The Carbon Credit Conundrum: Are Companies Really Making a Difference?

Some of the world’s largest corporations have vowed to tackle climate change, and the majority of them have done so by investing billions of dollars in carbon-offsetting solutions such as carbon credits. Companies such as Netflix, Disney, Shell, Gucci, and others have acquired carbon credits that, according to a recent analysis, have little to no effect on their climate change obligations as they have been purchasing phantom credits rather than carbon credits. 

A recent 9-month-long research by The Guardian, Die Zeit, and SourceMaterial has somewhat verified the skepticism expressed by many regarding the effectiveness of carbon credits in the fight against climate change. We intend to capture key details in this article to keep people aware of carbon-offsetting solutions and what to look for when obtaining carbon credits in the future.

Carbon credits or phantom credits?

Even though their operations produce gases that contribute to global warming, firms now frequently claim to be carbon-neutral by purchasing carbon credits by funding projects to protect rainforests. Carbon offsetting, or the reduction or removal of emissions of carbon dioxide or other greenhouse gases to make up for emissions created elsewhere, is the concept behind this. Major corporations have been purchasing rainforest carbon offsets as part of a complex system for years in order to reduce their harmful greenhouse gas emissions. However, a study by multiple journalistic media organizations revealed that some of these carbon credits are practically “worthless.” and have no real environmental impact.

A well-known carbon credit certifier that, as of November 2022, has certified over one billion carbon credits and is in charge of certifying one-third of all carbon credits issued globally, including those bought by well-known companies like Gucci, Liverpool FC, international airlines British Airways and United Airlines, and many other multinational corporations, has recently generated a lot of negative publicity regarding the environmental validity of the carbon credits it certifies.

A 9-month investigation by a group of independent journalistic organizations found that forty percent of the carbon credit issued by this organization is generated by protecting rainforests. The problem is discovered after a study by a team of international researchers that looked at 95 million certified carbon credits, which should theoretically be able to cancel the emissions of 25 coal plants. The assessment found that 94 percent of these “certified” and issued carbon credits did nothing for the environment. A further study by the University of Cambridge-based team looked at 40 projects and found that only four of them were responsible for 75 percent of the forest actually protected, according to The Guardian. The journalists concluded that, for 32 of the projects, the risk of forest loss was puffed up by around 400 percent.

Why exactly were these carbon credits problematic?

The Carbon credit certifier in question was found to have certified carbon credits for rainforest areas that were in no danger of being deforested. An excerpt from the investigative piece by The Guardian stated that “Only a handful of rainforest projects showed evidence of deforestation reduction according to two studies which further analysis indicating that 94% of the carbon credits had no benefit to the environment”

The problem here stems directly from the methodology applied in verifying carbon credits, the certifier did not carry out the due diligence to ensure that the project implemented was to protect a rainforest area to ensure it was not felled or damaged. And as such the area saved would directly account for carbon absorption and/or carbon sequestered. Companies that purchase these carbon credits, and can factor in these non-existent carbon offsets as part of their carbon reduction target and simply make the climate situation worse. While the organization in question did come out to disavow the journalistic piece, the result of the investigation has had many people asking questions, one of which is the effectiveness of carbon credits as a solution to global carbon emissions. 

Are carbon credits a worthwhile climate change strategy? 

The answer to this question is an unequivocal yes. Whatever the current status of the carbon credit sector, the fundamental intention to offset carbon emissions by funding initiatives that safeguard the environment and seek alternate and more sustainable methods of energy, transportation, and so on cannot be questioned. However, the carbon credit market needs greater clarity regarding its procedures. Carbon credit producers and certifiers must surely be more forthcoming about their operations and projects. Blockchain technology has been proposed as a potential solution to the market’s lack of transparency. The reality is that there needs to be a willingness amongst involved parties to commit to better levels of transparency.

Bottom Line

In conclusion, the recent investigation into the effectiveness of carbon credits has shed light on the need for greater transparency and accountability in the carbon credits market. While the intention behind carbon credits, to offset carbon emissions and promote a low-carbon economy, is commendable, the current state of the carbon credits industry has left much to be desired. The findings of the investigation revealed that many of the carbon credits that have been purchased by companies such as Netflix, Disney, Gucci, and Shell, may have had little to no effect on climate change. This calls into question the methodology used by carbon credit certifiers and highlights the need for greater oversight and due diligence in the verification of carbon credits.

Despite the flaws in the current state of the carbon credits industry, it is still a valuable tool in the fight against climate change. The solution to the problem, however, is not to abandon carbon credits but to improve and standardize methodologies used to create and verify them. This can be achieved through increased transparency and accountability and the adoption of blockchain technology, which can help increase confidence in the carbon credits market. The carbon credits market is still in its early stages, and it is crucial that the industry moves towards a more sustainable and effective way of mitigating the impacts of climate change. By improving the methodologies used to create and verify carbon credits, the carbon credits market can play a vital role in promoting a low-carbon economy and mitigating the impacts of climate change

Rene Hennen is the Chief Executive Officer and Co-Founder of FUND THE PLANET, a blockchain-based organization dedicated to the conservation of the world’s rainforests. Rene has been at the forefront of using blockchain technology to develop a more transparent and sustainable solution for the preservation of endangered rainforests. Visit our website and documentation to learn more about FUND THE PLANET and its revolutionary approach to conservation. You can also use the Rainforest Explorer to track FUND THE PLANET’s conservation efforts of each parcel in real-time.