Executive summary
Oil and gas majors and their affiliated trade associations have worked to negatively influence government regulation on carbon credits in the United States. This influence occurs at both the federal level and state level, with fossil fuel interests spending $273 million on lobbying California climate legislation over two decades between 2005 and 2026. The report highlights that these companies have strong incentives to ensure cheap and low-quality carbon credits remain eligible for compliance obligations to avoid making structural changes to their operations and business models.

Setting the scene
Shell has been the biggest purchaser of carbon credits for the last three years, using over 10 million credits in 2025. Eni was second with over 8 million credits, while Chevron has purchased 36 million since 2021. TotalEnergies announced an investment of $73 million in carbon credits in 2025 and committed to investing $100 million per year through 2030. Many of these credits are nature-based solutions of low quality. For example, 93% of the credits Chevron purchased between 2020 and 2022 were found to be of low quality. Shell was officially involved in 10 out of 37 rice farming projects in China that were ultimately rejected and sanctioned by Verra.

US trade associations
Influence is exerted through lobbying activities, including participation in climate policy workshops and private meetings with policymakers. Trade associations like the International Emissions Trading Association (IETA) and the American Petroleum Institute (API) advance positions favouring fossil fuel interests. In the United States, the Western States Petroleum Association (WSPA) and the California Chamber of Commerce are among the most prominent lobby groups. WSPA spent nearly $146 million between 2005 and 2026 to influence rules governing carbon credits and broader climate regulation.

Shaping US federal legislation
Big polluters have extended their lobbying efforts to the Commodity Futures Trading Commission (CFTC). Oil and gas majors have been involved through representation on advisory committees such as the Energy and Environmental Markets Advisory Committee (EEMAC). BP representative Vincent B Johnson was appointed in 2016, followed by Sarah Tomalty in 2020. Shell’s Matthew Picardi was a member from 2019 to 2026. These representatives provided sustained access to regulatory discussions. IETA and API have argued that existing principles are sufficient to protect against fraud, effectively lobbying against the CFTC stepping in to regulate carbon credit quality.

Fossil fuel companies and California’s carbon market policy
Between 2005 and 2026, BP, Chevron, ExxonMobil, and Shell spent nearly $127 million lobbying the state of California. Chevron was the largest individual spender at an estimated $101.7 million. These efforts reflect a coordinated strategy to halt or weaken climate-focused legislation, particularly the cap-and-trade programme. Research has raised serious doubts about the integrity of California’s carbon credits, with one study finding that the state “oversold the climate benefit” of certain nature-based projects, leading to a systematic over-crediting of 30 million tonnes of CO2.

Cap-and-trade regulation workshops
In workshops convened by the California Air Resources Board (CARB), fossil fuel interests called for greater flexibility and access to low-cost credits. Shell and BP urged CARB to maintain or reinstate high usage limits for carbon credits, such as the 8% limit from the Global Warming Solutions Act (AB 32). Shell specifically argued that “offset project” invalidation should be narrowed to cases that directly undermine climate goals, suggesting that regulatory violations unrelated to emissions—including human rights violations—should not lead to credits being revoked.

Assembly Bill 1207: market-based compliance mechanism extension
In 2025, WSPA and IETA provided feedback on the AB 1207 bill, which extends the cap-and-invest programme to 2045 and increases the credit usage limit from 4% to 6%. WSPA opposed the changes, claiming a “rushed timeline” would harm the stability of the oil and gas industry. They expressed concern over proposals to reduce the supply of allowances by the number of credits used for compliance, warning of “unintended adverse consequences” for the offsets market.

Assembly bill 1305: voluntary Carbon Market disclosures Act
AB 1305 requires companies to publicly disclose details of their carbon credit marketing and the role of credits in net-zero claims. WSPA strongly opposed the bill, calling it “needlessly vague”. While a proposed “clean up” bill (AB 2331) backed by the California Chamber of Commerce and IETA attempted to delay enforcement and remove durability disclosure requirements, it failed to pass. Consequently, companies must comply with original disclosure laws or face penalties of up to $2,500 per day.

Assembly Bill 1911: advertising and environmental marketing claims
Authored in 2026, AB 1911 aimed to create a legal “safe harbour” for companies using credits from approved programmes. This would make it harder to hold companies accountable for false climate claims like “carbon neutral”. Although supported by some conservation organisations, the bill was “held under submission,” effectively stalling it due to its perceived political and administrative risks.

Senate Bill 390 and 1036: voluntary carbon credits: business regulation
SB 1036 aimed to outlaw the sale of credits that were not “quantifiable, real, and additional”. It faced stiff opposition from 35 organisations, including crediting standards like the American Carbon Registry and project developers like Finite Carbon (in which BP held a majority stake). Opponents argued that civil courts lacked the technical expertise to assess credit quality and challenged the “durability” provisions by citing research to suggest there was no scientific consensus on the atmospheric lifetime of CO2.

Recommendations
Carbon Market Watch recommends that bodies like the CFTC should ban fossil fuel companies from holding membership or advisory roles to strengthen conflict-of-interest safeguards. The report also calls for the elimination of carbon credits from the California cap-and-trade programme to ensure domestic emission reductions. Lawmakers should prohibit greenwashing by preserving regulations like AB 1305 and reviving bills that address low-quality credits. Regulatory authorities must recognise that trade association feedback reflects commercial interests and should scrutinise their engagement. Finally, all companies should end the use of carbon credits as a substitute for decarbonisation.