Of the ‘carbon cowboys’ making millions from credit schemes

IN the districts surrounding Lake Kariba in Zimbabwe, most people have little idea their villages were at the centre of a multimillion-dollar carbon boom. Punctuated by straw-thatched mud houses, the Miombo woodlands on the edge of the enormous artificial lake are mostly home to smallholder farmers. The gravel roads are full of potholes; cars are infrequent, as are medical facilities and internet connections. Data in the region is patchy and, Hurungwe district, that covers a number of the villages has an average poverty rate of 88%.

These communities fall within the vast, lucrative Kariba conservation project, encompassing an area almost the size of the Caribbean island of Puerto Rico. It is among the largest in a portfolio of forest offsetting schemes approved by Verra, the world’s largest certifier. Since 2011, this project alone has generated revenue of more than €100m from selling carbon credits equivalent to Kenya’s 2022 national emissions to western companies, according to nowdeleted figures published by the project developer. Proponents say these schemes are a quick way of transferring billions of dollars of climate and biodiversity finance to the developing world through company net zero pledges.

More than a decade on from the project’s inception, however, many local people said the projects and infrastructure they anticipated never emerged. Only a fraction of the €100m has been distributed to the villages within the project.

‘We are not seeing money trickle down’

“Surely a reward must come,” said Rogers Kavura, a 46-year-old who lives in Chikova village in Hurungwe district. He became a forest ranger with the local council, funded by the offsetting project.

Kavura said the community would like to see improvements to roads, schools, health and irrigation.

“We hear reports that the company has been making lots of money, but we do not know where this money is going. The community is complaining because they are not seeing money trickle down,” Kavura said.

South Pole, the carbon scheme’s broker and technical lead, walked away from the Kariba scheme in October saying it was determined to learn from its experience on the project. The changes followed exposés by Follow the Money, Die Zeit and the New Yorker, which raised concerns about its financial transparency and undisclosed trophy-hunting activity in the project area. The confusion leaves Kariba’s villages and forests with an uncertain future. And after a year of controversies, the wider carbon market is in crisis — with some experts concerned other schemes around the world could be abandoned amid evidence that many projects are producing huge numbers of worthless credits that many believe do not mitigate global heating.

Under this kind of carbon offsetting scheme, communities are meant to be rewarded — via cash or investment in local infrastructure — for keeping trees standing. In reality, however, there are no legal or contractual obligations for companies selling offsets to share revenues, which are often kept secret by project developers.

Much of the €100m revenue generated by Kariba has been carved off along the way by the project developers in fees and expenses: €86m went into costs and profits assigned to the broker and technical lead South Pole and to the project coordinator Carbon Green Investments. In the end, only a maximum of €14m went to Kariba’s communities through cash transfers and infrastructure improvements.

The Guardian reviewed project documents, approached district council officials, contacted Verra, South Pole and Steve Wentzel, the Zimbabwean entrepreneur who owns land for the Kariba project and owns Carbon Green Investments, the company responsible for distributing the funds; and sent a reporter to Kariba to interview people and look for evidence of projects. While there was evidence some funds had been distributed to communities in the area, we found that only a fraction of the project’s revenue reached ground level.

South Pole — which was not involved in providing any services on the ground — made €18m profit, according to its figures, since deleted from its website — more than was spent on Kariba itself. The Swiss firm deducted €24m in costs before sending €57m to Wentzel for his 30% share of revenue, project costs and local communities.

“On paper, the money has been given. But in practice, it has not been seen on the ground,” said Bigboy Mangirazi, a teacher living in the carbon project area.

“I have been speaking with local chiefs. They have nothing to show for it,” he said. “There is a small agriculture field and a few borehole projects. We need to see visible things on the ground. People are very angry. How much are we benefiting from the carbon project?”

Under the rules of Verra — which approves three-quarters of all voluntary carbon offsets — project developers are not required to disclose or audit where the money from credits goes.

The ‘carbon cowboys’

For companies that traded in Kariba’s carbon credits, however, there is little doubt of the financial benefits generated by the project. During the pandemic, prices for forest carbon credits rose dramatically, from less than US$1 a tonne to more than US$30 a tonne (78p to £23.30) for some schemes. In the process, projects like Kariba were transformed from struggling conservation schemes into financial assets worth hundreds of millions of dollars. The credits have been traded by a growing number of carbon desks at investment banks and oil companies at lucrative premiums.

Experts say the Kariba example is illustrative of wider issues within the market, where forest-preservation projects often benefit international traders over local communities.

“Nature-based carbon markets have largely been co-opted by groups affectionately known in the industry as “carbon cowboys”. These groups spent much of the last 15 years snapping up and enrolling large tracts of land in the developing world, with little care for indigenous rights governing these areas, or ensuring that local inhabitants get paid for their conservation work,” said Elias Ayrey, a remote-sensing forest scientist who runs Renoster, a company that reviews the quality of carbon projects, and who publicly raised concerns about the project a year ago.

He calls Kariba “a textbook example”. “Them walking away from the project is an abandonment of the commitments that they made at the start … to ensure that the trees remained intact for 30 years and that local people benefited from the work,” Ayrey said.

Concerns about “carbon cowboys” and management of carbon projects are widespread. Away from Kariba, insiders worry about whether organised crime and money laundering have infiltrated carbon markets, where tens of millions of dollars can pass through schemes with few checks. In some projects, people have been forced from their homes. One scheme has faced allegations of widespread sexual abuse while claiming it was supporting local women. Other project developers have promised to establish land rights or provide community benefits, then failed to deliver.

“It is common for developers of carbon offsetting projects to forcefully assert local communities and Indigenous peoples are the main beneficiaries of their initiatives — yet these claims are usually unverifiable given the secrecy reigning over projects’ revenues and expenses,” said Luciana Téllez, a senior researcher with Human Rights Watch. “Generally, only companies running the projects really know how much money is trickling down, and how much their executives and business partners are cashing in.”

She continues: “The certification standards that dominate the voluntary carbon market do not actually require developers to equitably share profits with communities on whose land the project may be taking place. As it stands, the lack of transparency over projects’ revenues makes it impossible to fact check the sweeping claims about offsetting projects being a major source of livelihood for Indigenous peoples and local communities.”

After the New Yorker and Follow the Money published reports on the Kariba project and South Pole left the scheme, Renat Heuberger, the longtime South Pole chief executive officer, stepped do wn.

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