“Over-issuance of millions of carbon credits”: C-Quest Capital announces “wrongdoing” by its former CEO, Ken Newcombe

At the World Bank, and then in the private sector, Newcombe was one of the major proponents of carbon trading. He also spent 16 years on Verra’s board of directors.

On 26 June 2024, a carbon trading company called C-Quest Capital announced that it had “uncovered wrongdoing by its former Chief Executive Officer, Kenneth Newcombe”. This resulted in “the over-issuance of millions of carbon credits to the Company in connection with its clean cooking programs registered with the carbon credit registry Verra”.

Before we look in more detail at this latest scandal to hit the carbon offsetting world, let’s take a quick look at who C-Quest’s ex-CEO is.

It’s a rat trap, Kenny

Ken Newcombe remembers very distinctly when he first thought about the idea of carbon trading.

“It’s one of those moments that stick in one’s mind, like getting your finger caught in a rat trap, or something like that as a kid,” he said in a 2018 interview.

Newcombe tells the story that he first thought about carbon trading during the Earth Summit in Rio de Janeiro in 1992. He saw a “public-private-partnership” model with “the involvement of the private sector, with in principle endless capital, and a great deal of entrepreneurship” as the only way to raise the hundreds of billions of dollars that the negotiators at the UN considered necessary to address the climate and biodiversity crises.

Prototype Carbon Fund

Newcombe became an important player in promoting carbon trading within the World Bank. In 1994, Newcombe led the Bank’s involvement in the Forest Market Transformation Initiative — a “strategic coalition” of conservation NGOs, forest industry corporations, researchers, and financiers.

Forest Trends, a Washington DC-based NGO that promotes carbon trading, grew out of the Forest Market Transformation Initiative. Forest Trends’ CEO, Michael Jenkins, also came from the World Bank. Ecosystem Marketplace, an online publication that rabidly promotes carbon trading, is a Forest Trends project.

Newcombe used funding from the Norwegian government to set up the Carbon Investment Fund within the Environment Department at the World Bank. This was later renamed as the Prototype Carbon Fund.

The Plantar project was one of the first projects that the Prototype Carbon Fund financed. The Plantar S.A. Reflorestamentos Company was founded in 1967 under Brazil’s military dictatorship. Its eucalyptus plantations are used to produce charcoal which it uses to fire its own iron works. Tupinikim and Guarani Indigenous Peoples were evicted from their territories to make way for Plantar’s monocultures.

World Rainforest Movement points out that the plantations “destroyed jobs and livelihoods, dried up and polluted local water supplies, depleted soils and the biodiversity of the native cerrado biome, threatened the health of local people, and exploited labour under appalling conditions”.

The Prototype Carbon Fund also funded hydropower dams. In 2004, International Rivers wrote to Newcombe concerning his “erroneous and misleading use of the term ‘small hydro’ to describe all hydroelectric projects in the Prototype Carbon Fund’s Clean Development Mechanism portfolio”

The World Bank also provided funding for the disastrous Bisasar Road rubbish dump, in Durban, South Africa as a Clean Development Mechanism project.

Sajida Khan lived next to the dump. She died of cancer in 2007. The area around the dump is a cancer hotspot — almost certainly a result of the poisonous fumes from the dump.

In a 2002 letter to the Mayor of Durban, Newcombe wrote that the Bisasar dump was “operated and maintained on a world-class level”.

“Unlike me, he does not live across the road from Bisasar,” Khan responded.

Cashing in on carbon: Climate Change Capital, Goldman Sachs, C-Quest Capital

In 2004, at the Carbon Expo Trade Fair in Cologne, Newcombe explained that the World Bank’s involvement in carbon markets was about “reducing the risk for private investors”.

Two years later, Newcombe moved from the World Bank to the largest private sector carbon fund in the world, Climate Change Capital. After that, he spent a year heading the carbon desk at Goldman Sachs, before launching his own company, C-Quest Capital.

From 2007 until December 2023, Newcombe was on Verra’s board.

In February 2024, at the age of 76, Newcombe announced that he had decided to step down as CEO of C-Quest Capital. C-Quest states that Newcombe was one of several senior executive leaders and employees who were “terminated”.

Channel 4’s cookstove carbon offsets investigation

In December 2023, British TV station Channel 4 produced a short documentary about carbon offsets generated from cookstoves. Channel 4 travelled to Malawi. They found people cutting trees illegally in remote areas of protected woodland. The branches were loaded onto bicycles and pushed for four hours to the nearest market.

Smoke from indoor cooking leads to three million premature deaths every year worldwide. C-Quest provides clean cookstoves that produce less smoke and need less wood. C-Quest calculates how much carbon each cookstove saves and generates carbon credits which are sold to polluting corporations.

C-Quest’s partners include BP and Shell.

Channel 4 travelled to one of C-Quest’s projects. Some villagers had been given a cookstove, but were also using their old one. One villager explained that, “I think the stove broke because the fire was too hot.”

The villagers actually preferred the new stoves, because they produce much less smoke. But the C-Quest cookstoves break quite easily, the villagers said.

Channel 4 spoke to 30 families in the village. They had all been given cookstoves by C-Quest, but 16 families were not currently using them, in most cases because the stoves were damaged.

C-Quest denied the findings and said that more families were using the stoves than Channel 4 found. C-Quest said it is rolling out a stove maintenance programme and that the company aims to take breakages into account when calculating credits.

Channel 4 referred to the carbon credit ratings agency BeZero. The company found that most cookstove projects “have a moderately low to low likelihood of reaching their carbon avoidance promises”.

Channel 4 spoke to Barbara Haya, a researcher at the University of California Berkeley. Haya tells Channel 4 that,

“We did a comprehensive, quantitative analysis of the major cookstove offset programmes and found that they are claiming over six times the amount of climate benefits than they’re really achieving.”

In September 2023, C-Quest and 10 other cookstove companies signed an open letter disputing the findings of Haya’s research.

When the interview took place, Haya’s research had not been peer reviewed. It was published in the journal Nature Sustainability in January 2024, under the title, “Pervasive over-crediting from cookstove offset methodologies”.

The research has received significant media coverage.

C-Quest’s announcement and Verra’s response

In its announcement yesterday, C-Quest states that it has “voluntarily reported the wrongdoing to the U.S. federal law enforcement, regulators, and Verra”. C-Quest says that it expects Verra to launch its own independent review soon.

In early 2024, C-Quest commissioned a law firm to conduct a review of C-Quest’s operations. “The review uncovered issues with the Company’s operations that resulted from Mr. Newcombe’s wrongdoing,” C-Quest states.

The company says it is “voluntarily facilitating the cancellation of any over-issued credits from its inventory in Verra”. C-Quest will also improve its measurement, reporting, and verification processes, its methodologies, and its policies.

In February 2024, C-Quest appointed a new CEO, Jules Kortenhorst, as part of its remedial measures. “The Company has also terminated several other senior executive leaders and employees related to the matter.”

In its response to C-Quest’s announcement of “wrongdoing”, Verra states that it is “suspending the 27 implicated projects pending the outcome of a review”.

Obviously, Verra’s response fails to ask how this could happen under Verra’s watch. How could C-Quest’s millions of “phantom” carbon credits have appeared on Verra’s registry without Verra’s auditors picking up on the “wrongdoing”?

The fact that Newcombe was on Verra’s board for 16 years (2007 to December 2023) only makes things worse.

In its response, Verra states that over the past year “prior to learning of these allegations” Verra had carried out a “Review of Board Governance”:

Verra’s Board of Directors, led by its Governance Committee, conducted a comprehensive review of the governance of the Board. This review encompassed the Board’s governance policies, processes and procedures, including its code of conduct and conflict of interest policy. These efforts included an educational refresher for the Board regarding director duties and procedures for evaluating actual and potential conflicts of interest by Board members.

Verra (not for the first time) is making sure that the stable door is firmly closed long after the horse has bolted.

“Learning by doing”

In October 2023, Ken Newcombe, C-Quest’s then-CEO agreed to an interview with Channel 4.

The interview from the Channel 4 news piece is posted here in full. It’s a very interesting read. Newcombe’s denial of any problems is in contrast to yesterday’s announcement from C-Quest that Newcombe’s “wrongdoing” had “resulted in the over-issuance of millions of carbon credits”.

Channel 4 asked Newcombe for his response to the findings that some of his carbon offset projects are not delivering the environmental benefits they promise.

Ken Newcombe: I don’t find that true, and I think the basis on which they’re being criticised is flawed. But I would say right from the outset that all of this work in clean cooking and in the carbon market generally is learning by doing, and so nobody can claim to be perfect. Everybody is trying to do the best they can to manage climate change. And carbon credits and the carbon market is the easiest and fastest way to address climate change.

Channel 4: We have visited one of your projects and we spoke to people in the community and we found that 16 out of 30 of the stoves weren’t working. And if they’re not working then there’s a danger isn’t there that the carbon credits that you’re selling to offset major polluting companies around the world could be a dud.

Ken Newcombe: Of course we’re surprised to find that you went to those villages and we didn’t have the opportunity to go with you. But we subsequently went twice and we found that of the stoves that were in place in the households in the villages you visited 79% of those were functioning. And we, of course, questioned then the basis on which that assumption was made that 16 were not operational.

Channel 4: I wonder though how you can be certain that you’re not claiming carbon credits for projects that are not working when you’ve told us that your maintenance programme for these stoves hadn’t reached the particular villages in which we’d filmed.

Ken Newcombe: The way in which credits are generated from these projects is a thorough random sample of all of the households that are in the project and to the extent that random sample, which is independently audited, finds stoves not in use that percentage is deducted from the emissions reductions claimed.

Channel 4: So there’s research from the United States which finds that these cook stove projects maybe overstating the carbon benefits. Our analysis finds that could mean that there are about two billion basically useless phantom credits floating around. How worried are you about that?

Ken Newcombe: I’m extremely concerned about that. I find that research, which was issued before peer review, very irresponsible. And here’s a really serious problem in their analysis: They claim that something of the order of 70% of the carbon emissions from cooking comes back in the form of regrowth of trees. They ignore the fact that deforestation in Africa is the fastest anywhere in the world, that population growth here is higher than anywhere else in the world, and that there is no basis to assume there is an abundance of firewood if people are cutting down their food trees.

Channel 4: This market is worth hundreds of millions of dollars. It’s unregulated. I mean do you stand to make an awful lot of money out of this?

Ken Newcombe: Absolutely not at the moment. So when the UC Berkeley team, that I happen to know quite well, published their paper, the market crashed overnight. There is now a huge surplus of cookstove credits, purely based on the spurious claims of those academics, who’ve never been to Africa, never been to the villages, that for example we’re doing this filming in, do not know the real world.

Channel 4: With respect to the researchers that you cite are experts in their field. They’re from one of the most prestigious universities in the United States, and they would absolutely stand by their work.

Ken Newcombe: Well I can contest their work, because research that has been made available subsequently by people who actually do analysis on the ground, have contradicted their findings.

Channel 4: There is nobody who’s saying that these projects don’t deliver some benefit. But do you acknowledge concerns about the way the credits are calculated?

Ken Newcombe: There is absolutely room for improvement in methodologies. And the context is this is an evolving science and art form. It’s highly subjective. It’s not like Brent crude or metallurgic coal, with very precise specifications. So it behoves everybody to be conservative, and to be accurate, and be persuasive. So methodologies are improving.

There’s a lot that is frankly astonishing in Newcombe's responses to Channel 4’s questions. Here are some of the highlights:

• After more than 30 years of working on carbon trading, Newcombe admits he is still “learning by doing”. That may have been a reasonable position to take in 1996, but surely now those days are behind us?

• That anyone can still claim, after decades of failure, that carbon trading is “the easiest and fastest way to address climate change” is almost completely beyond belief.

• Newcombe seems to believe that journalists investigating a company should make sure that they travel with representatives from the company to the project area. That is not how good investigative journalists work.

• Newcombe dismisses the research by the University of California Berkeley as “very irresponsible”. That is really not a good look, particularly in the light of C-Quest’s announcement of Newcombe’s “wrongdoing” and the “over-issuance of millions of carbon credits”.

• My favourite bit is Newcombe’s description of the way carbon credits are calculated as “an evolving science and art form”. Newcombe even admits that the calculation is “highly subjective”.

  Heres the definition of the word “subjective” in the Cambridge Dictionary:

So Newcombe admits that calculating carbon offsets is based on personal beliefs or feelings, rather than on facts.

This matters because carbon offsets are traded against fossil fuels like Brent crude, which Newcombe acknowledges have very precise specifications.

When Brent crude is burned, it results in an increase in the concentration of greenhouse gases in the atmosphere. And burning fossil fuels is what’s driving the climate crisis.

Equating emissions from burning fossil fuels against carbon offsets that are based on “highly subjective” calculations is obviously a recipe for disaster.

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