Several biomethane suppliers who have partnered with major oil and gas companies on Upstream Emission Reduction (UER) credit schemes say dozens of overseas projects were faked, putting German regulators, auditors, and companies like Shell in the spotlight.

Zoltan Elek, the CEO of Landwärme, a biomethane supplier, flagged a whistleblower concern about a supposed chicken farm posing as an oilfield to Shell’s internal whistleblower site in January.

Emission reduction schemes like UER help large oil and gas companies meet their greenhouse gas (GHG) reduction quotas. Carbon credits obtained in the process are traded on the open market to allow businesses to offset their CO2 emissions.

Semafor first reported Elek’s complaint on Wednesday morning.

The chicken farm was just one of several false sites Elek says a Chinese whistleblower uncovered in September.

“The whole documentation always looked very good and perfect,” Elek told Fortune. “But if you took out something like the geo-coordinates, you ended up somewhere, sometimes in a lake, sometimes in a chicken farm.

“It’s like if somebody wants to generate some CO2 certificates with a windmill and just goes out to the countryside and takes a picture of a windmill which he doesn’t own.”

The company auditing the dubious projects in China told the German publication Die Welt the error resulted from a typo.

“Every project, it’s on the front page, the geo-coordinates. So it was easy to just google it and see what is there,” Elek said.

Further, several companies didn’t appear to exist, with Elek finding many created in 2022 with no address or registered in Hong Kong.

Because of the alleged fake carbon credits streaming out of China, their prices have collapsed by about 80% on the open market, Elek says.

Elek’s company has declared itself insolvent as Germany tries to get to the bottom of an alleged fraud that, according to one German industry lobby group, could total up to $5 billion.

Germany’s UER push turns sour

UER projects achieve carbon emissions reductions for petrol, diesel, and gas before they reach the refinery or storage stage. It is one of several methods oil and gas giants use to lower or offset their emissions.

These companies, including Shell, have used Chinese territory to carry out UER projects as part of their greenhouse gas (GHG) reduction quota. They receive certificates from these projects certifying that their efforts have led to reduced upstream CO2 emissions.

China commanded 90% of global UER projects in 2023, rising from an 80% share between 2020 and 2022.

However, a scandal over the veracity of these schemes in the country has been circulating in German media for several months.

Research by the German outlet ZDF alleged at least a quarter of UER projects were faked by overseas agents.

The scandal raises serious questions about the safeguards in place for carbon reduction projects, which have grown in popularity as polluters try to offset their emissions.

Elek has his own questions for Shell if the company is found to have invested in fraudulent projects. There haven’t been allegations of wrongdoing on Shell’s part, with German prosecutors investigating auditors and creditors of the project.

“You don’t buy 10 projects with a market value of €1 billion without doing your due diligence. And I’m really wondering how Shell’s due diligence went through a nonexistent company,” Elek said.

A representative for Shell told Fortune the company always acts in accordance with the relevant laws and regulations.

“This means that before certificates from UER projects are taken over or credited, the corresponding project activity is checked by the authorities in several steps,” the spokesperson said.

“In addition to the statutory audits by the authorities, Shell conducts its own due diligence on a voluntary basis and fully supports any inspections by German authorities.

“The Federal Environment Agency is currently investigating the allegations mentioned. We are waiting for the results of these investigations.”

Germany’s Federal Environment Agency has suspended a senior employee who was responsible for approving UER projects, ZDF reported.

The country has since moved to suspend UER projects in China and has stopped accepting new projects anywhere.

Elek is far from satisfied with the German authorities’ response, with carbon credits from allegedly faked projects still contributing to oil and gas companies’ quotas.

“It’s like you’re stealing at the supermarket. You can keep the good, you can continue to resell it on Amazon, and the only reaction was closing the supermarket so nobody can steal anymore next year.”

He fears shuttering all UER projects will cause further insolvencies for companies working on genuine oilfields.

The scandal threatens the future of several sustainable fuel suppliers in Germany after Landwärme declared itself an early casualty.