Carbon Finance for Climate Justice: Pathways to Inclusive Sustainable Development

As climate and environmental challenges grow increasingly severe, carbon markets have garnered significant attention in academic research. Carbon markets refer to the carbon pricing mechanisms that enable governments and non-state actors to trade greenhouse gas emission credits. Carbon trading and offsetting are central to these mechanisms, with the primary objective of reducing greenhouse gas emissions. Climate change injustice occurs when communities who contribute the least to climate change disproportionately bear the severe consequences. The aim of this review is to explore how carbon markets can be utilized as a mechanism to promote climate justice and contribute to sustainable development. By examining various policy approaches and their implications, the research seeks to shed light on how carbon markets can either advance or hinder climate justice goals. Findings indicate that carbon markets have the potential to encourage investments in clean energy and sustainable development projects which can benefit communities disproportionately affected by pollution. It can provide opportunities for broader participation on climate action allowing smaller emitters or developing countries to participate in emission trading. To maximize their positive impacts and minimize risks, carbon markets must be accompanied by complementary policies and measures that prioritize equity, inclusion, and community participation. Carbon market and climate justice can both aim to address climate change, but they can sometimes have synergies and conflicts due to differences in their objectives, priorities, and impacts on different stakeholders. Countries with greater capacity and responsibility for emissions need to take a more drastic actions and provide financial and technical support to developing nations.