Last year, as COP29 concluded, the adoption of standards for Article 6.4 on its opening day sparked a range of reactions. For businesses, it marked a significant step forward, offering a clearer framework to engage in the global carbon market. However, for climate justice advocates, it represented a missed opportunity to embed stronger safeguards and protections for communities in the Global South. The compromise raised a critical question: will this approach to carbon markets close gaps in climate action or deepen the divide in global climate justice?
The roots of the problem: colonial dynamics in carbon credits
Carbon credits were conceived as a flexible tool to offset emissions by funding projects such as reforestation or renewable energy abroad. Yet, in practice, this system often replicates colonial extractivism, enabling wealthier nations and corporations to outsource emissions reductions while disproportionately impacting communities in the Global South. These projects frequently fail to deliver meaningful benefits and, in some cases, displace communities or restrict their land use, exacerbating social and economic inequities. Additionally, the integrity of carbon credits is under scrutiny. Many credits overestimate their environmental impact or fail to ensure permanence, as forest carbon credits are particularly vulnerable to reversals from wildfires or deforestation. This undermines the credibility of carbon markets and their contribution to global climate goals.
What happened at COP29?
COP29 was seen as an opportunity to reform carbon markets by addressing these long-standing issues. Delegates from the Global South called for Article 6 provisions to mandate safeguards against human rights abuses and guarantee that carbon projects deliver tangible benefits to host communities. Despite these calls, the agreement largely sidestepped these demands. Loopholes persist, allowing wealthier nations and corporations to use carbon credits to delay meaningful emissions reductions at home. The failure to establish stronger protections leaves host communities vulnerable to exploitation and undermines confidence in the efficacy of carbon credits. Projects may fail to achieve promised emissions reductions or cause unforeseen harm while offering limited or no local benefits. For the Global South, this status quo reflects a missed opportunity to reshape carbon markets in a way that promotes equity and resilience.
How COP29’s outcomes help business
For businesses, the COP29 compromise offers a clearer pathway into the global carbon market. By establishing initial standards for Article 6.4, companies can now engage in carbon trading, plan offset initiatives, and align with emerging regulatory requirements. This provides a framework for managing costs while transitioning to greener operations, making the global carbon market an attractive option for industries facing increasing decarbonisation pressures. However, the reputational and operational risks associated with low-quality carbon credits should not be ignored. Businesses that prioritise high-integrity projects—those that genuinely benefit local communities and ecosystems—can position themselves as leaders in sustainable innovation. This approach not only mitigates risks but also aligns with growing consumer and investor demand for authentic climate action.
Can carbon markers serve the global good?
For carbon credits to deliver meaningful climate benefits, future COP summits must prioritise voices from the Global South and enforce accountability standards that guarantee benefits for host communities. Shifting from a model of offsetting emissions to investing in transformative projects—such as clean energy transitions and climate adaptation—could make carbon markets a tool for equity rather than exploitation. The Global North must also move beyond reliance on offsets and embrace direct emissions reductions. Supporting the Global South with fair and inclusive climate initiatives can simultaneously address historical inequities and advance global climate goals. Carbon credits, if used, must ensure long-lasting social and environmental co-benefits while involving local communities in governance and revenue-sharing.
About the author
Keertana Anandraj (MBA 2026) is an intern at the Wheeler Institute for Business and Development. Prior to joining London Business School she was a member of the International Sustainability Standards Board’s Technical Staff where she helped develop the first-ever global sustainability standards on climate-related risks and opportunities. A graduate of Wellesley College, Keertana is passionate about the role businesses can play in tackling the climate crisis.