South Pole and the Kariba REDD+ Project: An investigative report by Follow the Money exposes the rot at the heart of REDD
South Pole and the Kariba REDD+ Project: An investigative report by Follow the Money exposes the rot at the heart of REDD
South Pole is one of the largest climate consulting firms in the world. The company claims to be “helping to drive the transformation from a consumption-led, extractive economy to a low-carbon, sustainable one”. But a recent report by investigative journalists Bart Crezee and Ties Gijzel reveals that the company massively inflated the number of carbon offsets from the Kariba REDD+ Project in Zimbabwe and as a result the project led to an increase in carbon emissions.
Crazee and Gijzel’s report is published on the watchdog website Follow The Money and is well worth reading in full.
The Kariba REDD+ Project has featured twice on REDD-Monitor. The first post, from 2018, takes a look at a bizarre attempt to sell Earth Tokens generated from the project.
And in 2021, Bloomberg Green reported on how the oil giant TotalEnergies claimed to be selling “carbon neutral” fossil gas, thanks in part to carbon offsets from the Kariba REDD+ project. South Pole’s CEO, Renat Heuberger, admitted that the idea of carbon neutral fossil fuels is “such obvious nonsense”, but that didn’t prevent his company from selling the offsets to TotalEnergies.
The Kariba REDD+ Project is by far South Pole’s biggest project. It covers more than 750,000 hectares and in 2022 generated about 10% of South Pole’s revenue. In addition to TotalEnergies, South Pole has sold offsets from the project to Volkswagen, Delta Airlines, Ernst & Young, McKinsey, Gucci, Lidl, and energy supplier Greenchoice.
A crisis meeting
Crezee and Gijzel’s investigative report reveals that on 7 December 2022 South Pole held an online crisis meeting about Kariba. More than 100 South Pole employees took part. The meeting was recorded, and Follow the Money has a copy of the video.
Carlos Garcia-Borreguero chaired the meeting. Garcia-Borreguero is South Pole’s Practice Lead, Climate Action Credits (CAC). “CAC” is an almost perfect abbreviation for carbon offsets. I assume it derives from the Latin verb “cacare”. And it sounds just like an Alexei Sayle stand up comedy routine from the early 1980s.
Garcia-Borreguero told his colleagues in the crisis meeting that, “The objective is to build trust around this truly amazing project,” suggesting that he really hadn’t understood the seriousness of the problem.
South Pole’s co-founder, Christian Dannecker, spoke first. He has been involved in the Kariba REDD+ project since it started in 2011.
“I will just talk a little bit about the key points that came up,” Dannecker says. By “key points”, Dannecker means the concerns raised within South Pole that the number of offsets from the Kariba REDD+ project was massively overestimated. Several employees have resigned, according to Follow the Money.
Crezee and Gijzel write that,
“Employees are questioning why management is not informing its clients that a crucial mistake has been made. South Pole has since acknowledged that there are problems but insists that all the carbon credits sold are still ‘legitimate’.”
The inflated baseline
One of the slides in Dannecker’s presentation during the crisis meeting asked, “Are the Kariba credits based on reality?”
Dannecker’s response exposes the problem with all REDD projects. The number of carbon offsets generated by the project is based on a story about what might have happened in the absence of the project. Because the project did go ahead, it is impossible to verify the counterfactual baseline.
Here’s how Dannecker replied to his question:
“What is reality? … So we could engage now in a theoretical discussion and say, ‘Well, if we look back with technology that was not available ten years ago, with know-how we didn’t have ten years ago, to look at how many of these credits are, whatever, legit or not legit.’ … It would be very tricky to do the math here. So I would say, let’s not even get into this.”
This is pure bullshit. In his 1986 essay “On Bullshit”, the philosopher Harry Frankfurt explains that to the bullshitter truth is irrelevant:
“It is impossible for someone to lie unless he thinks he knows the truth. Producing bullshit requires no such conviction. A person who lies is thereby responding to the truth, and he is to that extent respectful of it. When an honest man speaks, he says only what he believes to be true; and for the liar, it is correspondingly indispensable that he considers his statements to be false. For the bullshitter, however, all these bets are off: he is neither on the side of the true nor on the side of the false. His eye is not on the facts at all, as the eyes of the honest man and of the liar are, except insofar as they may be pertinent to his interest in getting away with what he says. He does not care whether the things he says describe reality correctly. He just picks them out, or makes them up, to suit his purpose.”
Follow the Money points out the conflict of interest inherent in counterfactual baselines:
“There is an incentive to overestimate the clearcutting: if you assume that local people would have clearcut the forest at breakneck speed, then forest preservation would prevent a lot of carbon emission. The project then generates additional carbon credits and thus additional revenue for South Pole . . .”
South Pole estimated that 3.2% of the Kariba REDD+ Project area would be deforested each year. The estimate relies on deforestation figures from areas adjacent to the project – the control area. But recent satellite data shows that South Pole seriously overestimated the rate of deforestation. Instead of a 3.2% deforestation rate, deforestation in the control area fell to 1.5% between 2011 and 2021. Deforestation in the control area is currently only 0.2%.
Follow the Money writes that,
“In total, South Pole marketed considerably more carbon credits than the emissions it prevented in Zimbabwe. South Pole’s preliminary estimates, seen by Follow the Money, amount to 27 million tonnes of avoided carbon emissions existing only on paper, almost two-thirds of what the project yielded in total.”
South Pole argues that it will issue fewer carbon offsets in future, to compensate for the overestimate.
South Pole’s management have known about the overestimate since June 2022. Since then accounting firm EY paid €500,000 to South Pole for carbon offsets from the Kariba REDD+ Project, and McKinsey has handed over €200,000.
In December 2022, the Spanish-based firm Aenor issued an audit of the project, verifying the issue of 6.8 million carbon offsets for the two year period from 1 July 2019 to 30 June 2021. In late January 2023, South Pole stopped selling these offsets.
“Ridiculous baseline math”
In a 5 November 2022 post on LinkedIn, remote sensing scientist Elias Ayrey, co-founder of the ratings agency Renoster, argued that the Kariba REDD+ project could be generating 30 times as many offsets as it should. Ayrey wrote that the project uses “ridiculous baseline math”. (Crazee and Gijzel didn’t mention Ayrey’s criticism in their article.)
Ayrey’s post generated a lively discussion and Renat Heuberger, South Pole’s CEO, got involved.
Heuberger wrote that, “We started this project in 2012, together with the local communities. Back 10 years ago, deforestation rates were up to 3.7% per annum.”
Ayrey replied that, “According to Global Forest Watch, deforestation rates were never near that high. Only the project’s own maps make this claim. Deforestation in the reference region in 2012 was 0.12% according to peer-reviewed maps.”
Heuberger responded by telling Ayrey that, “The project baseline has been validated and externally certified.” He accused Ayrey of spreading “fake news”.
Ayrey noted that the fact that the project is “old and verified by Verra” is a particularly weak argument. “It’s only the project’s own self-made maps that make this claim [of 3.7% deforestation per annum],” Ayrey wrote.
Follow the Money reports that on 9 November 2022, four days after Ayrey’s LinkedIn post, South Pole announced a stop on sales of all Kariba offsets.
On 30 November 2022, South Pole’s Dannecker wrote about the Kariba REDD+ Project. He acknowledged the problem of counterfactual baselines, writing that, “As with any pioneering climate solution, it is difficult to predict the future and, in this case, future deforestation rates a decade ahead.”
He updated the post on 19 January 2023, to explain that Verra’s methodology (VM09) “has an in-built safety valve to ensure that credits issued from the project equate to actual rates of deforestation on the ground over the full duration of the Kariba project”. As a result, “while the real observed deforestation catches up with the previously modeled baseline, no additional carbon credits will be issued to the project”.
Follow the Money reports that it could take between 10 and 15 years to close this gap, according to South Pole’s internal estimates. That’s 10 to 15 years with no sales of carbon offsets, and therefore no income to the project. Using Ayrey’s analysis this period would be even longer.
On 6 December 2022, the day before the crisis meeting about the Kariba REDD+ Project, Heuberger posted a link to Dannecker’s post on his LinkedIn account. “Proud to share the story of one of our most successful forest conservation projects: Kariba REDD+ in Zimbabwe,” he wrote, firmly in bullshitting mode.
“A red flag has been raised”
The company running the Kariba REDD+ Project, Carbon Green Investments Guernsey Limited, was registered in the tax haven of Guernsey in December 2010. Before he started the Kariba REDD+ Project, Steve Wentzel, the man behind Carbon Green Investments, ran a safari business in Zimbabwe.
In 2009, Wentzel registered another company in Guernsey: EBC Guernsey Limited. EBC’s vision is to “provide financial liberty through modern off shore financial services globally”. The company apparently offers pre-paid debit cards.
A company called Carbon Green Africa, which is a wholly-owned subsidiary of Carbon Green Investments Guernsey, runs the project in Zimbabwe.
Follow the Money reports that one of Dannecker’s PowerPoint slides asked a question about Carbon Green Investments:
“On July 9 2022, a red flag has been raised that CGI is not willing or not able to prove the use of funds for its intended purpose. What was South Pole’s reaction on this red flag from then until today?”
South Pole wanted to invest directly in Carbon Green Investments, but changed its mind after carrying out a due diligence process in spring 2022. Carbon Green Investments is developing another REDD project in Zimbabwe, the Chirisa REDD+ Project.
South Pole has paid a total of €57 million to Carbon Green Investments, but has no way of finding out exactly how Carbon Green Investments has used the money. In its due diligence process, South Pole found that it cannot guarantee that the communities in the project area received the money they were supposed to under the agreement with Carbon green Investments.
“So we have overall statements that show us how the money flowed,” Dannecker said during the crisis meeting, “but not exactly where every dollar went. That would be patronising because it is not our project; it is from the communities.”
€30 million of the money transferred to Carbon Green Investments is supposed to have gone to local communities. “We trust that this agreement [with Wentzel] is being upheld,” South Pole told Follow the Money.
Wentzel did not reply to Follow the Money’s questions about South Pole’s doubts about Carbon Green Investments.
“Viewing climate change as an opportunity”
On its website, South Pole describes the company’s history. In 2006, five young entrepreneurs, graduates of the Swiss Federal Institute of Technology (ETH), got together and formed South Pole.
I met one of these entrepreneurs, Patrick Bürgi, at a meeting in Bangkok in 2011. At the time, South Pole was focussed on the Clean Development Mechanism. I got him to agree that the CDM did not reduce emissions, because it is an offsetting mechanism.
Even if emissions are reduced by an offsetting project in one part of the world those reductions are cancelled out by the buyers of the offsets who use them to continue emissions from burning fossil fuels. And that “if” in the the previous sentence is a very big if indeed. A 2016 report produced for the European Commission found that 85% of CDM offset projects failed to reduce emissions.
None of this, obviously, stopped South Pole from profiting from the sale of carbon offsets. South Pole’s description of the company’s history includes a subheading, “Viewing climate change as an opportunity”. And South Pole’s profits from the Kariba REDD+ Project reveal what an opportunity the false solution of offsetting presents for the company.
South Pole was supposed to receive 25% of revenue from sales of carbon offsets from the Kariba REDD+ Project. South Pole has sold about €100 million worth of carbon offsets from the project. South Pole actually managed to pocket 43% of this by buying offsets from the project cheaply and selling them years later when the price had increased significantly.
In some cases South Pole bought offsets for less than €0.50 and sold them for more than €20. Follow the Money uncovered documents showing that South Pole made huge profits on more than half of the offsets it resold.
South Pole denies that it speculated on the offsets. In a response to the Follow the Money article, company says it bought the offsets “simply to ensure that the project didn’t go bankrupt”. According to South Pole, the offsets were “high-risk assets” which had “no value at the time” and “there was a good likelihood we would never see any positive return”.
South Pole’s profits from offsets make a statement by Renat Heuberger in a recent South Pole promotional video sound distinctly hypocritical. In the video, Heuberger explains why his company is called South Pole:
“The name South Pole stands for our purpose. It’s actually climate action and climate justice. On the one side, South Pole stands for the geographic South Pole with all the ice and the penguins. And we need climate action to ensure that ice is staying there. But South Pole also stands for the Global South. Most of our projects happen in the Global South, and we want to make sure that people who have not contributed much to climate change are also benefiting from the solution. South Pole stands for our purpose.”
South Pole made an extra €18 million from speculating on Kariba offsets and none of that money went to the communities living in the Kariba project area.