This article is from The Spark, MIT Technology Review’s weekly climate newsletter. To receive it in your inbox every Wednesday, sign up here.

There are growing signs of trouble for the multibillion-dollar global carbon market, as investigative stories and studies continue to erode the credibility of the business world’s go-to tool for cleaning up climate emissions.

The promise of offsets is that companies or individuals can balance out their greenhouse-gas pollution by paying other parties to prevent emissions or remove carbon dioxide from the air. For example, landowners might plant a bunch of trees or agree not to cut them down, offsetting pollution generated elsewhere. At least, that’s the idea. 

But a bombshell New Yorker article earlier this month asserted that millions of carbon offsets generated by Kariba, a giant project that earned nearly $100 million for purportedly preventing deforestation in Zimbabwe, didn’t actually prevent deforestation and preserve the carbon in the trees and soil.

On Friday, Bloomberg reported that South Pole, the company that sold the majority of those credits, has severed its contract with the company that developed the site. The news “raises the real possibility that the Kariba project could collapse,” wrote the outlet, which had also highlighted problems with Kariba earlier this year. 

That, in turn, could undermine the claims of climate progress that major corporations, like Volkswagen and Nestlé, pinned on the purchase of those credits. It may also mean a lot of companies simply threw away a lot of money.

Researchers and journalists (including me) have been steadily highlighting a litany of problems with a variety of offset projects for years. These projects often harm Indigenous communities and fail to deliver the promised climate benefits. And that’s when they don’t burn down in wildfires, wiping out years of carbon gains in days.

But the sheer weight and consistency of the criticism increasingly seems to be resonating at a pitch that companies can’t ignore. In a late 2022 survey, some 40% of corporate respondents said they were concerned about the “reputational risk” raised by public criticisms of carbon offset projects.

In recent months, corporations including Shell, Nestlé, EasyJet, and Fortescue Metals Group all announced they were backing away from offsets or the claims of carbon neutrality that relied upon them. 

In a report last week, the advisory firm Carbon Direct highlighted a sharp decline in demand for offsets across the board. The firm analyzed the Voluntary Registry Offsets Database, maintained by the University of California, Berkeley, which contains data from the four major voluntary offset registries. 

Companies hoping to balance out their emissions can purchase carbon credits through these intermediaries, and then “retire” them to apply them against their emissions and ensure that no other party can count them against theirs. (This often, though not always, happens as a single step.)

But Carbon Direct estimates that those retirements are on track to decline by about 25% from 2021 levels by the end of this year. Issuances of new credits will also fall by about 7% over that period, it projects. 

“People have simply slowed down what they’re doing and are being more careful and taking longer to get to ‘yes,’” says Matthew Potts, chief science officer at Carbon Direct. “And that’s a good thing.”

Some of the slowdown could be attributable to new methodologies among offset marketplaces, as well as a crypto-related offset bonanza that spiked in 2021 and then quickly fizzled out.

But according to Carbon Direct’s report, the declines indicate a broader trend: “a fundamental downshift in the demand for riskier credits,” particularly the UN-developed REDD+ forestry credits that were the subject of a scathing study in September. 

The firm concludes that companies are backing away from credits that merely claim to prevent emissions, as when landowners agree not to cut down forests. The problem, as companies and critics have become increasingly aware, is that it’s often impossible to prove they intended to break out any chainsaws in the first place. 

Carbon Direct, however, says there’s a parallel trend underway: a flight to quality as businesses seek out projects that reliably remove carbon dioxide from the atmosphere and store it away—and thus aren’t as likely to put them at the wrong end of a Guardian, Bloomberg, or New Yorker greenwashing exposé.

(Quick note: Carbon Direct isn’t a disinterested party on this subject. It advises companies on their climate plans and carbon removal options. It’s also affiliated with, though operated separately from, Carbon Direct Capital, an investment firm that has funded startups that remove carbon dioxide or put it to use.)

The firm found that “quality-focused, removals-focused” purchases grew fivefold between 2021 and the third quarter of this year.

But what counts as quality? 

Carbon Direct says it can include carefully managed and closely monitored reforestation efforts or the burying of biochar, a charcoal-like material formed from plant matter that can sequester carbon in soil. It also noted emerging categories like carbon-sucking direct-air-capture factories and the use of trees and plants to produce energy, heat, or fuel while capturing and sequestering any resulting emissions (an approach known as “biomass with carbon removal and storage”).

But those are tiny categories today, and there are plenty of technical, economic, or carbon math challenges associated with most of those concepts as well. As the global carbon market continues to grow, expect plenty of continuing studies, stories, and spats over which approaches reliably counteract climate change and what the marketplace and governments will be willing to pay for such efforts.

In the meanwhile, companies looking to credibly shrink their climate footprint always have another, better option immediately at hand: directly cutting their pollution.

Related reading

Be sure to read Heidi Blake’s piece in the New Yorker, detailing the many problems with the Kariba project: “The Great Cash-for-Carbon Hustle.” 

A few years ago, I partnered up with ProPublica’s Lisa Song to produce a pair of pieces exploring how the befuddling tree math in California’s offset system could encourage cherry-picking practices that might dramatically overstate the climate benefits of such projects. 

Keeping up with climate

On Monday, the Washington Post’s Shannon Osaka highlighted the growing use of the terms like “climate emergency” and “climate crisis” in the scientific literature as researchers grow increasingly concerned over sharply rising temperatures. It also noted that the planet could cross the dreaded 1.5 ˚C warming threshold in about six years, at current rates of climate emissions.

In sad news, Professor Saleemul Huq, who directed the International Centre for Climate Change and Development, passed away over the weekend. Nature recently described him as the “unofficial leader” of the movement to compel the world’s heaviest historic climate polluters to recognize an obligation to pay developing nations for the damages wrought by climate change. Listen to his interview with Akshat Rathi of Bloomberg, who described him as “the greatest champion of climate vulnerable countries,” on the Zero podcast here.

Erecting far more transmission lines is one of the most important underappreciated pieces of any realistic plan to decarbonize the US electricity grids. But they got some much needed love this week, as the US Department of Energy announced it would spend $1.3 billion to help spur the development of a trio of major power lines across six states. As the New York Times’ Brad Plumer notes, however, far more needs to be done to build out the modern, interconnected network the nation needs.

Correction: This story has been updated to clarify that the decline in demand for offsets is a general trend.