Carbon Offsets and Inequality: Social Costs and Co-Benefits in Guatemala and Sri Lanka

Abstract

The Clean Development Mechanism (CDM) of the Kyoto Protocol is designed to reduce global CO2 emissions while transferring technology and investment to developing countries. Little evaluation has been conducted, however, regarding the efficiency of outcomes and co-benefits or the social costs generated by carbon-mitigation projects. This article presents a comparative case study of two carbon-offset projects funded by fossil-fuel based power generation companies in the United States: the first forestry project funded explicitly to offset greenhouse gas emissions, in Guatemala, and the first rural solar electrification–carbon offset finance agreement, in Sri Lanka. We demonstrate that achieving offset targets and development-related benefits from CDM projects cannot be assumed, and that social equity can be negatively impacted by CDM-type projects. As such, future offset agreements and post-Kyoto climate negotiations would benefit from closer attention to issues of context, transparency, and social equity in order to minimize the social costs of carbon emissions trading.

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