It’s been a brutal year for the developers of Kariba, one of the planet’s largest carbon projects. That includes South Pole, the company that sold most of the credits tied to the forest-protection project in Zimbabwe and whose business has come under repeated scrutiny. Now that turmoil could pose a danger to the rest of the $2 billion carbon market, which has slowed this year amid quality concerns and accusations of greenwashing.

A partial or full collapse of Kariba would badly undermine one of the market’s underlying insurance mechanisms, known in the industry as the credit buffer pool. Such backstops are necessary because hundreds of carbon projects around the world are tied to forests or other natural landscapes that are vulnerable to wildfires and droughts. A buffer pool is supposed to guarantee climate benefits aren’t eliminated by any unexpected setbacks.

Over the past decade, Kariba’s carbon credits have underpinned claims of breakthrough progress on cutting emissions from dozens of corporate giants such as Volkswagen AG, Nestle SA and L’Oreal SA. The project has generated nearly $100 million by selling credits for more than 23 million tons of heat-trapping emissions, roughly equivalent to half the annual climate footprint of Switzerland.

News reports earlier this year, including from Bloomberg Green, found the project had overestimated its climate benefits by at least a factor of five while delivering less money than indicated to communities in Zimbabwe tasked with protecting against deforestation. Earlier this month, a report in The New Yorker raised additional concerns. Steve Wentzel, the project’s operator, described an untraceable way of routing funds into Zimbabwe. “It was illegal,” he told the magazine.

Wentzel didn’t respond to requests for comment. South Pole said in a statement that they “diligently follow guidance and methodologies set by established carbon market standards, as they continue to evolve and improve.”

The fallout has put Kariba’s credits into doubt. Verra, the Washington, DC-based nonprofit that creates rules for carbon offsets and oversees the Kariba project, announced it would put the project “on hold” pending an investigation. South Pole, the world’s largest seller of carbon offsets, said it would review its role in the project.

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The mounting problems raise the real possibility that the Kariba project could collapse. After all, South Pole has put the cost of continued operations at a minimum of $60,000 per month. And making up for excess credits that have already been issued could require operating the site for years — or even decades — without new sales, according to Sylvera, a London-based firm that examines the quality of carbon projects.

South Pole told Bloomberg Green earlier this year that the forces driving deforestation in Zimbabwe had changed since it launched the project, leading to the issuing of credits beyond what the project’s carbon savings could support. At the time, the company said it would sell credits more slowly to close the gap. But the market for Kariba credits has dwindled as scrutiny of the project increases.

If Kariba shuts down, meaning the trees in the vast forest are no longer under a protective program, all the credits awarded since its inception would be canceled. This would render meaningless the already-shaky claims corporations have made based on these credits. To prevent this, Verra says it would replace these canceled credits by dipping into its buffer pool. Verra officials told Bloomberg Green earlier this year that doing this for a project the size of Kariba would be an “unprecedented situation” and could wipe out between 38% to 51% of its whole buffer pool.

“This is maybe the biggest real-world test we’re seeing so far on the use of buffer pools,” says Gilles Dufrasne, policy lead at Carbon Market Watch. “Sure, the buffer pool can sustain one big project. It’s going to impact it massively, but the numbers show it can compensate for those credits. But you can’t do it if it’s four, five or six projects.”

This is the latest in a string of concerns about how offset programs use backstops to protect their climate integrity. Most programs require nature-based projects, which are at risk of wildfires or infestations, to set aside usually between 10% to 20% of their credits for insurance purposes. Kariba, for instance, has put 5 million credits into a buffer pool administered by Verra.

But with climate change heightening risks to natural landscapes, some scientists fear these insurance mechanisms are under-capitalized. The nonprofit CarbonPlan warned in 2020 that forest fires could easily burn through the buffer pool in California’s carbon market. And at least one forest carbon offset project was damaged by Canada’s wildfires over the summer. Researchers at the University of California at Berkeley found last month that a popular category of forest offset projects was underestimating the risk from natural phenomena, like fires and pests, by a factor of 10.

“Putting aside a portion [of credits] as insurance is not a bad idea conceptually,” says Jess Roberts, vice president of ratings at Sylvera. “We just want to see the calculations be more robust. The more [credits], the better.”

The Kariba situation also raises a big question about who should replenish a buffer pool after it takes a major hit, so the other projects aren’t left badly exposed. Verra’s rules state that in a case of poor project management, the project proponent would need to replenish the buffer pool. For Kariba, that would be Carbon Green Investments, the firm operated by Wentzel. The rules add that the proponent won’t receive credits for any other carbon project “until the deficit is remedied.”

Carbon Green Investments is pursuing a new carbon project to protect more than 350,000 acres of land in Zimbabwe, according to records on Verra’s registry. South Pole is listed as a partner on the project. But the project hasn’t yet received any credits, and it’s unclear if Verra’s rules would be effective.

A Verra spokesman said in a statement that the nonprofit is “aware of these risk and accountability issues, and is continuing to investigate the Kariba project and explore how to best proceed.”