South Pole – a Swiss carbon finance consultancy company founded in 2006, is under scrutiny as being one of the oldest sellers of carbon offsets from forest-protection projects. According to Bloomberg Green’s research, analyses from several outside experts, and South Pole’s own analysis, the company and its partners have largely overestimated the benefits of its nature carbon sinks projects.
South Pole is now facing allegations due to exaggerated climate claims. Research from leading organizations has shown that the company’s largest money-making project – a mega-project in Zimbabwe called Kariba, has generated much more credits than it deserved.
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In November, Elias Ayrey, chief scientist at carbon ratings firm Renoster, estimated that the Kariba project claimed 30 times more carbon credits than it should have. According to Sylvera and Calyx Global – another ratings companies, the factor is five to eight.
South Pole has denied the allegations saying that none of the Kariba offsets are illegitimate and the project has never over credited. Originally, South Pole claimed that Kariba has prevented the annihilation of a forest nearly the size of Puerto Rico.
However, according to the projects’ accounts, it failed to meet the criteria of “additionality” which means the money that was paid for the project didn’t result in additional carbon savings as they claimed they will. The original prediction of mass deforestation that it should have prevented has been wildly overstated and South Pole has generated and sold credits for saving trees that, as it turns out, weren’t under threat.
The records also show that in theory, the funds have prevented deforestation by teaching local villagers sustainable farming techniques and training them in forest-friendly jobs like beekeeping. Therefore, the money generated by the Kariba project has brought some climate benefits but not to the extent it was paid for.
Bloomberg Green also conducted its own research as part of the broad investigation. Reporters visited several projects backed by South Pole, including a Mexican teak plantation. It appears that the projects fell short of their advertized climate impact.
As a result of the investigations, South Pole clients have taken measures to protect themselves from false climate claims. According to Bloomberg Green, officials at Barclays, L’Oreal and McKinsey have either used up their Kariba credits or had no plans to buy more.
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Dutch energy company Greenchoice, which acquired more than 4 million Kariba credits, said it was “unpleasantly surprised” and would launch an investigation before determining its next steps. Takeda Pharmaceutical Company, which used 75,000 Kariba credits in December for its climate targets, said it’s “pausing any future investments with South Pole.”
To explain the contradiction, South Pole pointed to industry standards. It said that Kariba met the rules set up by non-profit organization Verra. Under Verra’s rules, if the original estimates are too aggressive, the project can make up for this by not issuing legitimate credits in the future.
South Pole also said that the companies buying Kariba credits weren’t mistaken in claiming to have slashed their emissions but that the CO2 might not be pulled from the atmosphere until years down the line.
According to Sylvera estimates, South Pole and partner Carbon Green Investments (CGI) would have to operate Kariba for another 25 years to fulfill the credits that it has already generated. As, according to the research, funding the project costs at least $60,000 a month, it’s uncertain whether South Pole and CGI will keep sustaining it for that period.
Research also shows another foul practice as Kariba’s finances have sparked concerns among customers. According to Bloomberg Green, South Pole has announced to keep 25% of the sales of Kariba credits in return for the technical and marketing work.
South Pole then passes the credits to CGI which takes 30% of the remaining amount. The rest (52.5% of the original proceeds) is supposed to be allocated by CGI to the local communities and governments through a precise formula.
However, after journalists including Bloomberg Green pressed South Pole for more details on the numbers, the company published new data showing that it had kept closer to 42% of the Kariba project proceeds.
Axel Michaelowa, a senior researcher at the University of Zurich and founder of Perspectives, a climate consulting company that has collaborated with South Pole, commented on the results. “Since the voluntary carbon market took off in 2018, they’ve been touching the pot of gold… They’ve not really been fighting for a high-integrity market. They’ve been trying to capture benefits wherever they can,” he added.
Overall, the research confirms the familiar predicament in the carbon offsets industry – a large percentage of projects is shown to deliver far fewer benefits than advertized. Sellers of offsets like South Pole are yet to take the kinds of bold but expensive actions to cancel unsold credits, refund customers and fix the gaps that would prevent such fraudulent practices in the future. These unfair practices in the carbon offsets market have resulted in an enormous amount of investigation and scrutiny over the last few years.
The financing of aforestation, reforestation, and forest-protection projects is vital in a world where natural forests are destroyed at a light speed. Forests are priceless ecosystems essential to sustain life on Earth. If the sellers of carbon offsets from these critical forest-protection projects do not do their job as advertized, not only would billions for nature protection go down the drain, but also emissions reduction efforts would be prevented at a time when the world absolutely has to keep global warming below the 1.5 degrees mark.