Carbon Trading Opens Loophole in Paris Climate Accord
Credits issued under the landmark Paris accord come with limited oversight as international trading ramps up
Credits issued under the landmark Paris accord come with limited oversight as international trading ramps up
When the South American nation of Guyana wanted to sell millions of carbon-offset credits to preserve its rainforests, government officials knew they had a problem: The country’s lush Amazonian forests were actually in good shape.
Guyana’s rate of deforestation was already low, meaning its forests wouldn’t yield much under standard methodologies for calculating carbon credits. So its government chose a new method that allows a large adjustment for countries with healthy forests. The change raised the credits that Guyana could issue sixfold. Guyana sold 37.5 million of them last year to U.S. oil giant Hess for at least $750 million, and is now shopping the remaining two thirds to countries facing pressure to comply with the landmark Paris climate accord, officials say.
That agreement calls for governments to adopt national plans to limit greenhouse-gas emissions and allows them to pay for emission-reduction projects elsewhere in the world to offset their own pollution. Credits for each ton of emissions cut can then be traded between countries. It is as if the emission reduction happened in the country buying the credit, not the one selling it.
Guyana is among the first in a long line of developing-world countries expected to cash in on credits compliant with United Nations agreements. Some officials worry the U.N. risks giving its seal of approval to credits for forests that aren’t under threat. At the COP28 climate summit under way in Dubai, negotiators are debating how much scrutiny carbon trading should face from U.N. experts and the public to prevent the mechanism from becoming a loophole in the Paris accord.
“If we play that game—every country gets to come in and pull an arbitrary methodology out of the ether, apply it to their forest areas and say give me credits—we’re never going to get anywhere,” said Kevin Conrad, the climate envoy of Papua New Guinea.
For now, the Paris accord imposes relatively little oversight on the market. Credits are required to undergo review by a panel of experts. But at last year’s COP in Egypt, governments decided that the experts wouldn’t be allowed to review the “appropriateness” or “adequacy” of projects.
That is fuelling fears the accord opens the door for polluting countries to buy lower-quality credits from poorer nations to meet their own emissions targets, undermining the Paris accord ambition of limiting global warming to 1.5 degrees Celsius above preindustrial era temperatures. Some developing countries are pushing for the right to keep much of the information around offset projects confidential. Companies would end up buying the credits, critics say, that would support spurious greenhouse-gas reduction claims. Hess said it would apply Guyana’s credits to its goal of completely offsetting its emissions by 2050.
“There is very little oversight of the process,” said Jonathan Crook of Carbon Market Watch, a Brussels-based nonprofit. “Some countries could set a higher bar, but there’s a risk that others do not.”
Guyana is in talks to sell credits to Singapore, which is evaluating whether it will accept the adjustment for low deforestation countries, an official involved in the talks said. The U.N.’s civil aviation agency last year said it would accept Guyana’s methodology under new regulations it set to limit emissions from international flights, making Guyana’s offsets the first eligible under the rules.
Switzerland is moving to purchase the first credits under the Paris accord, for non-forest projects in Ghana, Thailand and Vanuatu. The credits will then be used by Swiss companies to comply with the country’s greenhouse-gas limits under the Paris accord.
The Swiss government is refusing to invest in forestry projects because of uncertainties around the baseline against which the lack of deforestation is measured. Switzerland also has concerns around whether protections for forests are long term—a tree cut down or destroyed in the future would release the planet-warming carbon dioxide it has absorbed over its lifetime.
Corporations over the past decade have invested billions of dollars in greenhouse-gas offset projects in the developing world. Those projects yield so-called voluntary carbon credits: The companies are under no legal obligation to buy them but do so because of public commitments they have made to offset their carbon emissions.
Academic research and media reports have cast doubt on the impact of many of the projects underlying these credits. The problems were particularly acute in projects to prevent deforestation. Because such programs typically cover relatively small areas within a larger forest, they risk pushing logging and clear-cutting for agriculture into other sections that aren’t protected by a project.
Guyana’s project is designed to address some of these problems. It is one of the first to cover an entire nation, eliminating the possibility that deforestation could be displaced within the country. Covering around 45 million acres, it is one of the world’s largest forest-protection projects, according to Trove Research.
Guyana has some of the most pristine forests on the planet. They have been mostly spared the rampant logging and clear-cutting seen in neighbouring Brazil. Guyana lacks rich soil suitable for large-scale agriculture, a major driver of deforestation, scientists say.
“These are among the poorest soils on the planet,” said Janette Bulkan, a Guyanese forestry expert at the University of British Columbia.
Critics say issuing credits for protecting such forests violates a core principle of carbon crediting: They should only be issued for emissions that would have happened without the project.
Guyanese officials say its forests are nevertheless at risk in the near future without intervention. The country’s economy is growing quickly, as is global demand for the commodities that could be extracted from its rainforests. Guyana is also reaping a windfall from oil discoveries off its coast that are now being pumped by Exxon Mobil and Hess.
“Guyana’s forests offer opportunities for a wide range of goods and services, and development opportunities for opening up areas for industry and manufacturing,” said Pradeepa Bholanath, who oversees climate policy at Guyana’s Ministry of Natural Resources.
Guyana’s credits have been calculated by Architecture for REDD+ Transactions, a program run by the U.S. nonprofit Winrock International. The program’s methodology allows countries like Guyana that have had little deforestation in the past to issue credits against a predicted future level of deforestation under a formula devised by Winrock.
Winrock and other advocates of the methodology say the money allows much-needed climate finance to flow to rain-forested countries, even if they haven’t experienced past deforestation. Guyana has already received more than $100 million in its deal with Hess. Officials say that money is reaching tribes that live in the rainforests and being used nationally for forest preservation and renewable energy projects.
A long-standing cultural cruise and a new expedition-style offering will soon operate side by side in French Polynesia.
The pandemic-fuelled love affair with casual footwear is fading, with Bank of America warning the downturn shows no sign of easing.
The pandemic-fuelled love affair with casual footwear is fading, with Bank of America warning the downturn shows no sign of easing.
The boom in casual footware ushered in by the pandemic has ended, a potential problem for companies such as Adidas that benefited from the shift to less formal clothing, Bank of America says.
The casual footwear business has been on the ropes since mid-2023 as people began returning to office.
Analyst Thierry Cota wrote that while most downcycles have lasted one to two years over the past two decades or so, the current one is different.
It “shows no sign of abating” and there is “no turning point in sight,” he said.
Adidas and Nike alone account for almost 60% of revenue in the casual footwear industry, Cota estimated, so the sector’s slower growth could be especially painful for them as opposed to brands that have a stronger performance-shoe segment. Adidas may just have it worse than Nike.
Cota downgraded Adidas stock to Underperform from Buy on Tuesday and slashed his target for the stock price to €160 (about $187) from €213. He doesn’t have a rating for Nike stock.
Shares of Adidas listed on the German stock exchange fell 4.5% Tuesday to €162.25. Nike stock was down 1.2%.
Adidas didn’t immediately respond to a request for comment.
Cota sees trouble for Adidas both in the short and long term.
Adidas’ lifestyle segment, which includes the Gazelles and Sambas brands, has been one of the company’s fastest-growing business, but there are signs growth is waning.
Lifestyle sales increased at a 10% annual pace in Adidas’ third quarter, down from 13% in the second quarter.
The analyst now predicts Adidas’ organic sales will grow by a 5% annual rate starting in 2027, down from his prior forecast of 7.5%.
The slower revenue growth will likewise weigh on profitability, Cota said, predicting that margins on earnings before interest and taxes will decline back toward the company’s long-term average after several quarters of outperforming. That could result in a cut to earnings per share.
Adidas stock had a rough 2025. Shares shed 33% in the past 12 months, weighed down by investor concerns over how tariffs, slowing demand, and increased competition would affect revenue growth.
Nike stock fell 9% throughout the period, reflecting both the company’s struggles with demand and optimism over a turnaround plan CEO Elliott Hill rolled out in late 2024.
Investors’ confidence has faded following Nike’s December earnings report, which suggested that a sustained recovery is still several quarters away. Just how many remains anyone’s guess.
But if Adidas’ challenges continue, as Cota believes they will, it could open up some space for Nike to claw back any market share it lost to its rival.
Investors should keep in mind, however, that the field has grown increasingly crowded in the past five years. Upstarts such as On Holding and Hoka also present a formidable challenge to the sector’s legacy brands.
Shares of On and Deckers Outdoor , Hoka’s parent company, fell 11% and 48%, respectively, in 2025, but analysts are upbeat about both companies’ fundamentals as the new year begins.
The battle of the sneakers is just getting started.
A luxury lifestyle might cost more than it used to, but how does it compare with cities around the world?
The pandemic-fuelled love affair with casual footwear is fading, with Bank of America warning the downturn shows no sign of easing.