Carbon credit speculators could lose billions as scientific evidence shows many offsets they have bought have no environmental worth and have become stranded assets.
Amid growing evidence that huge numbers of carbon credits do nothing to mitigate global heating and can sometimes be linked to alleged human rights concerns, there is a growing pile of carbon credits equivalent to the annual emissions of Japan, the world’s fifth largest polluter, that are unused in the unregulated voluntary market, according to market analysis.
From Apple to Disney, Gucci to Shell, many of the largest companies in the world have used carbon credits for their sustainability efforts from the unregulated voluntary market, which grew to $2bn (£1.6bn) in size in 2021 and saw prices for many carbon credits rise above $20 per offset.
The credits are often generated on the basis they are contributing to climate change, mitigation such as stopping tropical deforestation, tree planting and creating renewable energy projects in developing countries. Proponents say they need to massively increase in size and scale to help meet the Paris agreement to limit global heating.
But repeated scandals about their true impact and a crackdown from regulators on claims of “carbon neutrality” have meant that demand and prices for offsetting have slumped, with signs that some carbon credit traders are writing off investments that would have been worth hundreds of millions of dollars as recently as last year.
In the US, the derivatives market regulator has issued a whistleblower alert relating to fraud and misconduct in carbon markets and has created a new environmental fraud taskforce. [Continue reading…]