“Carbon markets are a failed model of climate finance that prioritises profits over people and delays over action”

A new report from Power Shift Africa.

A recent report by Power Shift Africa describes carbon markets as “a dangerous distraction for Africa”. In the introduction, Power Shift Africa writes that,

This brief argues that carbon markets are a false solution to Africa’s climate finance needs. Rather than delivering real, equitable, and transformative funding for climate action, these markets risk undermining Africa’s climate sovereignty by entrenching extractive economic patterns, delaying Africa’s just energy transition, fostering neocolonial land-grabs and, by failing to address climate change, further destabilising the Earth’s life support systems, leaving Africans first and worst affected.

The report highlights the structural flaws of carbon markets: “they permit further pollution, delay real climate action, fail to provide genuine scientific offsets or emission reductions, misallocate resources, undermine development, enable rich countries to shirk responsibility, enable corporate greenwashing, empower polluting industries, subsidise the fossil fuel industry, and entrench technocratic and elite control over lands and resources in the Global South”.

Why carbon markets are a dangerous distraction

The report highlights a series of problems with carbon markets, including the following.

Power Shift Africa points out that investment in zero-carbon development in Africa is important. But this investment should not come from schemes that justify continued emissions elsewhere:

Real emissions reductions in Africa must be recognised as African contributions, not used to offset corporate pollution. Anything less is a dangerous form of climate neo-colonialism that prioritises carbon accounting over African lives, rights, and development.

The reality is that carbon markets are a vehicle for business-as-usual emissions, hiding behind the illusion of climate action. Carbon offsetting distracts from the urgent need to stop burning fossil fuels.

This was an important message in a report published by Friends of the Earth with the title: “A dangerous distraction. Why offsetting is failing the climate and people: The evidence.”

The report was published 16 years ago, during a UN climate meeting in Bonn in June 2009.

The report argued against creating REDD as an offsetting mechanism and highlighted the danger that “forests could become a net source of carbon instead of a sink as the planet warms up”. In 2017, a study published in Science found that tropical forests had become a carbon source, not a sink. Since then, things have got even worse.

Power Shift Africa notes the false assumption that emissions from burning fossil fuels can be offset by absorbing an equivalent amount of carbon biologically in forests, soils, or wetlands. The report states that, “This false equivalence means that instead of reducing atmospheric carbon, carbon markets risk increasing the total carbon load in the biosphere.”

As the Land Gap Report shows, an area of land larger than the entire United States would be required to meet projected biological carbon removal in national climate pledges.

Power Shift Africa writes that,

Rather than empowering local communities, carbon markets predominantly channel financial benefits to project developers, certification and verification firms, carbon traders, and large polluting industries. These actors often capture the lion’s share of profits, while local populations receive little to no direct economic advantage. In some instances, carbon offset projects have worsened conditions for affected communities, adding to their debt burdens or causing social and ecological harm, such as displacement or restricted access to land and natural resources.

Carbon markets are a major source of greenwashing. Big Polluters claim to be “carbon neutral” or aligned with “net zero” goals, based on buying carbon offsets.

Recently Energy Australia admitted that “Offsets do not prevent or undo the harms caused by burning fossil fuels.” This admission followed a legal case about Energy Australia’s “carbon neutral” claims. And a recent report by the London School of Economics found that the number of legal challenges to carbon credit schemes is increasing.

Carbon credits are inherently vulnerable to fraud, overestimation, and manipulation. “In Africa, where regulatory frameworks may be less developed, the risks are even higher,” Power Shift Africa notes.

And carbon markets entrench technocratic and elite control. An ever expanding group of experts, consultants, investors, standards and registries, brokers, exchanges, traders, NGOs, and multilateral corporations control the mechanisms that carbon markets depend on.

Carbon Market Watch highlighted this problem in a 2023 report:

Power Shift Africa writes that,

This technocratic control reinforces global inequalities and perpetuates a model of climate finance that prioritises profit and financialisation over social justice and ecological sustainability. African farmers and indigenous communities are often sidelined in carbon project design and governance, which undermines local sovereignty and the potential for community-led climate solutions.

Alternative approaches to climate finance

The report also considers alternatives to carbon markets to raise climate finance. These include the following:

• Public climate finance: Rich countries must provide climate finance based on the principal of historical responsibility for the climate crisis.

• Debt cancellation and reparations: “African governments and civil society should actively campaign for the cancellation or restructuring of illegitimate, odious, or unsustainable debts that were incurred under unfair or exploitative conditions,” Power Shift Africa writes.

• Tax justice and financial reform: Reforms are needed to the global financial architecture to provide sustainable climate finance. This could include windfall taxes on fossil fuel profits, wealth taxes on the super rich, and stopping illicit financial flows from Africa.

• Community-led adaptation and agroecology: Local driven solutions such as agroecological farming methods, community forests, and decentralised renewable energy systems strengthen community autonomy and livelihoods.

• National climate funds: Transparent, accountable, and publicly governed national climate funds should be designed with civil society and Indigenous Peoples’ participation.

The report concludes that,

Carbon markets are a failed model of climate finance that prioritises profits over people and delays over action. Carbon markets have not worked in the past and are unlikely to deliver the promised development benefits for Africa. They are based on flawed scientific and economic assumptions, encourage pollution outsourcing, and open the door to land grabs, corruption, and greenwashing.