Colombian fossil fuel companies abuse forestry offsets to avoid taxes – report
BRUSSELS, 30 June – A new investigation by Carbon Market Watch and the Latin American Center for Investigative Journalism (CLIP) finds that project developers exploit carbon market rules in Colombia to create more credits than the amount of emission reductions that the projects are achieving. These credits are then used by fossil fuel companies under the national carbon tax legislation, to avoid paying the carbon tax. As a result, the Colombian government loses millions of US dollars in public revenues. The “hot air” credits also bring zero climate benefits.
Two large-scale projects which claim to reduce deforestation in the Colombian Amazon are overstating their impact by millions of tonnes of CO2e. The Mataven REDD+ and Kaliawiri REDD+ projects, registered under the VCS (United States) and ProClima (Colombia) standards respectively, have sold hot air credits to fossil fuel companies in Colombia which are allowed to purchase these as a substitute to paying the national US$5/tCO2e carbon tax.
Gilles Dufrasne, policy officer at Carbon Market Watch, said:
“This scandal is yet another striking example of carbon market standards failing to uphold environmental integrity of offset projects. It harms the climate, reduces government revenues and threatens the continuation of climate finance payments from international donors. We hear time and again that the voluntary carbon market helps countries go beyond their existing climate commitment, but here it has actually undermined national efforts.”
Despite having adopted legislation in 2018 to prevent this problem, the Colombian Ministry of Environment and Sustainable Development has not properly enforced its rules and has allowed project developers to game the system. The voluntary projects have sold credits for avoided emissions which are already being financed by Germany, the UK, Norway and the Green Climate Fund, through multilateral climate finance programmes.
Around 5 million credits which are possibly in breach of national legislation have been used, nearly entirely by Primax Colombia, a fossil fuel distributor, resulting in a loss of US$25 million for the Colombian government. Around 21 million hot air credits have been approved for issuance to date to both projects. This might only be the tip of the iceberg, as 75 other REDD+ projects are currently registered to sell credits for use under the Colombian carbon tax system.
The report puts into question the adequacy of allowing the use of carbon credits under the Colombian carbon tax policy. It also provides further proof for the need to review existing rules of voluntary carbon markets and hold standards accountable when they issue credits that do not represent real benefits for the climate.
Andrés Bermudez Lievano, from the Latin American Center for Investigative Journalism (CLIP), said:
“This case shows that although Colombia has been a pioneer in creating financial incentives to help communities preserve valuable forests, the system has many shortcomings, the government is not overseeing it, and transparency and traceability are not being encouraged. As a result, citizens have no easy way of understanding if we are really helping solve the climate crisis this way. It’s an issue where more public scrutiny and good quality journalism are strongly needed.”
Carbon Market Watch calls on project developers to stop selling credits from the Mataven and Kaliawiri projects, on VCS/Verra and Proclima to suspend the said projects in their registries and on the Colombian government to clarify the applicable legislation and enforce it better to ensure that no hot air credits are used under the tax system.
Gilles Dufrasne, Policy Officer
+32 491 916070
Notes to editor:
- Report: Two Shades of Green: How hot air forest credits are being used to avoid carbon taxes in Colombia (EN) En español
- The Colombian government has adopted a carbon tax of approximately US$5/tCO2ecovering liquid fossil fuels sold in the country. Fossil fuel companies can purchase carbon credits from projects in Colombia instead of paying the tax.
- The two projects investigated have used “inflated baselines” to calculate their impacts, i.e. they have not used the adequate government values to calculate expected deforestation rates, and have instead made assumptions that lead to a very high perceived risk of deforestation
Carbon Market Watch makes the following recommendations:
- Project developers should refrain from selling any more of the issued credits from the Mataven and Kaliawiri projects, and correct their baselines.
- Validation and Verification Bodies (VVBs) should evaluate the conservativeness of baselines and compliance with national regulation, as well as clearly describe in their reports how projects have performed against criteria. The conflict of interest facing VVBs should be addressed; they should not be selected by the project developer.
- VCS/Verra and Proclima should suspend the Mataven and Kaliawiri projects in their registries, and to purchase and retire new credits to compensate for credits already sold by both projects. All project documents, including annexes, should also be made publicly available, for all projects listed on their registries.
- The Colombian Ministry of Environment and Sustainable Development should clarify regulation 1447 and enforce a stricter application to ensure that hot air credits are not used under the tax system. Projects must be scrutinised in more detail, and the ministry should also improve access to information about offset projects, including by making all project documents publicly available via the registry, and publishing data on credit use.
- Primax Colombia SAS should refrain from any future use of carbon offsets and commit to investments in renewable energy and energy saving technologies at least equivalent to the gains made from the use of hot air credits. In addition, the company should invest in forest conservation, without claiming carbon neutrality through the purchase of offsets.
25 Oct 2021