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Nature-based carbon offset initiatives have proliferated across the Global South through the voluntary carbon market (VCM). Although often framed as “win-win” solutions for both climate mitigation and local development, evidence from Madagascar suggests that the VCM’s development potential should be approached with caution due to three key constraints.
The sector comprises a diverse range of actors, including governmental agencies, non-governmental organisations, and private sector entities. The latter often prioritise corporate profit over development outcomes for local communities. Notably, dominant carbon standards remain silent on stringent benefit-sharing mechanisms, allowing companies to establish projects with minimal community engagement.
There is often a significant gap between investment commitments and actual implementation, raising concerns about the scale and durability of such projects, as well as their impact on local communities and territories.
Even for community-based initiatives, the financial sustainability and scalability of projects remains uncertain due to the volatility of carbon-credit prices and structural barriers on the ground. At the same time, many rural communities in Madagascar live below the international poverty line, and enabling their participation in carbon markets can serve as a valuable strategy for diversifying income portfolios.
Currently, the VCM features diverse supply-side actors with varying commitments to rural development, volatile prices, and implementation delays. Policymakers should advocate for more comprehensive carbon standards and support the development of national carbon frameworks in target countries to enhance transparency and enable the implementation and scaling of inclusive carbon offset projects.
Persistent food insecurity and poverty remain critical challenges across rural sub-Saharan Africa (SSA), with Madagascar standing out for having among the highest rates in the region. Indices on food insecurity place Madagascar among the bottom-ten countries worldwide (Global Hunger Index 2024), while some 75 per cent of the population live below the national poverty line (World Bank 2024). Simultaneously, the region’s agricultural systems are increasingly vulnerable to the effects of climate change, underscoring the urgent need to strengthen the resilience of local livelihoods. Due to the lack of internal resources, policymakers and international development organisations have repeatedly highlighted the importance of foreign direct investment for rural development (World Bank 2020). Land-based investment projects in rural areas have a long and complex history in SSA. Since the turn of the new century, investments in the agricultural sector have surged across the continent, reigniting debate over land governance and sparking political unrest in a number of different countries. Madagascar, in particular, became the focus of international attention following the formulation of highly controversial land-lease proposals involving over 1 million hectares, which provoked widespread public protest and contributed to significant political instability in 2009. In addition, other investment initiatives failed to translate into effective implementation, with economic expectations often going unmet (Lay et al. 2021).
In the context of climate change mitigation, a new type of land-based investment project has emerged in many countries in SSA (Madagascar included) in recent years. Land-based carbon offset projects – often within the framework of nature-based solutions, including reforestation, afforestation, wetland restoration, and avoided deforestation – have multiplied across the Global South, as financed through the voluntary carbon market (VCM). These investments are complemented by the financing mechanisms of multilateral development agencies. These include REDD+ (Reducing Emissions from Deforestation and Forest Degradation), which gained traction in the early 2010s in Madagascar amid substantial funding from the World Bank to reduce carbon emissions. In 2020, the country received USD 8.8 million (total contract volume up to USD 50 million) to finance jurisdictional REDD+ efforts beyond the VCM (World Bank 2023).
For states like Madagascar, meaning those facing limited access to international finance, carbon offset projects thus offer an opportunity to attract much-needed capital while contributing to global climate goals. As a result, carbon projects have been promoted as “win-win” solutions, delivering both climate mitigation benefits and local economic development. While this narrative has gained traction over the years, we argue that the development potential of carbon markets in Madagascar, in particular the VCM, should be approached with caution due to three key constraints:
The sector involves a mix of governmental agencies, non-governmental organisations, and private sector actors, the latter of whom may prioritise profit over local development.
There is often a significant gap between investment commitments and actual implementation, raising concerns about the scale and durability of such projects as well as their impact on local communities and territories.
Even for community-based initiatives, the financial sustainability and scalability of projects remains uncertain, particularly given the volatility of carbon-credit prices.
Presented is recent data from Madagascar on these three key challenges, based on an exploratory study conducted in the country between January and May 2025. The investigation was done in three main stages. First, desk research was carried out to develop an inventory of carbon offset projects in Madagascar. Second, semi-structured interviews were held with representatives from three selected initiatives. Third and finally, a survey was carried out in the rural commune of Mahazoarivo, located in Fandriana district, to collect primary data at the community level on the effects of one reforestation project.
Project | Carbon Standard | Status | Size (ha) | Main Project Developers & Proponents |
Carbon Emissions Reduction Project in the COFAV | VCS & CCB | Late to verify | 135,212 | Conservation International (NGO), Govt. of Madagascar |
The Makira Forest Protected Area | VCS & CCB | Late to verify | 360,060 | The Wildlife Conservation Society (NGO) |
Carbon Emissions Reduction Project in the CAZ Protected Area | VCS | Late to verify | 370,032 | Conservation International (NGO), Govt. of Madagascar |
Reforestation of deforested land in Madagascar | VCS | Late to verify | 8,972 | Coopérative Avotrala with support of EcoFormation (NGO) |
Tahiry Honko Community Mangrove Project | PV Climate Version 4 | Registered | 1,200 | Blue Ventures (NGO) on behalf of the Association Velondriake |
Manjarisoa project | ERS | Registered | 300 | ForestCalling (private sector) |
Beampingaratsy REDD Project | VCS & CCB | Registration requested | 1,000 | Etc Terra - Rongead (NGO), BNC REDD+ (Govt.) |
Ala Honko Blue Carbon Madagascar | VCS | Under development | 687 | UNIMA SA. (private sector) |
Teraka Madagascar: Smallholder Tree Planting Program | VCS & CCB | Under validation | 6,000 | ITERAKA SARL (private sector) |
Fagnako: Agroforestry project in Madagascar | VCS | Under development | 10,563 | Canopy Energy (private sector) |
The idea of using nature-based solutions for carbon offsetting is not new in the country. Madagascar has seen numerous initiatives aimed at establishing a business model for forest conservation and restoration: the Projet holistique de conservation des forêts (PHCF), which received financial support from Air France, is a prominent example. In the past, however, only a limited number of projects advanced beyond the initial startup phase and were eventually registered in the VCM. Table 1 above details ten land-based projects in Madagascar that are currently listed in carbon offset registries, identified through a stock-taking exercise (first stage of the study). In total, six projects have successfully progressed to “registered” status, while four remain “under development” or “under validation.” Four of the six registered projects also face verification delays. The total land size of all listed carbon offsets is 894,026 ha. For the second stage of the study, and seeking to illustrate the diversity of carbon offset initiatives found in the country, semi-structured interviews were carried out with individuals from the following projects: “Fagnako: Agroforestry project in Madagascar,” “Tahiry Honko Community Mangrove Project,” and the “TERAKA Smallholder Tree Planting Program.” For the survey (third stage of the study), we conducted 167 household interviews in Mahazoarivo in March and April 2025, targeting both member (94) and non-member households (73) in the region of the TERAKA Smallholder Tree Planting Program, covering five villages in total. Additionally, we carried out 20 interviews with local authorities (mayor, village chiefs) and respective stakeholders.
The registry data show that actors involved in the carbon market are highly diverse and can be grouped into three types: large-scale conservation projects, community-based initiatives, and private sector investments. Since the turn of the new millennium, carbon finance has been recognised as a potential way to sustainably fund conservation management. In Madagascar, the carbon offset sector includes a small number of large-scale projects led by international NGOs, such as Conservation International or the Wildlife Conservation Society (WCS), which aim to generate additional funding through the sale of carbon credits.
One prominent example is the Makira Forest Protected Area project that alone accounts for more than 350,000 ha in Verra’s VCS registry. As with most natural forests in Madagascar, Makira Forest is legally owned by the state; private ownership of forest land is not permitted. In 2003, however, the Ministry of Environment and Forests granted the WCS exclusive management rights over the Makira area through a formal delegation contract. Under this agreement, WCS acts on behalf of the forest administration, holding authority over all activities within the protected area and having the power to enforce national and regional regulations related to natural-resource use and protected-area management. Although carbon markets are only one among several sources of financing for these types of projects, the agreement also includes the rights to carbon.In December 2024, a new agreement was signed to restart the issuance of carbon credits: accordingly, 50 per cent of net revenues from future carbon-credit sales will be allocated to community support through the Makira Community Carbon Fund. This initiative is backed by a USD 16 million commitment from Rio Tinto, one of the world’s largest metals and mining corporations, which includes a forward purchase (offtake) agreement for carbon credits generated by the Makira project (Wildlife Conservation Society 2024).
Other ambitions include to diversify the income portfolio of local farmers and promote rural development under the auspices of smaller and more concentrated projects mostly less than 10,000 ha in size. Many of these initiatives are based on community ownership and engagement. For instance, the Tahiry Honko project, implemented across ten villages in the southwest of Madagascar, focuses on sustainable mangrove conservation and alternative livelihood development. To diversify incomes and reduce reliance on natural resources, it promotes alternative livelihoods such as sea-cucumber ranching, seaweed farming, and beekeeping. Although the land and mangroves are state-owned, the Velondriake Association is seeking legal rights to manage the mangrove forest, which would enhance community control. However, a national ban on mangrove harvesting and unresolved land tenure remain challenges, particularly for carbon-credit sales. Another example is the TERAKA project, a community reforestation programme certified by the VCS and the CCB standard. Its activities began in Madagascar in October 2023. The project is funded by iTERAKA, a French mission-driven company dedicated to developing environmental projects. TERAKA is modelled after TIST (The International Small Group and Tree Planting Program), an agroforestry payment-for-ecosystems scheme that has been operating for over 20 years now in four different countries. TERAKA’s ambition is to replicate the TIST model in Madagascar, therewith enabling small groups of farmers to derive multiple and sustainable benefits from planting trees while enhancing their agricultural skills and leadership capacities. In line with the TIST approach, the carbon captured and stored by trees planted by smallholder farmers on their land is quantified and sold on relevant markets.
There are also a few endeavours led by more typical private sector actors. For instance, the Fagnako project, in the Atsinanana region of eastern Madagascar, focuses on land restoration through an agrosilvopastoral approach, combining silvopastoral systems for sustainable zebu grazing, agroforestry to integrate trees with crops, woodlots for energy needs, and assisted natural regeneration in degraded areas across an anticipated 10,500 ha in size. The developer and landowner here is Canopy Energy, a company based in Paris, France. In December 2023, the project, through a Canopy Energy intermediary, signed a 35-year emphyteutic lease with the commune of Vohitranivona to plant, among other things, pongamia and fruit trees. This involves collaboration with herders, farmers, villages, and municipalities, suggesting active stakeholder engagement. The developer aims to provide training and create employment opportunities, with an expected outcome of 300 permanent and 3,000 seasonal jobs, as well as to rehabilitate municipal infrastructure such as schools and medical clinics. However, the project document does not mention any benefit-sharing mechanism to provide local communities with a part of the revenues generated from carbon-credit sales.
Overall, this scoping exercise shows that when speaking about the potential gains from the VCM for local communities one needs to be mindful about the exact actors and strategies involved. For some the main objective is to secure sustainable financing for protected areas; focus elsewhere is solely on local community engagement and ownership; others are driven by the private sector and increasing demand for carbon offsetting. Crucially, prevailing standards do not mandate benefit-sharing (Healy et al. 2023), allowing actors to implement projects that – apart from often seasonal job creation – might have only limited economic benefits for local communities.
Our second argument is that the scale and impact of carbon offset projects might be more limited than expected. While REDD+’s work occurs at scale in Madagascar, prices for many of its credits have dropped substantially of late: from over USD 10 at the beginning of 2023 to around USD 5 by the end of the following year (AlliedOffsets 2025). This trend threatens the business model of sizeable conservation projects like the one taking place in Makira Forest. In addition, the local economic impact might be modest: in the long run, the 50 per cent of net revenues that are earmarked for community support are dependent on prices. Unlike REDD+, carbon dioxide removal projects are less affected by recent price drops. Reforestation and wetland restoration measures could have a more targeted impact on the ground; however, they are smaller in size (see Table 1 above). For instance, although progressing rapidly, listed initiatives such as the Fagnako project remain relatively small-scale. As of January 2025, the latter has reforested approximately 2,000 ha, with over 600,000 pongamia trees planted. Crucially, these endeavours in certain instances offer little transparency with respect to actual progress made.
Some projects are still in the startup phase and not yet listed in registries, although they promise substantial investment. One example is the Ma Honkô project – implemented by Bôndy, a social enterprise committed to reforestation and sustainable development in Madagascar – that aims to restore 40,000 ha of mangroves across three national regions. The founder of Bôndy is the current Malagasy Minister of the Environment and Sustainable Development; the project also attracted wider international attention with the CEO of Gold Standard visiting the country in 2025 (Kim 2024).
Another widely documented happening in Madagascar is the JTF-Tozzi Green Project, which is also not yet listed in a registry. It is implemented by Tozzi Green Madagascar, a subsidiary of Tozzi Green SpA – an Italian group focused on renewable energy. The company is, among other activities, planting acacia and eucalyptus trees on the land as part of a planned carbon offset project. To date, approximately 3,600 ha of monoculture plantations have been established, with ambitions to expand that figure to 5,200 ha by 2029. It is estimated that this expansion could generate 2.7 million carbon credits. Under contract here are 6,558 ha according to some sources, but documents also mention an intended size of 100,000 ha ultimately (Land Matrix 2025). Although still small in size, the project has already sparked severe land conflicts (Manisera, Sala, and Lova 2025).
This illustrates a dual dynamic at work: On the one hand, large-scale REDD+ projects may struggle to sustainably finance their activities – including both conservation activities and community engagement – through carbon-market revenues. On the other, a number of private sector actors currently have reforestation/afforestation and wetland restoration initiatives in the pipeline. The latter are either preparing to enter the VCM or planning substantial expansions in terms of project areas. If successfully implemented, they could significantly contribute to rural development. However, many of these endeavours remain relatively modest for now – typically covering less than 10,000 ha in terms of actual scope. Their capacity to drive broader economic development is, as such, limited. For both types of models, there is thus a notable risk that their impact on local economic development will remain below expectations.
Lastly, to better assess whether community-based initiatives can fulfil their promises to local populations, we conducted an in-depth study of the TERAKA project. Its initial activities – including training sessions, the formation of small groups, and tree planting – began, as noted, in October 2023. Given this recency, it is important to contextualise the current level of progress and the evaluation of on-the-ground activities accordingly. TERAKA adopts an approach centred on knowledge dissemination and capacity-building. This includes various training schemes on tree-planting techniques, water management, improved cookstoves, and integrated agriculture–livestock practices. Additionally emphasised are benefit-sharing from the sale of carbon credits alongside positive environmental and landscape outcomes through community-led reforestation efforts.
During the quantification process at the end of TERAKA’s first campaign in Fandriana district, some 24,000 trees were recorded as having been planted by smallholder groups across the four intervention communes of the district and a total of 492 farmers registered as members of said groups. This process enables the TERAKA programme to issue prepayments for each surviving tree. Per the formal contracts concluded between the company and TERAKA farmers, each member commits to planting an average of 250 trees over five years and is entitled to receive annual carbon prepayments for every living tree—approximately MGA 150 (USD 0.033)—as well as 70 per cent of the profits from carbon-credit sales. Based on TERAKA’s carbon-modelling projections and an assumed credit price of USD 40, farmers could earn on average USD 170 per year from carbon revenues alone. In addition, farmers could gain substantial non-carbon benefits—including fuelwood, fodder, food, and diversified livelihoods. In addition, trees provide shade, act as windbreaks, and contribute to soil stabilization. TIST farms have also been shown to generate positive greening effects on neighbouring agricultural land and support local forest protection (Buxton et al. 2021). By now, however, farmers in the commune of Mahazoarivo who are part of the TERAKA project have on average only planted 24 trees since it began (Grislain 2025).
To compare potential earnings here with the average income of agricultural households, we used data from a survey of 655 households in Vakinankaratra and Itasy (see Figure 1 below). The results indicate that in this early phase, with farmers having planted only 24 trees, income from carbon remains modest—accounting for just about 2 per cent of average household earnings, assuming the same per-tree carbon revenue as in the 250-tree scenario. However, if farmers increase planting to the level of their commitment (250 trees), that share could reach up to 18 per cent. Accounting for additional non-carbon benefits combined with potential increases in carbon credit prices, the overall benefits for smallholders could become substantial. At the time of our field survey in Mahazoarivo (March and April 2025), TERAKA’s farmers had not yet received their annual prepayments due to the complex process of implementing the payment system. Furthermore, since the project only began in October 2023, no carbon credits have been sold thus far, as the trees have not yet produced enough biomass to generate carbon.
Although the financial benefits are only slowly emerging, unlike other carbon offset projects in the country that negotiate direct access to land, TERAKA does not seek to access the latter within the intervention areas. Farmers decide whether, where, and how to plant trees, adapt their methods, source their own seeds and seedlings, and retain ownership of land and trees (and their products: cutting for timber or fuelwood, harvesting tree fruits, leaves, and similar). Our interviewees indicated that no household in the study area lost access to residential, agricultural, or grazing land because of TERAKA. Though these projects show significant potential vis-à-vis engaging communities in a fair and equitable manner, they evidently must also overcome technical difficulties while the benefits from carbon credits are also dependent on the future development of related markets.
Policymakers should adopt a cautious stance on the VCM’s potential to benefit local communities. The current landscape is characterised by a diverse range of actors on the supply side, including NGOs managing both small- and large-scale projects (some spanning over 100,000 ha) alike as well as private sector developers. Commitments made to local communities and regional development also vary greatly from one project to another. These range from basic training and awareness-raising initiatives to the creation of hundreds of jobs and the construction of vital infrastructure. However, all these projects operate within an overarching market framework that inherently prioritises cost reduction. A “race to the bottom” in terms of social-welfare and environmental standards could be triggered hereby, especially if private sector actors face cost-cutting pressures. Such trends may undermine the viability of endeavours that aim to deliver substantial benefit-sharing across the board. While means of certification such as the Climate, Community and Biodiversity Standards offer a pathway to monetising social co-benefits, market pressures could increasingly threaten the sustainable, long-term financing of these projects – particularly those with high fixed costs and extended implementation horizons. To counter a race to the bottom, rigorous standards on benefit-sharing and community engagement are needed.
It also remains uncertain whether the number and scale of carbon offsetting projects in Madagascar will grow meaningfully going forwards. The current situation mirrors to some extent the 2010 “land rush” for agricultural investment, when numerous high-profile announcements rarely materialised into substantial, lasting outcomes – especially in the Malagasy context. As then, many private sector investors and government stakeholders appear reluctant to acknowledge the limited impact many projects have had on the ground. This pattern seems to be repeating with carbon offsetting, although some involved – particularly NGOs – are demonstrating a stronger commitment to transparency and genuine community engagement.
Community-based projects – where co-benefits and benefit-sharing are central to implementation – also face challenges here. While those like TERAKA set a high standard for community engagement, both on-the-ground realities and the structure and prices of related markets present substantial obstacles to participating farmers securing stable, long-term financing. These challenges are illustrated by delays in payment and the fact that the income farmers receive from carbon payments represents only a small portion of their overall earnings if tree planting remains low. At the same time, many of these farmers live below the poverty line, and enabling their participation in carbon markets can serve as a valuable strategy for diversifying their income portfolio. In addition, if farmers increase their tree planting in the future, income streams could become substantial. Despite the initial limitations, the inclusion of smallholder farmers in such schemes holds potential for broader socio-economic benefits provided that mechanisms are in place to ensure reliability and equity in benefit-sharing.
In addition to these respective issues, persistent regulatory uncertainty continues to hinder the development of a robust carbon market in Madagascar. Until recently, the VCM was constrained by ambiguous legal frameworks. In 2021, Decree No. 2021-1113 introduced regulations that designated all carbon credits generated within the country as state-owned, effectively sidelining NGOs and the private sector. Although recent legislative changes now allow for the recognition of carbon credits with government approval, a complex and often lengthy administrative process had been introduced. As a result, some projects have faced significant delays and uncertainty regarding their ability to market and sell said credits. This, along with the evidence presented earlier, illustrates that the VCM remains an emerging sector in Madagascar – one characterised by a diverse set of actors with different goals, ambitious plans, numerous projects only in the startup phase, and a national carbon framework still in the making. The close attention of policymakers, civil society organisations, and researchers is clearly required. Given this setup, it remains unclear how land-based climate mitigation investments financed via the VCM will ultimately affect the livelihoods of the Malagasy population; both potential and risk are readily apparent here.
This report is based upon work in part supported by the Lincoln Institute of Land Policy through the project “Can Standards for Carbon-offset Projects Effectively Prevent Green Grabbing? Evidence from Local Communities in the Global South” (Research on the Benefits, Challenges, and Implications of Land-Based Mitigation Strategies).
An earlier version of this GIGA Focus Africa incorrectly stated that 65 per cent, rather than 70 per cent, of the carbon credit revenue was shared in the TERAKA project with farmers. The projection of potential carbon income from the TERAKA project was revised to also include scenarios with a higher number of trees planted.
