SPECIAL REPORTS AND PROJECTS
Finnish carbon offsetting firm Compensate finds 91% of carbon offset projects fail its evaluation process. Of course the remaining 9% will also not help address the climate crisis
Compensate is a Finland-based carbon offsetting company set up in 2019 by Antero Vartia, an entrepreneur, actor, and former member of parliament. In 2020, Compensate created project criteria to evaluate the projects from which it buys carbon offsets. One year later, Compensate reported on its experience with the project criteria:
90% of evaluated projects fail the criteria. The reasons vary, but are all equally alarming. Some projects can not be considered additional, others have serious permanence risks. Some have unreliable baselines, because assumed deforestation is largely inflated. Worryingly, many projects also cause serious human rights violations.
“International carbon standards are fundamentally flawed”
Compensate’s report exposes some of the structural problems with the voluntary carbon market:
The voluntary carbon market is characterized by a plethora of actors, methodologies, project types, and standards. It’s a tough job for businesses, organizations and individual consumers to try to navigate this complex market. Outright opportunism and greenwashing are not uncommon.
Compensate points out that standards like Verra, Gold Standard, and American Carbon Registry exist to reassure offset buyers about the quality of the carbon offsets they are buying. “Still,” Compensate adds, “these leading standards leave a lot to be desired.”
Compensate writes that,
[N]ot even the most renowned international standards guarantee real climate impact. Compensate has come across projects with unbelievably overestimated impact, or, worse yet, no impact at all. The market is flooded with millions of essentially worthless credits. Still, these credits have the stamp of approval of the leading international standards, and offsetters keep buying them with no knowledge of the fact they’re engaging in a lie.
And Compensate writes that,
International carbon standards are fundamentally flawed, as they develop and accept project methodologies that allow for the issuance of millions of meaningless credits.
Compensate is critical of corporate promises to reach “net zero“:
While companies claim they only purchase carbon credits for offsetting unavoidable emissions, there is little transparency on companies’ efforts to reduce emissions from operations, and how much of net-zero targets are achieved by offsetting. Company emissions cannot simply be balanced out by purchasing carbon credits. It is known that emissions stay in the atmosphere for 300-1000 years, whereas a tree can sequester CO2 for several decades or until its logged and burned, then releasing all the CO2 back into the atmosphere. This is why the best way to mitigate companies’ climate impacts is to reduce emissions.
Which raises the obvious question: Why is Compensate in the carbon offsetting business?
Compensate’s report includes a section titled “Characteristics of a good carbon credit”. According to Compensate, the following characteristics have to be recognised: additionality, reliability (i.e. the climate impact is not overestimated), permanence, avoided double counting, and environmental and social net impact.
The section would have been better titled “Why offsetting cannot work”. Compensate acknowledges that many projects struggle with demonstrating financial additionality, and even fewer can tackle policy level additionality.
Permanence is a problem, Compensate writes, because “the majority of forestation projects have a lifetime of 30 years. If the protected forest is logged immediately after the project is completed, and the trees are used for energy, the CO2 will be released into the atmosphere.”
Compensate argues that “missing links between theory and practice have left room for double counting to happen quite often”:
Commonly, the two claiming parties are an organization offsetting its emission and the host country trying to reach its nationally determined contribution under the Paris Agreement.
Compensate acknowledges that “Project developers can influence the number of credits issued with the selection of the baseline scenario.” And that this baseline “could be artificially inflated”. Buying credits from a project with an artificially inflated baseline “could actually add carbon into the atmosphere”.
But the problem of counterfactual baselines is not something that can be resolved with “robust methodologies” or “stricter additionality criteria” as Compensate’s report suggests. Larry Lohmann of The CornerHouse points out, “the problem is not ‘bad baselines’ but the concept of counterfactual baselines itself. That reality does more than invalidate any particular REDD project. It invalidates REDD (and all other offsets) as a whole.”
91% of carbon offset projects fail
Compensate started using its criteria early in 2020. The company has evaluated more than 100 nature-based projects (mainly forest conservation and tree planting projects). All the projects are certified by international organisations such as Gold Standard, Verra, Plan Vivo, American Carbon Registry and Climate Action Reserve.
Only 9% of the projects passed Compensate’s evaluation process.
- Compensate found that 52% of the projects are not additional. Examples include selling carbon credits by protecting forests that were never in danger. Commercial timber plantations do not pass the financial additionality criteria “as the project could be implemented without the need for revenue from carbon credits”. Compensate argues that when project activities are already included in national laws and policies there is a lack of policy level additionality. Compensate gives the example of Indonesia and the Democratic Republic of Congo: “Examples include protecting a forest in a country where there is a moratorium on converting natural forests to palm oil plantations (Indonesia) or a moratorium on granting new timber concessions (Democratic Republic of Congo).” Leakage occurs when a government grants conservation concession status to the project area, but also grants a logging concession elsewhere.
- Compensate found that 16% of the projects it evaluated had permanence risks due to an unstable political situation and high risk of corruption, natural disasters such as floods or fires, postponing timber harvest until after the project ends, or illegal logging.
- 12% of projects had “unreliable baselines” according to Compensate’s evaluation. Artificially inflating baseline emissions generates more carbon credits for the project.But Compensate does not take into consideration the fact that all baselines are unverifiable because they are based on a counterfactual story about what would have happened in the absence of the project.
- 6% of the projects Compensate evaluated failed because of community conflicts, for example through human rights violations and evictions, or a failure to deliver the promised benefits.
- And 5% of the projects did not meet Compensate’s criteria because they offset emissions that take place today with hoped for removals in the future. Compensate gives the example of tree planting projects that calculate the amount of carbon the trees with sequester over the next 50 years.
Carbon markets need to be eliminated not reformed
Compensate is a non-profit organisation, but as a carbon broker, the company’s continued existence depends on selling carbon offsets. It’s a smart marketing ploy to claim that 91% of carbon offsets are flawed, in that it suggests that Compensate is particularly careful about selecting which projects it buys carbon offsets from.
Indeed, Compensate’s report states that,
Like investment managers manage a fund to deliver the best value, Compensate manages a diverse carbon capture portfolio to deliver the best possible climate impact.
Compensate doesn’t point out the fundamental flaw of carbon offsets. The companies buying carbon offsets are using them in order to continue burning fossil fuels. Offsetting does not reduce emissions, it just shuffles them around the world. Often it is the poorest of the poor who have to adjust their livelihoods in order that the rich can continue flying, for example.
And Compensate’s experts make no mention of the carbon cycle. At the end of 2020, 23 researchers and experts published an article in the Swedish newspaper Dagens Nyheter titled, “Misleading and false myths about carbon offsets”. The second myth that the authors highlight is that “We can compensate for fossil fuel emissions using so-called ‘nature-based solutions’ (such as carbon sequestration in vegetation and soils).”
The authors explain the carbon cycle as follows:
The carbon cycle has two parts: one fast cycle whereby carbon circulates between the atmosphere, land and seas, and one slow cycle whereby carbon circulates between the atmosphere and the rocks which make up Earth’s interior.
Fossil fuels are part of the slow carbon cycle. Nature-based solutions are part of the fast carbon cycle. This biological carbon storage is not permanent. Carbon stored in trees can be released by forest fires – something we are seeing more and more often as the climate heats up.
Rather than calling for carbon markets to be abolished, Compensate is calling for an oxymoron: “a more sustainable carbon market”.
Original Source: redd-monitor.org
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SPECIAL REPORTS AND PROJECTS
How Carbon Markets are Exploiting Marginalised Communities in the Global South Instead of Uplifting them
The billion-dollar fiction of carbon offsets
Carbon markets are turning indigenous farming practices into corporate profit, leaving communities empty-handed.
For Janni Mithula, 42, a resident of the Thotavalasa village in Andhra Pradesh, cultivating the rich, red soil of the valley was her livelihood. On her small patch of land grow with coffee and mango trees, planted over decades with tireless care and ancestral knowledge. Yet, once a source of pride and sustainability, the meaning of these trees has been quietly redefined in ways she never agreed to.
Over a decade ago, more than 333 villages in the valley began receiving free saplings from the Naandi Foundation as part of a large-scale afforestation initiative funded by a French entity, Livelihoods Funds. Unbeknownst to Janni and her neighbours, these trees had transfigured into commodities in a global carbon market, their branches reaching far beyond the valley to corporate boardrooms, their roots tethered not to the soil of sustenance but to the ledger of profit and carbon offsets.
The project claims that it would offset nearly 1.6 million tonnes of carbon dioxide equivalent over two decades. On paper, it is a triumph for global climate efforts. In reality, the residents’ lives have seen little improvement. While the sale of carbon credits has reportedly fetched millions of dollars for developers, Janni’s rewards have been minimal: a few saplings, occasional training sessions, and the obligation to care for trees that she no longer fully owns. These invisible transactions pose a grave risk to marginalised communities, who practice sustainable agriculture out of necessity rather than trend.
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The very systems that could uplift them—carbon markets intended to fund sustainability—end up exploiting their resources without addressing their needs.
Earlier this year, the Centre for Science and Environment (CSE) and Down To Earth (DTE) released a joint investigative report on the functioning of the voluntary carbon market in India. The report critically analysed the impacts of the new-age climate solution, its efficacy in reducing carbon emissions, and how it affected the communities involved in the schemes.
The findings highlighted systemic opacity, with key details about the projects, prices, and beneficiaries concealed under confidentiality clauses. Developers also tended to overestimate their emission reductions while failing to provide local communities with meaningful compensation. The report stated that the main beneficiaries of these projects were the project developers, auditors and companies that make a profit out of the carbon trading system.
Carbon markets: The evolution
On December 11, 1997, the parties to the United Nations Framework Convention on Climate Change (UNFCC) convened and adopted the Kyoto Protocol with the exigence of the climate crisis bearing down on the world. The Kyoto Protocol, revered for its epochal impact on global climate policy, focused on controlling the emissions of prime anthropogenic greenhouse gases (GHGs). One of the key mechanisms introduced was the “Clean Development Mechanism”, which would allow developed countries to invest in emission reduction projects in developing countries. In exchange, the developed countries would receive certified emission reduction (CER) credits, or carbon credits as they are commonly known.
One carbon credit represents the reduction or removal of one tonne of CO2. Governments create and enforce rules for carbon markets by setting emission caps and monitoring compliance with the help of third-party organisations. For example, the European Union Emissions Trading System (EU-ETS) sets an overall cap on emissions and allocates allowances to industries. A financial penalty system was also put in place to prevent verifiers and consultants from falsifying emissions data. The impact of these renewable projects is usually verified through methods such as satellite imagery or on-site audits.
Companies such as Verra and Gold Standard have seized this opportunity, leading the designing and monitoring of carbon removal projects. Governments and corporations invest in these projects to meet their own net-zero pledges. The companies then issue carbon credits to the investing entity. Verra has stated that they have issued over 1 billion carbon credits, translating into the reduction of 1 billion tonnes of greenhouse gas emissions. However, countless case studies and reports have indicated that only a small fraction of these funds reach the local communities practising sustainability.
Article 6 under the Paris Agreement further concretised and regulated the crediting mechanism to enable countries interested in setting up carbon trading schemes. However, the parties failed to reach a consensus regarding the specifics of Article 6 at COP 27 and COP 28. So, climate finance experts and policymakers were very interested in the developments taking place at the COP 29 summit in Baku, Azerbaijan. Unlike its predecessors, the COP 29 summit has seen a diminished attendee list, with major Western political leaders including Joe Biden, Ursula von der Leyen, Olaf Scholz, and Emmanuel Macron failing to make it to the summit due to the increasingly turbulent climate within their own constituencies.
From a post-colonial perspective, carbon markets have been viewed as perpetuating existing global hierarchies; wealthier countries and corporations fail to reduce their emissions and instead shift the burden of mitigation onto developing nations. | Photo Credit: Illustration by Irfan Khan
Sceptics questioned whether this iteration of the summit would lead to any substantial decisions being passed. However, on day-two of the summit, parties reached a landmark consensus on the standards for Article 6.4 and a dynamic mechanism to update them. Mukhtar Babayev, the Minister of Ecology and Natural Resources of Azerbaijan and the COP 29 President, said: “By matching buyers and sellers efficiently, such markets could reduce the cost of implementing Nationally Determined Contributions by 250 billion dollars a year.” He added that cross-border cooperation and compromise would be vital in fighting climate change.
India has positioned itself as an advocate for the Like-Minded Developing Countries (LMDCs) group, with Naresh Pal Gangwar, India’s lead negotiator at COP 29, saying, “We are at a crucial juncture in our fight against climate change. What we decide here will enable all of us, particularly those in the Global South, to not only take ambitious mitigation action but also adapt to climate change.”
The COP 29 decision comes in light of the Indian government’s adoption of the amended Energy Conservation Act of 2022, which enabled India to set up its own carbon market. In July 2024, the Bureau of Energy Efficiency (BEE), an agency under the Ministry of Power, released a detailed report containing the rules and regulations of the Carbon Credit Trading Scheme (CCTS), India’s ambitious plan for a compliance-based carbon market. The BEE has aimed to launch India’s carbon market in 2026.
CSE’s report highlighted the challenges and possible strategies that the Indian carbon market could adopt from other carbon markets around the world. Referring to this report, Parth Kumar, a programme manager at CSE, pointed out how low carbon prices and low market liquidity would be prominent challenges that the nascent Indian market would have to tackle.
The Global South should be concerned
Following the landmark Article 6.4 decision, climate activists called out the supervisory board for the lack of discussion in the decision-making process. “Kicking off COP29 with a backdoor deal on Article 6.4 sets a poor precedent for transparency and proper governance,” said Isa Mulder, a climate finance expert at Carbon Market Watch. The hastily passed decision reflects the pressure that host countries seem to face; a monumental decision must be passed for a COP summit to be touted as a success.
The science behind carbon markets is rooted in the ability of forests, soil, and oceans to act as carbon sinks by capturing atmospheric carbon dioxide. This process is known as carbon sequestration, and it is central to afforestation and soil health restoration projects. However, the long-term efficacy and scalability of these projects have been repeatedly questioned. The normative understanding of carbon markets as a tool to mitigate climate change has also come under scrutiny recently, with many activists calling the market-driven approach disingenuous to the goals of the climate movement.
From a post-colonial perspective, carbon markets have been viewed as perpetuating existing global hierarchies; wealthier countries and corporations fail to reduce their emissions and instead shift the burden of mitigation onto developing nations. Olúfẹ́mi O. Táíwò, Professor of Philosophy at Georgetown University, said, “Climate colonialism is the deepening or expansion of foreign domination through climate initiatives that exploit poorer nations’ resources or otherwise compromises their sovereignty.” Moreover, the effects of climate change disproportionately fall on the shoulders of marginalised communities in the Global South, even though industrialised nations historically produce the bulk of emissions.
There have also been doubts surrounding the claiming process of carbon credits and whether the buyer country or the country where the project is set can count the project towards its own Nationally Determined Contributions (NDCs). Provisions under Article 6 of the Paris Agreement state that countries cannot use any emission reductions sold to another company or country towards their own emissions targets. However, this has become a widespread issue plaguing carbon markets. The EU has recently been criticised for counting carbon credits sold to corporations under the Carbon Removal Certification Framework (CRCF) towards the EU’s own NDC targets. This has led to concerns over the overestimation of the impact of mission reduction projects.
Also Read | India needs climate justice, not just targets
Carbon offset projects, additionally, alienate local communities from their land as the idea of ownership and stewardship becomes muddled with corporate plans on optimally utilising the land for these projects. For example, in 2014, Green Resources, a Norwegian company, leased more than 10,000 hectares of land in Uganda, with additional land being leased in Mozambique and Tanzania. This land was used as a part of afforestation projects to practise sustainability and alleviate poverty in the area. However, interviews conducted with local Ugandan villagers revealed that the project forcibly evicted the local population without delivering its promises to improve access to health and education for the community. These concerns highlighted how the burden of adopting sustainable practices is placed on marginalised communities.
While carbon markets are rightfully criticised, they remain a key piece of the global climate adaptation puzzle. Addressing the issues surrounding transparency and equitable benefit-sharing with local communities could lead to carbon markets having a positive impact on climate change. The system must ensure that larger corporations and countries do not merely export their emissions, but instead implement measures to reduce their own emissions over time. It is also imperative to explore other innovative strategies such as circular economy approaches and nature-based solutions that are more localised, offering hope for a just and sustainable future.
Adithya Santhosh Kumar is currently pursuing a Master’s in Engineering and Policy Analysis at the Delft University of Technology in the Netherlands.
Source: frontline.thehindu.com
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- 45% of Louis Dreyfus Company, with its massive land holdings in Latin America, growing sugarcane, citrus, rice and coffee;
- a majority stake in Unifrutti, with 15,000 ha of fruit farms in Chile, Ecuador, Argentina, Philippines, Spain, Italy and South Africa; and
- Al Dahra, a large agribusiness conglomerate controlling and cultivating 118,315 ha of farmland in Romania, Spain, Serbia, Morocco, Egypt, Namibia and the US.
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Sovereign wealth funds invested in farmland/food/agriculture (2023)
|
|||
|
Country
|
Fund
|
Est.
|
AUM (US$bn)
|
|
China
|
CIC
|
2007
|
1351
|
|
Norway
|
NBIM
|
1997
|
1145
|
|
UAE – Abu Dhabi
|
ADIA
|
1967
|
993
|
|
Kuwait
|
KIA
|
1953
|
769
|
|
Saudi Arabia
|
PIF
|
1971
|
620
|
|
China
|
NSSF
|
2000
|
474
|
|
Qatar
|
QIA
|
2005
|
450
|
|
UAE – Dubai
|
ICD
|
2006
|
300
|
|
Singapore
|
Temasek
|
1974
|
298
|
|
UAE – Abu Dhabi
|
Mubadala
|
2002
|
284
|
|
UAE – Abu Dhabi
|
ADQ
|
2018
|
157
|
|
Australia
|
Future Fund
|
2006
|
157
|
|
Iran
|
NDFI
|
2011
|
139
|
|
UAE
|
EIA
|
2007
|
91
|
|
USA – AK
|
Alaska PFC
|
1976
|
73
|
|
Australia – QLD
|
QIC
|
1991
|
67
|
|
USA – TX
|
UTIMCO
|
1876
|
64
|
|
USA – TX
|
Texas PSF
|
1854
|
56
|
|
Brunei
|
BIA
|
1983
|
55
|
|
France
|
Bpifrance
|
2008
|
50
|
|
UAE – Dubai
|
Dubai World
|
2005
|
42
|
|
Oman
|
OIA
|
2020
|
42
|
|
USA – NM
|
New Mexico SIC
|
1958
|
37
|
|
Malaysia
|
Khazanah
|
1993
|
31
|
|
Russia
|
RDIF
|
2011
|
28
|
|
Turkey
|
TVF
|
2017
|
22
|
|
Bahrain
|
Mumtalakat
|
2006
|
19
|
|
Ireland
|
ISIF
|
2014
|
16
|
|
Canada – SK
|
SK CIC
|
1947
|
16
|
|
Italy
|
CDP Equity
|
2011
|
13
|
|
China
|
CADF
|
2007
|
10
|
|
Indonesia
|
INA
|
2020
|
6
|
|
India
|
NIIF
|
2015
|
4
|
|
Spain
|
COFIDES
|
1988
|
4
|
|
Nigeria
|
NSIA
|
2011
|
3
|
|
Angola
|
FSDEA
|
2012
|
3
|
|
Egypt
|
TSFE
|
2018
|
2
|
|
Vietnam
|
SCIC
|
2006
|
2
|
|
Gabon
|
FGIS
|
2012
|
2
|
|
Morocco
|
Ithmar Capital
|
2011
|
2
|
|
Palestine
|
PIF
|
2003
|
1
|
|
Bolivia
|
FINPRO
|
2015
|
0,4
|
|
AUM (assets under management) figures from Global SWF, January 2023
|
|||
|
Engagement in food/farmland/agriculture assessed by GRAIN
|
|||
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