A smoke from the chimneys billow over St. Petersburg | SERGEY KULIKOV/AFP/Getty Bogus carbon offsets increased emissions Russian and Ukrainian companies abused a carbon trading scheme to undercut climate pacts.

A flawed scheme that allowed companies to earn tradable carbon credits for projects supposed to abate industrial gases actually created a "perverse" incentive to generate more waste, leading to an increase in global emissions instead of cuts, according to a new study.

The Stockholm Environment Institute (SEI) found that the credits may have increased emissions by as much as 600 million tons of carbon dioxide.

"What was shocking for us was the extent of the problem — we didn't expect that it would be so big," said Anja Kollmuss, an SEI associate who led the study.

The study could create problems for global climate talks later this year because they undercut the credibility of carbon trading schemes, one of the most popular ways of using market mechanisms to reduce emissions of greenhouse gases.

The worst offenders were in Ukraine and Russia, where the system was riddled with corruption, the Stockholm authors wrote in an article published Monday by the Nature Climate Change journal. They noted “perverse effects” that had the operators of three chemical plants removing safeguards and increasing the production of powerful greenhouse gases to earn more lucrative credits.

“If you produced more greenhouse gases only to destroy them and generate more carbon credits, you would essentially be damaging the climate for profit,” said Lambert Schneider, an SEI associate and co-author of the study.

The schemes are part of the inheritance of the troubled Kyoto Protocol, which established two offsetting mechanisms — Joint Implementation and the Clean Development Mechanism — allowing countries to generate Emission Reduction Units (ERUs) from greenhouse gas reduction projects and transfer them to other countries.

The idea was to spur climate change mitigation by making it more cost-effective. But a study by SEI of 60 random projects found that 73 percent of them would have gone ahead without the carbon credits. It also found that almost 80 percent of the credits were issued to projects of questionable environmental integrity. As of March 2015, almost 872 million ERUs have been issued.

“Joint Implementation has suffered from poor oversight and quality for a long time. This study has likely given the deathblow to the JI as we know it,” said Eva Filzmoser, director of Carbon Market Watch, an advocacy group.

Ukraine and Russia benefited the most from the scheme, together issuing 90 percent of ERUs.

The program was supposed to work by host countries cancelling one of their Kyoto emission allowances for every ERU issued. But Russia and Ukraine had an enormous surplus of Kyoto allowances because their level was set before the collapse of the USSR; after the end of communism many polluting and inefficient factories were closed, but the pollution allowances were not reduced. That meant when those countries issued ERUs, they would not have to compensate by further reducing emissions at home.

Adding to the problem, the program was only monitored by national authorities.

“Some early JI projects were of good quality, but in 2011–2012, numerous projects were registered in Ukraine and Russia which had started long before and were clearly not motivated by carbon credits,” says Vladyslav Zhezherin, an independent consultant in Ukraine and co-author of the study. “This was like printing money.”

The massive issuance of questionable credits also contributed to the collapse of credit prices. “This means legitimate carbon projects that really required carbon revenues to be viable may have been harmed by these schemes,” said Schneider.

According to the authors the findings are bad news for the EU’s climate targets and its flagship emissions reduction instrument, the Emissions Trading System,

The reason is that most of the questionable Russian and Ukrainian credits ended up being used in the EU's scheme, "so the poor overall quality of JI projects may have undermined the EU’s emission reduction target by some 400 million tons of CO2," said Kollmuss. That accounts for about a third of the EU's ETS reductions required from 2013 to 2020.

"This is a considerable amount," Kollmuss said, adding "If the EU was taking its climate targets seriously, then at least 400 million ETS certificates would have to be deleted to counter that."

The study comes a week before negotiators meet in Bonn to work on the agenda for this December's global climate summit in Paris. For reductions to work, they need to have a reliable system of accounting for carbon credits, so the evidence that past schemes were riddled with fraud may raise questions about the role market mechanisms can or should play in a global warming deal.

Filzmoser said that in Paris, countries must agree on a robust framework that ensures “only countries with stringent targets are able to participate in international carbon markets and that environmental integrity standards are rigorously implemented and enforced.”