What lays at stake for standards organisations pursuing fairness in the carbon market? Lessons from literature applied to practice in the carbon market

Produced as part of the Advancing climate finance and investment CCCEP research programme theme

In the context of an evolving voluntary carbon standards market, standards organisations are collaborating and competing in order to come up with new tools, rules and marketing strategies which could facilitate the certification of more pro-smallholder and pro-community carbon projects. One particular package is the concept of “fair carbon” projects, and “fairly traded” carbon credits. While “fairness” is a fuzzy notion, subject to multiple and competing interpretations, this paper unpacks the notion using the same framing as the proponents of the “fair carbon” package, where fairness is operationalised in terms of access for smallholders and communities, and benefits accrued to them. Using this framing, seven major challenges associated with the achievement of desired “fair” outcomes are identified, based on a review of literature. The complexities and costs of 1) carbon accounting, and 2) aggregation of multiple participants, pose challenges for access. Finding ways to 3) adapt standards to diverse institutional contexts 4) deal with the concept of “carbon rights”, are challenges for both access and benefits. Meanwhile, 5) the marginal benefits to smallholders and communities, and 6) their weak positioning vis à vis the project developer, both threaten abilities to benefit meaningfully from involvement in carbon projects. The final overarching challenge, of high transaction costs in the face of low market prices and falling demand, affects all the other challenges. This paper takes a cyclical approach which iterates between theory and practice, using evidence from literature and from carbon standards markets as connectors. We tackle a theoretical conundrum with a practice-based approach to “fairness”, then apply this lens to the analysis of literature on carbon projects. This allows us to link the practice-based approach in the carbon standards market with lessons from literature and highlight gaps and opportunities. The results of the literature review are then applied to a case of a collaborative standards initiative in order to determine which issues are priorities to be addressed and what needs to be better understood. Arising knowledge gaps are rendered into a three-pronged research agenda which involves conducting a critical examination of standards-making processes; examining fairness issues across the entire carbon value chain; and exploring the impact of standards interventions on access and benefits outcomes within carbon projects. Overall, we posit that defining “fairness” more explicitly in practice, can contribute in turn to understanding “fairness” through theory