The 29th Conference of the Parties to the UNFCCC (COP29) was the much-anticipated “finance COP.” Negotiators were tasked with replacing the previous $100 billion target with a more ambitious New Collective Quantified Goal on Climate Finance (NCQG). After tense last-minute discussions, the developed countries eventually committed to “taking the lead” on providing “at least [$]300 billion per year by 2035,” out of a $1.3 trillion total.
While nominally tripling the previous $100 billion target for developed country financing, the new goal incorporates funding from “a wide variety of sources.” When combined with the effects of inflation, this makes the NCQG at best marginally higher than the previous target, a reality that has generated withering criticism from activists and climate vulnerable states in the global South.
The return of US President Donald Trump has cast further doubt on the credibility of the NCQG. Having already withdrawn again from the Paris Agreement and announced a 90-day USAID spending freeze, the Trump Administration will likely redirect much if not all of the US’s planned multi-billion dollar annual climate finance contributions in the coming years, creating a sudden funding shortfall that will be difficult to fill.
Global South states have already begun to look elsewhere to meet their financing needs. COP29 controversially gaveled through new rules for carbon-credit trading under Articles 6.2 and 6.4 of the Paris Agreement, which the COP29 presidency claimed “could reduce the cost of implementing national climate plans by $250 billion per year.” Amid the final stages of NCQG negotiations, Bahamian Prime Minister Philip Davis also announced a $300 million debt-for-nature swap. This was the fifth such agreement orchestrated by the US NGO The Nature Conservancy (TNC), which its CEO championed as an “effective market-based solution” to address the global biodiversity and climate “funding gap.” Before COP29, a coalition of environmentalist NGOs announced their collective ambition “to unlock up to $100 billion in climate and nature finance” by scaling up debt-for-nature swaps.
Across these two “non-traditional,” market-based financing approaches—country-to-country carbon-credit trading and debt-for-nature swaps—lies a common denominator: the world of offshore finance. Offshore companies have already been at the center of some of the worst carbon-credit trading scandals in existing Voluntary Carbon Markets (VCMs), and offshore jurisdictions have played a central role in arranging commercial debt-for-nature swaps. In fact, the World Bank has played an unlikely role in condemning the reliance of recent swaps on “offshore special-purpose vehicles and trust funds,” rather than “country systems already in place.”)signed its first agreement(<)/a(>) with Côte d’Ivoire in December 2024.” class=”footnote” id=”footnote-1″ href=”#footnote-list-1″>1
For those who view the global green transition as an exercise in natural capital “portfolio management,” the offshore world is perhaps a natural ally. After all, tax havens have long played a pivotal role in the functioning of financial globalization. But what is at stake goes far beyond the question of generating additional finance. The rise of green offshore finance threatens to encase biodiversity and climate policymaking within global South states and across the multilateral system, locking in a standardized set of biodiversity and climate financing, governance, and policy measures for decades to come.
The task of financing the green transition further raises the specter of the global development project’s repeated failures. It is in this context that the offshore world has emerged as a site for mediating the green transition’s endemic contradictions.
The widening finance gap
The question of developed-country climate financing is by no means settled, with the “Baku to Belém Roadmap to 1.3T” providing ample opportunity for more ambitious commitments by COP30. However, COP29 has exposed the ever-widening gap between the willingness of global North states to provide concessional climate finance and the sheer scale of global South climate adaptation and mitigation needs. A similar rift is reflected in the Kunming-Montreal Global Biodiversity Framework’s annual financing target of $200 billion by 2030, for which developed countries have committed to providing at least $20 billion by 2025 and $30 billion by 2030.
The idea of a persistent biodiversity and the climate financing “gap” has proven politically generative for proponents of private financial solutions. In 2015, the World Bank famously outlined the “billions to trillions” approach, arguing that bilateral and multilateral financiers should use public resources to help scale up private investment in sustainable development. The very notion that public financing cannot meet global climate adaptation and mitigation needs— requiring private finance to step in and fill the gap—is central to arguments in favor of blended finance and derisked Public Private Partnerships (PPPs).
Such solutions have been robustly criticized in these pages on grounds of cost, efficacy, and fairness. While the notion that private finance can resolve existing biodiversity and climate finance shortfalls endures, faith in the “magic pony of private finance” is wavering, particularly due to a lack of clarity regarding how most biodiversity and climate finance projects could ever be made “investible.” Indeed, World Bank Chief Economist Indermit Gill has dismissed this new approach as a “fantasy.” For Gill, “the risk-reward balance cannot be allowed to remain as lopsided as it is today, with multilateral institutions and government creditors bearing nearly all the risk and private creditors reaping nearly all the rewards.”
Yet global North states have so far resisted efforts to generate and redistribute additional public financing and resources for the green transition. The current moment is plagued by a dual pessimism regarding both the prospects for raising developed country climate finance ambitions and for the private sector investing at scale in climate adaptation and mitigation in the global South.
In response, multilateral declarations and platforms such as the Bridgetown Initiative 3.0, the Paris Pact for People and the Planet (4P), and the Nairobi Declaration advocate for a range of non-traditional financing measures, even as they embody distinct and sometimes conflicting visions for the global green transition. Such “non-traditional” measures encompass global solidarity levies, Special Drawing Rights (SDRs), biodiversity and carbon credit markets, and climate-linked debt relief.
Beyond the first-order issue of generating new financing sources, the question of how the money should be spent looms large. The resulting trade-offs between local and transnational authority, environmental efficacy and justice, and state versus market control appear insoluble. They reflect the collision of different philosophies of climate action, from the UNFCCC’s commitment to upholding common but differentiated responsibilities to a market-based commitment to “valuing nature to save it.” Different financing models have profound implications for the degree of policy space afforded to global South states, local self-determination and indigenous sovereignty, the achievement of non-environmental development outcomes, the penetration of financial globalization, and the degree of international control over project implementation.
In response to these dilemmas, biodiversity and climate financiers are increasingly turning to the world of offshore finance.
Going offshore
After first emerging in the interwar years, offshore tax havens proliferated during the era of decolonization. Post-colonial self-determination prompted the flight of imperial capital to offshore jurisdictions, many of which were current or former British dependent territories. Financial liberalization in the 1970s led to several further waves of expansion. Absent alternative sources of revenue, numerous micro-states embraced the offshore model, selling off sovereign rights relating to taxation, international regulation, and even citizenship. The sustained rise of offshore finance reflects both imperial continuities in the structure of the global economy and a form of responsive statecraft in the face of international financial subordination.
With increased global capital mobility came further opportunities for billionaires and transnational corporations to engage in jurisdictional arbitrage, evading accountability, scrutiny, and ultimately democratic control. This dimension of the offshore world enables what Jason Sharman describes as “the pursuit of a calculated ambiguity, which refers to the ability to give diametrically opposed but legally valid answers when responding to the same question from different audiences.” It is this “calculated ambiguity” that is becoming increasingly valuable for biodiversity and climate financiers, as well as biodiverse global South states.
Offshore financial centers already play an established—and controversial—role in global development financing. Development finance institutions use offshore financial centers to implement PPPs and invest in private equity funds. Like many private companies, they do so to minimize investment risk and secure favorable legal and regulatory conditions, even at the expense of financing and legitimating the offshore industry writ large.
However, the offshore world offers unique advantages for navigating the dilemmas of the global green transition. By moving control of the planet offshore, proponents of carbon credit trading and debt-for-nature swaps can argue that biodiversity and climate financing is simultaneously controlled by local and international actors and aligned with both climate justice and market-based prerogatives. The turn to offshore is therefore as much about the question of who pays as the terms on which they do so.
In attempting to resolve some tensions, offshore financial mechanisms produce others, in part through what Julia Dehm portrays as the clash between the public law commitment to transparency and the private law commitment to confidentiality. This tension is central to recent carbon-credit trading controversies and has motivated much of the activist backlash to debt-for-nature swaps. Recent scandals concerning Liberia’s pursuit of country-to-country carbon credit trading and Ecuador’s multi-billion dollar debt-for-nature swaps in the Galapagos and the Amazon provide a window into the broader stakes of “non-traditional,” market-based climate and nature financing. They reveal the degree to which Article 6.2 carbon credit trading and commercial debt-for-nature swaps respectively rely on both the tools and the overarching logics of the offshore world, with severe long-term implications for state sovereignty and local self-determination.
Liberia and the international carbon credit trade
In advance of COP28, the UAE-based company Blue Carbon LLC infamously announced draft Memorandums of Understanding (MOUs) for carbon credit harvesting across vast swathes of Kenya, Liberia, Tanzania, Zambia, and Zimbabwe. The size of the agreements—they cover between 8 and 20 percent of each country’s land mass—has provoked accusations of “green grabbing” and a “new ‘scramble for Africa’.”
Through these MOUs, Blue Carbon LLC sought to gain a first-mover advantage in the global market for country-to-country carbon credit trading under Article 6 of the Paris Agreement, which enables countries “to transfer carbon credits earned from the reduction of greenhouse gas emissions to help one or more countries meet their climate targets.” The Paris Agreement allows for such trades either through direct exchanges of Internationally Transferred Mitigation Outcomes (ITMOs) under Article 6.2 or through a centralized carbon credit trading mechanism under Article 6.4. In practice, both mechanisms structurally allow heavy polluting states to offset their emissions.
Since the Paris Agreement was adopted in 2015, Article 6 has been the subject of persistent controversy. This is owing to widespread concerns about the poor quality of carbon credits issued through the 1997 Kyoto Protocol’s Clean Development Mechanism and existing Voluntary Carbon Markets, which many private corporations use to meet their net-zero targets, as well as opposition to the financialization of nature.
Nonetheless, COP29 adopted new guidance on “cooperative approaches” to Article 6.2 rules regarding the trading of Internationally Transferred Mitigation Outcomes (ITMOs) and established the “rules, modalities, and procedures” for a centralized carbon credit trading mechanism under Article 6.4. The former guidance affords significant flexibility for generating and exchanging ITMOs, leading to additional concerns about the transparency, accountability, and integrity of Article 6.2 carbon credit trading.
Such flexibility also paves the way for scaling up Article 6.2 carbon credit harvesting linked to “avoided emissions.” Most avoided emissions credits purport to capture how preventing deforestation through initiatives such as REDD+ reduces carbon emissions in comparison to the counterfactual. They have been particularly controversial in Voluntary Carbon Markets, due to their lack of integrity and dubious equivalence with direct emissions reductions. In practice, the generation of avoided emissions credits shifts the locus of responsibility for meeting climate targets from those who have contributed the most to climate change to those who have contributed the least.
With the clarification of Article 6.2 rules, numerous biodiverse countries in the global South have moved to establish legal frameworks to trade ITMOs. According to UNEP, as of May 16 2025, ninety-eight Article 6.2 agreements have already been signed among sixty countries, concentrated predominantly in Asia. Many more, including the Blue Carbon LLC agreements, are potentially in the pipeline.
Liberia’s experience is particularly instructive regarding the potential future of Article 6.2 carbon credit trading. In response to the proposed MOU with Blue Carbon LLC, Liberian civil society organizations warned that the agreement would violate its forest and land rights laws, as well as the ownership rights of local communities. A coalition of international NGOs also raised the alarm on Blue Carbon LLC, revealing its links to the UAE royal family and lack of carbon markets experience.
Of the countries that signed MOUs with Blue Carbon LLC, Liberia was arguably the most exposed as it lacked an established carbon credit legal framework. Following civil society backlash to the MOU, the Liberian National Climate Change Steering Committee (NCCSC) halted carbon trading until it had developed new rules and regulations. According to Emmanuel Urey Yarkpawolo, the Executive Director of Liberia’s Environmental Protection Agency (EPA), these rules will “emphasize balance between environmental goals and economic well-being of our people and take care of concerns about Indigenous people’s rights, including alternative livelihood means.”
Among international institutions such as the UNDP, the priority has now shifted to establishing Liberia’s “carbon market readiness,” including forest governance reforms that were allegedly already implemented after Liberia completed its “REDD+ readiness” program in 2020. The Liberian government has continued in its push toward Article 6.2 ITMO trading, signing an agreement with the Coalition of Rainforest Nations—a prominent supporter of REDD+ and ITMO trading—in October 2024. Liberia’s EPA recently created a Department of Forest Carbon Harvesting, Trading and Regulation and has held national consultations on Article 6 trading and “carbon readiness” workshops. And the economic potential of carbon markets is central to Liberian President Joseph Boakai’s newly-announced ARREST Agenda for Inclusive Development.
As Liberia aims “to participate in the global carbon market in the next 12–24 months,” the MOU with Blue Carbon LLC remains a live prospect. In Zimbabwe, Blue Carbon LLC is already soliciting bids for ITMOs linked to its projects, despite both the initial backlash to the agreement and ongoing controversies regarding carbon credits generated from Zimbabwe’s Kariba REDD+ project. While the Zimbabwean government has sought to negotiate better terms for its carbon credit projects, it ultimately watered down new regulations, allowing project developers to maintain a majority stake for the initial contract duration.
For the Liberian government, several issues remain in play, including the asking price for transferring ITMOs, the distribution of revenues generated through carbon credit harvesting, and the degree of local control over forest governance activities. Yet negotiations over these issues are occurring amid a new set of geopolitical and political economy dynamics. Heavy emitters in general, and petro-states in particular, increasingly have powerful incentives to remake the domestic climate and nature governance structures of biodiverse global South states, with the potential to extend far beyond already controversial development and REDD+ interventions. Their capacity to meet agreed climate targets could become increasingly dependent on the “success” of carbon credit harvesting in biodiverse global South states.
Any large-scale move toward carbon credit harvesting in Liberia would transform much of its forested territory into a set of internationalized conservation zones, with potentially severe sovereignty implications. In this context, the offshore world offers a venue for arms-length carbon credit generation. Heavy emitting states can use offshore companies to occupy and manage nature conservation zones in biodiverse global South states. Such invasive interventions would likely be considered intolerable violations of state sovereignty if undertaken directly by their governments. Instead, powerful polluters can create legal distance from carbon credit harvesting, while still ultimately benefiting from the transactions.
The role of offshore finance in carbon credit trading has the potential to be far more extensive than for development interventions through PPPs. Offshore financing vehicles are deployed not just for managing risk or as an extension of neoliberal policy agendas, but also as geopolitical tools for achieving governmental climate policy ends. A similar dynamic is at play in the rise of commercial debt-for-nature swaps, which make the even more invasive move of intertwining debtor state nature conservation governance with external sovereign borrowing.
Ecuador and the resurgence of debt-for-nature swaps
In recent years, commercial debt-for-nature swaps have risen to prominence as another source of “non-traditional,” market-based financing for biodiverse global South states. While debt-for-nature swaps have a long history, recent agreements with Belize, Barbados, Ecuador, and Gabon have operated at a much larger scale by deploying a novel “nature bond” structure. Through this structure, ad-hoc coalitions of international NGOs, investment banks, development financiers, and debtor states convert existing commercial sovereign bonds into new, cheaper “nature loans,” with stringent policy and spending conditions attached.
Despite being marketed as a “lifeline for our planet,” the swaps have been trenchantly criticized, with a coalition of activist NGOs arguing that they “lack transparency,” cannot achieve the “free, prior, and informed consent of citizens affected by these deals,” and “undermine global campaigns for debt justice.”
Ecuador’s 2023 and 2025 debt-for-nature swaps have been the subject of particular scrutiny. The agreements follow a recurring series of debt crises in Ecuador, beginning in the early 1980s. According to Debt Justice UK, in Ecuador, “[o]nly 14 percent of all money loaned between 1989 and 2006 was used for social development projects,” with the remainder spent on repaying sovereign debt.
After the 1998–1999 financial crisis, Ecuador undertook a series of drastic measures, including dollarizing its economy, restructuring its debts, and borrowing from the IMF. However, in 2008, Ecuador began to take a more confrontational approach toward its external creditors. Newly elected Ecuadorian President Rafael Correa launched a commission to evaluate the origins and legitimacy of the country’s debts. Drawing on the nascent odious debt cancellation movement—which rose to prominence in the aftermath of the US-led invasion of Iraq—the commission contended that Ecuador was not obliged to repay corrupt or illegitimate debts. The government consequently defaulted on two sets of sovereign bonds, drawing the ire of sovereign debt markets, before repurchasing them at a steep discount. Nonetheless, by 2020, with its public external debt stocks having more than doubled since 2013, Ecuador was again forced to restructure its sovereign debt.
Hence, Ecuador’s first debt-for-nature swap in 2023 occurred following multiple recent attempted restructurings. The swap exchanged approximately $1.6 billion in outstanding sovereign bonds for a $656 million loan linked to the issuance of a Galápagos Marine Bond. The bond was issued by GPS Blue Financing, an Ireland-registered Special Purpose Vehicle set up by the participating investment bank Credit Suisse (now UBS). It benefited from political risk insurance from the US Development Finance Corporation (DFC) and a partial guarantee from the IDB, consequently receiving an AA2 credit rating. GPS Blue Financing then on-lent the bond proceeds to Ecuador such that it could repay its existing bondholders at 53.25 (2030 bonds), 38.5 (2035 bonds) and 35.5 (2040 bonds) cents on the dollar respectively.
However, the swap provided Ecuador with minimal debt relief. Ecuador’s total external debt stock stood at over $48 billion even after the transaction, with its public debt-to-GDP ratio falling only marginally from 57 to 55.4 percent. Ecuador’s overall credit rating was also not upgraded. In 2024, Ecuador turned again to the IMF for a four-year, $4 billion loan.
While doing little to address Ecuador’s sovereign debt burden, the swap nonetheless transformed nature conservation governance in the Galapagos. Ecuador is now required to make annual contributions of over $17 million on nature conservation activities. The Pew Bertarelli Ocean Legacy Project, in collaboration with nature finance companies Oceans Finance Company and Aqua Blue Investments, established a new, privately-run Conservation Trust Fund to administer the spending. Despite being named the Galapagos Life Fund (GLF), the fund is “a Delaware non-profit, non-stock corporation.” The swap also requires that Ecuador undertake numerous policy measures, including establishing the 11,583-square-mile Hermandad Marine Reserve and increasing the monitoring and regulation of fishing activities. And the proposed penalties for non-compliance with these policy and spending conditions are significant, including substantial step-up payments and even loan default.
To justify this use of conditionality, proponents of the swap have invoked the Kunming-Montreal Global Biodiversity Framework’s 30 by 30 conservation target, according to which signatories must ensure “that by 2030 at least 30 percent of areas of degraded terrestrial, inland water, and marine and coastal ecosystems are under effective restoration.” However, rather than providing an international legal basis for the swap, the overarching framework emphasizes numerous important qualifications to its conservation targets, including the need to achieve the informed consent and participation of Indigenous Peoples and Local communities in decision-making about biodiversity governance.
On this basis, in May 2024, a coalition of Ecuadorian civil society organizations made a formal complaint to the Inter-American Development Bank’s (IDB) Independent Consultation and Investigation Mechanism, arguing that the swap lacked transparency and failed to involve affected citizens in decision-making about the swap. The complaint expressed additional concerns about the potential for powerful external groups to capture conservation spending linked to the swap, the GLF’s registration in Delaware – due to its reputation as a tax haven—and the loss of sovereignty and control over natural resources associated with the agreement.
The 2023 debt-for-nature swap accords with a long history of international assistance efforts sharply prioritizing nature conservation over other economic and social objectives in the Galapagos. The Latin American Network on Debt, Development and Rights (Latindadd) has argued that, “despite the fact that Galapagos receives millions of dollars a year in the name of conservation, local communities still have unmet basic needs such as lack of access to quality water, health care, and a complete re-engineering of the collapsed sewage system and proper wastewater treatment.”
This systemic neglect of community needs makes the lack of consultation over the swap particularly concerning, despite Ecuadorian Minister of Foreign Affairs Gustavo Manrique Miranda’s declaration that the swap “is special because of the participatory process involved in its creation.” To the degree it occurred, community consultation before the swap concerned the marine reserve, rather than the agreement’s financial structure and policy conditionality. As directly acknowledged by The Nature Conservancy (TNC)—the leading architect of commercial debt-for-nature swaps—confidentiality during negotiations is a product of the financial nature of the transactions. Many of the swaps’ financial terms are considered proprietary information, and TNC argues that active consultation before financial close would affect bond market pricing.
In response to the complaint, the IDB reiterated that it “did not constitute or finance” the GLF, leveraging the agreement’s complex offshore structure to minimize accountability. It also stated that the Ecuadorian government “led the process of determining the conservation commitments assumed by the country within the framework of the debt-for-nature swap,” eliding the lack of parliamentary debate over the agreement and the Ministry of Economy and Finance’s belated approval of a regulatory framework for debt conversions that “legitimates retroactively over two years of executed actions by private proponents.”
Ultimately, the process led to a series of minor concessions, including the appointment of a local NGO representative on the GLF board alongside an observer representing the Galapagos community. However, the GLF remains a privately-run, offshore-registered entity, and the swap’s implications for local self-determination and Ecuador’s sovereignty have been left unaddressed.
Yet the debt swap market continues to expand, with a recent flood of agreements being concluded with El Salvador, The Bahamas, Barbados, and indeed with Ecuador for an Amazon Biocorridor Program. This latest multi-billion dollar agreement has already been the subject of controversy regarding its exclusion of Ecuadorian Indigenous groups in the negotiation process.
In September 2024, the Ecuadorian National Assembly also voted to legalize carbon credit markets, reversing course on Ecuador’s previous constitutional prohibition on the trade, and has already begun to purchase avoided deforestation carbon credits. Thus, debt-for-nature swaps and carbon credit harvesting now represent two pivotal planks in Ecuador’s move toward financializing nature. According to Gustavo Manrique Miranda, “our currency is the biodiversity.”
Commercializing green sovereignty
Who governs the planet? And who ought to? These questions lie at the heart of debates about non-traditional financing and the ever-widening biodiversity and climate financing “gap.”
The offshore world is central to the rise of commercial debt-for-nature swaps and carbon credit trading. But the connection runs deeper. Both mechanisms represent the expansion of the offshore phenomenon as a logic of global South statecraft. Rather than becoming tax havens or selling off other regulatory rights, numerous biodiverse global South states are commercializing their sovereignty over the green transition. Absent sovereign debt cancellation or new public climate finance commitments, debt-for-nature swaps and carbon credits are fast becoming some of the only ways to generate new climate and nature financing.
It is therefore unsurprising that long-running participants in the offshore world such as Barbados, Belize, Liberia, and The Bahamas have also been some of the first to embrace these mechanisms. Carbon credit markets and debt-for-nature swaps have also drawn in new participants such as Ecuador and Gabon, in seeking to monetize their biodiversity. Yet the commitments associated with commercializing green sovereignty are arguably more stringent than for states who have adopted the tax haven model. Given their territorial dimensions and integration with external borrowing, carbon credits and debt-for-nature swaps are less reversible than governmental choices over tax policy or citizenship access.
The turn to offshore finance has further collapsed the distinction between biodiversity, climate, and development finance. Climate finance has traditionally been thought of as fundamentally different from development “aid” and related programs of “good governance” promotion, instead representing a form of “restitution” that should be controlled by climate vulnerable states. In part, this is due to the fact that global South states control many of the world’s biodiversity hotspots and retain the option to pursue fossil-fuel driven development pathways that would radically increase global emissions. But this conception of climate finance also recognizes the historical responsibility of developed countries for climate change, and their reparative obligations to the global South.
With global heating already exceeding the Paris Agreement target of 1.5 degrees and biodiversity loss accelerating at a rapid rate, the imperative for global action continues to increase even as biodiversity and climate financing ambitions stagnate. Rather than motivating measures that would curtail the transnational drivers of environmental degradation—including “large-scale agriculture, cattle ranching, logging, and mining”—this is fueling increased international regulatory attention on nature conservation in global South states. It is perhaps for this reason that momentum in the global North behind carbon credit trading and debt-for-nature swaps is surging, just as the push for a fossil fuel phaseout and redistributive loss and damage funding is at its most precarious.
The financing of the green transition is most definitely an issue of burden sharing and political will. Yet it is also a multi-layered battle for jurisdictional control over the future of biodiversity and climate policymaking, with local-national, national-global, local-global, and public-private dimensions. Carbon credits and debt-for-nature swaps are as much vehicles for transnational private control and power over environmental governance as they are non-traditional financing “solutions” to financing shortfalls.
A combination of increased developed country biodiversity and climate finance, ambitious global solidarity levies, unilateral debt cancellation, and the redistribution of Special Drawing Rights could meet the climate adaptation, mitigation, and biodiversity conservation needs of the green transition. But such measures would also sacrifice power and control, a choice which it appears many global North states, NGOs, and private corporations are, so far, unwilling to make.
