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.
Insetting program design starts with your supplier map. The carbon claim comes much later.
Consider a coffee procurement team that funds a farm intervention before checking its sourcing data. The supplier aggregates coffee lots from several regions. The buyer lacks farm-level traceability. Another purchaser expects to report the same outcome. A more attractive project brochure solves none of these problems.
If the distinction between a value-chain intervention and a purchased credit is still open, read CCC’s Insetting vs Offsetting guide before you set the brief.
Insetting program design begins with the purchasing relationship and works outward. You need to decide 1) where an intervention belongs, 2) what business problem it addresses, 3) who pays for it, 4) how results will be measured, and 5) what the evidence will let you say about them. This five-step playbook turns that sequence into a procurement plan.
Step 1: Insetting program design starts with supplier mapping
Start with the commodities that matter most to your Scope 3 inventory and sourcing continuity. Ask finance for spend by supplier, sustainability for the emissions baseline, and category managers for origin and volume records. Then identify which suppliers can trace material to a jurisdiction, sourcing region, producer group, or individual land-management unit.
The level of traceability affects what you can account for. Under the GHG Protocol Land Sector and Removals Standard, the spatial boundary for purchased land-based products depends on the traceability associated with each volume. Farm-specific factors or removals require physical traceability through an acceptable chain-of-custody model. A contract with a tier-one trader, by itself, does not establish a link to the farms behind its deliveries.[1]
Build a first-pass table with five columns: commodity and annual volume; supplier and origin; current traceability level; land-use and production risks; and the business owner who can change the purchasing terms. Mark missing data plainly. A blank cell is cheaper to fix before a program starts than after a claim is drafted.
If your company sets an SBTi Forest, Land and Agriculture target (FLAG), keep its land-related target boundary separate from energy and industry emissions. The current FLAG guidance also requires relevant companies to assess primary deforestation-linked commodities in their value chains.[2]
Step 2: Choose a commodity and jurisdiction for a pilot
Select one supply corridor where the sourcing connection can be established and procurement has a reason to stay. A useful pilot has repeat purchases, suppliers willing to share records, an intervention matched to a diagnosed problem, and a defined plan to measure the result. Carbon potential alone is a poor selection rule if the supplier cannot deliver the crop your business needs.
Compare candidate regions on land-use risk, supplier concentration, local rights and tenure, the availability of baseline data, and exposure to drought, erosion, or forest conversion. Check the relevant legal requirements separately. A nature project does not satisfy a due-diligence obligation merely because it has a carbon method attached.
Consider a coffee buyer sourcing from two districts. In the first, producer-group records identify the farms, while recent dry seasons have increased rejected green coffee lots. In the second, deliveries pass through several intermediaries and farm origins are unknown. Pilot shade management in the first district, with local agronomic advice and quality checks built into the plan. The buyer can trace purchases there and test the intervention against a defined sourcing problem.
Use a short decision memo to record why the selected corridor beats the alternatives, what remains uncertain, and what would stop the pilot. That memo is the first control against a project drifting toward whatever happens to photograph well.
Step 3: Design the supplier engagement and commercial model
The intervention needs an owner on each side of the contract. Decide who supplies planting material or training, who maintains the practice, who bears the cost if a harvest disappoints, and how long the buyer expects to purchase from participating suppliers. Where smallholders participate, budget cash flow and technical support for practices that offer a later return.
Put these terms in a supplier agreement or pilot addendum. It should cover eligible farms and volumes, consent to data collection, access for monitoring, any land or carbon rights that matter, benefit sharing, and what happens if the purchasing relationship ends. Ask local counsel and producer representatives to review the arrangement. The Accountability Framework is a useful reference for supply-chain work involving forests, ecosystems, and human rights.[3]
Avoid assigning an automatic carbon benefit to the buyer. The contract should say which party has the right to report each outcome, how overlapping claims will be checked, and how any issued credits will be handled. A reduction reported in a buyer’s inventory cannot simply be sold for someone else’s offset claim without an accounting review. SBTi FLAG guidance excludes purchased credits used as offsets from near-term FLAG target achievement.[2]
Set commercial measures beside environmental ones: delivered volume, rejection rate, supplier retention, and procurement cost. They tell you whether the program works as a supply-chain investment, even if carbon accounting takes longer to resolve.
Step 4: Build monitoring, reporting, and verification before rollout
Agree on the baseline and data flow before paying for a full rollout. Identify the land units or sourcing regions in scope, the practices that change, the records suppliers already keep, and the additional measurements the program requires. Decide which data can come from field visits, transaction records, or remote sensing, and who checks each source.
For carbon, separate three questions. Did the practice happen? Did emissions or removals change under an applicable method? Can the buyer attribute a defensible share to its purchased goods without double counting? The GHG Protocol’s 2026 guidance includes dedicated chapters on spatial boundaries, data and methods, evaluating actions, credited outcomes, and assurance.[1] These are distinct jobs. A photograph of a planted tree answers only part of the first.
CCC’s MRV and Additionality article explains the separate evidence questions a project reviewer will ask.
Create an evidence file for every reporting period: dated supplier and farm records, purchase volumes, methods and emission factors, uncertainty, quality checks, and changes from the baseline. Specify who can challenge the data and how corrections are recorded. If a project also seeks credit certification, keep project accounting and corporate inventory accounting separate. The GHG Protocol says its land standard focuses on entity-level inventories and does not set the rules for credit certification.[4]
Start with the minimum viable measurement design that can survive review. Add complexity when the pilot tells you which data actually changes a decision.
Step 5: Decide what can be reported and claimed
Insetting program design needs reporting rules before the marketing copy. Procurement, sustainability, finance, and legal should agree on four distinct outputs: operational performance; observed land or nature outcomes; inventory effects, if the accounting criteria are met; and any separately issued credits. One dashboard can display them, but they should not share a single unqualified headline.
SBTi FLAG guidance allows certain land-based removals within a company’s operations or supply chain to contribute to FLAG pathways, subject to criteria including permanence, traceability, data quality, and allocation. It does not allow purchased offsets to meet near-term FLAG targets.[2] Eligibility therefore depends on evidence and the applicable target rules, not on calling an activity “insetting.”
Draft a claims register. For each proposed sentence, record the period, boundary, data owner, calculation method, reviewer, and whether the result is measured, estimated, or still a goal. If the evidence supports only “we funded a pilot with 200 farms,” say that. Do not turn a funding fact into a verified emissions reduction.
What good looks like by year three
Treat year three as a review point, not a promised payback date. A mature pilot should have mapped participating supply volumes, a stable supplier agreement, a repeatable data collection process, and a comparison of commercial and environmental results against the baseline. It should also have a documented answer for outcomes that cannot be included in the buyer’s inventory.
Scale only where the pilot improves a sourcing decision and the evidence can follow the product. If neither condition holds, redesign the intervention or change the corridor. A disciplined program can conclude that a site is unsuitable. That is useful procurement intelligence.
Discuss your insetting program with CCC
Carbon Credit Capital designs nature-based supply chain investments around sourcing needs and measurable sustainability outcomes. Schedule a consultation with our carbon and sustainability experts to map your tier-one supplier network, FLAG exposure, and first pilot decision.
Sources
[1] GHG Protocol, Land Sector and Removals Standard, version 1.1, and companion Guidance, June 2026: https://ghgprotocol.org/land-sector-and-removals-standard ; https://ghgprotocol.org/land-sector-and-removals-guidance
[2] Science Based Targets initiative, Forest, Land and Agriculture Science-Based Target-Setting Guidance, version 1.2, March 2026, especially pp. 16–17, 37, and 41: https://sciencebasedtargets.org/resources/files/SBTiFLAGGuidance.pdf
[3] Accountability Framework initiative, Accountability Framework and guidance for companies: https://accountability-framework.org/
[4] GHG Protocol, Frequently Asked Questions: Land Sector and Removals Standard, questions 10 and 18: https://ghgprotocol.org/blog/frequently-asked-questions-land-sector-and-removals-lsr-standard
Nature-based carbon investments deserve consideration when they address a specific business dependency and produce outcomes you can measure. Imagine Moonbucks, a global coffee roaster planning next season’s espresso blend. It is considering natural Grade 4 coffee from Jimma, in southwestern Oromia, Ethiopia. Its sourcing decisions affect the roasting schedule and the cash tied up in coffee purchases. Moonbucks needs to understand which measures could protect that supply, what they would cost and how it would judge the results.
1. Define the sourcing problem before choosing a project
Moonbucks needs a dependable component for its espresso blend. Its procurement team wants continuity of volume and an agreed cup profile. Replacing a shipment at short notice could require new sample approval and changes to the blend, and given the schedules for cultivation, processing, and freight delivery, is practically impossible. Moonbucks needs to get this right, and its initial concern is inconsistent deliveries. It commissions an assessment of the supplying farms and post-harvest chain. The questions cover land condition, harvest availability and whether drying or storage problems are affecting saleable lots.
This distinction changes the investment brief. A tree-planting proposal cannot be assumed to fix drying problems. Better storage cannot restore eroded land. The team must establish which problem exists before selecting the response.
CCC’s guide to finding nature-based solutions in your supply chain explains where to look. Here, the next task is to turn a broad concern into a testable proposal.
2. Develop nature-based carbon investments around the actual supply chain
The assessment would trace Moonbucks’ purchases back through the exporter and supplying producer groups. Which farms supply the contracted lots? Who controls land-management decisions? How long does the buyer expect to maintain the purchasing relationship?
Furthermore, Jimma natural Grade 4 cannot be treated as interchangeable with every Ethiopian coffee. Moonbucks would need to test any substitute against its own blend and quality requirements.
Suppose Moonbucks’ assessment identifies an opportunity to maintain shade trees and restore vegetation along exposed streambanks. The IPCC describes agroforestry as a way to store carbon in vegetation and soil, with potential benefits for erosion control and water quality.1 Moonbucks would need local advice on species, growing conditions and maintenance before deciding how these measures fit its sourcing plan.
The proposal now has a defined sourcing connection and a candidate intervention. The next steps are to test its effect on production, assess carbon eligibility and build the financial case.
3. Compare the proposal with other ways to protect supply
WBCSD’s Nature-based Solutions Blueprint recommends comparing nature-based options with other responses across their benefits and costs.2 For Moonbucks, that means evaluating the landscape proposal alongside drying improvements, storage controls and alternative sourcing arrangements.
The product’s natural-process designation matters. Moonbucks should examine the drying and dry-milling chain alongside land conditions. Its team would check storage practices, contamination risks and incoming-lot quality to see whether problems arise before or after the coffee leaves the farms.
The revised proposal might combine land stewardship with separate post-harvest controls. Each component needs its own purpose and budget. A sustainability label should not obscure which activity is expected to solve which problem.
The project develops as the evidence improves. Its scope should follow the diagnosis rather than preserve the first idea unchanged.
4. Establish what the carbon outcome could count toward
Moonbucks’ sustainability team now tests the proposed carbon case separately from the sourcing case. Is the objective a measurable change in Moonbucks’ value-chain emissions, verified credits for separate voluntary use, or distinct outcomes under carefully defined arrangements?
Scope 3 covers value-chain emissions. A purchasing relationship alone does not prove that a farm intervention can be included in Moonbucks’ inventory. The team needs an applicable accounting method, defensible boundaries and evidence supporting attribution.
SBTi’s FLAG Guidance (forest, land and agriculture), version 1.2, says purchased credits used as offsets cannot meet near-term FLAG or energy and industry targets. Eligible land-based removals are subject to accounting requirements.3 Moonbucks needs to test its proposal against those rules before including an outcome in its targets.
For Moonbucks’ Jimma proposal, maintaining existing trees and establishing new vegetation could involve different carbon questions. Specialists must examine the baseline and additionality, meaning what changes because the project proceeds. They must also assess measurement and the risk that stored carbon is lost. CCC’s MRV and additionality article introduces those tests.
Until that work is complete, Moonbucks should not budget an assumed Scope 3 reduction or credit-sale receipt. Direct emissions reductions remain the priority.
5. Build a financial case that survives weaker assumptions
Moonbucks’ finance team would now build a multi-year budget. UNEP’s State of Finance for Nature 2023 compares current finance with the investment needed to meet climate, biodiversity and land-restoration goals.4 The company would cost its proposed activities, farmer participation and ongoing monitoring. Verification, where required, is a separate expense. Maintenance and responsibility for replacing failed plantings must remain visible after the initial establishment budget ends.
Operational benefits need equally careful treatment. If fewer rejected lots reduce emergency purchasing, count that saving once. Do not add “supply resilience” as another financial benefit when it represents the same avoided cost.
Moonbucks should compare a base case with slower benefits, higher implementation costs and no carbon revenue. It should also distinguish production outcomes from quality and shipment outcomes. A single good harvest would not prove that the landscape intervention caused better delivery performance.
A project can remain worth funding even when its carbon case needs more work. That decision must rest on the operational evidence and the company’s objectives, without unsupported environmental claims.
6. Fund a pilot with a clear expansion decision
Moonbucks’ first approval would fund a bounded pilot, rather than commit the entire sourcing program. Before spending, Moonbucks would agree on participating farms, responsibilities and the evidence needed at review.
Its scorecard could track farmer participation, implementation costs and plant survival, alongside accepted coffee volumes and lot-quality results. Carbon measurements would follow the selected method. Farm-level traceability must connect the intervention to the actual sourcing relationship.
Suppose Moonbucks’ review later finds that storage changes explain most quality improvements, while the land measures need longer observation. Those findings would shape the next decision: expand the proven component, adjust the landscape work or pause further spending. They would not justify crediting all improvements to tree planting.
This gives nature-based carbon investments a practical place in a multi-year strategy. Funding increases as the evidence supports it, and the project can change direction before a larger commitment.
Discuss a sourcing opportunity with CCC
Carbon Credit Capital’s nature-based supply-chain investment service uses its Dual-Value Model to examine supply-chain economics alongside potential sustainability outcomes.
Schedule a consultation to discuss your sourcing exposure and the questions to resolve before allocating capital.
Sources
- Intergovernmental Panel on Climate Change (IPCC), Climate Change 2022: Mitigation of Climate Change, Chapter 7, Agriculture, Forestry and Other Land Uses, section 7.4.3.3 (Agroforestry).
- World Business Council for Sustainable Development (WBCSD), Nature-based Solutions Blueprint, 5 June 2024.
- Science Based Targets initiative (SBTi), Forest, Land and Agriculture Science-Based Target-Setting Guidance, version 1.2, March 2026, section 3.1.4, pp. 37–38.
- United Nations Environment Programme (UNEP), State of Finance for Nature 2023, 2023.
A plastic credit funds the collection of plastic waste in places where no formal system exists to collect it. Each credit represents a measured, independently audited quantity of plastic taken out of the environment or returned to use, tracked on a public registry.
