Editorial in Science magazine confirms the conflict of interest at the heart of carbon offsetting: Auditors paid by project developers

“Auditors are unlikely to stay in business if they disapprove credits at the high rates that research suggests would be appropriate today.”

“Auditors can’t save carbon offsets,” is the headline of an editorial in Science magazine, published yesterday. The editorial points out that most carbon offset projects that have been closely scrutinised by independent academics, researchers, and journalists have been found to have “greatly exaggerated their climate benefits”.

The result is that potential buyers of carbon offsets have become more cautious about buying offsets, and carbon markets have stalled.

One of the responses from carbon market proponents is to promote “high quality” carbon offsets and to argue that auditing is key to ensuring this high quality.

For example the Integrity Council for the Voluntary Carbon Market argues that,

Robust independent third-party validation and verification through external third-party auditing is a key tool for accuracy, consistency, transparency, and integrity in the VCM. Auditing by third-party validation and verification bodies (VVBs) provides independent confirmation that the mitigation activity achieves the claimed GHG emission reductions or removals

“That reliance is misplaced,” the Science editorial points out.

The editorial is written by Cynthia Giles, an independent scholar who has worked in senior roles at the US Environmental Protection Agency under the Obama and Biden Administrations, and Cary Coglianese, Professor of Law and Political Science at the University of Pennsylvania.

Credibility concerns

Their editorial is based on a longer report titled, “Third Party Auditing Cannot Guarantee Carbon Offset Credibility”. That report includes the result of a review of 95 projects registered with Verra that significantly overclaimed carbon credits. Giles and Coglianese found that 21 of 33 auditors certified by Verra were involved in these problematic projects.

The report is a devastating critique of carbon markets. Giles and Coglianese write in the report that,

Despite the universal use of supposedly credibility-enhancing third-party auditing, a plethora of reports of exaggerated or invalid credits has piled up over the last two decades. Credibility concerns arose with the first UN-approved offsets,¹ and they continue through to the present day.² Forest protection projects have come under particular criticism. One study of Verra projects in tropical forests on three continents published in Science found that only 10% of the credits issued for these projects reflected truly avoided deforestation.

The problem is not that there are some “bad apples” involved in the auditing of carbon offsets. The problem is widespread.

In the Science editorial, Giles and Coglianese write that,

The broad body of research on third-party auditing has identified key circumstances that make self-serving bias most pronounced: in areas that are ambiguous and require exercise of judgment, when reviewing a proposal made by others rather than making a decision on their own, and when negative consequences to the auditor from adverse findings are immediate whereas risks from more positive findings are distant and uncertain. All of these factors occur in carbon offset auditing.

Auditors have been required from the beginnings of carbon offsetting. As Giles and Coglianese note, they have “failed to prevent substantial credit overclaiming”.

They give the example of the auditor of the Ntakata Mountains REDD project in Tanzania giving the project a zero fire risk, despite having seen “unattended fires throughout the project site” during their site visit.

Conflict of interest

Giles and Coglianese explain the conflict of interest at the heart of the carbon offsetting industry:

The offset system does little to counteract these outcomes because all key market participants benefit from inflated claims about carbon credits. Project developers prefer more credits to fewer. Nearly all registries in voluntary markets depend on revenues from issuing credits, so it isn’t in their interest to insist on sufficient levels of auditor rigor that would reduce credits awarded. Auditors seek business in a market where there is competitive advantage to being a reliable endorser of developers’ claims. Although ongoing efforts to modify methodologies can help, they won’t eliminate subjective judgments underlying these credits that introduce the opportunity for bias.

The fundamental problem, Giles and Coglianese write is that, “Auditors are unlikely to stay in business if they disapprove credits at the high rates that research suggests would be appropriate today.”

Giles and Coglianese conclude that,

Given that the existing auditing structure is not ensuring the promised high quality carbon credits today, dramatic increases in demand can only make the problem worse. Research teaches, and experience confirms, that third-party auditors selected and paid by audited organizations cannot guarantee carbon offset credibility.

There’s a simple way of looking at this auditing problem. “Put it this way,” Lara Williams, a Bloomberg journalist wrote in 2023, “Would you be happy eating at a restaurant that paid for its own food-safety inspector?”

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