‘We don’t know where the money is going’: 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 on the region is patchy, but 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 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 (£85m) from selling carbon credits equivalent to Kenya’s 2022 national emissions to western companies, according to now-deleted 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 say 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,” says 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.

“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 says.

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.

What is a carbon credit?

Carbon credits represent a ton of carbon dioxide or equivalent greenhouse gas that has been removed from the atmosphere, or whose release has been avoided.

How are they created?

The vast majority of credits are generated by avoiding emissions. For example: protecting a section of carbon-dense rainforest that would otherwise be cut down, or paying to switch the energy supply in a developing country to renewables when it would otherwise have been unaffordable to do so.

What is offsetting?

Credits are used by companies to “offset” their emissions, theoretically cancelling out the impact of polluting activities like flying, driving or buying new clothes.

Do they work? 

Supporters of carbon markets say that they can have a major impact on slowing global heating by providing desperately needed funds for mitigation, particularly in developing countries. But whether it be renewable energy or rainforest protection schemes, many studies show that carbon offsetting projects often have limited benefits. A growing number of regulators are taking action, with the EU set to ban the use of offsetting for advertising claims by 2026 in the bloc. 

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 (£15m) 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,” says 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 says. “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 $1 a tonne to more than $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 that 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,” says 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 says.

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,” says 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 CEO, stepped down. The company would not speak to the Guardian about the scheme, instead pointing to two previous statements defending Kariba as a positive example of carbon markets working, which had benefited local people. South Pole said distributing funds from the project had not been its responsibility and announced senior leadership team changes in 2024.

Wentzel, the owner of Carbon Green Investments, has faced significant scrutiny of the financial management and book-keeping on the project. He was ultimately able to provide the Guardian with internal documentation explaining €14m of distributed funds, including detailed receipts and invoices for about €4.5m of that total. He is undertaking a voluntary audit with Deloitte.

He says: “Experiencing the realities on the ground, along with understanding the associated costs and challenges, provides valuable context. Despite being operational for 12 years, Kariba Redd+ remains the only project of its kind in Zimbabwe, indicating the absence of viable alternatives or investor interest. Zimbabwe’s unique economic climate over the past 22 years defies comparison or adherence to standard guidelines.” Wentzel says the project would need to continue selling carbon credits to keep going.

There are also questions about whether companies that bought the offsets from the unregulated market have had the environmental impact they were promised. Analysis by Renoster concludes that the project has massively overstated the threat to the forest. The methodology used to generate the credits has since been discontinued by Verra.

Verra said it could not comment on many of the issues raised about Kariba while it is under review, but says it is an outlier.

“Kariba represents an unprecedented situation … and remains an outlier in the long history of impactful Redd+ projects around the world. Verra-registered projects have kept forests standing and are a critical solution to avoiding the worst impacts of climate change,” a spokesperson says.

Verra says project proponents can be suspended if unethical or illegal behaviour takes place, and it is assessing options to deal with alleged issues with the environmental integrity of the Kariba carbon credits. It says a key principle of its carbon standard is that it does not negatively affect the natural environment or local people.

A teetering market

The Kariba mega-project is unlikely to be alone in facing uncertainty. In January 2023, a joint investigation by the Guardian found more than 90% of offsets from a large proportion of projects were likely to be worthless. Many of the largest rainforest offset projects produced huge numbers of worthless credits, according to studies analysed in the investigation. Verra is reforming the system, introducing new rules for dozens of projects. But the reforms could mean schemes like Kariba are caught in between if they receive far fewer credits under the new system.

The value of the carbon market dropped significantly in 2023, falling from more than $2bn in 2021 to $343m in part-year figures to November of 2023, according to figures released in November by Ecosystem Marketplace. Companies are also facing scrutiny for their offsetting claims.

Delta, which is being sued in California over its claims to be a “carbon neutral” company, has stopped buying carbon credits. Delta strongly disputes the case. Barclays, L’Oréal and McKinsey are among the companies that say they have either used up all their Kariba credits or have no plans to buy more, according to Bloomberg. The US’s climate envoy, John Kerry, says the voluntary carbon market could become the “largest marketplace the world will have ever known”, but there is little sign of that becoming reality in the short term.

“Far from being the win-win solution that project developers and others promote, forest protection projects, especially when over-credited, are leaving a track record of winners and losers,” says Libby Blanchard, a researcher at the University of Utah who co-authored a UC Berkeley report in September identifying widespread issues with the offsetting system.

“These cases make forest protection schemes look more like a money-making machine for the developed world than a real intervention,” she says.

“In the Kariba project, project developers walked away with significant amounts of money and won. The people whose livelihoods the project affected – and who are the least responsible for climate change – lost out on leveraging those funds, as did the forest and biodiversity.”

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