Verra announced an update on the ongoing compensation process for carbon credits linked to the 37 rice cultivation projects in China that were rejected in August 2024. The news sheds light on the progress made toward compensating over-issued Verified Carbon Units (VCUs). It also details the remaining steps needed to rectify the situation.
Inside Verra’s Actions to Rectify Carbon Credit Discrepancies
In August 2024, Verra, a leading organization in the voluntary carbon market (VCM), decided to reject 37 rice cultivation projects in China. The rejection followed a thorough review that raised concerns about how these projects were being managed.
Verra found that the projects did not follow proper methods, and there were problems with the audits done by validation and verification bodies (VVBs). These issues led to more carbon credits being issued than were actually earned by the projects.
Of the 37 rejected projects, 25 were found to have over-issued VCUs, which are critical units in the carbon offsetting market. These credits are used by companies and organizations to offset their carbon emissions.
Any discrepancies in the issuance of these credits undermine the integrity of the entire carbon market. In other words, when too many credits are issued, it makes the carbon offset market less trustworthy.
As a result, Verra took swift action, imposing sanctions on the companies involved and VVBs to ensure accountability and maintain the credibility of its registry.
4.56 Million Credits at Stake: Compensation for Issued VCUs
As of January 2025, Verra confirmed that compensation has been made for the first set of over-issued VCUs. A total of 480,000 VCUs from 5 of the affected projects have been compensated by two of the project proponents:
- Vitol (China) Energy Co. Ltd. and
- Timing Carbon Asset Management Co. Ltd.
These companies have worked directly with Verra to ensure that the over-issued VCUs were fully compensated for. This is an important step in fixing the issue and making sure the carbon credits are correct.
However, there are still 4,080,000 VCUs that have not yet been compensated. These credits are linked to two main groups of projects managed by:
- Search CO2 (Shanghai) Environmental Science & Technology Co. Ltd., and
- Hefei Luyu Agriculture Technology Co. Ltd.
Sanctions and Next Steps
Verra has taken a firm stance against the non-complying parties. Search CO2, which is responsible for 10 rejected projects and 2,220,000 outstanding VCUs, has had its registry account suspended.
If the company does not compensate for the over-issued VCUs, Verra will permanently close its account. This shows Verra’s commitment to holding companies accountable and ensuring the integrity of the carbon credit market.
The remaining 1,860,000 VCU credits are linked to projects managed by Hefei Luyu Agriculture Technology Co. Ltd.
Hefei had an agreement with Shell Energy (China) Limited to manage these projects, but in September 2024, they ended their agreement. This left the projects without an active account holder on Verra’s registry.
As a result, Verra moved these projects to an administrative account and is now requiring Hefei to resolve the issue before they can open a new account or register new projects.
Integrity First: How Verra Is Shaping the Future of Carbon Markets
Verra’s actions in response to the rejected rice cultivation projects are a direct reflection of its commitment to maintaining the integrity, transparency, and quality of the VCM. According to Justin Wheler, Verra’s Chief Program Management Officer,
“This was the first time Verra imposed such sanctions, demonstrating Verra’s commitment to greater integrity, transparency, and quality in the voluntary carbon market. Verra took decisive action at every level at which concerns were identified. Verra is committed to continual improvement of its standards programs, particularly as we address issues arising from inappropriate marketplace conduct.”
In addition to its work with the project proponents, Verra is also finalizing its review of the responses received from the four VVBs that were involved in the rice cultivation projects.
The largest carbon registry issued non-conformity reports to these VVBs. Depending on the findings of the review, further sanctions may be imposed. These could include suspending the VVBs’ ability to validate or verify projects in the future, which would have significant implications for their operations in the carbon market.
The outcome of this review will be crucial in determining the long-term credibility of the VVBs involved. It will send a strong message about the importance of ensuring quality audits and transparency in issuing carbon credits.
Verra’s handling of rejected rice projects in China shows its commitment to carbon market integrity. How the carbon standard manages this situation will have a big impact on the future of the carbon credit market, especially as more and more companies turn to carbon credits to help meet their decarbonization targets.
By addressing discrepancies, ensuring carbon credit accuracy, and holding VVBs accountable, Verra aims to build trust. Its focus on transparency and quality will shape carbon credit standards, supporting global climate goals and the transition to a low-carbon future.