Carbon Offset Projects Are Overestimating Their Impact on Forest Preservation

Voluntary carbon offset schemes are overestimating how much deforestation they prevent, according to a new analysis by an international team of scientists and economists. Studying 18 major carbon offset projects, they found that the majority of carbon credits coming from these schemes were not tied to real-terms reductions in deforestation.

The research is published in Science.

How do carbon offset schemes work?

When a company wants to take action to reduce its carbon footprint, one of the ways it can do this is by purchasing so-called carbon credits. In essence, carbon credits work like permission slips for generating carbon emissions, with one credit being equal to around one ton of CO₂ emissions.

There are a variety of different industries that can create carbon credits, including investment in renewables, carbon capture and forest reforestation and deforestation prevention initiatives.

Carbon offsets run by voluntary forest preservation projects play a major role in the carbon credit market. National “reduced emissions from deforestation and forest degradation in developing countries”, or REDD+, projects are still in various stages of development, though voluntary standalone REDD+ projects are operational in many locations worldwide.

Through their forest conversation activities, which are estimated based on comparisons between observable forest cover in the project’s area of influence versus expected baseline deforestation scenarios, such projects estimate their theoretical carbon offsets and issue carbon credits accordingly. These projects effectively argue that, since trees are so good at carbon capture and storage, the preservation of trees that would otherwise no longer exist can be treated as the offsetting of a portion of greenhouse gas emissions.

However, since such schemes base their impacts on theoretical scenarios for their locales – a state of affairs that is de facto unobservable – questions have been raised over the real impact of such REDD+ projects.

Now, a new investigation of 18 major forest preservation carbon offset projects, led by experts at the University of Cambridge and VU Amsterdam, suggests that the majority of REDD+ projects have significantly overestimated their impact.

Millions of carbon credits are based on crude estimations

To verify the claims made by major voluntary REDD+ projects in Peru, Colombia, Cambodia, Tanzania and the Democratic Republic of Congo, the team used a counterfactual approach – examining control forest areas that were close matches to each REDD+ project in terms of their forest cover and local deforestation pressure – to compare this to the baseline scenarios reported by each project.

“We used real-world comparison sites to show what each REDD+ forest project would most probably look like now, rather than relying on extrapolations of historical data that ignore a wide range of factors, from policy changes to market forces,” said lead author Dr. Thales West, a fellow of the Centre for Environment, Energy and Natural Resource Governance at Cambridge, now based at VU Amsterdam.

Just two of the REDD+ projects – one based in Peru and the other in Tanzania – had appropriately adopted baselines for their claims, with the Peruvian site having underestimated its deforestation rates and the Tanzanian site accurately predicting levels similar to its comparison site.

The remaining 16 projects all claimed far more deforestation would have taken place than the control areas suggested. By overestimating deforestation rates, this means that the majority of projects achieved less impact than claimed by their initial forecasting.

Further calculations found that, of the 89 million carbon credits expected to have been generated by these 18 REDD+ project sites in 2020, 60 million credits would have come from projects that had no meaningful impact on deforestation.

Damningly, just 5.4 million carbon credits would have originated from projects that generated additional cuts in carbon emissions through the preservation of forests. The remaining millions were characterized as coming from projects that likely did avoid some amount of deforestation, but not to the levels expected by the project developers.

Carbon offset implications

What does this mean for the companies who purchase carbon credits from such schemes? Based on their estimations for credits already purchased in 2021, the researchers say that such projects have already been used to offset almost three times more carbon than they are actually mitigating.

“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,” said study senior author Professor Andreas Kontoleon, from Cambridge’s Department of Land Economy. “These carbon credits are essentially predicting whether someone will chop down a tree, and selling that prediction. If you exaggerate or get it wrong, intentionally or not, you are selling hot air.”

In their paper, the researchers put forth several different explanations as to why offset projects might be overstating their effectiveness. It is very possible that some projects are deliberating inflating claims in an opportunistic manner. But it is also possible that it is a result of using inaccurate historical trends or simply due to projects being located in areas where conservation efforts are most likely to succeed.

It was also noted that while certification schemes are in place for REDD+ projects, these rules require fixed periods for projections. This restrictive methodology could be making it more difficult for projects to adjust their baseline projections as time passes, they say.

For such projects to be truly effective, the researchers say that the development of improved certifications schemes and regulations, as well as better methodologies for constructing baseline estimates, need to be a priority for the industry.

“There are perverse incentives to generate huge numbers of carbon credits, and at the moment the market is essentially unregulated. Watchdog agencies are being created, but many of those involved are also linked to carbon credit certification agencies – so they will be marking their own homework,” Kontoleon said.

“The industry needs to work on closing loopholes that might allow bad faith actors to exploit offset markets. It must develop far more sophisticated and transparent methods of quantifying the amount of preserved forest to become a trusted marketplace.”

Reference: West TAP, Wunder S, Sills EO, et al. Action needed to make carbon offsets from forest conservation work for climate change mitigation. Science. 2023;381(6660):873-877. doi: 10.1126/science.ade3535

This article is a rework of a press release issued by the University of Cambridge. Material has been edited for length and content.