Two Shades of Green: How hot air forest credits are being used to avoid carbon taxes in Colombia

Update 1 July: Verra published a statement in response to this report, questioning its findings and accusing it of using flawed methodologies. Our response to Verra is available here.

Executive summary

The Colombian government adopted a carbon tax of approximately US$5/tCO2e covering fossil fuels in 2016. Companies can avoid paying the tax by purchasing carbon offsets from projects inside Colombia. This has boosted the Colombian carbon market, which includes projects aiming to lower deforestation, so-called “REDD+” projects.

At the same time, the Colombian government receives international finance for its regional (jurisdictional) REDD+ initiatives in the Amazon region, and has therefore adopted rules to ensure that voluntary projects do not sell an excessive number of carbon credits. If they did, this would lower the amount of finance which the Colombian government can receive, or would create a double counting problem if the same avoided emission is paid for by both buyers on the voluntary carbon market and international donors.

However, this report finds that at least two large scale projects do not use the official reference values set by the government in order to measure their achieved avoided emissions: the Mataven project, registered under the VCS standard, and the Kaliawiri project, registered under the ProClima standard. By setting artificially high baselines, these forest protection projects were able to generate millions of extra carbon credits which are unlikely to represent any real environmental benefits. These credits likely represent ‘hot air’, i.e. they do not deliver practical results for the climate, nor for forest conservation. As these credits were further used by companies as a substitute for paying the national carbon tax, they also led to a loss of public revenues.

The two projects analysed are estimated to have generated about 21 million credits more than they would have if they had used the official government reference values to set their baseline. Of these, 12.4 million are possibly breaching national regulation, or at least have been issued as a result of having exploited a lack of clarity in the regulation. If all the credits were used to avoid paying the Colombian carbon tax, the government would lose US$62 million in the form of forgone tax revenues.

4.9 million hot air credits have already been used, representing a loss of US$25 million for the State. These credits were nearly entirely used by one company, Primax Colombia SAS, a fossil fuel distributor covered by the tax policy.

This analysis also reports on one project which did use the official reference values to set its baseline, the Ticoya REDD+ project, in order to demonstrate that it would have been possible for the other projects to adopt the same approach.

Finally, it should be highlighted that finance for forest conservation is urgently needed, and that Indigenous people should be supported, including financially, in conservation efforts. But environmental integrity should not be sacrificed for the sake of promising more impact to buyers than what has actually been achieved.

Read the accompanying article by the Latin American Center for Investigative Reporting here

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Two Shades of Green: How hot air forest credits are being used to avoid carbon taxes in Colombia (EN)
Las dos caras del verde: El uso de bonos forestales por aire caliente para evitar impuestos al carbono en Colombia (ES)
INFOGRAPHIC: Credit Issuance by Projects
INFOGRAPHIC: Credit Issuance by the MATAVEN REDD+ Project
INFOGRAPHIC: Credit Issuance by the KALIAWIRI REDD+ Project