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A fair share of the voluntary carbon market?

How the absence of standard rules on benefit sharing arrangements hurts local communities and indigenous peoples

How and to what extent are the benefits from carbon credit sales shared with those implementing the projects and the local communities where the projects are located? This is the question Öko-Institut investigated and the resulting report, commissioned by Carbon Market Watch, provides insights and answers. 

Öko analysed the existing rules on benefit sharing arrangements (the contractual clauses that distribute the benefits of climate projects to stakeholders, including indigenous peoples and local communities) of selected carbon crediting programmes and standards, in addition to assessing the benefit sharing provisions in the documentation of selected projects that are registered under these standards. 

The study reveals that there are insufficient rules and enforcement of benefit sharing arrangements. The report worryingly uncovers that only two out of five of the assessed carbon standards made a reference to “benefit sharing arrangements” in their standard documents. 

A total of 47 projects were reviewed, and only 15 mentioned benefit sharing arrangements in their project design documents. Of these 15 projects, only four were found to contain “evidence of benefit sharing with stakeholders other than just the project implementers”. Out of these, only one single project has published evidence of having distributed benefits that go beyond mere payments for results. Payments for results and benefit sharing should not be considered equivalent, as the first is akin to salaries or wages for work done. 

Although the research does not cover the entire market, the study’s sample is skewed towards projects that are more likely to perform better than the market average when it comes to benefit sharing. Overall, it is therefore likely that evidence of benefit sharing across the voluntary carbon market is extremely lacking.

This briefing highlights the five main lessons of the Öko assessment and suggests recommendations to make sure that benefits accrued from voluntary market projects are more equitable and supportive of IPLCs. Standards should require all projects to have robust, clearly-defined benefit sharing arrangements. Benefit sharing should be separate from payments for results, whilst clear and consistent reporting should be the norm. We encourage the ICVCM to adopt clear rules requiring benefit sharing to be regulated by standards.

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