A multi-billion dollar market built on a promise that, for 25 years, has largely failed to deliver.
The concept is seductively simple: for every ton of carbon dioxide your company emits, you can pay for a project that reduces or removes a ton elsewhere. The result? You can claim to be "carbon neutral" without directly eliminating your own pollution. This is the promise of carbon offsets, a tool that has become a cornerstone of corporate climate pledges.
Yet, after 25 years and a market worth billions, a troubling question emerges: How real are these carbon offsets? A comprehensive review of the evidence reveals that the failure is not due to a few flawed projects, but rather deep-seated, systemic problems that have made most offsets a dangerous distraction from the real work of cutting emissions 1 8 .
The global carbon offset market has grown from virtually nothing in the late 1990s to a multi-billion dollar industry today, with projections showing continued expansion despite concerns about effectiveness.
At its core, a carbon offset is a tradable credit that represents the reduction, avoidance, or removal of one metric ton of greenhouse gas emissions from the atmosphere 1 . These credits are generated by projects around the world, which generally fall into two categories:
These prevent emissions that would have otherwise occurred. Examples include building renewable energy installations like wind or solar farms, distributing cleaner-burning cookstoves, or capturing methane gas from landfills 6 .
These actively pull CO₂ from the air. This can be through natural solutions like reforestation and peatland restoration, or through technological methods like direct air capture 6 .
The system operates on a few key principles. Projects must be additional, meaning they would not have happened without the offset funding 1 . The carbon savings must be permanent, and the projects must not simply shift emissions to another location, a problem known as leakage 3 .
In theory, this creates an efficient market that funnels money to the cheapest and most effective climate solutions globally. In practice, however, almost every step of this process has proven to be deeply flawed.
Recent scientific reviews have analyzed a quarter-century of carbon offset research, and the conclusions are stark. As Dr. Stephen Lezak from the University of Oxford puts it, "We must stop expecting carbon offsetting to work at scale. We have assessed 25 years of evidence and almost everything up until this point has failed" 3 .
"The research indicates that the present market failures are not due to a few bad apples but rather to 'systematic, deep-seated problems' that incremental changes cannot resolve." 1
A meta-analysis published in Nature Communications found that less than 16% of the carbon credits investigated showed real reductions in greenhouse gas emissions 3 .
Clean Development Mechanism established, creating the first international carbon offset market.
European Union Emissions Trading System begins operation, expanding offset markets.
Corporate voluntary carbon offset purchases increase significantly.
Article 6 establishes framework for international carbon markets.
Multiple studies reveal systemic over-crediting and additionality issues.
Comprehensive reviews confirm widespread failures in carbon offset effectiveness.
Several core issues consistently undermine the environmental integrity of carbon offsets:
This is the bedrock of offsetting, and it is crumbling. Many projects, particularly renewable energy, are now the cheapest form of power and would be built anyway. Paying for them as offsets does not change anything; it simply allows polluters to claim emissions reductions that were going to occur regardless 8 .
Protecting one forest from logging is ineffective if the loggers simply move to the forest next door. This displacement of emissions is common and difficult to track 3 .
The same carbon credit can be claimed by both the country hosting the project and the company that bought the offset, creating a false sense of double the progress 1 .
If these problems are so well-known, why do flawed offsets continue to be sold? A key reason lies in a foundational element of the market: the third-party auditing process designed to ensure quality.
A recent research paper published in Science dove into the structure of this auditing system 2 . The process is not unique—project developers hire and pay auditors from an approved list to verify their claimed emission reductions. However, the paper identified this arrangement as the source of a critical flaw.
This structure creates a direct conflict of interest. The auditors' income depends on the developers, creating both an economic incentive and an unconscious bias to deliver findings that favor their clients 2 . The study found that 64% of the certified auditors for Verra, the world's largest carbon standard, had been involved in projects where significant overcrediting was either acknowledged by Verra or found by peer-reviewed science 2 .
"This is not a case of a 'few bad apples.' The research concluded that the problem is structural. Training or sanctioning a few auditors does not address the inherent pressure built into a system where the audited entities select and pay their verifiers." 2
This fundamental flaw allows low-quality credits to flood the market.
| Tool/Component | Function in Theory | Flaw in Practice |
|---|---|---|
| Additionally Calculation | Determines if a project would not have happened without offset revenue. | Highly subjective and gameable; often relies on hypothetical baselines 2 . |
| Third-Party Auditor | Independent verifier to ensure project integrity and accurate carbon accounting. | Hired and paid by the project developer, creating a conflict of interest 2 . |
| Carbon Standard (e.g., Verra, Gold Standard) | Sets the rules and protocols for project development and verification. | Struggles with oversight; multiple standards create a "race to the bottom" on stringency 5 8 . |
| Monitoring Report | Documents the ongoing performance and emissions impact of a project. | Can be based on unverifiable assumptions, leading to systemic over-crediting 2 3 . |
| Registry System | Tracks the issuance and retirement of credits to prevent double-counting. | Not fully unified globally; double-counting between companies and countries remains a risk 1 . |
Despite this grim picture, the solution is not to abandon all climate finance. The review authors and other experts stress that the focus must shift dramatically.
The consensus among critics is that the only offsets that should persist are those from high-integrity, permanent carbon dioxide removal (CDR) and storage 1 3 . This means moving away from avoided emissions (like not cutting down a tree) and toward projects that actively suck CO₂ from the air and store it for centuries. While expensive and small-scale today, this includes:
Technological systems that filter CO₂ directly from the atmosphere.
Spreading minerals that naturally react with and absorb CO₂.
Converting biomass into biochar, a stable form of carbon that can be added to soil.
A more honest approach is gaining traction: the contribution model. In this model, companies would finance meaningful climate projects but not claim the emissions reductions as offsets for their own pollution 1 3 . This separates the laudable act of funding climate action from the accounting trick of "neutralizing" emissions, forcing companies to focus on actually reducing their own footprint first and foremost.
| Characteristic | Low-Quality Offset Projects | Higher-Quality Offset Projects |
|---|---|---|
| Core Type | Avoided emissions (e.g., renewable energy in areas where it's already cost-competitive) | Carbon removal (e.g., reforestation with permanent protection, direct air capture) 3 |
| Additionally | Unclear or likely false; project was probably going to happen anyway 8 | Well-documented and rigorous; project is truly additional 6 |
| Permanence | Short-term or uninsured (e.g., trees vulnerable to fire) | Long-term, monitored, and guaranteed with buffer pools or insurance 6 |
| Co-benefits | None or negative | Significant social and ecological benefits (e.g., biodiversity, jobs) 6 |
| Verification | Weakened by structural conflicts of interest 2 | Robust, independent, and transparent third-party validation |
The evidence is clear: the vast majority of carbon offsets on the market today do not deliver the climate benefits they promise. They are plagued by intractable problems that have persisted for 25 years. Relying on them to justify business-as-usual emissions is a dangerous distraction from the real, hard work of cutting fossil fuel use and decarbonizing our economy 1 8 .
"We must stop expecting carbon offsetting to work at scale... These junk offsets are a dangerous distraction from the real solution to climate change, which is rapid and sustained emission reductions." 1
The path forward requires a fundamental shift in mindset. Companies must take direct responsibility for their emissions, prioritizing deep reductions within their own operations and value chains. Financing external climate projects should be seen as a contribution to global climate action, not a get-out-of-jail-free card. Only by moving beyond the flawed offset paradigm can we hope to achieve a truly net-zero future.
This article was based on a comprehensive review of scientific evidence and reports from institutions including the University of Oxford, University of Pennsylvania, and Carbon Market Watch.