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Buy low, sell high: What they don't tell you about carbon offsets

As investors flock to a booming market, middlemen are pocketing cash that is supposed to fight climate change

Payments for carbon offsets routinely end up in the hands of middlemen instead of the conservationists they are designed to fund, SourceMaterial can reveal.

A joint investigation by SourceMaterial and Unearthed, Greenpeace's investigative journalism unit, found brokers buying carbon credits from forestry projects in poorer countries and selling them on to consumers and companies, including airlines and oil firms, at inflated prices.

Carbon markets are notoriously opaque and prices are secret but estimates by intelligence firm Allied Offsets, shared with SourceMaterial and Unearthed, identified almost 250 projects where brokers resold credits for at least three times the purchase price. 

In one example, leaked emails show a broker claiming to a potential buyer that “typically 85-95 per cent” of any purchase price goes to the project owner. But in the same exchange, the broker offered credits at a price seven times what they had originally paid to the project leader. 

The broker rejected the suggestion they were making “large and unfair margins at the expense of project developers” when contacted by SourceMaterial.

“The idea that you’re paying an airline to enrich an investment fund is probably not what the customer had in mind”

A consequence of the lack of transparency in the market is that consumers who think they are paying to offset their emissions are often sending the bulk of their payments to companies that do nothing to combat climate change. 

“The idea that you’re just paying a large airline to enrich an investment fund is probably not what the customer booking a holiday had in mind,” said Kelsey Perlman, a forest and climate specialist at Fern, a campaign group.

Offsetting is seen by many policymakers as a vital tool to slow climate change and trade is flourishing. Transactions for 2021 are estimated at a record-breaking $1 billion and Mark Carney, a former Bank of England governor and a UN climate envoy, has envisioned this reaching $100 billion. Commodities giants Vitol, Glencore, and Trafigura opened carbon trading desks last year.

Carney spearheaded a taskforce to expand this market, but has recently stepped back into an advisory role (picture: Simon Dawson, Bloomberg).

Opacity and under-regulation mean the conservation projects that should benefit most from the boom often miss out, according to Gilles Dufrasne of Carbon Market Watch, a non-profit that studies the carbon market. 

“We still cannot trust that money used to purchase carbon credits really is used to finance extra climate action,” he said. “This investigation shows again why transparency must be improved.”

‘Cottage industry’

Despite its rapid expansion, the carbon market “still operates like a cottage industry”, said Adrian Rimmer, an offsetting specialist at Finsbury Glover Hering, a public relations consultancy. “Prices are all over the place.” 

Leaked emails show that one French broker, EcoAct—whose clients include Natwest, easyJet, Air France and Coca-Cola—was in late 2021 offering credits from the Ribeirinhos initiative, a forest protection project in northern Brazil, for £15 ($20) apiece. EcoAct told potential buyers that “typically 85-95 per cent” of the purchase price goes to project owners, but that this varied according to the volume of credits sold and other factors. 

Michael Greene, who heads the Ribeirinhos initiative, a project that looks to conserve a threatened area of the Amazon, said he sold credits to EcoAct in 2020 for just $2.75 (£2.10), which would give EcoAct 86 per cent of the market price if sold at £15.

EcoAct’s parent company, Atos, is a French multinational that brought in 11 billion Euros in revenue in 2021. In 2014, it was at the centre of a controversy in the UK over fit-for-work assessments it had administered on behalf of the government. Statistics from the Department for Work and Pensions showed that thousands had died after being found fit for work and the government said the standard of Atos’ work was “unacceptable”.

“If the money doesn’t get to the projects, what’s the point?”

A spokeswoman for EcoAct said the company adheres to all industry standards and has a robust due diligence process to ensure projects’ social and environmental benefits are delivered.

“The suggestion of large and unfair margins at the expense of project developers is false. Factors influencing price, market dynamics, and services provided should also be taken into account,” she said. 

Asked specifically about the Ribeirinhos credit offer, she said: “We have no sales contract that corresponds to this price for this particular project.”

“If the money doesn’t get to the projects, what’s the point?” said Louis Redshaw, whose company Net Zero Markets sells offsetting price data. “Price transparency is important so that all participants in the chain can be aware of the numbers involved. That way they can make appropriate decisions about when to buy or sell.”

‘Replacement credits’

Worldview, a foundation that runs a mangrove conservation project in Myanmar, said it sold carbon credits for around $10.70 to a Swiss reseller, MyClimate, which then offered for sale at more than $30.

A spokesman for MyClimate said the organisation set the price after “market fluctuations” and that it reflected the cost of replacement credits for its clients in the event the mangrove project failed. He noted that the political situation in Myanmar later caused customers to drop out. 

Registered as a non-profit, MyClimate in 2020 made a surplus of 5.1 million Swiss francs ($5.4 million), most of which it paid into a fund that has grown steadily since 2016 and in its latest annual report was recorded as being worth 23.7 million francs ($25.3 million). 

MyClimate says it sends 80 per cent of its revenue to this fund and that this money is used to buy credits from other projects that are then sold to clients to “maximise climate impact”.

On its website, MyClimate does not mention that much of the money it receives for carbon credits may not go to the project itself and could instead be diverted to the investment fund.

“There seems to be at least a major lack of transparency,” said Dufrasne of Carbon Market Watch.

MyClimate’s spokesman said he felt the organisation’s website was clear and reiterated that “80 per cent of the offset revenues are earmarked for climate protection projects”. 

‘Deal of the century’

Today, as the resale market thrives, conservationists pushed into signing long-term deals during a mid-2010s price slump are being cut out of the bonanza.  

“The broker got the deal of the century,” said one Asia-based conservationist who is now locked into an exclusive contract with a Singaporean broker, asking not to be named for fear of alienating future buyers.

Another developer, Andrew Mahar, who runs a reforestation project in East Timor, said he had been inundated with aggressive advances from carbon brokers in 2015. 

“They told us working with them was the only way to get into the market,” he said. “They were looking to drive the price to the bottom, rather than a drive to the top to make these projects work.” 

Mahar's project aims to help subsistence farmers build more sustainable economies (picture: WithOneSeed).

Mahar was able to reject the approaches after gaining “no-strings” help from a donor and, unlike many of his peers, now sells credits for £35 per tonne of carbon dioxide removed from the atmosphere, funnelling 90 per cent of his income back to local farmers. 

“It was pretty outrageous that these companies would offer low and then go and sell for high when all they were doing was sitting on a computer making connections and the farmers were out there working to keep the trees alive,” he said. 

Booming market

The carbon market, after growing steadily over the past 18 months, has recently exploded—and is packed with buyers out to make a quick killing, said Steve Wentzel, a co-founder of Carbon Green Investments, which runs a project in Zimbabwe.

“There’s a lot of people who are buying fairly large volumes of current stock and asking for futures,” Wentzel said. “Buy low, sell high. There’s a lot of demand from those kinds of buyers. We try not to get involved with them as much as possible because it doesn’t do us any good.”

The market needs a radical overhaul if it is to have the positive impact touted by advocates such as Carney, rather than simply offering a new mechanism for savvy traders to cash in, said Dufrasne.

“Buy low, sell high.”

“If the broker gets several times more money than the company that is actually delivering the climate benefits, then something is clearly very wrong,” he said.

Even in a perfect world, there are concerns that carbon trading is just another false solution that ignores the root of the climate crisis.

“If you take a cut you have an incentive to sell as many credits as you can,” said Niklas Kaskeala of Compensate, a non-profit broker that charges clients a flat fee when selling them credits. “The danger of the market model is that brokers will encourage clients to offset emissions rather than reduce them.” 

Cutting pollution is a more effective way of fighting climate change than offsetting, he said.

“In the long run, we don’t want to exist.”

Main picture: Chris Barron and Keith Cooper


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