States enter the carbon market rush: more harms to come for communities and the climate

The much touted Paris agreement on climate change, which was signed in 2015, seems more like wet paper than ever these days. Over its decade of existence, it has failed to curb greenhouse gas emissions and hold large corporations to account. Today, its arguably most important signatory, the United States, has not only exited the agreement but, under its current commander in chief, its military, one of the world's biggest climate polluters, is bombing international cooperation into oblivion with total impunity.

Yet there is one aspect of the pact that has been very consequential for local communities. The agreement endorsed the idea of carbon markets. This allows corporations that generate a lot of greenhouse gas emissions to buy carbon credits to offset their emissions instead of actually reducing them. By doing this, the Paris accord set off a race to establish projects, mainly in the global South, that could generate these credits and sell them to corporations, which are mainly in the global North.

Carbon offsets are highly controversial. Most of the credits that have been produced so far are considered junk, in that they are not based on any real avoidance of emissions or sequestration of carbon.^[1] They have, however, generated real harms at the grassroots level. Communities have been evicted from their forests and grasslands, they have lost crop lands to tree plantations, and they have experienced serious human rights violations, without seeing much in the way of benefits, if any at all.^[2]

To date, nearly all of these carbon offset projects operate within what are called voluntary markets. In these markets, companies that want to set up projects rely on a few private agencies to certify their plans, and establish rules and methodologies for them to follow. The credits that are generated are then sold to corporations which want to offset their own emissions for their own reasons, not out of any legal obligation. But the prices paid in these markets are really low, given the widespread lack of trust, so it is difficult for this business to grow and make profits.

Intense efforts to change all this are about to unfold.

The Paris agreement not only endorsed voluntary carbon markets for corporations. It also laid the groundwork for governments to trade in carbon credits, too. Article 6 of the agreement provides two mechanisms through which carbon credits can be purchased by states to offset their national emissions. One, Article 6.2, allows governments to develop bilateral mechanisms for trading carbon credits between them. The other, Article 6.4, establishes a centralised mechanism, under the supervision of the UN, where governments can buy credits from companies.

These are called compliance markets, or regulatory markets, in the UN jargon. There are two reasons for this. The first is that projects have to be registered by a source country and the export of credits has to be counted against that country's national emissions reduction obligations. If, for example, Indonesia sells two million tonnes worth of carbon credits from a forest conservation project in its territory to the government of Japan, it cannot count the two million tonnes as a reduction in its own emissions. (If they did that, we would have double accounting.)

The second reason is that the rules and methodologies governing these markets are set by governments themselves. This can be done bilaterally, for projects under Article 6.2. It can also be done multilaterally, with the assistance of a government-appointed expert group, for projects pursued under Article 6.4.

Although the details of all this are still under negotiation, many countries are moving ahead with national emission reduction plans that rely on the trading of carbon credits. In fact, nearly all 129 countries that have submitted national plans under the Paris accord are counting on using carbon credits to reach their targets.^[3] At the end of 2025, the EU took a decision that will make it the single largest buyer of carbon credits under Article 6.^[4]

On top of all this, there are several new initiatives not governed by the Paris agreement that will only be open to projects authorised under Article 6. These include the Carbon Offsetting and Reduction Scheme for International Aviation, used by the major airlines, and carbon tax schemes, like Singapore's, which allow companies to purchase Article 6 authorised credits instead of paying a tax.

The political interest in all of this is easy to grasp. Big polluter countries, mostly in the global North, want to buy carbon credits from other countries as a cheap and less complicated (even if bogus) alternative to reducing their own emissions or establishing offsets in their own territories. Governments in the global South, on the other hand, are keen to make money off the sale of carbon credits from projects using their peoples' rich lands, forests and waters.

This has spawned a flurry of new national legislative frameworks for carbon markets, along with the establishment of bureaucracies tasked with implementation. As of January 2026, 85 countries have implemented or are implementing mechanisms for the issuance of Article 6 credits.^[5] Many national frameworks are being designed and implemented with the active involvement of the World Bank and the Korea-based Global Green Growth Institute, as well as bilateral assistance from countries like Norway and Japan.

The EU is another of the actors pushing global South countries to establish regimes for trading carbon credits. At the launch of Kenya's national carbon registry in February 2026, which was funded by the EU and Germany, the EU Ambassador Henriette Geiger had a blunt message for the Kenyan government: “Kenya should develop carbon credits as a premium export product. This is the 21st century; we cannot rely only on tea, coffee and avocado for export income.”^[6]

It is already apparent, and should come as no surprise, that the new carbon market under Article 6 is not going to be any different from voluntary markets when it comes to the scientific integrity of the projects and the harms to communities.

In early 2025, the carbon crediting mechanism under Article 6.4 went into operation and endorsed a first batch of projects. While its rules and methodologies are said to guarantee "high-integrity" credits, the watchdog group Carbon Market Watch found that only one in every 26 credits issued from the initial projects likely represents real reductions in climate emissions.^[7] Recent proposals to strengthen the rules and methodologies were watered down after heavy lobbying from corporate players.^[8]

Similar issues have been identified with the first bilateral projects under Article 6.2. At COP30 in Brazil, a proposal to ban credits from projects flagged as problematic was shot down by governments because it would have meant banning credits from all the projects that are currently operating under Article 6.2!^[9]

These issues have not stopped governments from racing ahead to set up bilateral carbon credit trading. As of February 2026, there were 108 bilateral deals signed under Article 6.2. They involve 64 countries. The main players are Japan, Switzerland, Korea and Singapore as buyers, and a range of countries across the global South as sellers.^[10]

In these bilateral deals, the terms are essentially set by the buyer countries. Japan and Korea have their own rules that projects adhere to, and use their own companies for verification. Singapore and Switzerland, on the other hand, pick and choose from the rules and methodologies of voluntary markets set by private companies, like Verra and Gold Standard, and rely on these same companies for verification.

In early 2025, Singapore issued a tender for carbon credit projects in countries where it has bilateral deals. (It currently has 28 such deals.) One of the four projects it selected is a cattle grazing project in Paraguay led by a US-based group called Boomitra. This company is financed by Chevron, a major US oil company, and Yara, the world’s biggest fertiliser producer, based in Norway.^[11] Boomitra recently got clearance to use a verification process for its carbon offsets based entirely on AI and satellite imagery.^[12] Normally, such projects require expensive and labour intensive testing of soil samples, and even then there are serious doubts about their ability to offset emissions.^[13] Boomitra's AI and satellite-based verifications, while less rigorous, are much cheaper and can be applied over much larger areas, making it possible to generate enormous amounts of carbon credits for cheap.

Projects that can produce large numbers of cheap credits cater to the interests of buyers like Singapore. This is also part of the reason why Korea and Japan are now focusing heavily on large-scale projects to reduce methane emissions in rice.^[14] But such projects can rub against the interests of host country governments that want to maximise money from levies on the export of high-priced credits, while minimising the emissions they have to compensate for in their national emissions reduction targets. When Singapore announced the Boomitra project, the Paraguayan government responded immediately with a public statement making it clear that they had not consented and would not allow exports of carbon credits to Singapore until they had approved it, which they still have not done as of March 2026.^[15] Political considerations may also be at play here. The Paraguayan government wants to use its new carbon registry for the export of credits from soybean farms and eucalyptus plantations by its powerful agribusiness interests.^[16]

In another recent case, the Kenyan government refused to authorise a cookstove project that had the financial and political backing of the World Bank. Credits for cookstove projects have been trading at low prices because of a slew of scandals that have exposed how they make exaggerated emissions reduction claims. The company in this case wanted an authorisation from Kenya so it could sell into one specific compliance market where it hoped it might get higher prices for its credits. But the Kenyan government realised that the project would eat up all the credits it had available to export under its newly developed national climate framework. This would leave zero room for other projects that the government might have more interest in supporting, for financial or political reasons. Right after Kenya announced its decision, the company filed for bankruptcy.^[17]

The projects that feature most heavily in these new carbon markets are often called land- or nature-based. They typically involve large-scale tree planting, the zoning off of forests for conservation, or getting farmers and pastoralists to change their traditional practices. Such projects appeal to both buyers and sellers, corporations and governments, but can generate major problems for communities.

GRAIN found that between 2016 and 2024, over 9 million hectares of lands in the global South were already seized for projects where trees and other crops were to be planted to produce carbon credits.^[18] This was before carbon credits under Article 6 started to come online in a serious way. The rush for community land could get far worse.

For instance, Singapore's 2025 tender was exclusively for land-based projects. One of the projects it selected, along with the one in Paraguay, was a 50,000 hectare tree planting project in Ghana. It is led by a company owned by Singapore's sovereign wealth fund, while the land is within the territories of the Indigenous Kwahu Traditional Council.^[19] Part of the project involves a forest reserve, while 30,000 hectares are on community lands, where the company says it will be signing confidential land contracts with each of the communities, binding them into maintaining tree plantations on their lands for decades.^[20]

By far the highest bidder in Singapore's 2025 tender was the oil trader Trafigura, one of the world's top carbon brokers.^[21] It is now teaming up with one of Portugal's richest families on a carbon offset project that will plant trees on 10,000 hectares and zone off another 550,000 ha of forests in Malawi. Communities currently rely on these forests for charcoal production. Trafigura’s stated intention is to sell credits from the project under Article 6, likely to Singapore and Switzerland as they have bilateral deals with Malawi.^[22] One of the world's top carbon traders, Trafigura believes that demand for carbon credits under Article 6 will represent 80% of the market within a couple of years, compared to 20% today.^[23]

These new markets under Article 6 will generate more demand and more money for carbon offset projects at a time when the industry is struggling and there are growing calls for this entire approach to be scrapped. More carbon credits will only take us further away from the real emissions reductions that are urgently needed. From what we’ve seen, this new compliance market is potentially more dangerous for communities than the voluntary one. It gives governments a financial stake in the projects that they authorise, bringing them directly into any land conflicts between project developers and communities. We can see this playing out already in Kenya, where Indigenous communities say the police are violently evicting them from forest and savannah areas to make way for projects that can generate carbon exports.^[24]

Communities, climate justice groups and social movements can resist this push for a regulated international trade in carbon credits. This will require collective efforts to keep offsets out of national climate regulations and frameworks, including carbon tax systems and carbon border adjustment mechanisms. It also requires that we work together to stop bilateral deals under Article 6.2 and find ways to dismantle Article 6.

Carbon markets are a dangerous distraction from the real climate solutions that the world desperately needs.

^[1] Chris Lang, "84% of carbon credits are junk," REDD-Monitor, December 2024: https://reddmonitor.substack.com/p/84-of-carbon-credits-are-junk

^[2] Simon Counsell and Jutta Kill, “Crooked Carbon Business: Overview”, September 2025: https://reddmonitor.substack.com/p/crooked-carbon-business-overview; Patrick Greenfield, "Revealed: more than 90% of rainforest carbon offsets by biggest certifier are worthless, analysis shows," Guardian, January 2023: https://www.theguardian.com/environment/2023/jan/18/revealed-forest-carbon-offsets-biggest-provider-worthless-verra-aoe

^[3] For up to date data on Article 6 developments see, UNEP, Article 6 Pipeline: https://unepccc.org/article-6-pipeline/.

^[4] New Climate, "How Article 6 could undermine climate ambition," March 2026: https://newclimate.org/news/how-article-6-could-undermine-climate-ambition

^[5] According to the A6 Implementation Partnership: https://a6partnership.org/a6-implementation-status/about

^[6] Patrick Vidija, "Kenya banks on carbon registry to strengthen integrity, global market participation," The Standard, February 2026: https://www.standardmedia.co.ke/amp/environment-climate/article/2001541136/kenya-banks-on-carbon-registry-to-strengthen-integrity-global-market-parti

^[7] Isa Mulder, "First wave of Article 6 carbon credits misfire spectacularly," Carbon Market Watch, April 2025: https://carbonmarketwatch.org/2025/04/10/first-wave-of-article-6-carbon-credits-misfire-spectacularly/

^[8] Isa Mulder, "UN carbon market drops the ball on permanence," Carbon Market Watch, October 2025: https://carbonmarketwatch.org/2025/10/15/un-carbon-market-drops-the-ball-on-permanence/

^[9] Gavin Mair, "COP30: Attempts to dilute inadequate carbon market rules thwarted," Carbon Market Watch, November 2025: https://carbonmarketwatch.org/2025/11/22/cop30-attempts-to-dilute-inadequate-carbon-market-rules-thwarted/

^[10] UNEP: https://unepccc.org/article-6-pipeline/

^[11] Singapore's National Climate Change Secretariat, "Singapore Will Contract High Quality Nature Based Carbon Credits From Four Projects," September 2025: https://www.nccs.gov.sg/singapore-will-contract-high-quality-nature-based-carbon-credits-from-four-projects/

^[12] Violet George, "Boomitra Secures Verra Registration For Its First Soil Carbon Project In Mexico," Carbon Herald, February 2025: https://carbonherald.com/boomitra-secures-verra-registration-for-its-first-soil-carbon-project-in-mexico/

^[13] Boomitra's project, like other grazing projects in Latin America, only sequester carbon temporarily and to a limited extent, while not accounting for the increased methane emissions from cattle (a more potent greenhouse gas than carbon dioxide). See: Maximiliano Manzoni, "Regenerative doubts," Climate Tracker Latin America, 2025: https://climatetrackerlatam.org/reportajes-ct/the-methane-wars-2/

^[14] GRAIN, “Carbon rice farming: A license to pollute at the expense of small farmers,” July 2023: https://grain.org/e/7009

^[15] Ministerio del Ambiente y Desarrollo Sostenible Paraguay, "Communicado", September 2025:https://www.facebook.com/mambientepy/posts/comunicadoel-ministerio-del-ambiente-y-desarrollo-sostenible-mades-a-trav%C3%A9s-de-l/1402913848544028/

^[16] Maximiliano Manzoni, “Paraguay wants to sell carbon credits. Its law could be an own goal”, El Clip: https://www.elclip.org/paraguay-creditos-carbono-ley-cop-28/?lang=en; and Maximiliano Manzoni, “Paraguay vende como solución al clima la misma soja que intoxicó dos pueblos,” Consenso, November 2025: https://www.elclip.org/paraguay-creditos-carbono-ley-cop-28/?lang=en

^[17] Chris Lang, "KOKO Networks’ cookstove carbon credits in Kenya were “largely hot air”, February 2026: https://reddmonitor.substack.com/p/koko-networks-cookstove-carbon-credits

^[18] GRAIN, "From land grabbers to carbon cowboys: a new scramble for community lands takes off," September 2024: https://grain.org/e/7190

^[19] See the Verra registry for project documents: https://registry.verra.org/app/projectDetail/CCB/5432

^[20] Personal communication with GenZero representatives at Singapore's COP30 pavilion, November 2025.

^[21] Natasha White, "Trafigura Positions for ‘Huge’ Growth in Market for CO2 Credits," Bloomberg, September 2025: https://www.bloomberg.com/news/articles/2025-09-30/traders-in-co2-credits-are-positioning-for-a-huge-growth-wave

^[22] Chris Lang, "Malawi has signed a 40-year contract with Portuguese engineering firm Mota-Engil to generate carbon credits from 550,000 hectares of the country’s forests," February 2026: https://reddmonitor.substack.com/p/malawi-has-signed-a-40-year-contract; Singapore's Ministry of Trade and Industry, "Singapore and Malawi Sign Memorandum of Understanding to Collaborate on Article 6 to Accelerate Climate Action," November 2025: https://www.mti.gov.sg/newsroom/singapore-and-malawi-sign-memorandum-of-understanding-to-collaborate-on-article-6-to-accelerate-climate-action/

^[23] Natasha White, "Trafigura Positions for ‘Huge’ Growth in Market for CO2 Credits," Bloomberg, September 2025: https://www.bloomberg.com/news/articles/2025-09-30/traders-in-co2-credits-are-positioning-for-a-huge-growth-wave

^[24] Anthony Langat and Diana Takacsova, "Kenya’s Growing Carbon Market Is a Setback for Indigenous Land Rights" September 2025: https://pulitzercenter.org/stories/kenyas-growing-carbon-market-setback-indigenous-land-rights; SOMO, "Carbon: the new frontier in the scramble for land in Kenya," December 2025: https://www.somo.nl/carbon-the-new-frontier-in-the-scramble-for-land-in-kenya/