Germany’s Federal Environment Agency (UBA) announced on Friday (September 6) that it has found “irregularities” in eight upstream emission reduction projects in China involving German companies, withholding 21.5 million tons of carbon emissions valued at €18 million (USD 20 million) without providing carbon credit quotas.
UBA President Dirk Messner stated in a statement released on Friday, “This means that the new UER certificates for these projects will not be issued to the market.”
The purpose of Upstream Emission Reductions (UER) is to achieve a certain level of carbon emission reduction before fuel enters subsequent processing (such as refining) or use, helping oil or gas companies reduce their overall carbon emissions. In return, companies receive carbon credit quotas that can offset their greenhouse gas emissions.
The investigation results from UBA revealed that seven out of the eight projects had “serious legal and technical inconsistencies,” while the eighth project was disqualified for starting prematurely and not meeting the requirements. The authority emphasized that only legitimate UER certificates will be allowed to enter the market.
Since 2020, German companies have been permitted to operate climate protection projects in China to meet their legal climate goals. Most of the projects certified by the Federal Environment Agency aim to reduce greenhouse gas emissions in oil production.
One UER carbon credit equals preventing one ton of carbon dioxide equivalent from entering the atmosphere. In recent years, due to many projects being found to exaggerate their green claims, such carbon credit quotas have been subjected to stringent scrutiny.
According to data from the global energy and commodity price reporting agency Argus Media, the current trading price for UER is around €85 per ton of carbon dioxide equivalent. These carbon credits reached a peak price of €440 per ton in 2022. False climate protection projects would ultimately impact ordinary consumers.
In June, German broadcaster ZDF revealed that a so-called climate protection project in Xinjiang Uyghur Autonomous Region, China, turned out to be an abandoned chicken coop, for which Germans were required to pay around €80 million in climate tax.
Currently, UBA and the German Emissions Trading Authority (DEHST) have approved 75 UER projects, with almost all of them located in China.
In January this year, a whistleblower accused the UER market of fraudulent activities. Subsequently, with the support of an international law firm’s representative office in China, relevant authorities have been investigating these allegations.
Messner stated, “The Federal Environment Agency will continue its investigation at full speed based on the investigation results provided by China.”
Europe launches investigation into fraudulent “green certifications” in China
As part of the anti-dumping investigation into Chinese biodiesel, the European Commission reported that imports of biodiesel and Hydrogenated Vegetable Oils (HVO) to the European Union tripled from 2021 to the start of its investigation period in December 2023, reaching 1.5 million tons.
At the same time, waste edible oils from China (a key raw material for biofuels) accounted for about 40% of the European supply in 2023.
Industry stakeholders are increasingly calling for stronger audit procedures to verify the green certifications of imported materials and expressing concerns about issues such as palm oil being misrepresented as waste edible oils.
Several European countries, including Germany and Ireland, have initiated fraud investigations, with market participants suggesting that such crackdowns could have a significant impact on renewable energy growth targets.