Only 16% of carbon credits issued to date represent genuine reductions in greenhouse gas emissions. This is the main finding of a study published in Nature, which analysed approximately 1 billion tonnes of CO₂-equivalent carbon credits, representing 20% of the total issued to date.

Carbon credits are permits or certificates allowing buyers to offset their emissions by investing in projects purportedly mitigating climate change, such as forest conservation or renewable energy projects. These credits are purchased by governments, businesses, NGOs, and individuals in voluntary markets to meet climate goals. They are also used by governments and international organisations to achieve their Paris Agreement objectives.

Carbon markets play a critical role in the climate strategies of businesses and governments, with demand expected to grow significantly in the coming decades. However, to contribute meaningfully to climate change mitigation, carbon credit mechanisms must undergo “fundamental reforms,” according to the authors.

The study synthesised findings from research using experimental or rigorous observational methods, analysing 14 studies on 2,346 carbon mitigation projects and 51 studies investigating similar field interventions implemented without issuing carbon credits.

The assessment documents “substantial and systemic quality problems across all project types,” including project developers picking favourable data or making unrealistic assumptions. Additionally, some methodologies rely on outdated data or inappropriate approaches.

Significant “heterogeneity” was also found across project types and methodologies, leading the authors to suggest that standards and methodologies for quantifying emission reductions “need considerable improvement.” Proposed reforms include reducing the flexibility of project developers to make favourable methodological assumptions, using conservative assumptions, and relying on the latest scientific evidence.

Offsetting, a tool for greenwashing

“Offsetting will be necessary and can be done well, but so far it has mainly been used as a greenwashing tool,” says Jordi Oliver Solà, CEO of inèdit. “It is easier, faster, and cheaper to buy carbon credits than to focus on actual decarbonisation, which disrupts the order of ‘calculate, reduce, and offset,’ often turning it into ‘calculate quickly and cheaply, offset, and communicate’,” he adds. However, Oliver notes a positive trend: “In the projects inèdit works on, corporations are increasingly prioritising direct emission reductions over relying on carbon offsetting.”

Picture: A reforestation project in Indonesia. Author: James Anderson, World Resources Institute. License CC BY-NC-SA 2.0