UN attacks companies’ reliance on carbon credits to hit climate targets

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The UN has outlined its opposition to companies using credits to cancel out their carbon dioxide footprint, putting it on a collision course with big oil and technology groups.

A draft document seen by the Financial Times and drawn up by a task force convened by UN secretary-general António Guterres says groups should not use carbon credits to offset emissions outside of state-regulated schemes.

The UN believes companies should invest in ways to curb their own emissions rather than relying on the multimillion-dollar carbon trading market.

Big polluters such as Chevron and ExxonMobil as well as technology companies such as Microsoft and Apple have included carbon offsetting in their plans to fulfil climate promises made to investors.

Industries that are carbon intensive in production, such as steel and cement, also rely on carbon credits in the private markets to offset their greenhouse gas emissions to meet net zero targets.

In theory, the proceeds of each credit funds a project that makes a cut or saving of CO₂ from the atmosphere, which could mean protecting an area of rainforest from deforestation or capturing and storing CO₂ underground. However, many schemes have been criticised because the amount of carbon removed or avoided is unverifiable or not permanent.

“I would hope and I would expect that serious organisations that are committed to protecting ecosystems . . . don’t shut down an avenue for channelling that carbon finance,” said Jeff Swartz, vice-president at BP’s trading and shipping arm, which buys and sells carbon credits.

Swartz, also a board member at industry body the Integrity Council for the Voluntary Carbon Market, said many of these ecosystems could be “at risk today of failing if they don’t get the sufficient level of climate finance”.

Industry figures expect the carbon credit market to grow. Boston Consulting Group in partnership with Shell last year published an estimate that carbon trading could rise to between $10bn and $40bn a year by the end of the decade.

However, the value of used carbon credits fell last year to $900mn from $1.4bn in 2022, according to data provider AlliedOffsets.

Guterres made his opposition to the reliance on carbon credits clear in a speech last year when he said business, investors, cities and regions should focus on cutting their own emissions and on “avoiding dubious offsets or carbon credits”.

The UN draft document said: “Carbon credits used cannot be counted as their [polluters’] own emission reductions” when purchased in voluntary markets outside of government-regulated schemes in which companies can trade permits giving them the right to pollute.

The document was prepared by the UN task force on global carbon markets, a group convened by the UN secretary-general’s climate action team.

The task force had input from leading UN agencies including the UN Framework Convention on Climate Change, which oversees the co-ordination of global efforts on climate issues, including at COP, the annual international climate gathering, where the development of carbon markets is a focus of attention. This year’s COP29 host country, oil and gas-producing Azerbaijan, has made the topic one of its priorities.

The UN declined to comment.