Junk Carbon Offsets Are What Make
These Big Companies ‘Carbon Neutral’

Illustration: Marisa Gertz/Bloomberg

Dozens of the biggest global companies — from banks to industrial heavyweights — have made bold climate claims justified by cheap renewable-energy offsets that don’t counteract global warming

By Akshat Rathi, Natasha White and Demetrios Pogkas

November 21, 2022, 12:00 AM EST

For more than a decade, Credit Suisse Group AG has claimed to be “carbon neutral” in its operations. Every gleaming office tower, every flight by an executive — all the emissions generated directly by a global banking giant are supposedly counterbalanced. A closer look at the Swiss bank’s sustainability reports tells a different story: its sweeping claim is based on purchases of low-quality carbon offsets that experts rate as useless.

Offsets are designed to allow companies to pay a small sum in exchange for removing carbon from their balance sheets. For years, researchers have been raising concerns that these transactions are letting polluters off the hook. Rather than actually reducing planet-heating emissions, they say, these offsets function like an accounting maneuver that allows more greenhouse gas to enter the atmosphere.

A Bloomberg Green analysis of more than 215,000 offset transactions in public datasets over the past decade reveals for the first time that dozens of global brands have followed in the footsteps of Credit Suisse. Airlines, online retailers, industrial firms and energy producers now rely heavily on the cheapest and most suspect type of offset — those tied to renewable-energy projects.

Most of these renewable-energy offset purchases are not credible, according to Julio Friedmann, chief scientist at consultancy Carbon Direct and one of six researchers who reviewed the data. “I would consider these to be low-quality credits that did not avoid or reduce greenhouse-gas emissions,” he said.

Purchasing credits tied to support of solar or wind projects sounds good for the climate. But experts consider these offsets largely bogus. The issue is timing: many renewable offsets came into being just as solar and wind power established themselves as the cheapest source of energy in most countries. Selling offsets for small sums as a way to support the economics of renewables doesn’t provide any real benefit if it’s already cheaper than building new coal or gas power plants.

That’s the basis on which these offsets are generated: additional support for something clean is assumed to displace a dirtier alternative. Offsets built on firmer footing — and costing far more money — now exist from a nascent industry that directly removes carbon dioxide from the air. Credit Suisse itself, an early purchaser of renewable offsets, now says it’s among the companies shifting towards buying more rigorous removals. “We are increasingly making use of carbon removals in our carbon offsetting selection strategy,” a spokesperson for Credit Suisse said in response to questions about its current offset purchases.

Yet as of last year renewable offsets remain widespread, despite deep doubts about their efficacy. In the broadest investigation yet of how companies have been relying on junk offsets, Bloomberg Green analyzed 190 million tons of carbon offsets purchased in more than 50,000 transactions in 2021. Close to 40% came from renewable-energy projects. According to Ecosystem Marketplace estimates, the total carbon offsets market was worth $2 billion in 2021.

Transactions amounting to at least 47% of the carbon offsets purchased last year did not have enough information to attribute them back to a buyer. Even with the limited disclosures, hundreds of global companies confirm they are erasing emissions off their books in this way.

Note: “Carbon neutral claim” is based on published company reports, company statements or public comments by executives and refers to claims made at the group, subsidiary company and/or product level. Eni and Spotify have both made product-level carbon neutral claims but these are on the basis of forestry-based offsets only.

Source: Bloomberg Green analysis of retirements of 1,000 carbon offsets or more in three registries: Clean Development Mechanism, Verra and Gold Standard; company reports and responses to Bloomberg Green inquiries; filings with the Carbon Disclosure Project. For full details, read the methodology note below

Bloomberg Green contacted more than two dozen of the biggest companies that made some of the biggest offset purchases — and most of which issued “carbon neutral” claims as a result. Delta Air Lines Inc., which runs more than 4,000 flights every day, has for over two years claimed to be carbon neutral. That means it has wiped away in its own accounts millions of tons of CO₂ from burning all that jet fuel, which it has used to launch an advertising blitz aimed at guilt-ridden travelers.

“Our customers shouldn’t have to choose between seeing the world and saving the world,” said Delta’s managing director for sustainability Amelia DeLuca in a statement. “We’re balancing our emissions with investments to remove carbon across our global operations.”

A closer look shows otherwise. The more stringent category of removal offsets comprised just 6% of its 27 million tons of Delta’s carbon credit purchases last year. Half the offsets Delta used to make that claim came from renewables, mostly wind and solar projects in India. An expert review of Delta’s largest single source of renewable offsets, the Los Cocos II wind farm in the Dominican Republic, determined that it almost certainly didn’t need additional support.

There’s almost no transparency on what specific buyers pay for an offset or what each project charges for them. The average price of a renewable-energy offset was about $2 per ton last year, making Delta’s preferred sources cheaper even than the $6 per ton it costs to buy the average offset from protecting forests, according to data from Ecosystem Marketplace. Much higher-quality offsets sourced from carbon removal, such as those sold by Iceland-based Climeworks from turning CO₂ into stone, can cost as much as $600 per ton.

La Poste SA, a French courier and banking group that is usually ranked highly on sustainability, claims its group-level emissions have been fully offset, making it the first among its postal peers to reach this milestone. But three quarters of the 2 million offsets it bought in 2021 came from renewable projects. La Poste said it’s committed to reaching net-zero emissions throughout its operations by 2050 and won’t rely on carbon offsets to get there.

Etsy Inc. likewise claims to be carbon neutral and on the path to net zero — a paradox since the terms are synonymous and a company can’t have one status without the other. The online marketplace bought hundreds of thousands of offsets from wind and solar projects last year, even if it’s frank about their value. Etsy “will phase down our investments in offsets,” the company said, adding that “in many markets carbon finance no longer has a role to play” in helping renewables out compete fossil fuels.

How Companies Responded to Bloomberg Green’s Investigation

Read more detailed company statements in the methodology section below

It's phasing out the use of offsets or transitioning away from renewables-tied offsets

Boeing
Credit Suisse
Delivery Hero
Eni
Etsy
Lyft
Vattenfall

It defended the use of offsets and/or renewables-tied offsets, with caveats

Air France-KLM
Barclays
Bulb
Chevron
Delta Air Lines
E.ON
GE
La Poste
Publicis
Santander
Telstra
Volkswagen

It did not respond or declined to comment in any detail

Acciona
BP
Banco BV
Banco Bradesco
Barilla
Interface
Lavazza
Octopus Energy
Samsung
Spotify
TotalEnergies

Among the major corporate purchasers of offsets contacted by Bloomberg Green, only ride-hailing company Lyft Inc. said it was ditching offsets entirely. Airplane maker Boeing Co. and oil company Eni SpA said they are winding down their use of offsets, just like Etsy, while Vattenfall AB and Delivery Hero SE joined Credit Suisse in moving to prioritize offsets projects that remove CO₂. Banco Santander SA and Air France-KLM said they were monitoring developments. Spotify Technology SA, Samsung Electronics Co., BP Plc, TotalEnergies SE and many others either did not respond or declined to comment.

Even as some of these major purchasers planned to move away from or reduce the use of renewable offsets, consultancies expect the total market to grow more than 10-fold as more companies set climate targets and adopt the cheapest ways to meet those targets. “It’s a bit like a magic wand right now,” said Juerg Fuessler, a managing partner at consultancy Infras. “You can claim carbon neutrality and assume that you can buy these credits at very low prices.”

The first offset project was launched in Guatemala in 1988, when an energy company paid a nonprofit organization to protect forests. Just like that, the emissions generated by a new coal power plant being built in the US could be written off. As the science of climate change firmed up over the years ahead, the voluntary decision to purchase offsets became a hedge by companies against expected government regulations aimed at reducing emissions.

Even if most offset projects began with good intentions, the adjustments they allowed to corporate climate ledgers stood on shaky carbon math. “The real challenge with carbon offsets since the very beginning is that they are trying to do different things,” said Mark Trexler, a climate-risk consultant who was involved in that initial Guatemalan offset project. “And to some extent, those things are potentially contradictory.”

The contradiction is that an offset is appealing precisely because it claims to curb emissions at the lowest cost possible. “That tension between low cost and mitigating climate change has been a constant,” said Trexler. “Unfortunately, the cost containment has, in effect, won out.”

Put another way, companies buying offsets often end up focusing on the cost rather than effectiveness or credibility. The slow and steady increase in demand for the cheapest solutions led to an increase in the types of projects aiming to generate offsets. Those included cleaner cooking stoves and trapped biogas from farm waste as well as renewable projects. The basis of all these projects was to claim that funding the “good” activity theoretically made it possible to avoid another “bad” activity that causes emissions.

For any of these offsets to be credible, however, the additional revenue stream must be central to the decision to build the “good” project. The standard for credibility is simple: Without offsets credits, would a project be financially viable on its own? This “additionality” requirement is a key pillar of offset projects. But it’s also easy to game because of the counterfactual behind the calculations. How can anyone be sure that the construction of a solar farm prevented the advent of a coal project?

Carbon-offset expert Mark Trexler on how a good idea went so wrong

Understanding the creative math involved takes a measure of brain-twisting assumptions. Project developers behind a renewable plant can claim offsets based on the entirety of the emissions supposedly avoided — even though offsets do not fund the entire cost and typically only increase profitability. That’s what makes these offsets so cheap. The financial contribution to the project from the offsets is disproportionate to the carbon benefit attributed to them.

This is how all renewable-energy projects generate offsets, according to Infras’ Fuessler, who was previously on a UN panel that approved such methodologies. “The regulatory bodies are not really incentivized to make sure that the rules are very tight,” said Fuessler. Many buyers “have an interest to be able to purchase low-priced credits.”

Note: One carbon offset represents one ton of CO₂. Country emissions data, from the Global Carbon Project, is for 2020 (the latest year available.)

Bloomberg Green contacted carbon market experts who examined a handful of the biggest sources of renewable-energy offsets tied to last year’s biggest buyers and found that none of the projects were credible. Many of these projects, especially in China, would clearly have been built because the government wanted them built; the money from offsets did not make them viable.

One example: the Zhangjiakou Chabei Wind Farm Project in China’s Hebei province. General Electric Co. bought more than 800,000 credits from the project in 2021, or about half of the company’s annual total. Experts say Chinese state subsidies and other support means that offset revenue likely didn’t factor heavily into a decision to build in 2010.

The project, which started generating credits in May 2011, is operating “in a regulated market context, where costs, tariffs, and the background financial structures of market actors are heavily influenced by state policy and decision-making,” said Danny Cullenward, policy director at nonprofit research group CarbonPlan. This means the financials of a project like this are “hard to extricate from broader state policy considerations.”

The top renewable offsets suppliers for Germany-based E.ON SE and Italy-based Eni came from state-backed hydropower projects in China’s Jiangxi and Sichuan provinces, respectively. These projects, which started generating credits in 2013, are “obvious examples of activities the state chooses to pursue or not,” said Cullenward, “not abstract market forces that can be nudged with a marginal incentive.”

Source: Bloomberg Green analysis of all carbon offset retirements listed in CDM, Verra and Gold Standard

While renewable-energy offsets have been sold for more than two decades, volume has rapidly increased in the last few years as companies are finally setting climate targets that align with government goals or investor interest. Many are turning to offsets as a short-term measure, since it’s often cheaper than eliminating their own greenhouse gas emissions.

Demand is coming from elsewhere, too: fund managers launching ETFs, traders stockpiling for an investment hedge or speculative bet, and even tech startups looking to back new cryptocurrencies. It’s possible that a crisis in confidence could shift companies away from low-quality offsets. Skepticism raised by experts has already caused two major independent verification bodies — Verra and Gold Standard — to start excluding grid-connected renewable projects in all but the poorest countries.

But there’s no enforcement mechanism. The global market for carbon offsets is entirely unregulated, and abiding by any standards for quality and provenance remains voluntary on the part of the companies who purchase offsets to remove millions of tons of greenhouse gas from their books. Even as the legacy verification bodies are rejecting some of the lowest-quality offsets, new bodies such as the Global Carbon Council in Qatar have been born to specifically validate renewable-energy credits.

That’s a sign of the challenge ahead. The sheer number of cheap, renewable carbon credits is growing alongside the multi-billion-dollar market for offsets. Even the US government, under climate envoy John Kerry’s direction, is attempting to find stricter criteria to create new renewable-energy offsets that would allow for corporations to channel money to developing countries like Indonesia that need to move away from coal. But experts remain skeptical that the voluntary carbon market can fulfill that role, and there’s no hard evidence yet that buyers are willing to turn away from low-quality offsets.

Barbara Haya, the director of the Berkeley Carbon Trading Project, views empty offsets as “paying for business as usual” behind a facade of decarbonization. “My fear is that we’re going to look back at this brief moment in time when we had to really rein in our emissions,” she added, “and say we failed.”

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Methodology

Our investigation into big corporate buyers of renewable-energy carbon offsets in 2021 draws on raw transaction data from three major registries of offset purchases: the United Nations’ Clean Development Mechanism; Gold Standard; and Verra. We corroborated data compiled from these sources for a portion of these companies with data reported by those companies themselves, via sustainability and other disclosures or filed with the Carbon Disclosure Project. We then contacted the shortlisted companies to provide them with an opportunity to dispute the data we compiled.

This process started off with a February 2022 copy of the registry data. Each dataset includes fields for the name of the project the offsets were bought from, the amount of retired offsets, the transaction date and the offsets’ buyer (Verra included two fields for the buyer, CDM and Gold Standard one.) Offsets can be bought directly by companies or individuals, as well as by third-party buyers who “retire” the offsets on behalf of somebody else.

On purchases of 1,000 offsets or more, we applied text analysis techniques to extract company names, including testing against a list of known company names, presence of keywords like “retired by” and presence of company suffixes. For transactions that automation didn’t yield results, we manually reviewed the buyer fields and attributed purchases to buyers. We then assigned purchases to corporates at the group level, going through the list of extracted company names and rolling up local branches, subsidiary companies or owned brands into unique entities.

For the purposes of our analysis we defined as “renewable-energy” those offsets coming from hydroelectricity, solar and wind power projects. To determine whether each offset-selling project found in the registry data is a renewable-energy project, we utilized the project name field. Projects whose names included the keywords “hydro”, “solar”, “photovoltaic” and “wind” in the context of power generation were tagged as “renewable-energy”. We didn’t tag projects that did include the words “renewable energy” in their names but didn’t include any of the keywords listed above, as it was not explicit whether the source of power generation is one of the sources in our definition of renewable-energy offsets or from another source such as biomass.

For each corporate buyer identified, we then calculated the total offsets purchased in 2021 and the share of those coming from renewable-energy projects. We built a shortlist based on who were the largest buyers of renewable-energy offsets and/or who had the highest share of total offsets coming from renewable-energy projects.

Where company disclosures or filings with CDP were available, we corroborated the registry-based tallies against that self-reported data. From CDP, we used only offsets disclosed as purchases (as opposed to offsets created by a company itself) and offsets purchased only voluntarily and not for compliance reasons. We determined which final source to use on a case-by-case basis, using as a general rule of thumb that self-reported data take precedence over the registry data.

Data for Vattenfall and Volkswagen is from company responses. Data for Credit Suisse and Delta Air Lines is from company reports. Data for Air France-KLM combines the company’s response with registry data. Data for Acciona, Barclays, Barilla, Boeing, BP, Eni, La Poste, Santander and Telstra is from CDP. Data for Banco Bradesco, Banco BV, Bulb, Chevron, Delivery Hero, E.ON, Interface, Lavazza, Lyft, Octopus Energy, Samsung, Spotify, Publicis and TotalEnergies is from the registries. Data for Etsy and GE uses a combination of CDP and registry data.

In its response to Bloomberg Green, Eni said it retired 2.2 million nature-based carbon offsets in 2021. However, Eni also disclosed to CDP that in 2021 it originated 1.5 million carbon offsets from forest-based projects and purchased 640,000 credits from renewable-energy projects. We used only the latter figure in our story.

In its response, Chevron said that it retired “a similar [to the amount presented to it by Bloomberg Green] volume of offsets in Colombia in 2021, which included offsets generated from hydropower projects, as allowed by Colombian carbon tax regulations.” Most of Chevron’s offset purchases in the registry data are attributed to its Colombia subsidiary Chevron Petroleum Company.

Bulb responded with a break-down of their total carbon offset purchases by financial year: 3.3 million from April 2020 to March 2021 and 3.1 million from April 2021 to May 2022.

Return to the story

Company responses

Phasing out use of offsets or transitioning away from renewables-tied offsets

Boeing said: “Offset purchase volumes will continue to decrease”

Credit Suisse said: “We are increasingly making use of carbon removals” while noting offsets make an “important contribution” to “the pursuit of carbon neutral operations”

Delivery Hero said: “Delivery Hero has currently pivoted its climate strategy to focus on carbon reductions”

Eni said: It’s “hard to prove the renewable projects additionality in a growing number of contexts,” adding it only uses nature-based credits against its own emissions targets

Etsy said: “We will phase down our investments in offsets as we meet our targets”

Lyft said: “We took a critical look at our carbon reduction efforts and decided to move away from offsets”

Vattenfall said: Offsets are “not a tool to fulfill our climate targets,” noting “a need for a stepwise shift for offsets going from activities that lead to avoided emissions to activities that remove CO₂ from the atmosphere”

Defended the use of offsets and/or renewables-tied offsets, with caveats

Air France-KLM said: “The offsetting of domestic flight emissions has become a legal obligation in France since April 2022” but “neither the Group nor any of its entities have claimed to be carbon neutral based on offsetting programs”

Barclays said: “The bank is only claiming carbon neutral status for our operational emissions,” and offsetting is just one component of that approach

Bulb said: “Carbon offsets from renewable energy projects that Bulb buys have supported the shift to a low carbon economy in countries like India, Turkey and Indonesia”

Chevron said: “Carbon offsets are expected to play an important role in global carbon reduction” and its target for net zero upstream emissions by 2050

Delta Air Lines said: “We’ve used high-quality offsets since 2020 to contribute to ending deforestation – a climate imperative – while we’ve had our eye on evolving technologies”

E.ON said: “Carbon offsetting is only done to neutralize emissions that are currently unavoidable in our business”

GE said: “GE is committed to achieving carbon neutrality within our own operations by 2030”

La Poste said: “We consider offsetting a relevant tool for going beyond the carbon reduction possibilities available to date”

Publicis said: “Carbon offsetting through carbon credits is just one part of our carbon neutral strategy”

Santander said: “Offsetting is not the main tool in achieving carbon neutrality, but it has a role to play. We understand this is an evolving issue and continue to monitor it closely”

Telstra said: “We do not accept the premise that all renewable offsets are ’junk’”

Volkswagen said: “CO₂ emissions that cannot currently be avoided are offset”

Return to the story

Junk Carbon Offsets Are What Make
These Big Companies ‘Carbon Neutral’

Dozens of the biggest global companies — from banks to industrial heavyweights — have made bold climate claims justified by cheap renewable-energy offsets that don’t counteract global warming

Buying Bogus Offsets

How Companies Responded to Bloomberg Green’s Investigation

How Renewable-Energy Offsets Compare

Selling Bogus Offsets

Junk Carbon Offsets Are What MakeThese Big Companies ‘Carbon Neutral’

Dozens of the biggest global companies — from banks to industrial heavyweights — have made bold climate claims justified by cheap renewable-energy offsets that don’t counteract global warming

Buying Bogus Offsets

How Companies Responded to Bloomberg Green’s Investigation

Renewable Projects Are a Big Part of the Carbon Offset Boom

How Renewable-Energy Offsets Compare

Selling Bogus Offsets

Junk Carbon Offsets Are What Make
These Big Companies ‘Carbon Neutral’