Climate impact of carbon crediting projects is substantially overestimated, analysis shows

Carbon markets play a critical role in firms’ and governments’ climate strategies by enabling the purchase and sale of carbon credits. These credits represent a specific amount of carbon emissions (CO₂) that has been mitigated through projects, such as avoiding deforestation or destroying potent greenhouse gases. These credits help organizations and countries meet their climate targets by offsetting a portion of their own emissions.

A pressing question is whether these carbon credits really reflect genuine emission reductions or whether the claimed effects are illusory. Do these projects truly benefit the environment or are we paying for something that lacks tangible value? Carbon crediting mechanisms allow project developers to earn credits through emission reduction projects. However, numerous studies have raised concerns about environmental integrity. A systematic assessment has been lacking to date.

A new meta-study published in Nature Communications analyzes 14 studies covering 2,346 climate projects and 51 studies of comparable projects for which no carbon credits were issued. All studies considered were based on experimental or rigorous observational methods. The analysis covers one-fifth of the total credit volume issued to date, which corresponds to almost a billion metric tons of CO₂ emissions.

The analysis shows that less than 16% of carbon credits issued to the evaluated projects represented actual emission reductions. Specific examples of this are:

• For clean cookstove projects, in which traditional stoves are replaced by cleaner ones, the actual emission reductions corresponded to only 11% of the carbon credits issued.
• In the abatement of the potent greenhouse gas SF6, the actual emission reductions amounted to only 16% of the carbon credits issued.
• Avoided deforestation showed a 25% reduction.
• Reducing the potent greenhouse gas HFC-23 performed comparatively well, with actual emission reductions amounting to 68%.

With regard to wind energy, the data shows that the projects would probably have been implemented even without the sale of carbon credits and that issuing carbon credits did not lead to any additional mitigation. Improved forest management was also implemented in reference areas without access to carbon credits to the same extent as in areas that benefited from carbon credits.

In projects destroying the waste gases hydrofluorocarbon (HFC)-23 and sulfur hexafluoride (SF6) in industry, however, the data shows that waste gas generation increased when plant operators were able to generate carbon credits.

Urgent need for improved certification rules

Dr. Benedict Probst, Head of the Net Zero Lab at the Max Planck Institute for Innovation and Competition, emphasizes, “There is an urgent need to establish better rules for issuing carbon credits. All project types face systemic quality issues, and the quantification of emission reductions needs substantial improvement.”

Co-author Dr. Lambert Schneider from the Oeko-Institut in Berlin points out that there is too much leeway when calculating emission reductions. “The rules of the carbon crediting programs often give project developers too much flexibility. This can lead to unrealistic assumptions being made or inaccurate data being used, resulting in an overestimation of reductions.”

The carbon crediting programs have a particular responsibility to improve the quality of the carbon credits, the authors indicate. Carbon crediting programs should enhance their approaches to assessing projects and calculating emission reductions to ensure they are based on conservative assumptions and the latest scientific findings.

According to the study, the findings also have societal implications:

• Major climate goals are at risk: if carbon credits do not lead to real emission reductions, we will not make the progress we think we are making in combating climate change.

• A potential trust issue looms: governments and firms rely on carbon credits to meet their climate pledges. If these credits are ineffective, it could undermine trust in carbon markets, which are seen as an essential tool in the fight against global warming.

• Avoiding potential greenwashing is critical: some firms could use ineffective carbon credits to claim “carbon neutrality” without actually reducing their emissions, misleading consumers and regulators.

The study shows that carbon markets are not delivering the necessary and expected impact. Reforms are urgently needed to ensure that carbon credit mechanisms are truly contributing to mitigate climate change. If we do not reform these mechanisms, we risk missing climate targets and allowing firms to appear more environmentally friendly than they really are.