By Betty Huang –
Carbon markets are systems where carbon emissions are turned into something you can buy and sell. The carbon offset process begins when a project generates carbon credits by reducing or removing carbon dioxide, typically one credit per ton of CO₂. These credits can then be sold to companies looking to counterbalance their own emissions. Credits may be bought and sold on the market by participants seeking profit, or they can be retired directly by a company to offset its emissions.
A 2025 study analyzing over 29,974 offset projects and 419,267 credit retirement records from 2000 to 2023 found no significant improvement in biodiversity outcomes from carbon offset projects and instead frequently observed perverse effects.
While carbon markets are an effective way to fund emissions reductions and support mitigation efforts, there are important limitations to their scalability and effectiveness as a tool for biodiversity conservation. Most carbon crediting mechanisms are concentrated in sectors like energy efficiency, renewable energy, forestry (46% in 2022), transport, and industry. Relatively few projects focus on areas more directly tied to biodiversity outcomes like livestock, peatland management, or agricultural land systems.
Renewable energy projects including wind, solar, and hydropower plants, which make up around one-third of carbon market projects, have been shown to negatively impact biodiversity (birds, bats, and fish) when they disrupt habitats. Contrary to intended co-benefits of carbon offsets and biodiversity, researchers have found that offset projects are associated with a 3.7% increase in habitat disturbance. In some cases, projects may protect one area while shifting environmental pressure elsewhere, a process known as leakage. As a result, there is little to no net environmental benefit, and the project fails to deliver true additional impact. These instances raise concerns about “biodiversitywashing” in voluntary carbon markets.
As shown in the map, many carbon offset projects are concentrated in regions with high forest cover, while biodiversity hotspots are often not aligned with these project locations. This spatial mismatch indicates that carbon markets often prioritize areas of maximum carbon storage potential rather than areas in need of biodiversity protection.
Despite these limitations, carbon markets remain a useful tool when combined with other ecological metrics to evaluate biodiversity outcomes across offset projects. To better protect ecosystems and prioritize biodiversity conservation, carbon mitigation policies should shift toward approaches that treat carbon storage as a co-benefit of conservation, ensuring balance across carbon reduction, biodiversity, and social well-being.
Map Source: Nature
Source: IUCN (2023), ICUN (2024), Duke University Fuqua School of Business, Global Research Alliance For Sustainable Finance and Investment, The Nature Conservancy