Revelations that almost 95% of the “avoided deforestation” carbon credits issued by the world’s largest certifier have zero climate mitigation value, have sparked calls for rigour, transparency, and accountability in the carbon credit process.

The forest carbon offsets used by Disney, Shell, Gucci, and other big corporations “are largely worthless and could make global heating worse,” reports the Guardian.

Journalism non-profit SourceMaterial, the Guardian, and German weekly Die Zeit conducted a nine-month investigation into the credits issued by Washington, DC-based Verra, the world’s leading carbon standard in the offsets market. They found that 94% of the non-profit’s rainforest offsets are likely to be “phantom credits” and do not represent genuine carbon reductions.

The investigation used satellite data from two 2020 studies by German, Dutch, and United Kingdom resource economists to check the results of 29 Verra-certified rainforest offset schemes. Only 6%, or 5.5 million of the 95 million carbon credits, were real emission reductions. And only eight of those 29 projects reduced any emissions at all. SourceMaterial observes that 95 million actual carbon credits, as opposed to “phantom” ones, would be “theoretically enough to balance the annual emissions from 25 coal-fired power plants or burning 220 million barrels of oil.”

Founded in 2007, Verra “operates a number of leading environmental standards for climate action and sustainable development, including its verified carbon standard (VCS) that has issued more than one billion carbon credits,” the Guardian says. The company approves 75% of all voluntary offsets, with rainforest protection or “avoided deforestation” schemes making up 40% of the total.

The process begins with a carbon credit project developer, either a private company or a conservation group, laying out a program “for activities that result, in theory, in a benefit to the climate,” explains SourceMaterial. “Each credit is designed to account for one tonne of carbon being removed from the atmosphere, or one tonne fewer being emitted.”

In the case of “avoided deforestation” projects—the most popular option—the developer must follow a methodology to prove the trees are actually at risk. The methodology can be written by the developer, prepared frameworks are also available for purchase from certifiers like Verra.

The developer then passes its proposed project on to an auditor, who makes sure that it aligns with the chosen methodology. The auditors are not required to “ensure that the methodology corresponds to reality.”

Once the auditors give the go-ahead, the project is approved by a certifier (like Verra), which assigns it carbon credits and allows it to register on its database.

Once in the database, a project’s carbon credits can be bought by companies seeking to offset emissions. Chevron, British Airways, Air France, Netflix, and Ben & Jerry’s are among Verra’s customers, along with Disney, Shell, and Gucci.

Fossil fuel companies and airlines can, in turn, legally use their credits to inform their customers that they can drive or fly “carbon-neutral,” notes SourceMaterial.

The heart of the problem with the rainforest carbon schemes examined in the news investigation seems to be that they overestimate the threat to the forests involved by an average of 400%, according to a 2022 study by the University of Cambridge that has not yet been peer-reviewed.

Verra has objected to these findings, insisting that satellite data and standardized approaches cannot capture what is happening on the ground. It is this methodological myopia that explains the yawning gap between approved credits and the emissions reductions estimated by scientists, Verra says.

“Verra has certified over 1,500 carbon projects, which have been assessed tens of thousands of times by third party auditors,” Verra spokesperson Steve Zwick told SourceMaterial. But according to the Guardian, these third party auditors are frequently vetted by Verra itself.

Verra also says that since 2009, its work has channelled billions of dollars into forest preservation. But the company also takes 10 cents from project developers for every credit it verifies, says SourceMaterial. “The more credits it approves, the more money it makes, giving it little incentive to limit the number of substandard offsets on the market.”

And the carbon credit industry has some shady corners, SourceMaterial adds. For example, an auditor reviewing one of Verra’s popular methodologies for calculating climate benefit from avoided deforestation, VM0015, once warned that it would “grossly overestimate deforestation.” Verra revised the model, but also left the flawed original available to developers.

Early in the development of another Verra methodology, VM0007, the auditor warned against Verra’s desire to “consider a forest at risk if a project developer merely declared an intention to cut down trees.”

There is also a fundamental problem with “avoided deforestation,” because it depends on the generation of a counterfactual: “if x amount of deforestation had not occurred, y amount of emissions would not have been generated.”

And counterfactuals are very tricky and deeply unreliable things, said Yadvinder Singh Malhi, an Oxford University professor of ecosystem science who was not involved in the investigation. “The challenge isn’t around measuring carbon stocks; it’s about reliably forecasting the future, what would have happened in the absence of the REDD+ [Reducing Emissions from Deforestation and Degradation] activity. And peering into the future is a dark and messy art in a world of complex societies, politics ,and economics.”

“Many of these projects may have brought lots of benefits in terms of biodiversity conservation capacity and local communities, but the impacts on climate change on which they are premised are regrettably much weaker than hoped,” Malhi added. “I wish it were otherwise, but this report is pretty compelling.”

Julia Jones, a Bangor University professor of conservation science and co-author of the Cambridge study, told the Guardian the carbon credit system needs urgent correction and renovation.

“We are at an absolutely critical place for the future of tropical forests,” Jones said. “If we don’t learn from the failures of the last decade or so, then there’s a very large risk that investors, private individuals, and others will move away from any kind of willingness to pay to avoid tropical deforestation, and that would be a disaster.”

Limiting deforestation is essential for achieving the world’s climate and biodiversity targets, said Thomas Crowther, professor of ecology at ETH Zürich and co-chair of the United Nations Decade on Ecosystem Restoration. “But transparency remains a key challenge, and it is critical that we use the best available scientific approaches to ensure the accountability of environmental commitments at scale,” he told the Guardian.

“Companies and citizens need to be able to support projects they can trust,” Crowther added. “We need to urgently create a system where this is a reality.”