Carbon removal is one of the most talked-about tools in the global climate fight. Companies and governments are using engineered carbon dioxide removal (eCDR) projects. They aim to balance emissions that are hard to reduce. These projects are seen as a “safe haven” in the voluntary carbon market as they offer lasting, long-term carbon storage.
But a new report from Meta and Calyx Global warns of a critical blind spot. Many of these projects do not properly account for embodied emissions—the carbon “debt” created when building and running removal infrastructure. This includes the energy and materials used in construction, machinery, and infrastructure.
By excluding or amortizing these emissions, some registries allow carbon credits to be issued before any real climate benefit occurs. If projects stall or fail, the result is phantom removals—credits with no actual climate impact.
The report shows a need for quick reforms in these areas:
- Upfront accounting,
- Full transparency, and
- Better alignment across registries
With eCDR credit purchases growing at record speed, the stakes are rising fast.
The Boom in Engineered Carbon Removals
Engineered carbon dioxide removal, or eCDR, is a set of technologies. These technologies pull CO₂ directly from the air and store it safely for centuries.
eCDR approach differs from nature-based solutions like reforestation. It focuses on long-lasting carbon removal. It uses techniques like direct air capture (DAC), biochar, bio-oil, enhanced mineralization, and biomass carbon removal and storage (BiCRS).
These approaches are energy- and capital-intensive but are seen as critical for reaching net zero because they provide permanent storage.
Notably, interest in engineered removals has exploded. Purchase agreements for future eCDR delivery grew seven times from 2022 to 2023. Then, they nearly doubled again to 8.2 million credits in 2024, according to cdr.fyi.
Another 25 million credits have already been bought in 2025, with Microsoft leading the way. At the same time, traditional nature-based credits, like afforestation, have slowed down a lot. This increase in demand has opened up more interest in engineered options.
- SEE MORE: Microsoft (MSFT Stock) Tops Q2 2025 Record-Breaking Surge in Durable Carbon Removal Credit Purchases
Buyers see eCDR as more durable and technically verifiable. Yet without proper embodied emissions accounting, the credibility of these credits is at risk.
The report warns that if projects shut down early, the embodied carbon debt may never be repaid. This leaves the market with phantom credits or removals that never actually occurred.
How Embodied Emissions Get Overlooked
Carbon markets usually track process emissions, such as energy used in operations. These emissions are measured in real time. But embodied emissions are treated inconsistently. Some registries ignore them. Others allow developers to amortize emissions, spreading them over many years of the project.
This means projects can start issuing credits even when they are still net emitters. For example:
- A biochar project might have embodied emissions equal to 20% of its first year’s credits. If those emissions are spread out, the project sells credits as if it has already removed CO₂. But the atmosphere still has more CO₂.
- A DAC facility with heavy upfront infrastructure may take years to break even. If the project halts early, its credits will have overstated its climate benefit from the start.
This accounting gap creates a major risk for buyers who assume their carbon offsets are delivering immediate impact. The report stated:
“It makes it difficult for a buyer to understand when projects start to deliver actual atmospheric benefits…Until the amortization period is over, projects will issue more credits than the net removals they have delivered. The true benefit comes when those over-credited removals have also been paid back.”
How Registries Differ: A Patchwork of Rules
The white paper highlights wide differences among carbon standards:
- No Accounting: Registries like the Verified Carbon Standard (VCS), American Carbon Registry (ACR), and Climate Action Reserve (CAR) do not require embodied emissions accounting. This means credits are almost always overstated.
- Default Deduction: Some standards, like Carbon Standards International, apply only small default deductions—not tied to actual project data.
- Amortization Allowed: Gold Standard, Puro.Earth, and others require accounting but allow amortization, sometimes over decades. A project could issue credits for years before becoming truly net-negative.
- Upfront Deduction Option: Isometric is the only registry that allows—but does not require—upfront accounting. This method provides the highest integrity but is rarely chosen.
This patchwork approach undermines transparency and comparability, creating uncertainty for investors and credit buyers.
When Offsets Aren’t Real: The Phantom Removal Problem
The risk of “phantom removals” is not just theoretical. If embodied emissions are amortized and a project ends prematurely, the carbon debt remains unpaid. Yet the credits already sold continue circulating in the market, allowing buyers to claim offsets that never happened.
A theoretical eCDR project (represented in the chart below) shows how amortizing embodied emissions can misrepresent climate benefits. The facility removes 1,000 tCO₂ annually but emits 400 tCO₂ during operations and carries 2,000 tCO₂ of embodied emissions from construction.
By spreading these embodied emissions over 10 years, the project claims 400 tCO₂ net removals each year. However, the atmosphere initially sees a “carbon debt,” with the project acting as a net emitter for three years. Carbon credits issued during this period are overestimated by up to 300% before balancing by year 10.
This gap not only erodes trust in carbon markets but also raises reputational risks for companies using these credits to meet climate pledges. For firms that value credibility, like Microsoft and Meta, phantom credits can hurt their net-zero goals.
What Needs to Change
The Meta–Calyx Global paper calls for immediate reforms to strengthen eCDR crediting integrity:
- Upfront Accounting – Require all upstream embodied emissions to be deducted in the first reporting period.
- Lifecycle Transparency – Publicly report full life-cycle emissions, including upstream (construction), ongoing (maintenance), and downstream (decommissioning).
- Buyer Safeguards – Encourage buyers to be cautious. They should “right-size” claims to cover uncounted emissions or pair credits with others that offer durability.
- Registry Reform – Push registries to standardize approaches and eliminate amortization practices that delay real climate benefits.
Buyers should ask for more transparency. They can delay using credits until projects show net removals. Stacking credits can also help hedge risks.
Why Credibility Matters in a Net-Zero World
Engineered removals are central to global net-zero strategies. The Science-Based Targets initiative (SBTi) has emphasized its importance. And demand from corporations is rising rapidly. Because these technologies are often energy- and infrastructure-intensive, embodied emissions can represent a large share of their footprint.
The market cannot afford another crisis of confidence like past controversies in carbon markets. Fixing embodied emissions accounting now can help registries and buyers ensure eCDR meets its promise. This way, it won’t create more questionable credits.
Meta and Calyx Global’s report sends a clear warning: ignoring embodied emissions risks flooding the market with phantom credits. With eCDR purchases growing at record speed, there’s a need to ensure transparency and credibility. The path forward requires upfront accounting, registry alignment, and greater buyer diligence.
The post Meta and Calyx Global Warn Engineered Carbon Removal Boom Risks “Phantom Credits” appeared first on Carbon Credits.
Most businesses that decide to act on their net-zero targets reach the same point of friction. Buying carbon credits has meant tracking down brokers, sitting through sales calls, and requesting a quote just to learn a price, sometimes with limited proof of what you are buying.
The earnings calls that quietly reframed climate from sustainability question to operating risk.
Three earnings calls in the last 18 months tell the story without any help from a press release.
Hershey, May 2024: cocoa price exposure compresses margin, and the company attributes part of the cost shock to West African weather. Olam, July 2024: coffee climate exposure quantified in the annual report. JBS, January 2025: supply chain climate disclosures expanded materially in response to investor pressure and regulatory expectation. None of these companies issued the announcement as climate news. They issued it as financial news. The climate-linked supply chain risk did not arrive with a sustainability framing; it arrived as a P&L line.
You are probably reading this article because you suspect the same thing is happening to your business. This piece walks through what is showing up on which earnings calls, how procurement and finance leaders are quantifying the exposure, and what serious corporates are doing about it before the regulator asks.
Where climate risk has already appeared in earnings
The pattern is consistent across resource-intensive sectors. A weather event compresses supply, the price spikes, the cost flows through the income statement, and the analyst on the call asks whether the event is anomalous or structural. Increasingly, the honest answer is the second one.
Cocoa is the cleanest example. The 2023 to 2024 West African harvest fell sharply on the back of erratic rainfall and disease. Cocoa futures more than tripled. Companies with concentrated West African sourcing absorbed the cost; companies with diversified sourcing absorbed less. The exposure was not climate as ESG topic. It was climate as cost of goods.
Coffee follows the same pattern. Brazilian and Vietnamese harvests have moved on weather more sharply across the last several seasons. Roasters with long-tenor supplier relationships and origin diversification have managed the volatility; roasters with spot-market exposure have not. Wheat, sugar, palm oil, beef: the same dynamic in different commodities, a pattern the IPCC AR6 Working Group II report projects will intensify across agricultural systems through mid-century.
What this means: climate risk is no longer a footnote in the 10-K. It is a line item the CFO has to explain on the call.
The three commodity exposures that hit margin first
For most companies with material Scope 3 exposure, three exposures dominate the near-term P&L risk.
- Concentrated single-origin sourcing in a climate-vulnerable region. If your tier-one supply for any material commodity sits in one geography, you have a concentration risk that climate amplifies. Diversification across origins is the obvious hedge, but it takes years to build and requires relationships you cannot acquire by tender.
- Supplier financial fragility under climate stress. Smallholder farmers, who supply a large share of the global cocoa, coffee, and palm oil market, do not carry the balance sheets to absorb yield shocks. When yields collapse, they exit. When they exit, your supply base shrinks, and the surviving suppliers raise prices. The risk is structural, not cyclical.
- Logistics and storage exposure to extreme weather. Hurricane disruptions to Gulf shipping, drought-driven Panama Canal restrictions, flooding in European inland waterways: each of these has moved input costs in the last three years, a pattern documented in Munich Re’s natural catastrophe data. The exposure shows up as a one-quarter event in the financial press but accumulates over time on the cost line.
TCFD and ISSB disclosure changes
The disclosure architecture has now caught up with the risk. The Task Force on Climate-related Financial Disclosures, whose recommendations are now embedded in the ISSB’s IFRS S2 climate standard, requires companies to disclose climate-related risks across physical and transition categories, with quantification where possible.
For physical risk specifically (the climate-linked supply chain risk you are reading about), the disclosure must address both acute exposures (extreme weather events) and chronic exposures (gradual changes in temperature, precipitation, and growing seasons). The disclosure must address the time horizon over which the risk is material, the parts of the value chain exposed, and the financial impact under different scenarios.
The CSRD imposes similar requirements under European law, with double materiality (both financial and impact materiality) embedded in the assessment. The practical effect: your auditors and your investor relations team now need a defensible answer to the climate-linked supply chain risk question, and the answer needs to be quantified.
What procurement and finance can do now
Three actions matter near-term.
Map your exposure. Most companies do not have a clear view of which tier-one and tier-two suppliers sit in which climate-vulnerable geographies. Without the map, you cannot quantify the risk, and without the quantification, you cannot disclose it credibly. The map is the foundation, and World Resources Institute climate risk research provides useful public tooling to start.
Diversify and deepen, in that order. Diversification across origins reduces concentration risk, but the deeper move is to invest in the resilience of the suppliers you already have. Regenerative practices, agroforestry, soil health interventions: these reduce yield volatility under climate stress and protect your input cost trajectory.
Embed the climate spend inside procurement, not outside it. Treating climate risk as a sustainability cost line subordinates it to the ESG budget. Treating it as a procurement and resilience investment puts it in the budget that matters, which is the cost-of-goods budget that the CFO defends quarterly.
Nature-based supply chain investments are the asset class designed for exactly this purpose. They sit inside the value chain, they reduce climate-linked supply risk, they generate verifiable Scope 3 reductions, and they produce the documentation an auditor and a regulator can both test.
If you are quantifying climate-linked supply chain risk in advance of the next earnings cycle or the next disclosure period, the carbon and sustainability experts at Carbon Credit Capital can help you map your exposure and structure a Dual-Value Model response that addresses reduction, resilience, and disclosure-readiness in a single program. Schedule a consultation.
More and more small and medium-sized businesses are hearing the same question from their larger customers: What is your carbon footprint? That question now travels down entire supply chains, and it arrives next to tender requirements, certification criteria, and rising customer expectations.
-
Climate Change1 year ago
Guest post: Why China is still building new coal – and when it might stop
-
Greenhouse Gases2 years ago嘉宾来稿：满足中国增长的用电需求 光伏加储能“比新建煤电更实惠”
-
Greenhouse Gases1 year ago
Guest post: Why China is still building new coal – and when it might stop
-
Climate Change2 years ago嘉宾来稿：满足中国增长的用电需求 光伏加储能“比新建煤电更实惠”
-
Renewable Energy11 months agoSending Progressive Philanthropist George Soros to Prison?
-
Climate Change2 years ago
Bill Discounting Climate Change in Florida’s Energy Policy Awaits DeSantis’ Approval
-
Greenhouse Gases1 year ago
嘉宾来稿：探究火山喷发如何影响气候预测
-
Carbon Footprint2 years agoUS SEC’s Climate Disclosure Rules Spur Renewed Interest in Carbon Credits