Voluntary carbon market is not benefitting people or planet, might in fact be leading to more emissions – says new CSE investigation
While the world waits to discuss – at the Dubai UN climate conference later this year — the issue of regulating the carbon market, a new investigation by Centre for Science and Environment (CSE) has blown the lid off this extremely furtive, cloaked-in-secrecy world of voluntary trade in carbon credits. The new report, titled Discredited: The voluntary carbon market in India, was released at a webinar today . Buying and selling of carbon credits is seen as an important way to combat climate change. In this, credits are assigned to projects that can reduce greenhouse gases. These credits, measured in tonne of carbon dioxide-equivalent (CO2e), are then priced and traded. People and businesses that wish to offset the emissions generated by their activities can buy these credits and ‘neutralise’ their carbon footprints. So, you could take a flight that is carbon neutral or buy a luxury bag, where the emissions to manufacture it have been offset; or you could travel for your company or produce oil and show that it has been ’offset’ – all through the purchase of these credits. But the world does not have an official carbon market yet – in fact, this is up for discussion at the UN’s 28th Conference of Parties to be held in Dubai. In the absence of an official mechanism, a voluntary carbon market has blossomed. Steeped in secrecy, beset by flaws, it is this market that CSE and Down To Earth’s six-month long rigorous analysis has focused on and exposed. Releasing the CSE investigative report in the webinar, CSE director general Sunita Narain said: “Carbon markets have the potential to unlock billions of dollars for countries in the Global South that need money to move to a low-carbon energy system and to ensure socio-economic development of their communities. But is today’s voluntary carbon market working for people and the planet? Our investigation shows that it is not.” “The purpose of this market seems to be to serve the interests of project developers, auditors and others who make a profit out of the lucrative carbon business. The carbon market as it exists today is not designed to mitigate emissions – in fact, it might actually be increasing emissions across the world. Buyers could continue to emit and increase their emissions, all the while claiming that they have bought credits and are hence, carbon-neutral!” adds Narain. “Our investigation clearly shows the double jeopardy we are in – these credits are either over-estimated or do not lead to the change that has been claimed,” says Narain. “Our climate-risked world does not need this shady secretive world of creative carbon accounting.” The CSE-Down To Earth investigation The world has two leading carbon registries – Verra and Global Standard. Together, they have registered 6,481 projects across the world; till May 2023, they has issued 1.4 billion carbon credits, says Avantika Goswami, programme manager, climate change, CSE. India, says the CSE team, is the world’s second largest supplier of carbon offsets and is “at the forefront of carbon investment”. India’s voluntary carbon market is worth over US $1.2 billion, and the country has 1,451 projects listed with the two registries named above. In 2022, three Indian project developers were among the top 15 in the world in generating carbon credits. Indian entities have already earned about US $652 million from carbon credits used to offset emissions. Says Narain: “We wanted to find out if this market was working to benefit people and the planet. What we found was there is much that needs to be done.” “CSE and Down To Earth researchers travelled to 40 villages and towns across India to understand how the market works. At every location, we found that communities, their lands and their labour were central to the business – but community members were almost never aware that they were working to generate carbon credits, but had no rights of their own over those credits. The projects also raised fundamental concerns about the accounting practices of these transactions and the companies behind them,” says Goswami. For instance, visits to Madhya Pradesh and Karnataka villages where EKI-Energy Services and Greenway Grameen Infra Pvt Ltd had distributed improved cookstoves,7 found a serious problem of overestimation of emissions. Similarly, visits to Araku Valley found that tribals had “signed” away the rights to carbon credit through a local NGO intermediary, Naandi Foundation, acting on behalf of Danone, which were then transferred to the Paris-based Livelihood Fund. Danone’s popular luxury water brand, Evian, then took credits for this sequestration to claim it was carbon-neutral. Michelin Group used it to ‘offset’ emission of its employees’ travel. But as ground reports by Rohini Krishnamurthy and Trishant Dev found in all these cases and many more, local people had no benefits from this business. “Our findings came despite the discouragement that we faced from project developers, who demanded that we sign non-disclosure agreements or simply did not permit us to visit the project areas,” say Rohini and Trishant. What is the way ahead? “The carbon market should be a real market, and not a secret pact between buyer and seller,” says Narain. The CSE-Down To Earth investigative team puts forward the following recommendations: Ensure transparency: The first step is to ensure transparency in the market. Details of projects should be listed; there should be information about the price that each credit has earned. CSE-DTE researchers met with stiff resistence when they asked for information; even being told of sign Non-Disclosure Agreements (NDA) before visits to project sites; or being told (by Paris-based investor company) that travel in Indian villages was dangerous; or by one of the leading players, EKI Energy Services that the “company is in a silent period”. Pay for real change: The second step is to decide the objectives of the market—voluntary, bilateral or multilateral—and design rules accordingly. If the purpose of the market is to invest in projects that will lead to reduction in emissions in different parts of the world, then the market must be based on paying for the real cost of the projects. Currently, the market pays less than 5 per cent of the costs of a renewable energy project or even a biogas project. The poor are literally subsidising the rich emitters in this market. Share the proceeds: Currently, the market only seems to work in the interest of the project developers, consultants and auditors. The communities get virtually nothing from the proceeds, and this means that they also have no stake in the emission reduction programme. Carbon market must be required to share the proceeds annually with communities in a verifiable manner. Keep it simple: There is widespread overestimation of emission reductions by project developers. One lesson that must be learnt is to keep the project design simple and not to trust the army of consultants and profiteers in this business. It means keeping their role minimal and to keep the control of the projects with public institutions and people. Countries must account: The voluntary carbon market must work within the confines of the government’s NDCs. The only “exportable” credits have to be those that are expensive for the country to do—where there is an advantage for the country as it can transform its emission trajectory. The fact is that the current voluntary carbon market is based on cheap options and this means that countries have “sold” off the lowest-hanging fruit—the options of emission reductions that they could afford. They would now be in the balance sheet of foreign entities and governments. This will only mean that countries will not be able to afford to make investments in the hard-to-abate options; and these will contribute to emissions and jeopardise our common future.