Carbon credits have become increasingly popular as people and businesses aim to offset their carbon footprints, achieve net-zero emissions, and support a healthier planet. However, this surge in demand has also attracted a large rise in fraudulent sellers. Understanding how to safely navigate this complex market is crucial for anyone committed to sustainability and climate action. This post will explore the deceptive practices of dishonest sellers, highlight key warning signs, and offer guidance to help you make informed choices.
Carbon Credit Market Overview
Carbon credits are permits that allow companies or individuals to emit a specific amount of carbon dioxide or other greenhouse gases. Generally, one carbon credit equals one metric tonne of emissions. The concept is clear: purchase credits to counterbalance emissions and fund projects focused on reducing greenhouse gases.
New Zealand has a Government-run 'compliance market' - the New Zealand Emissions Trading Scheme (NZETS) of Government-guaranteed New Zealand Units (NZU). These are genuine units that you can have confidence in. They are counted properly and traded on the official New Zealand carbon market.
Voluntary carbon credits are sold on an unregulated global Voluntary Credit Market - although just last week COP29 (an official United Nations climate body), set out the principles for legitimate voluntary credits. They must be real (actually existing - credits have been sold from non-existing forests!), additional (emission reductions would not have otherwise happened), measurable (proper carbon counting), permanent (carbon is stored or removed for at least 100 years), and verifiable (a suitably-qualified independent science authority should have checked on-site that they are real and not over-counted).
Though the Voluntary Carbon Market has expanded greatly, it has also drawn in scammers who prey on unsuspecting buyers. In 2023, it was estimated by Oxford University and other independent authorities from on-site studies that 90% of voluntary carbon credits were fake. Last week, another independent scientific report was released confirming Oxford University's 2023 study, with ETH Zurich finding that about 86% of the voluntary carbon market credits they examined are fake.
So, how can you tell the difference between trustworthy sellers and scammers?
Recognizing the Warning Signs
1) Lack of Transparency
A major red flag is a seller's refusal to be open about their operations. Legitimate carbon credit organizations clearly outline their projects, methodologies, and pricing. For example, they should provide comprehensive documentation, including verification reports and proof of positive project impact.
If a seller is unwilling or unable to share this important information, be cautious. A reputable seller should readily provide all necessary documentation that backs their claims.
2) Unrealistic Promises
Be skeptical of sellers who make lofty claims about the returns or effectiveness of their carbon credits. For example, a seller that promises to offset emissions for less than $USD25 per metric tonne is likely offering something questionable. The carbon credit market operates on supply and demand, and credible credits reflect the true cost of viable environmental initiatives. There is a mountain of fake credits out there still being offered at very cheap prices.
If an offer seems too good to be true, it probably is. Realistically, the prices for legitimate carbon credits range from $USD25 upward, depending on the type and certification of the credits.
3) Lack of Certification
Certification is critical in the carbon credit market. Authentic carbon credits can be certified by well-established standards like ISO 14064-2 (verification) and ISO 14064-3 (validation), but unfortunately until recently most of them have not. As noted above, in 2023 90% of voluntary carbon credits issued using non-ISO and non-Government standards were found to be fake . A genuine certification confirms that the credits originate from legitimate projects and adhere to strict measurement methodologies. The seller should offer online easily accessible and free verification and validation reports in a language you can understand.
If a seller cannot furnish proof of certification, consider this a significant warning sign. Always request third-party verification to confirm the legitimacy of the carbon credits you are considering. Check with us in the first instance.
The Importance of Research
1) Conducting Due Diligence
To avoid falling for fraudulent sellers, thorough research before making purchases is essential.
Begin by checking the seller’s credentials, reading customer reviews, and investigating their project history. Additionally, participating in online forums focused on carbon credits can provide valuable insights and personal experiences from other buyers.
2) Utilizing Official Resources
Check the COP29 voluntary standards for the carbon credit market. Official resources can offer crucial information on verified sellers - but please note these standards are still in development.
If you have doubts about a seller's authenticity, check in with us for further clarification.
3) Advocacy and Legal Action
If you suspect fraudulent activity or feel misled by a seller, it is important to take action. Reporting suspicious activities protects not only yourself but also helps maintain the carbon credit market's integrity. The New Zealand Commerce Commission or its equivalent overseas is the place to go to lodge a complaint.
Keep an eye on reports about government action on greenwash cases in the carbon market. We keep a case record of the latest actions worldwide.
What a fake carbon credit offer is likely to look like
Fancy corporate-looking web site that takes you round-and-round in circles with all the right buzz words, but you can't find the key information quickly, and you just always end up on their "buy carbon credits now" sales page
Credits certified using a discredited methodology
Credits really cheap, less than $USD25
Emission reduction projects not listed
Emission reduction projects are listed but there is no link, or no easily found link, to any verification or validation reports
No link to the people who actually own the project that you could contact for a fact-check
No response or an inadequate response from the vendor if you query their offering
Voluntary Carbon Market 2.0: High-Integrity Carbon Credits
The failure of the Voluntary Carbon Market 1.0 has led to the development of the Voluntary Carbon Market 2.0: High-Integrity. There is a group of genuine operators who are joining together to provide buyers with genuine carbon credits that will help them with their net zero transition.
GreenXperts and sister carbon trading company Carbon Equities NZ Limited are working the VCM 2.0. GreenXperts is completing project development to bring verified credits to market and to provide buyers with eagle-eyed due diligence services. Carbon Equities NZ is providing buyers and sellers with a legitimate and safe platform for carbon credit supply. Every credit tranche is checked for validity before it is accepted for listing and sale.
Example High-Integrity Voluntary Carbon Credit Project
Here is an example from our portfolio of a genuine high-integrity voluntary carbon credit offering. Fairhill Forest as all the elements required for a VCM 2.0 listing. Check it out. Anything short of this we would recommend you refer to us for a due diligence check, or just avoid.
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