In recent years, carbon offsetting has gained traction as a popular tool in the fight against climate change. It allows individuals and corporations to mitigate their carbon footprints by purchasing carbon credits, which represent reductions in greenhouse gas emissions elsewhere. However, the voluntary carbon market (VCM) is increasingly under scrutiny, with questions surrounding its effectiveness, transparency, and long-term impact.

This article takes a critical look at the journey of carbon credits, the ethical and logistical challenges they face, and the potential flaws in their ability to combat climate change.

The Voluntary carbon market

Carbon credits have become big business. The voluntary carbon market, which operates without strict regulation, has the potential to grow exponentially. Financial institutions such as JP Morgan and HSBC have also begun investing heavily in carbon offset projects, particularly in forestry. McKinsey estimates the market could hit $50 billion by 2030, with carbon credits being traded much like other commodities on platforms such as Xpansiv.

In theory, carbon credits allow companies to balance their emissions by investing in projects that reduce or absorb an equivalent amount of carbon dioxide from the atmosphere. These credits have gained widespread adoption, with companies such as Shell, Gucci, and even environmental-conscious consumers buying credits in a bid to label their activities as “carbon neutral.” On paper, this seems like a commendable effort—businesses and individuals funding critical environmental projects, such as reforestation or forest preservation, in exchange for compensating their emissions.

Companies like Ecologi have capitalized on this growing market, recording over 200% revenue growth last year. Ecologi is a company that offers consumers a way to offset their carbon emissions by funding environmental projects. For a monthly subscription of around $15, users receive updates detailing the environmental initiatives their money supports, including how many trees have been planted or how much CO2 has been offset on their behalf.

Much of the funding goes toward projects in the Global South, including forest conservation, renewable energy, and efficient cooking technologies. These consumers—often concerned about the impact of their personal emissions—are assured that their subscriptions are contributing to meaningful climate action. Despite monthly updates about tree planting and carbon offset statistics, there is growing skepticism that purchasing credits is truly making a measurable difference in curbing global emissions. 

Let’s have an example of this in Kenya. Between 2010 and 2017, Carbon Zero Kenya, a subsidiary of CO2Balance, distributed 55,000 efficient cooking stoves to rural households. These stoves were designed to reduce the amount of wood burned for cooking, thereby lowering emissions. Carbon credits generated from this project were then  certified by organizations like the Gold Standard Foundation. This certification process is based on calculations that quantify the emissions reductions from using the stoves, which are then sold as carbon credits to Ecologi and then bought by it’s users. However, these calculations rely purely on trust, particularly regarding “additionality”—the concept that the emissions reductions would not have occurred without the sale of credits.

This forces us to as some ctitical questions about the process. Like, are the emissions reductions accurate? and do the credits represent real change? Additionally, factors such as the emissions from manufacturing and transporting the stoves are rarely factored into the equation. So what about them?

Phantom Credits

Further  investigations have shown the crux of carbon credits system (The certification of said credits) also has significant flaws. A report analyzing Verra, the largest certifier in the $2 billion voluntary offsets market has shown that over 90% of rainforest carbon credits issued by Verra may be “phantom credits,” lacking any substantial impact on reducing carbon emissions. This has cast doubt on the effectiveness of carbon offsets as a tool for mitigating climate change, especially when big corporations such as Disney, Shell, and Gucci have utilized these credits in their sustainability efforts.

The core of the certification problem lies in the methodology used to estimate the benefits of forest conservation projects. Investigations revealed that the threats to forests were often exaggerated by up to 400%, leading to inflated claims about the effectiveness of carbon offsetting projects. While Verra and its defenders argue that unique local conditions make it difficult to apply a one-size-fits-all approach, scientists involved in the studies argue that the inconsistencies between predicted and actual deforestation rates are too significant to overlook. These findings suggest that the current certification system lacks the robustness necessary to ensure that carbon credits represent genuine reductions in emissions.

Moreover, the human rights concerns in areas where these offset projects are conducted further complicate the situation. In some cases, local communities have reported forced evictions and destruction of their homes, revealing a disconnect between the certification process and the realities on the ground. This issue is not only an environmental failure but also a social one, highlighting the need for more stringent oversight and reform in the certification process. If the system continues without substantial changes, the public’s trust in carbon offsets as a tool for achieving net zero emissions may be permanently damaged.

A Call for Accountability

Both the Verra investigation and our findings point to a common issue: a lack of accountability in the carbon credits market. If companies and individuals are to meaningfully reduce their carbon footprints, they must demand higher standards for verifying and tracking the effectiveness of these offsets. Relying on inflated data and dubious credits only contributes to further environmental degradation and public distrust.

The question of greenwashing is particularly troubling. By relying on these flawed credits, companies can continue their unsustainable practices, while publicly maintaining an image of environmental responsibility. This misleading narrative allows businesses to shift the focus away from the necessary steps of reducing actual emissions in favor of superficial offsets. Consumers, too, are swept up in this illusion, thinking their contributions to carbon offset programs are making a significant difference when in fact, they might be perpetuating the problem.