As hemp growers and processors begin exploring the potential business in carbon credits, they should tread carefully.
With a growing number of companies crowding into the potential $100 billion market for such credits, the carbon accounting industry is already under fire over such things as double counting in which the same credits are sold to more than one company, and out-and-out fraud in which credits have been falsely certified or emissions reductions have been overstated.
Just like in the early explosion of the CBD sector, scammers are everywhere. Most recently — and most notably – an investigation into Washington D.C.-based Verra, the world’s leading carbon standard, revealed in January that more than 90% of offset credits counted by the company are likely to be “phantom credits” that do not represent genuine carbon reductions.
Big boys duped
The joint investigation, by the UK’s Guardian, the German weekly Die Zeit and SourceMaterial, a non-profit investigative journalism organization, noted that such companies as Disney, Shell and Gucci were duped into purchasing such bogus carbon credits. Verra CEO David Antonioli, who founded the company, has resigned as a result of the scandal.
Other notable scams in the U.S have involved companies selling carbon offsets that were not actually reducing emissions, using fraudulent data to generate carbon credits, and generally overstating the environmental benefits of their programs. Cases have involved sanctions and fines from state agencies and from the U.S. Securities and Exchange Commission and the Department of Justice.
In the UK, the Advertising Standards Authority (ASA) has sanctioned at least three carbon accounting companies over the past three years for overstating the amount of carbon dioxide their projects were offsetting and misleading claims about the environmental benefits of their services, leveling fines in two cases.
The misleading claims often work hand-in-hand downstream with “greenwashing,” an unsavory form of marketing spin in which deceptive advertising messages overstate the friendliness of a producer’s environmental policies. Such major corporate players as Nestle, Coca-Cola and Hilton have been hit with fines for “greenwashing.”
‘Think long term
“It is essential to think in the long run and follow only high-integrity carbon standards and methodologies to avoid the race-to-the-bottom logic we have recently seen in the market for offsets,” said Nando Knodel, Co-CEO of HempConnect, a Hamburg-based provider of carbon-accounting services that is also developing strategies that will let hemp stakeholders develop biochar operations.
How can hemp operators sidestep the pitfalls and be assured of the value of any carbon credits they generate?
The first critical factor is the manner in which carbon credits are certified. Hemp growers and producers should take all precautions to avoid carbon-accounting service providers that offer in-house certification schemes on which there are no external checks, and seek out specialists who verify the credits through third parties to make sure they are legitimate.
Ensuring quality & value
Third-party certification helps to ensure that the credits are high quality and reflect the actual reduction of CO2 emissions — making them worth the money being paid for them and giving buyers assurance that carbon accounted for is the result of a transparent evaluation.
Critical to the process are “negativity,” which holds that only carbon captured beyond the operation’s footprint is eligible for trading, and “additionality,” assessing whether the activity would have been done without the additional credit sales anyway.
Hemp operators should also:
- Make sure the accounting project has clear and measurable goals.
- Research any third-party certifying organization.
- Ask precisely how the project assures that credits are “negative” and “additional.”
- Carry out exhaustive research on any potential service providers under consideration, including the professional backgrounds of the company officers. Criminal background searches are not out of the question.
- Have the service provider explain how emission reduction works, clearly define their accounting systems, and justify the costs of their services.
- Avoid carbon accounting companies whose shares are traded over the counter, the first fertile ground for scammers.
“The hemp industry has a unique chance to obtain an important position in the emerging carbon removal market and benefit financially. But hemp still deals with unjust stigmas and the industry cannot afford a setback in its sustainability and climate branding,” Knodel said. “Hunting quick profits through carbon crediting programs that are full of conflict of interest, for example not including a guaranteed carbon sink, threatens that position and hence the opportunity to monetize the climate potential of hemp for all industry participants.”