Germany has cancelled carbon credits from 30 projects in China that claimed to reduce pollution from oil and gas extraction. Authorities now say the projects were suspicious, overstated, or fraudulent.
The claimed effect was to cut emissions tied to oil and gas drilling. Instead, regulators found the claimed cuts did not hold up.
The whole point of a carbon credit is that it pays for a real, measurable cut in pollution. If the cut never happened, the credit is just paper.
The move follows a report from Germany's environmental agency in mid-January, which Bloomberg obtained through a freedom-of-information request. A spokesperson for Germany's General Customs Directorate previously told Bloomberg the credits were purchased in good faith, suggesting buyers did not knowingly buy something fraudulent.
The credits were part of a system called UER, or upstream emission reductions. It was once seen as a model for well-governed carbon trading, with government oversight and third-party audits.
Now the whole system is being phased out. The UER scandal first erupted in 2024, but Germany had never named the companies involved until now.
Dozens of energy companies bought credits in the system, and ExxonMobil, headquartered in Texas, was one of them. A project backed by ExxonMobil's Belgian affiliate claimed to save close to 96,000 tons of CO2.
When carbon credits prove fraudulent, building wealth still comes down to steady habits, so grab the free Always Be Buying E-Book
At an estimated price of €44 per ton, the company would have spent about €4.2 million, or $4.9 million, on the credits. It is real money, but for a company ExxonMobil's size, it is a rounding error.
A spokesperson for ExxonMobil said, "The company always acts in accordance with all legal requirements and does not generally comment on investigations." The agency's report also names a project backed by commodity trader Vitol SA, though that project was withdrawn in November 2024. Vitol said it made no payments related to the project and received no carbon credits from it.
The 30 projects together claimed to save 2.1 million tons of carbon dioxide. That is about the same as the yearly exhaust from 500,000 cars, giving a sense of the supposed cleanup.
Germany is not the only country caught up in this. In May, Bloomberg reported that at least nine European countries, Germany among them, had bought carbon credits from projects with similar red flags. Several of those projects appeared to be entirely nonexistent.
That means the problem stretched across borders, not just one country or one company.
The German Environment Agency's report said Beijing Karbon had, "through deception, created the appearance of legitimate UER projects" "and was the main developer of 45 projects the agency deemed" suspicious. Bloomberg's investigation also identified Robin Wang, who moved between auditing and project development, with roles at Verico SCE and Beijing Karbon, according to documents reviewed by Bloomberg.
This story matters if you own carbon credits or invest in companies that buy them. When a credit can be cancelled after it was sold, the whole idea of paying for emissions reductions gets shakier.
Cancelled credits are worthless, and that is a real risk for anyone holding them.
But the reputational question is bigger. How do you know the green credits you buy are real?
Carbon markets only work if the reductions they pay for actually happen. When regulators start pulling credits and calling projects fraudulent, it raises the risk for every company holding them.
For investors, this is a reminder to look past the label. Cheap credits might be cheap for a reason.
Markets may be messy, but your investing plan can stay simple with the Always Be Buying E-Book