Payments for carbon offsets routinely end up in the hands of intermediaries instead of the conservationists they are supposed to fund.
A joint investigation by Earthen and SourceMaterial found brokers buying carbon credits from forestry projects in poor countries and reselling them to consumers and businesses, including airlines and oil companies, at inflated prices.
The idea that you are only paying a major airline to enrich an investment fund is probably not what the customer booking a vacation had in mind
– Kelsey Perlman, Fern
Carbon markets are notoriously opaque and prices are secret, but estimates from an intelligence firm Allied offsetsshared with Earthen and SourceMaterial, identified nearly 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 what he had initially paid. The broker dismissed the suggestion that it was making “large and unfair margins at the expense of project developers” when contacted by Earthen and SourceMaterial.
One consequence of the market’s lack of transparency is that consumers, who think they are paying to offset their emissions, often send the bulk of their payments to companies that do nothing to address climate change.
“The idea that you’re just paying a big airline to add to an investment fund is probably not what the customer booking a vacation had in mind,” said forest and climate expert Kelsey Perlman. at Fern, a campaign group.
Offsetting is seen by many policy makers as an essential tool to slow climate change and the trade is flourishing. Transactions for 2021 are estimated at a record $1 billion and Mark Carney, former Governor of the Bank of England and United Nations climate envoy, led a task force seek to develop the sector. Commodities giants Vitol, Glencore and Trafigura all opened carbon trading posts last year.
According to Gilles Dufrasne of Carbon Market Watcha non-profit association that analyzes the compensation sector.
“We still can’t believe the money used to buy carbon credits is really being used to fund further climate action,” he said. “This survey again shows why transparency needs to be improved.”
Despite its rapid expansion, the carbon market “still operates like a cottage industry”, said Adrian Rimmer, offset specialist at Finsbury Glover Hering, a public relations consultancy. “Prizes are everywhere.”
Leaked emails show that a French broker, EcoAct – whose clients include Natwest, easyJet, Air France and Coca-Cola – was offering credits from the Ribeirinhos initiative, a project to protect forests in the north of the country, at the end of 2021. Brazil, for £15 ($20) each. EcoAct told potential buyers that “typically 85-95%” of the purchase price goes to project owners, but that varies depending on the volume of credits sold and other factors.
Michael Greene, who runs the Ribeirinhos initiative, a project that aims to conserve an endangered 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 company that had sales of €11 billion in 2021. An Atos spokeswoman said: “The suggestion of large and unfair margins to the detriment project developers is wrong. Factors influencing price, market dynamics and services provided should also be considered.
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 Ribeirinhos’ credit offer, she said: “We don’t have a sales contract that matches that price for that particular project.”
Greene was not unhappy with the deal, in which his project sold credits to EcoAct. He said the price paid reflected the market at the time and that EcoAct had simply benefited from the trade, 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 compensatory price data. “Price transparency is important so that everyone in the chain can know the numbers involved. This way they can make appropriate decisions on when to buy or sell.
The offsets market allows merchants to make large margins with little direct involvement in projects.
Dutch Green Business Group (DGB), which has Nigel Farage as Notable Support, Last year sold credits from a reforestation program in Sierra Leone to an unnamed “multinational energy company” for $10 a ton with a 60.7% markup. Earthen learned that DGB was able to complete this sale despite having no direct relationship with the project. Instead, the company bought credits from a carbon broker, resold them, and collected the profits. DGB claimed that the profits from this trade were reinvested in new projects, in response to a fact-checking email from Earthen.