Carbon Credits: Greenwashing Loopholes and a Path to Genuine Climate Action

April 20, 2022

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4 min read

Just like with most ideas, carbon credits started off with honest intentions but loopholes have turned it into a bookkeeping trick. Credits can be a greenwashing tactic that allow companies to mislead customers without making any improvements to their business model.

Introduction

Carbon credits are a way to reduce our carbon emissions and our carbon footprint to ensure a sustainable planet for future generations. One carbon credit is a permit that allows the owner to emit one ton of carbon dioxide or other greenhouse gases, without it contributing to their overall carbon footprint. Just like with most ideas, carbon credits started off with honest intentions but loopholes have turned it into a bookkeeping trick. Credits can be a greenwashing tactic that allow companies to mislead customers without making any improvements to their business model.

Types of carbon markets

Cap and trade program. Governments set a limit or cap on the emissions permitted across a certain industry. If a company goes over their allowance, they can buy more carbon credits from their market to continue emitting gases. They may also be penalized for a violation. However, if a company reduces their emissions, they can sell or “trade” carbon credits to other companies.

Voluntary offset program. This allows businesses, nonprofits, and individuals to offset their emissions by choice. Businesses can create and sell carbon credits by reducing, capturing and storing emissions through different projects such as investing in renewable energy, improving energy efficiency, carbon and methane capture, land reforestation, returning biomass to the soil and switching to biofuels.

Bogus Projects

Of all the carbon credits or emission reduction units that were issued, nearly 75% of them were bogus and lacked environmental integrity.

Spontaneous ignition of coal. Several Ukrainian coal companies extracted coal from the ground, burned them in power plants and claimed millions in carbon credits. So, they made money by selling power, they made money by extracting coal from the ground and all the emissions from burning coal in a power plant aren’t counted.
Expansion of natural gas pipelines. Natural gas is considered to be a cleaner fuel than coal or oil, which emit more carbon dioxide. Several Ukrainian pipeline projects that were registered in 2012, had already started in 2003, so they weren’t preventing emissions. On top of that, the assumed methane leaks were 3 times the real data.
Treatment of greenhouse gases like chlorofluorocarbons or CFCs and hydrochlorofluorocarbons or HCFCs. Companies deliberately increased their greenhouse gases by 4 times, then captured and destroyed them to claim millions in carbon credits.

Simply put, Russia and Ukraine were gaming the system. They took credit for projects that would have happened anyway or already happened a decade earlier. They overestimated emission reductions, and deliberately increased waste gases.

Jim Hourdequin, CEO of Lyme Timber recently exposed the fraudulent carbon credit system in this Bloomberg article by Ben Elgin. His company manages 1.5 million acres of US forests, roughly the size of Delaware. In the past, Lyme Timber made most of its revenue from chopping down trees. In 2012, they began selling carbon credits on 220,000 acres or 15% of its land. They earned $53 million from these environmental transactions over the past two years.

Exposing the Flaws

In addition to these greenwashing loopholes, the actual cost of each carbon credit can vary drastically from less than $1 per ton to over $50 per ton. The cost depends on the effectiveness of the carbon offset project, the location and additional benefits. For example, Bill Gates spends $600 per ton to negate emissions from his private jet. Microsoft pays an average of $20 per ton. On the lower end, Delta Air lines pays about $2.30 per ton. They spent $30 million on 13 million offsets, so they were able to declare themselves carbon neutral last year.

We need more insiders like Jim Hourdequin to expose the problem with carbon markets. His company, Lyme Timber, has now decided to only sell carbon credits that genuinely benefit the climate. This has raised the cost of his company’s carbon credits to $60 which unfortunately turns many clients away.

Conclusion

While carbon credits and offsets are intended to help combat climate change, their misuse by some companies through greenwashing tactics is a real concern. The genuine efforts of organizations like Lyme Timber bring hope for a more transparent and effective carbon credit system. As consumers, it is crucial to remain vigilant and demand real action to address climate change, without falling prey to misleading claims or fraudulent practices.