Forest Carbon—Questions of Indigenous Rights and Market Forces

Introduction

Until recently we probably assumed that carbon, sequestered in trees belonged to “nature” or “the tree.” However sequestered carbon can now be differentiated from wood to which it is intrinsic, and owned as a separate entity. Certificates representing this carbon can be banked, traded, passed from person to person, and finally retired. Each stage can create wealth for someone.

With a total carbon trading value of US$176 billion in 2011 ¹ capital cities worldwide are vying to become market hubs with all the trappings of financial markets like futures trading, derivatives, auditing, brokering, and legal services.^2,3

Joseph Mason ⁴ argues that like money, carbon is a necessary input to production and should be viewed like a fiat money supply. However manipulation of the supply of this “money” from forest carbon in a market-based carbon economy could have serious consequences for society where ownership of forests is not necessarily in the hands of those who trade on the carbon market. In addition certificates can end up a very long way from the forest; and the financial players involved in the multiple transactions that will inevitably occur before certificates are retired are likely to have vastly different objectives from the emissions reduction objectives of the Kyoto Protocol. ³ This warrants a closer look at forest carbon ownership and some of the issues inherent in realizing carbon credits from the world's forests.

Who Owns The Trees and Who Owns The Carbon?

In order to be tradeable, carbon needs to be own-able. ⁵ Australia for example, has legislation to recognise sequestered carbon as an own-able product regarded as a property right that can be traded separate from the tree. According to Hepburn this legislation led the world in effectively creating, and assigning ownership to, a commodity—carbon—that did not previously exist.^6,7 Australia owns all natural resources on behalf of the people; access to these resources is licensed by State and Territory Governments. In many developing countries however, ownership of forests is customary rather than legislated. According to the Forest Peoples Program (FPP) most of the world's forests are inhabited, with around 1.3 billion people depending on forests for their daily needs. ⁸ Despite this, some governments are selling their country's forests to outsiders along with the rights to carbon ⁹ often with bribes changing hands—something that the International Criminal Police Organization (INTERPOL) estimates to be worth over US$80m. ³

Indigenous organizations like the FPP and the Federation of small farmers of Madre de Dios in Peru (FADEMAD) believe that their lack of secure land rights is being exploited in a divide-and-conquer approach by numerous “carbon pirates” under the World Bank's Forest Investment Programme (FIP) umbrella.^10,11 The Peruvian government agrees that there are problems, acknowledging in its REDD+ ¹² proposal to the World Bank in 2011 that the current rate of deforestation will continue to increase because of investment plans and illicit activities that imply deforestation and forest degradation. ¹³ Nevertheless the government is promoting public and private investment in forest carbon trade. ¹⁰

Elsewhere governments are attempting to separate forest rights from carbon rights. Guyana for example is offering its forests as a carbon store for payment under REDD even though Guyana's indigenous forest dwellers own their trees under domestic law. ¹⁴ With no legal framework for separating carbon rights from forest rights there is potential for competing claims. ⁸

These ownership tensions are bound to continue as global pressure to conserve the world's forests as a means of combating climate change meets big finance, state governments, local politics, and cultural norms.

Trading in Carbon Credits From Forest Sequestration

Many see forest carbon as a potentially lucrative part of the carbon finance sector. Others view forest carbon separately because ownership is often unclear and those with the potential to profit through sophisticated transactions are probably not those with traditional ownership of forests. Hence most of the activity in carbon credits from forestry projects is still outside of international agreements and overall progress to include them is slower than expected. ¹⁵

The World Bank's Forest Carbon Partnership Facility (FCPF, 2008) was launched in 2007. ¹⁶ The FCPF provides funding for governments to prepare for forest carbon trading. Readiness includes improvements to forest law and land tenure structures as well as defining who owns the carbon credits. The FCPF is supported by: the Readiness Mechanism, which helps developing countries access complex, highly technical and expensive processes to estimate their forest carbon stocks; and the Carbon Finance Mechanism, which provides funding to pilot incentive programs for REDD+.

The World Bank's FIP supports the REDD+agenda in eight developing countries through grants and low interest loans. ¹⁷ It has pledged US$639m towards sustainable forest projects and is working towards gaining private sector investment to add to its capability. Through its Dedicated Grant Mechanism providing funds for knowledge sharing across eight countries, FIP hopes to prepare communities to engage with governments in REDD+projects.

Working closely with the World Bank is the United Nations (UN) REDD ¹⁸ program, supported primarily through funding from Denmark, the European Union (EU), Japan, Norway, and Spain. ¹⁹ At December 2012 US$157m had been awarded to REDD+programs across 46 partner countries. ²⁰ Funding can be provided for REDD readiness projects for carbon trading and for non-market based initiatives. REDD also supports evaluation of on-the-ground effectiveness of spending. However there are widespread complaints of incomplete reporting and monitoring of REDD+spend and few studies of individual REDD programs.^19,14

Apart from the UN and World Bank there are numerous commercial, not-for-profit, and non-government organizations concerned with prevention of forest destruction and/or generation of forest carbon credits mostly for the voluntary offset market. For example the British charity Cool Earth sells protection of Amazon rainforest for £60 per acre (2013). ²¹ Cool Earth's British based partner Ecotribal, in partnership with Treeflights, offers corporate and individual carbon offsets from Amazonian forest tree planting projects. ²² Llanos and Feather's report details eight of over 35 such projects operating in Peru in 2011/12. ²¹ All were viewed with suspicion by the FPP. One not-for-profit project for example, awarded itself 50% of all carbon credits generated while the 22 communities that owned the forests received the other 50%.

Redd Implementation

In 2011 Peru was approved over US$350m under the World Bank's FCPF and FIP for the preparation and implementation of REDD+readiness plans. The FIP in consultation with indigenous peoples proposed that funds be available to support recognition of indigenous peoples' land applications. ¹⁰ However the FPP has long been concerned that the World Bank prioritizes carbon trading over indigenous peoples' human rights.^23,15 A 2011 review of eight of the then existing 15 FCPF Readiness Preparation Proposals (R-PPs) found they focused predominantly on valuation and monitoring of forest carbon and reaffirming state ownership of forest lands. ²⁴ A 2011 FPP report indicated that REDD+policies and programs undermined rights of indigenous peoples and could lead to conflicts and a land grab for REDD+projects. ¹⁰ To counter this perceived exploitation the Indigenous Peoples Organisations (IPO) took the position that forest and climate protection schemes must not be financed by carbon offsetting mechanisms, and felt it necessary to say that plantations and biofuels must be excluded from REDD+schemes. ¹⁰ They suggested a non-market alternative to REDD+through funding to secure land rights and promote community livelihoods, forest management, and biodiversity conservation. Despite this plea a 2012 report led by Inter-Ethnic Association for the Development of the Peruvian Amazon (AIDESEP) ²¹ concluded that existing REDD+policies and programs were undermining the rights of indigenous peoples. A 2013 letter from AIDESEP representing 1,500 Amazonian communities, complained of the FIP's apparent support for illegal logging and the promotion of plantations in areas falsely claimed to be degraded. ²⁵ The letter suggested that “paper reforms” had taken the place of real on-the-ground change and indigenous peoples had been marginalized by the process. In 2013 the Peruvian government's REDD Readiness Progress Fact Sheet acknowledged some of these concerns, identifying carbon ownership and benefit sharing as legislative challenges to REDD readiness. ²⁶

Indonesia, with the world's joint second highest forest carbon stocks, was also among the first nations to recognize the potential of REDD. ²⁷ In 2008 the Indonesia-Australia Forest Carbon Partnership (US$43m) was launched. It was expected to generate REDD credits by 2010 but failure to deal with land tenure issues meant that the project was drastically scaled back and still not completed by late 2013. ¹⁴

In 2009 the Indonesian Ministry of Forestry signed a regulation on REDD that introduced the world's first national legal regime for REDD implementation. A 2009 investigation by the UN Committee on the Elimination of Racial Discrimination strongly criticized Indonesia's draft REDD regulations requesting that they be amended to ensure consistency with the rights of indigenous peoples to own and control their traditional territories and to consent to activities like REDD.^28,29 That same year Indonesia's R-PP to undertake REDD+projects was endorsed by the FCPF. Indonesia expected to trade REDD credits under any post-2012 international trading framework to help developed countries discharge their Kyoto committments. ⁸ However a 2010 report warned that corruption and financial mismanagement in the Indonesian forestry sector could jeopardize REDD trading. ³⁰ Following this report in September 2010 the Presidential REDD+Task Force was established to pull together and oversight the many disparate REDD-related projects which by 2013 were worth around US$4.35bn in grants and loans.

Most, but not all, of this money was destined to assist in developing the forest carbon trading market. US$1bn was an eight-year performance-based commitment from Norway, payment of which was based on verified emissions reductions.^31,32 These emissions reductions were not to be used to satisfy Norway's commitment to the Kyoto Protocol. Instead funding was to assist in reducing Indonesia's emissions and improve forest governance and law enforcement while helping indigenous peoples to improve their livelihoods.

The Plurinational State of Bolivia takes a totally non-carbon offset trading approach to REDD. In 2010 Bolivia hosted the World People's Conference on Climate Change and Rights of Mother Earth. At this conference, attended by over 30,000 people, market mechanisms such as REDD were condemned for their “violation of the sovereignty of peoples and the Rights of Nature.” ³³ The conference supported a version of REDD that did not tie international funding to a market solution through carbon trading, but instead provided international assistance to forest dwellers and local communities for development of sustainable lifestyles and the promotion of economic, social, environmental and cultural functions of the forest. In 2011 The Plurinational State of Bolivia presented its Proposal for the Development of the Joint Mitigation and Adaptation Mechanism for the Integral and Sustainable Management of Forests to the UN Framework Convention on Climate Change (FCCC) at the 17th Conference of the Parties (COP17) in Durban. ³⁴ This resulted in the inclusion of the possibility of non-market based approaches to sustainable management of forests in COP17 decisions. ³⁵ In 2012 Bolivia passed the Law of Mother Earth giving the Earth legal rights. Even so, saving the remaining forests is not guaranteed. One enduring issue is the difficulty of addressing the major causes of deforestation in Bolivia which are mechanized agriculture, infrastructure development, and cattle ranching.^36,37

Brazil, as the holder of the world's largest stock of forest carbon is an important player in REDD. Initially Brazil argued that its emissions reductions should not be used to generate carbon credits for use by the developed world to meet Kyoto obligations, believing that any forest and climate regime should be voluntary and not used to offset emissions in developed countries.^8,26,38 In this it was supported by voluntary contributions from foreign governments (including US$100m from Norway) and the private sector. Later at the urging of governors from the Amazon states, Brazil's Interagency Task Force on REDD and Climate Change recommended that REDD should be financed partly by government and partly by market mechanisms linked to additional financial commitments and an increased reduction target from Annex 1 countries. ³⁷ However grass roots organizations in Brazil still strongly reject REDD as a market-based mechanism used to offset the emissions from developed countries. ³⁹

Conclusion

It may be too late to avoid carbon credits becoming a new kind of global money supply with all that the financial analogy entails. But who can issue and who owns this new money is a question that is likely to occupy us for some time. Much of the current REDD activity is aimed at assisting developing nations create offsets for purchase by developed nations to meet carbon reduction targets, creating a market in which carbon credits can become just another business input (and market opportunity for those who want to speculate and trade). And as Sandel warns us, such a move can allow us to wash our hands of responsibility for what happens “on the ground.” ⁴⁴ While businesses buy, sell, and speculate on the carbon market the origin of that carbon-credit and the eco-system service that gave rise to it can become less and less tangible. Governments of developed nations and businesses engaged in offering compliance and hedging services for example could leave indigenous forest dwellers with little benefit from protecting the carbon stored in their forests. Like past resource booms in underdeveloped countries there is a danger, discussed by Paul Collier in his book The Bottom Billion, that the peoples of the resource-rich (in this case forested) countries remain poor while others make their fortunes. ⁴⁵

The Plurinational State of Bolivia is showing the way in rejecting a market approach to REDD. Brazil, with Norway's support, has also shown that there is an alternative to forest carbon trading. In the case of Indonesia, Norway's assistance shows that another approach can be adopted along side carbon trading. Responsibility for the protection of the world's forests can be undertaken outside of market mechanisms. Instead of being spent on costly and complex readiness for trading initiatives, funding from those governments and organizations willing to share responsibility for conserving the world's forests can be used to provide education, health, technological infrastructure, and work for local communities. This may or may not lead to more equitable access to a good quality of life. It is possible however that global trading in forest carbon could lead to further accumulation of wealth in the hands of the already wealthy with an unintended spin off of more money spent on goods and services the production of which causes further emissions. Meanwhile traditional owners of forest lands may find that they have little to show for the wealth that has somehow been created out of their trees.