By Damian Kahya
Business reporter, BBC News
Airlines are the biggest retailers of carbon offsets to consumers
Less than 30 pence in every pound spent on some carbon offset schemes goes directly to projects designed to reduce emissions, according to a new report.
The research, based on 10 projects, was carried out by Carbon Retirement, which offers an alternative to offsetting.
It highlights the complexity of the carbon off-setting system, which the consumers' association Which? said was "not the same as giving to charity".
They are often aimed at air passengers to counter emissions from flights.
"There is a lack of clarity in much of the carbon offset market about how much money actually reaches the offset project and how offset projects are verified, " said Martin Saville, who has looked at the offset market for Which? Magazine.
Offsetting starts with a project in a developing country designed to reduce emissions, such as a windfarm.
Carbon offsetting is a way to counter damage done through the release of carbon emissions (CO2), from activities such as driving a car, flying or heating a building.
For every tonne of CO2 emitted, an equivalent tonne is supposedly removed elsewhere.
Carbon offset schemes set a price on the amount it costs to mitigate the harm from emissions.
Offsetting does not undo the environmental harm caused but does cut the total amount of CO2 released.
The projects are mostly run and implemented by local for-profit companies.
On average, the firms spend about 30 pence in every pound paid by consumers on offsets in setting up and running the project, the report by Carbon Retirement said.
And 15p goes to the shareholders of these companies in profit, the report suggested.
Each scheme qualifies for a carbon offset credit for every tonne of carbon dioxide not emitted. These are often bought by investment banks - sometimes before the scheme is up and running - who take another 30p.
They sell the credits on to a retailer, who takes 10p.
The remaining 15p goes on tax, bank interest and fees.
The Carbon Retirement report is based on published UN data and industry research. The firm specialises in a government-approved scheme to buy up and retire carbon permits - an alternative way to encourage the reduction of emissions.
Ecosecurites, part of JP Morgan bank, defended the large slice taken by banks who invest in carbon credits.
"When the outcome of whether a project will be registered is far from certain, this risk can be high and unpredictable," Miles Austin from firm Ecosecurities explained.
Edward Hanrahan, executive director of two other JP Morgan business units, Environmental Markets and ClimateCare, said the key was not losing sight "of the ultimate goal which is in tackling climate change".
"To do this we need to be maximizing the amount of emission reductions we make, and thus the key question that needs to be asked is not 'what percentage of monies goes to the project?' but 'how many real verified tonnes of emission reductions can we fund for X amount of money?'," he said.
Airlines are the biggest sellers of carbon-offsets to consumers, as passengers want to counteract the emissions generated during their flights by investing in low-carbon schemes in developing countries.
Three airlines contacted by the BBC - who make no profit selling the credits - were unable to show exactly how much money from their schemes was used to meet the direct costs of emissions reductions.
Virgin Atlantic's website says that 85% of the money paid by customers goes to the projects it supports - which are certified by the UN and the Gold Standard scheme.
The airline uses a Swiss organisation, Myclimate, to supply its credits and the guarantee is written into its contract with them.
Myclimate confirmed that this money is paid to the companies who own and run the projects - but didn't detail how it was spent by them.
Myclimate also stated that up to 10% of the money may go to "transaction costs related to the project operating costs" - including verification by the UN and set up costs.
Virgin said it would ensure its contract with Myclimate was stuck to.
British Airways meets the UK government's Quality Assurance Standards and uses UN certified credits.
One of its projects mentioned is a windfarm in Mongolia. Investment bank Morgan Stanley sold on credits from the project.
Neither the airline nor the bank could say how much of the money customers paid ended up being used to build and run the farm, or how much was paid to the company running it.
Easyjet said it avoided intermediaries by buying UN certified credits itself.
Again, the airline did not provide details of how the money is spent on the ground.
A spokesperson for the Department of Energy and Climate Change said the cost of the credits reflects "reflects a number of factors, including the market price and the overheads related to setting up and auditing offsets projects to ensure that they're real and robust".
But the research highlights difficulties in tracking where the money goes.
The UK government is supporting reform of the governance of the UN system at the current UN climate summit in Copenhagen.
The government said they would keep their advice to companies under review to ensure financial transparency.
Meanwhile, Which? said offsetting websites should give more information on where the money goes and how much is spent on administration fees and company profits.