British Gas has been accused of misleading tens of thousands of customers by selling them “green energy” that may have no environmental benefit.

The energy giant claims to reduce its climate footprint by using “carbon credits”, which pump money into environmental work abroad.

But our investigation found that almost half the carbon offsets held by British Gas owner Centrica are “junk credits” that were issued under a discredited scheme that critics have called a “scam”.

They came from a chemical factory in China that was previously forced to deny “gaming the system” following an international probe into its supposed green credentials.

Carbon offset schemes allow energy firms to reduce their ‘carbon footprint’ without cutting their own emissions. Instead, they simply pay other firms to do good things for the environment, including producing renewable energy, clean water and protecting forests.

But there are no laws governing the voluntary carbon offsets market, with critics calling it the “wild west of carbon markets” with “poor transparency”. The booming market is now worth more than $1bn, after tripling in size last year.

Centrica has also bought carbon credits from a forestry project facing legal action by Indigenous communities in Brazil, and a dam linked to accusations of bribery and illegal timber felling in India.

Green MP Caroline Lucas told openDemocracy: “For British Gas to fork out on junk carbon credits doesn’t even succeed in its thinly veiled attempt at greenwashing. Not only is its offset portfolio seemingly fruitless in our race against time to tackle the climate emergency; it also appears to have links with corruption and bribery in parts of the Global South.”

British Gas now claims to have “one of the most environment-friendly tariffs available anywhere” thanks to its carbon-offsetting programme.

But experts today accused the company of running a “smokescreen” with some offsets it has purchased.

‘Junk credits’

Records from June this year show that 44% of Centrica’s offsets came from Shandong Dongyue Chemical Co Ltd, which produces a type of greenhouse gas used in fridges and air conditioning.

The Chinese firm sells carbon credits in return for safely disposing of a waste by-product called HFC-23, which is created in the process of making fridge gas.

HFC-23 is highly potent and heats the atmosphere 12,000 times more powerfully than carbon dioxide, so factories have been encouraged to get rid of it safely.

Purchasing carbon credits in HFC-23 gives manufacturers a financial incentive not to release the gas into the environment. But some have been caught deliberately producing extra HFC-23 in order to sell more credits.

In 2011, Shandong Dongyue Chemical Co Ltd was forced to deny it was “gaming the system” after the Bloomberg news agency obtained a highly critical UN report. Xiao Gang Niu, the company’s assistant general manager, denied that it was operating to maximise emission credits it could sell.

The EU’s climate commissioner at the time said that carbon credits purchased from HFC-23 projects had a “​​total lack of environmental integrity”, and the trade of the offsets was later banned from the EU’s emissions-trading system.

Bryony Worthington, the crossbench peer and emissions trading expert, said the scheme created “perverse incentives”, while other critics called it a “fraud” and a “scam”.

The UN no longer allows Shandong Dongyue to issue HFC-23 credits, but the company can still sell old credits that were issued between 2007 and 2013.

Gilles Dufrasne, a policy officer at Carbon Market Watch, told openDemocracy: “Decade-old HFC-23 credits are nothing more than junk credits. Buying these does nothing to address the climate crisis, as multiple scientific papers have shown. It’s a smokescreen and grossly misleading.”

In November last year, Centrica purchased enough of these Shandong Dongyue credits to “offset” 262,100 tonnes of carbon dioxide.

This would be enough to offset the emissions of more than 100,000 households – the equivalent of a large city. But there is no evidence that they had any impact on emissions at all.

Centrica has pledged to become “net zero by 2050”, which it will do partly thanks to carbon credits like those issued from Shandong Dongyue.

For more than a week, openDemocracy asked Centrica to comment on its carbon credits – and say whether customers are charged a premium for gas supplied on its Green Future tariff. The company failed to respond and our emails were never acknowledged.

We also asked Centrica about the cost of its HFC-23 carbon credits, or whether it conducted any due diligence before buying them. Again, the company did not respond.

Eventually, when we shared our findings with journalists at Sky News, a British Gas spokesperson admitted the carbon credits were “not aligned with our high environmental standards”.

The spokesperson said British Gas had bought the credits to offset emissions from a green tariff that it stopped selling in 2019 – but failed to name that tariff, or explain why it had only purchased the credits in November 2021.

The spokesperson said HFC-23 credits would not be purchased again. “Any future offset purchases for British Gas will be of the same high standard associated with the Green Future tariff,” the firm said.

Green Future is British Gas’s current eco-tariff. The company claims to offset all emissions associated with gas use, although it has not said which specific carbon credits are used to achieve this.

How green is your tariff?

Records obtained by openDemocracy reveal that Centrica’s offset portfolio includes several other controversial schemes.

They include a scheme that claims to stop a forest in Brazil from being cut down. But the Indigenous communities who live there say the scheme operator, Ecomapua, does not own the forest, does nothing to protect it and has no right to sell the offsets.

Community leaders say the Brazilian government had already granted them the land in order to protect their way of life – and claim to have the paperwork to prove it. This year, they filed a £16m lawsuit against Ecomapua and its clients, arguing that the company has “violated the rights” of local people.

Legal papers seen by openDemocracy accuse Ecomapua of selling carbon credits that “did not belong to them”, which has caused “material and moral damages”.

openDemocracy attempted to contact representatives of Ecomapua but did not receive a response.

Separately, openDemocracy has also found that Centrica bought offsets in two hydro-power dams in India that have been linked to accusations of bribery and environmental crime.

Documents authored by the dams’ owner, Paschim Hydro Energy Private Limited, state that “the local population expressed pleasure” when they were told during a community consultation that the dam would improve their electricity supply and lead to quality job opportunities.

But academic field research contradicts this claim. Researchers interviewed 73 people living near the dams and found that each of them independently “stated that they were neither informed nor consulted prior to dam construction”. The study says that local approval for the project “was pretence, driven largely by bribes and political pressures”.

The research also found that just one of the 73 interviewees was offered permanent employment and that 22% had joined demonstrations calling for more jobs.

Contrary to the dam operator’s claims, the study says that non-locals were perceived as preferred employees, which was mostly attributed to “vigilant behaviour of local employees in reporting illegal activities undertaken by dam authorities” such as “sand mining and timber felling”.

openDemocracy could not reach Paschim Hydro Energy Private Limited for comment.

"The lack of scrutiny by companies – such as, apparently, Centrica – leads to traders fooling the gullible into thinking that these units are worthwhile, when they are the clear product of a gaming episode," said Pedro Martins Barata, co-chair of the Integrity Council for the Voluntary Carbon Market's expert panel.

"The obvious risk is that of 'greenwashing': offsetting with these types of units is not a credible claim. But given that the units are issued, one can only alert potential buyers to the obvious lack of integrity, as the issuing authority – the United Nations CDM – does not have the authority to revoke issuance."