Source: COP28 / Anthony Fleyhan via World Meteorological Organisation
Introduction
As the world's nations convened at COP28, the complexities of global climate policy came under renewed scrutiny, particularly, Article 6 of the Paris Agreement, which governs international carbon markets and mechanisms for emission reduction.
Through Article 6, countries and entities can trade carbon offsets [1], meaning they can compensate for their own emissions to meet ambitious “net zero” emissions aims by purchasing carbon offsets from renewable energy projects elsewhere. These partnerships are often between one developed and one developing country at a time, termed “bilateral efforts” under the UNFCCC scheme. Under this scheme, governments of the ‘Global North’ agree to act as financiers, funders, and lenders for the rollout of renewable energy projects, with the land, resources, and manpower for building solar power panel plants, wind farms, and more coming from the ‘Global South.’
This article critically examines the intricacies of Article 6 of the Paris Agreement and the role of carbon markets in addressing climate change.
We argue that, although carbon markets are seen as a pragmatic solution to achieving emissions reductions, they risk perpetuating a form of carbon colonialism. This involves the outsourcing of environmental responsibilities to the Global South and raises questions about the true benefits of such projects for these developing regions.
Carbon Markets: The Only Way Forward?
Many private sector players argue that Article 6, as a private sector mechanism, is the only practical way forward. The main argument is that, despite increased pledges of public climate finance this year (namely, a record of USD 12.8 billion to the Green Climate Fund), disbursement of these funds poses critical challenges (United Nations Climate Change, 2023). Official institutions tasked with this disbursement, like the World Bank, are presently overwhelmed and understaffed, contributing to the slow processing of climate finance requests. Their selective, subjective credibility assessment across hundreds of loan requests is another hurdle (Hammersly, Pill, & Rajah, 2023). Moreover, their strained reputation among developing countries amidst a slew of accusations deters the willingness of small NGOs to work with them.
Comparatively, business-to-business interactions (B2B), mediated by the newer, more neutral, less politically charged carbon exchange platforms, are more desirable for certain players. Transactions are also likely to be processed faster, offer more flexibility, and involve more responsive personnel. For these reasons, carbon markets, i.e., the involvement of the private sector, are widely perceived as the only way to get the urgent financing needed for the rollout of renewable energy projects.
From a purely economic perspective, this market dynamic is also logical. It allows developing countries, rich in natural resources, to supply carbon, while developed countries provide the demand, leveraging their existing businesses, technologies, infrastructure, and human talent. This arrangement capitalises on each country’s strengths, requiring less adaptation and presenting fewer frictions.
However, while framed as “job-generating” and creating “green growth opportunities” in the Global South, many have raised ethical concerns regarding the UNFCCC’s approach to emissions reductions. Instead of making direct emissions cuts domestically, some worry that the UN’s framework allows the Global North to invest in carbon offset projects at the disproportionately greater expense of non-Annex I countries (Parsons, 2023b). This includes the physical labour of building projects, re-training the workforce, recruiting workers, and developing, maintaining, and managing of renewable energy projects. Additionally, playing this role compels fiscally poorer communities in the Global South to assume significantly more financial risk, such as the potential failure or malfunction of renewable energy projects.
Under such an interpretation, developed countries might simply be using Article 6, carbon markets, and “green finance” to conveniently reroute the comparatively more challenging tasks involved in the energy transition to the Global South. In other words, Annex I countries sit back and observe as the Global South continues to shoulder the bulk of the transition work.
Nevertheless, this outsourcing of responsibility perpetuates a system where the Global South may have to sacrifice economic growth in the name of global emissions reduction. Carbon offsets are perceived as an accounting trick, enabling countries to mask the environmental repercussions caused by their industrial activities. Instead of addressing the issue directly, they transfer it beyond their borders, where it often escapes regulatory and accounting scrutiny (Parsons, 2023a).
Despite the global nature of climate change, the carbon accounting system remains rigidly nationalistic, confined within nation-state borders (Moore et al., 2018). Similar to the practice of relocating environmentally harmful industrial processes to the environment of the Global South (Baumert et al., 2019; Malik & Lan, 2016), carbon offsets ostensibly absolve countries of the Global North from their emissions reduction responsibilities by focusing on reductions in the annual flows of CO₂ emissions. Developed countries can highlight reductions in global annual emissions, yet they often overlook the fact that these reductions were achieved at the cost of unfair and unequal economic development. Simultaneously, they evade the responsibility of decoupling their economies from carbon-intensive processes.
The most uncharitable reading of this particular dynamic is that Article 6 risks perpetuating a form of exploitation of the Global South, otherwise termed ‘carbon colonialism’. We adopt Eberle et al.’s (2019) definition of carbon colonialism as a process where non-industrialised nations forfeit their chances for development to compensate for the environmental degradation caused by industrialised countries. This term is used for its pejorative connotations, highlighting uneven geo-political power dynamics that align with the postcolonial legacies of unjust economic relations and opposition (Dehm, 2016; Eberle et al., 2019). Colonialism evokes the idea of wealthier countries exploiting developing countries for their own benefit, often through violent and undemocratic processes. In the context of Article 6, this involves the active displacement and relocation of rural and indigenous communities under the guise of “sustainable development” to make space for large-scale wind farms, solar panel projects, etc.
For good reason, there is growing concern about whether Article 6 projects truly serve the communities in the Global South that they necessarily involve.
The Discrepancy in Global Emissions and Responsibility
To add on, such a dynamic is even more unjust from a historical perspective on emissions. Countries in the Global North, representing a minor fraction of the world's population, are accountable for the vast majority of excess emissions throughout history. In Jason Hickel’s book Less Is More: How Degrowth Will Save the World, he identifies two ways of viewing the issue of responsibility. Crucially, he distinguishes between stock and flow perspectives (Hickel, 2020). Of importance is not the annual flows of CO₂ in the atmosphere, but rather the historical stocks of CO₂ that have accumulated. When considering the stock perspective, the countries of the Global North (comprising regions like North America and Europe, as well as countries such as Japan and Australia among others) have contributed 92% of all overshoot emissions despite only making up 19% of the global population (Hickel, 2020).
This discrepancy in emissions has not only fueled the economic ascent of the Global North but also led to a disproportionate impact on the Global South, where the majority of climate-related deaths occur (Hickel, 2020). This is despite their minimal contributions to atmospheric carbon stocks. In spite of surpassing the United States as the largest emitter of CO₂ in 2006 (Liu et al., 2023), China is still under its proportionate share of excess emissions, compared to the US. Significantly, the combined contribution of the continents of Latin America, Africa, and the Middle East amounts to just 8% of the total (Hickel, 2020). The brunt of climate change will be borne by the countries of the Global South, who historically had little responsibility for this issue yet find themselves vulnerable to the adverse effects of climate change such as increased flooding, droughts, and rising sea levels (Parsons, 2023a). For instance, 2022 saw heatwaves in India and Pakistan affecting nearly a billion people. Since 2020, the Horn of Africa has experienced its worst drought in 40 years, which placed nearly 20 million people at risk of severe food insecurity and resulted in tens of thousands of deaths (Paddison, 2023). According to reports released by the World Weather Attribution initiative, climate researchers have found that climate change significantly heightened the likelihood of these events occurring (World Weather Attribution, 2022; World Weather Attribution, 2023). It is anticipated that, in the future, extreme heat risks will impact half of the urban population, especially in the tropical regions of the Global South and in coastal cities and settlements (Huang et al., 2019).
While steps have been taken during COP28 to compensate these nations through the agreement and finalisation of the Loss and Damage Fund, the issue of ensuring equitable development remains open-ended (Jaynes, 2023). For all the discussions on achieving the 1.5ºC pathway, the favoured approach for countries has been market-centric, with carbon offsets being one of the mechanisms. Countries are free to determine how emissions reductions are achieved using market mechanisms. The creation of a carbon offset market has largely mirrored the North-South divide. The diagram below illustrates the geographical divide between the demand and supply of carbon offsets in the global market. The outsourcing of responsibility to the Global South is predicated upon the argument that the relative abundance of untouched biodiversity in many countries of the Global South makes them ideal choices for carbon offset projects, usually in the form of reforestation (Wang, 2021).
Source: Dagens Nyheter (2019) [2]
Senior fellow at the Centre for Social and Economic Progress, Rahul Tongia, argues that developed countries have a greater responsibility to reduce their own national emissions while drawing attention to the hypocrisy and difficulty in forcing developing countries to make strides towards global emissions reduction when their economies remain in a state of development (Tongia, 2022). The developing nations of the world should not be compelled to forgo economic development in order to help developed nations achieve their share of emissions reductions. This dynamic undermines the spirit of equitable climate action.
Conclusion
Whether an ardent supporter or the worst critic of Article 6, the global conversation seems to be centred on, and advancing, within this arena. Other negotiation tracks such as the Loss and Damage Fund, as well as the Just Transition, faced significantly more resistance in negotiation rooms at COP28. At the heart of this discussion lies the challenge of implementation. The question of whether carbon markets are truly exploitative or beneficial to development will only be resolved through vigilant monitoring of the integrity of carbon offset projects. The quality of these projects and the actual amount of emissions reduced have come under scrutiny, as noted by West et al. (2023). This scrutiny made the discussions on the terms of Article 6 during COP28 crucial. Notwithstanding, the limited progress in reaching a consensus on these terms is concerning, indicating a potential challenge in effectively addressing the complexities of carbon offsets and their impact on global emissions reduction efforts.
This article emphasises the need for international parties to ensure that carbon offsets are of high quality and genuinely contribute to sustainable development in the Global South. It calls for stringent verification processes to ensure that offsets represent real, additional, and permanent reductions in emissions, and do not merely act as a license for continued pollution by wealthier countries. The goal is to create a more equitable global framework that balances environmental integrity with the developmental needs of all countries.
Endnotes:
[1] ‘[Tokens] representing one tonne of CO2 equivalent that can be traded between an entity that continues to emit and an entity that reduces its own emissions or removes carbon dioxide (CO2) from the atmosphere’ (Gabbatiss et al., 2023).
[2] Grön: Länder där projekten utförs = Green: Countries where the projects are carried out. Röd: Länder som köper klimatprojekt = Red: Countries that buy climate projects. Länder med flest antal projekt = Countries with the most number of projects. Aktörer som köper mest klimatkompensation i världen = Actors that buy the most climate compensation in the world (Translated using ChatGPT).
This article represents the views of contributors to STEAR's online digital publication, and not those of STEAR, which takes no institutional positions.
References
Baumert, N., Kander, A., Jiborn, M., Kulionis, V., & Nielsen, T. (2018). Global outsourcing of carbon emissions 1995–2009: A reassessment. Environmental Science & Policy, 92, 228-236. https://www.sciencedirect.com/science/article/pii/S1462901118307536
Dagens Nyheter. (2019, October 31). ”Klimatkompensation är en ny slags kolonialism”. Dagens Nyheter. https://www.dn.se/nyheter/sverige/klimatkompensation-ar-en-ny-slags-kolonialism/
Dehm, J. (2016). Carbon colonialism or climate justice? Interrogating the international climate regime from a TWAIL perspective. Windsor Yearbook of Access to Justice. https://doi.org/10.22329/wyaj.v33i3.4893
Eberle, C., Münstermann, N., & Siebeneck, J. (2019). Carbon colonialism: A Postcolonial assessment of carbon offsetting. University of Bonn / United Nations University. https://www.researchgate.net/publication/337622634_Carbon_Colonialism_A_postcolonial_assessment_of_carbon_offsetting
Gabbatiss, J., Dunne, D., Chandrasekhar, A., Dwyer, O., Lempriere, M., Quiroz, Y., Tandon, A., & Viglione, G. (2023, September 25). In-depth Q&A: Can “carbon offsets” help to tackle climate change? Carbon Brief. https://interactive.carbonbrief.org/carbon-offsets-2023/
Hammerseley, G., Pill, M., & Rajah, R. (2023). Revitalising the Green Climate Fund. https://www.lowyinstitute.org/publications/revitalising-green-climate-fund#:~:text=It%20has%20struggled%20to%20define,countries%20with%20the%20greatest%20needs.
Hickel, J. (2020). Less Is More: How Degrowth Will Save the World. Penguin Random House.
Huang, K., Li, X., Liu, X., & Seto, K. C. (2019). Projecting global urban land expansion and Heat Island intensification through 2050. Environmental Research Letters, 14(11), 114037. https://doi.org/10.1088/1748-9326/ab4b71
Jaynes, C. H. (2023, December 1). COP28 agrees to establish loss and damage fund for vulnerable countries. World Economic Forum. https://www.weforum.org/agenda/2023/12/cop28-loss-and-damage-fund-climate-change/
Liu, H., Evans, S., Zhang, Z., Song, W., & You, X. (2023, November 30). The Carbon Brief Profile: China. Carbon Brief. https://interactive.carbonbrief.org/the-carbon-brief-profile-china/
Malik, A., & Lan, J. (2016). The role of outsourcing in driving global carbon emissions. Economic Systems Research, 28(2), 168-182. https://doi.org/10.1080/09535314.2016.1172475
Moore, S. A., Rosenfeld, H., Nost, E., Vincent, K., & Roth, R. E. (2018). Undermining methodological nationalism: Cosmopolitan analysis and visualization of the North American hazardous waste trade. Environment and Planning A: Economy and Space, 50(8), 1558-1579. https://doi.org/10.1177/0308518X18784023
Paddison, L. (2023, April 27). Catastrophic drought that’s pushed millions into crisis made 100 times more likely by climate change, analysis finds. CNN. https://www.cnn.com/2023/04/27/africa/drought-horn-of-africa-climate-change-intl/index.html
Parsons, L. (2023a). Carbon Colonialism: How Rich Countries Export Climate Breakdown. Manchester University Press.
Parsons, L. (2023b, June 29). Lifting the Curtain on Carbon Colonialism. Atmos. https://atmos.earth/where-global-north-sends-its-carbon-emissions/#:~:text=Carbon%20colonialism%20is%20the%20system,its%20economy%20and%20its%20production.
Tongia, R. (2022, October 26). It is unfair to push poor countries to reach zero carbon emissions too early. The Brookings Institution. https://www.brookings.edu/articles/it-is-unfair-to-push-poor-countries-to-reach-zero-carbon-emissions-too-early/
United Nations Climate Change. (2023, December 13). COP28 Agreement Signals “Beginning of the End” of the Fossil Fuel Era [Press release]. https://unfccc.int/news/cop28-agreement-signals-beginning-of-the-end-of-the-fossil-fuel-era#:~:text=Increasing%20climate%20finance&text=The%20Green%20Climate%20Fund%20
Wang, J. (2021, May 3). Carbon offsets, a new form of neocolonialism. Columbia Climate School. https://climatesociety.ei.columbia.edu/news/carbon-offsets-new-form-neocolonialism
West, T. A. P., Wunder, S., Sills, E. O., Börner, J., Rifai, S. W., Neidermeier, A. N., Frey, G. P., & Kontoleon, A. (2023). Action needed to make carbon offsets from forest conservation work for climate change mitigation. Science, 381(6660), 873–877. https://doi.org/10.1126/science.ade3535
World Weather Attribution. (2022, May 23). Climate Change made devastating early heat in India and Pakistan 30 times more likely [Press Release]. https://www.worldweatherattribution.org/climate-change-made-devastating-early-heat-in-india-and-pakistan-30-times-more-likely/
World Weather Attribution. (2023, April 27). Human-induced climate change increased drought severity in Horn of Africa [Press Release]. https://www.worldweatherattribution.org/human-induced-climate-change-increased-drought-severity-in-southern-horn-of-africa/