CLA News / Credit where it’s due: Carbon Markets and Community Rights By Natasha Jackson and Margherita Cornaglia

Carbon markets are increasingly promoted as a mechanism for enabling and financing climate mitigation. In simple terms, they translate emissions reductions into tradable units, ‘carbon credits’, that can be bought and sold internationally. Each credit generally represents the reduction or removal of one metric tonne of carbon dioxide (or its equivalent). Entities that reduce emissions through activities such as forest conservation, ecosystem restoration or renewable energy generation can generate credits that can then be sold on to those seeking to mitigate their own emissions.

Carbon markets can either be regulated or voluntary. One of the most well-known examples of regulated carbon markets is the European Emissions Trading System, a cap-and-trade scheme that sets an annually decreasing emissions allowance for polluters in the electricity, industrial, aviation, and maritime sectors across the EU and European Economic Area. Article 6 of the Paris Agreement establishes a similarly regulated framework for international cooperation on emissions reductions, allowing countries to trade carbon credits and use market-based mechanisms to meet their nationally determined contributions (‘NDCs’). Despite being agreed in principle at COP26 in Glasgow in 2021, the system has yet to be made fully operational, with negotiations on the detailed rules and institutional infrastructure proving notably protracted.

On the other hand, the voluntary carbon market (‘VCM’) is a self-regulated, decentralised, marketplace in which private entities voluntarily purchase carbon credits generated by emissions reduction, avoidance, or removal projects around the world in order to compensate for their own carbon footprint.  Companies generally purchase credits to offset emissions as part of corporate climate commitments rather than legal obligations.

Despite significant growth over recent years – reaching approximately USD 2 billion in 2022 – the VCM has come under considerable scrutiny over concerns relating to credit quality, transparency, and concerns that offsetting offers a poor substitute for genuine emissions reductions. There are many good reasons to champion ‘offsetting’ as a pragmatic approach to evening out emissions on a global scale. But a model whereby companies (principally in the global North) outsource their responsibilities (principally to carbon projects in the global South) instead of committing to reducing emissions is, rightly, contentious.

Further, the rapid expansion of the VCM has exposed a number of controversial regulatory challenges. Many question the environmental integrity of credits, the permanence of emissions reductions, fraud and greenwashing associated with credit purchases, and the distribution of financial benefits generated by projects. There is also concern that VCMs create a ‘license to pollute,’ threatening the ability to reach net zero. Particularly where projects take place on land used or managed by Indigenous peoples and local communities, concerns have also arisen about land rights, participation, and equitable benefit sharing, leading civil society groups in the Global South to criticise VCMs as a form of “climate colonialism.”

These issues place carbon markets at the intersection of international climate law, human rights law, and domestic environmental governance.

Carbon markets in international climate law

The international legal framework for climate mitigation is established by the United Nations Framework Convention on Climate Change (“UNFCCC”) and the agreements adopted under it. The UNFCCC sets the overarching objective of stabilising greenhouse gas concentrations in the atmosphere at levels that prevent dangerous anthropogenic interference with the climate system, guided by principles including equity and common but differentiated responsibilities.

Although the early climate treaties focused primarily on state obligations to reduce emissions, the framework has increasingly recognised the importance ofpublic participation and community protection. The Paris Agreement (2015) builds on this by explicitly linking climate action with human rights. Its preamble recognises that parties should respect and promote their obligations relating to human rights, including the rights of Indigenous peoples and local communities, and emphasises the importance of public participation and the protection of vulnerable groups.

These developments are complemented by broader principles of international human rights law, including the concept of Free, Prior and Informed Consent (“FPIC”). FPIC, reflected in instruments such as the United Nations Declaration on the Rights of Indigenous Peoples, requires that communities be adequately informed about projects affecting their land and resources, that consultation take place in advance, and that communities have a genuine opportunity to give or withhold consent.

FPIC has particular significance for carbon markets. Many carbon projects – particularly those involving forestry, conservation or land management – take place on land traditionally used or managed by Indigenous peoples or local communities. Ensuring that such projects respect community land rights and involve meaningful participation is central to the legitimacy of climate mitigation initiatives.

Recent developments in international and regional jurisprudence have reinforced this connection between climate governance and human rights. Notably:

• The Advisory Opinion of the International Court of Justice embedded human rights law within the framework of State obligations concerning the climate.
• In Europe, the European Court of Human Rights in Verein KlimaSeniorinnen Schweiz v Switzerland (2024) confirmed that inadequate climate mitigation policies may engage states’ Convention obligations, and that access to information and public participation in environmental decision-making are fundamental safeguards.
• The Inter-American Court of Human Rights’ Advisory Opinion on Climate Emergency and Human Rights (AO-32/25) issued guidance on states’ human rights obligations in responding to climate change, including protecting populations particularly vulnerable to environmental harm.
• Within Africa, the African Court on Human and Peoples’ Rights is expected to issue an advisory opinion on climate change addressing the obligations of African states under the African Charter. The request is centrally concerned with carbon markets in Africa’s climate transition, noting that Indigenous Peoples are particularly vulnerable to climate impacts on land and resources, and that carbon market projects implemented without FPIC have further impacted their rights.

Taken together, these developments reinforce that climate mitigation efforts, including those implemented through carbon markets, must respect human rights and protect affected communities. The African Court’s forthcoming opinion is one to watch, given its anticipated focus on the legal nexus between carbon markets, environmental justice and indigenous peoples’ rights.

Community rights in practice

While VCMs can bring opportunity for income and conservation financing, the implementation of carbon projects has sometimes generated significant tensions with community land rights, particularly in projects involving land use change, conservation, or ecosystem restoration on land used or managed by Indigenous peoples and local communities.

As noted above, FPIC is the central safeguard, and an increasing number of States have implemented FPIC principles into domestic schemes regulating VCMs. In practice, FPIC requires that communities receive clear information about proposed projects, that consultations occur before decisions are made, that communities participate meaningfully in decisions affecting their land, and that consent be obtained through legitimate community decision-making processes.

A frequently cited concern relates to the complexity of carbon market agreements, which often involve long-term contracts governing land use, benefit-sharing and carbon rights allocation. These agreements may run for decades and rely on technical methodologies difficult for communities to assess without specialised expertise, creating significant power imbalances between developers and communities.

Issues of community participation and representation have also emerged. Projects have sometimes relied on agreements reached with local leaders rather than the broader community, risking the exclusion of certain groups – particularly women, youth, or marginalised households – from participation or benefits. Such issues have been the subject of much debate in relation to the Northern Rangelands Trust (NRT) soil carbon project, the Ogiek’s Mau Forest VCM projects and the Kasigau Corridor REDD+ project in Kenya.

Carbon projects can also create tensions where new land-use restrictions affect traditional livelihoods, such as pastoralism or agriculture. Disputes have arisen regarding who holds the rights to carbon stored in community lands, particularly where national, county, and community interests intersect.

Such concerns illustrate the importance of effective safeguards for community participation, including access to affordable legal advice, and benefit-sharing in the governance of carbon markets. As the CLA Sabah Declaration on Climate Justice (2024) affirms, just and inclusive governance of natural resources is vital to protect human rights, foster peace and economic stability and prevent conflicts exacerbated by environmental degradation and resource scarcity.

Implications for Commonwealth Lawyers

For lawyers across the Commonwealth, experiences of carbon markets to-date illustrate the complex interaction between international climate law, human rights obligations and domestic environmental governance.

Carbon markets may provide an important mechanism for mobilising climate finance and supporting mitigation efforts in developing states. As the CLA Sabah Declaration on Climate Justice recognises, climate finance initiatives must adhere to the principles of the rule of law, good governance and respect for human rights while promoting the value of green economies.

In our view, the long-term legitimacy of carbon markets should depend on legal frameworks capable of ensuring both environmental integrity and the protection of community rights.

Further, we are convinced that it is ultimately in the self-interest of global North purchasers of carbon credits (and the lawyers who advise them) to ensure that local and indigenous communities are meaningfully informed, consulted, and made genuine participants in carbon market projects from the outset, rather than treated as an afterthought. As the experiences of the Northern Rangelands Trust, the Ogiek, and others have demonstrated, projects that fail to secure authentic community buy-in and respect fundamental rights are increasingly likely to unravel, whether through sustained community opposition, legal challenges, or reputational fallout, ultimately undermining the very credits that purchasers have paid for.

 By Natasha Jackson and Margherita Cornaglia