Carbon markets can still preserve USAID’s global conservation efforts
Last month, I joined thousands of international development professionals furloughed as the Trump administration dismantled the United States Agency for International Development.
As the senior climate finance advisor at one of its largest implementing partners, I had a front-row seat to the chaos caused by the administration’s abrupt funding freeze on dozens of global conservation projects. The paused projects focused on biodiversity conservation to protect critical habitats and keep air and water clean.
In 2023 alone, USAID invested $375 million in biodiversity conservation. Then, suddenly, everything stopped.
Amid this chaos, one proven tool offers hope: carbon markets. Conservation projects are costly and time-consuming. Donors like USAID help overcome these challenges in developing countries by providing grant funding and technical assistance. And so with the Trump administration's shift away from foreign aid, conservationists have lost a key source of funding.
Carbon financing can, however, play a larger role here if the private sector can help fill the financing gap left by USAID’s withdrawal.
Because most carbon projects operate on a pay-for-results basis, credits are usually sold after emissions reductions are verified by a third party. This arrangement, meant to ensure emissions reductions are real, often shifts the financial risk of project design and initial implementation to the local conservationists.
Government donors and philanthropies have often helped to bridge this gap, providing grants to take projects from concepts to bankable investment opportunities.
The conversation around carbon markets is fraught — companies purchasing credits have been accused of greenwashing. The truth is more complicated.
Carbon markets provide countries and corporations with a mechanism to fund the most efficient climate actions globally, enabling the exchange of dollars for emissions reductions. Credit buyers must still invest in decarbonizing their own operations to reduce emissions and meet their climate goals, but carbon credits are a powerful tool to abate currently unavoidable emissions.
Carbon markets are not perfect, nor can they fully replace USAID’s role in global conservation. But they are the best available nature conservation tool at our disposal. Two decades of rigorous testing and dozens of successful projects prove it.
Take La Plata in Bahia Malaga on Colombia’s Pacific coast. There, Afro-Colombian communities historically relied on highly destructive logging that polluted their environment, harmed biodiversity, and contributed to global warming.
Between 2011 and 2023, USAID funding financed forest patrols and alternative livelihoods, fostering ecotourism and shellfish production, ultimately reducing their dependence on timber harvesting.
In 2012, USAID turned to relatively new carbon markets to sustain the positive impacts of grant financing. By tracking emissions avoided by reduced logging, and applying advanced technologies like satellite forest mapping, the communities developed a carbon project, achieved third-party validation and sold carbon credits to corporate buyers.
The first verification generated millions of dollars from carbon credit sales, the majority of which was reinvested into the communities.
When I visited La Plata in 2022, greeted at a newly built dock by community leaders, I was blown away by the astounding investments made with carbon finance. These investments funded the community's first health clinic, universal education and new businesses including a poultry operation, a banana plantation, and a whale-watching company. I even spotted ecotourists coming off the thrill of their first whale sighting.
Most importantly, I did not see chainsaws, tractors or sawdust.
Scientists agree that halting tropical deforestation is one of the most effective ways to address climate change, as agriculture, forestry and other land uses account for 22 percent of annual global emissions. Reducing nature-based emissions has impressive co-benefits, including improving crop yields, strengthening local economies and safeguarding biodiversity.
Yet, with climate change accelerating, extreme weather events increasing and greenhouse gas emissions reaching catastrophic levels of atmospheric pollution, action is lagging.
Recent reports show the world is off track to fulfill 2030 emissions reduction targets, with only 18 percent of the necessary financing in place. Voluntary carbon finance, valued at approximately $1 billion in 2024, is projected to grow exponentially, with estimates up to $40 billion by 2030. This could provide a crucial boost to conservation efforts.
To be sustainable long term, carbon project developers cannot rely on tenuous grant financing. Private carbon credit investors and buyers must adjust, by providing up-front financing for nature-based carbon projects to meet the stringent requirements of standards agencies.
This isn’t purely altruistic — carbon markets are a pragmatic solution that is profitable for investors, helps corporations meet their climate goals and benefits the planet.
Bahia Malaga shows what’s possible. Where USAID conservation projects have been upended, the private sector can step in. Many of these projects already contain the ingredients for high-quality carbon finance.
When Trump issued the executive order disrupting USAID, I was in a humid conference room in rural Guatemala, discussing a new carbon project with local partners. As the torrent of attacks on conservation work swelled that week, I felt defeated.
But surrounded by dedicated local experts and community leaders, I also felt a sense of hope that carbon markets could provide a mechanism for the private sector to drive conservation.
Max McGrath-Horn is a principal at Magnitude Global Finance and was formerly a senior climate finance advisor at Chemonics.
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