Carbon Markets: False Solution

The 26th UN Climate Change Conference 2021 (COP26) will take place in Glasgow, Scotland, from the 31st of October to the 12th of November 2021. COP26 will be the first summit to summarise what has been done (and what has not been done) to mitigate the climate crisis since the signing in 2015 of the main regulatory document in this area, the Paris Climate Agreement.

Government officials are expected to discuss technical issues including carbon credits, funding for countries vulnerable to climate change and nature-based solutions in the first week of the summit. The second week will cover topics including gender, transport and the practical solutions needed to adapt to climate impacts.

Climate finance for developing countries will be perhaps the most important topic of discussions in Glasgow. On the eve of the Glasgow summit, more than 100 countries from the global South set out their demands: the richer countries from the North shall allocate funds to them to implement the decisions made and pay compensations for the damages that has already been caused to their economies by global warming.

Finance discussions at COP26 in Glasgow will mainly centre on agreement of rules for Carbon Markets under Article 6 of the Paris Agreement, the last part of the ‘Paris Rulebook’ that is outstanding. So far, six years of negotiations on this article have stalled on many key issues related to "joint approaches" to the implementation of the Paris Agreement. However, the slow pace of the Article 6 negotiations does not justify the rapid decision-making "at any cost". Such a decision, especially in the absence of representatives from many of the countries that may be most affected by Article 6 related activities, is not a criterion for success. On the contrary, fixing weak rules for decades simply for the sake of making a decision could undermine the very integrity of the Paris Agreement.

As demonstrated by past examples, market-based mechanisms threaten local communities. Too often, trading of carbon credits through offset schemes merely enables business-as-usual pollution by large emitters, and the human rights and environmental harms that accompany it. Without robust protections, markets incentivise land-grabs, jeopardizing the rights of indigenous peoples and local communities. Loopholes have allowed credits without verified or permanent reductions, and reliance on offsets perpetuates the fallacy that a climate benefit in one place can count against continued emissions in another. Treating climate mitigation as a mere carbon accounting problem is reductionist and suggests a false equivalency between carbon emissions that ignores the experience of the communities where pollution is concentrated. Market mechanisms have no long-term role to play as keeping temperature rise below 1.5°C requires real and immediate domestic action on reducing emissions.

Carbon markets are heavily criticised by many experts and civil society organisations. These include Friends of the Earth International. There are four main reasons why Friends of the Earth International stands with climate justice organisations and indigenous peoples’ rights groups in opposing carbon markets:


  • Carbon markets have horrific impacts on Indigenous Peoples and local communities

Indigenous peoples and local communities have long resisted carbon offsetting schemes as forms of climate colonialism. Such schemes have led to conflict, corporate abuse, forced relocation and threats of cultural genocide, particularly for indigenous peoples, smallholder farmers, forest dwellers, young people, women and people of colour. Perhaps the most infamous among these schemes is REDD (Reducing Emissions from Deforestation and Degradation).


  • Carbon markets are a dangerous distraction 

Carbon markets delay urgent mitigation action in the global North and prevent new and additional public climate finance flowing to the South for energy transformation. Instead of obliging rich nations to do their fair share of the climate effort, carbon markets give them political and environmental license to continue wrecking the climate under the guise of ‘international cooperation’, while developing countries are devastated. Rich nations also argue that money received by Southern countries through carbon markets should count as climate finance, meaning they can avoid paying their climate and ecological debt as well as their fair share of additional public finance to support adaptation and mitigation activities in developing countries. 


  • Carbon markets do not reduce emissions or deliver real climate action

Perhaps the most glaringly obvious reason not to pursue carbon markets is the fact that they simply do not work. Under these schemes, global emissions have continued to rise. Carbon markets (even Cap and Trade) are riddled with intrinsic flaws that render them unworkable such as the inclusion of international credits from offsetting schemes (such as the CDM, Clean Development Mechanism). This loophole effectively renders the ‘cap’ in the cap and trade system useless, as credits within the system are no longer effectively limited to a cap. Monitoring problems mean that it is difficult to track whether offsetting projects have actually taken place, and how much carbon has truly been offset. Furthermore burning carbon from fossil fuels in one part of the world cannot be ‘balanced out’ by offsetting carbon from natural land carbon cycles. 


  • Carbon markets strengthen corporate power 

For a long time, energy and mining companies and other energy-intensive industries have lobbied hard for the expansion of carbon markets on the world stage. Big fossil fuel companies such as Shell have included offsetting as a major part of their strategy, allowing them to continue expanding the fossil-fuel based energy model indefinitely. They want to secure carbon markets in the Paris rulebook (in the same way that they helped to shape the Paris Agreement), because this would buy them at least another decade of profit. The fight against carbon markets goes hand-in-hand with the fight against the corporate capture of our democratic decision-making institutions, such as governments and the UNFCCC, where people-led solutions are constantly side-lined while corporate interests take centre stage. 

Friends of the Earth International have published a Carbon Markets Briefing Note for COP26 that you can find here.

Olga Senova, Head of the Climate Program of the Russian Socio-Ecological Union, believes that “Carbon markets are neither the best nor the priority tool for solving the problem of climate change. They shall not divert financial resources from projects of direct actions to reduce emissions. Errors and falsifications in the use of carbon credits have undermined the credibility of the system. Emission charges or carbon tax can stimulate action to reduce emissions, but only if there are clear sectoral and enterprise reduction targets and transparent carbon payment mechanisms.”


A.V. Fedorov