The Forest Mafia: How Scammers Steal Millions Through Carbon Markets

The resulting audits are not particularly reliable. When the UN conducted spot checks of carbon auditors Det Norske Veritas and SGS in 2008 and 2009, the investigation revealed that both firms certified projects without visiting them, according to the Interpol report. Both were temporarily suspended from audits. In some cases, the auditors were ill-qualified to complete the work, lacking either training or "proper technical skills" for the projects to which they were assigned. Of course, these reviews only occurred in-house and not on the ground, Interpol and Harper’s note. "With the number of projects taking place in remote areas of the world, there will continue to be limits in the United Nations [sic] ability to properly police those projects," Interpol writes. In addition, according to the 2007 estimates a UN official reported in the Interpol study, 15 to 20 percent of Clean Development Mechanism projects granted carbon credits did not adequately prove that the emissions savings were directly linked to outside investment. Though these findings were for projects on the compliance market, the likelihood of passing off false data on the voluntary market is even greater. 

Interpol's Stewart explained that even savvy investors don't really understand the process behind how the credits are generated, which makes it more difficult to detect when something is amiss. "It's not like a bag of rice or other commodities that can, at some point, be easily verified," he said. "Here, you'll have projects that are operating in very remote parts of the world, difficult to access. It becomes very difficult even for an independent auditor who goes, who can make it all the way out to that remote village or that remote town to verify that the project exists—and that they're doing what they say they're doing.” Carbon cowboys who set their sights on forest conservation can flourish quite easily because the product they sell, according to Tom Bewick, a Rainforest Foundation project manger who does work on the ground in Peru and Panama, is “an abstract commodity of nothing happening.”

In the voluntary market, it's really the investor's responsibility to make the determination whether the operators they're dealing with are legitimate or not. Because they're making a feel-good purchase, many times, it seems, they don't evaluate the sellers with much scrutiny. "Anyone can set up a project and sell voluntary carbon credits to anyone who will buy them," Chris Lang, of, wrote in an email. "The price can be whatever they can get away with. A large number of companies have been selling carbon credits as investments to members of the public -- targeting pensioners. Some people have lost their life savings to this scam."

In one such case, City of London police arrested Ian Macdonald and David Downes at London's Heathrow airport after a three-year trans-Atlantic investigation revealed that the pair had sold $9 million in fake or worthless carbon credits and shares to investors in the U.K. They had recruited cronies to use the phone lists from real companies to cold-call and convince their mostly elderly victims to sign up. "Some victims were contacted again months later and told companies they had invested in were the subjects of hostile takeovers and that they needed to buy more shares to protect their original investment. Individual losses ran as high as $600,000," a press release announcing the convictions read. The duo, which deposited the cash in American and Canadian bank accounts, lived ostentatiously. "We know they traveled the world," Detective Constable Claire Armson-Smith told British journalists. "Traveled business class. They had nice cars. Jaguars. Porsches. Nice clothes. Rolex watches.”

Another Australian, Brett Goldsworthy, who operates the company Shift2Neutral, has set up what he claimed were huge forest carbon credit projects that helped Australian PGA and the Sydney Turf Club events go carbon neutral. But, again, according to reporting by the The Sydney Morning Herald in 2011, the carbon projects, which Goldsworthy claimed were based in the Philippines, Democratic Republic of Congo, and Malaysia, were not actually happening. Instead, Shift2Neutral, which claimed to have produced more than $1 billion worth of carbon offsets, had no employees besides Goldsworthy and was operating out of a small office in a Westleigh, Australia, shopping center. ''I realized there was something strange about Brett when we were negotiating with the tribes in the Philippines and he said he had a boatload of commandos waiting offshore in case he needed a 'hot extraction,''' Robert Hick, an investor who never received any compensation or returns from Goldsworthy, told the Herald. A website for Shift2Neutral is still active and has a list of press releases that outline its projects. 


Predictions of future deforestation from a Conservation International project description. (Conservation International)

Even forestry projects that receive certifications through independent auditors are surprisingly easy to manipulate, according to experts. In vast thickets of jungle, like the ones Nilsson was after, maps of the land are usually either poorly labeled or inaccurate, according to Stewart. Boundaries between forest parcels can often be in dispute. When a developer claims the rights to a particular section of forest, flaws in titling records may make it very difficult to prove fraud.

A British company’s overestimation of the amount of carbon stored in the forests of Liberia would have exposed the country to $2.2 billion of financial risk, an amount higher than its annual GDP.

Corrupt officials and tribal leaders may also claim the authority to make a deal they can't approve, according to Rainforest Foundation's Bewick, who also worked as a legitimate carbon credit developer in Colombia a few years ago. "They're just as likely to be part of the deal if they get something," he said. "The people that get screwed are the forest communities."

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