A brief history of colonialism, climate change and carbon markets

SOMO’s ‘Facing the facts: carbon offsets unmasked’ series debunks eight myths promoted by the offset industry.

Coal and colonialism

The science unequivocally says that burning fossil fuels is the leading cause of the climate crisis. Based on historical and per capita emissions data, a comprehensive study estimates that industrialised countries in the Global North are responsible for 92 per cent(opens in new window) of the excess emissions driving climate breakdown. Not everyone in the Global North is equally responsible, however. Just 75 investor-owned companies are responsible for about a third(opens in new window) of worldwide emissions, and just 125 billionaires(opens in new window) emit 393 million tons of CO2 each year. That is more than the 2022 emissions of Chile and Argentina combined(opens in new window) .

The release of fossil fuel emissions on an industrial scale began in Great Britain during the Industrial Revolution of the 19th century. The Industrial Revolution relied heavily on both coal and colonialism. Colonies supplied raw materials to British factories. Many colonies, such as India, were pushed to de-industrialise(opens in new window) to become dependent economies of Britain despite powerful resistance(opens in new window) . Coal also powered(opens in new window) British imperial warships, whose heightened mobility was a highly effective tool of domination. This allowed Britain and other European colonisers to expand the colonial and capitalist frontier, supporting the interests of colonial trading companies.

Oil, gas and the neo-colonial agenda

What started with coal in the 19th century expanded with oil and gas in the 20th century. Many oil, coal, and gas companies originated in European and North American countries, establishing their access to fossil fuel deposits through colonising land, labour and cultures. These companies and the governments of their home states are still driving the climate crisis.

The major oil corporations of the Western world – the infamous Seven Sisters – gained privileged access to the oil reserves of the colonies, from Nigeria (Shell) to British-occupied Persia (British Petroleum -BP(opens in new window) ).

As liberation struggles achieved independence, countries in the Global South frequently faced regime change if their policies or political views were deemed unfavourable to the economic interests of former colonial powers or the West more generally, particularly fossil fuel interests. Mohammed Mossadegh of Iran, for example, was overthrown by a US-backed coup(opens in new window) in 1953. In 1965, the US Central Intelligence Agency (CIA) supported the Indonesian military(opens in new window) when it killed up to 1 million suspected communist sympathisers, ushering in the authoritarian Suharto regime. Both Iran and Indonesia were then ruled for decades by brutal dictatorships that opened up the countries to Western oil interests. These were far from the only former colonised countries where Western secret services overthrew leaders, invaded(opens in new window) or otherwise manipulated. Ghana’s Kwame Nkrumah, the first president of an independent African nation, was one of the first people to describe this neo-colonialism. One year before he was overthrown(opens in new window) in a plot allegedly supported by the CIA(opens in new window) , he wrote:

“The essence of neo-colonialism is that the State which is subject to it is, in theory, independent… In reality, its economic system and thus its political policy is directed from outside.” –Kwame Nkrumah

The ‘Elf Affair’ involving French oil company Elf, which became part of what is now TotalEnergies, was one of the most telling exposés about post-independence manipulation. Court actions (opens in new window) revealed how France used its oil company to retain significant influence in former colonies in Africa, and how Elf executives had propped up dictators, including Gabon’s Omar Bongo, and engaged in grand-scale corruption that effectively robbed African citizens of hundreds of millions in revenues.

The neo-colonialism identified by Nkrumah has persisted. Recent studies(opens in new window) show that the Global North continues to extract(opens in new window) vast amounts of land, labour, raw materials and energy from the Global South.

Fossil fuels and Neoliberalism

In the 1970s, the Middle East overtook North America(opens in new window) as the largest oil-producing region. Middle East oil reserves were nationalised in a way that maintained capitalist and neo-colonial power. In 1974, U.S. Secretary of State Henry Kissinger made a secretive deal(opens in new window) with Saudi Arabia to ensure they sold oil exclusively in dollars, solidifying the dollar as the global reserve currency and essentially forcing the world to subsidise the US economy(opens in new window) .

This move paved the way for the US and European allies to impose a neoliberal economic agenda on countries in the Global South. US banks flooded with petrodollars invested heavily in these countries(opens in new window) but under tax, trade and investment rules that strongly favoured the Global North investors. Global South countries saw little benefit. Huge portions of the resources and wealth of the South were extracted and transferred to the North. The International Monetary Fund (IMF) and the World Bank, heavily dominated by the West, especially the US, forced countries to open their economies for foreign investment, leading to wide-ranging privatisation(opens in new window) . They insisted on austerity policies and promoted the export of raw materials to ensure countries could secure the US dollars they needed to repay their large debts to Western governments and banks.

These policies were part of what is known as the ‘Washington Consensus’(opens in new window) . The human and environmental impacts were catastrophic for many Global South countries. Yet, the petrodollars and neoliberal policies combined became a major driver of further accumulation by banks and corporations under a ‘growth at all costs’ economic agenda. This economic growth agenda has driven, and continues to drive, the climate crisis and is the main obstacle to effectively combatting climate change.

Saving capitalism from the climate crisis

Fossil fuel corporations have long known(opens in new window) about the climate crisis but chose to finance climate denial, sowing confusion and doubt to preserve their power and profits.

The 1992 UN Earth Summit Conference, from which the UN Framework Convention on Climate Change (UNFCCC) emerged, was led by Maurice Strong, a gas and energy entrepreneur and an advisor to the World Bank. The set-up of the conference(opens in new window) allowed corporations, who were also summit sponsors, to have a major lobbying presence(opens in new window) , thereby significantly shaping the foundational documents of the climate negotiations.

Despite opposition(opens in new window) , particularly from the US, the UNFCCC included the concept of “common but differentiated responsibilities” of countries. This addition acknowledged that the Global North (the so-called industrialised countries) was responsible for the largest share of historical and current emissions and should lead the reduction efforts. As a result, the 1997 Kyoto Protocol required governments of the Global North to reduce greenhouse gas (GHG) emissions by 5.2% below 1990 levels by 2012, while the Global South was not required to limit emissions. This would, of course, have significant consequences, especially for the Global North’s corporations.

It was in this context that the idea of a trading scheme for managing carbon emissions gained significant attention, as part of efforts to ensure that how the world dealt with climate change would have minimal impact on the ‘business-as-usual’.

The idea of offsetting emissions sounds simple: an entity, such as a company, can emit more GHGs than it should (according to an established cap or a voluntary target) if the excess emissions are ‘cancelled out’ by carbon credits generated somewhere else. The need of corporations and wealthy governments for such credits gave birth to an industry: the carbon offset industry. Carbon credits are generated from projects that claim to reduce, remove or avoid emissions in ways that would not have happened without the project and the funding it brings. These offset projects usually involve activities like protecting forests from deforestation or planting trees, but other approaches are evolving as criticism of these forest-based projects increases. Once the offset project has been audited and approved, which mostly happens under the auspices of self-appointed entities whose revenue model is based on volumes of carbon credits issued, the project can generate and sell carbon credits. Each carbon credit is, in theory, equivalent to one tonne of CO2 equivalent (tCO2e) emissions. If a corporation buys carbon credits, it can claim to have decreased its ‘net emissions’ . If it buys enough credits to cover all of its pollution, it can claim to be carbon neutral or to have ‘net zero’ emissions.

The reality, however, is not so simple. Multiple studies have shown that a large proportion of carbon credits do not represent any actual emissions reductions(opens in new window) . Increasingly, research is also exposing serious human rights abuses(opens in new window) linked to the way offset projects are set up and run. Despite the evidence, the 2015 UN Paris Agreement opened the door to a potentially massive expansion of carbon markets and included forest-based offsets in the negotiation documents.

Carbon offsetting and the reproduction of colonial systems

The influence(opens in new window) and pressure(opens in new window) that corporations, financial institutions and their governments have established within international climate negotiation processes has been immense and effective. They have successfully prevented policies that could impact their economic interests. These actors have also strongly promoted carbon offsets.

Despite the rhetoric of decarbonisation and ‘net zero’ businesses, carbon offsets perpetuate the damaging model of ‘growth at all costs’. The offset industry is driving large-scale land grabbing for offset projects, which frequently leads to forced evictions of traditional and Indigenous communities and serious limitations on their livelihoods and the way they interact with their territories. People, their lands and the environment, mostly in the Global South, are instrumentalised to protect and advance the economic interests of the Global North. The offset industry reinforces colonial relations between North and South and is increasingly described in terms of ‘green colonialism(opens in new window) ’ or ‘carbon colonialism(opens in new window) ’.

Situating carbon markets within the history of fossil fuel and capitalism brings back into focus the politics, power imbalances, and injustices ingrained in the capitalist system in a way that narrowly focuses on carbon offsets as a commodity. In order to learn from the past, it is essential to recognise the historical patterns of domination and oppression that underpin the current system. The myths and assumptions at the core of the offset industry are rooted in this history and reproduce its injustices.

SOMO’s ‘Facing the facts: carbon offsets unmasked’ series debunks eight myths promoted by the offset industry. Each one builds on and links to the others, and our concluding summary makes the linkages clear.