Leading academics and watchdog groups allege that the UN's main offset fund is being routinely abused by chemical, wind, gas and hydro companies who are claiming emission reduction credits for projects that should not qualify. The result is that no genuine pollution cuts are being made, undermining assurances by the UK government and others that carbon markets are dramatically reducing greenhouse gases, the researchers say.
The criticism centres on the UN's clean development mechanism (CDM), an international system established by the Kyoto process that allows rich countries to meet emissions targets by funding clean energy projects in developing nations.
Credits from the project are being bought by European companies and governments who are unable to meet their carbon reduction targets.
The market for CDM credits is growing fast. At present it is worth nearly $20bn a year, but this is expected to grow to over $100bn within four years. More than 1,000 projects have so far been approved, and 2,000 more are making their way through the process.