Carbon credit standards body defends policies after former director accused of fraud

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Carbon credit standards body defends policies after former director accused of fraud

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The new chief executive of Verra, the world’s largest carbon credit registry, has defended its conflict of interest policy, after a former board member and client was indicted in the United States for fraud involving credits he had certified.

US federal prosecutors in New York accused former Goldman Sachs and Verra director Kenneth Newcombe earlier this month of falsifying data to obtain part of the $100 million invested in C-Quest Capital , a carbon credit developer backed by Macquarie and Shell.

Verra has issued 148 million carbon credits in 2023, more than twice as many as the second largest registry, the Switzerland-based Gold Standard, making it the largest verification body in an unregulated market worth around 1 billion dollars per year.

Mandy Rambharos, who became chief executive of the Washington, D.C.-based nonprofit in August, told the Financial Times that allowing Newcombe to serve on the registry’s board while her company was also developing projects carbon that she paid Verra to accredit was “not inappropriate”.

Rambharos previously spent 14 years with South African utility Eskom, where she represented South Africa in international carbon market negotiations and helped negotiate an 8-year public-private financing program. billion dollars intended to help the country transition away from coal-fired energy.

She took up her role at Verra more than a year after the resignation of its previous CEO. This followed reports, which she disputed, that the organization approved methodologies that exaggerated the amount of carbon dioxide saved when forests were protected.

Newcombe was a longtime member of Verra’s board of directors, from 2007 until the end of 2023. This included the period during which the registry gave approval to credits issued by 26 of its projects, based on inflated data that it would have been submitted to Verra between 2021 and 2023, in exchange for a fee per credit.

CQC projects overestimated emissions avoided by financing the shift to cleaner cooking fuels in developing countries and issued millions more credits than they should have, the company said. The registry has since canceled more than 5 million credits.

Verra said in June that it had reviewed its board’s “governance policies, processes and procedures, including its code of conduct and conflict of interest policy.”

The registry requires board members to disclose conflicts of interest and will in some cases ask them to recuse themselves or leave the board, Rambharos said. Being a board member “doesn’t give you any advantage. . . you still have to follow the rules.”

But barring project developer clients from joining the board would be “like saying you shouldn’t have a technical person on your board because you’re currently trying to digitize your processes,” she said. “The policy hasn’t changed.”

Newcombe faces up to 20 years in prison if convicted of offenses including wire fraud and securities fraud, according to charges unsealed by the U.S. Attorney for the Southern District of New York on October 2. He did not sue the holding company CQC Impact Investors. company after voluntarily disclosing the misconduct and fully cooperating.

The same day, the Commodity Futures Trading Commission filed a fraud complaint against Newcombe and fined CQC Impact Investors, in what it said was its first enforcement action for fraud in the voluntary carbon credits market. He did so shortly after finalizing the first federal guidelines for unregulated carbon offsets.

CQC declined to comment and a representative for Newcombe did not respond to a request for comment.

A person close to Shell said it would not use or trade the CQC credits it held until it received assurances of their integrity. Macquarie declined to comment on its investments in the group.

A proposal for safeguards for a global carbon trading system is expected to be presented at the United Nations climate summit in Baku next month, in a bid to boost the credibility of instruments meant to represent a ton of CO₂ reduced or saved.

Rambharos said of corporate purchasing of carbon credits: “It’s not just the Wild West, there’s a lot of rigor. »

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