‘We’re trying something new’, says company behind carbon credits that fall short of government guidelines

A company trading carbon credits that “do not always” meet industry and government standards has resumed sales, after a brief pause following Stuff enquiries.

Customers purchasing carbon offsets issued by CarbonCrop – at $50 per tonne – might expect their cash was funding new activity to help the climate – such as fencing, pest control, or planting seedlings.

But CarbonCrop does not require landowners with regenerating native bush to do anything extra in exchange for customers’ cash, which runs counter to government guidance and international standards.

After Stuff alerted CarbonCrop to these issues last month, the start-up temporarily stopped issuing carbon credits and the website Carbonz, which sold the credits, paused sales. Sales have now resumed, without substantive changes.

Company founder Nick Butcher admitted there “is a non-zero per cent chance” that landowners could take all the money from carbon credits “and never make any effort to sequester new carbon”. But he believes many will use the money to achieve some extra carbon gains.

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What CarbonCrop says

Company executives told Stuff they’re “trying something new”, and hope the forest owners will use the money to help the environment.

But there’s no obligation on forest owners to do anything. The system relies on goodwill to make the planet a better place.

Since it paused issuing credits on June 29, the company has updated the information it provides on its website to explain its credit-issuing process.

For example, the company said its units “do not always meet” a key principle of the industry and government guidelines.

When asked why it isn’t upfront in saying it requires no new action from landowners, Butcher said: “Presenting it in that form would be to suggest it is not a nuanced topic, and it is an extremely nuanced topic.”

He added: “We’re having this conversation because we’re extremely transparent.”

CarbonCrop chief executive Jo Blundell said the company would “take a closer look” at the wording, adding that earlier marketing “under-communicated our position”.

However, others in the industry said the company was breaching well-accepted international standards, and called for regulation of New Zealand’s offset market.

How offsets work

Companies and individuals buy carbon offsets to reduce their impact on the planet. Businesses that have purchased enough to cover their annual carbon footprint often market themselves as ‘carbon neutral’.

Companies such as Les Mills have purchased credits issued by CarbonCrop. Les Mills said the purchase was a donation to support native trees. The CarbonCrop credits are not part of Les Mills’ offsetting scheme.

The international carbon offset market has standards intended to protect customer, including the concept of permanence. Under this framework, trees planted in 2022 that could be felled in 2050 should not be eligible for carbon offsetting. “Double selling” is also against the rules – if a forest owner plants trees that absorb 1000 tonnes of carbon, they can’t sell the same 1000 tonnes to two different organisations.

Carbon Forest Services managing director Ollie Belton, who helps forest owners to earn carbon cash and has worked in the industry for 15 years, said CarbonCrop offsets failed to meet many of these accepted principles. “I’ll be blunt. Everything is wrong with this.”

An organisation that failed to meet the principles was putting itself at risk of greenwash accusations and theoretically even prosecution by the Commerce Commission, Belton added. (The Commerce Commission said no complaints had been made about CarbonCrop, and the offsets were not being investigated.)

When Stuff shared the Commission’s guidelines with CarbonCrop, the start-up said it was “continuing to meet with a range of individuals and organisations”.

Typically, independent specialists – such as Gold Standard, Plan Vivo and Verra – put projects through their paces to ensure they meet industry principles. The ones that meet the grade are certified.

This set-up protects consumers “but also the environment”, Belton said.

CarbonCrop offsets aren’t certified by an internationally recognised body. The company intends to seek independent certification, though the process can be lengthy. This exercise would test whether CarbonCrop’s provisions against issues including double selling and impermanence are sufficiently robust.

Sean Weaver, the chief executive of carbon accounting firm Ekos, said offsets that were uncertified and unregistered were “abandoned” by the global carbon market in 2006. Weaver has achieved certification status for offset projects in the Pacific.

“The general public can’t go into a warehouse and see all these carbon credits stacked up on the shelf. They’re invisible. They need to be wrapped up in enough quality control and quality assurance for anybody to trust them.”

Extra effort or status quo?

Under established industry standards, an offset project can only claim credits for incremental effort. This principle – known in the industry as “additionality” – is also in guidance issued by the Ministry for the Environment and backed by the Commerce Commission. It means the customer’s money must pay for an activity that wouldn’t have happened otherwise.

The additionality principle is comparatively easy to prove when you’re planting new seedlings in the ground.

But when trees are already in the ground, you’d expect them to continue growing regardless of whether the owner sells offsets.

Ordinarily, offset projects for regenerating forests need to demonstrate that they improve the way the forests are managed, Belton said.

“People who’ve got these [established] forests are going to be able to earn something, but they are going to have to prove that they haven’t just sat back and bought a new Lamborghini with all their carbon money – they’ve actually been doing pest control, fencing, and actually had it measured.”

The additionality principle dates back decades.

To meet it, a project must conservatively calculate how much extra carbon dioxide is being absorbed.

Only this extra sliver of growth would be issued as carbon credits under the standards of major certifiers such as Verra, Gold Standard or Plan Vivo.

To calculate the size of the sliver, the landowner needs to measure how much carbon they’ve actually removed from the atmosphere, plus how much carbon would have been removed if the project had never happened (the business-as-usual baseline).

The baseline is impossible to know for sure, so either the landowner has to guesstimate, or the certifier will calculate the baseline.

Researchers have criticised some guesstimated baselines – particularly forest conservation projects that overestimate deforestation. These projects might be issued more credits than they should have been eligible for.

But while experts have called for tougher standards and stricter baselines to solve the problems, CarbonCrop has moved in the opposite direction.

Essentially, it does not calculate a business-as-usual baseline. (It always uses a rate of zero.)

Butcher and Blundell confirmed their credits don’t meet the industry’s additionality bar. They describe this as not meeting “the strictest interpretation” of the principle.

CarbonCrop and Carbonz contend there are many definitions to additionality.

Yet according to the World Bank, there is consensus in the industry: “All existing standards and schemes apply a common definition of additionality – a credit is considered additional if the emissions reduction that underpins the credit would not have occurred in the absence of the activity that generates the credit.”

The start-up also claimed the approach is used by others, including environmental certifier Toitū Envirocare. Farms with Toitū’s carbon-neutral certification are allowed to offset emissions from their animals and fertilisers with existing trees on their land.

But Toitū said its approach was different.

The critical difference, Toitū said, is where the offsetting happens. Some entities can offset all their emissions in-house. For example, an iwi might own methane-emitting cows and carbon-creating trucks and factories, but also enough forested land within its borders that balances out all the sources of emissions.

In-house offsetting doesn’t require the additionality principle to be met, Toitū said – pointing to two international standards.

But that changes when a business produces more emissions than sequestration, and has to go externally in order to become carbon-neutral, Toitū said. When offsets are traded between two different groups, international standards require proof the emissions savings go beyond business as usual.

“In the case of CarbonCrop referencing our certification and clients, we see this as inaccurate for their claim and have subsequently asked for this to be removed,” Toitū said in a statement.

Revenue matters

CarbonCrop’s approach means it can issue more carbon credits than it could otherwise.

“We are trying something new,” Butcher said. The company’s intent is to drive additional climate action, he added.

However, he admitted that CarbonCrop’s rules do not guarantee that.

“There will be some people in some cases who do nothing different and still get a [carbon credit],” Butcher said.

Butcher does not believe that customers will feel ripped off. Some offset projects have been busted inflating or deflating baselines, and these were awarded more carbon credits than they deserved. Butcher believed consumers were used to this.

He said the company has not changed its processes to meet industry standards. “However, we are committed to refining our approach as necessary to achieve [a] better climate mitigation outcome.”

No binding rules

Currently, the carbon offset industry is not directly regulated in New Zealand.

In its most up-to-date guidance, the Ministry for the Environment said that carbon offsets must pay for “a specific intervention and would not have occurred under business as usual”.

It adds: “This means the voluntary climate change mitigation cannot be an action or activity that was going to happen anyway, something that is already required under existing regulation, or incentivised by other policy measures.”

The guidelines aren’t enforceable, though, as the ministry has no power to investigate complaints or penalise breaches. Officials can meet with companies to discuss adherence to the guidance, the ministry said in a statement to Stuff.

CarbonCrop planned to meet the ministry this week, Blundell said.

The Commerce Commission also issued guidance on environmental claims. The commission enforces the Fair Trading Act, which prohibits traders from engaging in misleading and deceptive conduct. The commission’s advice referenced the Ministry for the Environment’s guidance. “Care should be taken not to use the term [carbon-neutral] if you cannot back up the claim,” the commission said.

Businesses are increasingly interested in measuring their footprint and reducing and offsetting emissions, Belton said.

“Government needs to fill the void and regulate the voluntary market pretty quickly. Ultimately, it’s the environment that loses, because the money being spent on these activities could be far better spent.”

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