“These carbon credits are essentially predicting whether someone will chop down a tree, and selling that prediction,” said one study author. “If you exaggerate or get it wrong, intentionally or not, you are selling hot air.”
Most carbon offset schemes significantly overestimate their impact on reducing deforestation, with many of the carbon credits purchased by polluting corporations amounting to little more than “hot air,” according to a researcher behind a study released Thursday that could portend billions of dollars in losses for speculators.
“Reducing emissions from deforestation and forest degradation (REDD) projects are intended to decrease carbon emissions from forests to offset other carbon emissions and are often claimed as credits to be used in calculating carbon emission budgets,” explains the study, which was published in the journal Science.
However, according to the study:
We examined the effects of 26 such project sites in six countries on three continents using synthetic control methods for causal inference. We found that most projects have not significantly reduced deforestation. For projects that did, reductions were substantially lower than claimed…
Methodologies used to construct deforestation baselines for carbon offset interventions need urgent revisions to correctly attribute reduced deforestation to the projects, thus maintaining both incentives for forest conservation and the integrity of global carbon accounting.
“Carbon credits provide major polluters with some semblance of climate credentials. Yet we can see that claims of saving vast swathes of forest from the chainsaw to balance emissions are overblown,” study co-author Andreas Kontoleon, from the University of Cambridge’s Department of Land Economy, said in a statement.
“These carbon credits are essentially predicting whether someone will chop down a tree, and selling that prediction,” he added. “If you exaggerate or get it wrong, intentionally or not, you are selling hot air.”
A new analysis in Science reveals that emission reductions from forest conservation projects—sometimes used to “offset” carbon emissions from other sources—have been overestimated.
Kontoleon added that overestimations of forest preservation have driven an increase in the number of carbon credits on the market, resulting in artificial price suppression.
“Potential buyers benefit from consistently low prices created by the flood of credits,” he said. “It means that companies can tick their net-zero box at the lowest possible cost.”
This could mean that carbon speculators stand to lose billions of dollars in the future as offsets become stranded assets.
“It’s currently a buyer’s market and buyers are, rightly, prioritizing quality. There are over a billion tons of issued but not retired credits in the market—this suggests lots of credits can be written off, and there will remain a large supply for buyers to tap into,” Anton Root, head of research at AlliedOffsets, toldThe Guardian Thursday.
“A correction like that could help to orient the market toward fundamental supply-demand dynamics, which we don’t currently tend to see, and drive up the price for credits that are deemed to be above the quality threshold,” he added.
“Carbon credit speculators could lose billions as scientific evidence shows many offsets they have bought have no environmental worth and have become stranded assets.” https://t.co/gnx6fZy8yS
The new research follows other scientific research and journalistic investigations, including a January study by The Guardian, Die Zeit, and SourceMaterial that concluded that over 90% of the rainforest carbon offsets sold by Verra, the nonprofit organization that sets the world’s leading sustainability standard, “are largely worthless and could make global heating worse.”
While some scientists argue that CO2 extraction, either via natural or technological means, is needed in order to meet the goals of the Paris climate agreement, opponents call the technology a “false climate solution.”
“Carbon offset markets are widely discredited,” Food & Water Watch policy director Jim Walsh said earlier this year. “Their only benefit lies in enriching the middlemen charged with selling the lie.”
Despite this, the Biden administration is pushing ahead with a plan to invest $2.5 billion in a pair of major carbon capture and storage projects, which it claims will “significantly reduce carbon dioxide emissions from electricity generation and hard-to-abate industrial operations” as part of the “effort critical to addressing the climate crisis and meeting the president’s goal of a net-zero emissions economy by 2050.”
“Instead of providing desperately needed clean energy, they feed us greenwashing garbage.”
A new analysis of the activities of twelve major fossil fuel giants shows that the companies are misleading the public about their emission-reduction commitments while raking in record profits from fossil fuels, which are driving catastrophic extreme weather events across the globe.
In a report published Wednesday, Greenpeace Central and Eastern Europe examines the decarbonization pledges, investments, and profits of six global fossil fuel giants—including Shell, BP, and TotalEnergies—and six European oil companies.
The results indicate that, in 2022, close to 93% of the oil giants’ investments on average went to keeping the companies on the “fossil oil and gas path” while just 7.3% were aimed at promoting “low-carbon solutions” and sustainable production.
“Although most of the sample companies are committed to ‘net zero’ by 2050, a closer look shows that none of them has developed a coherent strategy to achieve this,” the report notes, adding that the examined companies are in fact “scaling back their ambitions” even as their polluting activities wreak havoc worldwide. Shell and BP recently announced they are ditching previous plans to curb oil production and emissions.
The report shows that BP, Equinor, Wintershall and TotalEnergies cut their investments in renewable products last year—a fact that, according to Greenpeace, bolsters the case for “compulsory investment in genuinely green infrastructure” and other government regulations.
Kuba Gogolewski, a finance campaigner at Greenpeace CEE, said Wednesday that “as the world endures unprecedented heat waves, deadly floods, and escalating storms, Big Oil clings to its destructive business model and continues to fuel the climate crisis.”
“Instead of providing desperately needed clean energy, they feed us greenwashing garbage,” Gogolewski added. “Big Oil’s unwillingness to implement real change is a crime against the climate and future generations. Governments need to stop enabling fossil fuel companies, heavily regulate them, and plan our fossil fuel phase-out now. They will never change on their own.”
“Fossil fuel companies like Shell, TotalEnergies, BP Equinor, and ENI have shown the public they are incapable of self-regulation.”
The new report offers several examples of companies offering misleading data in an apparent attempt to convince investors and the public of their commitment to the renewable energy transition.
“Shell reports a ‘renewable capacity’ of 6.4 gigawatts for the 2022 financial year,” the analysis observes. “Only in the footnote… does one learn that this figure also includes plants that are still under construction or committed for sale. The actual capacity at the end of 2022 was only 2.2 gigawatts, as the group admits in another place in its reporting.”
In the case of BP’s 2022 financial disclosures, the report notes, “there is no number that would show the amount of wind and solar power” the company generated last year.
“This lapse is only an indication that no major oil company can show a comprehensible plan for a ‘net zero’ in 2050,” the report states.
“Fossil fuel companies like Shell, TotalEnergies, BP Equinor, and ENI have shown the public they are incapable of self-regulation after scaling back their climate ambitions, despite being heavily responsible for the climate crisis,” said Gogolewski. “That’s why Greenpeace is calling for European governments to strictly regulate the industry and begin its rapid economic and political downsizing.”
🔴NEW REPORT🔴
🏭Fossil fuel companies have NO MEANINGFUL PLANS to reduce their carbon emissions or switch to renewables.
🤥 Yet they continue with their GREENWASHING talking about greener investments and net zero trajectories.
The new analysis comes in the wake of devastating fires in Maui, Hawaii that were fueled by climate change, which contributed to the severely dry conditions that allowed the fires to spread rapidly.
Maui County is currently suing Shell, BP, and other fossil fuel giants, accusing them of engaging in a “coordinated, multi-front effort to conceal and deny their own knowledge” about the climate threat and profiting “from a massive increase in the extraction and consumption of oil, coal, and natural gas, which has in turn caused an enormous, foreseeable, and avoidable increase in global greenhouse gas pollution and a concordant increase in the concentration of greenhouse gases.”
The Maui lawsuit states that “wildfires are becoming more frequent, intense, and destructive in the county” as the planet warms due to ever-rising carbon emissions.
Greenpeace activists scaled Deutsche Bank’s headquarters in Frankfurt Wednesday and strung up a large yellow banner to protest against the climate investment policies of the German lender and its asset management company DWS.
The action came a day ahead of the annual shareholder meeting of DWS, which is mostly owned by Deutsche Bank and has drawn attention from activists and regulators over allegations it misled investors about “green” investments. DWS has disputed the claims.
Deutsche Bank (DB) said sustainability and climate protection were “strategic priorities,” and that it supports DWS in the development of its sustainability policies and standards.
The German-language Greenpeace banner was unfurled shortly after 6 a.m. local time (midnight ET) and stretched across part of the glass facade on the lower section of Deutsche Bank’s twin office towers. The banner translated as “Force DWS [to] protect the climate!”
HSBC made a secretive multimillion-dollar loan to an energy company that is bulldozing a village in western Germany to expand a huge coal mine, just three months after the bank pledged to stop funding coal.
HSBC, which claims it is “helping to lead the transition to a more sustainable world”, approved the $340m deal with energy giant RWE after internal discussions in which senior figures at the bank recommended that its involvement should not be publicised.
Violent clashes broke out at the site of the mine on Wednesday as riot police tried to drag away protesters to make way for the bulldozers under the glare of the world’s media. Hundreds of environmental activists have set up camp in Lützerath, the last of several villages to be sacrificed for the 35 km2 Garzweiler mine, which is owned by RWE, one of Europe’s largest energy companies.
According to data from Refinitiv, RWE borrowed a total of $5.4bn in loans arranged by a group of 25 banks including HSBC, Barclays and Santander. All three have committed to aligning their financing and investments with net zero by 2050.
At COP27 last year the UN secretary general, António Guterres, said that it was reprehensible to use “bogus net-zero pledges” to cover up “messy” fossil fuel expansion. “It is rank deception,” he added. “This toxic cover-up could push our world over the climate cliff. The sham must end.”
HSBC told the Bureau: “Details of this [deal] and all its participating banks are in the public domain, as is normal. We have processes to ensure our financing aligns with our policies, which include an expectation on clients to produce and implement credible transition plans.”
Barclays declined to comment on the RWE loan but said it is phasing out financing of thermal coal mining and coal-fired power generation. Santander declined to comment.
Image: Mike Langridge 2008
‘We don’t want our name associated with it’
At the end of 2021, HSBC committed to withdraw financing from clients that are expanding the production of thermal coal and phase out funding for coal-fired power and thermal coal mining.
Bankers asked internally whether lending money to RWE would comply with this policy and raised concerns about RWE’s plans to demolish several villages. The Garzweiler mine produces 25m tonnes of lignite – the dirtiest form of coal – every year.
After several meetings, the sustainability and reputational risk department approved the deal but said that RWE should not publicise HSBC’s involvement.
An HSBC banker, who asked to remain anonymous, said of the deal: “We’re saying, ‘We don’t want our name to be associated with it, but here are the funds and please don’t tell anyone that we gave you the funds.’ I acknowledge that this approach is questionable.”
The deal was initially structured as a sustainability-linked loan, meaning its terms include a commitment from RWE that it will hit certain climate targets by 2025. But the penalty it would face for failing to do so is a tiny increase in the interest it pays on the loan. This would come to $86,700 a year for a company whose most recent annual revenues were $26bn.
Sustainability-linked loans are meant to encourage polluters to transition to more environmentally friendly operations, but companies that raise funds through the loans do not face any restrictions on how that money is used.
The HSBC banker said: “There is no guarantee that the [RWE loan] won’t be used to help pay a supplier, or pay salaries of contractors involved in the coal mine project.”
Protesters near Lützerath in January 2023. Photo: Lützi lebt/Unwisemonkeys CC BY-NC 2.0.
A condemned village
The vast Garzweiler open-cast mine has already swallowed 13 villages, according to Friends of the Earth Germany. Thousands of residents have been resettled and churches, schools and village halls have all been bulldozed to satisfy the voracious demand for energy in a heavily industrialised area.
Local residents and environmental activists across Germany have campaigned to protect another six neighbouring villages that were slated for demolition and appear to have had some success. RWE recently said that it would stop using coal in 2030 and so would drop its plans to raze five of the villages.
That just leaves Lützerath, where police are battling to evict hundreds of activists who have been living in abandoned buildings and makeshift treehouses for the past two and a half years. They have built a skate hall, farmed their own food and run workshops on climate justice.
Eckardt Heukamp was Lützerath’s last remaining resident until he moved out last year. “You saw how the church was torn down and dug up, how the villages have vanished,” he told the Times. “At some point you just say to yourself that it can’t keep going on like this, being subjugated and driven into a corner all the time.”
The showdown between the authorities and occupying activists escalated on Wednesday as riot police armed with batons moved in to evacuate the area, hauling out protesters and making arrests as fires burned in the streets of the village.
Just a few hundred metres away, one of the world’s largest land vehicles continues to carve away at the earth, bringing the edge of the mine ever closer to Lützerath.
Meaningless targets
In order to secure the loan, RWE committed to reducing its carbon emissions per unit of power generated, across all its energy sources. This means that, as long as it adds enough wind and solar power into the mix, the company could in fact increase its emissions from coal – and its planet-warming emissions overall.
It also committed to increasing the proportion of energy it generates from renewables and the amount it is investing in sustainable energy.
The penalty if RWE fails to meet all three targets is an increase in the interest it pays on the loan of less than 0.03 percentage points.
“It’s almost meaningless,” said Tariq Fancy, BlackRock’s former chief investment officer for sustainable investing. “Because the only thing that really changes behaviour in financial markets is when you change incentives. And you can’t change incentives with something so miniscule.”
Critics say RWE – which is Europe’s largest emitter of CO2 – could single-handedly stop Germany meeting its climate targets. Catharina Rieve of the German Institute for Economic Research said this will be the case if the company follows through with its plan to burn 280m tonnes of coal from the Garzweiler mine before 2030.
RWE told the Bureau it disputed this projection because the EU’s emissions trading system means that “if one company emits less, other companies elsewhere can emit more”.
The company added: “In the current energy crisis, ensuring security of supply is vital. At the same time, protecting the climate remains one of the key challenges of our time. RWE supports both. The company invests billions of euros into accelerating the energy transition.”
The HSBC banker said it was questionable to view a company as transitioning to net zero while it was expanding coal extraction, and that the bank’s attempts to challenge polluters on their transition plans was minimal.
HSBC decided the loan should not be classified as “sustainability-linked” internally, even though environmental targets remained part of the agreement. The bankers agreed it should not count towards HSBC’s target to contribute up to $1tn in sustainable finance by 2030 because of RWE’s plan to expand the Garzweiler mine and demolish several villages.
Barclays and Santander declined to comment on whether they are counting their parts of the RWE loan package towards their internal sustainable finance targets.
HSBC told the Bureau: “We have been clear we will finance energy companies who are taking an active role in transitioning to a net zero energy future, and we remain committed to this goal amid the double challenge of tackling climate change and an acute energy crisis in Europe.”
RWE is not the only company expanding fossil fuel production that has borrowed money under the guise of sustainable finance. Refinitiv data shows that Chrysaor – now part of the UK North Sea’s biggest producer of fossil fuels – raised $4.5bn with a sustainability-linked loan arranged by HSBC, Barclays, Lloyds, Natwest and a number of other banks.
One of the biggest oil producers in the US, Occidental Petroleum, raised $4bn, and the world’s biggest oil services provider Schlumberger raised $912m, also with sustainability-linked loans arranged by HSBC and other banks.
Tony Burdon, chief executive at Make My Money Matter, which campaigns for greener investments, said: “HSBC took an important first step in ceasing direct finance towards fossil fuel expansion projects. But as this report so clearly shows, they haven’t gone far enough.
“By continuing to provide sizeable corporate loans to companies involved in fossil fuel expansion such as RWE, HSBC is not just damaging the environment and displacing communities, they’re undermining their own climate targets.”
Lead image: Riot police stand in front of burning barricades as activists stage a protest in Lützerath. Credit: Bernd Lauter / Getty
Reporter: Josephine Moulds Environment editor: Robert Soutar Impact producer: Grace Murray Global editor: James Ball Editor: Meirion Jones Production editors: Alex Hess and Frankie Goodway Fact checker: Andrew Wasley
This reporting is funded by The Sunrise Project. None of our funders have any influence over the Bureau’s editorial decisions or output.
