Food & Climate
Some rice cultivation projects in China has shaken confidence in the voluntary carbon market after successfully selling carbon credits to a number of major oil and gas companies such as Shell, even though they did not use production methods that reduce methane emissions.
Verra, a major certifier of carbon emission offsets, announced in August that it was rejecting 37 Chinese rice cultivation projects and revoking issued carbon credits, due to quality concerns. Some of the credits from these so-called “phantom” projects had already been procured to offset greenhouse gas emissions by major companies, like Shell and China National Petroleum Corporation, according to a report seen by “Food & Climate” platform.
Rice farmers in Asia commonly grow rice in flooded fields. However, these anaerobic soil conditions lead to the production of methane, a particularly potent greenhouse gas.
In 2018, rice cultivation projects in China produced almost 9.33 million tonnes of methane – or 39.1% of the country’s total agricultural methane emissions. That made rice the second-largest agricultural source of the gas, after livestock farming.
Rice cultivation projects under carbon credit schemes aim to tackle this by promoting intermittent drainage, also known as alternate wetting and drying, which reduces methane emissions.
The 37 rice cultivation projects in China
The 37 rice cultivation projects in China in question were all green-lit by auditing firms used by Verra. Each project supposedly started at some point between 2018 and 2020. Verra has said it started a quality control review at the end of 2022, the results of which were announced this August. In Verra’s words, it ultimately “applied strong censures to the auditors that had reviewed [the projects’] applications.”
According to a company spokesperson, the identified concerns about quality covered: the accuracy of baseline figures used; the activities that projects claimed had been undertaken, and the sufficiency of followed practices; and the evidence that Verra’s chosen independent validation and verification bodies (VVBs) provided when verifying projects.
Over the past two years, however, the carbon credit ratings firm Ecoptima spotted unusual patterns in these projects during big data analysis.
Upon reaching out to over 70 agricultural authorities and other relevant departments, Ecoptima was told no Verra-registered, rice cultivation carbon credit projects existed in their jurisdictions. In some cases, no agencies had been authorised to carry out such projects.
Based on written governmental responses, at least 19 of the 37 rice cultivation projects in China rejected by Verra appear to be “phantom” projects. Beyond Shell, companies such as PetroChina International Company Limited and the United Kingdom’s OVO Energy also purchased credits from these projects. Furthermore, 87 other projects awaiting carbon credit certification raised similar concerns.
Together, these projects account for nearly 40% of all rice cultivation projects in China that are seeking Verra certification. They span 13 provinces and municipalities, with claimed annual emissions reductions exceeding 57,000 tonnes of CO2 equivalent per project.
Three farmers in eastern Anhui province, China, could hardly have imagined their rice fields would be linked to some of the world’s largest energy companies. Shell, for example, used carbon credits from their fields to offset greenhouse gas emissions from “23 LNG [liquefied natural gas] cargoes between January 1, 2022, and December 31, 2023”. This enabled Shell to label the shipments as “carbon neutral.”
According to documents concerning the development of these projects, the rice fields of the three Anhui farmers were part of separate projects. The documents claim alternate wetting and drying was being used to reduce emissions. But the farmers tell Dialogue Earth that nobody had spoken to them about alternate methods to cut emissions, nor had they heard of carbon trading. Among the three, only one farmer (from the city of Tongcheng) had tried intermittent drainage, and only then in one small area while continuing with traditional methods elsewhere.
Another complication is that, because younger members of the community have found work in the cities, much Chinese farmland (particularly in the south) is managed by older people. For them, the idea of reducing emissions seems very distant from daily life.
Less than 16%
In early 2023, three news organisations, including the UK’s Guardian newspaper, published the findings of a nine-month investigation: ninety per cent of Verra’s rainforest carbon offsets had exaggerated their actual emission cuts.
In November this year, a synthesis study surveying over 2,300 carbon-mitigation projects worldwide found less than 16% of the associated carbon credits represented actual emissions reductions.
Those project types included cleaner cookstoves, the destruction of the greenhouse gas sodium hexaflouride, and the abatement of another, hydrofluorocarbon-23. The synthesis covered carbon credits equivalent to almost a billion tonnes of CO2, which its authors claim is approximately one-fifth of all carbon credits issued globally to date.
The study’s authors point out that the quality of carbon credits is determined by the robustness of the standards used, the strict implementation of those standards during project implementation, and the strength of oversight from auditors and the carbon-crediting mechanism. Under the existing model, one potential problem is that project owners choose and pay auditors. This may lead auditors to take a more relaxed approach to obtain customers.
After identifying problems with its rice cultivation projects, Verra attributed part of these mistakes to flaws in the methane emission-reduction methodology it was using. Named AMS-III.AU, the methodology is a part of the UN Framework Convention on Climate Change’s Clean Development Mechanisms methodology. In March 2023, Verra suspended all project development under AMS-III.AU and started developing a new methodology. Verra also instructed four of the implicated VVBs to generate corrective action plans.
As a result of Verra’s AMS-III.AU cancellation, over 200 further Chinese rice cultivation projects, all being processed for Verra certification, had their applications halted.
A Verra spokesperson said the four VVBs had failed to meet their required levels of independence and rigour: “This unprecedented situation was serious enough to warrant sanctions that could result in the suspension of Verra’s approval for the VVBs to continue auditing Verra projects.” Verra also said it is evaluating the response and action plans of the four bodies, according to “Dialogue Earth“.