Climate Action
Cutting Emissions or Cutting Corners?
June 27, 2025
Once upon a time, corporations across the land were told a story: by paying a small amount of money to help protect the forests of a faraway kingdom, they could continue releasing harmful chemicals into the air without a care in the world.
It seemed like a fairytale — companies could help the environment without having to make any changes or compromise their business strategy. Surely, this story would have a happy ending for everyone involved!
But was it too good to be true? To answer this, we have to go back to the beginning.
Carbon Offsetting
Carbon offsetting is a strategy often pursued by governments, industry and corporations which involves funding projects that avoid or reduce greenhouse gas emissions elsewhere, in exchange for permission to emit an equivalent amount of gases.
These projects might involve reforestation and tree planting, or investing in renewable energy or carbon capture technology, in order to balance out the release of greenhouse gases by the gas-emitting entities.
For example, a factory in Idaho making red widgets might fund an organization, 1000 miles away, to plant 200,000 trees on their behalf in order to offset the emissions generated from manufacturing the red widgets.
Carbon Markets
The mechanisms which make this possible are known as carbon markets — economic systems in which countries and corporations buy and sell the right to emit greenhouse gases.
A key element of carbon markets is the trading of carbon credits — individual permits allowing the emission of a certain amount of greenhouse gases. In the case of carbon dioxide, this is typically one ton per credit.
There are two main types of carbon markets: compliance and voluntary.
Compliance carbon markets, sometimes referred to as Emissions Trading Schemes (ETS), are government-regulated systems and require emitters to adhere to specific rules and established emissions reduction targets. These markets typically utilize cap-and-trade programs, involving government-mandated limits on total greenhouse emissions and how many credits corporations can buy each year in order to comply with that emissions “cap.”
Ideally, as credits become less available and more expensive over time, companies should be motivated to start investing in clean technologies that truly mitigate climate change rather than just spending more money on buying more credits.
The trading of carbon offset credits, on the other hand, generally takes place in voluntary carbon markets (VCMs), in which emitters are not beholden to any external emissions reduction goals or regulations.
How Offsetting Became Our Climate Crutch
Carbon offset schemes first emerged in 1988 as a way to compensate for greenhouse gas emissions, often through projects like reforestation or renewable energy. The concept gained international traction after the 1997 Kyoto Protocol, which was the first major international agreement committing developed countries to reduce their emissions. Under the Kyoto Protocol, carbon offsetting and emissions trading schemes became formal tools to help countries meet their climate targets.
In 2013, however, the European Union restricted carbon credit purchases from certain foreign industrial projects, particularly those involving industrial gases, following a collapse in carbon prices caused by an oversupply of cheap credits. In 2020, the European Union’s ETS banned international credits altogether.
While carbon offsetting can still provide a simple and cost-effective way for companies and governments to reduce the impact of their carbon emissions, if not the emissions themselves, to comply with regulations, the carbon trade is also inherently at risk of fraud and greenwashing.
REDD+ projects, or initiatives to reduce emissions from deforestation, are particularly vulnerable to fraud. In 2022, an investigation found that more than 90% of rainforest offset credits sold by Verra, the world’s leading carbon offset certifier, did not represent actual emissions reductions and had no real climate benefit. In addition, it was found that in many cases Verra had been significantly overstating the threat of deforestation in areas covered by Verra projects.
More recently, in 2024 the Commodities Future Trading Commission (CFTC) issued two consent orders and filed a complaint against C-Quest Capital Impact Investors LLC (CQC), a Washington D.C.-based developer of voluntary carbon credit projects, alleging that CQC had engaged in fraudulent activity, specifically regarding their clean cookstove projects in Africa and Asia.
An investigation by the CFTC found that CQC had repeatedly reported inaccurate or misleading emissions reduction statistics, leading to the issuance of millions of carbon credits which were then sold by CQC to voluntary carbon market buyers. Kenneth Newcombe, the former CEO of C-Quest Capital, was eventually indicted on charges of wire fraud and commodities fraud, and faces up to 20 years in prison if convicted.
Another related concern of carbon offsetting is the negative impact on developing countries. Some experts have warned that carbon offsetting could easily become a new form of “neocolonialism,” in which developed countries are telling developing countries how to take care of their land. This is particularly a concern with reforestation projects, through which developed countries or corporations replant trees on land belonging to Indigenous groups or other communities in order to reap the benefits — i.e permission to continue polluting.
Also known as “green grabbing,” this practice of appropriating land or other resources in the name of environmental action is not only unfair to the communities to which they rightfully belong, but is ultimately disingenuous with regard to how these countries and companies are procuring their emission rights.
Carbon Markets of Today
At the 2015 United Nations Climate Change Conference, 195 nations negotiated the Paris Agreement, a climate treaty aimed at limiting global warming to below 2 degrees Celsius. Article 6 of the historic treaty established a new framework enabling voluntary, international cooperation in order to achieve climate targets.
Despite the concerns regarding carbon trading, Article 6.4 outlines the Paris Agreement Crediting Mechanism, in which countries can buy and sell greenhouse gas credits. This new system was ultimately meant to be more transparent and effective than the Kyoto Protocol’s Clean Development Mechanism. While still skeptical of international carbon credits, the EU was heavily involved in the development of Article 6 regulations.
In recent weeks, the EU has been considering allowing international carbon credits once again. This would permit EU countries to buy credits from organizations that are facilitating projects to reduce greenhouse gas emissions overseas and apply those reductions to the EU’s goal of reducing emissions by 90% (compared to 1990 levels) by 2040. The publication of this target, however, has been delayed until the summer of 2025 due to criticism as overly ambitious, despite the fact that it is still below what it needs to be if the EU is to meet its emission reduction goals outlined in the Paris Agreement.
The EU is also in the process of developing a Carbon Removal and Carbon Farming (CRCF) Framework, in which emitters will be able to purchase offset credits by investing in carbon sequestration and permanent removal technologies. The European Commision plans to recognize certification schemes and begin issuing credits by 2026.
While international credits may seem like a promising way for countries to more easily reach emissions targets, concerns remain regarding whether these credits will result in true climate progress.
Last month, Carbon Market Watch — a non-profit carbon “watchdog and research” organization — conducted an assessment of the first batch of credits planned to be released under Article 6.4 of the Paris Agreement: they found that less than 1 of 27 credits (about 3.7 percent) is likely to represent true emission reductions.
None of this should be surprising. As is the case with so many fairy tales, something cannot come from nothing, and everything has a price. If we want to live “happily ever after,” we must stop relying on magic wishes and take our climate future into our own hands.
EARTHDAY.ORG empowers individuals and communities around the world to do just that — become activists. Making the switch to renewable energy is critical to securing a healthier and more sustainable future for all, but we need YOU to make your voice heard! Get involved in EARTHDAY.ORG’s many climate campaigns, sign the Renewable Energy Petition, and contact your local and federal lawmakers to make clear that the time for change is right now.
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