Companies using carbon credits to ‘cover their tracks’, says iron ore billionaire

<span>Photograph: Ben Makori/Reuters</span>
Photograph: Ben Makori/Reuters

Carbon offsets are questionable, dangerous and far from a good investment for companies hoping to reduce their environmental impact, Australia’s richest man has said.

Andrew Forrest, a billionaire turned philanthropist who made his fortune in mining and minerals, is turning his vast iron ore extraction operation, Fortescue Metals Group, into a zero carbon business.

Unlike most companies, Fortescue is not seeking net zero greenhouse gas emissions but what Forrest described as “real zero”. To achieve net zero, many companies use carbon credits, awarded for projects such as planting trees or preserving existing forests, to count against their greenhouse gas emissions.

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Forrest thinks this is a mistake and instead plans to use entirely renewable energy and zero-carbon technologies to transform his business.

“Companies think they can continue piling emissions into the world, and cover their tracks with carbon offsets,” he said.

“But carbon credits are really questionable,” he told the Guardian in an interview in London. “We are pushing beyond carbon credits.”

Having examined the market for carbon credits, Forrest has concluded that only about 10% to 15% of available credits represent real reductions in greenhouse gas emissions.

“I am an ecologist and I have seen how these credits get valued. Some are from just planting trees where trees would have been growing anyway,” he said. “Carbon credits are dangerous.”

They are being relied upon increasingly as companies seek to become net zero but questions about the market for offsets are intensifying. Earlier this week, the airline Easyjet announced it would no longer use carbon offsetting to reach its net zero goals, but will invest further in low-carbon technologies for aviation.

Related: Easyjet to stop offsetting CO2 emissions from December

The Guardian conducted a wide-ranging investigation of the market for forestry credits last year and found numerous problems, including “phantom credits” and questions over whether credits awarded for preserving and planting trees represented genuine “carbon sinks”.

Forrest said the carbon markets merited deep investigation. “There are all sorts of cranks out there selling carbon credits,” he said. “This abuse must stop.”

Forrest’s Minderoo Foundation charity targets plastic pollution , modern slavery and the climate crisis. Nicknamed Twiggy, he has announced plans to give away most of his $27bn fortune, has been criticised in Australia for controversial proposals on welfare for low-income people, for mining on Indigenous land, and by those who argue that tax is a better redistribution of wealth than philanthropy.

Fortescue, whose profits topped US$6bn (£5.5bn) last year, will use solar and wind power, electric vehicles, hydrogen and hydro-electricity with pump storage to make its operations zero carbon by the end of this decade. Surplus renewable energy would be used to pump water uphill during times of excess generation, to be released to generate power when needed.

Forrest insisted the strategy was not only technically feasible but could be achieved at a profit, thanks in part to the plummeting cost of wind and solar energy, and the soaring price of fossil fuels.

“The biggest cost saving is on buying the fossil fuels,” he said. “Wind and sun don’t send you a bill at the end of the month. We have seen [from the Ukraine war and global gas crisis] how foolhardy it is to rely on fossil fuels.”

Heavy industries, such as mining, have long been regarded as among the hardest sectors to decarbonise, but Forrest said the falling costs of renewable energy generation and the rapid development of technologies, such as batteries and hydrogen, meant there was little excuse for the sector not to move swiftly.

He urged other companies to follow his lead. “The question is not why are we doing it – it’s why everyone else is not doing it.”