Conflicts of interest and Verra’s cancellation of 5 million C-Quest cookstove carbon credits

Verra’s system is riddled with conflicts of interest.

Ken Newcombe, ex-CEO of carbon offsetting firm C-Quest Capital, was charged with fraud by US federal authorities earlier this month. Newcombe was a major proponent of carbon offsetting, first with the World Bank, then at Climate Change Capital and Goldman Sachs, before launching his own company, C-Quest Capital. He was also a board member of the Washington DC-based carbon credit certifying company, Verra.

Maurits Blanson Henkemans, a former senior policy officer at the Dutch ministry of economic affairs, met Newcombe frequently when both men were members of the World Bank Carbon Finance Unit Board.

“At the World Bank, he was a spider in the web of carbon projects in developing countries,” Henkemans told Follow the Money. “He has been involved in this market from the beginning and knows exactly how it all works.”

“The charges are a blow to the carbon offset development industry,” Bloomberg writes, “in which Newcombe and C-Quest were leading players.”

Newcombe denies the charges.

Tridip Goswami, former head of C-Quest’s carbon and sustainable accounting team, was also charged. Goswami denies the charges, arguing that his duties were related to “technical” tasks, and not “financial dealings”.

Verra cancels 5 million C-Quest credits

On 27 June 2024, Verra suspended 26 of C-Quest’s cookstove projects and launched a review of the projects. (Verra initially announced that 27 projects were under investigation — it turned out that one of the projects had not yet been registered with Verra.)

On 17 October 2024, Verra announced that it had completed the quality control reviews of 22 of the 26 cookstove projects. Four are “pending review outcome”.

Verra found that all of the 22 C-Quest projects reviewed so far had exaggerated the number of credits generated. Three of these projects had not issued any carbon credits. The projects have all been reinstated on Verra’s Registry.

Verra’s press statement explains that, “Verra has determined that a total of 5,004,915 VCUs were issued by these projects in excess of the correct amounts.”

Verra gives no further information about how it determined this number of credits, beyond a table of the projects with one column giving “original emission reductions claimed” and another column giving “revised emission reductions”.

Verra states that,

CQC [C-Quest Capital] must compensate for these excess issuances. Accordingly, CQC has requested, and Verra has processed, the cancellation of 5,004,915 VCUs.

The worst performing project is a cookstove project in Malawi that cooked the books to the tune of more than 2 million carbon credits, according to Verra’s review. Buyers of credits from this project include Boeing, Patch (which sells carbon credits to more than 200 companies), German multinational energy company E.ON, and 4AIR (which provides "sustainability solutions" for the aviation industry).

Verra provides no information about how it carried out the review, or how it calculated the “revised emission reductions”.

The Dutch ministry of Foreign Affairs

Follow the Money reports that the Dutch ministry of Foreign Affairs invested more than US$6 million in C-Quest. Follow the Money’s journalists, Pien Barnas and Ties Gijzel, write that the ministry told them that “it would not include figures from C-Quest Capital in its environmental impact report”.

The foreign ministry invested in C-Quest through the Dutch development bank FMO, which is 51% owned by the Dutch state. FMO told Follow the Money that it was “shocked” by the charges against Newcombe. A bank representative said that,

“FMO exists to combat inequality and climate change. It is very distressing when [alleged] fraud undermines much-needed climate action and the chance of a slightly better life for the world’s poorest women, in addition to eroding already fragile confidence in the carbon credit market.”

Conflicts of interest

In 2020, the FBI writes, Verra adopted a methodology written by Newcombe and colleagues at C-Quest.

The indictment against Newcombe states that,

Newcombe was in favor of the Cookstove Methodology because he believed it would allow CQC to generate more VCUs than existing methodologies.

“The apparent conflict of interest is symptomatic of wider problems in the market,” Follow the Money notes.

Verra receives a US$0.20 commission on every carbon credit that it certifies. Follow the Money points out that, “The organisation therefore has a financial interest in not being too exacting when it assesses project calculation methods.”

Then there’s the problem that the auditors under Verra’s system are paid by the developers of the projects. “For these auditors, it is in the interest of keeping companies like C-Quest Capital friendly as they may otherwise switch to a competitor,” Follow the Money writes.

In August 2024, Mandy Rambharos became Verra’s chief executive. She recently told the Financial Times that allowing Newcombe to sit on Verra’s board was “not inappropriate”.

The Financial Times reports Rambharos as saying that Verra “asks board members to disclose conflicts of interest and will in certain cases ask them to recuse themselves or leave the board”.

Board membership “doesn’t give you any advantage . . . you still have to follow the rules”, Rambharos says.

But Adriaan Korthuis of Climate Focus told Follow the Money that there were “question marks” about Newcombe’s role on the Verra board from the moment he founded C-Quest Capital.

Korthuis told Follow the Money that,

“He should have cited too many conflicting interests and withdrawn from Verra much earlier. But Verra probably also benefited greatly from having someone like him on the board. He knows everything, he has all the contacts. It’s very difficult to say goodbye to someone on your board who is this kind of giant with this knowledge of the market.”

Korthuis adds that Newcombe wasn’t the only one on Verra’s board with conflicts of interest:

“Verra was founded by market practitioners and since the beginning there have been numerous carbon market practitioners on its board. To me, it could have been clearer how Verra has managed these conflicts of interest.”

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