Can Brazil's new carbon market turn tide on decades of exploiting ...

November 21 - As companies and governments race to meet emissions offset targets, Brazil has the potential to be one of the largest global providers of carbon credits. That is, if the country manages to guarantee the integrity of its processes.

According to consultancy firm McKinsey, 15% of the global potential for offsetting emissions through natural climate solutions is in Brazil, and carbon markets, along with renewable power and bio-based energy, are three areas where Brazil can take a leading global role in the green economy.

In early October, the Senate passed a bill to regulate the carbon market. The system will work under the cap-and-trade model, in which companies in regulated sectors will have emissions limits, starting at 25,000 tons. About 5,000 companies are expected to be affected. The legislation is expected to be passed by the full legislature this year.

Although concerns have been raised that the market excludes agribusiness, the sector responsible for most of Brazil's emissions, Guarany Osorio, coordinator of the environmental politics and economics program at Fundacao Getulio Varga's (FGV) Center for Sustainability Studies, believes climate policy in Brazil will need more than one instrument to address all the country's emissions.

"The regulated market is not a silver bullet. There are instruments for each need, such as command and control and energy certifications, and so we will have a climate package to reduce emissions. Within the package, the regulated market is an important piece," he said.

Trees are seen at a seed nursery for a reforestation project in Itapua do Oeste, Brazil. REUTERS/Alexandre Meneghini Acquire Licensing Rights

Jose Pugas, head of ESG at JGP investment firm, agreed. “In finance, the most important element is predictability. With that, we can adapt to anything. We have an attractive market, (and) Brazil is a strong brand.”

He said it was important for the legislation to pass quickly as it will take a couple of years to implement, in time to demonstrate Brazil's prominence when it hosts COP30 in the Amazonian town of Belem do Para.

Importantly, the bill gives indigenous and traditional communities the right to generate and sell credits in their territories, and says carbon transactions will have to protect indigenous rights under international convention ILO 169, in both the regulated and voluntary markets.

The role of Indigenous and traditional peoples in safeguarding forests and biodiversity is increasingly being recognized. A summit of eight Amazon nations held in Belem in August failed to agree a common approach to ending deforestation, but strongly asserted the need for indigenous peoples’ rights to be protected. Read more

And Razan Al Mubarak, the U.N. Climate Change High Level Champion for COP28, has promised that indigenous peoples will have a bigger role in this year’s climate talks in Dubai.

Luiz Inacio Lula da Silva as Brazil's president-elect with members of an indigenous group at COP27 in Egypt in November 2022. Indigenous peoples have been promised a bigger role in this year’s climate talks in Dubai. REUTERS/Mohammed Salem Acquire Licensing Rights

“This is far more than a moral imperative,” she said. “We simply won’t be able to solve the climate crisis without authentically incorporating the leadership of Indigenous peoples and other traditionally under-represented groups such as women and youth."

Safeguards in Brazil’s new carbon market will seek to prevent the exploitation and harassment that Indigenous peoples have experienced in the unregulated voluntary carbon market, where the race to generate carbon offsets has made indigenous lands an object of desire.

According to an analysis by the MapBiomas platform, a land cover and use monitoring system, Indigenous lands in Brazil experienced just 1% of deforestation between 1990 and 2020, compared with 20.6% in privately held land.

Maurício Terena, legal coordinator of the Articulation of Indigenous Peoples of Brazil (APIB), says voluntary carbon markets have put Indigenous lands under a lot of pressure, in addition to economic activities such as mining and illegal deforestation.

"Companies arrive, harass leaders, do not explain their intentions adequately, do not carry out a free, prior and informed consultation and make leaders sign million-dollar contracts for money that will not return to the territory," he said.

Indigenous people take part in a march as the Amazon Summit kicks off in Belem, Para state, Brazil August 8, 2023. REUTERS/Ueslei Marcelino Acquire Licensing Rights

Sineia Wapichana, coordinator of the National Indigenous Climate Change Committee, adds: "We are always seen as beneficiaries, but we are part of the discussion. Frequently, we are only consulted when something has been decided."

In July this year, the public defender's office of Pará filed five lawsuits to suspend the construction of carbon credit projects in Portel, in the Marajo archipelago. According to a World Rainforest Movement report, companies including Air France, Amazon and Liverpool football club are among the purchasers of credits from the Verra-registered projects, unaware of the irregularities.

In an official note, the Public Defender's Office stated that "the action indicates that there was grabbing of public lands and the use of property documents that do not have legal validity" and that "there was no prior consultation with communities, nor prior study, which creates socio-environmental risks to biodiversity and traditional knowledge".

In a statement to Ethical Corporation, Verra said “As a standard setter, Verra does not comment on questions related to market impact in order to maintain impartiality. We are focused on continued commitment to integrity and the ongoing improvement of Verra’s rules and methodologies, as demonstrated by continuous program updates.”

It added that that the Verified Carbon Standard (VCS) program’s rules and requirements expressly require projects to comply with all applicable laws, “regardless of whether or not the law is enforced".

So will allowing indigenous people the right to generate and sell credits in their territories safeguard against abuse?

Latex from a rubber tree is collected in a bucket in Pará, Brazi. Thomson Reuters Foundation/Cícero Pedrosa Neto Acquire Licensing Rights

In the case of the Igarape Lourdes Indigenous Land, where the Gaviao people live, in the municipality of Ji-Parana, in the state of Rondonia, communities have been debating the implementation of a REDD+ project for 10 years, which, once approved, will be implemented and lead by indigenous people. They are extractivists and collect nuts, alongside with rubber and copaiba oil.

According to indigenous leader Josias Gaviao, over the years, the Indigenous people understood that REDD+ is a tool for implementing their territorial management plan and a way of accessing financial resources to improve the people's quality of life.

"In our understanding, if we implement the project now, we will say what we want and we will manage the carbon credit resource. We are consulting communities, calling partners and making things happen. We cannot wait for the government to tell us what we should do and how to manage our territory", he stated.

For Pugas at JGP, the consultation and transparency processes involved in projects with Indigenous communities necessitate putting a premium value on the carbon credits, as they are more expensive to develop. Also, these projects will need more upfront investment to gain scale.

“There’s a great opportunity for Indigenous carbon credits, especially because of the impact and shared benefits they provide. They aren’t the only solution, or an impossible one, it’s a path with its peculiarities, which rely on legal safety, premium values and transparency of the consultation processes,” said Pugas.

Miles away from the Amazon forest, the Atlantic forest concentrates around 72% of the Brazilian population and has around 12% of the native forest standing. The extent of degradation has led to the emergence of reforestation initiatives in the region.

The Serra da Mantiqueira Atlantic forest region extends through the states of Sao Paulo, Rio de Janeiro and Minas Gerais. Instituto SuperACAO/Handout via REUTERS Acquire Licensing Rights

One of them is in the Serra da Mantiqueira, region that extends through the states of Sao Paulo, Rio de Janeiro and Minas Gerais. It is led by the NGO The Nature Conservancy Brazil, in partnership with Mercado Livre, a company that operates online markets dedicated to electronic commerce and that wants to offset its emissions. Through the project 157 rural producers have committed to the recovery and conservation of the Atlantic forest and will help regenerate 2,717 hectares of the biome.

In the first five years, owners will receive an incentive of 300 Brazilian reals ($60) per hectare, every 12 months, when the areas being restored are completely isolated from other activities. After this period, this incentive will be provided through carbon credits that can be generated. In the first 10 years, 80% of carbon credits go to the investor and 20% go to rural owners. In the eleventh year, rural landowners become the sole owners of the credits that are generated.

For the director of the restoration project in Mantiqueira at TNC Brazil, Adriana Kfoury, the initiative differentiates itself because of equity. "We value the rural owner through payment. As the carbon market develops in Brazil, he is paid for restoring and begins to generate the credits that will remain with him."

For Indigenous people, regulating the carbon market in Brazil is not about providing guarantees for the generation of credits, said Wapichana, of the National Indigenous Climate Change Committee. For them, the relationship with the forest, water, soil and seeds is fundamental to life. "In the indigenous tradition, the value is different. Everything belongs to life. We do not see nature as something to be sold, it is quite different from a market."

According to APIB’s Terena, the Indigenous lifestyle is a solution to the current climate disaster. "Our culture is not what destroys the ecosystem and Earth. We have a different logic for organizing ourselves as a society and that is what we need at this stage of the climate crisis."

The anti-deforestation and forest degradation association NBS Brazil Alliance recently released a good practice guide for consulting with Indigenous and traditional communities on nature-based solutions. Its president, Janaina Dallan, says her dream is that the children and grandchildren of the current generation will want to live in the forest. "It will be such a cool, developed place, with universities and a forest belonging to us. If we can achieve this transformation, everyone will want to live in the forest."

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Ethical Corporation Magazine, a part of Reuters Professional, is owned by Thomson Reuters and operates independently of Reuters News.