New private property concept may rip off those on the ground

Just like private property, carbon sequestration credits can now be bought and sold on national or international markets.

Countries such as Australia are creating this new private property in response to international schemes that reward developing countries and landholders for REDD+, so-called for Reducing Emissions from Deforestation and Forest Degradation.

Already, according to the International Institute for Environment and Development (IIED) in a new report, there are concerns that carbon payments will primarily benefit large landowners, carbon traders or governments.

There are widespread concerns that tradable property rights will not benefit the millions of poor people that depend on forests for their livelihoods.

"Many indigenous and other communities dependent on forests are fundamentally opposed to the idea," it says.

They want a rethinking because how forests are managed on the ground involves a much wider set of rights, from land tenure to free movement, than simple ownership of carbon.

Communities want a careful assessment of how carbon rights are assigned to ensure they support the rural poor who rarely hold formal land ownership or tenure rights but who are key players in putting sustainable forest management into practice on the ground.

It also means rethinking the eligibility criteria for REDD+ projects so that they include economic, social and environmental standards and co-benefits.

What are carbon rights? A narrow understanding focuses on the title of ownership to sequestered carbon as a possible trading commodity.

Here, stored carbon is seen as a self-contained, intangible asset with a monetary value similar to an intellectual property right or a company’s brand value.

This type of carbon right is created through law or contract based on, for example, ownership of the land or management activities that reduce emissions, or enhance stocks, of carbon.

Turning carbon into a new form of property in this way supports REDD+ in that it recognizes the benefits of maintaining carbon stocks and sequestering carbon in forests.

But these activities will only generate money if appropriate emissions trading or fund-based compensation regimes are established where carbon rights can be bought and sold.

Options

A statutory or voluntary mechanism will play a crucial role in allocating carbon property rights, and governing their transfer and trading.

"Making REDD+ work, especially for the poor, is not simply about turning carbon into a new tradable commodity," the IIED reports. "This may create new economic opportunities, but forest-dependent communities may be short-changed and subject to unfair competition with powerful elites for access to resources."

And, because drivers of deforestation are complex and change over time, a narrow focus on carbon property may miss opportunities and barriers to successfully reducing deforestation and forest degradation in the broader context.

"The sequestrating forest provides a continuous link to a wider set of rights, including land use and tenure, employment, accommodation and free movement," the IIED says. "And so a broader understanding of carbon rights also takes into account the civil, political, social, economic and cultural rights of all forest-dependent people."

Many of the rural poor depend heavily on forests for firewood, water, food, animal fodder and medicines. They rely on forests for key environmental services such as keeping agricultural pests and diseases at bay, and the provision of fertile soils, pollinators and arguably better water quality and quantity.

These people rarely hold formalized rights and cannot easily access planned REDD+ schemes.

One option is state ownership of such rights to help distribute more fairly the revenues derived from REDD+.

This didn’t work in New Zealand where legislation to reduce emissions in 2002 was a key driver instead of deforestation between 2004 and 2008. By keeping hold of the credits and liabilities of storing carbon in forests, the government allegedly removed the financial incentive for forest owners to keep trees that they had planted.

In 2008, New Zealand reversed the nationalization of carbon rights, devolving their ownership to forest owners.

Alternatively, credits could be allocated to stakeholders other than the registered land holders (or users) whose forest-related rights are affected by REDD+ activities – for example, a local forest-dependent subsistence farming community.

In Australia, all six states have laws to define carbon rights. At the national level, draft legislation – called the Carbon Farming Initiative (CFI) – allows forest carbon to be traded as part of a national emissions trading scheme.

Credits are issued to the person or organization responsible for carrying out the project. All projects must be entered into the land registry or other documents so future buyers or leasers know that it is subject to obligations associated with the project.

Whether native title holders and other categories of indigenous land can hold carbon rights under the CFI remains unclear.

Potential designs for REDD+ carbon trading schemes are often based on the understanding that payments will be made for a ton of carbon (sequestered

in trees) or at a flat rate per hectare of land. But participating in these schemes is likely to carry high transaction costs, for example to negotiate contracts or monitor compliance.

This means it will be proportionately more expensive for smallholders.

To more fairly distribute the costs of and benefits from participation, schemes could provide a declining payment for each additional unit of land. This would result in diminishing payment as land size increases.

In such a way, participation of small landholders is encouraged while ensuring that large landholders do not rip-off the benefits associated with REDD+. Source: IIED