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A proposed carbon offsetting project in Papua New Guinea, which has been labelled a “scam” by a local politician, appears to be of questionable environmental benefit and has seemingly failed to consult with local communities sufficiently and transparently, a Carbon Market Watch analysis concludes. This project must not receive certification.

Carbon Market Watch’s analysis of a very large proposed carbon offsetting project in Papua New Guinea (PNG) found significant red flags concerning environmental integrity and local consultation. Other organisations, such as NGO Melanesian Carbon Watch and think tank the Australia Institute, have also sounded the alarm on the project.

These concerns have also been echoed by the governor of the country’s Oro province who has called this proposed project a scam through which “landowners were fooled into signing [illegal] agreements for a 100-year contract.” 

Carbon offset certifier Verra should clearly reject this proposed project’s request for certification.

When a gigatonne is not a gigatonne

Kanaka Management Services (KMS), a project developer, recently applied for certification from standardisation body Verra’s Verified Carbon Standard (VCS) for a huge proposed avoided deforestation carbon market project in Papua New Guinea. If approved, it would be either the largest or the second largest Verra VCS project ever in terms of the number of carbon credits it could issue.

It would generate a whopping 8.1 million carbon credits annually for 100 years. That amounts to 810 million credits, representing nearly a gigatonne of supposedly avoided CO₂ emissions. That’s equivalent to all of industrial powerhouse Germany’s territorial carbon emissions in 2018.

While this might sound impressive, the reality is far from it.

In the 130-page draft project description, the project developer assumes that without the project, 85-95% of nearly half a million hectares of forest would be chopped down, even though it is located on largely rugged and mountainous terrain. KMS, also asserts that all local groups, who actually own the land, were rigorously consulted before signing century-long contracts. However, KMS fails to provide sufficient information and evidence to back these assumptions and claims, raising concerns about the project’s integrity.

Our recent analysis of the project found it to be missing essential justifications and evidence. The project documentation lacks key information on core aspects pertaining to the carbon crediting baseline: why should the project issue 810 million carbon credits? The document does not make clear the additional benefits the project would bring: is such remote and hard-to-access rainforest really at risk of almost completely vanishing? When it comes to local stakeholder consultation, there is a lack of evidence that local groups were meaningfully engaged and adequately informed before signing contracts, and that they would equitably benefit from the project. 

Scamming local communities

Gary Juffa, governor of Papua New Guinea’s Oro Province described KMS and this proposed project as being “farcical [and] a scam.”

Juffa accused KMS of having fooled landowners into signing illegal 100-year contracts. It would be deeply concerning if KMS did in fact intentionally mislead local communities about the nature and legality of the contracts or failed to uphold the principles of free, prior and informed consent in any other way.

The governor has also stated that the provincial government would support any landowners in the event that KMS were to take legal action against them or to try and enforce the contracts.

Moratorium to safeguard rights

Governor Juffa also cited Papua New Guinea’s March 2022 moratorium on all new or proposed avoided deforestation projects occurring on the voluntary carbon market as another reason why this proposed project cannot be approved.

The moratorium was announced by PNG’s Minister for Environment and Climate Change Wera Mori two weeks after the project proposal was opened to public comment. It came about for two key reasons: concern for local communities and for Papua New Guinea’s ability to reach its climate target.

Papua New Guinea wants to ensure that local communities retain their rights and benefit equitably from any projects, which cannot necessarily be guaranteed on the voluntary carbon market. 

The Ministry of Environment, Conservation and Climate Change’s press release announcing the moratorium highlights the risks posed by voluntary market activities. It underscores the need for a framework for “an acceptable benefit sharing arrangement” to be established in PNG and states that avoided deforestation projects on the voluntary market “must be brought under the compliance system […] through a national approach [that benefits] the country and its local communities.”

Since the voluntary carbon market is not used for compliance purposes in most countries, it is often loosely, or not at all, regulated. Juffa, who welcomed the moratorium, also highlighted that PNG does not have a national regulatory framework for carbon markets and would need one before considering opening up to carbon crediting projects.

In the absence of clear regulation and oversight in PNG, some project developers could seek to establish inequitable or non-transparent “benefit sharing arrangements” with local communities, as is being alleged against KMS in the case of this proposed project.

No piggybacking

Unregulated and large-scale voluntary carbon market projects risk undermining Papua New Guinea’s own climate targets under the Paris Agreement by effectively selling the country’s cheaper emission reductions to polluters in wealthier countries. 

This is because for every voluntary carbon credit sold internationally, PNG would need to reduce an extra tonne of CO₂ domestically since it would have sold one tonne to a polluter in another country.

Since every country under the Paris Agreement has a climate target, when one sells a carbon credit to another or to an airline, both countries cannot each count the carbon credit as their own reduction/removal of 1 tonne of CO₂eq (this would be called “double counting”). To avoid double counting, countries are required to apply “corresponding adjustments”: the country selling carbon credits must deduct them from its accounts so the buyer-country can count them towards its own climate target. Papua New Guinea’s press release on the moratorium suggests the country would also apply corresponding adjustments for credits sold to private companies (This is indeed necessary, to avoid that reductions paid by companies actually form part of what the host country was planning to deliver anyway).

Therefore, having to compete with polluters with deep pockets means that Papua New Guinea would effectively be carrying the pollution burden of the rich. This makes it harder for PNG to reach its own climate target, especially when it is also seeking to develop, and it would get worse in the future since countries must consistently increase the ambition of their targets under the Paris Agreement. It could even require PNG to finance more expensive mitigation options in the long-run to make up for not being able to claim less expensive forestry emission reductions.

This problem is exacerbated in cases where projects overestimate their emission reductions capacity, generating hot air credits that do not actually represent real emission reductions (this can and does happen, as exposed by  CMW’s previous investigation in Colombia).

With all this in mind, one can sympathise with Papua New Guinea’s decision to impose a moratorium to safeguard, or at least have some control over, its mitigation potential in the future. This is especially the case with projects such as KMS’ which assumes there will be 85-95% projected deforestation over 418,000 hectares of forest without supporting this with compelling justifications or reasoning.

Stricter oversight

KMS has applied for certification from Verra’s Verified Carbon Standard for its proposed project, which is currently under review. 

Clearly, Verra should reject this proposed project. This is evident given the announced moratorium in PNG, the many red flags about the project detailed by Carbon Market Watch and others, and because the Governor of PNG’s Oro Province – where the project would take place – has called it a scam underpinned by illegal 100-year contracts with local groups.

Beyond this, Verra should also improve its ‘VCS project cycle’ process by strengthening its initial review of proposed projects before listing them on the registry. According to Verra’s project registration process, for a proposed project to be listed on the registry as “under development”, it must submit a draft project description, which Verra reviews “to ensure that sufficient information is present to create the project record.” If this review is successful, then the project is listed on the registry and proceeds to a 30-day public comment period.

The numerous problems concerning the proposed project in PNG suggest that Verra’s initial review of proposed projects is not robust enough. It requires improvements to avoid future situations where similarly flawed projects are listed on the registry and advance to the public comment phase when they should already be easily rejected by Verra in the first place.

Verra should also make key project information more accessible, for example by requiring the project developer to produce a short summary to feature on the project’s registry page: e.g. a 3-5 page document summarising the core assumptions and explanations regarding the baseline, additionality, and public consultation process. Such a clear and concise document would be of convenience to a range of stakeholders, including third parties seeking to assess a project and provide a public comment in a 30-day window.

More lead time

Verra should consider extending their public comment period beyond 30 days, for example to 45 days, in order to ensure more consistent, detailed and meaningful engagement from the wider public. A 30-day period leaves little time for third-parties to learn that a project is open for public comment, to go through complex methodological project documents that can be well over 100 pages, and then formulate a public comment. One needs to check the Verra website regularly and be subscribed to the Verra newsletter to be notified of projects open for consultation. If one is not already familiar with carbon market projects and Verra’s methodologies, then the entry barrier is even higher. Also, some stakeholders may not have good access to the internet, which presents another challenge for a 30-day comment period. 

Finally, Verra should put in place a new provision to automatically extend the public comment period for projects when incorrect documentation was initially provided. This extension should be in line with the date when the correct documentation was updated: e.g. if incorrect documents were on the registry until an update on day 15 of the public comment period, then an extra 15 days should be added, meaning it would end on day 45 rather than day 30.

This would have been called for in the case of this proposed project, for which correct ‘shape files’ (indicating the precise coordinates) were only uploaded with less than a week before the end of the original public comment period. 

To be clear, forest conservation is urgently needed and local communities should be financially supported. However, there is no place for projects such as this one, which would allow big polluters to buy what are likely to be empty offsets, all while the local people who are already protecting these forests stand to lose certain rights and be excluded from equitably sharing the benefits of lucrative carbon market deals.