The Problem With Carbon Offsets Nobody Wants to Discuss

In 2023, an investigation by The Guardian and Zeit Online found that more than 90% of the rainforest offset credits certified by Verra — the world's largest voluntary carbon market standard — were essentially worthless. The deforestation they claimed to prevent was not actually happening at the baseline rates used in the credit calculations. The carbon savings were largely fictional.

That finding did not destroy the carbon offset market. Companies are still buying offsets, and some of them are good. But the incident clarified a problem that serious ESG practitioners had been aware of for years: the voluntary carbon market is structurally prone to overcrediting, double-counting, and weak enforcement, and most corporate buyers lack the expertise to distinguish good credits from bad ones.

The Four Core Problems

Additionality: A genuine carbon offset must represent emissions reductions that would not have happened without the offset revenue. This is surprisingly hard to verify. A forest conservation project is only additional if the forest would otherwise have been cleared. But demonstrating that requires credible baselines for deforestation rates — baselines that project developers have strong financial incentives to inflate. The Verra investigation found systematic inflation of these baselines across hundreds of REDD+ projects.

Permanence: Forest-based offsets in particular are vulnerable to reversal. A fire, drought, disease outbreak, or policy change can release stored carbon back into the atmosphere decades before the credit's claimed permanence period ends. Buffer pools — where a portion of credits is set aside to cover losses — exist but are often inadequate for catastrophic or systemic risks. With wildfire intensity increasing in major forested regions, permanence risk is growing, not shrinking.

Double counting: If a developing country government plans to use the emissions reductions from a forest conservation project in its own national NDC (nationally determined contribution under Paris Agreement), and a corporation also claims those same reductions as an offset, the same tonne of carbon has been counted twice in the global accounting. The Paris Agreement's Article 6 was designed to address this through corresponding adjustments, but implementation has been slow and inconsistent. Most voluntary market credits still do not carry corresponding adjustment documentation.

Measurement uncertainty: Biological carbon sequestration is genuinely hard to measure precisely. Forest biomass estimates rely on sampling methodologies with significant uncertainty ranges. Soil carbon projects are even more uncertain. The margin of error in many offset calculations is large enough that a nominally verified credit could represent somewhere between 50 and 150% of its stated carbon value.

What Good Offsets Actually Look Like

This is not an argument that all offsets are worthless. Some are genuinely good, and some categories are structurally more reliable than others.

Engineered removals — direct air capture, enhanced weathering, biochar — have much more verifiable and permanent carbon removal than biological sequestration, though they are currently expensive ($200 to $1,000+ per tonne). Industrial destruction credits — verified methane capture at landfills, coal mine methane, refrigerant gas destruction — tend to have strong measurement certainty because the destruction can be directly verified. Cookstove and clean water projects have co-benefits beyond carbon that can justify the purchase even if the carbon arithmetic is uncertain.

The characteristics to look for when evaluating any offset: Is it certified by a rigorous standard (Gold Standard, ACR, CAR, or Verra's newer ICR protocol with Article 6 alignment)? Has it undergone third-party verification by an accredited verifier, not just validation? Does it carry a corresponding adjustment if your disclosure framework requires one? What is the project type and what are the specific permanence and additionality risks? Can you trace the retirement to a specific serial number in the registry?

The Right Role for Offsets in a Corporate Climate Strategy

Most credible net-zero frameworks — Science Based Targets initiative, Oxford Offsetting Principles, the Integrity Council for the Voluntary Carbon Market's Core Carbon Principles — treat offsets as a tool for addressing residual emissions that cannot be eliminated, not as a substitute for direct reduction. The SBTi's corporate net-zero standard is explicit: companies must reduce Scope 1, 2, and 3 emissions by at least 90% from a 2020 baseline before claiming net zero. The remaining 10% can be neutralized through carbon removal.

This framing matters because it changes how you should be spending your sustainability budget. If you are buying $500,000 per year in offsets while your Scope 3 footprint is largely unmeasured and unaddressed, you are creating reputational and regulatory risk, not managing it. The EU Green Claims Directive, finalized in 2024, restricts environmental claims based on offsets that are not additional, permanent, and third-party verified. Several major companies have already faced regulatory action in Europe for offset-based net-zero claims that did not meet these standards.

Offsets have a legitimate role in corporate climate programs, particularly for genuine residual emissions and for contributing to climate finance in developing markets. But that role is much narrower than the market has historically assumed, and it comes after direct reduction — not instead of it.

Practical Guidance

Before your next offset purchase: calculate what a direct reduction intervention would cost for the same tonne. If your energy efficiency projects have a cost of $15 to $40 per tonne avoided, and the offsets you are buying are $8 per tonne, you should ask whether the offset is actually credible or just cheap. Cheap offsets are usually cheap for a reason. Consider allocating a portion of your offset budget to higher-quality engineered removals, even at higher cost per tonne, as a hedge against the quality risk in nature-based credits.

And document everything. Regulators, investors, and ESG rating agencies are increasingly asking for credit-level documentation on offset purchases. Knowing the project ID, vintage year, registry, and verification status for every credit you retire is not optional in a disclosure environment that is getting stricter every year.