Low-Quality Carbon Credits Fuel Corporate Neutrality Claims

Researchers from Kyoto University have shown that the 20 businesses that have retired the most offsets from the voluntary carbon market (VCM) over the past four years have primarily relied on inexpensive, low-quality credits. These businesses include major oil companies, aviation and airline manufacturers, automakers, logistics providers, and others. The study was published in the journal Nature Communications.

Claims by large firms to reduce their carbon footprints or even achieve carbon neutrality may not hold up under scrutiny.

Concerns are growing that many projects supplying carbon credits on the VCM are of low quality and fail to achieve the emissions reductions claimed by their developers.

Gregory Trencher, Study Lead Author, Graduate School of Global Environmental Studies, Kyoto University

Combined, the businesses under investigation are responsible for over 25 % of all offsets removed from global offset databases.

The study is based on an original, publicly accessible dataset that tracks offset retirements made between 2020 and 2023. It incorporates data from the three major offset registries in the VCM: Gold Standard, the United Nations Clean Development Mechanism, and Verra's Verified Carbon Standard. The research was a collaborative effort, with co-authors from the University of Hamburg and EPFL in Switzerland.

The team's analysis found that none of the 20 organizations could claim that a significant portion of their retired offsets met recognized quality standards on the VCM. The study also revealed that many companies sought low-cost offsets, most of which originated from projects completed over ten years ago.

This indicates that much of the business spending on offsets has not effectively driven new investments in climate mitigation.

This suggests that the VCM’s unresolved quality issues stem not only from the supply side, but also from the demand-side, particularly from the purchasing decisions made by individual companies.

Gregory Trencher, Study Lead Author, Graduate School of Global Environmental Studies, Kyoto University

The findings are particularly concerning given that all but one of the 20 companies have set a net-zero climate goal, and several also offer services marketed as "climate neutral." These conclusions lend further support to the theory that many businesses may be "greenwashing" their records, creating a misleading image of their environmental impact.

Prevailing offsetting practices on the VCM cannot be seen as an effective substitute for robust government policies that mandate physical changes in the energy technologies, supply chains, and business models of large emitters.

Gregory Trencher, Study Lead Author, Graduate School of Global Environmental Studies, Kyoto University

Journal Reference:

Trencher, G., et al. (2024) Demand for low-quality offsets by major companies undermines climate integrity of the voluntary carbon market. Nature Communications. doi.org/10.1038/s41467-024-51151-w.