Does carbon offsetting work? Hope for integrity in the midst of the climate crisis

Monday, November 7, 2022

There are plenty of questionable carbon projects on the market. At Compensate, we have evaluated over 170 forestry projects and only less than 10% pass our evaluation criteria. Reasons why projects fail vary but are often linked to additionality, overestimated project impacts compared to the alternative reality where the project is not implemented, permanence, and community impacts. Even the projects which pass our criteria are not perfect, this is why we take further steps to mitigate the risks by overcompensating and having a portfolio approach . What we learnt in the past 3 years is that international standards are not enough to guarantee quality. Our findings were also mirrored in a series of investigative articles exposing low quality credits and the fundamental flaws of the market, for instance, The Guardian , Bloomberg , Nikkei , Quartz just to name a few.

Companies' climate action is scrutinized now more than ever. Companies should focus on rapid, deep emission cuts covering the entire value chain emissions in addition to taking responsibility for offsetting their current emissions, so that offsetting does not become a substitute for urgently needed emission reductions.

Market flaws

What are the most common flaws in carbon capture projects? Learn more in our white paper .

When compensating for their emissions, buyers are often unaware of the quality issues and risks projects have and are unable to distinguish a good project from a bad one. In the past weeks, there have been two articles exposing low quality credits which have been used by Finnish companies to compensate for their emissions. One article was published by Helsingin Sanomat - the leading media outlet in Finland and the other by Yle MOT - the national broadcasting company in Finland.

A conservation project gone wrong - the case of Isangi REDD+

The Helsingin Sanomat article focuses on three Finnish companies from the food industry who chose to compensate for their emissions with the Isangi REDD+ project. The project is protecting a forest from deforestation and issuing carbon credits. Drivers of deforestation identified in the project documents are agriculture expansion by local people. However, in reality, the actual deforestation threat is the project proponent itself - Safbois, a Swiss forestry company, whose parent company has been logging in the area since the late 1980s and has been accused by Greenpeace for illegal logging. Safbois has expanded its operations also into the carbon credit market, meaning that it has stopped some of the logging in its logging concessions and instead started to protect it and in return generate carbon credits. 

Conservation projects like Isangi, issue credits based on the comparison of the baseline - what the deforestation levels would be in the absence of the project and how much deforestation is being prevented thanks to the project. However, the project uses a reference area that is 10 times bigger than the project area. A common criticism of REDD+ projects is that a reference area is often chosen where the probability of logging is high, for example, due to the settlement already located in the area. In a more remote and smaller area, the probability of logging is lower and the project could issue less carbon credits. This is a common issue in most of the forest conservation projects Compensate has evaluated.


TIST is part of Compensate's carbon capture portfolio and it is an example of a high integrity carbon project that meets Compensate's criteria that are based on scientific evaluation. It is an award-winning reforestation and sustainable development programme, representing a community of more than 95 000 farmers, across Kenya, Uganda, Tanzania and India. TIST participants own the land and the trees and they receive 70% revenue share from the sale of the carbon credits. Furthermore, each planted tree creates an additional value of $8 for the farmers. (Photo credit: TIST)

Another worrying fact is that the project proponent still has the rights of logging concessions, so there is no barrier for logging the forest after the project ends or even before that. In fact, the last credits issued for the project in the Verra registry are from the 2009 - 2013 period, meaning the last monitoring and verification has taken place then. This is a red flag that something is wrong, as usually monitoring and verification take place every 3 - 5 years. The Helsingin Sanomat article confirms that the project has been interrupted, leaving the possibility that the forest might have been logged already.

Serious additionality concerns in the compensation of 11 state-owned companies

In the Yle MOT’s article, the focus is on 11 Finnish state-owned companies that have compensated for their emissions using renewable energy projects, such as solar, wind, and biogas. Issuing carbon credits from renewable energy projects was a way to support the development of these emerging technologies when they were still vastly more expensive than traditional energy sources. In the 2020s, renewable energy has fully emerged, and their pricing is historically low. Therefore, renewable energy is no longer eligible for carbon credit issuance, and international carbon standards are starting to phase these projects out of their registries. Verra and Gold Standard stopped accepting new grid-connected renewable energy projects in middle income countries at the end of 2019. In 2017, the European Commission released a study showing major flaws in CDM offsets - 85% of all the projects covered in their analysis and 73% of the potential 2013-2020 Certified Emissions Reduction (CER) supply have a low likelihood that emission reductions are additional and are not over-estimated.

The article also highlights a biogas project where inhabitants of rural India make biogas from cow dung, instead of having an open fire. However, there is a conflict of interests since the local people self-report the usage of biogas used and in return are paid for the usage they report. Everything is based on the trust that the reporting is done in good faith. In a discussion with the local people participating in the project, it turns out that half of them don’t even have cows, but are still making biogas and getting carbon credit revenues.

Hope for integrity?

To have an effective voluntary carbon market, first the current flaws of the market need to be recognized and corrected, in order to ensure quality and create trust. The Integrity Council for the Voluntary Carbon Market Core Carbon Principles draft is already a step in the right direction. However, surprisingly not all market players are welcoming the draft proposals for ensuring the quality of carbon offsets. Opposed to what many market players are fearing , stricter rules and improved quality of carbon credits will not slow down the market, but will actually help scale it. Currently, companies that want to take responsibility for their emissions are faced with the choice of compensating knowing the market is not perfect and bearing the consequences of using low quality carbon projects or not compensating at all to avoid negative publicity.

"To have an effective voluntary carbon market, first the current flaws of the market need to be recognised and corrected, in order to ensure quality and create trust."

We also need a functioning voluntary carbon market to keep the 1.5-degree future alive. The Intergovernmental Panel on Climate Change (IPCC) finds that global emissions must fall by at least 43% from 2019 levels by 2030 to align with the 1.5-degree C goal. By contrast, the current countries’ commitments will only reduce global emissions by about 7% from 2019 levels according to the World Resource Institute's new State of NDCs report. Another landmark report is the latest Emission Gap Report by the UN Environment Programme. According to the report, with current policies we are headed towards 2.6C warming above pre-industrial levels, “though uncertainties in the climate system mean that warming of up to 4C cannot be fully ruled out.” Countries need to reduce emissions x6 as much to align with the 1.5-degree C goal. 

The voluntary carbon market could play an important role in closing the gap but only if carbon projects create additional avoided emissions and removals to what countries have already committed to achieve and these avoided emissions and removals are not overestimated, resulting in hot air carbon offsets. Hopefully, the discussion around double claiming and corresponding adjustments will move forward at COP27. We need corresponding adjustments if the voluntary carbon market is to contribute to climate change mitigation beyond the insufficient country’s Nationally Determined Contributions.

Text: Eftimiya Salo, Head of Carbon Projects at Compensate

What are the most common flaws in carbon capture projects? Read more in our white paper or learn more about our criteria to evaluate carbon projects.

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