For the very first time in Switzerland, a major commodities trading firm was being tried in what serves as the country’s highest criminal court. The case was brought by a Swiss corruption probe against Trafigura, the world’s third-largest oil trader, for bribes paid to Angola’s state oil company Sonangol in 2011. When Trafigura tried to settle out of court, per Switzerland’s usual protocol of favoring fines over trial spectacle, prosecutors refused. Former Trafigura executive Mike Wainwright now faces four years in jail, while the company could receive a $156 million fine.
Last December, the small town of Bellinzona , Switzerland, underwent its annual transformation into a winter wonderland, erecting Christmas markets, lights, and ice rinks at the foot of the medieval castle that looms over its historic center. Meanwhile, in the nearby Federal Criminal Court, an obscure but significant piece of financial history was being made.
For the very first time in Switzerland, a major commodities trading firm was being tried in what serves as the country’s highest criminal court. The case was brought by a Swiss corruption probe against Trafigura, the world’s third-largest oil trader, for bribes paid to Angola’s state oil company Sonangol in 2011. When Trafigura tried to settle out of court, per Switzerland’s usual protocol of favoring fines over trial spectacle, prosecutors refused. Former Trafigura executive Mike Wainwright now faces four years in jail, while the company could receive a $156 million fine.
Still awaiting the final sentencing, Trafigura’s lawyers have framed the case, which offered a rare glimpse into a normally clandestine industry, as a political “crusade.”
The trial becomes even more significant when set against the backdrop of the climate crisis, which is already forcing broader shifts within the commodity trading industry. In a sector that has long evaded public scrutiny, traders have historically remained agnostic to both policy goals and public opinion; the Trafigura trial caps off a wave of fresh allegations of past corruption—including against peer firms like Glencore and Gunvor—serving as a stinging reminder of the industry’s long-standing reputation for putting profits over compliance or public well-being.
At the same time, commodity traders are suddenly more key than ever to the markets, regulatory tools, and supply chains on which global climate policy aims currently depend. In fact, industry experts and environmental advocacy groups now argue the energy transition can’t be achieved without them.
With traders poised to become major players in the fight for carbon neutrality, what can regulators and the public do to make sure their future activity stays in the public eye and in line with policy goals? What’s clear is that no one wants to repeat the mistakes of the past.
Commodity trading houses thus wield enormous influence over sustainable futures. Not only because they control the global distribution of oil, gas, and metals needed to produce solar panels and battery-powered cars, but because they are uniquely positioned to jumpstart the adoption of new technologies and policy-driven market behaviors. These include the development of low-carbon resources—such as fuel alternatives for ships and planes—and carbon markets, which put a price on emissions. On the road to carbon neutrality—as on any other road leading through global supply chains—it’s a can’t-go-around-them/must-go-through-them kind of situation, even for the industry’s many critics.
This special positioning stems from firms’ unique nature as entities that exist somewhere between banks and industrial producers. Like banks, commodity traders finance new ventures, operate in futures markets, and transact trades on behalf of clients. Since the 2000s, however, they have also increasingly acted like producers, buying up fixed assets like refineries, mines, and associated railways, roads, and portside storage, in order to meet unprecedented global demand for natural resources. Today’s commodity giants—including Trafigura, Vitol, Gunvor, and Glencore—therefore span entire supply chains, from point of production to point of sale. They are also involved in all the financing and logistics required in-between, leaving them with unique power to influence what kinds of resources come to market.
“That’s one of the fascinating things about this sector,” says Florian Wettstein, a professor of business ethics at the University of St. Gallen in Switzerland. “They’re so central and key to so many industries, they can dictate the conditions under which other industries purchase those commodities.” As a result, they have “quite a bit of leverage in terms of improving the value chains” of the global economy.
For critics, the problem is that firms have historically had little interest in exercising that leverage in ways that bring supply chains in line with Western humanitarian and foreign policy goals. From the 1970s to the commodity “supercycle” years of the 2000s, when economic development in China and other emerging markets exploded demand for natural resources, the world’s commodity trading giants operated largely in the dark. During those decades, traders reaped unprecedented profits, often acting as the lender of last resort to authoritarian, apartheid, or sanctioned regimes in places such as Chad, South Africa, Iraq, and Iran.
They were not immune to turning a blind eye to corruption or, in some cases, human rights abuses. Through a shell company in 2006, Trafigura arranged to dump 36 tons of toxic residue derived from coker gasoline in a residential area of the Ivory Coast, sickening 100,000 people. In 2005, Glencore, Trafigura, and Vitol were all implicated in a scheme to pay illicit surcharges to Iraq under the United Nation’s oil-for-food program there. Around the same time, American agricultural trading house Archer Daniels Midland lobbied for ethanol subsidies, aware that turning corn into an inefficient biofuel would take food directly out of the mouths of the world’s poorest; the intervention contributed to already skyrocketing global food prices that analysts say helped set off the Arab Spring.
These practices were a function of firms’ ability to fly under the radar. Those days are over, as Bloomberg journalists Javier Blas and Jack Farchy argued in their 2022 book, The World for Sale. Yet the culture of training public scrutiny on commodity trading houses is still relatively new. It was only in 2011, when Glencore—then the largest commodity trader in the world—had a $60 billion initial public offering that the rest of the world was shocked into recognizing just how rich and powerful this industry really was. Documents released during that rare IPO also shed light on the corruption that riddled the supercycle years, sending a ripple effect through the media.
Why should policymakers, or even the trading companies themselves, expect the industry’s behavior in today’s decarbonization race to be any different? The main reason is that, per policymakers’ intentions and changing consumer habits, not doing the right thing has suddenly become expensive.
Voluntary carbon markets are defined in opposition to compliance markets, or government-run exchanges where companies subject to emissions caps are required to buy allowances directly from regulators at auction. The price for credits is designed to rise over time as the world approaches carbon neutrality; the European Union’s Emissions Trading System (ETS) is the foremost example.
In voluntary markets, by contrast, carbon credits are developed ad hoc, with no set budget or cap for how much participating firms can emit. Instead, real-world projects that ostensibly reduce emissions (e.g., adopting renewables or reducing energy waste) or remove carbon from the atmosphere (e.g., reforestation) are transformed into credits. That’s where commodity traders come in.
Developing voluntary carbon credits requires coordinating multiple layers of the physical and financial supply chains: producers in need of the capital (and financial incentives) to adopt green initiatives; a certification body that determines whether the projects merit carbon credits (and how many); an end client seeking to purchase the resulting credits as part of a corporate responsibility campaign; and, finally, traders willing to structure and transact the trade.
Consultants and environmental policy think tanks therefore believe commodity firms, with their unique reach, can play a crucial role in developing, financing, and transacting financial instruments linked to decarbonization efforts on the ground, especially in energy-hungry, resource-rich, and high-risk regions in the global south, where firms are already deeply embedded.
Jennifer Morris, CEO of the Nature Conservancy, an environmental advocacy group, argues that trading firms could play an essential role in improving land use in the agricultural industry, which accounts for an estimated 13-21 percent of global emissions, by financializing farmers’ efforts to prevent deforestation (or to reforest degraded land). Take the case of cattle farmers in Brazil. They are legally required to maintain a certain percentage of forest coverage on their farms but often struggle to meet this target. If those farmers can, by way of voluntary carbon markets, instead sell successful reforestation efforts as credits, an incentive structure is suddenly supplied. The rosiest outcome of such a scheme would be an influx of cash to producers in decarbonization-resistant industries in the global south, with a corresponding reduction in global emissions.
But without the support of trading companies that can provide seed capital, or else refuse to work with producers with unsustainable land use practices, “it’s not going to happen,” Morris says.
Commodity trading giants are also eager about the possibilities. In 2021, Trafigura began setting up a Geneva desk dedicated solely to trading on voluntary and compliance markets. The move amounts to a big bet that regulatory clarity—stipulated by Article 6 of the Paris Agreement, which standardizes quality measures for voluntary credits—will soon transform the risky novel instruments into investment-grade assets. Already, the desk has invested $600 million in reforestation efforts concentrated in Colombia and in Africa’s Miombo woodlands.
This sounds like an easy win-win. Everything depends, however, on the quality of the underlying projects to which carbon credits are linked. Unfortunately, quality assurance remains an uphill battle. A recent Nature study found that “companies predominantly sourced low-quality, cheap offsets.” Of those, 87 percent are highly at risk of failing to deliver meaningful emissions reductions, largely due to the difficulty of measuring and assessing the carbon value of nature-based projects like planting trees. This leaves voluntary carbon markets ripe for greenwashing on an enormous scale.
Therefore, it’s crucial for all involved to have clearer signals from regulators and to establish global standards for what high-quality credits look like. “We haven’t always had that, frankly, and that’s why we’ve had some bad projects,” Morris says. But with the creation of new regulatory bodies, like the Integrity Council for the Voluntary Carbon Market, and with better technology for measuring carbon offsets, a newer, better iteration may be underway.
The main comparison is government-run compliance markets. Here, credits correspond closely to their stated emissions reductions. They “could not be more accurate,” says Michael Pahle, head of the climate and energy policy group at the Potsdam Institute for Climate Impact Research and who helped design the ETS in the European Union. That’s because the industrial emissions they capture are easier to measure than nature-based voluntary credits: “Basically, you go to the factory or to the plant, and you measure what comes out of the chimney.” This is the gold standard. However, establishing these gold-standard markets and scaling them up takes time—more time than the world has to reach carbon neutrality. From this view, voluntary markets—and commodity trading houses’ activities within them—are less a perfect solution or end goal than a necessary stepping stone in the global race against the clock.
Pahle suggests imagining a two-track system, in which fast (but lower quality) voluntary and slow (but high-integrity) compliance markets are developed in parallel. “Let the quick tools do what they do, but develop long-term and high-integrity markets in the meantime, building on the lessons learned from the quick ones” he says. From this view, the advantage of voluntary markets is that they supercharge investment in new technologies and more sustainable practices, immediately connecting novel solutions to consumers willing to pay a premium. According to Pahle, it would take “ages,” by contrast, for governments to capture the same level of investment through slow-to-design compliance markets.
The trade-offs are real. In 2023, scared by scandals surrounding low-quality credits, corporations pulled out of voluntary markets en masse, causing the price to drop to $0.15. Yet with compliance markets still lagging, there was no substitute vehicle for firms looking to invest in green initiatives at a similar scale. For now, if firms pull out of voluntary markets, there’s nowhere else for that ready money to go.
Because of the persistent risk of low-quality credits, however, Pahle cautions against allowing voluntary markets to capture the entire carbon trading space. “The requirements are that they need to go fast, and the scope needs to be small enough to mitigate externalities that would jeopardize the scaling up of compliance markets,” he says.
Firms’ main role here is what their role has, traditionally, always been: to help coordinate financing for risky, and capital-intensive, new technologies and resource extraction.
They are already doing so, with signs of success. Christian Lins, head of Oliver Wyman’s Energy and Natural Resource Practice in Zurich, says that while activities in voluntary markets have so far delivered “mixed results,” in low-carbon markets, commodity trading houses are already addressing “material demand” for fuel alternatives in the “road transportation, aviation, and maritime sectors.”
Trafigura has also entered the low-carbon market game. Alongside its carbon trading desk, the firm has opened a Geneva operation dedicated to low-carbon aluminum. The metal is extremely energy-intensive to produce but lighter than steel, making it a top choice for the production of energy-efficient electric vehicles. Establishing a new financing platform with its lenders, the desk secured $500 million at preferential interest rates, allowing it to pay a premium to low-carbon producers of the metal and effectively subsidizing aluminum produced through more sustainable means. In a statement, the company framed the move as a hedge against changing markets ahead.
As with carbon credits, however, everything depends on whether the certification of “low-carbon” translates into real emissions reductions, and whether it is adopted at scale. Trading standard aluminum at business-as-usual volumes will quickly cancel out the gains of any low-carbon desk.
In terms of finding a balance, regulators are only one part of the story; individual attitudes and public awareness are more key than many may realize. Philip Hardwick, head of environmental projects at the mid-sized trading firm BB Energy and who has worked in carbon markets for the past 18 years, says that in entering carbon markets, traders are not currently motivated by profits that, for now, “simply aren’t there.” They are instead responding to “demand” from clients—namely, wholesale purchasers of commodities, corporations with responsibility campaigns, and financial partners like banks—who are, “in turn, being driven by the demand of their customers.” The end client here is the individual consumer. “It’s the consumer asking for a quicker energy transition, a better transition, more scrutiny, and new innovation,” Hardwick says.
The main takeaway for concerned individuals, then, is that public scrutiny, awareness, and attitudes matter now more than ever. Florian Wettstein, the business professor at the University of St. Gallen, emphasizes that, of shifts the commodity industry has made toward more compliant business practices over the past decade, “most, if not all, have to do with civil society movements.” Firms may prove more responsive to the climate crisis than they have been to social justice concerns. As Wettstein points out, environmental attitudes have become a non-negligible market force. “The one perhaps real difference between climate matters and social matters, even though they’re very intertwined, is that climate matters have a consumer base that responds” he says, adding that when bad behavior becomes “expensive, that’s usually when the business starts to change.”
Therefore, the public has an important role to play. Carbon markets are designed to kickstart what policymakers hope will be the next “supercycle”: the energy transition. If commodity trading houses are to play as big a role as many believe, then Swiss citizens—and the Swiss regulators on whom they exercise pressure—may, like the firms themselves, wield outsized influence.
In the year 2050, when the global deadline for carbon neutrality arrives, it will suit neither regulators, nor the climate, nor Trafigura to wind up back in Bellinzona at Switzerland’s Federal Criminal Court. There are no shortcuts—no bribes—to securing carbon neutrality.