'Voluntary Carbon Credit Is Not Benefitting People': CSE Report Uncovers Ineffectiveness In Carbon Market

Voluntary carbon market is not benefitting people or planet, might in fact, be leading to more emissions, according to a new Centre for Science and Environment (CSE) investigation report.

While the world waits to discuss — at the Dubai UN climate conference later this year — the issue of regulating the carbon market, the CSE investigation has blown the lid off this extremely furtive, cloaked-in-secrecy world of voluntary trade in carbon credits.

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, adding, “Our climate-risked world does not need this shady secretive world of creative carbon accounting.”

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.

“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, seven 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.

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.

Pay for real change: The second step is to decide the objectives of the market — voluntary, bilateral or multilateral — and design rules accordingly.

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.

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.