Beyond Beneficiaries: Fairer Carbon Market Frameworks

Companies are increasingly turning to carbon credits to complement their climate targets and to finance near-term reductions that are otherwise too costly or difficult to abate. Demand is expected to grow: the voluntary carbon market alone is expected to soar from a $2 billion valuation in 2021 to as much as $50 billion in 2030,2while compliance carbon pricing schemes already cover almost one-quarter of global emissions.

This finance could be critical at scaling transformational climate benefits and positive social change –if done well. Yet this opportunity is not without risks. Since carbon credit projects first appeared, there have been concerns about “carbon cowboys”, a term used to describe firms driving the reckless development of carbon projects for financial gain without regard to the rights of Indigenous Peoples and Local Communities (IPLCs) and/or other local landowners. Poorly designed or outright predatory projects have resulted inland grabs, forced resettlement, loss of resource access, value extraction and exploitation, and deceptive legal agreements.

Carbon credit standards (including both “voluntary” standards such as Verra and “compliance” standards like the Clean Development Mechanism) have generally tried to address these risks through a combined approach of avoiding negative outcomes (“do no harm”) and ensuring positive social outcomes. Most requirements to date have focused on safeguarding against negative impacts; more work is needed to ensure positive results and to bolster foundational aspects around the rights of IPLCs and local landowners to own and transact carbon credits – or to opt out of carbon markets if they wish. This report seeks to identify:

1.Current frameworks: Key considerations in the benefit-sharing of today (page 13)

2.Gaps: Shortcomings in current benefit-sharing approaches (page 23)

3.Standards: Snapshot of current guidance (page 33)

4.Solutions: Achieving robust IPLC partnerships (page 36)

Because best practices in benefits-sharing can vary widely in different contexts, this report focuses exclusively on natural climate solutions (NCS) projects that are intended for sale in the voluntary carbon markets (VCM), with a focus on those with Indigenous Peoples and Local Community involvement.