Carbon finance as climate adaptation depends on smallholder livelihood contexts in Uganda

Abstract

Nature-based solutions in voluntary carbon markets have become increasingly important instruments for financing climate adaptation and mitigation, yet limited evidence exists on whether and how these mechanisms enable smallholder adaptation. This research examines smallholder participation in agroforestry-based carbon projects as a climate adaptation pathway and investigates the decision-making dynamics shaping participation in rural Uganda. Here we show that participation decisions depend on financial, social, institutional, and livelihood contexts. Qualitative evidence demonstrates that identical compensation levels are perceived differently depending on farmers’ available resources and risks, revealing that adaptation costs are relational rather than uniform. Quantitative analysis indicates a context-specific compensation benchmark of 54 USD per ha per year. Participation likelihood increases with higher compensation (1% per additional dollar), prior agroforestry experience (22%), climate disaster exposure (14%), and trust in climate policy (6%) whereas price uncertainty reduces participation likelihood (4%). These findings suggest predictable payments, floor prices, adaptation co-benefits, and institutional support for equitable and durable climate-resilient development in rural communities. Adaptation costs vary across social financial and environmental contexts and cannot be understood through compensation alone, according to a mixed methods study combining interviews and stated preference analysis in Uganda.