Change in livelihoods among participating communities in carbon projects in developing countries between 2015 and 2026: a systematic review

Technical Summary: Change in Livelihoods Among Participating Communities in Carbon Projects in Developing Countries (2015–2026)

Problem Statement
The transition to a climate-neutral global economy, anchored by the 2015 Paris Agreement, has positioned carbon financing as a primary mechanism for both mitigation and rural development. While intergovernmental narratives often present carbon projects as "win-win" scenarios for climate action and poverty alleviation, empirical evidence regarding their actual impact on community livelihoods remains mixed and context-dependent. Since 2015, communities in the Global South have navigated a tension between potential income diversification and risks such as "green grabbing," restricted resource access, and tenure insecurity. Despite advancements in digital monitoring (e.g., blockchain, remote sensing) reducing transaction costs, persistent barriers including insecure land tenure and ill-enforced conditionality continue to limit welfare gains. Furthermore, existing literature disproportionately focuses on biophysical outcomes, leaving the social dimensions of carbon trading under-researched. This review addresses the gap in synthesizing longitudinal evidence on whether carbon project participation enhances adaptive capacity or exacerbates existing inequalities.

Methodology
This study is a systematic review adhering to PRISMA guidelines, synthesizing evidence from 2015 to April 2026.

• Search Strategy: A semantic search was conducted across 138 million academic papers using the Elicit search engine (encompassing Semantic Scholar and OpenAlex). The primary query focused on livelihood changes in developing countries.
• Inclusion Criteria (PICO):
  • Population: Households and individuals in developing countries participating in carbon projects (REDD+, agroforestry, soil carbon, etc.).
  • Intervention: Direct participation in community-based carbon initiatives.
  • Comparator: Non-participating communities, pre-intervention baselines, or alternative project designs.
  • Outcomes: Objective livelihood indicators (income, assets, food security, employment) and subjective well-being.
• Screening Process: From an initial 5,000 results, 208 papers passed abstract screening, and 50 met full-text criteria for final inclusion. Papers were excluded if they lacked a clear link between project participation and livelihood outcomes, lacked a comparator, or focused solely on ecological metrics.
• Data Extraction: A large language model was utilized to extract data on project characteristics, participation mechanisms, livelihood changes, social outcomes, and contextual factors, followed by manual verification against primary sources to ensure accuracy.
• Synthesis: The review employed narrative synthesis complemented by meta-analysis where homogeneous quantitative data existed, alongside thematic synthesis for qualitative findings.

Key Contributions and Results
The review synthesizes evidence from diverse geographies (South Asia, Sub-Saharan Africa, Southeast Asia, Latin America) and project types, revealing substantial heterogeneity in livelihood outcomes.

1. Divergence by Project Type:

   • Agroforestry and Agricultural Projects: These consistently produced positive livelihood effects. Examples include a 100,879 KES annual income increase in Kenya (TIST program), significant asset accumulation in India, and a 5.6% growth in rural income in China. In the Nilgiris (India), agroforestry was found to be 3.8 times more profitable than monoculture even without carbon revenues. Food security improved via yield gains (SMD 0.41) and dietary diversity, with biochar application raising maize yields from 0.9 to 4.4 Mg/ha.
   • REDD+ and Forest Conservation: These projects, which often restrict land use, frequently imposed opportunity costs without adequate compensation. In India, opportunity costs reached 18.3% of annual crop income; in Madagascar, households lost an average of $107 annually (11% of agricultural production). In Sierra Leone, Indonesian Borneo, and Peru, no income gains were detected, and in some cases, subjective well-being declined despite neutral material welfare.

2. Economic and Material Impacts:

   • Meta-analytic evidence indicates small but statistically significant positive effects on material welfare (SMD 0.09) across REDD+ and carbon-PES programs. However, subjective well-being remained neutral (SMD −0.01).
   • Opportunity Costs: Restrictive projects imposed significant costs, ranging from 27% to 84% of median annual income in Madagascar when annualized.
   • Income Diversification: While some projects shifted labor toward non-forest activities (e.g., a 43.5% increase in farm wage income in Sierra Leone), others failed to generate sustainable diversification, particularly where payments were delayed or insufficient.

3. Social Capital, Governance, and Equity:

   • Governance: Community-owned initiatives often strengthened local institutions and decision-making (e.g., Nepal, Zanzibar). Conversely, externally managed or "command-and-control" projects frequently reduced local flexibility and led to elite capture.
   • Inequality and Exclusion: Participation was often skewed toward larger landholders and non-marginalized castes. In India, non-marginalized castes comprised 83% of participants in agricultural carbon projects, while women comprised only 4%.
   • Elite Capture: Intermediaries in voluntary carbon markets were found to capture up to 70% of credit value, leaving communities with only 30–40% of revenues.
   • Gender: Women often faced increased labor burdens without commensurate income gains. However, projects with gender-inclusive payment formulas (e.g., Nepal's weighted allocation) showed improved targeting and outcomes for women.

4. Critical Success Factors:

   • Secure Land Tenure: Projects in areas with unclear tenure faced fundamental implementation barriers.
   • Payment Timing and Design: Timely payments matching opportunity costs were crucial. Projects with customized, differentiated payments achieved significantly higher socioeconomic gains than uniform-benefit schemes (p = 0.045).
   • Payment Modality: Mixed payment structures (cash + community assets) outperformed cash-only or asset-only models, showing super-additive effects on conservation adoption and poverty reduction.

Significance and Claims
The paper claims that carbon projects are more likely to deliver livelihood benefits when designed to support income generation alongside mitigation goals, rather than relying solely on restriction-based conservation. The review identifies that the "win-win" narrative is contingent on specific institutional prerequisites: secure land tenure, timely and adequate compensation for opportunity costs, and benefit-sharing mechanisms that differentiate based on local needs and vulnerability.

The authors conclude that while carbon finance holds potential for rural development, its current implementation often fails to translate into sustainable development outcomes for forest-dependent communities due to governance weaknesses, payment delays, and exclusionary practices. The review emphasizes that future interventions must move beyond uniform benefit schemes toward customized, livelihood-oriented designs to ensure climate finance delivers durable resilience. The evidence suggests that without addressing structural inequities and opportunity costs, carbon projects risk exacerbating existing inequalities rather than alleviating them.