The report by British non-governmental group Sandbag claims that some of Europe's biggest polluters are choosing the easiest - and arguably less effective - option provided by the European Union's carbon trading scheme. Instead of cutting their greenhouse gas emissions, a number of them are choosing to purchase so-called carbon offsets -- used to finance environmental projects in the developing world.
What Sandbag's director Bryony Worthington faults, is the way this scheme is implemented.
"We don't have an objection to offsetting in itself. I think the problem is the kinds of projects that are getting funding are the very cheapest projects," said Worthington.
Europe has the world's largest carbon trading market. It works by allotting heavy industries credits stipulating the amount of carbon dioxide they are allowed to produce. If they go over the limit, they must buy more credits from companies with excess credits or invest in projects in poorer nations. The market is considered a critical tool to meet the EU's target of cutting 20 percent of its greenhouse gases by 2020.
Some industries have complained the system is too tough, and hurts their competitiveness overseas. By contrast, some watchdog groups like Sandbag say Europe's system is not tough enough.
"What we are trying to show is that the EU can afford to take on tighter targets. It has the schemes in place to be able to do that," said Worthington.
The Spanish company Endesa tops Sandbag's list of European companies offsetting their emissions. Endesa did not respond to a request for an interview, but in a press release earlier this month, it said it had cut its CO2 emissions by 12 million tons since 2005.