At the Cop28 climate summit last December, governments agreed to set up a new global carbon credit market under Article 6.4 of the Paris Agreement – and a host of fossil fuel firms and their middlemen are now trying to cash in by making their projects eligible for trading.

Developers applied for thousands of projects to be transferred over from the old discredited Clean Development Mechanism (CDM) to the new market that will be established, before the deadline of January 1 this year.

Most of these projects are for renewable energy – which, while good for the climate, have stirred debate. Critics argue that they do not need additional funding from selling carbon credits because they are profitable without it.

However, more controversial are ten projects Climate Home News has identified, based largely in Asia, which backed the construction of power plants that run on natural gas, one of the fossil fuels governments agreed to transition away from at Cop28. 

If approved by their host nations, the projects would transfer more than 10 million old gas-linked credits – equivalent to the reduction of 10 million tonnes of carbon dioxide (CO2) emissions a year – to the new Paris carbon market.

“These projects are entirely inappropriate,” said Carbon Market Watch researcher Jonathan Crook. “Some were registered as far back as 2009. It’s unreasonable to assume they expected to rely on revenue from a new market mechanism in 2024 – not to mention that these projects may lock in fossil fuel emissions and infrastructure for years to come, among other issues.”

Clean, cheap or fair – which countries should pump the last oil and gas?

The Integrity Council for the Voluntary Carbon Market was set up in 2021 in a bid to ensure that carbon credits deliver on the emissions reductions they have promised and have a positive impact for the climate. In its categorisation of different types of carbon credit, offsets issued for gas-fired power plants are given the worst ranking.

Similarly, BeZero, a ratings agency for carbon credit projects, looked at three of the CDM gas projects that have applied for transfer to the new market. It gave them a ‘C’ grade, meaning they “provide a very low likelihood” of reducing emissions by as much as they claim. 

It cited the “minimal impact” of carbon credit revenues on the project’s overall financial situation and the risk of methane leaks from gas infrastructure that would make the projects more polluting than asserted.

Chinese gas-fired plant

The biggest project is a gas-fired power plant built by China’s state-owned oil and gas company CNOOC and Japanese conglomerate Mitsubishi in 2010 in the province of Fujian, China, just across the sea from Taiwan.

To fire the plant’s four turbines, CNOOC and Mitsubishi imported gas from an Indonesian gas field called Tangguh, which they both had stakes in, through the CNOOC-owned Fujian gas import terminal.

In addition to the income they received from selling the gas, importing it through the terminal and then selling the electricity it produced, they also submitted an application to the CDM to develop and sell carbon credits linked to the plant.

By their own calculations, the plant would emit 2.3 million tonnes of CO2 a year when fully operational. But if they didn’t build it, they said the electricity would come from coal, emitting over 5.3 million tonnes of CO2 a year. So they claimed credits for reducing the amount of CO2 that would have entered the atmosphere by an annual 3 million tonnes.

Justifying this assumption, they said that oil was too expensive and zero-carbon alternatives were not viable as an alternative. Most of Fujian’s hydropower potential had already been tapped, while wind power was “just start-up” and “of seasonal nature”, they added. They did not even mention solar power  – now the cheapest electricity source.

However, coal’s main competitors in the province are not gas but nuclear and hydro, power sources that do not emit greenhouse gases. Wind power has also grown rapidly in the province since the gas-fired plant was built.

Lauri Myllyvirta, a senior fellow with the Asia Society Policy Institute, told Climate Home: “The premise that power generation growth would come from coal if a new fossil gas plant wasn’t built was never true and certainly is not true today.”

Mitsubishi withdrew from the carbon credit project in 2022. While CNOOC remains involved, the main project participant is now a company called Europe New Energy Investment Capital, run by a Chinese citizen called Dongquan Yang.

A spokesperson for CNOOC said the project “is out of the scope of CNOOC Limited’s business operations”. Asked how that was compatible with CNOOC Fujian Gas Power Co., Ltd being listed as an authorised participant, the spokesperson did not reply. 

Indian carbon-credit developer

Fossil fuel firms are not the only ones trying to monetise carbon offsets from existing gas power plants. Documents show that Indian company EnKing – which has since changed its name to EKI Energy Services Ltd and claims to be the world’s biggest developer of carbon credits – is involved in three of the Indian gas power projects identified.

Last August, Climate Home revealed that EnKing vastly overestimated the benefits of carbon offsets linked to cookstoves in rural India and helped sell those junk credits to oil and gas giant Shell.

Cooking the books: cookstove offsets produce millions of fake emission cuts

Working with fossil fuel companies, EnKing used a methodology (AM0025), under the old Clean Development Mechanism, to derive credits from the building of gas-fired power plants in India.

The successor to this methodology is still technically up and running – but Verra, one of the main international carbon credit verifiers, has declared it inactive due to lack of use.

According to Crook of Carbon Market Watch, it is “extremely unlikely” that this type of methodology will be applicable under Article 6.4, which will govern the new UN carbon market when it launches. EnKing did not reply to a request for comment.

‘Not good practice’

To oversee the new carbon market, governments have agreed to set up an Article 6.4 supervisory body, made up of government climate negotiators. But the rules agreed for it so far offer little power to reject old CDM credits from gas-fired power plants. 

The host countries of those projects – including China and India – could refuse to authorise them, but they could still be sold, branded as “mitigation contribution units” under Article 6.4.

These are a lower class of carbon credit agreed at Cop27 which do not require authorisation by the host country as it does not need to do a “corresponding adjustment” for them, which means wiping the credits’ emissions reductions from its accounts.

Carbon credits talks collapse at Cop28 over integrity concerns

Mitigation contribution units cannot be counted towards national emissions goals set under the UN climate process, but they can be bought by companies and used for other purposes. That means the firms trying to sell carbon credits from old gas power stations just need to find buyers to make a profit.

Crook said such deals “wouldn’t be good practice”. “Retiring these credits paradoxically rewards fossil fuel companies for locking in emissions,” he added.

The post Fossil fuel firms seek UN carbon market cash for old gas plants appeared first on Climate Home News.

Last month, Shell used rice farming carbon credits to offset a chunk of its annual emissions, claiming to reduce the “carbon intensity” of its fossil fuel products.

But experts have long argued that the sellers of these offsets are over-counting their emissions reductions and using accounting tricks to evade checks, as a Climate Home investigation showed last year.

These accusations led leading carbon standard Verra to suspend the projects early last year and launch an investigation. Shell took them off its website as a result.

But, although Verra’s review continues, on January 9 Shell quietly retired over a million credits produced by the suspended projects, meaning it counts the claimed emissions reductions towards its climate targets.

Rachel Rose Jackson, director of climate policy at Corporate Accountability, said Shell’s actions were “shameful, dubious and reckless against the backdrop of a deadly climate emergency”.

“To retire over one million offsets from projects actively under investigation reeks of bad faith and malintent”, she added.

Carbon Market Watch’s Jonathan Crook said Shell should have at least waited until Verra’s review had ended to see if there were problems with the offsets.

If the offsets do have problems then, he added, they “have no value from a climate perspective and using them towards net carbon intensity targets is totally inappropriate”.

Shell did not reply to detailed questions on these particular offsets. But a spokesperson said that the credits the company buys are “certified in accordance with independent standards and further screened through our due diligence process”.

Claiming to lower rice emissions

The idea behind the projects is that emitters like Shell pay for Chinese rice farmers to take measures to reduce their emissions that they wouldn’t otherwise be able to afford.

Rice is traditionally grown in flooded fields known as paddies. These have more bacteria than dry fields and the bacteria breaks down decaying plants, turning them into a potent greenhouse gas called methane.

To reduce the damage to the climate and save water, the project developers claimed they would pay farmers to periodically drain their fields. With less standing water, there are fewer bacteria and less methane.

A rice field irrigated with alternate wetting and drying methods

But opinions from experts and scientific literature suggest that lots of farmers already employ this technique across China, encouraged by the central government. So they do not need incentives from carbon credit to do so.

Carbon credit rating agency BeZero Carbon has given a Chinese rice cultivation project similar to Shell’s its lowest possible score. 

Its assessment says there is a “significant risk” that the emissions reduction measures are not additional to what would happen without the carbon credit money “due to the high level of government support for the project activities”.

A Climate Home investigation last year found that the project developers artificially divided up fields across several projects to pass them off as small-scale and avoid stricter checks.

Quality issues

These activities were initially given the green light by leading carbon standard Verra. But early last year, in response to concerns, it identified “quality issues”, launched a review and stopped the projects from producing any more credits.

But the suspension did not prevent offsets already in circulation from being sold or used to offset emissions.

When Climate Home approached Shell last year, the company said it was aware of Verra’s review and “would look carefully at the results when they are published”. 

The company took the offsets off a webpage dedicated to its portfolio of carbon credits offered to external clients, with a spokesperson saying this was “pending Verra’s review”.

Rich nations miss loss and damage fund deadline

Nearly a year later, the results of the review have still not been published and the projects remain on hold. But Shell retired 1.23 million carbon credits issued by those projects, offsetting emissions equivalent to three gas-fired power plants running for a year.

A Shell spokesperson said the company had “recently retired a number of carbon credits as part of our net carbon intensity target”.

Finding a way out

Shell’s involvement in these projects is not just as a buyer. The schemes were originally set up by a Chinese firm but four years later Shell signed a series of agreements to become its exclusive agent.

The role granted Shell the right to either claim the credits against its emissions or sell them to other companies, potentially profiting from their sale.

Italy launches ‘ambiguous’ Africa plan fuelling fears over fossil fuels role

Before Verra suspended the projects, only a quarter of the credits issued by the projects had been used, primarily by Chinese state-owned oil company PetroChina. 

Shell retired the vast majority of the remaining credits on January 9. Carbon Market Watch’s Crook says it would appear Shell “had sunk money into the projects and had these credits sitting on their books”.

“Perhaps they have not been able to find any buyers since the projects were put on hold”, he added. “Or perhaps they are doubting that the review will be positive and it will be difficult to sell or trade any of these credits in the future. So they went ahead and used them themselves”.

Shell involved in rule-making

While Verra probes the credits, it has taken the rare step of banning any further use of the rice farming methodology under which the projects were developed.

The register is now working on a new rulebook for future rice farming offsets. It says it will allow project developers “to credibly achieve emission reductions and generate high-quality credits”.

To advise them on this, Verra has appointed an Indian company which is part of Shell, raising concerns about conflict of interests.

Crook described this as a “recurring issue” in the carbon credit world. He said: “You have actors who wear all these different hats. They can sometimes develop methodologies, transact carbon credits and/or use them towards their own targets, potentially based on rules they helped develop. It raises real questions around conflicts of interest and integrity.”

A Shell petrol station. Photo credit: Tomcat MTL/Flickr

A Verra spokesperson told Climate Home it “takes potential and actual conflicts of interest very seriously” and that methodologies “undergo an extensive review process before they are finalised” and at each stage “all stakeholders, including the public, have an opportunity to evaluate and comment”. 

They said: “This process is designed to promptly identify any issues with the methodology, including the opportunity to identify any perceived conflicts of interest”.

Investigation ongoing

The spokesperson said Verra does not comment on specific projects under review to avoid influencing the outcome of the investigation.

“The steps in a review, as well as the timeline for completing the review, depend on the underlying facts and circumstances, the complexity of the issues, the cooperation of third parties and other factors”, they said.

“A review may take several weeks or months to complete,” they added, “while every review is different, Verra aims to conduct an appropriately scoped review as expeditiously as possible.”

A spokesperson for Shell said: “We retire credits to compensate emissions, including those associated with the energy our customers use in transport, homes, producing goods and providing services. This approach complements our activities to avoid and reduce emissions from our own operations”.

The post “Shameful”: Shell uses carbon credits under investigation to meet climate targets appeared first on Climate Home News.

Climate Home analysis shows that renewable energy investments make up four-fifths of all projects seeking a transfer from the old Clean Development Mechanism (CDM) to the new system under article 6.4 of the Paris Agreement.

Experts have long written off the vast majority of credits produced from renewable energy as junk because they often already provide the cheapest sources of power in most of the world and selling offsets to fund them does not have any additional impact on emissions.

Some of these projects have also been accused of human rights violations such as forced evictions for the construction of large dams.

Harry Fearnehough from New Climate Institute told Climate Home that “it could definitely undermine the credibility of the mechanism because, while there’s still uncertainty over what it will look like, as a starting point you have a huge supply of low-quality offsets that are potentially available at a very low cost”.

Established in 1997 by the Kyoto Protocol, the UN’s CDM allowed rich countries to meet some of their climate obligations by financing emission-cutting projects in poorer ones.

The programme has received widespread criticism for its patchy human rights record and for failing to deliver promised climate benefits. Supporters of a new mechanism currently being developed under article 6.4 of the Paris Agreement say it is an improved, higher-integrity successor to the CDM.

Winning a lifeline

Countries are still wrangling over many aspects of the future market, but one much-debated issue was settled at Cop26 in Glasgow.

Under pressure from Brazil, Russia, China and India, countries agreed that a vast number of projects originally created under the CDM were allowed to migrate to the new mechanism. This handed them the chance to significantly extend their lifespan and their potential credit sales.

Project developers had until the end of December 2023 to fill in a simple two-page form and submit their transition requests.

Azerbaijan appoints fossil fuel execs and scandal-hit officials to all-male Cop29 committee

Of the nearly 3,500 eligible projects, over a third (1,284) seized that opportunity.

In total, the projects that have requested transition by the deadline could supply 1.4 billion tonnes of carbon credits between 2021 – the start year for accounting purposes set by the regulation – and 2035, according to a preliminary analysis by NewClimate Institute shared with Climate Home. That is more than the annual CO2 emissions of Germany.

While a relatively small share of the projects opted in, they account for approximately three-quarters of the potential supply of carbon offsets.

That’s because some of the programmes seeking to move could produce an outsized volume of credits. The two biggest ones – a hydro plant and a nitrous oxide emission reduction scheme, both in Brazil – each have the potential to issue around 6 million tons of offsets a year. That’s similar to the annual emissions of Sierra Leone.

Fearnehough says that “very few, if any, of these credits are genuinely likely to be additional”, going beyond what countries would do anyway without the carbon finance.

“A key reason for this is that the CDM was really only scheduled to run up to the end of 2020,” he added. “No investor would have made a decision purely based on expecting revenues from credits in the 2020s because, quite simply, there was no political indication that the possibility to move over to a new mechanism would exist”.

Climate and social concerns

That is particularly true for the renewable energy projects vastly dominating the list. Experts say they are highly likely to fail the additionality test, meaning their credits do not bring any climate benefit. When used to compensate for real emissions elsewhere, they result in more greenhouse gases entering the atmosphere.

The reason is simple. Many renewable offsets came into existence just as solar and wind power were becoming the cheapest source of energy in most countries. After years in operation, they are likely to be profitable from the sale of the electricity alone, without the need for additional revenues from carbon offsetting.

A 2016 study commissioned by the European Commission concluded that the vast majority of these projects “are not providing real, measurable and additional emission reductions”.

The Jirau hydropower plant is located on the Madeira River, in Brazil. Photo: UHE em Jirau/Flickr

Hydropower projects carry even more concerns as their implementation is often marred by human rights problems. Vulnerable communities relying on rivers for their livelihoods are particularly at risk of forced displacement.

The largest project applying for the transition to the new mechanism – the Jirau mega-plant in Brazil’s Rondonia state – is a case in point.

Over the years the project has faced multiple accusations of stoking tensions, pushing indigenous people away from their territories and breaching the rights of the workers that built it. Engie, the project’s developer, previously rejected any accusations.

Other categories of activities featuring prominently on the transition list have raised major concerns in the past.

Credits from projects which claim to cut or stop the emission of industrial gases such as nitrous oxide (N20) and trifluoromethane (HFC-23) were banned by the EU in 2013 for use in its emission trading system.

That’s because, according to studies, they created “a perverse incentive” to increase the production of gases depleting the ozone layer.

Countries’ authorisation dilemma

While the CDM projects have now made their move and requested transition, they are not automatically through to the new system.

Standing in their way is the need to receive a formal authorisation to proceed from the countries where their activities are located. Governments have until 2025 to make a decision and, experts predict, it won’t be a straightforward one.

“A la carte menu”: Saudi minister claims Cop28 fossil fuel agreement is only optional

“It’s not a guarantee that all host countries will want to approve all of these projects”, according to Jonathan Crook from Carbon Market Watch, who said there would be contrasting forces at play.

“If they authorise them, they have to do corresponding adjustments, which they might not be so keen on since those emission reductions will be deducted from their [NDC climate plans]. But, at the same time, most projects are located in very large countries and it may not make a big difference to their plans”.

The answer to this dilemma will rest primarily in the hands of China, India and Brazil. Between them, the countries host around three-quarters of all projects that are looking to migrate under article 6.4.

Spotlight on three countries

Observers of climate talks said their governments all pushed for rules that would grant a lifeline to as many CDM projects as possible when those negotiations took place at Cop25 in Madrid and Cop26 in Glasgow. But, since then, they have been conspicuously quiet on the topic.

Climate Home approached the respective carbon market authorities in the three countries but did not receive a response at the time of publication.

Trishant Dev is a carbon market expert at the Delhi-based Centre for Science and Environment. He expects there will be “a lot of pressure on the Indian government to let projects through from the carbon industry, which is thriving in the country”.

But, at the same time, he thinks the government will take time to properly understand all the pros and cons of allowing such authorisations. “It’s a chaotic process. Countries want to make sense of what the final outcome of the article 6 discussions will be and how that will interact with domestic carbon markets they are constructing”, he said.

Who will buy the credits?

Article 6 talks collapsed at Cop28 last December after attempts led by the EU to introduce tighter controls and further integrity safeguards had been rebuffed by the US. Negotiators will try again this year to hammer out a deal on many technical issues that need to be resolved before trading of offsets can begin.

Meanwhile, questions also remain on who will be interested in using those credits, once the market is up and running. Countries, corporations and individuals could all be potential buyers.

Comment: High stakes for climate finance in 2024

New Climate Institute’s Fearnehough said there doesn’t seem to be much appetite from countries based on what they are saying in public. “But it’s hard to predict what will happen when suddenly the offsets are available and you have an easy option to meet your NDC targets”, he added.

The credits may gain more interest from polluting companies. Banks, airlines and industrial heavyweights keep buying large volumes of questionable renewable energy offsets despite the known concerns, a Bloomberg investigation found. Dressing them up with the UN stamp of approval may add to the appeal.

Carbon Market Watch’s Crook believes much will depend on the transparency of the system – something still largely unknown. “If there is a very transparent register disclosing who purchased how many credits and for what purpose, that would disincentivize companies from transacting low-quality credits out of reputational fears,” he said. “But if it isn’t transparent, buyers may not be as careful with due diligence or may be even encouraged to buy bad credits since there won’t be scrutiny”.

A previous version of this article stated that projects requesting transition could provide 700 million tonnes of credits until 2035, while the correct figure is 1.4 billion tonnes. That was due to a computational error in the model used by NewClimate Institute for their analysis of which we were informed after publication.

The post Junk offset sellers push to enter new UN carbon market appeared first on Climate Home News.

But not all its people. Because of the USA’s huge emissions, financial power and  electoral system, our hopes lie largely on those in a few swing states – like Pennsylvania, Wisconsin, Georgia and Arizona.

In 2020, we spoke to grassroots campaigners trying to boost climate voter turnout in Georgia. They were crucial in swinging the Senate then, which allowed a huge climate bill to be passed in 2022. The planet needs the likes of them again.

1.Who will win the US election?

Of all the world’s elections, the USA’s is the one that matters the most for the climate. The policies of the world’s second biggest polluter swing wildly depending on who is in the Oval Office.

The vote on November 5 is likely to pit Joe Biden against Donald Trump. Polls and bookmakers currently suggest Trump is more likely to win.

That would put a major dampener on climate hopes ahead of Cop29, on November 11.

We know where both men stand. As president, Trump withdrew the US from the Paris agreement. Biden re-joined it on his first day in office and pushed through $369bn of green spending.

On the same day as the Presidential election, Americans will also vote for all the seats in the House of Representatives and a third of those in the Senate.

Republican control of the House of Representatives is a big barrier to US climate finance. Given Democratic turnout is usually higher when there’s a Presidential election, there’s a chance Democrats could win control and at least deliver on their $3 billion promise to the Green Climate Fund.

Donald Trump being sworn in as US president in 2016 (Pic: White House photo)

2.What will the new global finance target be?

Compared to fossil fuels, finance was low profile in 2023 – to the anger of developing countries.

But 2024 should be its year, as countries have to negotiate a new finance goal for 2025 onwards by the time they leave Cop29 in Baku in November.

Expect debate over who should pay and who should receive, as well as how much should be given and to what.

Separately, France and Kenya have launched a taskforce on how to get money for climate which isn’t just from governments.

Options include taxes on international shipping, aviation, financial transactions and fossil fuels.

The US, Germany and others will continue their push to squeeze more money out of the World Bank and International Monetary Fund for climate.

3.Will emissions finally start going down?

Almost every year so far, the world’s humans have pumped out more greenhouse gas than any year before, sparking depressing headlines about “record emissions”.

But 2023 could well be the last year of this.  A report by Climate Analytics finds a 70% chance that emissions will peak in 2023 and start falling in 2024.

The International Energy Agency thinks something similar – but the US government’s forecasters are more pessimistic.

Whether emissions peak or not, the amount of greenhouse gas in the atmosphere will keep going up. A bath tub doesn’t empty because you put less water in it each year – you have to pull the plug out.

Climate Analytics says emissions are likely to peak this year but how fast they decline depends on policies (Photos: Climate Analytics)

4.When will the loss and damage fund start spending?

Before rich nations agreed to a loss and damage fund at the end of 2022, they argued that it would take years and years to set up – too long to be useful.

After governments agreed on most of the details in 2023, 2024 may be the year they are proved wrong.

Regional groups are appointing their board members to the fund now.

Then the board needs to meet, agree policies, receive the money it’s been promised and start dishing it out.

What’s for sure is that there will be loss this year and there will be damage – droughts, heatwaves, storms and more. So the victims can’t wait.

5.Will countries firm up adaptation targets?

After two years of talks, at Cop28 this year governments agreed to draw up targets on adapting to climate change in areas like healthcare, food security and protecting nature.

They will now spend two years discussing whether there should be numbers attached to those targets and what those numbers should be.

Developing countries want the numbers – like a target to reduce adverse climate impacts on agricultural production by 50% by 2030.

But developed nations argue numbers can’t show how well you’ve adapted to climate change.

They will hash out this debate at Bonn in June and at Cop29 in Baku in November.

Seaweed farmers in Tanzania are having to move into deeper waters as seaweed-killing bacteria thrives in warming seas (Photo: Natalija Gormalova / Climate Visuals Countdown)

6.Will governments get rid of fossil fuel subsidies?

Since 2009, governments have kept promising to get rid of subsidies for fossil fuels – but not really doing so.

At Cop28, a dozen nations including France and Canada joined a coalition to try and finally turn this promise into action.

They committed to drawing up an inventory of their fossil fuel subsidies by Cop29 in November.

Inventories can lead to action. When a Dutch inventory revealed they were spending $40bn a year subsidising fossil fuels, protesters braved water cannons to block off the country’s parliament, rocketing the issue up the agenda. Will the same happen elsewhere?

7.Will coal-to-clean deals keep disappointing?

Just energy transition partnerships (Jetp) faced a brutal reality check in 2023, as investment blueprints were finally unveiled.

Rich countries are offering most of their money as loans not grants. Ambitious plans to switch off coal plants early in South Africa, Indonesia and Vietnam are now much more uncertain as a result.

As the money starts flowing in 2024, the implementation of the first few projects should give a flavour of how effective and just the transition will be.

The energy transition deal aims to wean Indonesia off coal, which now takes up nearly half of the country’s electricity mix. Photo: Kemal Jufri / Greenpeace

8.Will new treaty target plastic production?

Government negotiators are currently debating a draft of a new plastics treaty, which they hope to finalise by the end of 2024 – after meetings in Ottawa in April and Busan at the end of November.

One option being fiercely debated is whether to set limits on the amount of plastic each country can produce.

While the majority of European and African countries want limits, the US and Saudi Arabia are resistant.

Plastics are made from oil and gas. With electricity systems and vehicles transitioning to renewable electricity, oil and gas companies see plastics as a lifeline which this treaty could take away.

9.How will companies prepare for the EU’s carbon border tax?

Many developing countries have long seen the European Union’s carbon border tax and elements of the USA’s Inflation Reduction Act as unfair protectionist trade measures, dressed up in concern for the environment.

These complaints were high-profile at Cop28 – with China and others trying to get them put on the official agenda. The United Nation’s trade chief – Costa Rica’s Rebecca Grynspan – recently echoed these concerns and they’re likely to keep rising up the agenda in 2024.

The EU’s carbon border tax incentivises companies making certain polluting products outside of the EU to clean up their manufacturing – or at least to say they’re cleaning up. As the 2026 start date for the tax nears, we expect more stories about companies greenwashing to lessen their tax burden and about the impact of the tax on ordinary people in developing countries, aluminium workers in Mozambique for instance.

Bratsk aluminium smelting facility in Russia will be affected by the EU’s border tax (Photo credit: UC Rusal/WikiCommons)

10.Will carbon markets gain integrity?

Carbon markets – and the voluntary one, in particular – are facing a credibility crisis. Scandal after scandal has put the spotlight on the wildly exaggerated claims and environmental and social issues of many projects. Demand has slowed down as a result.

The Integrity Council for the Voluntary Carbon Market – a new regulator-like body – is trying to steer buyers away from dodgy offsets and onto quality ones. It is expected to apply its quality label on the first batch of credits at the start of the new year.

After talks collapsed at Cop28 earlier this month, Article 6 negotiations will resume in Bonn in June. The US and EU are at loggerheads. Another bitter battle seems likely.

The post Ten climate questions for 2024 appeared first on Climate Home News.

Like every year, the quick answer is more than nothing but less than enough. To dissect that in more detail, here are our six takeaways from the year in climate.

1. Oil and gas felt the heat

Phasing out or down fossil fuels? Abated or unabated? Scaling up renewables, carbon capture and storage (CCS) and techno solutions. Energy dilemmas, and their buzzwords animated international talks in 2023.

The headline breakthrough came at the end. The Cop28 agreement included for the first time a goal to move away from all fossil fuels in energy systems.

It was the centrepiece of a bigger package that included a call for the tripling of renewables and doubling energy efficiency by 2030.

But it also gave a platform to “transitional fuels” (read gas) and CCS, which some politicians and campaigners regard as “dangerous loopholes” for continued fossil fuel use.

Cop hosts the UAE and most developed countries welcomed the deal as “historic”. For small island states and other vulnerable nations it did not go far enough.

Like most Cop agreements, it was the result of a hard-won compromise struck in overtime – after Saudi-led opposition threatened to leave oil and gas out of the text altogether.

Cop28 president Sultan Al Jaber applauds in the closing plenary (Photo: Flickr/Cop28/Christopher Pike)

The road to Dubai had been equally bumpy. The G7 saw fights over gas and coal with hosts Japan attempting to push controversial strategies like ammonia co-firing.

The G20 in Delhi offered a dress rehearsal of what was to expect at Cop with broad agreement over renewables and bitter disputes over fossil fuels.

In the background, Sultan Al Jaber, oil executive turned Cop president, garnered constant curiosity and scrutiny. He was initially adamant that the focus should be on emissions and not on the fuels themselves, raising more than an eyebrow. But, amid a series of controversies and apparent slip-ups, his position gradually shifted.

Al Jaber contended the Dubai deal would be enough to keep the 1.5C goal in sight. A day later he told the Guardian that Adnoc, the oil firm he runs, would press ahead with a massive oil and gas expansion.

Other rich nations, like the US, keep him company on that front. Such chasms between words and actions will continue to be closely watched.

2. Slow progress on climate cash

The other side of the coin from the fossil fuels debate is finance. When rich countries ask their developing counterparts to sign on to ambitious energy transition plans, many reply: ‘who is going to be paying for that?’

When governments wrangled over targets for adapting to climate change, similar questions were asked.

A clear answer was never forthcoming. We might get more clarity in 2024, with governments set to discuss, and hopefully agree on, a new collective goal at Cop29 in Baku in November.

But a lack of trust has taken root. Rich countries have so far not respected the previous commitment to provide $100 billion a year in climate finance to vulnerable countries.

That was “likely” met in 2022, two years after the original deadline, according to the OECD. We will be looking out for the receipts for confirmation.

Countries were also invited to refill the coffers of the Green Climate Fund. The four-yearly replenishment round got off to a decent start, but an underwhelming pledging summit in October put ambition at risk.

Then the US landed in Dubai in December with a $3 billion funding promise. It brought total pledges to $12.8 billion – setting the GCF on course for a “middling” level of ambition.

But that comes with a gigantic caveat. To deliver the dollars, the Biden administration will have to persuade Republicans in Congress or take control of it by winning elections. Both are tall orders.

Graphic: Joe Thwaites/NRDC

Money talked outside UN diplomacy too. Lots of attention centred on the much-touted reforms of multilateral development banks inspired by the Bridgetown Agenda.

Progress has been slower than many were hoping for. The World Bank lowered its equity-to-loan ratio, freeing up $4 billion a year.

It also installed a new more climate-aware president, officially changed its mission statement and promised pauses in debt repayments for disaster-hit countries. Encouraging steps, but far short of the trillions of dollars developing countries have been calling for.

3.US-China climate talks thawed

Formal diplomatic relations between the world’s biggest polluters suffered an ice-age-like deep freeze in the latter part of 2022 after US Congressional leader Nancy Pelosi visited Taiwan. Climate talks were collateral damage.

But 2023 saw a slow but steady thawing. It culminated in a momentous bilateral meeting held in Califonia’s Sunnylands resort a few weeks before Cop28.

The countries’ respective climate envoys, John Kerry and Xie Zhenhua, agreed to revive a climate working group and sketched out the outline of a potential alignment in the upcoming negotiations.

It proved decisive. In particular, their joint support to “accelerate the substitution for coal, oil and gas generation” helped find the right formula to unstick the thorny energy language in Dubai.

U.S. Special Presidential Envoy for Climate John Kerry shakes hands with his Chinese counterpart Xie Zhenhua before a meeting in Beijing, China July 17, 2023. (Reuters/Valerie Volcovici/ File Photo)

The special personal relationship between Kerry and Xie was a big factor in these improved relations.

When formal diplomacy was on hold, the two kept talking. Xie even brought his grandson to Dubai because the 8-year-old wanted to say “happy birthday to my good friend Mr. Kerry”, who turned 80 during the summit.

But Cop28 was most likely their last hurrah together. Xie is set to retire soon ending a 16-years on-and-off stint. He is likely to be replaced by Liu Zhenmin, a former vice foreign minister.

Kerry has been vague about his future with US elections looming large on the horizon. He recently told Reuters that he would “continue as long as God gives me the breath and work on it [climate] one way or the other”.

4. Carbon credits terrible year

To say 2023 won’t be remembered as carbon credits’ finest year is an understatement. It began with a now-infamous report pouring cold water on forestry-based offsets and ended with talks over Article 6 falling apart spectacularly in Dubai.

In between, scandal after scandal dented the reputation of carbon markets. From the collapse of the world’s second largest project to the suspension of dozens of schemes over exaggerated claims or alleged human rights violations. The blowback prompted even some of the most enthusiastic corporate credits buyers to cool on the idea.

Co-chairs of negotiations at Cop28 on carbon trading rules
(Photo: Flickr/Cop28/Kiara Worth)

Many carbon market supporters had pinned hopes on Cop28 for a spot of good news. Ahead of the talks, it looked like governments could finally fire the starting gun on the creation of a long-awaited global carbon market under the Paris Agreement.

But those hopes were misplaced. Negotiations ended without an outcome following a bitter disagreement over integrity rules between the US and the EU.

Leaping on the string of failures, some critics have been pushing for the whole concept of carbon offsetting to be chucked into the dustbin of history.

But others claim carbon markets provide an essential source of finance for developing nations, love it or loathe it. They are trying to build them back up from the nadir with more stringent climate provisions and better social safeguards.

5. Coal-to-clean deals reality check

As  promises turned into proper plans, Just energy transition partnerships (Jetp) hit the cold wall of reality in 2023. The three initial deals – with South Africa, Indonesia and Vietnam – have all been beset by issues.

The type of money put on the table by rich nations has been a source of common grievance. Grants make up a very small percentage of the funding packages, fuelling fears over debt. As a result, recipient countries revised climate targets downwards.

The energy transition deal aims to wean Indonesia off coal, which now takes up nearly half of the country’s electricity mix. Photo: Kemal Jufri / Greenpeace

Indonesia has watered down coal retirement plans. It now aims to start shutting down on-grid plants before their scheduled closure no earlier than 2035 – five years later than originally planned.

So-called captive plants, that power specific industries, have also caused a massive headache. Wrong assumptions meant a much lower number of them were baked in the original modelling. Struggling to find a way out, the Indonesian government has so far excluded them – and their emissions – wholesale from the Jetp blueprint.

Vietnam’s investment plan, unveiled during Cop28, has no timeline at all for retiring coal. It expects instead to operate plants “flexibly” and to rely on the controversial co-firing of biomass and ammonia with coal.

The authoritarian Vietnamese government has also all but buried the ‘just’ aspect of the partnership. It has jailed five environmentalists on tax evasion charges, which human rights groups say are trumped-up accusations.

Vietnamese campaigner Hoang Thi Minh Hong was sentenced to three years in prison. Photo: CHANGE/350Vietnam

In South Africa, the transition is meant to be reasonably easier as its Apartheid-era coal plants are nearing retirement. But crippling blackouts prompted President Cyril Ramaphosa to say the timetable “must be relooked at” earlier this year.

The plan is also facing fierce opposition from the powerful coal lobby. Our investigation with Oxpeckers discovered the sector partnered with politicians and even managed to water down or delay key policies in a bid to sink the scheme.

6. Loss and damage fund’s good start

As the Cop27 president gavelled the landmark decision on a loss and damage fund in Sharm-el-Sheik, a question loomed large: will countries manage to agree on how it should work within the following 12 months?

‘Yes, definitely’ was the answer.

Governments adopted the decision on operationalising the fund on the very first day of Cop28. It gave the summit’s president Al Jaber an early win and prevented loss and damage from being used as a bargaining chip in the ensuing negotiations.

The success is down to the painstaking work of a 24-member transitional committee that hashed out the details over five gruelling meetings. At the outset, developed and developing countries were at odds on just about everything: who should benefit from the fund, who is expected to pay into it, where it’s meant to be hosted.

Distances gradually narrowed and a compromise deal was eventually struck a month before the climate summit. The World Bank will initially host the fund for four years, despite strong resistance to its involvement from developing nations.

Campaigners at Cop27 call for a loss and damage fund to be set up (Photo credit: Kiara Worth/UNFCCC)

All developing countries “particularly vulnerable” to the effects of climate change will be eligible to benefit from the mechanism. However, the definition of vulnerability – one of the thorniest issues – has not yet been defined.

The decision “urges” developed countries to provide financial resources to the fund, while other nations are only “encouraged” to do so “on a voluntary basis”. Rich nations have been strongly pushing to broaden the donor pool and will likely keep up their efforts.

Pledges from a slew of countries should inject over $700 million for the start-up of the fund. The UAE won plaudits by committing $100 million. The US was lambasted for offering a paltry $17.5m, despite being the world’s largest economy and biggest historical emitter.

The post Six takeaways from 2023’s climate change news appeared first on Climate Home News.

Talks over Article 6.2 of the Paris Agreement – allowing for bilateral deals – collapsed in Dubai following a bitter fight over integrity between the European Union and the United States.

But willing countries can still move ahead with agreements in a vacuum that is increasingly being filled by independent certifiers from the voluntary market. Some observers are raising questions on whether they are fit for purpose.

Transatlantic fight

When the EU led a push at Cop28 for tighter controls over the bilateral exchange of carbon credits, one of its main goals was to restrict the role of operators from the voluntary carbon market.

In the year leading up to the summit, criticism of the market, which sells offsets mainly to corporate emitters, intensified. The climate credentials and the social and environmental integrity of several of its projects were being questioned. The nascent mechanism should draw a blank slate – the EU argued – and rely on a new standard directly supervised by the UN.

US Climate envoy John Kerry is a major proponent of carbon markets. Photo: COP28 / Christophe Viseux

The US went into the talks with a polar opposite vision. It wanted a light-touch approach built on the existing voluntary standards, accepting their requirements and using their infrastructure, according to a leaked EU memo prepared before Cop28 and first reported by The Lever.

The two forces clashed during deeply divisive marathon negotiations in Dubai, failing to find common ground. “Views have become more polarised,” said Pedro Martins Barata, an expert at EDF and a former carbon markets negotiator. “There’s more dissent on an almost philosophical level on what carbon markets should be like.”

After no deal

As the summit drew to a close, the Cop presidency put a ‘take it or leave it’ text on the table. It contained provisions the EU and other groups found unacceptable and was roundly rejected. Negotiators will try again to land a deal at Cop29 next year.

In the meantime, countries can still go ahead with bilateral deals under an initial rulebook agreed two years ago in Glasgow. “Nothing that happened in Dubai prevents countries from moving forward and some will certainly do so,” said Martins Barata.

Switzerland is developing projects with Ghana, Thailand and Vanuatu that will help achieve its climate goals. Singapore inked a similar deal with Papua New Guinea during the summit.

How Russia won a ‘dangerous loophole’ for fossil gas at Cop28

The political stalemate has opened up a big opportunity for players from the voluntary market. They are expected to take a leading role in filling the regulatory gap, experts told Climate Home.

“If a voluntary standard or its projects are given preference by certain countries, it will be a significant stamp of approval and could generate lots of investment,” said Jonathan Crook from Carbon Market Watch.

Voluntary market eyes opportunity

Some are wasting no time. Singapore, a pioneer in bilateral offsets, is partnering up with Verra and Gold Standard, the leading carbon credit registers. Their goal is to create a “playbook” with rules and procedures for countries to use existing carbon credit programs to achieve their climate plans under Article 6.

Hugh Salway, a senior director at Gold Standard, sees an important role for existing operators to speed up the implementation of deals. “A government can create its standard which would take time to develop and would be complicated to maintain,” he told Climate Home. “Or it can use our standard which is already set up with rules, methodologies, and auditors.”

‘Car without wheels’: Adaptation playbook lacks finance target

Another register, the Qatar-based Global Carbon Council (GCC), is also working with a series of credits-producing countries, including Oman and Ghana. They are looking to sell article 6.2 offsets in a first-of-its-kind auction at the beginning of 2024.

“We have been doing this for years, we have the necessary capacity to make it work,” said Kishor Rajhansa, chief operating officer of GCC. Limiting the role of the private sector “would kill off the potential of article 6.2,” he added in an interview at Cop28.

Integrity concerns raised

But some observers are concerned by an outsized influence of existing standards given their chequered record.

Some flagship projects certified by Verra have come under fire for making exaggerated climate claims and for causing alleged environmental and human rights violations. The GCC has been accused of breathing new life into offsets that hardly make any difference to global emissions and would not be accepted anywhere else.

Using voluntary market systems “may simplify things, but it raises many questions about how suitable it is, both for countries and the climate, given all the issues that have been flagged,” said Carbon Market Watch’s Crook.

This article was updated on 20/12/24 to add that the leaked EU memo was first reported on by The Lever.

The post Countries go ahead with carbon deals despite Cop28 standoff appeared first on Climate Home News.

Countries failed to agree on key rules to trade offsets bilaterally and to kickstart a long-awaited global UN-sanctioned market.

Two opposing, and ultimately irreconcilable, forces fueled tense marathon negotiations regularly stretching into the early hours. Getting the system up and running as quickly as possible, on one hand, while ensuring integrity and transparency on the other.

The US championed what observers described as a “light-touch, no-frills” approach to regulations. That would hand a prominent role to private sector players from the much-criticised voluntary market.

A bloc led by the EU along with African and Latin American states pushed back. They wanted stronger checks and balances and a loosening of confidentiality clauses that could have prevented scrutiny.

The risk many highlighted is that, with a weak framework, the new mechanism could become a dumping ground for junk credits.

After late-night informal negotiations tried to salvage a deal, the presidency put “take it or leave it” text on the table. It contained confidentiality provisions many found unacceptable and was roundly rejected. Negotiators will try again to land a deal at Cop29 next year.

Markets in limbo

The collapse leaves bilateral deals in limbo. Several countries have struck preliminary deals to buy carbon credits from others to meet their emissions targets. Switzerland signed its first such agreement with Peru back in 2020, while Singapore inked a deal with Papua New Guinea on Friday.

Controversial Emirati startup Blue Carbon is also aiming to trade credits under the mechanism from several African and Caribbean nations.

The breakdown in talks also sends rule-makers for a new global carbon market back to the drawing board.

Over 12 months and several meetings, a technical body had drafted rules on methodologies underpinning projects and on the eligibility of removal activities. But countries did not adopt the body’s recommendations.

“Trading carbon credits requires strong environmental and human rights guardrails,” said Gilles Dufrasne, policy lead at Carbon Market Watch. “The text on the table just didn’t provide this. It would have risked reproducing the mistakes of voluntary carbon markets, and by rejecting it, negotiators made the best out of a bad situation.”

Mark Kenber, executive director of the Voluntary Carbon Market Integrity initiative, said the lack of agreement would make it harder to achieve the goals of the Paris Agreement.

“For the market to fully develop in the next two years as the UN and governments have called for, policymakers can draw on the foundational work of the VCMI and IC-VCM to accelerate the transparency and integrity agenda, developing high-integrity VCM and Article 6 markets that deliver the finance that makes ambitious global action possible,” he said in an emailed statement.

Non-market tussle

Nor was significant progress made on non-market approaches to cross-border cooperation that don’t involve an exchange of carbon credits.

Bolivia lamented the lack of attention given to these tools and threatened to impose a moratorium on market mechanisms if that was not rebalanced. Developing countries also fought back against attempts by the European Union to include carbon taxes and levies among non-market activities, observers said.

On this item, there was a procedural outcome “encouraging” countries to continue work on identifying non-market approaches.

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Blue Carbon plans to take over forested areas the size of the United Kingdom and sell carbon credits from their conservation under a mechanism established by the UN. The UAE firm, chaired by a member of Dubai’s royal family, has been on a deal-making spree with African governments to make that happen.

The 58-year-old Italian is no forestry expert, but – he says – he was tapped by the company right after its launch a year ago because of his decades-long technology experience. In Dubai, Landi is known as the owner of a cybersecurity firm devising fully encrypted phones.

In his native country, Landi is a wanted man. He was convicted in two separate trials for a bankruptcy fraud that sank one of Italy’s largest telecommunications companies and left over 2,200 people without a job nearly 15 years ago.

Landi’s advisory role in Blue Carbon is likely to fuel concerns over the integrity of a company bidding to become a large player in a sector already plagued by environmental and social risks.

Blue Carbon did not respond to emailed questions. After Climate Home contacted the company, Landi emailed the reporter in a personal capacity and agreed to a video call. He rejected the legitimacy of the court judgments against him, alleging that Italian judges ruling over his case were corrupt.

Bankruptcy fraud

Samuele Landi was the founder and chief executive of Eutelia, an Italian company providing landline and internet services to millions of users across the country in the early 2000s.

The firm, which had ballooned in size through acquisitions, seemed set on a meteoric rise. But in 2008 cracks started to appear. Drowning in debt, Eutelia asked the government to place most of its workers in a state-funded job retention scheme while trying to restructure its activities.

But at the same time, according to court records, Samuele Landi and other senior executives illicitly moved funds worth dozens of millions of euros outside of Eutelia and into shell companies mainly based outside of Italy.

Shades of green hydrogen: EU demand set to transform Namibia

Eutelia went bankrupt. By the time Italian police moved in to arrest Landi in mid-2010, he had relocated to Dubai. At the time Italy had no extradition treaty with the UAE. Landi told Climate Home News he did not move to Dubai out of fear of being arrested but because he was looking for more freedom.

Landi never returned to Italy. Two separate trials against him and other executives went ahead in his absence. In one Samuele Landi was handed an 8-year prison sentence on bankruptcy fraud charges in 2020. In a second one, stemming from the bankruptcy of a company linked to Eutelia, the court of appeal in Rome sentenced him to 6 years and six months in prison at the end of October.

Landi said he had referred the first case to the European Court of Human Rights, claiming it was an unfair trial. He said he is going to appeal against the second sentence to the Italian Supreme Court. “There is no evidence. I did not steal one single euro”, he told Climate Home.

Liberian diplomat

While his legal troubles rumbled on in Italy, Landi started a new life in Dubai. He set up a cybersecurity company and became a diplomat, after being appointed as consul general in the UAE for the African state of Liberia.

Landi told Climate Home he “developed the diplomatic relations between the Liberian and the UAE governments”, which resulted in the construction of roads, hospitals and sports centers in the African nation over the last few years.

It is through this role that he first came in contact with people from Blue Carbon. Landi said he accompanied a delegation from Liberia to a meeting with Sheikh Ahmed Dalmook Al Maktoum, a member of the Dubai royal family and chairman of Blue Carbon. “When they formed the company a year ago they asked me to be their advisor”, Landi said. “I help them with information technology. Sometimes they call me to make evaluations on IT solutions.”

A screenshot from the Blue Carbon website

Liberia is one of the African countries that have signed a raft of memorandums of understanding with Blue Carbon in the run-up to Cop28, alongside the governments of Kenya, Angola, Zimbabwe, Zambia and Tanzania. Landi said he was not directly involved in the negotiations between Blue Carbon and Liberia.

Blue Carbon’s African scramble

The deals, which are not yet definitive, could see the UAE firm gain control over more than 30 million hectares of forests across the countries. In Zimbabwe alone, it is set to secure rights over a fifth of its total landmass.

Blue Carbon plans to set up forestry protection schemes, produce carbon offsets on a never-seen-before scale and sell them to polluting governments and companies.

The firm is looking to operate under a new mechanism established by Article 6 of the Paris Agreement, which is set to transform carbon markets. Blue Carbon wants to trade a specific type of credit, internationally transferred mitigation outcomes (ITMOs), that can be used by governments to achieve emission reduction goals set out in their nationally determined contributions.

 

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Blue Carbon’s foray into Africa has prompted numerous concerns.

Alexandra Benjamin, forest governance campaigner at Fern, calls Blue Carbon’s plans “a new scramble for Africa”.  “These deals, mostly struck under a veil of secrecy, aren’t just bad news for the climate, but for the lives and livelihoods of rural African communities, whose rights are threatened by them”, she added.

Civil society and indigenous groups fear communities will be forced to make way for the projects, losing control over land that constitutes their primary livelihoods. A number of forest protection offsetting projects – unrelated to Blue Carbon – have been suspended recently following allegations of abuse and forced evictions.

Exposed: carbon offsets linked to high forest loss still on sale

The second concern is that little money would actually end up in the hands of African governments and local communities, contrary to what the mechanism is set up to achieve.

Finally, there are worries that the unprecedented volume of credits created could end up greenwashing oil and gas operations without providing any meaningful emission reductions. Forestry offsetting programs have been hotly debated after a series of articles and scientific studies cast doubts over their climate integrity.

COP28 plans

Blue Carbon has said the deals will bring “vital environmental impacts” and “a transformative wave of economic opportunities” for the African countries signing on. Sheik Dalmook Al Maktoum told the Zimbabwean government the programme could bring $1.5 billion of climate finance into the country.

“Beyond the immediate goal of carbon emissions reduction, the heart of these carbon projects pulsates with the intent to bring about tangible improvements at the grassroots level,” the company added when announcing the agreement in Harare.

The company has indicated that more details about its carbon credit plans will be revealed at Cop28 in Dubai. It told CNN that it would present its deals at the climate summit as a “blueprint” for carbon trading.

Landi said he has no intention to take part in Cop28. Nearly a year ago he moved to a barge moored in the international waters off the Arabian coast with the goal to set up a so-called decentralized autonomous organisation.

“The idea is to create a place where people can stay without being subjected to the matrix,” he told Climate Home. “No one can say which kind of insects or fake meat you have to eat, which kind of injections you have to get. A libertarian state is very important.”

The post Meet the Italian fugitive advising Emirati start-up Blue Carbon appeared first on Climate Home News.

Politicians, businesses, some NGOs and big philanthropy are trying to get an African Carbon Market Initiative off the ground, which would allow companies to buy carbon credits in exchange for continued emissions.

It’s become a major topic of controversy in the run up to the Africa Climate Summit this month. But Africa’s leaders should think twice before supporting this wolf in sheep’s clothing.

The idea is that some of the money paid by the corporations for these “carbon credits” – or more accurately, permits to pollute – would go towards projects in Africa that avoid or reduce emissions: renewable energy projects, or land and nature schemes that aim to capture carbon from the atmosphere.

But a number of key questions are being ignored – do they work for African people, the climate and development?

UAE pitches itself as Africa’s carbon credits leader

For western polluters, they are a silver bullet painkiller that allows them to keep pumping greenhouse gases into the atmosphere. But for Africa, they are a placebo drug that ends up making the pain of climate change far worse.

Africa is indeed right to demand climate funding from the global north, who caused the climate crisis which is devastating African people, economies, and nature in the first place.

But instead of signing up to a carbon market initiative that is full of booby traps, African leaders should use the opportunity to work together with others in the global south to interrogate where the real and essential money is for the critical role we play in protecting forests and nature, without which the Paris Agreement would fail?

Where is the money for the actions to reduce emissions and adapt to climate change that we need and deserve?

African leaders skirt over fossil fuels in climate summit declaration

A string of summits – the Amazon Summit last month, the Africa Climate Summit, the Three Basins Summit, and Cop28 – offer real opportunities for Southern leaders to drive forward financing options that aren’t merely set up to cover for the big polluters.

African leaders have three serious questions to ask about the African Carbon Market Initiative.

The first: will this cut pollution, or enable it? For global corporations, purchasing credits is the cheapest way to avoid real cuts and continue business as usual.

Take Delta Airlines: they claimed to be carbon neutral, in part down to the purchase of tens of millions of carbon credits per year. Meanwhile, they continue to operate 4,000 flights a day.

Calculations like this rely on the argument that a ton of carbon pumped out is equivalent to a ton of carbon avoided, or captured in forests or agricultural land. This is wrong.

What climate funders must learn from Kenya’s wind power troubles

Fossil fuel emissions are permanent, but storing carbon in nature is fragile: forests burn down, loggers move in, and the carbon is released again. That means a hotter world: and for Africa, more droughts, floods and devastating storms. 

The second question Africa’s leaders must ask: when we follow the money, who wins? Two players benefit from carbon markets more than anyone else: fossil fuel companies, and the financial brokers who buy and sell credits with huge markups.

Fossil fuel giants see their product legitimised, because polluters can continue to burn it by buying pollution permits.

Carbon credit traders are in line for hefty profits too: one study found that some brokers sell credits for three times the price they pay to the project that actually created them.

Southeast Asia must not let Japan hijack its energy transition

Because they profit from every trade, they’re incentivised to create, trade and speculate on as many carbon credits as possible – so a market claimed to be worth $100 could actually be due to a single $10 credit being traded ten times. African countries will be sorely disappointed when the actual flow of funds is well below the market value they’re promised.

The third question leaders need to answer: Will carbon markets promote development? What do African people gain from this? It won’t be the money they deserve: financial brokers pocket plenty of the cash before it reaches projects in Africa. And promises of economic development by the African Carbon Markets Initiative rely on exaggerated claims for job creation and income.

Indeed, since carbon markets were started more than two decades ago, initially with the Kyoto Protocol, there’s a large body of evidence showing offsetting schemes mean insecurity and land grabs.

‘Carbon bomb’ in Argentina gets push from local government

Planting new forests requires land, and so does flooding valleys for new hydropower projects.

In the Democratic Republic of the Congo, families were kicked off land they had owned and farmed for generations to make way for a carbon offsetting project for oil giant Total Energies.

Similar stories ripple through countries, like Colombia, who’ve had similar experiences. Which is why Indigenous communities from South America spoke out against carbon markets at Cop26.

Instead, Africa needs to take control of the discussion about how to finance our response to the climate crisis.

There is a lot at stake: adaptation costs in Africa as well as the costs for a clean energy transition and other measures to build zero-carbon societies will amount to hundreds of billions of dollars a year over the coming decades.

US denies rigging loss and damage fund’s board in rich nations’ favour

We can’t afford to lock ourselves into the constraints of illusory and non-functioning carbon markets.

Africa is blessed with world-leading talent, the planet’s best sources of wind, sun, biodiversity and geothermal energy, and the ability to leapfrog other continents to the technologies of the future.

We should consider a new “polluter pays” funding mechanism, where polluting businesses would pay towards reducing emissions and adapting to climate change, where Africa defines its own needs.

The amount they pay would increase over time, to incentivise companies to stay within the limits of the Paris Agreement.

The money would boost African capacity for clean, resilient and affordable development led by local communities. It would remove the market brokers and middlemen and maximise money to projects.

We need a plan for debt cancellation, more domestic investment in renewables, an end to fossil fuel subsidies and investments, and a fair share of climate finance for Africa. Africa can’t afford another false solution to the climate crisis.  

Mohammed Adow is the founding director of Power Shift Africa, a Nairobi based climate change and energy think tank.

The post A wolf in sheep’s clothing: why Africa should shun carbon markets appeared first on Climate Home News.

It sounds like a a win-win. A company gets a step closer to telling its investors and consumers it’s reached net zero, and critical forest protection gets an injection of cash.

These days, forests generate a lot of credits: they represent one in three carbon credits sold through Verra, the largest of the voluntary carbon market administrators. 

But this market is plagued with problems. It routinely inflates its climate impact, diverts money to middlemen who cream off profits, and exploits Indigenous communities. High-profile investigations have exposed widespread malpractice. 

G20 climate talks fail to deliver emission cuts despite leadership pleas

That scrutiny should not stop, because the most dangerous element of exploiting forests for carbon credits still exists: businesses buy credits as a shortcut to meet their net zero targets while continuing to pump out emissions.

Forest offsets, no matter how incredible trees’ role in tackling climate change is, are simply not equivalent to cutting emissions: storing carbon in trees isn’t always a long-term bet to keep carbon out of the atmosphere.

Deforestation, decay, or fire (as we have recently seen in Canada) can release it back into the atmosphere within hours. The only sure way to slow down climate change and meet net zero goals is to keep coal, oil and gas in the ground.   

To understand the risks of forest carbon credits being sold as offsets, take a look at Guyana: a story of zombie carbon credits, dubious accounting, and a cosy relationship between offset schemes and the oil industry. 

UN deep-sea mining talks deadlocked over agenda clash

Guyana’s story begins with a calculated overstatement of the risk of deforestation. A report written by McKinsey in 2009 claimed that the country’s forests could disappear at a rate of more than 4% per year, gone entirely within 25 years.

Independent assessments show that the true rate of deforestation was actually around 0.2%. But the inflated McKinsey estimate had already established an attention-grabbing baseline number that would set the project up to report an impressive – but false – impact.   

In a deal set up with the Norwegian government, Guyana received four payments totalling nearly $200 million for ‘avoided deforestation’. Recently, Guyana sold 33.5 million carbon credits for reducing forest loss during 2016 and 2020, this time under an ART-TREEs crediting scheme.   

But analysis of the methodology used shows that, as with previous payments to Guyana, the ‘emissions reductions’ may be largely fictitious. According to one analysis, some 84% of these credits were created by accounting manipulations allowed under the scheme.

Independent evidence also suggests deforestation actually rose during the crediting period. Data from the independent Global Forest Watch shows that forest loss in four of the five years was higher than in all the years the analysis looked at. 

Germany plans to keep funding new gas projects overseas despite pledge

Meanwhile, the Amerindian Peoples Association, which defends the rights of Guyanese Indigenous Peoples, said that there hadn’t been proper consultation about the programme with people with ancestral rights to land. 

Astonishingly, this project – which allowed deforestation to rise, and more carbon to be released into the atmosphere – was used to greenwash oil drilling off Guyana’s coast. The Hess Corporation, which has a 30% stake in a deal exploiting oil from Guyana’s recently-opened Starbroek offshore oil block, announced its intention to buy $750 million of credits generated by Guyana forest projects to offset its emissions.

But in comparison to the 33 million tonnes of carbon supposedly captured by the scheme so far, the oilfield could, over its lifetime, release up to 5.5 billion tonnes of carbon. That’s 166 times as much. 

A race to the bottom of offset standards permitted the creation of millions of ‘zombie carbon credits’ used to justify oil drilling.  

UN climate fund suspends project in Nicaragua over human rights concerns

But can we blame forest nations for looking to exploit a promising source of finance? For decades emerging economies dense in essential biodiversity have faced promises of critical finance from the global north to protect and restore rainforests – the lungs of the earth and the only tried and tested method for removing carbon from the atmosphere.

A $711 billion a year funding gap currently exists for nature protection and restoration, with $200 billion of that needing to be new sources of finance outside of repurposing existing subsidies that could be channelled in better directions.  

In the run up to Cop28 we’re seeing countries and continents rich in carbon storing biodiversity come together – through the Amazon Summit, Africa Climate Summit and Three Basins Summit all before COP28 –  to renegotiate what those financing solutions should look like.  

Now is the time to turn away from the small piece of the funding pie failing carbon markets represent and focus energy on real solutions that really have forests, people and the climate at their heart.  

On its website, ART TREES says credits created under its HFLD methodology “constitute additional climate action” and “incentivises jurisdictions to protect intact forests since guarding the carbon sequesterd in these forests is essential to meeting the goals of the Paris Agreement”

Joe Eisen is the executive director of the Rainforest Foundation UK

This story was was edited on August 21, 2023, to correct the role of the Amerindian Peoples Association as a defender of indigenous rights in Guyana, but not a legal representative of them.

The post As Guyana shows, carbon offsets will not save the Amazon rainforest appeared first on Climate Home News.

The Multilateral Investment Guarantee Agency (Miga) expects to gain an expanding role in providing insurance cover to carbon credits projects in a bid to facilitate large-scale investment in countries considered as high-risk.

The agency’s foray into the carbon market comes as several developing nations are moving to regulate or restrict the trade of credits generated within their borders.

Bitter conflicts stop Eastern Europe from choosing next year’s Cop host

The upheaval has spooked project developers and investors in the $2 billion voluntary market. Hailing predominantly from rich nations, they have been profiting from activities like planting or protecting trees in developing nations and selling on the resulting credits.

Carbon credits – or offsets – are used by companies, governments or people to compensate for the greenhouse gas emissions they generate themselves.

A Miga spokesperson told Climate Home News, as governments around the world are starting to regulate carbon markets, the agency will be able to protect investors against risks of governments breaching agreements.

Fake social media profiles wage “organised” propaganda campaign on Cop28

But some campaigners have expressed concern over Miga’s plans. Teresa Anderson from ActionAid told Climate Home News that offsetting projects “have a long track record of displacing communities while worsening the climate crisis by giving polluters an excuse to avoid real emissions cuts”.

“Miga might claim to be insuring green projects, but in reality, this is about ensuring greenwash”, she added.

Greening Miga

Founded in 1988, Miga’s mission is to help foreign investment into developing countries by issuing guarantees. Its backing allows investors to obtain better financing terms, like cheaper loans, from banks.

Over the years, the agency has come under fire for heavily subsidising fossil fuel energy projects.

But, as part of its updated strategy, it has pledged to increase its support for projects that address climate change.

Comment: Bonn talks offer opportunity to bridge the adaptation gap

The ‘greening’ of Miga’s portfolio is part of a sweeping set of reforms which could give the World Bank a much bigger role in enabling climate finance.

Among a long list of measures, a plan drafted by the bank’s steering committee and currently under discussion sees an expansion of Miga’s guarantees “to cover risks related to carbon rights”.

Pioneering carbon insurance

Miga plans to equip offsets developers with its political risk insurance and to develop new types of covers specifically for carbon investors.

Offset projects have often been contentious. If a dispute between developers and the host country cannot be resolved, Miga may be liable to pay compensation.

The agency funds itself through the financial contributions given by member countries. Its biggest shareholder is the United States (with 18% of capital), followed by Japan, Germany, the UK and France.

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The agency will plug a gap in a market for which private insurers have so far shown a lack of appetite. Insurance policies for carbon projects are currently very limited.

Peter Zaman, a carbon markets lawyer at HFW, says project developers don’t have any specific insurance cover normally.

“They have been in denial about the risks and so the products that would protect them have not even been produced,” he said.

Carbon markets upheaval

The risks that Zaman refers to revolve around countries’ ongoing efforts to assert tighter control over carbon rights.

Similar to intellectual property, carbon rights refer to the ability to lay claim to an amount of carbon dioxide trapped or avoided through activities like tree planting and sell it under the guise of credits.

For more than a decade private developers and investors have been setting up projects across the world operating in the loosely regulated voluntary market.

Many of these initiatives have been sharply criticised not only for exaggerating their climate benefits. But also for giving local governments and indigenous populations a small fraction of the profits.

An Indonesian ranger patrols a forest protected through a carbon credit project. Photo: Dita Alangkara/CIFOR

After years-long inaction, now a growing number of governments, especially in developing countries, are waking up to the value of these projects and stepping in to regulate them.

Zimbabwe announced last month it would retain half of all revenue from carbon projects and consider voiding all existing programs in the country.

Zimbabwe hosts Kariba, one of the world’s largest – and most controversial – forest conversation project, which is controlled by Swiss company South Pole.

Elsewhere, Papua New Guinea has suspended new projects while the government decides on new rules for future and existing projects.

Indonesia has restricted exports of carbon credits generated within the country with a view to centrally control sales in the future.

‘Low-hanging fruits’

In regulating offsetting projects, experts say governments are not only motivated by their revenue-raising potential.

Countries are also eyeing the possibility to count the greenhouse gases avoided or trapped through these programs towards their national climate goals under the Paris Agreement.

This calculation will become ever more important when the United Nations set up a new global carbon trading mechanism. The rules will prevent the same credit from being used more than once.

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Peter Zaman says carbon credits are “low-hanging fruits” to achieve climate commitments. “It is entirely logical for countries to establish control over these cheap sources of emission reductions and decide how to best use them”, he added.

Miga believes its involvement in the carbon market will spur foreign investment in riskier countries as new regulations come into place.

The agency says it will protect investors against risks of governments breaching agreements that allow investors to export credits at pre-agreed terms, or risks of governments not respecting double-counting rules.

The post World Bank set to take on risk of insuring carbon credits amid market upheaval appeared first on Climate Home News.

The CEO of Verra, David Antonioli, has announced he will leave his post after 15 years during which the company issued over one billion carbon credits, in theory stopping a billion tons of carbon dioxide from worsening the climate crisis.

But under his tenure, Verra has also been repeatedly accused of approving “worthless” offsets which could harm climate commitments.

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Antonioli, who has strenuously rebutted any accusation, has not given a reason for his departure but said he would be taking holidays and sabbaticals.

Verra’s recently-appointed president Judith Simon will replace him as interim CEO next month.

Carbon credits – or offsets – are when companies, governments and people pay for someone else to cut greenhouse gas emissions on their behalf, so they can take credit for this climate action.

Certifiers like Verra are supposed to check whether projects actually reduce the number of emissions that they claim.

Antonioli has overseen a period of tremendous growth for the company. In the last two years alone Verra’s annual revenues have more than tripled, reaching $40.5 million a year. In 2021 it made 92% of its money by taking a cut from the sale of carbon credits.

String of accusations

But at the same time, mounting concerns have been raised over a string of projects approved by Verra.

Climate Home News revealed last March how dozens of Chinese rice cultivation projects on the Verra registry were riddled with accounting loopholes and questionable integrity claims.

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Polluters, including Shell, had bought hundreds of thousands of carbon credits generated by the projects before Verra put them on hold pending a review.

Previously, an investigation by the Guardian accused Verra of listing largely worthless rainforest credits. According to independent studies, most projects overstated the threats to forests which calculations are based on, inflating their climate benefits.

Rules review

Verra strongly disputed the investigation’s findings and said it was already working to transition all forest projects to one updated methodology.

The new rules are currently being reviewed by an external auditor before getting the final approval towards the end of the year.

But experts told Climate Home that the new rules will not fix the conflicts of interest which undermine these programmes and that the way Verra is carrying out its review of the rules is flawed.

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Announcing the CEO’s departure, the chair of Verra’s board said “Antonioli had an immeasurable impact on Verra and on the global climate action community”.

“We are grateful for what he has contributed and are glad that we will be able to draw on his expertise as Verra enters its next phase”, he added.

The post Verra boss steps down after criticism of its carbon credits appeared first on Climate Home News.

Verra says the new methodology will ensure that the programmes are actually protecting as many trees as those buying and selling the carbon credits they produce claim.

But experts told Climate Home that the new rules will not fix the conflicts of interest which undermine these programmes and that the way Verra is carrying out its review of the rules is flawed.

Forest offsets

Carbon credits are when companies, governments and people pay for someone else to cut greenhouse gas emissions on their behalf, so they can take credit for this climate action.

Organisations like Verra are supposed to check whether projects actually reduce the amount of emissions that they claim.

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Projects which aim to reduce emissions by saving forests, allowing them to keep sucking in planet-destroying carbon dioxide, make up much of Verra’s credits portfolio.

Project developers estimate what would have happened if the conservation project had not existed. The ‘avoided’ emissions are then turned into credits to be sold to polluters. Verra approves the projects and advertises them for sale on its website, receiving a fee for each transaction.

Under fire

But in January, a Guardian investigation alleged in January that more than 90% of its rainforest offset credits are likely to be ‘phantom credits’ and do not represent genuine carbon reductions.

It found that most projects overstated the threats to forests which calculations are based on and did not show real evidence that they had saved the forest.

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Verra disputed the investigation’s findings and said it was already working to transition all forest projects to one updated methodology.

More than three years in the works, Verra finally unveiled its draft rules in mid-April. They are expected to be finalised by the end of the year, before coming into force in 2025.

Controversial pick

After drawing up the rules, Verra sent them to an independent auditor called Aster Global Environmental Solutions to review.

Aster is a family firm from rural Ohio which makes its money auditing carbon offset projects and consulting for the industry.

As an auditor, its job is to asses whether projects follow Verra’s rules and are likely to achieve the emissions reductions they claim. After they’ve marked the project developer’s homework, Verra gives the final seal of approval.

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Simon Counsell, who has been assessing offsets for 15 years, says auditors are hugely influential. “In many respects, the quality of the carbon credits depends on the rigour of their work,” he said.

But Aster has come under fire for a series of projects recently. It’s accused of approving a grassland conservation project which harms indigenous cattle herders in Kenya and forest protection projects which over-count emissions reductions in Zimbabwe and Peru.

Indigenous herders disrupted

Aster approved the Northern Kenya Grassland Carbon project, which claims to increase the amount of carbon stored in the soil of savanna grasslands by managing the grazing patterns of livestock.

The carbon credits from the project were sold to the likes of Netflix, Facebook owner Meta and the Natwest bank.

Indigenous cattle herders in Kenya’s countryside. Photo: Ninara/Flickr

But the Survival International campaign group claim the project is breaking down long-standing Indigenous herding systems without their informed consent and cannot accurately account for how much carbon it is removing from the atmosphere.

The group also took issue with the work of Aster Global as a validator and verifier. “Far from having undergone ‘rigorous’ assessment, numerous fundamental problems with the project were not properly addressed during its validation and the subsequent verification,” it said.

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Counsell carried out Survival International’s analysis of the project. He said Aster was “clearly troubled” by what they saw as it raised a large number of concerns with the developers during the assessment.

“The troubling part is that they never received convincing responses and yet still approved the validation”, Counsell added. “This raises questions about their rigour.”

Aster has not responded to a request for comments.

Mixed messages

In March, Verra suspended the Northern Kenya project while it carries out a review to “investigate claims” that the project does not comply with the rules.

If it identifies any irregularities – Verra says – it will require Aster to explain the cause for any quality control issues.

Verra will review the response and “reserves the right to take action” against the body, a spokesperson told Climate Home.

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But Verra, who appointed Aster to review their methodology shortly after they suspended the Kenyan project, said it would be premature to blame Aster for the project’s review.

Counsell commented: “You’d think [Verra] would at least wait until they conclude their analysis of what went wrong with the Kenyan project before putting [Aster] in charge of this really important work”.

Verra says Aster is a very experienced auditor and its proposal for the methodology review “demonstrated the best quality”.

Over-counting

Aster has also approved projects which stand accused of over-counting. When offset seller South Pole claimed to have saved an area of forest in Zimbabwe the size of Puerto Rico, Aster verified that claim for the Verra registry.

Elephants on the edge of Lake Kariba in Zimbabwe. This area comprises a forest protection project that has been accused of exaggerating its climate benefits. Photo: Vince O’Sullivan

But separate reports by Bloomberg and carbon rating firms found that the Kariba project had wildly overstated the risk of mass deforestation its calculations were based on.

South Pole denied this but voluntarily suspended the sale of some of the offsets. Verra said the baseline validated by Aster Global for the Kariba project was “in conformance with VCS Standard and reflected the data available at that time”.

Aster also verified forest protection credits in the Peruvian Andes which were later questioned by an Associated Press investigation. An Aster review found nothing wrong with the project.

Baselines are key

The baseline is a key component of carbon credits as it describes what would happen if the project did not exist and therefore how much difference the project makes.

It is one of the most contested elements of Verra’s forest offsets.

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Carbon rating firm Calyx Global estimated almost two-thirds of forest offset projects have a high risk of an overestimated baseline, leading to tens of millions of worthless credits and more pollution.

Elias Ayrey, chief scientist at carbon ratings firm Renoster, puts this down to many project developers’ “manipulating” data and maps showing where deforestation has occurred and is likely to occur in the future.

Verra’s remedy

Under its new rules, Verra proposes to fix this by guessing how much of the forests could be destroyed in every region and setting a cap on the total amount of emission reductions that developers can claim.

Then they split that cap up among individual projects in that region based on risk maps.

Ayrey believes the new methodology brings some welcome changes, but ultimately “is not going to significantly improve the market”.

The problem – he says – remains that the maps can continue to be made by “biased” parties, including project developers. The only difference is that, in future, they would need a sign-off from a state official.

Several analysts believe the only way to ensure the integrity of the system is to have baselines set by truly independent third parties.

“As long as these maps are not made by peer-reviewed scientists at academic institutions, like Nasa, we are going to keep having this problem”, says Ayrey.

The post Verra’s revamped forest offset programme comes under fire appeared first on Climate Home News.

The initiatives are meant to slash methane emissions by changing irrigation methods in rice paddies. But projects in which Shell is involved have implemented a series of accounting tricks that would help them avoid stricter controls.

The oil and gas giant says the projects, certified by the leading carbon standard Verra, reduce greenhouse gas emissions, increase rice productivity, and provide job opportunities – particularly for women.

But their integrity is now under question.

Verra is now carrying out a quality review of its rice farming offsets after identifying a series of concerns with how rules were applied. It also banned any future use of the methodology under which the activities were developed.

Verra has put the projects linked to Shell on hold, pending its review. But the activities have already generated hundreds of thousands of carbon credits, which have been used by fossil fuel giants to compensate for part of their greenhouse gas emissions.

An investigation by Climate Home News has found alarm bells could have rung sooner.

It found rice paddies which are part of Shell’s carbon offsetting projects have allegedly been chopped into smaller plots to avoid stricter rules, according to an analysis of satellite images and emission reductions data.

Additionally, the techniques used are not entirely new, which further undermines their integrity. For nearly two decades, China had already rolled out the methane-reducing irrigation techniques championed by the project.

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Shell acts as a ‘carbon credits broker’ in at least nine of the Chinese rice farming projects currently under review by Verra. The role grants the oil and gas giant the right to either claim the credits against its own emissions or transfer them to other companies, potentially profiting from their sale.

Fossil fuel companies including state-owned PetroChina have purchased more than 450,000 carbon credits issued by the rice farming projects in which Shell is involved. According to Quantum, a carbon market data provider, credits in Chinese rice farming projects have been traded for around $6, meaning that Shell may have pocketed up to $2.7m from their sale. 

Gilles Dufrasne, an expert from Carbon Market Watch, says the findings “raise concerns about the quality of the credits”.

“If project proponents are willing to ‘game the system’ in that way, these credits are not worth what they’re supposed to be worth. They should not be used for offsetting emissions”, he added.

Verra said it takes any concerns about the integrity of projects registered in the VCS Program very seriously and is committed to investigating them thoroughly.

A Shell spokesperson told Climate Home News the company is conducting its own internal review.

“We are aware of the review Verra is conducting of some of its rice cultivation projects and will look carefully at the results when they are published. Our diverse portfolio of carbon credits includes rice cultivation,” it added.

Carbon credits form an integral part of Shell’s net zero strategy. The company aims to offset emissions of around 120 million tonnes a year by 2030 with nature-based solutions of “the highest independently verified quality”.

But Shell has also become a major player in producing offsets, as well as buying them. In 2022 it invested $92 million in carbon credits projects.

This line of Shell’s business has repeatedly come under fire. The company’s purchase of forest carbon credits has been a particular focus of controversy. At the same time, however, Shell has been acquiring a primary role in a nascent, and less scrutinised, niche of the carbon credits market: rice farming.

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Lowering rice emissions

The farming of rice is a big contributor to climate change. The flooded fields, known as paddies, that rice traditionally grows in, encourage bacteria.

This breaks down decaying plants, turning them into a potent greenhouse gas called methane.

To reduce the damage to the climate and save water, over the last few decades some farmers have started to periodically drain their fields. With less standing water, there are fewer bacteria and less methane.

A rice farmer in a field irrigated with alternate wetting and drying methods. Photo credit: IRRI Photos/Flickr

In the early 2000s, the UN’s official carbon offsetting scheme was set up. Known as the Clean Development Mechanism, it established a set of rules for how to get paid to reduce emissions.

One of these sets of rules was meant to reward rice farmers for reducing their methane emissions, encouraging them to drain their fields.

The scheme was aimed at small communities who wouldn’t otherwise have been able to afford the switch to the more climate-friendly irrigation method.

To encourage small farmers to get involved, the rules allow small-scale projects to face fewer checks and paperwork.

Any project which cuts less than 60 kilo tonnes of carbon dioxide equivalent every year is defined as small-scale.

But announcing a review of the methodology, Verra said it was concerned about how certain projects had been categorised as small-scale, therefore benefitting from looser requirements.

Chopped up rice fields

Climate Home News has analysed all of the 37 rice farming projects that have been registered by Verra using this methodology.

On average they declared annual emission reductions of 58.2 kilo tonnes of CO2. For one of the Shell projects the number is 59.99.

In other words, they manage to qualify as small-scale by a very narrow margin. If they had surpassed the 60 kilo tonnes threshold, they would have not been eligible as carbon credits.

Shell is a partner in at least nine paddy fields offsetting projects in China. They are all located in one of the country’s most important areas for rice production, the Eastern Anhui province.

On paper, the projects are presented as unrelated small-scale initiatives. But, at closer inspection, the similarities are striking. They were all approved on the same day, 29 May 2017, by the same proponent: Hefei Luyu, an agricultural technology company based in the capital of the Anhui province. The documents outlining the project's characteristics are broadly identical to one another and were written by the same Shanghai-based consultancy.

Each of those projects bundles together ten of thousands of disparate farms sitting on either side of the Yangtze river.

Our analysis can point to the close proximity of rice paddies grouped by Hefei Luyu under distinct projects. Climate Home News has identified the geographical location of the farms on satellite images. They show rice paddies intersecting into different projects without clear distinction. As little as 280 metres separate farms belonging to separate projects.

If all of those rice projects were merged into one, they would stretch for over 200 kilometers. They would also sum emissions reductions of over 500 kilo tonnes of CO2 per year, rendering them ineligible to be registered as carbon offsets.

Some of the rice fields included in different offsetting projects are only a few hundred meters away from one another

Verra began registering the projects in 2021 after having the proponent’s claims verified by external certification bodies based in China. Now, nearly two years later, Verra says its review has identified quality issues with the work of the validators.

Verra told Climate Home News it cannot comment on specific projects while they are under review.

Kazunori Minamikawa, a senior researcher at the Japan International Research Center for Agricultural Sciences who has conducted several studies on irrigation methods in rice paddies, believes the projects’ proponent may have artificially divided up fields across several projects to obtain the ‘small-scale’ status.

“They just follow the current rule,” he told Climate Home News. “But I think the developers of AMS-III.AU [the rice cultivation methodology] did not imagine such loophole at that time. To solve the concerns in the short run, Verra should create additional strict rules.”

Hefei Luyu did not respond to a request for comment.

Credits without integrity

The categorisation of a project as small-scale is not a trivial matter. In fact, this grants proponents a series of advantages.

Small-scale projects have more leeway in demonstrating that their type of activity is not already a common practice in the project's region. This key principle is known as additionality.

Under this requirement, a proponent needs to demonstrate that its emission reduction project would not have happened without the money obtained through the sale of carbon credits.

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Carbon Market Watch’s Gilles Dufrasne says the concept of additionality underpins the credibility of a carbon offsetting activity.

“The whole logic is that these projects should generate extra emission reductions and that's why they can be used to compensate other emissions somewhere else,” he told Climate Home News. “So it's plus one here, minus one there, it sort of matches up. But if that is not true, it actually leads to an increase in overall emissions. The entire system falls apart”.

The rice farming projects aim to cut methane emissions by helping farmers change irrigation method, switching from continuously flooded paddies to intermittently flooded ones. Thanks to the carbon credits, the projects outline says, farms have been equipped with the cement ditches necessary for the new water regime.

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Documents submitted by the proponents claim people in the areas “have poor living standards and economic backwardness”. Therefore, they would have been unable to implement a new methane-cutting irrigation system without the carbon offsetting initiatives. The documents add the additionality findings are based on surveys conducted by a local academy of social sciences.

Climate Home News has not been able to check the claims.

But opinions from experts and scientific literature suggest that the use of intermittent flooding in Chinese rice paddies is not entirely a new concept.

Chris Butenhoff, a physicist from Portland State University, studied efforts to reduce methane emissions in Chinese rice paddies in the early 2000s. He says it is certainly the case that changes in rice water management in China likely date back to at least the 1980s.

“The transition to intermittent flooding and drying of the rice paddy was driven in part by increased demand for water resources due to population growth, industrialization and expansion of hydropower resources,” he added.

Butenhoff says the data on this is poor so it is hard to have a precise historical record of how the practice spread geographically.

Rice farmers in the Anhui province of China take part in a trial implementing water-saving techniques. Photo credit: IRRI Photos/Flickr

Scientific studies suggest that in 2018 - when the offsetting projects began - around 41% of rice paddies in China were already being irrigated using an alternative wetting and drying method.

This rollout has coincided with the Chinese government making water-saving techniques a key tenet of its agricultural policy. The 2015 National Agricultural Sustainable Development Plan urged to “accelerate the construction of an efficient and water-saving agricultural system”. It set out a plan to increase the proportion of agricultural areas using water-saving irrigation to 75%.

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Kevin Chen, China Leader for CGIAR Mitigate + Initiative, says in recent years, China has invested significantly in building high-yield paddies through the construction of good irrigation systems. “At present, the water management method of paddy fields in most areas of China has changed from traditional flooding irrigation to mid-stage drying and wetting irrigation”, he added.

Chen says the impact has been known for a long time. "The adoption of intermittent flooding by paddy rice farmers might have reduced global emissions of methane from rice fields by about 12% during the decade 2000 to 2009".

Verra raised concerns about China’s rice farming offsetting projects not exceeding what is required by government regulations — the so-called surplus regulatory requirements.

Shell’s offsets

The rice farming projects first came into existence years before Shell entered the picture. Hefei Luyu decided to develop all its carbon credit projects at a meeting of their stockholders held on 29 May 2017.

Only three years later Hefei Luyu and a carbon trading consultancy based in Shanghai - its then partner in the projects - began submitting requests to Verra to have the offsetting projects validated and listed on the exchange.

Shell bursts onto the scene after Verra gave the green light. Starting from December 2021, Shell (Energy) China, a subsidiary of the oil giant, signed a series of agreements with Hefei Luyu, becoming a partner in at least nine rice farming projects.

In particular, according to the documents, Shell took on the role of an exclusive agent for the projects. Those were transferred into the Verra account of Shell (Energy) China, granting the company the right to request the issuance and transfer of carbon credits generated by the projects.

“Shell appears to be acting as a broker for the carbon credits”, Carbon Market Watch’s Gilles Dufrasne says.

“This is becoming increasingly common. Once they have access to the credits they can do what they want. They can use the credits towards their own targets or they can profit by selling them to other companies.”

In recent years, Shell has become an increasingly active player in the carbon credits industry through partnerships and direct acquisition of project developers.

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On a dedicated webpage illustrating its carbon credits portfolio, Shell says it “employs a rigorous internal screening process” to ensure it invests in activities with clear climate and environmental benefits. Shell’s environmental products division markets these carbon credits to customers needing them for compliance requirements or voluntary carbon compensation.

The portfolio lists dozens of offsets, including the nine rice farming projects in the Anhui province. Shell says they “cut greenhouse gases, increase rice productivity, and provide job opportunities - particularly for women”.

More than 450,000 credits issued by the rice farming projects in which Shell is involved have been purchased and used to compensate for emissions between June 2022 and January 2023, according to Verra’s registry.

The credits give polluters a license to emit 450,000 tons of carbon dioxide, more than Tonga emits in a year.

Over 85% of those credits ended up in the hands of PetroChina, the country’s state-owned oil and gas company. 

Verra says its investigation does not affect credits that were issued before the review began unless any excess credits were issued. "If Verra finds that excess VCUs [carbon credits] have been issued, the project proponent will be responsible for compensating for these excess VCUs," it added.

Shell and PetroChina are close commercial partners. In 2021 the companies signed a five-year deal for the supply of what they described as carbon-neutral liquified natural gas (LNG). For each cargo delivered under this agreement, PetroChina and Shell promised to offset the emissions generated using high-quality carbon credits. 

At the time environmental groups branded the initiative as 'greenwashing'. 

PetroChina did not respond to a request for comment.

The post Revealed: How Shell cashed in on dubious carbon offsets from Chinese rice paddies appeared first on Climate Home News.

This – the Swiss giant says – not only captures carbon from the atmosphere, generating credits to be claimed against its climate targets.

But it also protects crops, reduces water reliance and supports workers on the very farms the company sources materials from.

This practice is called insetting, a term creeping into the “net zero” plans of a rising number of corporations.

Instead of buying carbon credits from unrelated third parties – as they would in traditional offsetting schemes – through insetting, companies invest in carbon reduction or removal projects on their own land or the land of their suppliers.

Critical report

Its emergence comes as more doubts are being cast over the reliability of carbon offsets. A new critical report says this is no coincidence.

The New Climate Institute (NCI), a German campaign group, says insetting is simply offsetting in disguise and is plagued by the same integrity issues.

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The report also raises concern over companies “successfully” lobbying standards-setters to rubber-stamp the inclusion of insetting claims within their net zero pledges.

In particular, the report points the finger at the Science Based Targets Initiative (SBTI), a corporate climate target watchdog supported by NGOs like the World Wildlife Fund and World Resources Institute. The report accuses it of “legitimizing” insetting.

What is insetting?

There is no single and universally-accepted definition of insetting, but the term generally refers to a company offsetting emissions through carbon reduction or removal projects along its own supply chain. Insetting is most commonly used by corporations with a large land footprint and involves protecting nature.

The International Platform for Insetting (IPI) – a business-led group – says insetting brings a more “holistic” approach. “Insetting is an important mechanism for companies not only to achieve their net zero commitments,” Michael Guindon, IPI’s executive director, told Climate Home. “But it also helps companies reach other goals, in improving biodiversity, ecosystems and livelihoods for communities they work with.”

But the NCI claims insetting is just a rebranding operation for “low-standard” offsetting. “The impression is that offsetting has gained a bad reputation, so companies are moving to a different term to avoid criticism, rather than abandoning it altogether,” Silke Mooldijk, co-author of the NCI report, told Climate Home News, “This distracts from the need for real emission reductions”.

The NCI scrutinised the climate pledges of 24 major multinational corporations. It found that the practice of so-called insetting is “gaining momentum and undermining more companies’ climate strategies”.

Offsets – also referred to as carbon credits – have come under increasing criticism over the last few years with academics, journalists and NGOs raising questions over the real contributions to emission reduction. In December 2022 a Guardian investigation  claimed up to 90% of forest-based carbon credits approved by a leading certifier are worthless – which the certifier Verra denies.

Methodologies questioned

The NCI report says the insetting claims it analysed are also plagued by a lack of robust methodologies and the required verification steps.

Insetting within a company’s supply chain may take the form of emissions reduction projects or carbon dioxide removals.

The NCI calls both “highly contentious”. It claims that describing emissions reduction projects as insetting is a “false concept”, because this is a measure of reducing its own emissions and should not be used to neutralise some of the companies’ other emission sources. The risk is that reductions may be counted twice.

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Carbon dioxide removals include carbon storage in soil or wood. These projects – the NCI says – may be compromised by the same integrity issues as any other offsetting project: the difficulty in demonstrating the emission reductions are additional to what would have happened anyway and that they are permanent.

Tree planting activity in Thailand. Photo: Chanklang  Kanthong / Greenpeace

Unlike offsets, insetting projects do not currently require verification against globally agreed standards.

“This could offer a potential avenue for companies to bypass those standards,” Justin Baker, a forest economist at North Carolina State University, told Climate Home News. “That raises concerns regarding the credibility or potential climate benefit of the insetting action.”

Nestlé and Pepsi

Nestlé and PepsiCo are among the companies relying on insetting for emissions reductions or removals.

Nestlé plans to halve its emissions by 2030 and to reach net zero by 2050. The company says it does not use offsetting outside its value chain to deliver emissions removals – even though some of its brands do buy offsets

Its main focus, it says, is instead on sucking in carbon through restoring forests, wetlands and peatlands on its suppliers’ land.

Climate Home News asked Nestlé to provide detailed information about the company’s projects but did not receive a response.

Nestlé ’s publicly available information on insetting overwhelmingly refers to tree-planting initiatives.

A chart from a Nespresso report shows the role of removals and insetting in the company’s net zero strategy. Credit: Nespresso’s Positive Cup report)

Critics like the NCI say tree planting does not always have permanent benefits. If, for example, trees were cut or went up in flames, the carbon sequestered would be immediately released back into the atmosphere.

A Nestlé spokesperson said that “when it comes to the food and agriculture sector, the NCI approach to decarbonization simply does not work”. “Food and agricultural companies like ours can and must play a role in adopting nature-based solutions to achieve their climate targets,” it added.

PepsiCo aims to reduce emissions by 40% by 2030 and to reach net zero ten years later. In its strategy, the company says it wants to deploy “carbon insetting at scale” without elaborating on specific practices and targets.

In 2021 PepsiCo announced a partnership with the Soil and Water Outcomes Fund to subsidize regenerative agricultural practices on 20,000 acres of land in Illinois, a supply area for the company. They claimed this project would “generate verifiable carbon reductions” that could be used to inset corporate emissions.

“Lobbying to legitimise insetting”

The NCI claims Nestlé and PepsiCo are “among the companies successfully lobbying to legitimise the contentious practice of what they label as insetting”.

Nestlé and PepsiCo are among over a dozen large corporations who provided input into SBTI’s guidance for the forestry, land and agriculture (Flag) sector, alongside experts from several NGOs.

The guidance was supported by the charitable foundation of Intel co-founder Gordon Moore and “additional support was provided” by companies in the Flag sector like furniture shop Ikea and food companies Cargill, Mars and General Mills.

The SBTI is the most prominent standard-setter for corporate climate targets globally. It says its targets are “grounded in an objective scientific evaluation” and represent a more robust approach for companies to manage their emissions.

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It treats offsets and insets differently. SBTI’s April 2020 guidance said that “offsets and avoided emissions should not count toward [science-based targets]”.

But, in its September 2022 Flag sector guidance, SBTI accepts removals within a company’s supply chain towards greenhouse gas emission reduction targets.

“No company can purchase offsets to meet its near-term Flag or energy/industry target,” the guidance says, “only removals on land owned or operated by a company or within a company’s supply chain can be included”.

In a separate document, the group said it would “assess insetting on a case-by-case basis during the validation process” due to the absence of a “standardization of the term”.

Climate Home News asked SBTI to provide details on the number of insetting claims approved or declined, but received no response.

Science Based Targets initiative accused of providing a ‘platform for greenwashing’

An SBTi spokesperson told Climate Home News that “carbon credits may be used between producers and buyers as evidence that a reduction or removal occurred in association with a commodity to ensure unique claim to the [greenhouse gas] reductions or removals”. It added that “this only applies for Flag if such a reduction or removal is associated with on-farm actions that sit within company value chains”.

The post Corporations push “insetting” as new offsetting but report claims it is even worse appeared first on Climate Home News.

In an updated climate plan submitted to the UN this month, Cuba says it “intends to use cooperative approaches that involve the use of mitigation results of international transfer” under Article 6 of the Paris Agreement.

An international carbon market to put Article 6 into practice is still under negotiation. It would allow countries to sell any over-achievement of their emissions reductions targets, for other countries or corporations to count towards their carbon-cutting commitments.

This concept has long been controversial, particularly with left-wing governments allied to Cuba like Venezuela and Bolivia. They prefer “non-market measures”.

Some green campaigners argue carbon trading is a distraction from reducing emissions and could encourage countries to set low reduction targets in order to sell more credits.

Gilles Dufrasne, a policy officer at Carbon Market Watch, told Climate Home that carbon markets “leave the door open for big polluters to continue business as usual”.

The scheme’s supporters though say it incentivises countries, especially poorer ones, to make deeper emissions reductions.

Carbon trading rules meet socialist sticking point

Emily Morris, a Cuba expert at University College London, told Climate Home that Cuba’s statement on Article 6 was “ambiguous”. The Cuban environment ministry did not respond to repeated requests for clarification.

“My guess is that this should not be read as an intention to participate in the carbon credits market as currently proposed,” Morris said, “but rather as a statement that, if and when the question of the responsibility for financing climate change is resolved through a ‘satisfactory covenant’, Cuba would participate, as net recipient of such transfers.”

Morris added that Cuba is restructuring its economy and reviewing its relationships with international finance. While Cuba is committed to reducing carbon emissions, she said, it is also insistent that the richest and most polluting countries should pay the poorer countries (like Cuba), which are suffering most from climate change.

Kelly Levin is an expert in tracking climate action from the World Resources Institute. She told Climate Home that Cuba was one of many vulnerable countries interested in Article 6 – although they would wait and see how it is negotiated before committing.

“Article 6 has the potential to be able to finance mitigation if it is done well but we also need to ensure that it’s done in a way that has environmental integrity and avoids double-counting and strengthens ambition and commitments over time,” Levin said.

In its climate plan, Cuba admitted it doesn’t have a measurement, reporting and verification system in place in line with the Paris Agreement, but said this is an “objective” it is working on. Levin said that such a system is vital if Cuba is to trade carbon credits, although there is some flexibility for small island developing states.

Delay to climate talks deepens uncertainty over carbon markets

An international carbon trading scheme called the Clean Development Mechanism (CDM) was set up under the 1997 Kyoto Protocol. It lost momentum when the European Union stopped buying credits, making them worth a lot less. Levin said the Kyoto scheme only benefitted a few countries while leaving vulnerable countries behind.

Cuba has two projects registered under the CDM in 2007 and 2009, to upgrade a gas-fired power station to more efficient turbines and capture methane from landfill sites, respectively.

Negotiations on a new scheme have been held up by disagreement on how to implement it so as to avoid double-counting. This is when a nation counts an emission reduction towards its own climate pledge but also sells a carbon credit so another country can count it towards its emissions target.

After coronavirus delayed further talks, any scheme will not be agreed until December 2021 at the earliest, when the UK hosts Cop26 in Glasgow.

Cuba’s Article 6 comment came in its updated nationally determined contribution (NDC) to the Paris Agreement, which all signatories are due to submit by the end of 2020. Cuba’s previous plan covered only the energy sector but now it has added goals for agriculture, transportation and forestry.

This move was welcome by Patricia Espinosa, executive secretary of the UNFCC. She tweeted that she was “glad to see [Cuba’s] commitment in expanding [its] mitigation goals by including agriculture, transportation and forestry sectors in addition to renewable energy and energy efficiency.”

Thank you Cuba for submitting updated #NDC to @UNFCCC. Glad to see your commitment in expanding your mitigation goals by including agriculture, transportation and forestry sectors in addition to renewable energy and energy efficiency #ClimateAction #ParisAgreementGoals

— Patricia Espinosa C. (@PEspinosaC) September 18, 2020

Manuel Carmona Yebra, a policy officer at the European Commission’s directorate general for climate said it was “excellent news”.

On transport, Cuba aims to reduce fossil fuel consumption by land vehicles by 50% by 2030. The country’s rail network is old, slow and unreliable and is being improved by Russian and Chinese investment.

The government plans to increase forest coverage to 33% of total land area by 2030 which it says will remove 170m tons of CO2. According to the World Bank, forest coverage was 31% when last measured in 2016.

In agriculture, it aims to treat 100% of waste water from the pig farming sector. Pig manure emits greenhouse gases but filtration and treatment can reduce the emission level.

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Cuba reaffirmed a target to increase renewables from 4% of the country’s electricity generation mix (mainly biofuels) to 24% by 2030. Morris said this was less ambitious than Caribbean neighbours like Belize, Jamaica and the Dominican Republic. “Moreover, the Cuban target refers only to electricity generation, rather than to total energy, and therefore excludes the use of hydrocarbons for transport, which accounts for a quarter of total energy consumption globally,” she said.

According to the International Energy Agency, over 70% of Cuba’s total energy comes from oil products – most of which is imported. The country’s socialist government has traditionally imported oil from its ideological allies, first from the Soviet Union and then from Venezuela and Mexico.

Morris said that Cuba has a “very strong economic imperative” to shift from fossil fuels to domestic renewables as fuel imports account for a “major share”, around 30%, of its total import spending. “Not only does this represent a heavy burden for a foreign exchange-constrained economy, but it also generates vulnerability to economic crisis, due to the volatility of international oil prices” and “leaves Cuba exposed to supply interruptions”, she said.

According to the International Renewable Energy Agency (Irena), one barrier to achieving this “ambitious” goal is a lack of finance. “With the government’s renewable energy investment goal of $3.5 billion, foreign investment in the small island state is critical,” Irena said.

Could Cuban detente bring a new energy dawn?

Cuba used its climate plan as a chance to attack Donald Trump’s “intensification” of the US’s long-running blockade of Cuba. They said this was the “main obstacle to the achievement of major progress when facing climate change and national development” and a “fundamental barrier for Cuba to access international financial resources, supplies and technologies”.

Morris said that most sources of finance were obstructed by US sanctions, but “progress in developing programs to gain access to those limited international climate funds that are not blocked by US sanctions or mobilise domestic sources for investment in renewables has so far been weak”.

Cuba made a similar attack on the blockade when submitting its original climate plan in 2015 – although they recognised then-president Barack Obama’s “limited measures” to relax the embargo. Democratic candidate Joe Biden has pledged to re-instate Obama’s relaxations if elected US president in November.

This article was amended to note that Cuba participated in the CDM.

The post Despite socialist scepticism, Cuba shows interest in carbon trading appeared first on Climate Home News.