 2021 offering credits from the Ribeirinhos initiative, a forest protection project in northern Brazil, for £15 ($20) apiece. EcoAct told potential buyers that “typically 85-95%” of the purchase price goes to project owners, but that this varied according to the volume of credits sold and other factors.
Michael Greene, who heads the Ribeirinhos initiative, a project that looks to conserve a threatened area of the Amazon, said he sold credits to EcoAct in 2020 for just $2.75 (£2.10), which would give EcoAct 86% of the market price if sold at £15.
EcoAct’s parent company, Atos, is a French multinational that brought in 11 billion Euros in revenue in 2021. A spokeswoman for EcoAct said: “The suggestion of large and unfair margins at the expense of project developers is false. Factors influencing price, market dynamics, and services provided should also be taken into account.”
She added: “We adhere to all industry standards and have our own robust due diligence processes to ensure that the social and environmental benefits reported by our projects are indeed delivered.”
Asked specifically about the Ribeirinhos credit offer, she said: “We have no sales contract that corresponds to this price for this particular project.”
Greene did not resent the deal, in which his project sold credits to EcoAct. He said the price paid reflected the market at the time and EcoAct had simply benefited from trading, as with other commodities. Others disagree.
“If the money doesn’t get to the projects, what’s the point?” said Louis Redshaw, whose company Net Zero Markets sells offsetting price data. “Price transparency is important so that all participants in the chain can be aware of the numbers involved. That way they can make appropriate decisions about when to buy or sell.”
The market in offsets allows traders to make significant margins with little direct involvement in projects.
Dutch Green Business Group (DGB), which has Nigel Farage as a notable backer, last year sold credits from a reforestation scheme in Sierra Leone to a nameless “multinational energy company” for $10 per tonne at a 60.7% markup. Unearthed has learned that DGB was able to make this sale despite having no direct relationship with the project. Instead, the firm purchased credits from a carbon broker, sold them on, and banked the profit. DGB claimed profits from this trade went back into new projects, in response to a factchecking email from Unearthed.
See earlier, a long article by Unearthed in May 2021 https://unearthed.greenpeace.org/2021/05/04/carbon-offsetting-british-airways-easyjet-verra/
Study shows carbon offsets, by forest protection, used by major airlines are based on flawed system
Carney’s carbon offset taskforce unclear about environmental integrity and effectiveness of private sector market
As Mark Carney, the UN special envoy for climate action and finance, unveiled plans for a new “taskforce” to scale up the private sector voluntary carbon market, campaigners warn key criteria for carbon offsets, that could be effective and might improve environmental integrity, are missing. The taskforce includes some of the world’s largest carbon emitting companies, including EasyJet, Boeing, BP, Shell, Total, and Tata Steel. There are no green groups among its members. Businesses increasingly realise they are expected to take carbon seriously, and set net-zero targets, as far ahead as possible. And they want the cheapest way possible to do this. Hence the drive for cheap carbon credits, which are often from developing countries, such as tree-planting, ecosystem restoration, energy efficiency or waste management. Demand for carbon credits is anticipated to rise, as companies continue to grow and emit more carbon (instead of genuinely reducing their emissions, themselves). Climate campaigners warn these ineffective carbon credits could give polluters a free pass. They also help to delay real cuts in companies’ carbon emissions, or investment in the necessary technologies. What is needed is real carbon removal.
Greenpeace calls for end to carbon offsets – they just allow large polluters to continue as normal
Greenpeace International has said that carbon offsets are allowing the world’s biggest polluters to forge ahead with business plans that are threatening global climate goals. The offsets do not have the effect of lowering global emissions, either now or in future. The practice of buying carbon offsets means polluting companies – such as airlines – can buy carbon credits from projects that reduce or avoid the release of CO2 elsewhere. Examples would be mass tree plantings or solar farms. Instead of making every effort to emit less CO2 themselves, the companies hope equivalent amounts of carbon are being removed from the atmosphere, by others. This cancels out the reduction in CO2 emissions achieved by the provider of the carbon credit. Few carbon credits are reliable, and can guarantee carbon is not emitted, or is removed from the atmosphere. One of the most popular is planting trees. When a tiny sapling is planted, if will (if all goes well and it does not die from neglect, or the impacts of worsening climate change) only become large enough to sequester much carbon in several decades. Eventually the tree will die, returning the carbon to the atmosphere. The only real offset would be permanent, for-ever, underground storage of carbon.
REDD forest CO2 offsets used by Virgin shown to be ineffective – much of the forest has been cut down
Virgin Atlantic tries to make out that it is a “green” and responsible airline. It has given its passengers the chance to buy “carbon offsets” to pay for the carbon emitted because they flew. But it has emerged that the forest project, in Cambodia, that Virgin got its passengers to obtain carbon credits from is wholly inadequate. While the hope is that buying an “offset” means carbon is taken out of the atmosphere somewhere, the reality is that forest offsets do not work reliably. The scheme used by Virgin, they said in good faith, only seems to monitor forest project to ensure they meet the necessary criteria, every 5 years. The scheme Virgin used was checked in 2013, and seemingly the right boxes were ticked. Subsequently much of the forest was cleared by the Cambodian military. It no longer exists. So any carbon “offsets” bought by passengers are worthless. Carbon has NOT been taken out of the air – there is cleared land instead. This demonstrates that forest offsets should not be used. They would only work if forest is kept complete and healthy for decades. That cannot be guaranteed. Virgin has now admitted the scheme has not worked and has pulled out of it. Worryingly, this sort of cheap forest “offset” is exactly what ICAO hopes to use, in its CORSIA scheme, to give the impression that growing aviation CO2 is being mopped up elsewhere.