Over the last two years, there has been a growing interest in carbon offsetting through the Kyoto Protocol’s Clean Development Mechanism (CDM) and voluntary credit schemes. The number of CDM projects increased exponentially between 2002 and 2006 and, as of October 2007, there were 803 registered projects, and approximately 2,000 more are at the validation stage. The voluntary market has also expanded exponentially in size, and it is expected that in 2007 a total of 100 Megatonnes of CO 2eq will be traded in the form of Voluntary Emission Reductions (Kenber, 2006). As the scale of financial flows in these markets grows there is increasing interest in the potential benefits they can bring for poor rural communities (‘co-benefits’) as well as concern about their possible negative implications. There are a few well documented case studies of specific projects (e.g. May et al., 2004 in South America; Corbera et al., 2006 in Mexico) which indicate both positive (e.g. increased incomes) and negative effects (e.g. elite capture of benefits). But beyond these limited examples, there has been very little research on the linkages between offsets and opportunities for poor rural communities. Before further progress can be made, a number of problems need to be addressed:

• There is a lack of readily available information about the way projects are structured and governed and a lack of understanding amongst producers interested in accessing the market about how different structures and governance options influence potential benefit flows.
• Some standards schemes set out clear criteria for improving social impacts of projects but do not give much guidance on the best ways to implement these.
• Interest in multiple benefit carbon offsets tends to be quite supplier-led, with growing interest amongst potential producers in developing countries, but it is unclear to what extent this is matched by interests in the marketplace to fund such projects. What are project developers looking for? And how does this constrain the design of projects and the benefits they may offer? Few existing studies make these links effectively.

Many of these issues are especially severe for forestry offset projects, as there are relatively few projects in existence and few of those that exist have been studied in depth. The main objectives of this project are:

1. To improve understanding of the benefits and risks that carbon offset projects are offering poor rural communities , focussing specifically on the benefit flows, institutional structures and governance of projects in different locations and at their different levels of organisation;
2. To evaluate the way in which social assessments relating to carbon offset projects are being approached;
3. To improve understanding amongst project developers and those wishing to access carbon market benefits of the relationships between supply-side and demand-side interests in the carbon markets;
4. To develop a more systematic framework for understanding the opportunities and constraints of carbon offsets for poor rural communities.