BERKELEY, California – A popular category of carbon offsets held by a number of major publicly traded companies is significantly more prone to greenwashing than previously feared, according to a new investigation of the financial instruments.
The conclusion is based on work done by a team of 14 researchers in association with the University of California, Berkeley’s Goldman School of Public Policy. The study looked at so-called Redd+ credits, which represent roughly a quarter of carbon offsets issued globally.
“Many of the researchers have been studying carbon-offset quality for many years, and even we were surprised,” Dr Barbara Haya, director at the Berkeley Carbon Trading Project and the lead researcher behind the report, said in an interview. “We found problems under every stone we turned.”
The findings may have serious implications for companies that have based their climate statements on the offsets probed in the study. That list includes energy firms Shell and Eni, and Delta Air Lines, according to an analysis of public data by Carbon Market Watch, a nonprofit that commissioned the Berkeley research.
The study also has ramifications for the traders of offsets, according to Mr Gilles Dufrasne, global carbon markets lead at Carbon Market Watch.
Traders and companies that end up buying offsets need to “do some work to figure out which ones are worth something and which ones are worth nothing,” Mr Dufrasne said. “Most credits probably don’t represent any climate benefit.”
Dr Haya said Redd+ credits can’t be viewed as a reliable tool for offsetting, so brokers trading them would be better off viewing them as “a donation.”
Trafigura Group, the world’s largest trader of carbon-removal credits, has already suspended a consignment of Redd+ offsets as it awaits the result of a probe into a forestry project behind the units.
And Bloomberg has previously reported that more than 75 million carbon credits currently lie dormant on the accounts of Vitol, the world’s largest independent commodity trader. Dutch trader ACT Commodities Group and ACT Financial Solutions, which are both units of SMS Holding, wrote off about 1.5 million credits last year.
Shell appeal
Shell has already been called out by regulators for its claims around offsetting. Last year, the oil major lost an appeal against a ruling by the Dutch advertising watchdog that an ad campaign promoting carbon credits was misleading.
A spokesperson for Shell, which recently shelved a plan to develop its own carbon offset projects at scale, said such instruments remain “an important additional means” to support its target of reaching net-zero emissions by 2050. “But they don’t replace our efforts to avoid and reduce emissions,” the spokesperson said, adding that Shell has “robust due diligence processes.”
“While we recognise the system isn’t perfect, it is continually improving,” the Shell spokesperson said.
A spokesperson for Eni said carbon offsets are “one of the many tools in Eni’s decarbonisation pathway.” The credits are subject to audits and due diligence, according to the highest control standards applied by the company, the spokesperson said.
Delta hasn’t responded to a request for comment.
Dr Haya and her team of researchers looked at four methods designed by Verra, a nonprofit that developed the Verified Carbon Standard (VCS) Programme, to generate carbon credits from projects that protect forests. These allow developers to pick a baseline of predicted carbon loss in the project area based on historical deforestation rates in the region, and then measure change against that. The difference between those two carbon values is packaged and sold in the form of credits, based on so-called avoided emissions.
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