Consumers trying to offset their emissions are at risk of being ripped off in a "wild west" unregulated carbon market, an investigation by The Telegraph has found.
With the trading of carbon credits enjoying a boom, concerns have been raised about offsetting projects around the world.
Environmentalists have warned that offsetting could be doing more harm than good because it makes people wrongly believe they are not having an environmental impact.
It comes as The Telegraph became one of the first media organisations in the world to gain access to an illegal sapphire mine in a Madagascan conservation zone which is used to generate carbon credits but has seen increasing rates of deforestation.
Separate satellite analysis for The Telegraph also revealed that trees are being cut down at a project in Brazil used for offsetting by both British Gas and the International Air Transport Association.
To offset emissions, individuals or companies can purchase credits which have been generated by a project elsewhere removing carbon from the atmosphere – for example by planting trees or preventing deforestation.
However, campaigners say the premise is fundamentally flawed and carbon trading cannot be justified when there has actually been an increase in deforestation.
The revelations are the latest in a long line of problems facing projects, some of which have seen saplings dying because of droughts and forests ripped up by the Cambodian army or Brazilian gold miners.
The news comes after details emerged of Government plans to ban the burning of domestic coal and certain types of wood, as well as the sale of petrol and diesel cars, as part of efforts to tackle climate change.
Despite the controversy surrounding offsetting, the industry is experiencing a boom from the "Greta Thunberg effect", fuelled by big companies such as easyJet, British Airways and BP pledging to go carbon neutral and offering customers offsetting options.
The combined global carbon trading market is estimated to be worth hundreds of billions of dollars while the voluntary market, on which individuals can purchase carbon credits, was worth $295.7 million (£229 million) in 2018 – more than double the previous year, according to Ecosystem Marketplace, which tracks global trends.
Its December report said the market is "at the tipping point we've been long waiting for" as companies respond to consumer pressure to offer green options, but also noted that growing demand could lead to "sub-par" offsets as "inexperienced buyers" get involved.
Lou Munden, the founder of TMP Systems, a consultancy specialising in climate change which has analysed carbon markets since 2011, said: "We don't have any good evidence one way or another to tell you whether this stuff works – we just don't know."
Environmental groups have called for more regulation in the market, which currently sets its own standards and prices. These differ depending on which project the credit is generated from.
Peter Rigg, who convenes the Climate Land Ambition and Rights Alliance – which includes Oxfam and Action Aid among its members – said the fact that a single credit can have a different price depending on its "backstory" showed that carbon is not a fixed tradeable commodity.
Dr Doug Parr, Greenpeace UK's chief scientist, said: "It's bad enough that big carbon emitters like airliners are using offsetting as a license to pollute, but they often encourage their customers to join in the greenwash too.
"Passengers are given the impression that, by coughing up a few quid, they can magic away the planet-heating gases from their flights. But what customers aren't told is that this market is an unregulated wild west and there's little evidence that offsetting schemes generally work.
"The best and safest way to reduce carbon emissions remains not to produce them in the first place."
Studies have shown that around three quarters of projects do not provide any environmental gain because they would have happened anyway.
Industry sources told The Telegraph there is a recognition that forest projects are not really working, but senior conservationists are reluctant to point out flaws in the system, saying it is "better than nothing" and voicing fears that people will stop buying credits.
Gilles Dufrasne, a policy officer at Carbon Market Watch, said that consumers do not know what they are buying under the current system.
"There is such a lack of transparency and communication from many of the big companies that purchase carbon credits that you don’t really know what is being purchased or what the impact of your money is," he told The Telegraph.
"I would never tick a box saying I would pay to offset without knowing what the project was."
The news comes as the first stage of the UN's Corsia scheme, which will offset international aviation emissions above 2020 levels, comes into effect this year.
The German Environment Ministry commissioned a report into the 14 schemes that have applied to offset emissions under Corsia, including ones currently being used on the voluntary market, and found that none meet all the criteria required.
Projects are supposed to provide additional, permanent emission reductions from a credible prediction of what would happen if they did not take place at all.
However, a study by the University of Cambridge, due to be released in the coming months, is expected to show that projects designed to prevent deforestation – known as REDD projects – are having the desired impact.
Professor David Coomes, director of the University of Cambridge Conservation Research Institute, said: "We have found quite a big drop in deforestation in REDD projects. Offsetting could be an important solution in the short term while we get our act together on the decarbonising front.
"It has been a bit of a wild west decade where people have been trying to work out different ways of offsetting carbon, and there has been a mixed bag of scrupulous and unscrupulous organisations, but I do think it is settling now. The baddies are slowly being filtered out of the system."
Grant Shapps, the Transport Secretary, has spoken in favour of carbon offsetting, and last year the government launched a consultation on whether to make it compulsory for consumers across the transport sectors to be offered the opportunity to offset.
The results of the consultation are expected this year, but are understood to have been delayed as the government tries to work out how to keep up with the scale of voluntary offsetting among airlines.