How a Chinese firm ran a billion-euro carbon credit scam

When Stefan Schreiber decided to invest in a carbon emission reduction project with a Chinese company, he was convinced he was dealing with a trustworthy business partner. "They made a very professional impression: the way they presented themselves, the way they communicated," he said. 

DW met Schreiber in a meeting room at his company's plant in Schwedt, a town near Berlin. The office overlooked huge pipes and tanks, and trucks trundled past. Schreiber is a board member of Verbio, a German biofuel producer that also trades carbon certificates. 

In essence, carbon credits are generated by projects that save or remove greenhouse gas emissions. To fulfill their climate targets, companies can either reduce emissions in their own production or activities — or buy these credits from others. These carbon credits can then be resold to other companies. 

A risk-free deal?

In 2023, Verbio acquired the rights to carbon credits from an oilfield in China. It had been approved as a carbon-saving project by German authorities.  All Verbio's management had to do was sign a contract and transfer the money for the carbon credits. 

Then Verbio resold the credits on the German carbon market. 

A risk-free deal, Schreiber thought. Except that, it turned out to be too good to be true. Today, Schreiber is convinced that the project his company paid for was part of a billion-euro fraud. 

Together with German public broadcaster ZDF, DW's investigative unit dug into this alleged fraud, sifted through hundreds of auditing reports, compared satellite images and talked to industry insiders. 

What we found was likely a criminal plot that has generated carbon credits worth roughly €1 billion ($1.05 billion) since its implementation in 2020 until it was shut down this year. Dozens of projects in China were approved in Germany, although they did not meet the legal requirements of a specialized carbon scheme set up for the fossil fuel industry. 

Tailor-made for the oil industry

While projects could be set up in nearly any country in the world, the carbon credits were issued by the German Environment Agency and could only be used to meet the climate targets of oil companies in Germany.  

Many of the industry's big players, we found, invested in the credits, including Shell , Exxon, Total and BP. But Verbio's Schreiber was the only investor willing to talk to us. 

The project Schreiber purchased credits from was supposed to save more than 120.000 tons of carbon by collecting gas from an oil extraction site in China's Xinjiang Region. The gas would have otherwise been released into the atmosphere or flared – both of which are a major contributor to global warming.

That's why extraction — and not just consumption — of fossil fuels is a major source of carbon emissions. The German government designed its carbon scheme to incentivize companies needing to reduce their emissions to channel funds to projects abroad to help them invest in carbon-saving facilities or processes. 

Only new projects were eligible for the scheme. 

'Should never have been approved'

But, DW and ZDF found that preexisting projects were, in fact, approved. Such was the case with Verbio's project. 

According to the documents submitted to the German authorities, construction started in September 2020. Satellite images of the site, however, clearly show that the facility had already been built in 2019, including the huge gas tanks referenced as new in the reports. 

"This project should never have been approved," said Axel Michaelowa, a leading expert in carbon trading at the University of Zurich.   

And yet, it was. By officials who never actually visited the site: The German Environment Agency, which issues the credits, does not inspect them. 

"We have three employees who deal with these projects," Dirk Messner, the agency's president, told us.  He said those employees don't have the capacity to review all the projects.

Instead, the work is outsourced to private auditing companies. The approval is based on the paperwork provided by these companies. It's a relatively common procedure in carbon certification. But this time, it provided the opportunity for a billion-euro fraud.  

In total, the German Environment Agency approved 66 projects in China. Project documents obtained by DW allowed us to identify at least 16 projects that were, in all likelihood, fraudulent. 

Almost all of them followed a similar pattern: An existing installation was submitted as if it were new. 

At first glance, they all seem to have been submitted by different companies. But, we found that almost all seem to have close links to one company: Beijing Karbon.

That company is a consultancy specializing in carbon reduction and certification. According to its website, it provides services to businesses that want to reduce their carbon footprint and helps Chinese firms invest abroad. 

An opaque company network

Its founder held influential positions within the energy sector: In the 1990s, she was in charge of energy conservation at China's National Development and Reform Commission, a powerful government commission that steers economic policies. Later, she held a leading position in a state-owned enterprise that invests in energy conservation before going on to set up her own business together with her son and others. 

We cannot say which, if any, role her previous positions may have played in setting up and expanding her company. 

Back in his office in Schwedt, Schreiber had no reason to doubt his new partners. The documentation he received "looked wonderful."

After learning of the fraud allegations, he thinks the Chinese company must have had collaborators. "There must have been people in Germany who knew this system inside out," he said. "Otherwise, it would not have been possible in this form, also with this level of professionalism."

Allegations of collusion

Many within the industry think these collaborators may have been two prestigious auditing companies. A letter by insiders of the Chinese carbon market sent to Germany's Environment Agency accused the projects' auditors of having "colluded with Beijing Karbon." 

Just two companies audited the majority of the projects: Müller-BBM Cert and Verico SCE, two specialized environmental certification companies. 

Verico's executive chairman is considered by many to be a leading expert in the world of carbon certification. For more than a decade, he represented auditing companies to UN bodies.

A third company, TÜV Rheinland, audited two likely fraudulent projects.

The fact that so many projects seemed to come from Beijing Karbon and were almost all audited by the same auditing companies "should have immediately set off alarm bells," Michaelowa said.

All three companies were recently searched by the Berlin prosecutor's office and are being investigated for joint commercial fraud, as a spokesperson of the office told DW and ZDF. None of the companies have admitted to any intentional wrongdoing.

"We have no reason to doubt our auditing work, nor the work of our auditors," Verico SCE replied to our request for comment.

Müller-BBM Cert said it was sure that "no criminal offense has been committed by employees of our company." 

TÜV Rheinland said it was investigating and asked for "understanding that we will share the investigation results with the authorities first and only then with the public." 

'Worst case scenario'

The allegations of fraud against these well-known auditing companies have shaken up the industry.

"If it turns out that the auditors were part of that fraud, this would be the worst-case scenario," Dirk Messner, the Environment Agency's president, told DW.

His agency has placed 45 projects under suspicion, closed the program to new applications and is working to rescind as many of the credits as possible. 

Beijing Karbon did not reply to our requests for comment.

Editing: Naomi Conrad and Carolyn Thompson

Fact-Checking: Carolyn Thompson

Legal support: Florian Wagenknecht

Yuchen Li contributed research to this story