Oil and gas giant BP has been caught up in a controversy involving low payouts to Mexican villagers participating in its carbon credit program, designed to improve forest conservation while offsetting the company’s greenhouse gas emissions.
A report published this month in Bloomberg Green said BP has been buying carbon credits from numerous Mexican villages at a shockingly low price, raising questions about the carbon credit market’s viability as a tool for transitioning companies to green practices.
“BP has found a carbon bargain in some of Mexico’s poorest areas. In more than a dozen places identified by Bloomberg Green, the oil company has bought offsets at an enormous discount,” the report said, pointing out that many residents didn’t know the true market price for the credits they were selling.
With a funding match from USAID, BP paid $2.5 million to start the CO₂munitario program in 2019, eventually growing to 59 rural communities and around 200,000 hectares (nearly 500,000 acres) of land. Around 1.5 million offsets were purchased for $4 each, the report said. The program was administered by Mexican NGO Pronatura, which said the figure was reached by looking at 2019 carbon tax prices.
In some communities, residents worked for years conserving existing forests and replanting before receiving their first payment, what ended up being equivalent to just one week of labor for other conservation programs they had participated in. Some sources in the report called the deal a “rip off,” “sham” and “carbon colonialism” that takes advantage of poor, rural communities.
Premium carbon credits — each representing one ton of conserved carbon — go for around $7, the report said. Taking into account the additional $2.30 to support poor communities, what BP paid ended up being less than half of the market value.
“Four dollars per ton doesn’t even begin to cover a real lasting change on how land is used,” Charlie Donovan, a former BP executive, told Bloomberg Green. “I’ve never seen an instance where $4 per ton was enough to move the needle.”
Carbon offsets are supposed to incentivize local communities to maintain their forests and even reforest areas that would otherwise be devoted to farming and cattle ranching. If big companies can undermine the market by paying communities a “pittance,” sources in the report said, it could render many carbon offset programs useless.
Carbon credits have been widely criticized for allowing companies to continue to pollute, especially when their credit programs aren’t producing results. On the other hand, they give companies a chance to reduce their emissions while figuring out how to fully transition to more sustainable practices for the long-term.
“Carbon offset schemes incentivize land grabbing, human rights violations, and enable corporate polluters, like BP and Chevron, to continue profiting from their pollution while claiming forest protection,” Leila Salazar-López, executive director of Amazon Watch, told Mongabay. “What is truly needed is a real commitment to permanently protect forests, stop industrial and fossil fuel extraction, respect the rights of Indigenous and forest peoples.”
A BP spokesperson told Bloomberg Green that it aims to create conditions that help landowners generate revenue from the protection, restoration and sustainable management of forests.
The carbon credit project in Mexico is also tied to conservation groups like the World Resources Institute (WRI), which has helped guide industry standards and best practices for carbon offset programs and acted as a watchdog for climate solutions in the private sector, the report said.
But the organization doesn’t have a lot of experience managing offset programs of its own, and some critics in the report said it’s a conflict of interest for WRI to be overseeing industry standards while participating in that same industry.
“We know and acknowledge it’s a low price,” Javier Warman, WRI Mexico’s Forest Director, told Bloomberg Green, adding that, when the project started, “nothing was moving and there was no demand, so for the communities, this decision of going with $4 was better than nothing.”
In response to Bloomberg Green’s reporting, BP has reportedly agreed to increase the pay in some communities. The report didn’t say what the new figure will be.