South Pole pulls out of the Kariba REDD project in Zimbabwe
But will South Pole reimburse the companies that bought fake carbon credits from the project?
South Pole is the world’s largest carbon consulting firm and is the biggest carbon trader in the voluntary carbon market. The company’s flagship project, the Kariba REDD project in Zimbabwe, has recently faced a stream of criticism.
In 2022, the Kariba REDD project generated 10% of South Pole’s revenue. Last week, South Pole announced that it was laying off about 200, or about one-fifth, of its employees.
In a press statement released today, South Pole announced that it has “terminated its contract with Carbon Green Investments”, the company that runs the Kariba REDD project.
Over-estimated carbon credits
The announcement follows a series of critical articles about the Kariba REDD project and South Pole’s role in the project. In February 2023, Follow the Money reported that “South Pole marketed considerably more carbon credits than the emissions it prevented in Zimbabwe.”
South Pole’s management knew about the over-estimated carbon credits in June 2022. Nevertheless the company continued selling carbon credits from the project. Follow the Money writes that,
In late September 2022, accounting and consultancy firm EY paid over half a million euros to offset carbon through the Kariba project. Even days after South Pole declared a sales stop on all Kariba credits on 9 November 2022, it sold the McKinsey consultancy firm more than 200 thousand euros of Kariba credits, as South Pole’s internal documents prove.
“An expensive mistake”
In March 2023, Bloomberg Green reported on South Pole and the Kariba REDD project. The money from the sale of carbon credits from the project, which amounted to €100 million, went largely to South Pole and Carbon Green Investments.
Some of South Pole’s biggest customers were questioning the project, Bloomberg Green reported:
Officials at Barclays, L’Oreal and McKinsey told Bloomberg Green they’ve either used up their Kariba credits or had no plans to buy more. Dutch energy company Greenchoice, which acquired more than 4 million Kariba credits, said it was “unpleasantly surprised” and would launch an investigation before determining its next steps. Takeda Pharmaceutical Company, which used 75,000 Kariba credits in December to help reach climate targets, said it’s “pausing any future investments with South Pole.”
Allister Furey, head of carbon credit ratings agency Sylvera, told Bloomberg Green that,
“When a highly-marketed and well-known project is revealed not to be delivering the claimed impacts, there’s a risk the entire reputation of carbon markets will be destroyed.”
Under Verra’s rules, if a project over-estimates the number of carbon credits generated, there’s a self-correcting mechanism. The project can issue fewer, or no, credits in the future, until the books are balanced. In the case of Kariba, Sylvera told Bloomberg Green, South Pole and Carbon Green Investments “would have to operate Kariba for another 25 years to fulfill the credits it’s already generated”.
“Funding the project costs at least $60,000 a month,” Bloomberg Green notes. “Best-case scenario, it’s an expensive mistake.”
Community has “great doubts about the project”
Research carried out by Die Zeit, Swiss broadcaster SRF, and Follow the Money was published in a a series of articles about Kariba. They found that little of the money from the sales of carbon credits had reached the communities in the project area in Zimbabwe.
In its report, SRF included several quotations from community members in the project area:
“The community has great doubts about the project. There’s nothing we can point to and say we benefited from.”
“At the beginning they told us that anyone who protected 50 trees would get $50. We protected the trees and the forest, but no money came.”
“The only thing they have done is the two gardens. But only 15 to 20 people benefit – and there are 3,000 of us in the surrounding villages.”
“We were promised that they would drill boreholes for us. So far that hasn’t happened.”
“CGA [Carbon Green Africa] gave us small gardens, but we didn’t see any money.”
No paper trail
Recently Heidi Blake, a journalist with The New Yorker, published a superb piece of investigative journalism into the Kariba REDD project.
She interviewed Steve Wentzel, the director of Carbon Green Investments. Wentzel had incorporated the company in the tax haven of Guernsey back in December 2010.
Wentzel told Blake that he transferred the money he received in Guernsey via a series of offshore funds. It would eventually arrive as cash in Zimbabwe. “There’s no paper trail,” Wentzel told Blake.
“I don’t know what you’re going to report on this,” Wentzel said later in the interview. “I hope to God it’s not all of it, because I probably will go to jail.”
South Pole jumps ship
In its press release about terminating its contract with Carbon Green Investments, South Pole states that,
The termination follows careful consideration of the project, issues involved, and allegations that have been raised publicly. All activities related to carbon certification and carbon credits from the Kariba REDD+ project will now be the responsibility of CGI, and South Pole's role as the carbon asset developer has ended.
After Follow the Money reported that the Kariba REDD project had sold millions of fake carbon credits, South Pole responded by referring to self-correcting mechanism that it said exists “to ensure that issued credits equate to actual observed rates of deforestation on the ground over the full duration of the project”.
South Pole anticipates that “the project is expected to keep operating within Verra’s requirements and safeguards”.
But now that South Pole has terminated its contract with Carbon Green Investment, how likely is it that Wentzel will continue to pay out money for the next 25 years in order Verra’s self-correcting mechanism to function? Particularly when there is no more money coming in from sales of carbon credits?
Another question is whether South Pole will reimburse the companies that bought fake carbon credits from the Kariba REDD project?
On 17 October 2023, Verra announced that it was suspending the Kariba REDD project pending an investigation.
If the project collapses, all the credits sold from the project would be cancelled. In this case, Verra would replace these credits with credits from its buffer pool.
Bloomberg Green reports Verra officials as saying that doing this for a project the size of Kariba this would be an “unprecedented situation” that could wipe out between 38% and 51% of its entire buffer pool.
Carbon Market Watch’s Gilles Dufrasne told Bloomberg Green that,
“This is maybe the biggest real-world test we’re seeing so far on the use of buffer pools. Sure, the buffer pool can sustain one big project. It’s going to impact it massively, but the numbers show it can compensate for those credits. But you can’t do it if it’s four, five or six projects.”
Verra currently has a total of 1,658 projects in its registry. These projects have issued a total of more than 1.1 billion carbon credits. The buffer pool contains 70,092,077 credits.
I’m reading the New Yorker article, a great in-depth examination of South Pole and the “more selling than substance” that is the carbon credit world. And thanks for all you do, Chris.
Oh, really - "there’s a risk the entire reputation of carbon markets will be destroyed"? This gets exciting! If "carbon markets" actually ever had any Substance, there would be nothing to worry about. Rule #2- NEVER rip off the big accounting firms! Especially EY - you might as well try to rig the Oscars voting. But again, it's the people on the ground getting burnt The worst, promises then nothing. For the investors - buyer beware!