“Carbon credits have hardly led to any additional climate protection”

EU climate targets: economist Benedict Probst explains the contribution of carbon offsets in an interview

The EU Parliament and the EU Member States have set out a new climate target. EU’s CO₂ emissions should be reduced by 90 percent by 2040 relative to the 1990 levels. Starting in 2036 it will be possible to achieve up to five percent of this reduction using international carbon credits from outside the EU. The EU Emissions Trading System for buildings, road transport as well as small industries (ETS2) will now start in 2028 instead of 2027. Benedict Probst, environmental economist and head of a research group at the Max Planck Institute for Innovation and Competition in Munich, shares insights on what carbon offsets contribute to climate protection.

Ben Probst, how effective are carbon credits from countries outside the EU for climate protection?

This regulation is a step backwards in climate policy. If we meet a significant portion of our climate targets through carbon credits, we will be taking the pressure off the European economy to undergo a true transformation. The evidence of the last 20 years is clear: carbon offsets have not generally achieved the emissions reductions they promised. But what is at stake is not just climate protection, but the future of Europe. Every euro we put into questionable certificates is money that is not available for investments here at home: in renewable energies, heat pumps, green hydrogen and climate-neutral industry. While we are using offsets as an excuse, China is investing heavily in precisely these forward-looking technologies, with the result that we run the risk of falling even farther behind on the key industries of the 21^st century. That is not only disastrous in terms of climate policy, but also economically short-sighted.

What does it mean that five per cent of CO₂ emissions can be credited through non-European emissions certificates?

It is important to understand the scale of this: five percent sounds harmless, but it is an enormous amount when measured against the 2040 target level. In concrete terms, it means that, if the EU makes full use of this allowance, in 2040, 50 percent more CO₂ may be emitted in the EU. That would be problematic enough, but the real danger is that many of these certificates do not deliver what they promise. Yes, the standards in the new Article 6 trading mechanism [under the Paris Climate Agreement - editor’s note] may be slightly better than before. But there are still major loopholes for dubious certificates.

You are researching whether climate certificates actually deliver the promised benefits. Do CO₂ compensation measures such as the construction of wind farms, the protection of forests, more climate-friendly forestry or low-CO₂ cooking stoves make sense for countries in the Global South?

The measures themselves make sense, but carbon credits issued for them have hardly led to any additional climate protection in the past. For example, building wind farms in China is good for the climate. However, it is not good to claim that these wind farms could only be financed through the sale of certificates. The studies we have analyzed show that the sale of certificates plays no role whatsoever in financing decisions for wind farms.

What are the problems with certification?

Last November we published a meta-study in Nature Communications by an international team of authors, which I led. In this study, we systematically reviewed 14 studies on 2,346 carbon mitigation projects, and we show that less than 16 per cent of the offset issued by the investigated projects reduced greenhouse gases as reported by the project developers. There are several problems behind these low figures: in many projects, the sale of certificates did not lead to any additional CO₂ reduction, for example in wind power projects in China, as these would have been implemented anyway. Also, many project developers calculate the reductions using methods that are not state of the art. Added to this are perverse incentives in the methodological design of the programs. In the USA, for example, improvements in forest management often incorporate areas in which less timber has been harvested for a long time. However, the baseline used for comparison is a higher regional average, which means the reductions are greatly overestimated. Since then, additional studies have been published that come to the same conclusions. The evidence remains critical.

Can carbon credits still contribute to climate protection?

Residual emissions from industry or the transport sector, which are virtually unavoidable, must be offset in the long term. However, this can only be done using permanent removal methods such as direct air capture, i.e. the removal of CO₂ from the air, or the storage of CO₂ produced during biomass combustion. These certificates are very expensive, but they will become cheaper as the technology develops and such processes are used on a large scale. There are consortia of companies such as Frontier that purchase the expensive certificates for permanent offsetting. However, this is still only a small part of the market.

How is CO₂ priced – apart from carbon credits?

For one thing, there are carbon taxes, with a fixed amount per ton of CO₂ emissions, and for another, there is emissions trading. In Europe, for example, an emissions budget is set for industrial plants. Companies receive pollution allowances for a part of this budget, which they can trade. The cap decreases year for year, thereby raising the price and the pressure on companies to reduce their CO₂ emissions. There are fears that companies will buy allowances and thus circumvent emissions trading. However, this has only happened to a limited extent so far.

How can private individuals offset CO₂ emissions, for example from flights?

We have to let go of the illusion that we can offset flights by paying a small sum of money. Fossil fuel emissions remain in the atmosphere for thousands of years and require permanent removal measures. Common approaches like forest protection are not sufficient, as their effect is quickly negated by forest loss, for example through fires. However, allowances can be purchased from permanent carbon-removal methods such as direct air capture, as offered by the Swiss company Climeworks, for example. Since these are very expensive, hardly anyone can completely offset their emissions. But it is a way to contribute to further development.

What solution do you see?

There are definitely rays of hope. The costs of wind, solar, batteries and other green technologies are falling steadily – faster than most forecasts predicted. Over the past 20 years, we have systematically underestimated the cost reductions in the green sector. This makes the transition increasingly attractive, even from a purely economic perspective. It may well be that our climate targets will be easier to meet in a few years’ time, simply because the alternatives are becoming so much cheaper. There is also progress in the carbon mitigation projects themselves: more critical attention, stricter standards, better monitoring. This could in fact improve quality. But – and this is important – the evidence so far does not inspire optimism when it comes to carbon offsets. We should build our climate strategy on real emissions reductions, not on the hope that carbon offsets will work this time around.

The interview was conducted by Michaela Hutterer and Peter Hergersberg. This is updated version of an interview in MaxPlanckResearch 4/2024. Last Update: 10.12.2025