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More energy giants accused of misleading public over ‘green investments’

Revealed: UK energy companies’ attempts to ‘offset’ fossil fuel use may do nothing for the climate

Lucas Amin
14 October 2022, 12.54pm
Some 'green investments' have been linked to Amazon deforestation
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Dylan Garcia Photography / Alamy Stock Photo

Fresh evidence uncovered by openDemocracy reveals that ‘green’ investments by British energy giants are likely to have done nothing for climate change.

British Gas owner Centrica, E.ON and SSE have all boosted their green credentials by buying so-called ‘carbon credits’ – investments to help deliver renewable energy projects around the world that could not have been built otherwise.

The companies argue that purchasing the credits helps offset the emissions generated by their gas.

But documents obtained by this website cast serious doubt on the claim that the investments made any difference to the delivery of the green projects, which were already forecasting healthy profits even before the energy firms’ cash injections.

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The findings cast doubt on whether the money spent by energy firms has helped to reduce emissions at all. Since renewable technologies are now relatively cheap and easy to finance, they do not require additional funding through carbon offset schemes.

The independent Climate Change Committee this week warned that voluntary carbon markets aren’t working and could actually undermine net zero targets.

It follows our revelation last month that Centrica tried to ‘offset’ its dirty energy by purchasing huge numbers of ‘junk’ carbon credits from a chemical factory in China that likely made no difference to the climate crisis. Green MP Caroline Lucas said the sale was a “thinly veiled attempt at greenwashing” that had not succeeded.

Gilles Dufrasne, a policy expert at Carbon Market Watch, said: “If companies buy these credits to advertise fossil fuels as ‘green’, then they are wasting their money and misleading their consumers.”

Dufrasne added: “Carbon offsets generated by large renewable energy installations have no impact on emissions. While these projects are largely beneficial for the climate, they simply don’t need to sell carbon credits to exist.”

Amazon deforestation

openDemocracy can now also reveal that Centrica bought offsets in a Brazilian dam linked to deforestation in the Amazon rainforest.

Records show the company purchased 21,995 carbon offsets for an unknown price in one of five hydropower dams that are part of the Braco Norte project.

But project documents state that the dam’s forecasted rate of profit was 19% even before income from offsets was even considered, meaning the project would almost certainly have gone ahead without Centrica’s investment.

And although the dams produce green energy, research suggests they have in fact driven deforestation in the Amazon.

The Brazilian National Institute for Space Research found that 70% of the rainforest surrounding the five Braco Norte dams had been cleared since construction began in 1985. In total, 250 sq km of forest was cleared to make way for roads, croplands and pastures – the equivalent of 32,000 football pitches.

Although the dams produce green energy, research suggests they have in fact driven deforestation in the Amazon

One of the leading firms that licenses green projects to sell carbon credits, Verra, stopped accepting new green energy projects in 2019 unless they are in the poorest and “least developed countries” such as Afghanistan, Haiti or Somalia, which do not have mature renewables industries.

But credits issued by Verra before 2019 are still for sale on the voluntary market.

Records seen by openDemocracy also show E.ON and SSE pumping money into contentious projects to try and boost their green credentials.

In 2021, E.ON launched a new tariff called “climate+” and claims to offset its customers’ gas emissions by investing in carbon neutral initiatives around the world.

But, as of 1 July 2022, its carbon credit portfolio shows that two thirds of the company’s offsets come from a wind farm in India that does not appear to need the investment.

Documents authored by the farm’s owner, CLP Wind Farms (India), stated that the project’s two phases were expected to generate pre-tax returns of 8.8% and 12.8% respectively.

When questioned by openDemocracy, E.ON said these offsets were not linked to its climate+ tariff and that the company had recently bought further credits to offset those customers’ emissions. But it would not reveal any details about them.

A spokesperson said: “These credits related to older gas tariffs which were offered by the old npower business. They came into E.ON’s ownership when we took over npower… in 2019.”

Another energy giant, SSE, sells “green gas” to customers that is “25% certified renewable gas and 75% carbon-neutral gas backed by carbon offsets”.

But openDemocracy has discovered that the company’s carbon offsetting programme is entirely based on credits from a single hydro-electric power plant in Turkey called Yumrutepe.

SSE purchased credits to offset 2,067 tonnes of CO2 on 1 April 2022.

According to project documents, the Yumrutepe dam obtained two operating licences some 15 years ago. But the decision to sell carbon credits was not made until a decade later – long after the project was commissioned – suggesting the plant did not need income from carbon credit sales to be commercially viable. Internal company analysis also shows that, without offsets revenue, Yumrutepe was still forecasting pre-tax profits of 5.74%.

SSE told openDemocracy it would continue to purchase carbon offsets related to renewable energy projects due to “customer demand for green gas”.

The company said: “With demand for green gas growing, SSE offers customers a choice of purchasing a purely 100% renewable gas product or a standard green gas product backed by renewable certificates and carbon offsets, which is cheaper.”

The Climate Change Committee said in its report this week: “[The] government must put in place stronger guidance, regulation and standards to ensure purchase of carbon credits is not used as a substitute for direct business emissions reduction, and to improve the integrity and transparency of carbon credits.

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