By Georgie Barkas

The world cannot stop the climate crisis without protecting our remaining forests and empowering the communities who sustainably steward them. Afforestation and reforestation have been touted by the IPCC as cost-effective and fast acting solutions that deserve broad support.

At first glance, the World Bank appears to be playing a leading role, with afforestation and reforestation initiatives contributing to a forest and landscape portfolio of approximately US$10.8 billion as of 2025. But underneath this green veneer is a troubling reality: These efforts are increasingly tied to carbon offsetting schemes – a false solution that undermines real climate action and threatens the rights of Indigenous and local communities. 

A Carbon Market History Fraught with Failures

In recent years, the World Bank has played a key role in driving carbon markets across the globe, heavily influencing financial allocations while supporting the creation of the institutional mechanisms in more than 60 countries, and mobilizing US$4.8 billion in “carbon funds.”

The Bank’s history with carbon credits, however, has been fraught with systematic flaws. The Bank introduced a voluntary carbon market scheme through the “Forest Carbon Partnership Facility (FCPF)” in 2008, which allowed polluters to “offset” their emissions by purchasing carbon credits from projects that supposedly remove or reduce carbon dioxide emissions. In their two decades of existence, voluntary carbon markets have completely failed to reduce carbon emissions, undermining efforts to achieve the Paris Agreement objectives.

A study by the European Commission revealed that 85 percent of offset projects under the UN’s Clean Development Mechanism from 2013 to 2020 failed to uphold environmental integrity and reduce emissions. Similarly, a meta-analysis cited by the IPCC found the “net combined effects [of climate markets and credits] on emissions to be negligible.” By leaning on carbon offsetting to fund forest protection, the Bank thus undermines the very climate benefits their forest and landscape protection projects are supposed to deliver.

Local Communities Exploited for their Carbon 

Not just ineffective from a climate standpoint, carbon offsetting has also repeatedly trampled upon the rights of Indigenous and local communities. The Bank’s push for increased land titling, which it argues is necessary to create land access for climate action, has facilitated the transformation of land from a territory and home to a transferable commodity measured by units of carbon. As a result, economic actors across the globe have swooped in to capitalize on Indigenous Peoples’ deep care for and stewardship of their lands. Communities have become the victims of “carbon cowboys” who lure them with promises of substantial financial gains from carbon credit sales. These unscrupulous actors frequently coerce local groups into signing opaque and exploitative deals, seizing their carbon and land rights for periods that can last over 100 years. 

While the voluntary carbon market is touted by the Bank as a vital climate financing source, host countries, and local communities often only receive a small fraction of the revenues made by foreign developers and financial intermediaries. In Papua New Guinea, communities in East New Britain claim to have received none of the US$18 million made by a US firm from the sale of 1.3 million carbon credits, which were allegedly issued without their consent. In another case, oil giant BP purchased 1.5 million carbon credits from Mexican villagers at a paltry price of US$4 per credit. These villagers worked for several years to safeguard forests, only to receive a meager payment equivalent to little more than a week’s worth of salary per person. 

Beyond project developers, money pledged to carbon offsetting projects is siphoned away by a complex network of predatory actors, including standard-setting bodies, registries, traders, brokers, and investors. Many of these entities have intertwined financial and political interests tied to the production and sale of carbon credits. 

Speculation on carbon markets is also pervasive, as documented by the intelligence firm Allied Offsets, which identified nearly 250 projects where brokers resold credits for at least three times their original purchase price. As a result, a significant portion of the financing intended for climate mitigation projects and local communities only enriches financial intermediaries – primarily wealthy individuals, firms, and organizations based in the Global North.

The Bank’s Rebranding of Climate Markets

Despite this litany of issues, in September 2023, the Bank announced new “ambitious plans for the growth of high-integrity global carbon markets,” suggesting that rebranding with the buzzword “high-integrity” would somehow address the widespread flaws and frauds reported in recent years. Through a new 2024 Carbon Market Engagement Roadmap, it is doubling down to make carbon markets work, claiming it will “be a win-win for people and the planet, potentially generating millions, if not billions, for countries on the pathway to low carbon development.”

The Bank’s pledge to build “high-integrity” carbon markets rests of shaky ground considering its plans to partner with the scandal-plagued company Verra, the world’s leading carbon credit certifier. In 2023, an explosive investigation by The Guardian, Die Zeit and SourceMaterial exposed that more than 90 percent of Verra’s rainforest offset credits are likely to be “phantom credits” with no actual carbon reductions behind them.  The findings dealt a massive blow to voluntary carbon markets and the high-profile companies including Shell, Gucci, Salesforce, and easyJet that had purchased rainforest offsets approved by Verra.

Wealthy Countries Push their Problems Away

Despite their lack of climate impact and history of exploiting local and Indigenous communities, carbon markets continue to receive staunch support from the Bank as it pushes them across the globe. Before anyone else, this serves the interests of wealthy countries and corporations – historically responsible for the climate crisis – to continue their GHG emissions and conveniently offset them, thereby passing the burden onto the Global South.