Natural and financial impacts of payments for forest carbon offset: A 14 year-long case study in an indigenous community in Panama

To counteract undesirable impacts of climate change, several different mitigation instruments have been proposed to sequester carbon through reforestation or avert greenhouse gas emissions due to land use change through forest carbon offset projects. Such projects will require an explicit focus on equitable benefit sharing to generate sustainable and alternative livelihoods. However, research on the impacts of forest carbon offset projects for individuals and communities has often been conducted without baseline data or counterfactuals built into the research methods. We conducted a study in a small Indigenous community in eastern Panama with participants and non-participants in a forest carbon offset project, across wealth groups. In this mixed methods study, participants and non-participants completed surveys before, during, and after implementation over 14 years to assess changes to natural and financial assets. We also assessed major concerns and perceived benefits of the carbon offset project via open-ended questions. Quantitative data show that participants continued to engage in reforestation practices even after payment cessation. Quantitative data also suggest carbon offset payments provided financial stability for poorer participants to diversify into other sources of income over time, while income inequality remained stable across wealth groups. Qualitative data indicate that the greatest benefit of the carbon offset project for participants was economic security for future generations, while concerns about basic needs like food and money declined over time for both participants and non-participants. This research suggests that forest carbon offset projects can be effective for encouraging long-term adoption of forestry practices, specifically reforestation and agroforestry, while providing social co-benefits for rural livelihoods, across wealth dimensions.