The Zimbabwean government wants to regulate the voluntary CO2 market in the country.  According to information minister Monica Mutsvangwa, the existing contracts between Western CO2 traders and Zimbabwean projects will be declared null and void. And according to reports from the financial news agency Bloomberg, local governments in Zimbabwe will now have to enter into partnerships through the central government and the Ministry of Finance wants to levy a 50 percent tax on the turnover from all CO2 projects in the country.

At the end of January, Follow the Money published a report on abuses concerning the Kariba project in Zimbabwe, one of the largest forest protection projects in the world. The aim of the project was to prevent forests from being cut down by offering the local population alternative sources of income and by investing in local infrastructure.

As a result, the people would be more inclined to leave the trees alone, which in turn traps the CO2 that would otherwise have gone into the atmosphere. These CO2 savings can then be converted into CO2 credits, a type of securities that are each the equivalent of a tonne of CO2. The credits are sold to companies such as Gucci and Greenchoice that want to produce sustainable clothing or sell ‘green’ gas.

Follow the Money showed in its January report that the Kariba project had three major problems. Firstly, South Pole, one of the world's most influential climate consultants and the project’s developer, pocketed nearly twice as much money as agreed, instead of sharing that revenue with the Zimbabwean people. This was revealed by confidential information within the company.

Secondly, South Pole could not show that the money involved in the sale of CO2 credits actually ended up in Zimbabwe. The money went to a company in tax haven Guernsey. 

Thirdly and perhaps most importantly: more than 60 percent of the climate benefits of the project existed only on paper. 

This news also reached the Zimbabwean government, which now sees the CO2 market as a new source of income. From now on, the Ministry of Environment, Climate, Tourism and Hospitality will supervise the domestic CO2 market. A new 'CO2 trade committee' is being set up for this purpose. 

This news is a major setback for South Pole. In 2022, the Kariba project was by far its most important source of income and the company had counted on being able to sell carbon credits from Kariba for almost two more decades. But the Zimbabwean government plans threaten to undermine South Pole's revenue model now that South Pole will have to hand over half of its turnover there.

South Pole might use the measure ‘as an excuse to cancel the project without really hurting the image of the project’

The Zimbabwean government plans are like a new bomb being planted under the Kariba project. At present, South Pole is busy revalidating the calculation model with which it predicts prevented deforestation. 

The company must close a gap of at least 8 million CO2 credits over the coming years with credits that have yet to be generated. In addition, South Pole overestimated deforestation in the area by a factor of at least 14 in recent years. As a result, the project is likely to generate far fewer carbon credits in the future than the company had counted on. 

So is this the end of the Kariba project? 

In a response from South Pole, it said it is ‘assessing the implications that this new potential regulation might have on the Kariba project’. Until then, the company will not comment further.

Steve Wentzel, owner of Zimbabwe's Carbon Green Investment (CGI), and South Pole’s local partner in the Kariba project, also declined to comment. ‘No one was aware of the position taken by the government and I only have knowledge via certain news channels. We have no formal notice of the position taken and therefore can not comment.’

Environmental economist Thales West, working at the Vrije Universiteit Amsterdam, expects South Pole to use the measure ‘as an excuse to cancel the project without really hurting the image of the project. That’s what I would expect, there are just too many people criticising this project.

The people of Kariba are threatened with a second disappointment: after it was revealed that South Pole skimmed off more money than promised, the promised income stream for the next two decades is now at stake.

Customers stop or ponder suing

This is also a new setback for customers such as Greenchoice, Gucci, Adyen and Volkswagen. They bought the credits to support their climate performance, but more than 60 per cent of them turned out to be worthless, based on South Pole’s own internal estimates.

South Pole denies that some of the credits it sold are worthless and believes it will be able to close the gap that arose in the future. But due to steps taken by the Zimbabwean government, the future of the entire project is at stake – and therefore also the chance to make up for any shortfalls.

Follow the Money previously reported that most of South Pole’s clients were reluctant to adjust their climate claims, even though their claims were often derived from the Kariba project. For example, two-thirds of Gucci’s climate neutrality claims were based on the fictional climate impact of South Pole’s project. This also applies to 40 per cent of all ‘green’ gas sold by Greenchoice. 

Greenchoice and Volkswagen are considering legal action against South Pole and recent developments might accelerate this. Their potential claims against South Pole could amount to tens of millions of euros. Both companies could not yet elaborate.

Dutch payment service provider Adyen told Follow the Money: ‘We have since stopped using carbon credits. You always try to do the best with the knowledge that we have. If that knowledge develops, we develop with it.’

Asked how Adyen plans to rectify its missed climate impact, the company cannot yet answer. 'We are closely monitoring the situation and waiting for all the facts to be known.'

The Global South is leading the way 

According to Jonathan Crook of the Brussels-based NGO Carbon Market Watch, countries in the Global South are now more often developing a strategy for domestic CO2 trade. ‘There is an increasing push to regulate, due to the lack of transparency on the market. You don’t know how much much money is floating around with the intermediaries in the Global North.’

According to him, the attention being paid to the ins and outs of the CO2 trade is something that is only happening in recent years. For example, at the climate summit in Glasgow in 2021, it was decided that countries should deduct the climate impact of CO2 projects in their country from their own climate impact. Crook: ‘That makes the countries affected exercise more caution on what projects they want to authorise and stricter checks are carried out to see whether, for example, the project’s climate impact has been overestimated. After all, such an overestimate would also mean that their own climate impact has actually been underestimated.'

A second development is that the voluntary CO2 market has risen sharply in value in recent years, which has also aroused the interest of governments. ‘Recent headlines have also pushed governments to take a more of a role in regulating this or making sure that they receive a fair share of benefits.’