The Dubious Business of Trading Carbon and Its Stakes For India’s People and Forests
Tribal communities in the Araku Valley of Andhra Pradesh “signed away” their rights to carbon credits through a local NGO intermediary. While the tribal communities undertook plantations on their private land spread across 6,000 hectares – an area of the size of almost 150 football grounds – in 333 villages, these began generating carbon credits for the French company Livelihood Funds in 2010. The Paris-based company obtained these credits, while Evian – a popular luxury water brand – of French food production MNC Danone (on whose behalf the NGO acted) took credit for this carbon sequestration and claimed it was carbon-neutral. Meanwhile, the Michelin Group – a leading tyre manufacturer based in France – used the same carbon credits to “offset” emissions from its employees’ travels. Notably, Livelihood Funds did not sell these credits in the open market, but to its investors like the Michelin Group, Schneider Electric and others. The data is sketchy on how many credits Livelihoods Funds sold to its investors. These findings, based on ground reports by Rohini Krishnamurthy and Trishant Dev, researchers from the Delhi-based think tank Centre for Science and Environment (CSE), are part of their recent report titled ‘Discredited: The Voluntary Carbon Market in India’. Krishnamurthy and Dev’s visits also found that in many cases, locals did not reap any benefits from this business. Background Carbon markets were first envisioned in 1997 as part of the Kyoto Protocol, which intended to put a price on the amount of carbon dioxide (CO2) being emitted by developed countries. This market’s function, like that of any other market, is to connect buyers to sellers. If you polluted or emitted to the permissible limit, you could purchase carbon credits off the carbon market and emit more CO2. A carbon credit is a kind of tradable permit and equals one tonne of CO2 removed. Background Carbon markets were first envisioned in 1997 as part of the Kyoto Protocol, which intended to put a price on the amount of carbon dioxide (CO2) being emitted by developed countries. This market’s function, like that of any other market, is to connect buyers to sellers. If you polluted or emitted to the permissible limit, you could purchase carbon credits off the carbon market and emit more CO2. A carbon credit is a kind of tradable permit and equals one tonne of CO2 removed. Background Carbon markets were first envisioned in 1997 as part of the Kyoto Protocol, which intended to put a price on the amount of carbon dioxide (CO2) being emitted by developed countries. This market’s function, like that of any other market, is to connect buyers to sellers. If you polluted or emitted to the permissible limit, you could purchase carbon credits off the carbon market and emit more CO2. A carbon credit is a kind of tradable permit and equals one tonne of CO2 removed. But such projects didn’t really contribute to climate change mitigation; instead, they ended up polluting the environment even more. These projects also did not offset more emissions that would have occurred in their absence. Barbara Haya, a researcher and faculty at the University of California Berkeley’s Goldman School of Public Policy, points out that countries should not get credits for building something that would have been built anyway. Haya spoke to a consultant who was helping a wind developer with a project and ended up preparing two different financial assessments for it. In one, he would show the project to be cost-effective and send this assessment to banks. In the other, he would show that the project wasn’t cost effective and send that to the UN. This shows how carbon credits and the way they are planned can be manipulated. Later, Article 6 of the Paris Agreement allowed for the creation of carbon markets. Of this, ‘Reducing Emissions from Deforestation and Forest Degradation’ (REDD+) projects are the ones with the most credits on the voluntary carbon market. A leading idea from this was that industrialised nations could buy tradable carbon credits by paying governments, organisations, communities and individuals in forested areas, primarily in the countries of the Global South, including India. Carbon trading has been criticised on many grounds. One of these is the potential creation of “sacrifice zones”. This means that carbon emissions can get accumulated in one area where a local transmitter continues emitting carbon by buying credits from other sources. There have been examples of oil refineries disproportionately sited in areas where underprivileged communities live. These refineries emit not only carbon, but also several co-pollutants in the process. These co-pollutants – including toxic gases such as benzene, dioxins and ammonia – may also get traded along with the carbon emissions, while also exposing local communities to further hazards. It has been anticipated that there is potential for these to exacerbate the already-existing exposure of lower-income minority communities to landscapes of environmental injustice. “Voluntary carbon markets claim to serve the public good, providing quantitative and qualitative benefits to the climate and the community. But the ecosystem designed to help companies make claims of carbon neutrality is, in itself, a black box,” says Dev of the CSE. Forestry projects and carbon markets Haya of Berkeley’s Goldman School says that “the offsets can only work if one’s sure that they’re keeping carbon out of the air”. Every country maintains a registry to track such offsets, which mandates a set of rules stipulating project types as well as the eligibility criteria and methods for estimating emissions reductions. For instance, if an entity wants to buy wind farms to offset CO2 emissions, these rules determine if it qualifies to do so. Voluntary carbon markets grew from organisations that wanted to offer companies and individuals a chance to buy the carbon credits necessary to offset their emissions voluntarily. The majority of projects on the market are forestry projects, accounting for as many as 43% of credits. Featured photo: Seratobikiba/Wikimedia Commons. CC BY-SA 4.0. Tribal communities in the Araku Valley of Andhra Pradesh “signed away” their rights to carbon credits through a local NGO intermediary. While the tribal communities undertook plantations on their private land spread across 6,000 hectares – an area of the size of almost 150 football grounds – in 333 villages, these began generating carbon credits for the French company Livelihood Funds in 2010. The Paris-based company obtained these credits, while Evian – a popular luxury water brand – of French food production MNC Danone (on whose behalf the NGO acted) took credit for this carbon sequestration and claimed it was carbon-neutral. Meanwhile, the Michelin Group – a leading tyre manufacturer based in France – used the same carbon credits to “offset” emissions from its employees’ travels. Notably, Livelihood Funds did not sell these credits in the open market, but to its investors like the Michelin Group, Schneider Electric and others. The data is sketchy on how many credits Livelihoods Funds sold to its investors. These findings, based on ground reports by Rohini Krishnamurthy and Trishant Dev, researchers from the Delhi-based think tank Centre for Science and Environment (CSE), are part of their recent report titled ‘Discredited: The Voluntary Carbon Market in India’. Krishnamurthy and Dev’s visits also found that in many cases, locals did not reap any benefits from this business. Background Carbon markets were first envisioned in 1997 as part of the Kyoto Protocol, which intended to put a price on the amount of carbon dioxide (CO2) being emitted by developed countries. This market’s function, like that of any other market, is to connect buyers to sellers. If you polluted or emitted to the permissible limit, you could purchase carbon credits off the carbon market and emit more CO2. A carbon credit is a kind of tradable permit and equals one tonne of CO2 removed. You could purchase credits by investing in projects that either prevented future emissions or promised to remove carbon from the atmosphere. Such investments were to be made in projects that needed additional revenues for their implementation. The project’s outcome couldn’t have been ‘business as usual’ either, meaning that the project should have been able to mitigate more CO2 emissions than would have been mitigated in its absence. The idea that a project must offset more emissions that would have occurred if it didn’t exist is known as additionality. Photo: Jonathan Wilkins/Wikimedia Commons. CC BY-SA 3.0 Unported. Early research on carbon offsets in India in 2000 showed that since Indian state governments at the time were very interested in building wind farms, they gave many subsidies and incentives for the required technology. At the same time, European countries too were interested in building the same wind power. But such projects didn’t really contribute to climate change mitigation; instead, they ended up polluting the environment even more. These projects also did not offset more emissions that would have occurred in their absence. Barbara Haya, a researcher and faculty at the University of California Berkeley’s Goldman School of Public Policy, points out that countries should not get credits for building something that would have been built anyway. Haya spoke to a consultant who was helping a wind developer with a project and ended up preparing two different financial assessments for it. In one, he would show the project to be cost-effective and send this assessment to banks. In the other, he would show that the project wasn’t cost effective and send that to the UN. This shows how carbon credits and the way they are planned can be manipulated. Later, Article 6 of the Paris Agreement allowed for the creation of carbon markets. Of this, ‘Reducing Emissions from Deforestation and Forest Degradation’ (REDD+) projects are the ones with the most credits on the voluntary carbon market. A leading idea from this was that industrialised nations could buy tradable carbon credits by paying governments, organisations, communities and individuals in forested areas, primarily in the countries of the Global South, including India. Carbon trading has been criticised on many grounds. One of these is the potential creation of “sacrifice zones”. This means that carbon emissions can get accumulated in one area where a local transmitter continues emitting carbon by buying credits from other sources. There have been examples of oil refineries disproportionately sited in areas where underprivileged communities live. These refineries emit not only carbon, but also several co-pollutants in the process. These co-pollutants – including toxic gases such as benzene, dioxins and ammonia – may also get traded along with the carbon emissions, while also exposing local communities to further hazards. It has been anticipated that there is potential for these to exacerbate the already-existing exposure of lower-income minority communities to landscapes of environmental injustice. “Voluntary carbon markets claim to serve the public good, providing quantitative and qualitative benefits to the climate and the community. But the ecosystem designed to help companies make claims of carbon neutrality is, in itself, a black box,” says Dev of the CSE. Article 6 of the Paris Agreement allowed for the creation of carbon markets. Photo: UNclimatechange/Flickr. CC BY 2.0. Forestry projects and carbon markets Haya of Berkeley’s Goldman School says that “the offsets can only work if one’s sure that they’re keeping carbon out of the air”. Every country maintains a registry to track such offsets, which mandates a set of rules stipulating project types as well as the eligibility criteria and methods for estimating emissions reductions. For instance, if an entity wants to buy wind farms to offset CO2 emissions, these rules determine if it qualifies to do so. Voluntary carbon markets grew from organisations that wanted to offer companies and individuals a chance to buy the carbon credits necessary to offset their emissions voluntarily. The majority of projects on the market are forestry projects, accounting for as many as 43% of credits. “Most forest projects aren’t credited for doing something, but not doing something … not deforesting, not aggressively harvesting,” Haya said. She added that it was “easy to tell the story of a high risk of deforestation”, referring to how a project proponent can claim that a certain forest is likely to be deforested and needs protection or conservation, without necessarily having supporting evidence for the same. “Most projects on the market are forest projects [relating to] improved forest management and avoiding deforestation, especially in the Global South.” In 2023, an investigation by SourceMaterial, The Guardian and the German weekly Die Zeit revealed that more than 90% of the rainforest offset credits that Verra, a registry, had verified did not represent genuine carbon reductions. Not only that, but some of these projects, such as the ones in Peru run by the NGO Conservation International along with the country’s government, are rife with human rights abuses, with evidence of people being displaced from their homes.