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01 Electricity demand saw the third-largest absolute increase ever in 2024
02 China’s per capita electricity use overtook France’s for the first time in 2024, and was five times that of India’s
03 A fifth of the demand increase in 2024 was due to the impacts of hotter temperatures compared to 2023
Global electricity demand increased by 4% (+1,172 TWh) in 2024. This was the third-largest absolute increase in electricity demand ever, only surpassed by rebounds in demand in 2010 from the global recession and in 2021 from the Covid-19 pandemic. This increase is significantly above the average annual demand growth of 2.5% in the previous ten years (2014-2023).
Global electricity demand rose to 30,856 TWh, crossing 30,000 TWh for the first time. Since the turn of the century, electricity demand has doubled.
Some of the exceptional growth in 2024 was due to weather conditions. As explored in chapter 1, we calculate that hotter temperatures added 0.7% to global demand in 2024. Nonetheless, emerging drivers of electricity demand such as electric vehicles (EVs), data centres and heat pumps also added 0.7% to global demand growth in 2024 (+195 TWh), a slight step up from the 0.6% they added in 2023 (+174 TWh). See more in chapter 2.2.
China recorded the largest increase in electricity demand, adding 623 TWh (+6.6%), which accounted for more than half of the global increase. The US saw a rise of 128 TWh (+3%). India’s demand increased by 98 TWh (+5%). As recent Ember analysis shows, all three countries experienced heatwaves that drove up electricity demand beyond increases due to economic activity.
Other countries with substantial increases were Brazil (+35 TWh, +4.9%), Russia (+32 TWh, +2.8%), Viet Nam (+26 TWh, +9.5%) and Türkiye (+18 TWh, +5.6%).
China’s share of global electricity demand has increased due to its continued demand growth above the world average. With 10,066 TWh, China’s electricity demand contributed roughly a third (32.6%) of the global total, up from 28% five years ago.
China’s global share of demand was more than double that of the US at 4,401 TWh (14.3% of the global total). The EU made up 8.8% (2,727 TWh) of global electricity demand. India’s electricity demand reached 2,054 TWh (6.7% of global demand).
26% of global electricity demand comes from economies that each contribute less than 2%.
Among the top ten electricity consumers, the difference in per capita consumption remained vast. Canada had the highest per capita demand for electricity at 15.5 megawatt hours (MWh). This was more than 10 times higher than India, which places last among this group at 1.4 MWh.
China’s per capita demand (7.1 MWh) was almost double the world average of 3.8 MWh, overtaking France in 2024 and Germany in 2023.
Asia’s electricity demand has grown fourfold since the turn of the century from 4,199 TWh in 2000 to 16,153 TWh in 2024 (+285%), driven by demand increases in China, and increasingly India, Indonesia, Viet Nam and other fast-growing economies.
This trend was not replicated elsewhere. Demand outside Asia grew by just 3,624 TWh (+33%) over the same period, from 11,079 TWh to 14,703 TWh.
Despite moderate increases in the past decade, the entire continent of Africa accounted for just 3.1% of total global electricity demand in 2024, less than Japan.
01 Low-carbon sources surpassed 40% of global electricity generation, driven by record renewables growth
02 Global solar generation has doubled in three years, continuing its pattern of exponential growth
03 Wind and solar have met more than half of global growth in electricity demand since 2015
In 2024, low-carbon power sources rose to 40.9% of global electricity generation, the highest level since the 1940s when hydro generation alone met over 40%.
Solar and wind power are the fastest-growing sources of electricity. Combined, they accounted for 15% of global electricity in 2024, with solar contributing 6.9% and wind 8.1%. The two sources combined now produce more electricity than hydropower at 14.3%. They already surpassed nuclear generation in 2021, which continues to reduce in share (9% in 2024). The rise in wind and solar power over recent years has been remarkable, with solar in particular maintaining rapid growth rates despite reaching high levels of absolute generation. Solar power has doubled in the three years since 2021, continuing its pattern of exponential growth.
The share of fossil sources declined to 59.1% in 2024, despite increases in absolute generation. It has declined substantially since the peak of 68.3% in 2007 and is set to fall further in the coming years as renewable generation growth continues to accelerate. The share of coal generation has fallen significantly, from 40.8% in 2007 to 34.4% in 2024, with more consistent falls in the last 10 years. The share of gas generation has fallen for four consecutive years since it peaked in 2020 at 23.9%, reaching 22% in 2024.
Clean generation met 79% of the increase in global electricity demand in 2024. Electricity generation from clean sources grew by 927 TWh (+7.9%), the largest increase ever recorded. The clean generation increase in 2024 would have been large enough to meet the rise in electricity demand in all but three years in the last two decades.
However, heatwaves in 2024 elevated cooling demand, which was the main driver of a small 1.4% increase in fossil generation (+245 TWh), similar to the rise in the previous two years. Without the impact of hotter temperatures, fossil generation would have remained flat.
Renewables growth alone met 73% of the increase in electricity demand. In total, renewable power sources added a record 858 TWh of generation in 2024, 49% more than the previous record set in 2022 of 577 TWh.
Solar dominated the growth in electricity generation as it was the largest source of new electricity for the third year in a row. Solar added 474 TWh (+29%) in 2024. Solar’s increase alone met 40% of global electricity demand growth in 2024. Wind growth remained more moderate (+182 TWh, +7.9%), with lower wind speeds in some geographies leading to the lowest increase in wind generation in four years despite continued capacity additions. Hydro generation rebounded in 2024 (+182 TWh) as drought conditions in 2023 eased, particularly in China.
Nuclear generation increased by 69 TWh (+2.5%), mostly as a result of less downtime for reactors in France as well as small increases from new reactors in China.
The global increase in fossil generation came mostly from coal which rose by 149 TWh (+1.4%). Gas generation increased by 103 TWh (+1.6%). Other fossil fuels saw a minor fall of 7.7 TWh (-0.9%).
China and India saw the largest increases in coal generation in 2024, together totalling more than the global net increase. The gas generation growth in the US alone (+59 TWh, +3.3%) was equivalent to 57% of the global increase. Gas generation in the US is rising mainly as a result of coal-to-gas switching. Ember’s analysis shows that heatwaves also played a role in raising fossil generation in China, India and the US in 2024.
Since 2015, solar and wind have been the two largest-growing sources of electricity, meeting more than half (52%) of global demand growth. Solar generation has grown eightfold since 2015, from 256 TWh in 2015 to 2,131 TWh in 2024. Wind generation tripled from 830 TWh in 2015 to 2,494 TWh in 2024.
China has dominated changes in the global electricity system since 2015, recording the largest increases of any country for solar, wind, hydro, nuclear and coal. China accounts for 45% of global growth in wind and solar generation since 2015. At the same time, global coal generation would have fallen since 2015 without the increase in China.
India saw the second-largest increase in coal generation behind China. India’s rise in coal generation was equivalent to 40% of the global increase in coal since 2015.
The US was responsible for 43% of the global increase in gas generation since 2015. Its gas generation increased by 40% (+531 TWh) over the same period.
01 Power sector emissions hit a new record high as heatwaves drove a small rise in fossil generation
02 Carbon intensity fell by 15% since its peak in 2007, driven by clean generation growing faster than fossil generation
03 Africa and Latin America each make up less than 4% of global power sector emissions, despite representing 19% and 8% of the global population respectively
Global power sector emissions reached a new record high in 2024, rising by 1.6% or 223 million tonnes of CO2 (MtCO2), compared to 2023. This increase was similar to 2023 (+1.5%) and 2022 (+1.3%) and was driven by an increase in fossil generation, predominantly from coal. However, without the impact of 2024’s heatwaves, fossil generation would only have risen by 0.2% from 2023, and power sector emissions would have remained almost unchanged (see Chapter 1).
Despite the overall increase in power sector emissions, the emissions intensity (emissions per unit of electricity produced) of global power generation continued to decrease. Emissions intensity dropped by 2.3% to 473 grams of CO2 per kilowatt hour (gCO2/kWh), down from 484 gCO2/kWh in 2023. Emissions intensity has now fallen in nine of the last ten years, with the only increase occurring in 2021 as fossil generation rebounded following large falls in demand during the Covid-19 pandemic.
The decline in emissions intensity is driven by the growing share of clean power in the mix, which reached 40.9% in 2024. As of 2024, the emissions intensity of the global power sector has fallen by 15% since the peak of 555 gCO2/kWh in 2007.
China’s size and reliance on coal generation kept it as the world’s highest power sector emitter in 2024, with emissions reaching 5,640 MtCO2, four times those of the US and India.
Emissions from power generation in the US amounted to 1,683 MtCO2, accounting for 11.5% of the global total. India’s power sector emissions reached 1,457 MtCO2, now close to matching the US and reaching 10% of global power sector emissions for the first time.
China accounted for 38.6% of global power sector emissions – more than the US, India, the EU, Russia and Japan combined. Countries individually producing less than 2% of global power sector emissions made up the remaining 28.8% of the global total.
India and China had the highest emissions intensity of electricity production among the top ten electricity consumers. India’s emissions intensity remained particularly high at 708 gCO2/kWh, compared to the global average of 473 gCO2/kWh. However, India’s emissions intensity has been falling as clean generation has been growing faster than coal.
Canada, Brazil and France had the lowest emissions intensity due to their high shares of low-carbon generation from hydro and nuclear, along with a growing share of wind and solar.
Despite this, Canada’s emissions per capita (2.8 tCO2) were nearly three times larger than India’s (1 tCO2), driven by substantially higher per capita demand for electricity.
South Korea (5 tCO2) and the US (4.9 tCO2) had the highest power sector emissions per capita among the ten biggest electricity consumers due to a combination of high per capita electricity demand and a high share of fossil generation in the mix. China’s emissions per capita have risen to match Japan’s at 4 tCO2.
Driven by rapidly growing electricity demand in Asian economies, Asia’s share of global power sector emissions has surged over the last two decades. In 2000, Asia made up a third (33%) of global power sector emissions. In 2024, this had risen to nearly two-thirds (63%).
Power sector emissions in North America and Europe have both fallen by a third since peaking in 2007. Within Europe, EU power sector emissions have halved (-52%) since 2007, whilst emissions in Russia and Türkiye have risen. In the Middle East, emissions have risen more sharply, driven by growing electricity demand in large markets such as Saudi Arabia and Iran, where fossil fuels dominate the electricity mix.
In 2024, African countries still only made up 3.6% of global power sector emissions, despite accounting for 19% of the world’s population. Similarly, Latin America and the Caribbean contributed just 3.2% of global power sector emissions while representing 8% of the global population.
Half of global greenhouse gas emissions are now covered by a 2035 climate pledge following a key UN summit this week, Carbon Brief analysis finds.
China stole the show at the UN climate summit held in New York on 24 September, announcing a pledge to cut greenhouse gas emissions to 7-10% below peak levels by 2035.
However, other major emitters also came forward with new climate-pledge announcements at the event, including the world’s fourth biggest emitter, Russia, and Turkey.
Following the summit, around one-third (63) of countries have now announced or submitted their 2035 climate pledges, known as “nationally determined contributions” (NDCs).
The NDCs are a formal five-yearly requirement under the “ratchet mechanism” of the Paris Agreement, the landmark deal to keep temperatures well-below 2C, with aspirations to keep to 1.5C, by the end of this century.
Nations were meant to have submitted these pledges by 10 February of this year, but around 95% of countries missed this deadline.
UN climate chief Simon Stiell then asked laggard countries to make 2035 pledges by the end of September, so they can be included in a report synthesising countries’ climate progress.
At the summit, many nations shared that they were still working on their NDCs and that they would aim to submit them to the UN before or during COP30 in November.
The map below shows countries that submitted their 2035 pledges by the 10 February deadline (dark blue), after the deadline (blue) and that have now announced their pledge, but not yet submitted it formally to the UN registry (pale blue).
The EU has not yet agreed on a 2035 climate pledge. At the UN climate summit, European Commission president Ursula von der Leyen announced a “statement of intent” to cut emissions somewhere in the range of 66.3-72.5% below 1990 levels by 2035.
She added that the EU would aim to make its formal NDC submission to the UN before COP30 in November.
The world’s second-largest emitter, the US, submitted its 2035 pledge in 2024 under former president Joe Biden.
However, current president Donald Trump has since signed an order to withdraw the country from the Paris Agreement. Therefore, it is now assumed that the US pledge is now void.
More than 100 nations spoke at the UN climate summit, which was held on the margins of the annual UN general assembly in New York.
Some media outlets mistakenly reported that all of these countries “announced” new pledges at the summit.
However, many of the countries speaking at the summit had already submitted their 2035 pledges, or used their slots to promise to do so at a future date.
Carbon Brief reviewed the six hours of footage from the UN climate summit to get a clear picture of which countries announced new 2035 pledges during the event.
Countries that made new NDC target announcements during the event included China, Russia, Turkey, Palau, Tuvalu, Kyrgyzstan, Peru, São Tomé and Príncipe, Fiji, Bangladesh and Eritrea. (Tuvalu has since submitted its NDC to the UN.)
These countries together represent 36% of global greenhouse gas emissions, according to Carbon Brief analysis. (It is worth noting that China alone accounts for 29% of emissions.)
Some 53 countries have already submitted their 2035 climate pledges to the UN Framework Convention on Climate Change (UNFCCC). These nations account for 14% of global greenhouse gas emissions.
Therefore, countries that have either announced or submitted their 2035 climate pledges now represent half of global emissions, according to Carbon Brief analysis. (The 50% figure excludes the US and the EU for the reasons outlined above.)
Despite the new announcements, two-thirds of nations have still not submitted their 2035 climate pledges, according to Carbon Brief analysis.
This includes major emitters, such as India, Indonesia and Mexico.
According to the Hindu, India plans to submit its 2035 climate pledge at the beginning of COP30 on 10 November.
Both Mexico and Indonesia spoke at the UN climate summit. Mexico said it was “still consulting industries” about its proposed target, while Indonesia made no mention of when it might submit its NDC.
Many other nations appearing at the summit made promises to submit their 2035 climate pledges by COP30.
This might mean that many nations miss the end of September deadline set by UN climate chief Simon Stiell to be included in an upcoming NDC synthesis report.
August 28, 2025 – Today, Climate TRACE reported that total global emissions in the first half of 2025 are 30.99 billion tonnes CO₂e. This is 0.13% higher than emissions were in the first half of 2024. Global greenhouse gas emissions for the month of June 2025 totaled 5.12 billion tonnes CO₂e. This represents an increase of 0.29% vs. June 2024. Global methane emissions in June 2025 were 34.82 million tonnes CH₄, an increase of 0.49% vs. June 2024.
Data tables summarizing emissions totals for June 2025 by sector, country, and top 100 urban areas are available for download here.
Lookback: Global Greenhouse Gas Emissions for the First Half of 2025
In the first half of 2025, the sector driving the most growth in emissions was fossil fuel operations, where emissions rose by 1.5% (an increase of 77.65 million tonnes of CO₂e). The United States accounted for more than half of that increase. Manufacturing emissions also rose in the first half of 2025, growing by 0.3% (an increase of 18.75 million tonnes of CO₂e), led by increases in India, Vietnam, Indonesia, and Brazil.
Meanwhile, global power sector emissions saw the biggest decline in the first half of 2025, falling by 0.8% (a decrease of 60.27 million tonnes of CO₂e), driven almost entirely by declines in China and India, where power emissions were 1.7% lower and 0.8% lower than their totals in the first half of 2024, respectively.
The first half of 2025 shows small but positive progress on decarbonization in China, Mexico, and Australia. China’s emissions decreased 45.37 million tonnes CO₂e, or 0.51% compared to the first half of 2024. Mexico’s emissions decreased 7.78 million tonnes CO₂e, or 1.71% compared to the first half of 2024. Australia’s emissions decreased 6.56 million tonnes CO₂e, or 1.51% compared to the first half of 2024. However, some of the world’s other major emitting economies, including the United States, India, the EU, Indonesia, and Brazil, saw emissions rise in the first half of 2025.
– United States emissions increased by 48.57 million tonnes CO₂e, or 1.43% compared to the first half of 2024;
– India emissions increased by 4.44 million tonnes CO₂e, or 0.21% compared to the first half of 2024;
– European Union emissions increased by 2.90 million tonnes CO₂e, or 0.15% compared to the first half of 2024.
– Indonesia emissions increased by 3.06 million tonnes CO₂e, or 0.39% compared to the first half of 2024;
– Brazil emissions increased by 9.84 million tonnes CO₂e, or 1.24% compared to the first half of 2024.
Greenhouse Gas Emissions by Country: June 2025
Climate TRACE’s preliminary estimate of June 2025 emissions in China, the world’s top emitting country, is 1.46 billion tonnes CO₂e — an increase of 0.92 million tonnes of CO₂e or 0.06% vs. June 2024.
Of the other top five emitting countries:
– United States emissions increased by 4.89 million tonnes CO₂e, or 0.86% year over year;
– India emissions declined by 0.11 million tonnes CO₂e, or 0.03% year over year;
– Russia emissions increased by 0.95 million tonnes CO₂e, or 0.38% year over year;
– Indonesia emissions increased by 0.43 million tonnes CO₂e, or 0.33% year over year.
In the EU, which as a bloc would be the fourth largest source of emissions in June 2025, emissions declined by 1.80 million tonnes CO₂e compared to June 2024, or 0.58%.
Greenhouse Gas Emissions by Sector: June 2025
Greenhouse gas emissions increased in June 2025 vs. June 2024 in fossil fuel operations, manufacturing, transportation, and waste, and decreased in power. Fossil fuel operations saw the greatest change in emissions year over year, with emissions increasing by 1.85% as compared to June 2024.
– Agriculture emissions were 641.40 million tonnes CO₂e, unchanged vs. June 2024;
– Buildings emissions were 285.59 million tonnes CO₂e, unchanged vs. June 2024;
– Fluorinated gases emissions were 137.71 million tonnes CO₂e, unchanged vs. June 2024;
– Fossil fuel operations emissions were 846.19 million tonnes CO₂e, a 1.85% increase vs. June 2024;
– Manufacturing emissions were 929.05 million tonnes CO₂e, a 0.02% increase vs. June 2024;
– Mineral extraction emissions were 23.22 million tonnes CO₂e, unchanged vs. June 2024;
– Power emissions were 1,297.34 million tonnes CO₂e, a 0.56% decrease vs. June 2024;
– Transportation emissions were 759.10 million tonnes CO₂e, a 0.77% increase vs. June 2024;
– Waste emissions were 197.77 million tonnes CO₂e, a 0.26% increase vs. June 2024.
Greenhouse Gas Emissions by City: June 2025
The urban areas with the highest total greenhouse gas emissions in June 2025 were Shanghai, China; Tokyo, Japan; New York, United States; Houston, United States; and Los Angeles, United States.
The urban areas with the greatest increase in absolute emissions in June 2025 as compared to June 2024 were Pittsburgh, United States; Xinyu, China; Tokyo, Japan; Baotou, China; and Algeciras, Spain. Those with the largest absolute emissions decline between this June and last June were Leipzig, Germany; Anqing, China; Duren, Germany; Houston, United States; and Anchorage, United States.
The urban areas with the greatest increase in emissions as a percentage of their total emissions were Kombissiri, Burkina Faso; Gambat, Pakistan; Bitilta Zebraro, Ethiopia; UNNAMED, Sudan; and Oviedo, Spain. Those with the greatest decrease by percentage were Leipzig, Germany; Duren, Germany; Wolfsburg, Germany; Atebubu, Ghana; and Evansville, United States.
RELEASE NOTES
Revisions to existing Climate TRACE data are common and expected. They allow us to take the most up-to-date and accurate information into account. As new information becomes available, Climate TRACE will update its emissions totals (potentially including historical estimates) to reflect new data inputs, methodologies, and revisions.
With the addition of June 2025 data, the Climate TRACE database is now updated to version V4.6.0. This release incorporates the most recent FAOSTAT and CEDS data in applicable sectors. The release also reflects updated methodology for non-GHG emissions from glass, cement, and lime production; the addition of N2O emissions across agriculture subsectors and additional refinements to agriculture emissions factors; updated North America and Europe data for Q4 2024 in petrochemicals and oil and gas refining; updated methodology and data for cement and steel production to reflect updated emissions factors; and the addition of 56 steel plants to our database.
A detailed description of data updates is available in our changelog here.
To learn more about what is included in our monthly data releases and for frequently asked questions, click here. All methodologies for Climate TRACE data estimates are available to view and download here. For any further technical questions about data updates, please contact: coalition@ClimateTRACE.org.
To sign up for monthly updates from Climate TRACE, click here.
Emissions data for July 2025 are scheduled for release on September 25, 2025.
About Climate TRACE
The Climate TRACE coalition was formed by a group of AI specialists, data scientists, researchers, and nongovernmental organizations. Current members include Carbon Yield; CTrees; Duke University’s Nicholas Institute for Energy, Environment & Sustainability; Earth Genome; Former Vice President Al Gore; Global Energy Monitor; Hypervine.io; Johns Hopkins University Applied Physics Lab; OceanMind; RMI; TransitionZero; and WattTime. Climate TRACE is also supported by more than 100 other contributing organizations and researchers, including key data and analysis contributors: Arboretica, Carnegie Mellon University’s CREATE Lab, Global Fishing Watch/emLab, Michigan State University, Open Supply Hub, and University of Malaysia Terengganu. For more information about the coalition and a list of contributors, click here.
Media Contacts
Fae Jencks and Nikki Arnone for Climate TRACE
India’s carbon dioxide (CO2) emissions from its power sector fell by 1% year-on-year in the first half of 2025 and by 0.2% over the past 12 months, only the second drop in almost half a century.
As a result, India’s CO2 emissions from fossil fuels and cement grew at their slowest rate in the first half of the year since 2001 – excluding Covid – according to new analysis for Carbon Brief.
The analysis is the first of a regular new series covering India’s CO2 emissions, based on monthly data for fuel use, industrial production and power output, compiled from numerous official sources.
(See the regular series on China’s CO2 emissions, which began in 2019.)
Other key findings on India for the first six months of 2025 include:
The analysis also shows that emissions from India’s power sector could peak before 2030, if clean-energy capacity and electricity demand grow as expected.
The future of CO2 emissions in India is a key indicator for the world, with the country – the world’s most populous – having contributed nearly two-fifths of the rise in global energy-sector emissions growth since 2019.
In 2024, India was responsible for 8% of global energy-sector CO2 emissions, despite being home to 18% of the world’s population, as its per-capita output is far below the world average.
However, emissions have been growing rapidly, as shown in the figure below.
The country contributed 31% of global energy-sector emissions growth in the decade to 2024, rising to 37% in the past five years, due to a surge in the three-year period from 2021-23.
More than half of India’s CO2 output comes from coal used for electricity and heat generation, making this sector the most important by far for the country’s emissions.
The second-largest sector is fossil fuel use in industry, which accounts for another quarter of the total, while oil use for transport makes up a further eighth of India’s emissions.
India’s CO2 emissions from fossil fuels and cement grew by 8% per year from 2019 to 2023, quickly rebounding from a 7% drop in 2020 due to Covid.
Before the Covid pandemic, emissions growth had averaged 4% per year from 2010 to 2019, but emissions in 2023 and 2024 rose above the pre-pandemic trendline.
This was despite a slower average GDP growth rate from 2019 to 2024 than in the preceding decade, indicating that the economy became more energy- and carbon-intensive. (For example, growth in steel and cement outpaced the overall rate of economic growth.)
A turnaround came in the second half of 2024, when emissions only increased by 2% year-on-year, slowing down to 1% in the first half of 2025, as seen in the figure below.
The largest contributor to the slowdown was the power sector, which was responsible for 60% of the drop in emissions growth rates, when comparing the first half of 2025 with the years 2021-23.
Oil demand growth slowed sharply as well, contributing 20% of the slowdown. The only sectors to keep growing their emissions in the first half of 2025 were steel and cement production.
Another 20% of the slowdown was due to a reduction in coal and gas use outside the power, steel and cement sectors. This comprises construction, industries such as paper, fertilisers, chemicals, brick kilns and textiles, as well as residential and commercial cooking, heating and hot water.
This is all shown in the figure below, which compares year-on-year changes in emissions during the second half of 2024 and the first half of 2025, with the average for 2021-23.
Power sector emissions fell by 1% in the first half of 2025, after growing 10% per year during 2021-23 and adding more than 50m tonnes of CO2 (MtCO2) to India’s total every six months.
Oil product use saw zero growth in the first half of 2025, after rising 6% per year in 2021-23.
In contrast, emissions from coal burning for cement and steel production rose by 10% and 7%, respectively, while coal use outside of these sectors fell 2%.
Gas consumption fell 7% year-on-year, with reductions across the power and industrial sectors as well as other users. This was a sharp reversal of the 5% average annual growth in 2021-23.
The most striking shift in India’s sectoral emissions trends has come in the power sector, where coal consumption and CO2 emissions fell 0.2% in the 12 months to June and 1% in the first half of 2025, marking just the second drop in half a century, as shown in the figure below.
The reduction in coal use comes after more than a decade of break-neck growth, starting in the early 2010s and only interrupted by Covid in 2020. It also comes even as the country plans large amounts of new coal-fired generating capacity.
In the first half of 2025, total power generation increased by 9 terawatt hours (TWh) year-on-year, but fossil power generation fell by 29TWh, as output from solar grew 17TWh, from wind 9TWh, from hydropower by 9TWh and from nuclear by 3TWh.
Analysis of government data shows that 65% of the fall in fossil-fuel generation can be attributed to lower electricity demand growth, 20% to faster growth in non-hydro clean power and the remaining 15% to higher output at existing hydropower plants.
Slower growth in electricity usage was largely due to relatively mild temperatures and high rainfall, in contrast to the heatwaves of 2024. A slowdown in industrial sectors in the second quarter of the year also contributed.
In addition, increased rainfall drove the jump in hydropower generation. India received 42% above-normal rainfall from March to May 2025. (In early 2024, India’s hydro output had fallen steeply as a result of “erratic rainfall”.)
Lower temperatures and this abundant rainfall reduced the need for air conditioning, which is responsible for around 10% of the country’s total power demand. In the same period in 2024, demand surged due to record heatwaves and higher temperatures across the country.
The growth in clean-power generation was buoyed by the addition of a record 25.1GW of non-fossil capacity in the first half of 2025. This was a 69% increase compared with the previous period in 2024, which had also set a record.
Solar continues to dominate new installations, with 14.3GW of capacity added in the first half of the year coming from large scale solar projects and 3.2GW from solar rooftops.
Solar is also adding the majority of new clean-power output. Taking into account the average capacity factor of each technology, solar power delivered 62% of the additional annual generation, hydropower 16%, wind 13% and nuclear power 8%.
The new clean-energy capacity added in the first half of 2025 will generate record amounts of clean power. As shown in the figure below, the 50TWh per year from this new clean capacity is approaching the average growth of total power generation.
(When clean-energy growth exceeds total demand growth, generation from fossil fuels declines.)
India is expected to add another 16-17GW of solar and wind in the second half of 2025. Beyond this year, strong continued clean-energy growth is expected, towards India’s target for 500GW of non-fossil fuel capacity by 2030 (see below).
The first half of 2025 also saw a significant slowdown in India’s oil demand growth. After rising by 6% a year in the three years to 2023, it slowed to 4% in 2024 and zero in the first half of 2025.
The slowdown in oil consumption overall was predominantly due to slower growth in demand for diesel and “other oil products”, which includes bitumen.
In the first quarter of 2025, diesel demand actually fell, due to a decline in industrial activity, limited weather-related mobility and – reportedly – higher uptake of vehicles that run on compressed natural gas (CNG), as well as electricity (EVs).
Diesel demand growth increased in March to May, but again declined in June because of early and unusually severe monsoon rains in India, leading to a slowdown in industrial and mining activities, disrupted supply-chains and transport of raw material, goods and services.
The severe rains also slowed down road construction activity, which in turn curtailed demand for transportation, construction equipment and bitumen.
Weaker diesel demand growth in 2024 had reflected slower growth in economic activity, as growth rates in the industrial and agricultural sectors contracted compared to previous years.
Another important trend is that EVs are also cutting into diesel demand in the commercial vehicles segment, although this is not yet a significant factor in the overall picture.
EV adoption is particularly notable in major metropolitan cities and other rapidly emerging urban centres and in the logistics sector, where they are being preferred for short haul rides over diesel vans or light commercial vehicles.
EVs accounted for only 7.6% of total vehicle sales in the financial year 2024-25, up 22.5% year-on-year, but still far from the target of 30% by 2030.
However, any significant drop in diesel demand will be a function of adoption of EV for long-haul trucks, which account for 32% of the total CO2 emissions from the transport sector. Only 280 electric trucks were sold in 2024, reported NITI Aayog.
Trucks remain the largest diesel consumers. Moreover, truck sales grew 9.2% year-on-year in the second quarter of 2025, driven in part by India’s target of 75% farm mechanisation by 2047. This sales growth may outweigh the reduction in diesel demand due to EVs. Subsidies for electric tractors have seen some pilots, but demand is yet to take off.
Apart from diesel, petrol demand growth continued in the first half of 2025 at the same rate as in earlier years. Modest year-on-year growth of 1.3% in passenger vehicle sales could temper future increases in petrol demand, however. This is a sharp decline from 7.5% and 10% growth rates in sales in the same period in 2024 and 2023.
Furthermore, EVs are proving to be cheaper to run than petrol for two- and three-wheelers, which may reduce the sale of petrol vehicles in cities that show policy support for EV adoption.
As already noted, steel and cement were the only major sectors of India’s economy to see an increase in emissions growth in the first half of 2025.
While they were only responsible for around 12% of India’s total CO2 emissions from fossil fuels and cement in 2024, they have been growing quickly, averaging 6% a year for the past five years.
The growth in emissions accelerated in the first half of 2025, as cement output rose 10% and steel output 7%, far in excess of the growth in economic output overall.
Steel and cement growth accelerated further in July. A key demand driver is government infrastructure spending, which tripled from 2019 to 2024.
In the second quarter of 2025, the government’s capital expenditure increased 52% year-on-year. albeit from a low base during last year’s elections. This signals strong growth in infrastructure.
The government is targeting domestic steel manufacturing capacity of 300m tonnes (Mt) per year by 2030, from 200Mt currently, under the National Steel Policy 2017, supported by financial incentives for firms that meet production targets for high quality steel.
The government also imposed tariffs on steel imports in April and stricter quality standards for imports in June, in order to boost domestic production.
Government policies such as Pradhan Mantri Awas Yojna – a “housing for all” initiative under which 30m houses are to be built by FY30 – is further expected to lift demand for steel and cement.
The automotive sector in India is expected to grow at a fast pace, with sales expected to reach 7.5m units for passenger vehicle and commercial vehicle segments from 5.1m units in 2023, in addition to rapid growth in electric vehicles. This can be expected to be another key driver for growth of the steel sector, as 900 kg of steel is used per vehicle.
Without stringent energy efficiency measures and the adoption of cleaner fuel, the expected growth in steel and cement production could drive significant emissions growth from the sector.
Looking beyond this year, the analysis shows that CO2 from India’s power sector could peak before 2030, having previously been the main driver of emissions growth.
To date, India’s clean-energy additions have been lagging behind the growth in total electricity demand, meaning fossil-fuel demand and emissions from the sector have continued to rise.
However, this dynamic looks likely to change. In 2021, India set a target of having 500GW of non-fossil power generation capacity in place by 2030. Progress was slow at first, so meeting the target implies a substantial acceleration in clean-energy additions.
The country has been laying the groundwork for such an acceleration.
There was 234GW of renewable capacity in the pipeline as of April 2025, according to the Ministry of New and Renewable Energy. This includes 169GW already awarded contracts, of which 145GW is under construction, and an additional 65GW put out to tender. There is also 5.2GW of new nuclear capacity under construction.
If all of this is commissioned by 2030, then total non-fossil capacity would increase to 482GW, from 243GW at the end of June 2025, leaving a gap of just 18GW to be filled with new projects.
When the non-fossil capacity target was set in 2021, CREA assessed that the target would suffice to peak demand for coal in power generation before 2030. This assessment remains valid and is reinforced by the latest Central Electricity Authority (CEA) projection for the country’s “optimal power mix” in 2030, shown in the figure below.
In the CEA’s projection, the share of non-fossil power generation rises to 44% in the 2029-30 fiscal year, up from 25% in 2024-25. From 2025 to 2030, power demand growth, averaging 6% per year, is entirely covered from clean sources.
To accomplish this, the growth in non-fossil power generation would need to accelerate over time, meaning that towards the end of the decade, the growth in clean power supply would clearly outstrip demand growth overall – and so power generation from fossil fuels would fall.
While coal-power generation is expected to flatline, large amounts of new coal-power capacity is still being planned, because of the expected growth in peak electricity demand.
The post-Covid increase in electricity demand has given rise to a wave of new coal power plant proposals. Recent plans from the government target an increase in coal-power capacity by another 80-100GW by 2030-32, with 35GW already under construction as of July 2025.
The rationale for this is the increase in peak electricity loads, associated in particular with worsening heatwaves and growing use of air conditioning. The increase might yet prove unneeded.
Analysis by CREA shows that solar and wind are making an increasing contribution to meeting peak loads. This contribution will increase with the roll-out of solar power with integrated battery storage, the cost of which fell by 50-60% from 2023 to 2025.
The latest auction held in India saw solar power with battery storage bidding at prices, per unit of electricity generation, that were lower than the cost of new coal power.
This creates the opportunity to accelerate the decarbonisation of India’s power sector, by reducing the need for thermal power capacity.
The clean-energy buildout has made it possible for India to peak its power-sector emissions within the next few years, if contracted projects are built, clean-energy growth is maintained or accelerated beyond 2030 and demand growth remains within the government’s projections.
This would be a major turning point, as the power sector has been responsible for half of India’s recent emissions growth. In order to peak its emissions overall, however, India would still need to take further action to address CO2 from industry and transport.
With the end-of-September 2025 deadline nearing, India has yet to publish its international climate pledge (nationally determined contribution, NDC) for 2035 under the Paris Agreement, meaning its future emissions path, in the decades up to its 2070 net-zero goal, remains particularly uncertain.
The country is expected to easily surpass the headline climate target from its previous NDC, of cutting the emissions intensity of its economy to 45% below 2005 levels by 2030. As such, this goal is “unlikely to drive real world emission reductions”, according to Climate Action Tracker.
In July of this year, it met a 2030 target for 50% of installed power generating capacity to be from non-fossil sources, five years early.
This analysis is based on official monthly data for fuel consumption, industrial production and power generation from different ministries and government institutes.
Coal consumption in thermal power plants is taken from the monthly reports downloaded from the National Power Portal of the Ministry of Power. The data is compiled for the period January 2019 until June 2025. Power generation and capacity by technology and fuel on a monthly basis are sourced from the NITI data portal.
Coal use at steel and cement plants, as well as process emissions from cement production, are estimated using production indices from the Index of Eight Core Industries released monthly by the Office of Economic Adviser, assuming that changes in emissions follow production volumes.
These production indices were used to scale coal use by the sectors in 2022. To form a basis for using the indices, monthly coal consumption data for 2022 was constructed for the sectors using the annual total coal consumption reported in IEA World Energy Balances and monthly production data in a paper by Robbie Andrew, on monthly CO2 emission accounting for India.
Annual cement process emissions up to 2024 were also taken from Robbie Andrew’s work and scaled using the production indices. This approach better approximated changes in energy use and emissions reported in the IEA World Energy Balances, than did the amounts of coal reported to have been dispatched to the sectors, showing that production volumes are the dominant driver of short-term changes in emissions.
For other sectors, including aluminium, auto, chemical and petrochemical, paper and plywood, pharmaceutical, graphite electrode, sugar, textile, mining, traders and others, coal consumption is estimated based on data on despatch of domestic and imported coal to end users from statistical reports and monthly reports by the Ministry of Coal, as consumption data is not available.
The difference between consumption and dispatch is stock changes, which are estimated by assuming that the changes in coal inventories at end user facilities mirror those at coal mines, with end user inventories excluding power, steel and cement assumed to be 70% of those at coal mines, based on comparisons between our data and the IEA World Energy Balances.
Stock changes at mines are estimated as the difference between production at and despatch from coal mines, as reported by the Ministry of Coal.
In the case of the second quarter of the year 2025, data on domestic coal has been taken from the monthly reports by the Ministry of Coal. The regular data releases on coal imports have not taken place for the second quarter of 2025, for unknown reasons, so data was taken from commercial data providers Coal Hub and mjunction services ltd.
Product-wise petroleum product consumption data, as well as gas use by sector, was downloaded from the Petroleum Planning and Analysis Cell of the Ministry of Petroleum & Natural Gas.
As the fuel dispatch and consumption data is reported as physical volumes, calorific values are taken from IEA’s World Energy Balance and CO2 emission factors from 2006 IPCC Guidelines for National Greenhouse Gas Inventories.
Calorific values are assigned separately to different fuel types, including domestic and imported coal, anthracite and coke, as well as petrol, diesel and several other oil products.
Cleveland has big ambitions to reduce its planet-warming emissions. But a massive steelmaking facility run by Cleveland-Cliffs, one of Ohio’s major employers, could make it difficult for the city to see those plans through.
The plant emits roughly 4.2 million metric tons of greenhouse gases each year, complicating Cleveland’s effort to achieve net-zero emissions by 2050, according to a report released by advocacy group Industrious Labs this summer. The plant is the city’s largest single source of planet-warming pollution.
Cleveland’s climate action plan is “bold and achievable,” said Hilary Lewis, steel director for Industrious Labs. But “if they want to achieve those goals, they have to take action on this Cleveland Works facility.”
As a major investment decision looms over an aging blast furnace at the facility, it’s unclear whether the company will move to cut its direct greenhouse gas emissions — or opt to reinvest in its existing coal-dependent processes.
Cliffs’ progress in reducing its nationwide emissions earned it recognition as a 2023 Goal Achiever in the Department of Energy’s Better Climate Challenge. As this year began, the company was set to slash emissions even further through projects supported by Biden-era legislation — the Inflation Reduction Act and the 2021 infrastructure law.
Then the Trump administration commenced its monthslong campaign of reneging on funding commitments for clean energy projects, including ones meant to ramp up the production of “green” hydrogen made with renewable energy. In June, Cliffs’ CEO Lourenco Goncalves backed away from a federally funded project to convert its Middletown Works in southwestern Ohio to produce green steel, saying there wouldn’t be a sufficient supply of hydrogen for the plant.
To Lewis, coauthor of the Industrious Labs report, that’s a weak excuse, because hydrogen production by other companies would have ramped up to supply the facility. “[Cliffs was] going to need so much hydrogen that they would be creating the demand,” she said.
Meanwhile, Cliffs’ Cleveland Works continues to spew emissions that drive climate change and harm human health. Industrious Labs’ modeling estimates that pollution from Cleveland Works is responsible for up to 39 early deaths per year, more than 1,700 lost work days, and more than 9,000 asthma cases. Cleveland ranks as the country’s fifth-worst city for people with asthma, according to the Asthma and Allergy Foundation of America.
Cleveland Works’ Blast Furnace #6 is a hulking vessel that removes impurities from iron ore by combining it with limestone and coke, a form of coal that burns at very high temperatures. Industrious Labs’ report notes the unit’s lining is nearing the end of its useful life.
To Industrious Labs, this presents an opportunity: The company could replace the old infrastructure with equipment that can process iron ore with natural gas or hydrogen instead of coal. Investing in this technology, called direct reduction, would cut the plant’s greenhouse gas emissions by more than 30% if natural gas is used. Using green hydrogen would slash emissions even more, the Industrious Labs team found.
The alternative is to just reline the furnace, which was the course Cliffs chose for the Cleveland facility’s Blast Furnace #5 in 2022.
Relining might provide small emissions cuts when measured per ton of steel, due to increased efficiencies, Lewis said. But ramped-up production from running more ore through the furnace could offset those reductions or even increase total emissions.
Cliffs did not respond to Canary Media’s repeated requests for comment for this story, and it has not yet publicly announced its plans for Blast Furnace #6.
To put itself on track with Cleveland’s emissions goals, however, the company would need to do more than just convert Blast Furnace #6 to the direct reduction process, Industrious Labs said.
The next step in the road map the group laid out would be for Cliffs to process refined iron ore into steel with an electric arc furnace — which can run on carbon-free power — instead of using the current basic oxygen equipment. Investing in green-hydrogen-based direct reduction and an electric arc furnace, instead of relining Blast Furnace #6, would increase emissions cuts to 47%, according to the Industrious Labs report.
Later steps would use direct reduction of iron and an electric arc furnace to refine and process the ore that is currently handled by Blast Furnace #5. Completing that work would cut Cleveland Works’ greenhouse gas emissions by 96%, according to the report.
The Industrious Labs analysis appears to lay out a credible decarbonization pathway, although not necessarily the only one, said Jenita McGowan, Cuyahoga County’s deputy chief of sustainability and climate. Cuyahoga County, which includes Cleveland, also has a goal of net-zero greenhouse gas emissions by 2050 and is in the process of finalizing the latest version of its climate action plan.
“My question about the paper is how feasible it truly is that Cleveland-Cliffs will deploy it in the near future,” McGowan said. Policy uncertainties at the federal level further complicate matters, she added.
For now, the city and county seem to be taking a pragmatic approach, focusing on achievements to date and encouraging future cuts wherever companies will make them.
But getting to net-zero for the industrial sector “will require more fundamental changes … [which] will take place over decades, rather than over a few years,” Cleveland’s climate action plan says. It also notes that low-carbon steel costs 40% more to produce compared to standard methods, “making it difficult for steelmakers to justify the investment in clean production.”
Cuyahoga County’s draft climate plan highlights Cliffs’ energy-efficiency improvements, including Cleveland Works’ use of some iron from the firm’s direct reduction plant in Toledo, Ohio. Cleveland Works also leverages much of the waste heat from its industrial activities to make electricity. The facility recently boosted that combined-heat-and-power generation by about 50 megawatts, the plan notes. That replaces electricity the plant would otherwise need from the grid, a majority of which still comes from fossil fuels.
Faster emissions reductions are certainly better, McGowan said. But the county also wants to make sure companies can stay in business as they decarbonize — especially Cliffs, one of the largest sources of commerce at the city’s port.
In Lewis’ view, decarbonizing Cleveland Works earlier rather than later would be a smart business move for Cliffs. “I think the biggest thing is staying competitive,” Lewis said.
One of Cliffs’ largest markets is supplying high-quality steel for automobiles, including electric vehicles, she added. In March, Hyundai announced plans to invest $6 billion in a new plant in Ascension Parish, Louisiana, that will produce low-carbon steel. As automakers face global pressure to source cleaner metal, Cliffs could find itself left behind, Lewis suggested.
The Industrious Labs report “opens the door for Cleveland to be a leader in clean steel,” Lewis said. Before that can happen, though, “there’s a lot of work to do.”
Every day, people are invited to buy products and services with supposed climate benefits – whether this be “carbon-neutral flights”, “net-zero beef” or “carbon-negative coffee”.
Such claims rely on “carbon offsets”.
Put simply, carbon offsets involve an entity that emits greenhouse gases into the atmosphere paying for another entity to pollute less.
For example, an airline in a developed country that wants to claim it is reducing its emissions can pay for a patch of rainforest to be protected in the Amazon. This – in theory – “cancels out” some of the airline’s pollution.
It is not just businesses that are relying on carbon offsets. Major economies, too, are investing in carbon offsets as a way to meet their international emissions targets – with offsetting becoming a major talking point at UN climate negotiations.
For its supporters, offsetting is a mutually beneficial system that funnels billions of dollars into emissions-cutting projects in developing countries, such as renewable energy projects or clean cooking initiatives.
But offsetting has also faced intense scrutiny from researchers, the media and – increasingly – law courts, with businesses facing accusations of “greenwashing” over their carbon-offsetting claims.
There is mounting evidence that offset projects, from clean-cooking initiatives to forest protection schemes, have been overstating their ability to cut emissions. One yet-to-be published study suggests that just 12% of offsets being sold result in “real emissions reductions”.
Projects have also been linked to Indigenous people being forced from their land and other human rights abuses.
Decades of countries trading carbon offsets has had a negligible impact on emissions and likely even increased them.
In this in-depth Q&A, Carbon Brief explains what offsets are, how they are being used by businesses and nations, and why they can be a problematic climate solution. The article also explores whether a system, which one expert describes as “deeply broken”, could ever be effectively reformed.
Carbon offsetting allows individuals, businesses or governments to compensate for their emissions, by supporting projects that reduce emissions elsewhere.
In theory, after cutting their emissions as much as possible, offsets can pay for low-carbon technologies or forest restoration to “cancel out” emissions they cannot avoid.
This could also provide support for relatively low-cost climate action in developing countries and facilitate greater global ambition.
But, in practice, offsetting often enables these entities to justify “business as usual” – producing the same volume of emissions while making claims of reductions that rely on offsets.
Carbon offsets are tokens representing greenhouse gases “avoided”, “reduced” or “removed” that can be traded between an entity that continues to emit and an entity that reduces its own emissions or removes carbon dioxide (CO2) from the atmosphere.
While it allows the first group to continue to emit, theoretically, the second must reduce its emissions or sequester CO2 by an equivalent amount.
Offsets are usually calculated as a tonne of CO2-equivalent (tCO2e) and are also described as tradable “rights” or certificates.
The terms “carbon offsets” and “carbon credits” are often used interchangeably, but the key difference lies in the marketplace they are traded in and how they are mandated to deliver on emissions reductions.
There are broadly two types of carbon markets on which offsets can be traded. The first is the “compliance” market, which is regulated and involves emissions reductions that are mandated by law, supported by common standards and count towards national or sub-national targets.
Common examples include cap-and-trade emissions trading schemes, such as the EU Emissions Trading System (ETS), where power plants and factories must submit carbon “allowances” to cover their emissions each year, within an overall “cap” for regulated sectors.
Companies can buy and sell allowances from – and to – each other. In some cases they can also buy approved offsets from external emission-cutting projects to stay within their limits.
Such schemes cover around 18% of global emissions and, according to the Intergovernmental Panel on Climate Change (IPCC), they have contributed to emissions cuts in the EU, US and China.
Nevertheless, there is considerable evidence that many of the external offsets that have fed into these schemes have resulted in negligible emissions cuts. (See: How are countries using carbon offsets to meet their climate targets?)
The second type of carbon market is the largely unregulated voluntary carbon market, where offsets are used by corporations, individuals and organisations that are under no legal obligation to make emission cuts. Here, there is far less oversight and even less evidence of real-world emissions reductions.
(Most available credits are eligible for use on the voluntary market, but only a smaller subset can be used for compliance. Initially, UN and government-backed programmes were for compliance markets and NGO-backed programmes were for the voluntary market, but both types of programme now often cater to both markets.)
The table below shows a sample of offsetting registries and programmes on offer. These bodies “issue” offsets – meaning they confirm that a number of tonnes of CO2 has been cut, avoided or removed by a project.
These credits are then bought and “retired” when an entity wishes to count them towards its voluntary goal or binding emissions target. Once retired, they cannot be used again.
Offsets can broadly be sorted into two groups, which can be seen in the flow chart below, based on the work of the Oxford Offsetting Principles – an academic framework that seeks to define “best practice” for offsetting.
The first group covers “emissions reductions”. These offsets are used when an entity attempts to compensate for an increase in emissions in one area by decreasing emissions in another area. This group of offsets spans a few types, depending on whether emissions are avoided or reduced, with or without storage.
“Avoidance” or “avoided emissions” offsets are from projects that represent emissions reductions compared to a hypothetical alternative. One of the main types of avoidance offsets is renewable projects that are built instead of fossil-fuel plants. Another is “clean” cookstove schemes, where the distribution of more efficient cooking equipment is intended to cut reliance on traditional fuels, such as firewood, leading to lower emissions.
(Note that carbon offsets are a minefield of overlapping terminology and definitions. Here, “avoided emissions” offsets, as defined by the Oxford Offsetting Principles, are distinct from “emissions avoidance” credits, which have a distinct meaning within UN climate talks.)
Emission reduction offsets with short-lived storage of the relevant CO2 include credits from avoided deforestation projects, such as under the framework for reducing emissions from deforestation and forest degradation (REDD+). These are projects that aim to avoid emissions by protecting forests that would have otherwise been cleared or degraded.
(REDD+ was developed at the UN in the late 2000s as a way to help developing countries preserve their forests and is part of the Paris Agreement on climate change. Separately, projects labelled as REDD+ – which may not be aligned with UN rules – have emerged as a major part of the voluntary offset market, accounting for around a quarter of total volumes.)
Adding carbon capture and storage (CCS) technology to a fossil-fuel power plant, meanwhile, could generate emission reduction credits with a longer shelf-life.
“Removals” offsets are generated by projects that absorb CO2 from the atmosphere. Today, most removal offsets involve tree-planting projects, which do not guarantee permanent storage. (See: Could carbon-offset projects be put at risk by climate change?)
A new wave of more permanent removal offsets could be generated using machines that suck CO2 out of the air and techniques such as enhanced rock weathering. So far, these offsets are limited to the voluntary market and are still under review for inclusion in a new international “Article 6” carbon market by the UN.
Taxonomy of carbon offsets with five types of offset based on whether carbon is stored, and the nature of that storage. Diagram by Carbon Brief, based on the original by Eli Mitchell-Larson for the Oxford Offsetting Principle.
According to Carbon Brief analysis of data from the Berkeley Carbon Trading Project, just 3% of offsets on the four largest voluntary offset registries involve removing CO2 – all from tree-planting projects.
Many available offsets have been labelled “junk” or “hot air” because they result from carbon-market design flaws and do not represent real emissions reductions.
The ideas and experiments with carbon offsets and trading trace back at least half a century, as outlined in the timeline below.
Over the years, offset projects have been dogged by allegations of land conflicts, human rights abuses, hampering conservation and furthering coal use and pollution.
They have been decried as a “false solution” by activists. Negotiations over new carbon markets under Article 6 of the Paris Agreement have seen a sustained outcry for not delivering mitigation at scale, threatening Indigenous rights and “carbon colonialism”.
Meanwhile, companies claiming carbon neutrality using voluntary offsets have been increasingly called out and restrained from making “greenwashing” claims. (See: Why is there a risk of greenwashing with carbon offsets?)
The central problem of carbon offsetting is summarised by Robert Mendelsohn, a forest policy and economics professor at Yale School of the Environment. Reflecting on the achievements of carbon offsets, he tells Carbon Brief:
“They have not changed behaviour and so they have not led to any reduction of carbon in the atmosphere…They have achieved zero mitigation.”
Yet with carbon offsets now firmly established, there are still many who view them as an effective way to bolster corporate climate action, encourage governments to pledge more ambitious emissions cuts and channel climate finance where it is most needed.
“I think we can solve the problems that we currently have in the carbon-market space,” Bogolo Kenewendo, a member of the steering committee for the Africa Carbon Markets Initiative, tells Carbon Brief, emphasising the need for “high quality and high integrity credits”.
Since its formation in 1988, the UN’s climate science authority, the Intergovernmental Panel on Climate Change (IPCC), has published six sets of “assessment reports”. These documents summarise the latest scientific evidence about human-caused climate change and are considered the most authoritative reports on the subject.
Prof Joeri Rogelj – director of research at the Grantham Institute – Climate Change and the Environment and professor in climate science and policy at the Centre for Environmental Policy at Imperial College London – has been involved in writing several of these reports.
He tells Carbon Brief that the phrase “carbon offsets” is “not part of the jargon that the [scientific] literature uses”, so it is not widely used in IPCC reports either.
Most carbon-offset projects around today involve “emissions reductions”, whereby an entity can compensate for their pollution by paying for emissions to not happen somewhere else.
This is most commonly achieved by entities supporting, say, the creation of new renewable energy projects in the place of fossil-fuel schemes, for projects that supply clean cookstoves in the global south or for projects that protect ecosystems in order to avoid more deforestation. (More on this in: What are ‘carbon offsets’?)
While IPCC reports do not say much on carbon offsets, they do discuss the role that these kinds of techniques could play in helping the world meet its climate goals.
For example, the latest IPCC report on how to tackle climate change says that all scenarios for limiting global warming to either 1.5C or 2C involve “greatly reduced” fossil fuel use and a transition to low-carbon sources of energy, such as renewables.
It also says that changes to land-use, such as stopping deforestation, “can deliver large-scale greenhouse gas emissions reductions” – although it adds that this “cannot fully compensate for delayed action in other sectors”.
The report also notes that all scenarios for keeping global warming at 1.5C or 2C require “widespread” access to clean cooking.
A much smaller proportion of carbon offsets around today work by aiming to remove CO2 from the atmosphere to compensate for an entity’s emissions elsewhere.
This is commonly achieved by planting trees, which remove CO2 from the atmosphere as they grow, or by restoring damaged ecosystems, which are natural carbon stores.
Other, more technologically advanced types of CO2 removal are being tested and developed by a handful of companies around the world.
These include growing plants, burning them to generate energy and then capturing the resulting CO2 emissions before they reach the atmosphere – a technique called bioenergy with carbon capture and storage (BECCS).
Another proposed technique would be to use giant fans to suck CO2 straight from the atmosphere before burying it underground or under the sea – a technology called direct air capture and storage (DACCS).
However, neither one of these technologies exist at scale at present – and, therefore, do not yet play a large role in carbon offsetting.
Removing CO2 straight from air is a climate technology still undergoing development. Credit: DPA Picture Alliance / Alamy Stock Photo.
The latest IPCC report on how to tackle climate change concludes that CO2 removal techniques are now “unavoidable” if the world is to limit global warming to 1.5C or 2C.
And Carbon Brief analysis finds that CO2 removal is used to some extent in nearly all scenarios that limit warming to below 2C.
While there is clear scientific evidence that techniques to cut emissions and remove CO2 from the atmosphere will be needed to meet global climate goals, there is not yet a clear understanding of whether finance provided via carbon offsets could – or should – help with implementation.
The latest IPCC report on how to tackle climate change does not discuss in detail the extent to which carbon-offset finance provided by countries could help with implementation, report lead author Dr Annette Cowie, principal climate scientist at the University of New England in Australia, tells Carbon Brief.
One reason for this is that the report was written when countries were still debating the rules for how carbon markets should work under the Paris Agreement, Cowie says. (For more, see: How are countries using carbon offsets to meet their climate targets?)
In addition, the report did not have a “a big focus” on how businesses and organisations use carbon offsets in the voluntary carbon market because the IPCC tends not to focus on the “company level”, she says. (For more, see: How are businesses and organisations using carbon offsets?)
Nevertheless, the report does say that “we will need the private sector to contribute to funding the climate challenge” and refers to carbon markets as a “potentially effective mechanism to achieve this”, she adds.
Nearly every country in the world has set out plans under the Paris Agreement to cut its emissions. Most major economies also have net-zero targets.
Nations have also agreed on a succession of carbon-offset programmes, overseen by the UN. These systems could, in theory, help identify the cheapest emission cuts and enable those countries struggling with their climate goals to pay for reductions elsewhere.
This could help governments achieve their targets and encourage them to set more ambitious ones. It could also deliver money to developing countries, where much of the low-hanging fruit is located – but financial support is needed to take advantage of it.
Yet, despite being in operation for around two decades, so far these mechanisms have not driven a tangible reduction in countries’ emissions.
Instead, energy companies and factories in large, emerging economies have made money selling cheap, but often worthless, offsets to developed countries. As a result, these programmes have increased global emissions.
The earliest major offset schemes were established with the Kyoto Protocol – the first binding international agreement to cut emissions – in 1997.
By far the largest was the Clean Development Mechanism (CDM). This is a compliance mechanism that has allowed developed countries to meet their binding Kyoto emissions targets by buying credits largely generated by low-carbon energy projects in developing countries.
Souparna Lahiri, climate policy advisor with the Global Forest Coalition and a critic of carbon markets, tells Carbon Brief the CDM gave “leeway” to developed countries:
“[They said] let’s spend money where you can reduce [emissions] at a much cheaper cost. So we don’t spend much, but in return for investing…we get a credit that we can balance out with our own emissions.”
The CDM was also meant to channel much-needed climate finance to developing nations, which were not obliged to cut their own emissions under the Kyoto Protocol.
Carbon Brief analysis of UNFCCC data shows China, India, South Korea and Brazil account for 81% of the CDM credits that have been issued, with China alone issuing more than half, as the chart below shows. Barring Egypt and South Africa, African nations have issued just 1% of the credits on the market.
The CDM was agreed alongside another offsetting strategy, termed “Joint Implementation”,
The EU, New Zealand and Switzerland allowed their power plants and factories to purchase Kyoto credits to meet their emissions trading system (ETS) (As of 2020, CDM credits were no longer eligible for use under the EU ETS.)
According to one study, the Kyoto markets helped nine developed countries, including Japan, Spain and Switzerland, meet their initial targets.
Despite this apparent success, many have concluded that the CDM has, ultimately, hindered rather than helped global climate action.
This is because most of the low-carbon projects it supported would likely have happened without finance from developed countries, either because they were already profitable or required by law.
A 2016 EU-commissioned study concluded that 85% of CDM projects, particularly wind power and hydropower plants, were likely to have overestimated their emissions reductions and supported no “additional” low-carbon capacity in developing countries. According to the IPCC’s AR6 report:
“There are numerous findings that the CDM, especially at first, failed to lead to additional emissions cuts in host countries, meaning that the overall effect of CDM projects was to raise global emissions.”
One study found the CDM may have increased emissions by 6bn tonnes of CO2 (GtCO2).
Reports began to emerge in 2012 that the CDM market had “collapsed” amid a “carbon panic”. This was largely the result of a lack of demand from the EU ETS.
From 2012, the EU decided to limit the credits it would accept under the scheme – for example, excluding those generated by industrial gas cuts in factories. Such CDM projects had been accused of incentivising the additional production of greenhouse gases in order to claim credits for destroying them.
The EU also stopped accepting new credits unless they came from least developed countries. At the same time, other developed countries failed to set more ambitious Kyoto targets, meaning there was little demand from outside the EU.
(Despite pushing hard for the inclusion of carbon offsetting, the US ended up not participating in the Kyoto Protocol at all, removing a key potential market for credits.)
The credit price slumped from a record high of $27.50 per tonne of CO2 in 2008 to $0.55 per tonne in 2012. As the chart below shows, the number of new projects being registered to participate in the CDM fell dramatically and has never recovered (although projects continue to issue credits to this day).
With the Paris Agreement, countries agreed to establish new carbon markets that would ultimately replace the troubled Kyoto system. They are collectively known as Article 6 markets, referring to the section of the treaty laying out how countries could “pursue voluntary cooperation” to reach their climate targets.
The carbon-trading components include Article 6.2, which enables countries to directly trade credits dubbed Internationally Transferred Mitigation Outcomes (ITMOs) with each other, and Article 6.4, which creates a new, UN-backed carbon market to effectively replace the CDM.
Unlike the CDM, any country – developed or developing – can buy and sell credits using Article 6 mechanisms to meet their climate goals under the Paris Agreement.
Critically, the new carbon market established under Article 6.4 – but not Article 6.2 – includes a specific goal to “deliver an overall mitigation in global emissions”, achieved by automatically cancelling 2% of any credits that are traded in this system.
This should mean that offsetting under this system is no longer a zero-sum game. No one will be allowed to use those 2% of credits to claim an emissions reduction, ensuring a real-world drop rather than simply moving emissions cuts from one place to another.
Nations have also agreed to avoid “double-counting” Article 6 credits, meaning that if an offset is sold by one country to another, they cannot both count its emissions cuts towards their climate targets. (See: Why is there a ‘double-counting’ risk with carbon offsets?)
Negotiations over the technical details of these new markets have been lengthy and complex.
Some details are still being hashed out by an Article 6.4 supervisory body and the trade in credits under this system is not expected to start until 2024 at the earliest, once the final rules have been established.
Among the issues at stake in the body’s various meetings are methodologies for calculating how many credits are issued and whether to include carbon-removal projects.
Some initial agreements to exchange ITMOs under Article 6.2 have already been made between a handful of nations, including Switzerland with Peru and Ghana.
(See Carbon Brief’s in-depth explainer on the background and technical elements of Article 6 carbon markets, plus the overviews of COP25, COP26, COP27 and the most recent UN talks in Bonn, for details of how these markets have been negotiated.)
According to the International Emissions Trading Association (IETA), 156 countries have signalled their intention to use Article 6 markets either as buyers or sellers. It estimates that the markets could trigger billions of dollars in climate investment and reduce the total cost of implementing climate plans by $250bn a year by 2030.
(IETA represents the carbon-trading sector, including fossil-fuel companies, which have broadly supported market-based approaches in UN climate negotiations.)
Pedro Chaves Venzon, international policy advisor at IETA, tells Carbon Brief:“I expect rapid growth of engagement with Article 6 in the coming years…because not all countries have the potential to scale emission reductions and removals to achieve net-zero only through domestic action.”
Yet supply and demand for Article 6 credits is not guaranteed.
Unlike the Kyoto Protocol, the Paris Agreement requires every country to make an emissions-cutting pledge, not just developed countries.
The avoidance of double-counting could, therefore, make it difficult for countries to both sell large numbers of offsets and also meet their emissions goals. Scott Vaughan, senior fellow at the International Institute for Sustainable Development (IISD), tells Carbon Brief.
“It’s really important for sellers to beware, particularly for developing countries, because you don’t want to be in a position where you end up essentially selling your low-hanging fruit… [then having] very few options in terms of your own domestic [goals].”
Moreover, IETA’s assumptions about nations buying and selling credits are based on governments having more ambitious plans to cut emissions than they do today. If climate goals are not ramped up, there will be less pressure to buy emissions offsets from others.
Finally, civil society groups are concerned that Article 6 markets could repeat the same mistakes as the CDM.
Following years of argument, a relatively small number of CDM credits issued during 2013-2020 are eligible for use to meet nations’ 2030 climate pledges under the Paris Agreement.
(Australia had long proposed to use such credits to meet its Paris pledge. In 2020, following years of pressure, it climbed down and agreed to meet its pledge through domestic action.)
In addition, CDM projects will be allowed to continue issuing credits under the new system, if they meet the new Article 6.4 rules. This could lead to billions of what Carbon Market Watch calls “largely dud credits” entering the Paris regime, with one analysis estimating that up to 2.8bn carbon credits could be issued.
Businesses and other organisations are turning to carbon offsets in response to growing pressure to act on climate change, either to meet legal targets or their own, self-assigned emissions goals.
More than half of the world’s largest 100 companies by revenue have said they intend to purchase offsets, according to Carbon Brief analysis of Net Zero Tracker data. Only four have expressly ruled them out – Walmart, Brookfield Asset Management, Roche and Thai oil-and-gas company PTT Exploration & Production.
Among the biggest offset users are large oil-and-gas companies, airlines and car manufacturers.
In theory, “best practice” for businesses using offsets would involve them cutting their emissions as much as possible each year. Then, offsets could be purchased from elsewhere to cover any “residual” emissions that are too difficult or costly to reduce.
Yet there have been many accusations of “greenwashing” as firms buy cheap offsets of questionable quality, often from projects in developing countries, rather than doing their best to cut their own emissions. (See: Why is there a risk of greenwashing with carbon offsets?)
In places such as the EU, California and Quebec, high-emitting businesses, including factories and power plants, can purchase compliance offsets to meet their legal emissions-cutting obligations under regional emissions trading schemes. These schemes cover billions of tonnes of emissions – and some have linkedemissions cuts at participating facilities to the impact of the regulations.
The UN Carbon Offsetting and Reduction Scheme for International Aviation (Corsia) is a unique example where an entire sector will be obliged to purchase carbon credits to offset its emissions growth beyond 2027.
Beyond such legal requirements, businesses have faced growing societal demand for climate action, corporate social responsibility and the uptake of net-zero pledges.
An entire market has sprung up to serve this demand, known as the voluntary offset market. It is largely unregulated and frequently described as a “wild west” full of “junk” credits.
The voluntary market is underpinned by standards and registries such as the Verified Carbon Standard (VCS) – light blue in the chart below – which accounts for nearly two-thirds of the voluntary market and is administered by the NGO Verra.
The chart below, which shows the number of credits issued by different registries each year, demonstrates the growing dominance of these standards (shades of purple) compared to the UN’s Clean Development Mechanism (CDM – green).
Number of offset credits issued, millions, in the four largest voluntary offset registries, American Carbon Registry (ACR), Climate Action Reserve (CAR), Gold Standard and the Verra (VCS), as well as credits issued by those registries and used for compliance under the California Air Resources Board cap-and-trade programme (shades of purple). Credits issued under the UN-backed Clean Development Mechanism (CDM) are shown in green. Source: Berkeley Carbon Trading Project. Chart: Carbon Brief.
It demonstrates how demand has grown beyond companies and countries investing in CDM offsets solely to meet their obligations under emissions trading schemes and the Kyoto Protocol. (For more on the CDM, see: How are countries using carbon offsets to meet their climate targets?)
Unlike UN-backed credits, the organisations issuing these voluntary market offsets are NGOs and private entities. They have their own frameworks for verifying and issuing credits.
(The division between “voluntary” and “compliance” markets is complicated by the fact that businesses can also buy compliance offset market credits – for example, from the CDM – to make voluntary claims, if they wish. At the same time, compliance programmes such as Corsia or California and Quebec’s cap-and-trade scheme
allow participants to purchase an approved subset of voluntary offset credits to meet compliance targets. Credits issued for the latter scheme are indicated by the California Air Resources Board section of the chart above.)
On top of the standards, there is a supporting ecosystem of auditors who check that offset projects are working as they are supposed to, as well as exchanges and retailers who trade in offsets and act as middlemen in transfers. The infographic below outlines the steps involved in the production, certification and sale of offsets, along with problems that can occur along the way.
According to Carbon Brief analysis of data collected from the four largest voluntary offset project registries by the Berkeley Carbon Trading Project, three-quarters of the 1.8bn voluntary offsets issued are from projects in developing countries, as the map below shows.
As with the CDM, large, emerging economies, such as China and India, have generated a lot of these credits, with 16% and 12% of the total, respectively. As have countries with sizable forests, such as Peru and Indonesia.
Nearly all of the remaining credits are from the US, which is the largest issuer. However, roughly 90% of its credits come from primarily US-based registries, such as the American Carbon Registry, which are, in turn, largely purchased by US-based organisations – often to meet legal targets.
Number of offset credits issued on the four largest voluntary offset registries, American Carbon Registry (ACR), Climate Action Reserve (CAR), Gold Standard and Verra (VCS), by country. Source: Berkeley Carbon Trading Project. Map: Carbon Brief.
A report released by Shell and Boston Consulting Group found the voluntary offset market reached a record $2bn in 2021, four times larger than the previous year. It estimated the market would reach $10-40bn in value by 2030 – and many players in the sector have projected “exponential” growth for voluntary offsets in the coming years.
(This is still far smaller than the value of “carbon markets” more broadly. The trading of permits on the EU ETS and other regional emissions trading schemes was valued at $851bn in 2021.)
There is a disconnect between predictions of growth and the recent backlash against the voluntary offset market.
Prices of voluntary carbon offsets have plummeted over the past year. Investors have been hit by the economic downturn, but there are also broader concerns about the integrity of voluntary offsets. Dr Barbara Haya, director of the Berkeley Carbon Trading Project, tells Carbon Brief:
“The market is in a lot of flux right now and there are two factors pulling in opposite directions where you have all of these carbon-neutral and net-zero targets. So there’s growing interest from buyers to buy offsets, but then also a growing realisation that the market is deeply broken and almost all credits are over-credited.”
(For more on why most offsets are over-credited, see: Do carbon-offset projects overestimate their ability to reduce emissions? and Why is there a ‘double-counting’ risk with carbon offsets?)
Such issues have led to the Science Based Targets Initiative, an organisation that sets guidelines for corporate climate policy, stating unambiguously:
“The use of carbon credits must not be counted as emission reductions toward the progress of companies’ near-term or long-term science-based targets.”
At the same time, Haya adds that offsets can help to promote emissions reductions within businesses.
“Many companies would not have taken on carbon-neutrality goals if it weren’t for that option to buy cheap carbon credits,” she says. Analysis by carbon credit-rating company Sylvera found companies that were investing in offsets were simultaneously cutting their actual emissions at twice the rate of companies that were not.
Efforts to improve the market (see: Is there a way for carbon offsets to be improved?) are underway and Pedro Chaves Venzon, from industry group IETA, tells Carbon Brief that the voluntary market could also help develop methodologies and quality standards for use in international compliance markets:
“While they may not be perfect, they can play a key role in the planet’s journey to net-zero as they can help governments to build the infrastructure required for countries to develop compliance systems and engage with Article 6.”
In conclusion, Haya tells Carbon Brief: “I think it’s absolutely essential that we fix quality before growing the market, otherwise you have an even bigger market standing on a house of cards which is going to collapse when there’s scrutiny.”
One major criticism of carbon offsetting schemes is that they can often, for various reasons, overstate their ability to reduce emissions.
This can be intentional or unintentional. (For more on intentional efforts to overstate the benefits of carbon offsets, see: Why is there a risk of greenwashing with carbon offsets?)
Understanding the ways in which carbon-offset projects can overestimate their ability to cut emissions is important.
This is because, by design, carbon offsets do not lead to a net reduction in emissions entering the atmosphere – but rather aim to allow an entity to “cancel out” their pollution by paying for another entity to pollute less. If the entity paid to pollute less has overestimated its ability to do so, it will lead to a net increase in emissions, exacerbating climate change.
Most carbon-offset projects around today involve “emissions reductions”, whereby an entity can compensate for its pollution by paying for emissions to not happen somewhere else.
This is most commonly achieved by entities subsidising, say, the creation of new renewable energy projects in the place of fossil fuel schemes, supporting projects that supply clean cookstoves in the global south or projects that protect ecosystems in order to avoid more deforestation. (More on this in: What are ‘carbon offsets’?)
Each of these approaches come with risks, says Gilles Dufrasne, global carbon markets lead at the independent watchdog Carbon Market Watch. He tells Carbon Brief:
“For all three you have strong scientific evidence on how there is a massive risk of overestimation in terms of the impacts that these projects are having.”
A recent preprint – a study that has not yet completed the peer review process – estimated that just 12% of carbon-offset projects around today “constitute real emissions reductions”.
There are several ways in which overestimates of emissions reductions can occur.
The first comes from the way that projects measure their ability to reduce emissions, says Dufrasne:
“The big problem with these projects is setting the baseline. When you measure the impact of your project, what are you comparing it to? You’re comparing it to what would have happened in the absence of your project. That counterfactual is quite difficult.”
For example, a forest protection project will generate a certain number of carbon credits to sell on to polluters based on how much deforestation the project developers think they have stopped from happening.
Research shows that forest protection schemes often overestimate how much deforestation they have prevented – and, thus, the amount of emissions they have been able to offset.
One study examining 12 forest protection projects in the Brazilian Amazon found that they consistently overestimated how much deforestation they had prevented.
An investigation by the Guardian, the German weekly Die Zeit and SourceMaterial, a non-profit investigative journalism organisation, published earlier this year found that 90% of the rainforest protection schemes approved by Verra, the world’s largest carbon offsets standards agency, had grossly overestimated the amount of emissions they had saved. Verra strongly refuted the allegations.
An analysis by carbon credit ratings agency Calyx Global found that 70% of clean cookstove projects significantly overestimated their ability to reduce emissions.
And a separate investigation by the Guardian published in September found that the majority of carbon-offset projects that have sold the most carbon credits did not deliver on promised emissions reductions.
Another way that overestimates occur comes from assumptions about how long offset projects can keep carbon locked up. This concept is often called “permanency”.
During a transaction, buyers purchase credits – each representing one tonne of CO2 – with the assumption that an equivalent amount of carbon will be offset somewhere else.
However, this transaction does not consider whether the amount of CO2 offset will stay out of the atmosphere permanently.
This is particularly a problem for forest protection schemes, Dufrasne explains:
“The CO2 you’re emitting into the atmosphere when you burn fossil fuels is going to stay there for centuries to millennia, but the carbon stored in forests – we don’t know how long that is going to stay there. So, there is no equivalence between storing carbon in forests and avoiding the combustion of fossil fuels.”
The carbon stored inside forest protection schemes is at risk from myriad factors.
This includes political and economic changes, which may affect deforestation rates, as well as climate change, which is making tree-killing events, such as wildfires and droughts, more likely. (See: Could carbon-offset projects be put at risk by future climate change?)
This “permanency” risk is well illustrated when a fossil-fuel company pays for its emissions to be offset by a forest-protection scheme, says Dufrasne:
“You’re basically shifting the storage from a very stable carbon pool – fossil fuels trapped under the ground – to a very unstable pool, which is carbon in forests. In the short term, you could say it’s the same thing – it’s one tonne of carbon. But in the medium to long term, it’s not the same thing.”
The risk of overestimates worsens still through another concept known as “additionality”.
This term refers to a conundrum carbon-offset financers often face: how can they really be sure that the money they provided via carbon credits was the deciding factor in the project going ahead – and, thus, the resultant emissions reductions?
This is particularly an issue for renewable energy schemes. While these needed subsidies in the past, price reductions mean renewables such as solar and wind are now cheaper than fossil fuels in most countries – meaning there is already a good economic case for funding such projects without carbon credits, Dufrasne explains:
“For many renewable energy projects, it’s quite unlikely that revenues from carbon credits would make any difference to the economic viability of these projects. In other words, they would have happened anyway.”
The additionality risk associated with renewables is so great that many of the largest registries for voluntary carbon offsetting, such as Verra and Gold Standard, do not allow new renewable energy projects on their books.
(However, it remains undecided whether renewable energy projects will still be able to receive offsetting finance from countries under the Paris Agreement.)
A related concept to additionality is “attributability”.
This refers to the worry that, even if a project would not have gone ahead without carbon credits, how can financers be sure that the emissions reductions achieved are attributable to the project itself – and not some other factor related to politics, economics or the environment?
An example of this issue could occur with a forest protection scheme in the Brazilian Amazon, says Dufrasne.
In 2022, left-wing “zero deforestation” advocate Luiz Inácio Lula da Silva swept to power after a four-year term of Jair Bolsonaro, a far-right president who oversaw an acceleration in Amazon deforestation. Dufrasne explains:
“Let’s say we have a carbon-offset project that’s being implemented between Bolsanaro and Lula’s terms. The project might claim to have stopped deforestation and offset lots of carbon. But how much of that is actually down to the project rather than the change in political leadership?”
Another related issue is “leakage”. This refers to the worry that introducing a carbon-offset project in one region could lead to new emissions happening elsewhere. For example, if a forest protection scheme opens across one stretch of the Amazon, deforesters may simply respond by logging another area of the forest that is not under any protection.
A smaller proportion of carbon offsets around today work by aiming to remove CO2 from the atmosphere to compensate for an entity’s emissions elsewhere.
This is commonly achieved by planting trees, which remove CO2 from the atmosphere as they grow, or by restoring damaged ecosystems, which are natural carbon stores.
As with emissions reductions, offsets that remove CO2 from the atmosphere can often come with risks of overestimates occurring.
Prof Ian Bateman is an environmental economist at the University of Exeter and director of NetZeroPlus, a research project that is examining how the UK could remove emissions from the atmosphere through tree-planting and restoring ecosystems.
He tells Carbon Brief that tree-planting is fraught with intricacies and complications that – if not carefully considered and managed – can lead to overestimates of emissions reductions occurring and – in the worst cases – more carbon being added to the atmosphere:
“Very often, we don’t know what the net carbon consequences of what we’re doing actually is.”
An example of tree-planting gone wrong occurs when forests are planted over peatlands, he says.
Peatlands are waterlogged environments with extremely carbon-rich soils. Past tree-planting schemes have drained peatlands in order to plant forests – unintentionally causing vast quantities of carbon once trapped in soggy soils to be released into the atmosphere, Bateman explains:
“You get this problem of ‘global warming forests’. If you’re planting in the wrong area, you can emit more carbon than you store by a long way – I’m not talking a bit, I’m talking multiples of the amount of carbon that a tree can store.”
Does he worry that carbon-offset project developers may not have the capacity to take into account the many risks associated with tree-planting?
“Yeah, absolutely. Globally, we need tools – provided by scientists – that people can use to allow them to understand these risks.”
Another criticism of carbon offsets is they can be fraught with risks of “double-counting”.
“Double-counting” is when two entities use the same emissions reduction towards meeting their climate targets.
There are various ways that double-counting can happen.
One way that double-counting might occur, in theory, is when a country pays for a carbon-offset project in another country. The risk here would be that both countries count the same emissions reductions achieved by the project towards their own climate targets, giving an inflated picture of how both countries are doing on tackling emissions globally.
However, at the COP26 climate summit in Glasgow in 2021, countries agreed to new rules under the Paris Agreement to stop this kind of double-counting from occurring, says Gilles Dufrasne, global carbon markets lead at the independent watchdog Carbon Market Watch.
“If a country buys a carbon credit, then the country where the project is being implemented cannot count that project towards its international climate pledge. So, let’s say the US buys credits in the Brazilian Amazon, the US can use that towards its international climate target – but Brazil cannot.”
Another way that double-counting might occur is when a private company pays for a carbon-offset project in another country. The risk here would be that the country where the carbon-offset project is located counts the emissions cuts towards its climate target, while the company uses the same emissions reductions to make claims about reducing its carbon footprint or achieving net-zero.
Under the Paris Agreement, this kind of double-claiming is currently not completely prevented from happening, Dufrasne explains:
“So, you could have, [hypothetically], Microsoft buying carbon credits in the Brazilian Amazon. Brazil will use those emissions reductions for its international climate target and Microsoft will use it to say they are carbon neutral.
That is where we think there is a double-claiming risk with two entities counting the same emissions reduction.”
In other words, if the company pays for one tonne of carbon to be stored in the Brazilian Amazon – both the company and Brazil can individually claim that they have offset one tonne of carbon.
This is – in theory – not actually a problem for the Paris Agreement. That is because only countries have to report their emissions under the agreement. So, it would only be Brazil that would claim they have offset their emissions under the framework.
However, groups such as Carbon Market Watch argue that this sort of double-claiming is highly misleading for consumers. In addition, it can raise an “additionality” risk, says Dufrasne.
“Additionality” refers to a problem carbon-offset financers frequently face: how can they really be sure that the money they provided via carbon credits was the deciding factor in the project going ahead – and, thus, the resultant emissions reductions? (See more in: Do carbon-offset projects overestimate their ability to reduce emissions?)
Dufrasne explains: “If you have [a company such as] Microsoft counting the same reduction as Brazil, how can Microsoft be sure it’s not just paying for something Brazil was going to do anyway?
In other words, if the private sector provides enough cash through carbon credits to reduce Brazil’s emissions by a sizable amount, Brazil might no longer feel the need to introduce new policies to tackle its emissions itself. Dufrasne continues: “The private sector is sort of substituting what the government was planning to do anyway. It’s not a bad thing in itself to support developing countries, but it’s not the same thing as delivering additional tonnes of CO2 reductions.”
At the COP27 climate summit in Egypt in 2022, negotiators did come up with a new concept to try to reduce the risk of double-counting by companies and countries.
They agreed to establish a new type of carbon credit known as a “mitigation contribution”. This type of credit would allow countries hosting carbon-offsetting projects to count the emissions reductions achieved towards their climate targets, but not the companies responsible for funding the project. Instead, the company would “contribute” to the emissions cuts in the host country, making these credits effectively a form of climate finance.
Another – less talked-about – way that double-counting can occur is when carbon-offset projects overlap.
The risk of overlap is particularly high for forest-protection schemes and clean cookstove initiatives, says Dufrasne. (See: What are carbon offsets?)
Both schemes claim to reduce emissions by stopping deforestation. (Clean cookstove projects aim to reduce deforestation by providing people in the global south with fuel-efficient cookstoves, meaning they no longer have to cut down trees for firewood.)
If a cookstove project and a protected forest initiative are active in the same area, there could be a risk that both projects assume that the drop in deforestation they’ve measured is just down to them alone, Dufrasne explains:
“Currently, there aren’t specific rules to address that.”
An analysis by carbon credit ratings agency Calyx Global found that more than half of energy efficient cookstove projects are co-located in areas where projects claim emission reductions from protecting forests. It said it was not possible to determine the full extent of double-counting between the two types of offsetting projects.
Another possible way for double-counting to occur is through how carbon credits are traded in markets.
At present, carbon-offsets registries must mark when a carbon credit has been “retired” – namely, used by a buyer. (Find out more about how registries work: How are countries using carbon offsets to meet their climate targets?)
However, registries do not always provide information about who used the credit – potentially leaving a loophole for exploitation, says Dufrasne:
“There’s very little transparency about what happens to the credits once they are on the market. In theory, there could be unscrupulous brokers selling credits to multiple clients, saying: ‘I’ve retired the credit for you, you can see it in the registry.’
“I have no proof this ever happens, it’s just a possibility.”
Accusations of “greenwashing” against companies – and even governments – have climbed as the use of carbon offsetting has grown.
Offset purchases have led to firms making misleading claims about “carbon-neutral” airlines, fossil fuels and international sporting events.
Dr Barbara Haya, the director of the Berkeley Carbon Trading Project, tells Carbon Brief:
“We know that offsets are undermining direct action in some cases. We know that offsets are also making us believe the fiction that we can fly guilt-free, that we can buy carbon-neutral gasoline, and that’s never the case.”
According to Prof Gregory Trencher, an energy-policy expert at Kyoto University:
“The fundamental definition of greenwashing refers to a situation when the climate benefits that are claimed by a particular company don’t match the reality. And I think we see a very clear trend with certain companies, looking at their offsetting practices, if we look at the kind of benefits that are claimed by these particular projects.”
A 2023 study that Haya led found “shortcomings” among each of the three major voluntary offset market registries that generate credits by “improved forest management”. According to the authors, all three registries “risk over-crediting” for projects. The paper called for a “higher burden of evidence for quality” of offsets.
So-called “bogus” or “junk" credits are not a new problem. The US Federal Trade Commission (FTC), the country’s consumer-protection agency, was investigating “fraudulent carbon trading” as early as January 2008, National Public Radio reported at the time.
Many companies demonstrate a “clear preference” for purchasing avoidance credits over removal ones, since the avoidance credits are significantly cheaper than removal credits – even though the former are “a little bit misleading”, Trencher says. He tells Carbon Brief:
“If we put ourselves in the position of the consumer, or a stakeholder, we’re assuming that when a corporate activity is conducted [and] that amount of CO2 is released into the atmosphere, we’re assuming that that’s somehow physically removed and compensated for.”
Similarly, companies often purchase cheaper, “aged” offsets – offsets issued for projects that were established years or even decades ago – rather than the more expensive, newer ones.
But if credits are being issued for, say, a project that was built 15 years ago, “the effect of that project on lowering emissions in the world today is extremely questionable”, Trencher says. Offsets should have a “stronger temporal association between the polluting activity and the activity that’s used to mop up these emissions”, he adds. “This window is really, really stretched in many situations.”
Trencher co-authored a 2023 study that examined the net-zero strategies and offsetting behaviours of four major oil companies. It found that none of the companies had plans to transition away from fossil fuels, instead relying on offsets to reach net-zero emissions. The authors concluded:
“These findings challenge the appropriateness of claims about ‘carbon-neutral’ hydrocarbons, showing how net-zero strategies omit the urgent task of curbing the supply of fossil fuels to the global market.”
Pushing back against the notion that carbon offsets give companies a “licence to pollute”, a report from Sylvera, a carbon-credit-rating company, found that purchasing offsets was associated with actual emissions reductions.
Among 102 companies across a range of sectors, those who purchased credits reduced their direct emissions and those related to their energy consumption by a combined average of 6.2% per year over 2013-21, while those that did not reduced their emissions by an average of 3.4% per year. (See: How are businesses and organisations using carbon offsets?)
Nevertheless, increased scrutiny of companies’ net-zero pledges has developed into a trend of litigation against these companies for false or misleading advertising, often on the basis of their carbon offset use.
The years of 2021 and 2022 each saw more than 25 lawsuits filed over misleading “climate-washing” claims, according to the Grantham Institute’s 2023 “Global trends in climate change litigation” report.
And this number is likely an undercount, since the database used in the report does not capture motions filed in administrative or consumer-protection bodies, explains Catherine Higham, a policy fellow at the Grantham Research Institute on Climate Change and the Environment at the London School of Economics and Political Science. She tells Carbon Brief:
“These are representative of the fact that we have so many industries trying to make these claims about carbon neutrality, relying often on offsetting.”
Unlike lawsuits that have been brought on the basis of human rights or for climate-related damages, claims brought on the basis of greenwashing have typically been resolved relatively quickly – and often in favour of the plaintiffs, Higham says. She tells Carbon Brief:
“We have seen a significant number of successes where courts have said that whatever the advertising campaign is, it is misleading and isn’t particularly well-substantiated.”
Additionally, such lawsuits are being filed against a “really diverse set of players”, Higham says – not just traditionally high-emitting industries such as fossil-fuel companies, automobile manufacturers and airlines, but also banana growers, cleaning product companies and both dairy and non-dairy milk producers.
In March 2022, UN secretary-general António Guterres established the High‑Level Expert Group on the Net-Zero Emissions Commitments of Non-State Entities. The group, whose membership comprised a range of experts, including researchers, policymakers and business executives, produced a report on their findings, called “Integrity Matters: Net Zero commitments by Businesses, Financial Institutions, Cities and Regions”.
In the report, the group lays out a range of recommendations for these “non-state actors” to establish effective net-zero plans, including that they “prioritise urgent and deep” emissions reductions, rather than relying primarily on offsets.
At the report’s launch in COP27 in Sharm el-Sheikh, Guterres told the room:
“We must have zero tolerance for net-zero greenwashing…Using bogus ‘net-zero’ pledges to cover up massive fossil fuel expansion is reprehensible. It is rank deception.
“The absence of standards, regulations and rigour in voluntary carbon market credits is deeply concerning. Shadow markets for carbon credits cannot undermine genuine emission reduction efforts, including in the short term. Targets must be reached through real emissions cuts.”
The report provides a strong foundation for plaintiffs to build their lawsuits upon going forward, Higham says, pointing out that it is “just one of quite a lot of efforts” among governments and other groups to establish standards and regulations for the use of offsetting.
Trencher notes that as scrutiny around the use of offsets has increased, messaging from companies has shifted, putting increased focus on the quality of offsets. He adds:
“This correlation between offsetting and greenwashing has been, I think, acknowledged now as a real risk for offsetting companies.”
Another major criticism of carbon-offset projects is that they often come with side effects for local communities, particularly Indigenous peoples.
In the past two years, several high-profile media investigations have alleged that carbon-offset projects selling credits to companies ranging from the oil firms Total and Shell through to Disney, Meta and Netflix have led to serious impacts for local communities, including forcing Indigenous peoples out of their homes or farmland.
There have also been detailed investigations into how carbon offsets issued to countries under the Clean Development Mechanism – the UN’s first attempt to allow carbon trading between nations – have had serious impacts for people and nature.
For example, the Guardian in 2015 reported that a planned dam in Guatemala, which issued carbon credits for developed countries to buy under the CDM, was linked to the killing of six Indigenous peoples, including two children.
REDD+ projects that issue carbon credits from forest protection activities have been particularly damaging for Indigenous peoples.
This is due to some offset projects not complying with Indigenous peoples’ and communities’ rights over their territories, leading to some being forcibly removed from their homes or farmland.
Levi Sucre, a Costa Rican Indigenous leader and coordinator of the Mesoamerican Alliance of Peoples and Forests – which stretches from Mexico through to Panama – explains to Carbon Brief the importance of territory for Indigenous peoples: “Those are ancestral lands. We have lived there for generations. It is important that countries respect the rights of Indigenous people. Otherwise, we would face an imminent dispossession of land, which means livelihoods, cultural uprooting and destruction of the people”.
In a report published by the Rights and Resources Initiative (RRI), Woodwell Climate Research Center and Rainforest Foundation US, it is estimated that the land “held and used” by Indigenous peoples, Afro-descendent peoples and local communities store at least 253bn tonnes of carbon, which is distributed in the regions shown in the map below.
The map shows the carbon stocks that lie in both legally recognized and unrecognized territories owned by Indigenous and local communities that make up the Global Alliance of Territorial Communities. Colours indicate the tonnes of carbon per hectare. The more yellow the regions is, the more carbon it stores. Map: Carbon Brief, adapted from Rights and Resources Initiative, Woodwell Climate Research Center and Rainforest Foundation US report.
Another recent report by the RRI concluded that more than 1375m hectares of the land claimed by Indigenous peoples, Afro-descendent peoples and local communities has not yet been legally recognised.
Without legal recognition of land rights and, eventually, “carbon rights” – defined as the rights to the benefits generated from emissions reduction – communities are at risk of missing out on benefits from offset projects, according to Alain Frechette, director of strategic analysis and global engagement at the RRI. He tells Carbon Brief:
“Carbon rights are tied to land rights. But some countries are nationalising carbon rights, meaning that the government or the public owns the carbon that is in the trees that [Indigenous peoples] own, then what right do they have to use that tree and benefit from it?”
The International Labour Organization Indigenous and Tribal Peoples Convention (number 169), signed in 1989, is a key document when considering Indigenous rights in the context of carbon offsetting schemes.
The landmark agreement contains two important rights for Indigenous peoples. These are the right to self-determination and the right to free and informed consent “prior to the approval of any project affecting their lands or territories and other resources”.
The UN Declaration on the Rights of Indigenous Peoples, adopted in 2007, recognises Indigenous people’s rights to their lands – either legalised or traditionally owned – territories and resources. It also says that states “shall consult and cooperate” to obtain Indigenous people’s free and informed consent.
“These rights already exist; there is no excuse for them to be violated”, stresses Julián Trujillo, a researcher at Gaia Amazonas, an NGO providing guidance in human rights to Indigenous communities of the northeast Colombian Amazon.
However, the reality differs in various African and Latin American countries, which have reported breaches of these rights.
In the northernmost, heavily forested region of the Republic of the Congo, a REDD+ emission reductions programme approved in 2021 by the World Bank led to an unequal benefit-sharing plan for communities. Locals will only obtain 15% of the benefits, according to the organisation REDD-Monitor.
In southern Colombia, poverty and violence drove the Nukak Indigenous community to negotiate selling carbon credits to a national company in 2019, under an “irregular and disadvantageous” contract for Indigenous peoples, Mongabay reported.
Although the project did not materialise, it was criticised by the Indigenous community by the lack of consultation to obtain their free, prior and informed consent, as well as the lack of state support to help people in the community understand the contract and defend their rights.
The lack of state support could lead to further conflicts in the communities due to the misunderstanding of the contracts, said Horacio Almanza, a researcher at the Mexico’s National Institute of Anthropology and History who has worked with communities in the Tarahumara Sierra in northern Mexico.
It is not a matter of creating new rights, but rather situating them in the carbon credits context, Trujillo notes.
Some carbon offset-related rights were established at the COP16 climate summit, held in Cancun in 2010, which delivered a set of environmental and social safeguards to be “promoted and supported” in REDD+ projects in developing countries. These include respect for the knowledge and rights of Indigenous peoples and local communities.
But the Cancun safeguards were agreed upon until COP21 in 2015, and only 26 countries have submitted their safeguard system to UN-REDD – the body that oversees REDD+ projects – according to a new report by the Rainforest Foundation UK.
These safeguards are included in carbon credit certifications, says Sucre. However, the Mesoamerican Alliance of Peoples and Forests calls for offset certification companies, such as ART TREE, to account for the UN Declaration on the Rights of Indigenous Peoples in their certifications as well. Sucre stresses:
“When we want to complain to the certifier that they did not take into account [certain rights], and we want to appeal to that instrument [the UN Declaration on the Rights of Indigenous Peoples], we cannot do it because it is not within their standards.”
Human rights and the rights of Indigenous peoples have also been a contentious topic in more recent UN talks around Article 6 carbon markets.
While these issues have been acknowledged, Carbon Market Watch says they were not “strongly enough” referenced in the outcomes and there was no “specific requirement to obtain free, prior and informed consent from Indigenous peoples and local communities”.
Once a carbon offset project is established, problems related to the administration of the resources and benefits can emerge within the local communities, notes Almanza.
For Silvia Gómez, director at Gaia Amazonas, Indigenous peoples and local communities should be the holders and owners of the carbon offset projects. Her organisation works to help such communities manage their revenue streams and fairly distribute the profits.
There are additional mechanisms that Indigenous peoples, local communities and non-profit organisations are trying to boost to ensure their rights in carbon markets.
Almanza considers that communities could put formal complaints before international courts “as it has been done recently and with good results”.
Finally, speaking on the condition of anonymity, an expert on human rights and Indigenous communities consulted by Carbon Brief says that in some Latin American communities, organised crime has already taken over illegal logging, but it could expand to carbon offset projects if institutions do not tackle the problem and end with impunity.
“The funds could go to those who are now controlling forest management processes”, he warned.
Forest protection is a common form of carbon-offset project.
Around 40% of the credits that have been issued on the voluntary market come from forest protection, management and, to a lesser extent, creation, according to Carbon Brief analysis of data from the Berkeley Carbon Trading Project.
But climate change leaves an uncertain future for how the carbon storage of trees will fare under rising temperatures and more extreme weather events.
Prof Ian Bateman describes the main climate-related risks as the “four horsemen” of the “tree apocalypse”: pests, disease, fire and wind.
Forest fires are already having a noticeable impact on offset projects.
Canada’s recent wildfires burned vegetation at an offset project. A forest offset programme funded by companies including Microsoft and BP was also impacted by US fires in 2021.
Dr Shane Coffield, a postdoctoral researcher in Earth system science at the University of Maryland, does not believe future climate risks are sufficiently considered in offset projects. He tells Carbon Brief:
“If the carbon is going to go back to the atmosphere in 50 years [due to extreme weather], that just means that we haven’t offset our emissions. We actually contributed to making the problem worse.”
Coffield was the lead author of a study assessing the climate impacts on ecosystem carbon storage in California – a state that has generated around one-tenth of the forestry-related voluntary offsets on the market, according to Berkeley data.
The study found that projected carbon storage declines were “particularly high in areas that already have offset projects”, highlighting that there is a “lot of uncertainty”, Coffield says. (See: Do carbon offsets overestimate their ability to reduce emissions?)
Extreme weather is often taken into account in offset projects through a “buffer pool” – carbon credits set aside to cover any future harm that might befall an offset project.
This insurance mechanism aims to guarantee that the purchased credits will still be valid, even if the project is damaged down the line by fire, drought or other issues.
A 2022 study found that wildfires have already used up almost one-fifth of the California forest carbon offsets programme’s 100-year buffer pool. This is equivalent to 95% of the contributions specifically intended to cover all fire risks.
This indicates that California’s insurance is “severely undercapitalised” and unlikely to be able to guarantee the programme’s “environmental integrity” for 100 years, the study said.
The lead study author, Grayson Badgley, a research scientist at climate solutions non-profit CarbonPlan, says buffer pools generally seem to be “far too small”. He tells Carbon Brief:
“If we don’t get the buffer pool right, we have the chance of actually having the programme make climate change worse [and] justifying emissions. So we have to have the numbers absolutely precise.
“We expect drought to get worse in the future. We expect wildfires to get worse in the future. We’re already seeing both of those things happen and I don’t know of a programme that actually takes those sort of shifting baselines into account.”
Offset programmes update their risk assessments as more evidence emerges, but Badgley says not all factor in specific and sufficient risks, both now or in the future.
The map below shows how a fire burned through some of a forest offset project in Oregon during an intense fire season in the western US in 2020.
The total area burned by the Riverside, Beachie Creek and Lionshead fires (red) between 5 August-17 September 2020, laid over the Warm Springs forest offset project (yellow), known as ACR260 in the offsets registry. Analysis showed that around 72% of the project area was burned by the Lionshead Fire. Map: Carbon Brief, adapted from CarbonPlan.
Further effects of climate change also impact forests and other ecosystems. Rising temperatures and drought may lead to widespread regional tree mortality, according to the IPCC.
Coffield notes that temperature “has a huge influence on drying out vegetation” which can lead to plant stress. He adds:
“The temperature’s going up, the rainfall in some places might go up or down, but certainly not enough to compensate for that increased water demand associated with the temperature and the wildfire risk.”
This rising water stress could affect the rate that plants and trees grow via photosynthesis, reducing their ability to remove CO2 from the atmosphere, research suggests.
Currently, forest protection project developers are not required to consider how plants may absorb less CO2 in future when making estimates about how much carbon their projects could offset over time.
Tipping points, where climate change could push parts of the Earth’s system into abrupt or irreversible changes, could also have an impact on land carbon storage.
Another threat is tree pests and diseases, which are spreading more rapidly to different parts of the world due to trade and climate change.
Badgley notes that these uncertainties around future climate-related impacts on trees means offset calculations may become “more mixed up” in future. He adds:
“We’re potentially banking on these forests to do more help in fighting climate change than they’re capable of.”
Carbon-offset providers are facing intense pressure to reform as buyers show less willingness to invest, amid mounting public, media and legal scrutiny of their climate benefits.
Numerous efforts have been launched to improve carbon markets in recent years.
Negotiations around Article 6 carbon markets under the Paris Agreement have given countries an opportunity to build a new UN system that improves on the flawed Kyoto Protocol markets, such as the Clean Development Mechanism (CDM).
Along the way, many civil society groups and countries have championed “high-integrity carbon markets” – for example, with the San Jose Principles.
Ultimately, while observers have welcomed some improvements in the Article 6 system, there remain outstanding issues that could – if left unresolved – compromise their ability to drive meaningful emissions cuts and avoid harming communities. (See: How are countries using carbon offsets to meet their climate targets?)
Article 6 rules are still being developed, including the methodologies and baselines for issuing credits. Ultimately, this will govern what type of credits are allowed under Article 6.
Scott Vaughan from the IISD, tells Carbon Brief: “There’s still stuff that they’re negotiating. There’s always going to be tweaking to some parts of the rules, because it’s complicated. I think they did the right thing though, saying, look, here’s the framework and here are the standards. But here’s a bunch of things that we need to finalise.”
Meanwhile, as it expands rapidly, the voluntary offset market has seen a slew of efforts to improve what remains a largely unregulated system. Among them have been the Integrity Council for the Voluntary Carbon Market (ICVCM), the Voluntary Carbon Markets Integrity Initiative (VCMI) and the Science Based Targets initiative (SBTi).
The Oxford Principles for Net Zero Aligned Carbon Offsetting, which were unveiled in 2020, set out four core principles for the sector:
As the Oxford principles state, the market for such high-quality offsets is currently “immature and in need of early-adopters”.
As the chart below shows, just 3% of credits on the four main registries in the voluntary market, as captured by the Berkeley Carbon Trading Project database, have been issued for carbon removal – coloured red in the figure below – all of them for tree-planting projects. None of the major registries have issued credits for long-term storage, such as in geological reservoirs.
Number of offset credits issued, millions, in the four largest voluntary offset registries, American Carbon Registry (ACR), Climate Action Reserve (CAR), Gold Standard and the Verra (VCS). Blue indicated projects that involve emissions reduction or avoidance, red indicated projects that involve emissions removal and yellow indicates projects that involve a mix of the two. Source: Berkeley Carbon Trading Project. Chart: Carbon Brief.
There has been growing recognition from the sector that some of the offsets on sale are lower quality than others.
In the voluntary offset market, efforts to avoid lower quality credits include the two largest offset certifiers, Verra and Gold Standard, both stopping issuing credits from grid-connected renewable projects except in least-developed or lower-income nations in 2019.
This reflects the reality that renewable projects in relatively wealthy nations are now economically attractive investments without offset money and, therefore, provide no additionality. This means offset purchasers should not be claiming responsibility for the emissions reductions provided by the projects.
Yet there are still many credits available on the market that could undermine the climate action promised by the principle of carbon offsetting.
For example, credits issued by projects started under the Kyoto Protocol before 2020 remain available, despite question marks over how “additional” the associated emissions cuts are.
These credits will be labelled, meaning buyers can clearly differentiate them.
This is highlighted in research from Trove Research and University College London (UCL), which proposes that companies buying offsets can help limit the use of older, poor quality credits.
Above all, credits created under the CDM must be prevented from “polluting” today’s voluntary offset market, Guy Turner, lead author of the study said at the time of publication.
Speaking to Carbon Brief, Turner expands: “I personally would like to see less of them used. Because I think we need to invest new money in new projects, rather than meet our current demand for that stuff that was already there.”
(For more on criticism of CDM credits and details of how they may be used under the new Article 6 carbon market, see: How are countries using carbon offsets to meet their climate targets?)
UCL and Trove’s research also fed into the establishment of the Taskforce on Scaling Voluntary Carbon Markets (TSVCM), which was set up by Mark Carney, the former governor of the Bank of England.
ICVCM – the governance body launched by the TSVCM – unveiled its Core Carbon Principles (CCPs) in July 2023, described as 10 fundamental principles for “high-quality carbon credits that create real, verifiable climate impact, based on the latest science and best practice”.
These are separated into three key pillars: governance, emissions impact and sustainable development.
In addition to the CCPs, the ICVCM has released a framework for accrediting projects, allowing multi-stakeholder working groups to begin assessing projects and providing a CCP label. This allows those interested in supporting carbon-crediting programmes to clearly see which have been judged against the principles – and verified to meet them.
As such, while the ICVCM’s framework does not represent regulation, the group hopes the CCP label will represent quality. The aim is this will grant a premium to the projects and programmes which gain it, ensuring there is value in adhering to the principles and making it likely they will trade at a premium price determined by the market.
Daniel Ortega-Pacheco, co-chair of the ICVCM and director of Biocarbon, tells Carbon Brief:
“Build integrity and scale will follow. The largest measure of our impact will be now that integrity can be consistently delivered across carbon credit brands, because you have common rules, common understanding and we will do our best to assess that. Now it’s time for investors to really mobilise that finance.”
A number of key questions remain around the development of the voluntary carbon-offsets market. These include how technologies such as digital monitoring, reporting and verification should be incorporated, issues about permanence, and the relationship between the voluntary carbon market and Article 6.
But having the initial framework in place gives the ICVCM something to build on, says Nat Keohane, board member of the ICVCM and president of C2ES.
Welcoming the principles framework, Dr Francisco Souza, managing director of the FSC Indigenous Foundation and an ICVCM board member, said in a statement that the CCPs will encourage the development of “high integrity” projects that provide finance for Indigenous peoples, “while also respecting our rights, traditions, cultures and knowledge”.
Projects with Indigenous peoples as stakeholders are already emerging, such as the development of a 30-year forestry protection project in San Jerónimo Zacapexco, Mexico.
Some experts, including those behind the Science Based Targets initiative, have simply stated that offsets in their current form should not be used to make net-zero claims. This sentiment is echoed by Robert Mendelsohn, a forest policy and economics professor at Yale School of the Environment. Speaking to Carbon Brief, he says:
“If we are ever going to have effective voluntary carbon reductions, we must first discredit the existing market. But this will make it much harder for an effective market to start. They will have to regain the public’s trust.
“I believe that an effective market can be created but we must first get rid of these project-based credits and move to a system that looks a lot more like regulation where firms have limited emissions.”
One alternative approach that is being discussed would be to enable companies to channel finance to climate-related projects, without allowing them to claim the outcomes as “offsetting” their own emissions.
“Mitigation contribution” credits issued under the Paris Agreement could potentially already provide a vehicle for this. (See: Why are there ‘double-counting’ risks with carbon offsets?)
Kaya Axelsson, a net-zero policy fellow at the University of Oxford who works on the Oxford principles, explains this to Carbon Brief:
“Why not just say, we have invested in this credit because it’s contributing to emissions reductions in this area…instead of making false claims.”
Time will tell if there will be a new era of carbon-offsets projects, one backed by stronger frameworks, greater transparency and a drive for additionality, which can have a genuine, significant impact on helping countries and companies reach net-zero.
President Donald Trump has been derailing U.S. efforts to cut planet-warming emissions since he moved back into the White House. Now we have a more precise accounting of the expected damage.
The U.S. is currently on track to reduce greenhouse gas emissions just 26-35% below 2005 levels over the next decade, according to new estimates from research firm Rhodium Group.
That’s much less of a reduction than was forecast under the Biden administration. A July 2024 report from Rhodium found that the U.S. had at that point been on track to cut emissions 38-56% by 2035. In other words, the worst-case scenario under Biden last year was still better than the best-case scenario following Trump’s destruction of the country’s decarbonization strategy.
As it stands, the U.S. will miss its 2030 Paris Agreement commitment by a mile — a fact unlikely to trouble Trump, who abandoned the agreement on his first day back in office.
The new Rhodium findings illustrate how swiftly Trump and the GOP have undone the hard-fought energy-transition progress made by the Biden administration.
Three years ago, then-president Joe Biden signed the landmark Inflation Reduction Act into effect, creating generous tax incentives for renewables, home-energy upgrades, and electric vehicles, as well as a host of grant and loan programs aimed at accelerating industries away from fossil fuel use.
But the Trump administration and the GOP-controlled Congress have essentially repealed the law, as well as a host of other environmental protections, like limits on vehicle emissions, that would have helped not only rein in greenhouse gases but also reduce harmful air pollution.
It’s grim news. But inherent in this rapid reversal of progress is, if you squint, a kernel of hope: Trump has proven that things can change very fast. Under a new administration, a rapid change of trajectory could happen again.
Nippon Steel, the parent company of U.S. Steel, is moving forward with its plans to renovate a giant coal-fueled furnace in Gary, Indiana.
The Japan-based steel manufacturer, which acquired U.S. Steel in June, will begin “relining” its largest blast furnace at the Gary Works steel mill in 2026, U.S. Steel CEO David Burritt said this week at an industry conference in Atlanta, details first reported by the Japanese newspaper Nikkei.
Such an investment can extend a furnace’s operating life by up to 20 years — prolonging the company’s reliance on coal-based steelmaking, and potentially delaying America’s broader transition to low-carbon manufacturing methods.
Nippon Steel has committed to spending around $300 million to revamp Blast Furnace No. 14, the largest of four blast furnaces still operating at the sprawling Gary Works complex on Lake Michigan. The Japanese steelmaker said it will spend a total of $3.1 billion across Gary Works as part of a $11 billion capital investment in U.S. Steel’s footprints through 2028.
“Gary Works supports a large number of jobs and demand in the Midwest, and we are moving forward with numerous investment plans to support the industry,” Burritt said at the conference, adding that U.S. Steel and Nippon Steel expect to announce more specific details about their plans soon. (A spokesperson for U.S. Steel confirmed Burritt’s remarks in an email.)
Blast furnaces make the iron that’s turned into high-strength steel, an essential material found in everything from cars, boats, and planes to buildings, bridges, and roads.
The scorching-hot furnaces combine iron ore with purified coal, or “coke,” and limestone to produce liquid iron, which is then moved into a separate furnace to become steel. Only seven of these integrated iron and steel facilities are currently operating in the United States, accounting for about a quarter of total U.S. steel production. But the steel mills are responsible for around 75% of the industry’s greenhouse gas emissions. They’re also among the biggest sources of toxic air pollution in the communities where they operate.
A recent report by the Environmental Integrity Project found the Gary Works complex is a major source of health-harming pollutants like chromium, which can cause breathing problems and increase the risk of lung cancer.
America’s blast furnaces — among the oldest in the world — use specialized bricks that degrade over time. When that happens, companies can decide to undertake a costly and lengthy maintenance process to replace the bricks and prop up aging plants. Or they can put that money toward building cleaner facilities that make use of “direct reduced iron” technology that doesn’t require coal.
Climate advocates and community groups in Gary, Indiana, are urging Nippon Steel to take the second route.
“Today, the company is at a crossroads,” Toko Tomita, campaigns director at the advocacy group SteelWatch, said in a statement. “If this relining decision goes ahead, it would be a slap in the face for communities, and a coffin-nail for Nippon Steel’s reputation on climate.”
Tomita said that relining the Gary Works furnace is “an extremely short-sighted move” that will leave Nippon Steel with outdated facilities at a time when automakers and other major steel buyers are increasingly signaling their demand for products made using lower-emission methods.
At the moment, however, America’s steelmakers seem committed to keeping their coal-based mills up and running.
Along with its four Gary Works blast furnaces, U.S. Steel operates two blast furnaces at its Edgar Thomson plant in the Mon Valley Works in southwestern Pennsylvania — the same complex that suffered a deadly explosion on Aug. 11 at a coke-producing plant. Nippon Steel has announced plans to schedule all six blast furnaces for relining or major repairs by 2030 in order to “extend their useful lives for many years to come.”
Cleveland-Cliffs, the only other U.S. steelmaker that uses coal-fueled facilities, operates blast furnaces across its steel mills in Indiana, Ohio, and Michigan. The Ohio-based firm has said it plans to reline a furnace at its Burns Harbor steel plant in Indiana in 2027.
On an earnings call last month, Cleveland-Cliffs CEO Lourenco Goncalves confirmed that, in addition to the relining, the company is no longer pursuing a federally supported project to build a new green steel facility in Middletown, Ohio. Cleveland-Cliffs is instead working with the Trump administration to “preserve and enhance” its Middletown steel mill using fossil fuels.
The Department of Energy has once again delayed the retirement of an oil- and gas-fired power plant, adding to concerns that the Trump administration aims to prevent any fossil-fueled power plant from closing during its term.
Today, the Trump administration reissued an emergency order forcing the Eddystone power plant outside of Philadelphia to stay open another 90 days. The plant’s two main units, totaling 760 megawatts, were originally set to shutter on May 31, but one day before their scheduled retirement, the DOE issued an emergency stay-open order, which expired today.
Eddystone is not the only fossil-fueled power plant being forced to stay open past its closing date. Last week, the Trump administration extended its emergency stay-open order for the J.H. Campbell coal plant in Michigan, which was also slated to close in May.
Before this year, the DOE had wielded its emergency powers sparingly, issuing orders mostly in response to utilities or grid operators who requested federal restrictions be lifted during times of extreme strain on the grid. It has never before used Section 202(c) of the Federal Power Act to intervene in a power plant retirement, according to Caroline Reiser, senior attorney for climate and energy at the Natural Resources Defense Council.
But under President Donald Trump, the agency is invoking those powers to extend the life of fossil-fueled units that grid planners had already deemed unnecessary, raising costs for consumers and stalling the transition to carbon-free energy.
In today’s order, the DOE once again pointed to an “emergency” in portions of the electricity grid operated by PJM Interconnection, which serves Washington, D.C., and 13 states from Illinois to Virginia. The agency cited recent reports from PJM that found, among other things, that the grid operator could struggle to keep up with demand this summer during heat waves.
The DOE said in the new order that the emergency conditions that led to the first directive are still in place, as summer isn’t over. The Eddystone station’s units 3 and 4 generated over 17,000 megawatt-hours during June, per U.S. Environmental Protection Agency data cited by DOE. They also ran for a combined total of 47 hours during a three-day spell of hot weather in late July.
The order also cites a widely criticized report that the DOE released in July, which energy experts say vastly overstates the risk of grid outages. The citation further confirms fears that the Trump administration will use the methodologically flawed report to continue to justify keeping aging, expensive fossil-fueled power plants online.
PJM has supported both stay-open orders, calling each one a “prudent, term-limited step” that would allow the DOE, PJM, and Eddystone’s owner, Constellation Energy, to analyze the longer-term need for these generators.
“PJM has previously documented its concerns over the growing risk of a supply and demand imbalance driven by the confluence of generator retirements and demand growth,” a spokesperson said in an emailed statement about the new order. “Such an imbalance could have serious ramifications for reliability and affordability for consumers.”
Regulators, energy experts, and advocates have questioned the DOE’s justification for keeping the Eddystone and the J.H. Campbell plants open. They point to the fact that the power plants’ owners, state officials, regional grid operators — including PJM itself — and other experts spent years evaluating the impact of closing these facilities and decided it was safe to shut them down.
For its part, the Eddystone plant has operated infrequently in recent years because the facility was not economical. Constellation filed a deactivation notice with PJM in December 2023, which was approved by the grid operator months later following a study that “did not identify any reliability violations” from the shutdown.
In June, state utility regulators and environmental groups filed rehearing requests with the DOE in an attempt to force the agency to reconsider its emergency orders. The agency denied those requests, clearing the way for critics, like the state of Michigan, to take the agency to court.
Advocates fear that these directives, taken together with recent executive orders and other DOE moves, signal the Trump administration’s commitment to keeping every fossil-fuel plant running, no matter the consequences.
In total, just over 38 gigawatts’ worth of power plants are slated to close between now and the end of 2028, more than two-thirds of which is coal.
Blocking all planned closures of fossil-fueled power plants would be disastrous for efforts to decarbonize the U.S. power grid — and also for consumers, who are already navigating fast-rising power bills. It could cost utility customers billions of dollars each year to prop up this unnecessary infrastructure, according to an August report from research firm Grid Strategies.
The administration’s statements have done little to quell advocates’ fears. In fact, a Tuesday post on X from the DOE was crystal clear.
“Coal plants will STAY IN OPERATION,” it read.
It sure looks like the Trump administration is not going to let any coal plants close down during its term — no matter the cost to consumers and to the climate.
About 27 gigawatts’ worth of coal is slated to retire in the U.S. between now and the end of 2028, per U.S. Energy Information Administration data, equal to roughly 15% of the country’s current coal fleet.
Coal plant retirements have been the engine of U.S. progress in cutting emissions. As natural gas became more abundant and renewables plummeted in cost, more than 140 gigawatts’ worth of coal plants have retired since 2011, when the dirty energy source peaked at nearly 318 GW of generation capacity. Carbon emissions from the power sector have fallen steadily over that same period.
Now, the U.S. gets more power from wind and solar alone than it does from coal, an extremely carbon-intensive form of energy that provided around half of the country’s electricity at the start of the millennium.
But President Donald Trump is trying to put a stop to coal’s demise. On his first day in office, Trump declared a national energy emergency that experts have called baseless and which is now being challenged by 15 states in court. The “emergency” is also belied by Trump’s efforts to obstruct clean energy, which for years has accounted for over 90% of new electricity added to the grid.
Trump has since built on that edict by availing himself of emergency powers to force fossil-fuel plants to stay online past their scheduled retirement.
In May, the Trump administration issued 90-day stay-open orders for two facilities set to close days later: the J.H. Campbell coal plant in Michigan and the Eddystone oil- and gas-burning plant in Pennsylvania. Trump just reupped those mandates for another 90 days. Families and businesses will pay the price: The first three months of continuing to operate J.H. Campbell alone could cost consumers as much as $100 million, estimated Michigan’s Public Service Commission chair.
And in July, the Department of Energy released a specious report that overstates the risk of grid blackouts. States are attempting to make the agency fix the report, which they expect will be used to justify additional emergency stay-open orders for other coal plants. Blocking all planned closures of fossil-fuel power plants could result in billions of dollars in additional yearly energy costs for consumers by the end of Trump’s term.
The administration’s desire to revive America’s dirtiest form of power will only exacerbate the nation’s brewing utility bill crisis. The price of electricity has been rising for several years, and despite promises of slashing energy costs, Trump’s pro-coal, anti-renewables agenda is making things even worse.
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