The Phantom Tree – inside carbon’s balance-sheet fugazi

The carbon credit on my client’s balance sheet represented a tree that did not exist, planted in a Brazilian forest that was not disappearing, as a counter to emissions that were never going to happen.

But the credit was real. It had a serial number. It was registered in a “verified” carbon standard.  It reduced the company’s reported carbon footprint by exactly one metric ton of CO₂ equivalent.

Credits for Brazilian forestry projects at the time were typically trading in the range of $10-25 USD per metric ton, with wide deviation from factors such as co-benefits and vintage. My client’s credit was slightly under the mean.

And it cost them $15.

As a consultant, I traced it back to a forestry project in South America claiming offsets for “protecting” a rainforest in a national park. This was clearly monetizing a non-action that was already legally required.

This was not a glitch; it was the system working as designed.

It is a fugazi.

Figure 1 – The $15 Phantom Tree

A credit for ‘protecting a Peruvian rainforest’ that was already legally safeguarded.

If the vast majority of these offsets are phantom, why do regulators (and buyers) keep playing along?

Could pension pressure be the fuel additive? After all, many believe that the power of the financial industry, especially pensions and insurance, will demand “net zero”.  What I am seeing, in homage to Charlie Munger, is a perversion of incentives over fact.

The economics of incentives

The carbon offset market thrives on double-counting, non-additionality, and statistical fraud so ingrained, it makes plastic recycling symbols look honest.

A 2023 joint investigation by The Guardian, Die Zeit, and SourceMaterial revealed that over 90% of rainforest carbon offsets approved by Verra, the world’s leading certifier, are “phantom credits”.  These permitted corporations such as Disney, Shell, and Gucci to claim “carbon neutrality” while their emissions chugged along unabated. Uber joined the party recently, touting zero-emission goals by 2040 that lean heavily on such mechanisms. Fast food delivery to a healthier planet!

Hint: Every time you see “carbon neutrality,” look for legerdemain.

Every time.

Core fraud mechanics

Double-counting (the copy-and-paste economy): Multiple parties claim the same reduction. In renewable energy certificates (RECs), tech giants declare “100% renewable” while utilities report the same for mandates. Same electrons, claimed twice.

Non-additionality (monetizing the inevitable): Credits for reductions that would happen anyway. The Brazilian national park case monetized status-quo protection; methane projects often claim credits for obeying existing regulations.

Statistical fraud (baseline illusion): Inflated “worst-case” projections create artificial “savings”. Verra’s rainforest credits (94% phantom per the 2023 analysis) exemplify this. More recent revocations include Zimbabwe’s Kariba REDD+ project (15.2 million excess credits issued, over half of the total, due to overstated deforestation baselines with knock-on effects covered here). Furthermore, 37 Chinese rice cultivation projects were rejected in 2024 for over-issuance and integrity failures (some phantom afforestation projects in a parallel nod to unpopulated, ghost cities include phantom rice that never existed on the ground). Verra’s ongoing compensation issues for millions of credits reflect a concept addressed in a recent BIG Media article on a scientific house of cards.

Monetizing the counterfactual

Developers project a “worst-case” scenario that was never going to happen. They then sell the difference between that fantasy and reality as a reduction.

This is the anatomy of a phantom credit: A baseline inflated with improbable threats (e.g., deforestation in a protected area) creates credits for doing nothing extra.

Figure 2 – An informative carbon offset flow diagram

Given its arcane, messy, and clearly perilous process, companies should consider

moving away from carbon offsets and development or adoption of operational

excellence, including technology such as Airbus. Source: The Guardian

The additionality paradox

Consider a project developer claiming credits for not building a coal plant that was never planned, in a grid-less region, assuming 10% annual growth in a stagnant economy.

In any other industry, selling a “not-stolen car” to an insurance company for a premium discount would land you in jail for fraud. In the environmental protection realm, it is hailed as a “climate solution”.

The math exposes the illusion: Global voluntary carbon offsets retired in 2024 totalled 182 million metric tons of CO₂ equivalent – less than 0.5% of global anthropogenic CO2 emissions of approximately 42 billion tons. That is admittedly better than the mathematical ghost of claimed ice loss on Antarctica, which I recently wrote about here.

Widespread “neutrality” claims? Mathematically fraudulent.

Time to audit your fugazi

I dropped the consulting gig over this — ethical nausea induced by the shell game.

If you are in the environmental, social, and governance or sustainability game, check your company’s offsets. What tree are you really buying?

If you think it is all suspect, consider the recent GAO examination into voluntary carbon markets and the pointed notes ongoing over crediting risks, especially in forestry; highlighting limited federal oversight and challenges around additionality. Those playing fast and loose could feel the sting of justice (something I challenged students to address in a Sustainability and Ethics course that I created). The market is in dire need of a credibility boost, demonstrably unable to make progress due to intractable, systemic problems.

In a series exposing the climate cults and cartels – from plastic myths to Antarctic divides – this essay is merely one branch.

The synthesis?

Coming soon in my final essay in this series.

(Richard LeBlanc – BIG Media Ltd., 2026)