Carbon credit integrity has become the central question in global climate finance. The answer, backed by forensic audits and peer-reviewed economics, is damning: less than 16% of nearly one billion tons of analyzed credits represent actual emissions reductions.[s] The voluntary carbon market, which companies use to claim net-zero progress, is not a climate solution. It is a financial arbitrage scheme that allowed corporations to buy absolution at an average of $6 per ton in 2024 while EU ETS compliance allowances averaged $61.[s]
This 10× price gap is not a market inefficiency. It is a feature. Companies systematically purchased the cheapest, lowest-quality credits available, with most originating from projects that started issuing over a decade ago.[s] The carbon credit integrity crisis is not a few bad actors exploiting loopholes. It is structural failure baked into how these markets operate.
The Kariba Scandal: A Case Study in Collapse
In September 2025, Verra, the world’s largest carbon credit registry, concluded its investigation into the Kariba REDD+ project in Zimbabwe. The finding: 15,220,520 excess credits had been erroneously issued, representing more than half of the project’s total issuance.[s] The project had wildly overestimated future deforestation rates in its reference area; when actual deforestation came in far lower, millions of credits became phantoms, representing “reductions” of emissions that would never have occurred.
Of those 15.2 million excess credits, 10.3 million had already been retired by buyers, meaning companies had used them to make environmental claims tied to credits Verra itself said were excess.[s] The proposed remedy? Verra “requested compensation” from the project developer, Carbon Green Investments. The catch: CGI had already withdrawn from Verra’s registry, and CarbonPlan, citing The New Yorker, reported serious concerns about CGI’s financial practices and record-keeping.[s]
This is the carbon credit integrity problem in miniature. A project runs up its tab, overissues credits that don’t represent real climate benefits, and then walks away. Verra is left hoping for voluntary repayment from a developer that has withdrawn from its registry. As CarbonPlan noted in their analysis, “By assigning the responsibility for replacing invalid credits to CGI, Verra has called into question its ability to deliver on its core promise: to ensure that the credits it issues represent real climate benefits.”[s]
When Offsets Increase Emissions
Kariba is not an outlier. Research on the Clean Development Mechanism, the world’s largest carbon offset program under the Kyoto Protocol, reveals something worse than non-additionality: offsets that actively raised emissions.
A study of Chinese manufacturing firms participating in CDM found that emissions at registered firms rose by 49% over four years. This was the opposite of what they projected in their applications, which claimed emissions would fall by 20%.[s] The mechanism was supposed to fund efficiency improvements that would reduce emissions. Instead, high-growth firms used the efficiency gains to expand production, and the selection effect meant growing firms were more likely to apply in the first place.
The climate damages from this perverse outcome were substantial. Researchers calculated private benefits of $7 to $14 per ton for participants, versus climate damages of $89 per ton from the increased emissions. The result: a global welfare loss of approximately $65 billion from CDM participation by Chinese manufacturers alone.[s]
The core problem is additionality: offsets only work if they fund reductions that would not have happened otherwise. “Otherwise, the seller gets credit for a reduction that would have occurred anyway, and the buyer uses offsets to keep their own emissions high. In this case, allowing offset markets increases global emissions.”[s]
Structural Rot: Why Carbon Credit Integrity Cannot Be Audited Into Existence
The carbon credit integrity crisis stems from structural incentives that no amount of reform can fully address. Three problems are endemic:
Adverse selection: Economically attractive projects, those that would happen anyway, are overrepresented in credit applications. The CDM’s Indian wind power sector exemplifies this; a 2025 American Economic Journal study estimated that at least 52% of approved carbon offsets were allocated to projects that would very likely have been built anyway.[s]
Auditor conflicts of interest: Verification bodies receive compensation from project developers. Their financial incentives promote approval and higher credit volumes, weakening the oversight on which environmental integrity depends.[s] This is not occasional corruption; it is the business model.
Unverifiable counterfactuals: Additionality requires knowing what would have happened without the offset payment. That counterfactual scenario “is by definition impossible to observe, and therefore relies on highly subjective assumptions.”[s] Project developers control the inputs to this unknowable baseline.
These are not bugs to be patched. They are features of any system that attempts to verify emissions reductions against a scenario that never existed.
The Delay Effect: How Cheap Credits Postpone Decarbonization
Beyond the carbon credit integrity failures at the project level, offsets create a macro-level harm: they delay actual decarbonization. When companies can buy absolution at prices like the 2024 voluntary-market average of $6 per ton, they have less incentive to make costly internal changes.[s] Research confirms this “delay effect”: reliance on offsetting “could delay or weaken decarbonisation if companies prioritise credit purchases and divert funds away from internal decarbonisation and fossil fuel phase-out initiatives.”[s]
An analysis of net-zero strategies by oil majors found credits being used to legitimize continued production and consumption of conventional fossil fuels.[s] The offset market allows companies to claim progress on paper while continuing to extract and burn hydrocarbons that took millions of years to form. The math is simple: if EU ETS compliance allowances averaged $61 per ton in 2024 and companies could buy voluntary credits for an average of $6, rational actors buy the credit.[s]
The French Treasury’s own analysis concluded that “carbon credit markets are experiencing a crisis due to supply-side quality issues as well as challenges to the credibility of the principle of offsetting emissions owing to several greenwashing scandals.”[s]
The Defense: Are Carbon Markets Fixable?
Industry participants argue that critics rely on outdated data from pre-reform vintages. The Integrity Council for Voluntary Carbon Markets has established Core Carbon Principles. Article 6.2 and 6.4 frameworks under the Paris Agreement address double-counting. Dynamic baselines and satellite monitoring improve measurement. ClearBlue Markets, a carbon credit broker, argues that “abandoning carbon markets now would not reduce emissions; it would dismantle one of the few scalable systems that channel private finance to real mitigation.”[s]
The International Chamber of Commerce maintains that “when grounded in transparency, integrity and strong standards, voluntary carbon markets can enable businesses to invest credibly and confidently in a net-zero future.”[s]
These arguments deserve serious consideration. Carbon markets do channel private finance toward mitigation projects that might otherwise lack funding, particularly in developing countries. Remote solar and wind projects in regions without grid access, cookstove replacements, reforestation: these have real benefits, both for carbon and for communities.
But the defense conflates two distinct questions. Can carbon credits fund worthwhile projects? Probably. Can they offset emissions? The evidence says no. The counterfactual problem is not solved by better satellite monitoring. Auditor conflicts are not eliminated by new standards. And as long as a 10× price arbitrage exists between voluntary credits and compliance markets, corporations will continue buying the cheapest option.
What Should Change
The carbon credit integrity problem is not fixable within the current paradigm. Three shifts are necessary:
Contribution, not compensation: Carbon credits should be framed as voluntary climate contributions, not offsets that cancel out a company’s emissions. This is the direction emerging from groups like the Voluntary Carbon Markets Integrity Initiative: reduce what you can, offset only what you cannot. If credits cannot demonstrate additionality, they should not be used to make net-zero claims.
Regulatory integration: The EU’s approach of keeping emission trading systems separate from voluntary credit markets makes sense. Article 6 of the Paris Agreement should establish quality benchmarks that voluntary markets must meet if credits are to count toward any official target.
Price transparency: The 2024 $6 vs. $61 arbitrage should be visible to every consumer and investor. When a company claims carbon neutrality, its annual reports should disclose the average price paid per ton and the verification standards those credits met. Sunlight would reveal how little most “net-zero” commitments cost.
A mounting body of evidence suggests that the global carbon market is awash in excess credits.[s] The 16% figure, the 49% emissions increase, the $65 billion welfare loss: these are not aberrations. They are the system working as designed, a system that prioritizes transaction volume over climate impact, that pays auditors to approve and developers to overstate, that lets project owners withdraw while buyers claim credit for reductions that never happened.
The price of pretending we can buy our way out of the climate crisis is measured in degrees, not dollars. Carbon credit integrity is a contradiction in terms until proven otherwise.
