Since 2023, more than 130 nature-based carbon projects covering over 20 million hectares have been registered under Verra’s Verified Carbon Standard. Globally, the broader market includes more than 3,000 projects across over 20 registries.
Carbon markets across Asia are expanding quickly, positioning themselves as a key tool to finance climate action and biodiversity conservation. But a new study warns that despite their promise, these markets are falling short of delivering meaningful ecological outcomes.
The research, published in Nature Reviews Biodiversity, finds that while nature-based carbon projects are scaling across Southeast Asia, fundamental design limitations are undermining their ability to protect ecosystems over the long term.
Since 2023, more than 130 nature-based carbon projects covering over 20 million hectares have been registered under Verra’s Verified Carbon Standard. Globally, the broader market includes more than 3,000 projects across over 20 registries.
In 2023 alone, more than 36 million carbon credits worth US$351 million were traded from such projects in voluntary markets.
Yet behind this growth lies a more fragile reality.
RELEVANT SUSTAINABLE GOALS
Market Expansion Meets Weak Demand and Uncertainty
Despite increasing interest from policymakers and corporate buyers in high-quality carbon removals, Southeast Asia’s carbon markets are facing mounting pressure.
The study points to weak demand, political uncertainty and delays in methodologies as key factors weighing on market stability. These challenges are emerging even as the region becomes central to global carbon strategies.
Southeast Asia holds significant potential. Up to 114 million hectares of threatened forests could become financially viable under carbon schemes, with the potential to protect 25 million hectares of key biodiversity areas and support global conservation targets.
But the study makes clear that scale alone is not enough.
Climate Goals vs. Biodiversity Reality
At the core of the issue is a structural misalignment: carbon markets are designed to reduce emissions, not to conserve biodiversity.
This distinction has far-reaching consequences.
One of the most critical challenges is “additionality” — the requirement that projects prove they reduce emissions beyond what would have happened anyway. While essential for carbon accounting, this rule can exclude ecologically valuable areas, such as intact forests with low deforestation risk.
These areas may be rich in biodiversity but generate fewer measurable carbon credits, making them less attractive within current market frameworks.
Leakage, Permanence and the Limits of Carbon Accounting
Other core principles of carbon markets also create unintended gaps.
Efforts to address “leakage” — where deforestation shifts outside project boundaries — focus on tracking displaced emissions rather than preventing ecological damage. As a result, habitat loss can continue elsewhere, even as projects maintain their carbon credentials.
The concept of “permanence” presents another challenge. Carbon projects typically operate over 40 to 100 years, with buffer systems to compensate for potential future losses.
But biodiversity does not follow the same timeline. Species loss and ecosystem degradation can be irreversible, and cannot be offset in the same way as carbon emissions.
Unintended Consequences on the Ground
The study also highlights risks tied to how projects are implemented.
Some initiatives prioritize fast-growing monoculture plantations to maximize carbon absorption. While efficient for carbon storage, these plantations can reduce species diversity and weaken ecosystem resilience.
At the same time, the commodification of nature may create social tensions.
High technical and financial barriers can exclude smaller or community-led projects, while restrictions tied to carbon schemes may limit access to land and resources for Indigenous and forest-dependent communities. In some cases, this dynamic risks triggering what the study describes as “green land grabs.”
A Role for Carbon Markets — With Limits
Despite these concerns, the researchers do not dismiss carbon markets outright. Instead, they argue for a more balanced approach.
Carbon finance, they suggest, should be integrated into broader conservation frameworks that include strong regulation, community-led initiatives and blended finance models.
Such an approach could help align climate goals with ecological integrity while ensuring more equitable outcomes for local communities.
The study delivers a clear message: carbon markets alone cannot solve biodiversity loss.
“Optimism around these projects’ utility for supporting conservation should be tempered,” the authors conclude, warning that overreliance on carbon markets risks falling short without complementary policies and governance.
As Southeast Asia becomes a focal point for global climate investment, the challenge ahead is not just scaling solutions — but ensuring they work for both the climate and the ecosystems they aim to protect.
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