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Keeping carbon criminals out of the forests

External Reference/Copyright
Issue date: 
4 October 2011
Publisher Name: 
Environmental Finance
Davyth Stewart
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The REDD+ lobby would do well to learn the lessons of the Uganda land grab and build transparency, anti-corruption measures, conflict resolution into the system from the start, says Davyth Stewart from Global Witness

Forestry investment in developing countries is in the news once more, and for all the wrong reasons. Allegations from Oxfam that more than 20,000 people have been moved from their homes and land in Uganda to make way for tree plantations for carbon offsetting highlights once more the need for strong safeguards and regulation in investments in forest projects. 

For those of us who work on projects that aim to reduce emissions from deforestation and degradation (REDD+), the Uganda case, although not a REDD+ project, shows how badly even well-intentioned forest projects can turn out if the rules aren’t right from the beginning. 

REDD+ presents an unprecedented opportunity to protect the world’s remaining forests, as well as tackle climate change, conserve biodiversity and contribute to the livelihoods of the billion people who live in or depend on forests. Billions of dollars have already been invested in REDD+, including $5 billion of government money pledged for immediate action to set up national programmes. Once up and running, payments for performance in forest protection are expected to total many times this amount each year. 

Of particular concern to Global Witness, however, is whether these new investments will achieve genuine forest protection, or simply make things worse.

Previous efforts to finance forest protection have a history of being undermined by poor governance and conflicting interests. The international donor community spent tens of billions of US dollars over the last 20 years to reduce forest loss in developing countries and harness forests for economic growth. Despite these efforts, however, an area of forest the size of Greece is still being destroyed every year, mainly from the clearing of tropical forests for agriculture. 

The forest sector is notorious for systemic corruption and illegality. Illegal logging is by far the biggest area of corruption, estimated by the OECD to account for 5-10% of global timber production. Over the last 15 years, we have uncovered many examples of endemic corruption in some countries, sometimes reaching the highest levels of government. 

As national REDD+ plans get underway around the world, Global Witness has been sketching out where risks of corruption, illegality and embezzlement of funds lie and how they can be minimised. We’ve just released this as a briefing paper, Forest Carbon, Cash and Crime: The Risk of Criminal Engagement in REDD+.   

We’re all familiar with the types of corruption and illegality that can occur when huge sums are invested in developing countries with weak governance and high levels of corruption: bribery of officials, false documentation, dubious accounting and tax evasion to name but a few. REDD+, however, introduces new risks. For example, separating rights to forest carbon from land rights, as being considered in Papua New Guinea and Ghana among others, would add a huge layer of complexity to land and natural resource rights, making them vulnerable to exploitation. 

Carbon markets vulnerable to manipulation

Cross-border trade in intangible assets such as forest carbon also creates an opportunity for large amounts of money to be siphoned off. Carbon markets, if REDD+ takes this route, are also vulnerable to manipulation, as huge value-added tax fraud in the EU Emissions Trading System in 2009 showed. 

So how can we ensure REDD+ finance protects forests while also protecting the rights of local people? 

Forests projects and programmes need to be independently monitored, involving formal civil society oversight to act as a watchdog on governments and companies. Independent forest monitoring is a well established practice, whereby a third-party monitor is contracted to assess legal compliance and forest governance. This assessment is then discussed, reviewed and adopted through a national body with seats for the forest authorities, the private sector and civil society. 

As regards finance, given that large sums of money should be flowing into at-risk forest countries from the international community, a key principle will be financial transparency. Mandatory and truly independent auditing of REDD+ financial flows from the international to the local levels will need to be part of the forest monitoring systems set up to monitor levels of carbon emissions and forest loss. Also helpful will be registries of REDD+ finance and activities that journalists, NGOs and the general public can access to keep track of the money. 

Conflict resolution mechanisms vital

In the Uganda case, the company involved has committed to a thorough investigation, and we welcome this. When cases of conflict between local people and companies or governments occur, conflict resolution mechanisms can help fix the problem early before it escalates. Most REDD+ countries could use existing systems such as national courts or dialogue forums, adapted to recognise traditional laws and customs, but it would also be beneficial if the REDD+ framework at international level sets out clear pathways to resolve disputes, including the ability to enforce decisions and allocate compensation. 

Underpinning all this, countries implementing REDD+ will need to update their legal frameworks to ensure they have strong anti-corruption measures, clear laws without loopholes, freedom of information rules and clarity on property rights around land and forest carbon ownership. This will also include boosting law enforcement capacity to deal with the new challenges REDD+ brings and measures to limit corruption within institutions. 

Some of these suggestions are perhaps blue-sky thinking. It’s hard to imagine countries such as Papua New Guinea and Cameroon, with deep corruption problems, turning around their endemic problems just because of REDD+, especially with donors desperate to get money out the door and into action straight away. 

As the private sector explores ways to engage in REDD+, many have called for clear and concise international rules to help define their role and minimise operational and reputational risks. It is clear that from past experience, the private sector should be cautious about investing in REDD+. But preparation and ‘readiness’ support is forthcoming and REDD+ is a good opportunity for investors to push for better governance and regulation. If policy-makers and investors want their money to have a real impact, this should be their priority. 

Davyth Stewart is senior campaigner at Global Witness


Extpub | by Dr. Radut