Verra doesn’t have a good solution for excess crediting

Three weeks ago, Verra announced the conclusion of its investigation into Kariba, the REDD+ offset project that has become synonymous with carbon market dysfunction. The announcement represents the culmination of nearly three years of exposés, profiles, and controversy. In the announcement, Verra acknowledges that it erroneously issued at least 15 million “excess credits” to the project — credits that do not represent real climate benefits and should not be used to make environmental claims.

Unfortunately, individuals and companies have already used millions of Kariba’s excess credits. But according to Verra, this is not a problem. That’s because Verra plans to ask the owner of the Kariba project to voluntarily pay for replacement credits.

Market participants should treat Verra’s proposed solution to Kariba’s excess credits with skepticism. Rather than putting Kariba to rest, it reveals a deep structural flaw in the largest registry of the global carbon market.

What Verra announced

The most striking part of Verra’s announcement is its acknowledgment that the Kariba project received 15.2 million more credits than it should have. Those excess credits result from problems in the project’s verified estimates of future deforestation rates.¹1Multiple carbon credit rating agencies estimated Kariba’s excess crediting could be even higher. According to Verra, 10.3 million of those excess credits have already been used to make environmental claims, while 4.9 million credits remain unused and still active within various accounts across Verra’s registry.

The announcement then lays out a multi-part plan for addressing their mistake. First, Verra has “invited” owners of the 4.9 million unretired Kariba credits to voluntarily cancel them. That invitation has borne some fruit: South Pole, an offset broker closely involved with bringing Kariba credits to market, announced the voluntary cancellation of 2.5 million verified Kariba credits in response to Verra’s announcement.²2South Pole (2025) Response to Verra’s update on its section 6 review into Kariba REDD+ Second, Verra has “requested compensation” from Carbon Green Investments (CGI), the developer of the Kariba project, for the remaining excess credits — the 10.3 million already retired, plus any unretired credits still outstanding. The announcement does not offer a timeline on which any of these parties must respond.³3In section 6.1.5 of the Verra standard, the provisions dealing with excess crediting indicate that the project developer must take action within 60 days of receiving notice from Verra. However, it is not clear whether this standard applies to the Kariba case, because the project has withdrawn from the Verra program.

In short, Verra announced that it plans to rely on voluntary corporate action to remedy a major failure of its promise that credits issued under its program are real.

No good options

Under normal circumstances, Verra treats excess crediting as a mundane accounting problem. As spelled out in section 6.1.5 of the Verra’s Registration and Issuance Process, a project is expected to i) immediately cancel any excess credits it still owns, ii) replace the excess credits “from subsequent [i.e., future] issuances,” or iii) buy replacement credits on the open market. ⁴4Verra (2024) Registration and Issuance Process v4.6, § 6.1.5 Verified Carbon Standard And if those efforts fail, Verra reserves the right to impose sanctions on the project owner’s account.

In theory, this approach should work fine. But there’s a wrinkle. Last year, amid the media fallout, CGI exercised its right to withdraw Kariba from the registry ⁵5Verra (2024) Registration and Issuance Process v4.6, § 4.7.2 Verified Carbon Standard . Suddenly, the simple accounting problem for addressing excess credits became significantly more complicated. With Kariba’s withdrawal, there will be no future issuances from which Verra can recover those excess credits. Nor is there an account that Verra can sanction. In effect, Kariba ran up its tab and skipped town.

In this situation, Verra appears to have no good options. Buying replacements for at least 10 million credits is expensive. According to Allied Offsets, the lowest rated REDD+ credits currently sell for around $3.60 per credit, which comes to a replacement cost of around $37 million. This likely exceeds Verra’s own financial resources, as Verra entered 2025 with under $24 million in net assets.⁶6Verra (2024) 2024 Annual Report Turning to the buffer pool isn’t an easy solution either. Verra’s buffer pool contains 72 million available credits, and while using upwards of 14 percent of the buffer pool to address Kariba might be feasible, it doesn’t seem that Verra designed its buffer pool to absorb both the scale of excess crediting that might exist and the types of natural risks (e.g., wildfire, drought) that many of its projects face.

Left with no easy options, Verra is now betting the environmental integrity of its offsets program on CGI’s willingness to voluntarily pay up.

Unfortunately, we see little reason to think that CGI will oblige. For one, it’s a huge request: tens of millions of dollars is an eyewatering bill for a corporation of any size. And what little we know about CGI does not inspire confidence that it could — or would want to — pony up that kind of cash to make things right.⁷7In speaking with The New Yorker, CGI’s founder, Steve Wentzel, described some of CGI’s financial practices as “illegal,” and admitted that he didn’t keep records of how he used Kariba funds.

A structural problem

It’s possible that CGI will make Verra whole. But to some extent, the outcome in this case doesn’t matter. By assigning the responsibility for replacing invalid credits to CGI, Verra has called into question its ability to deliver on its core promise: to ensure that the credits it issues represent real climate benefits. Even if CGI comes through, what about the next project that receives excess credits? Or the one after that?

It’s all but guaranteed that Verra will need to address the existence of a substantially larger number of excess credits in the years to come. A mounting body of evidence suggests that the global carbon market is awash in excess credits.⁸8B S Probst et al. (2024) Systematic assessment of the achieved emission reductions of carbon crediting projects Nature Communications ^,99J Romm et al. (2025) Are carbon offsets fixable? Annual Review of Environment and Resources ^,1010G Trencher et al. (2024) Demand for low-quality offsets by major companies undermines climate integrity of the voluntary carbon market Nature Communications And Verra is likely responsible for a significant share. For example, Verra has over 100 million credits backed by wind energy projects in India that rely on rules developed under the Clean Development Mechanism. A recent detailed analysis suggests excess crediting for these types of projects is likely 50 percent or more.¹¹11R Calel (2025) Do carbon offsets offset carbon? American Economic Journal: Applied Economics Other high profile studies have found systematic excess crediting under four tropical forest protocols administered by Verra, due to unrealistic assumptions about deforestation rates.¹²12T A P West et al. (2020) Overstated carbon emission reductions from voluntary REDD+ projects in the Brazilian Amazon Proceedings of the National Academy of Sciences ^,1313T A P West et al. (2023) Action needed to make carbon offsets from forest conservation work for climate change mitigation Science ^,1414T A P West (2024) Methodological issues with deforestation baselines compromise the integrity of carbon offsets from REDD+ Global Environmental Change Reporting by The Guardian, SourceMaterial, and Die Ziet based in part on this work estimates that roughly 90 percent of credits across these protocols were issued in error. Taken together, Verra has used these four protocols to issue more than 450 million credits, 290 million of which have already been used to make environmental claims.

The possibility of a project's withdrawal from the Verra registry exposes a profound structural flaw with Verra’s rules for addressing excess crediting. Any project that generates excess credits faces a choice: remain enrolled in Verra’s program and repay the credits, or leave the program entirely.

For projects that have already sold significant numbers of credits, the potential incentive to withdraw seems clear. Enrollment in Verra’s program comes with costs, like maintaining project staff and paying for verification. If a project learns that it has received excess credits, the owner might suddenly face a future where new credits won’t actually generate new revenue, while the costs of running the project will persist. With the option of withdrawal from Verra’s program on the table, there is a structural incentive for developers to do what Kariba did: seek excess credits upfront and walk away if that’s the most profitable option.

Conclusion

Verra has backed itself into a corner. It’s extremely unlikely that Kariba will be the only case of excess crediting that they will need to confront. What will happen if Verra needs to acknowledge even a fraction of the excess credits that academics and journalists have identified? Will those projects also withdraw? Will they agree to voluntarily repay excess credits? And perhaps most importantly, are offset buyers willing to bet on a future in which their credits aren’t backed by a guarantee from Verra, but instead rely on an ad hoc system of voluntary IOUs from developers with a financial incentive to walk away? It seems unlikely.

That would seem to leave Verra with two options moving forward: forever deny that serious problems exist with the carbon offsets they offer, or come back to the table with a better solution for addressing excess credits than they’ve currently proposed.