Offsets being used in Colombia to dodge carbon taxes

Fossil fuel levy can be avoided by buying carbon offsets that may have no benefit for climate

Forest protection carbon offsets that may have no benefit to the climate have been used by polluters to avoid paying carbon taxes in Colombia, according to a report.

In 2016, a levy of about $5 (£3.60) was introduced in the South American country to cover the use of some fossil fuels. However, companies that emit carbon dioxide can avoid paying the tax by buying carbon offsets from Colombian emission reduction projects, including those that conserve threatened natural carbon banks such as peatlands, forests and mangrove swamps.

According to the report, a new analysis of large-scale forest protection schemes in the Colombian Amazon by Carbon Market Watch claims that they may be dramatically overstating their impact on preventing deforestation. The report warns that millions of carbon credits have likely been generated with no benefit to the climate.

It finds the issue of “hot air” carbon credits from forest protection schemes in Colombia could be the “tip of the iceberg”, with 75 similar projects permitted to sell credits under the country’s domestic tax system.

About 5m credits have been bought from the projects considered in the report, nearly all by Primax Colombia SAS, a fossil fuel company covered by the carbon tax. This would represent a loss of about $25m to the government, according to the report, which has been published as part of an investigation with the Latin American Center for Investigative Journalism (CLIP).

Carbon Market Watch, an accredited observer of UN climate negotiations, has called on Verra, a US nonprofit which administers the world’s leading carbon credit standard used by one of the projects analysed in the report, to suspend the scheme from their registry.

The analysis comes amid growing concern over the environmental integrity of emission reductions from forest protection schemes approved by Verra, frequently used by major polluters to substantiate “net zero” and “carbon neutral” claims.

Last month, an investigation by the Guardian and Unearthed, Greenpeace’s investigative journalism unit, into 10 schemes approved by Verra found they face a significant credibility problem, with experts warning the system is not fit for purpose.

Verra is in the process of reviewing its rules for its Redd+ projects but has so far ruled out retrospectively cancelling credits that have already been approved.

Gilles Dufrasne, policy officer at Carbon Market Watch, said: “This scandal is yet another striking example of carbon market standards failing to uphold environmental integrity of offset projects. It harms the climate, reduces government revenues and threatens the continuation of climate finance payments from international donors. We hear time and again that the voluntary carbon market helps countries go beyond their existing climate commitment, but here it has actually undermined national efforts.”

Forest protection schemes, known as Redd+ (reducing emissions from deforestation and forest degradation), generate credits by preventing environmental destruction against a baseline often based on historical loss.

Concerns that projects were producing “hot air” credits by exaggerating their environmental impact by using dramatic deforestation baselines have long dogged Redd+ projects and in 2018, the Colombian environment ministry introduced rules requiring schemes to comply with a national baseline development by the government, known as a forest reference emission level (FREL).

The report said some schemes are not using the national baseline and are claiming credits against a much higher deforestation scenario, probably producing credits of little benefit to the climate. While more finance for forest conservation is needed, Carbon Market Watch said it could not come at the expense of environmental integrity.

Verra said the analysis was methodologically flawed. A spokesperson said: “It compares the project’s baseline to the country’s Forest Reference Emission Level (FREL), but the assessment of Colombia’s FREL by the UNFCCC has not yet been finalised, and in any event a FREL represents an average across an entire country or region and is not site-specific.

“Verra emphasises that all VCS projects follow approved methodologies and are validated by independent third-party auditors. All emission reductions and removals are verified by such auditors as well.”

In response to the report, the Colombian environment ministry said it was developing a strategy to strengthen the integrity of the current system by improving the environmental credibility of the carbon market and governance of the carbon tax exemption mechanism, among other measures.

Primax Colombia did not respond to request for comment.

By Patrick Greenfield

This article was originally shared by The Guardian.