The social and economic impacts of carbon markets on local communities in low and middle-income countries
FSD Africa, United Kingdom Foreign, Commonwealth & Development Office (FCDO)
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Abstract: This review examines the social and economic impacts of carbon trading on local communities in low- and middle-income countries (LMICs), with a focus on voluntary carbon markets. Drawing on evidence from mainly small-scale forestry projects, it highlights both positive and negative community outcomes shaped by project type, design, and governance. While carbon markets can deliver social and economic co-benefits alongside climate goals, these benefits are uneven and often limited by poor project design and governance. The study identifies conditions for more inclusive, beneficial carbon markets and maps key knowledge gaps to guide project developers, buyers, regulators, and verifiers in minimizing harm and maximizing community benefits.