As the eight South American countries that share the Amazon meet to discuss a regional response to deforestation, climate change and crime, attention has turned to the role of carbon markets in the climate solution.
The BBC reports that Pará, well-known as the centre of Brazil’s deforestation, has become an appealing prospect for carbon markets.
Carbon markets are considered big business, with the World Bank estimating that the forest carbon market is worth USD 210 billion a year.
An organisation that pollutes can buy credit worth one tonne of carbon dioxide – so for every tonne of CO2 emitted, the credit represents a tonne of CO2 captured and offset.
Those credits are bought and sold, and their prices are determined like any other market.
Forest carbon is considered a forest product – effectively, forest managers receive credit to manage the forest for carbon sequestration – taking the resource out of the market to produce forest products.
Offsets are split into three categories – reforestation/afforestation, avoided conversion, and improved forest management.
When companies purchase credits, the money is supposed to finance projects intended to deliver economic and social benefits on the ground in developing countries.
Governments recognise the value of forest carbon markets
Whilst the Amazon summit is a diplomatic event, the run-up to the meeting included several days of discussions on issues, including the carbon market.
Increasingly, governments are pushing to retain more of the benefits of emissions-reduction projects, whether as revenue or as credit toward their national climate goals.
“If you are a developing country and have the right project opportunities, you’ve got a golden goose,” said Mark Lewis, Head of Climate Research at Andurand Capital Management.
For countries with dense rainforests, mangrove swamps, or other natural carbon sinks, carbon credits are considered as valuable as minerals and metals like gold, lithium, or copper.
“Commodities markets have created the precedent,” said Samuel Gill, President and Co-founder of Sylvera, a carbon research and rating firm.
Under the 1997 Kyoto Protocol, wealthy countries had emissions targets and could buy credits from projects in developing countries to meet them.
The 2015 Paris Agreement introduced targets for all developing countries, effective from 2020.
This means governments now view the units not just as a source of revenue but as a tool to meet their international obligations.
“The Paris Agreement acknowledges emissions as sovereign liabilities,” said Finn O’Muircheartaigh, Director of Policy and Markets at BeZero Carbon.
“Countries are now recognising they also have sovereign assets, which are their ability to reduce or sequester carbon.”
In Pará, carbon credit companies are working with communities
The BBC reports that Robson Gonçalves Machado lives on the banks of the River Acangatá in Para, which recently signed a statement of intent with one of the carbon credit companies working in the area.
It has yet to start in earnest, but they must undertake courses that include sustainable forestry management, chicken rearing and biogas projects.
“At the beginning, there were many doubts,” Robson said.
“In the municipality, there was a huge land grab worth millions of reais of carbon sold, which didn’t get passed down to the community.”
Carbon credit companies operating in Ilha do Marajó have been accused of harassing people into contracts and pressuring them to be part of their projects without giving them much detail.
The Pará public prosecutor has since got involved in halting projects that have caused concern.
The Brazilian carbon credit market is unregulated
The market remains unregulated, although the Wall Street Journal reports that Brazilian President Lula has promised to address this.
Teacher Bianca Teles and her family make their living from cassava flour in a community two hours boat ride from Robson.
There needs to be more than the $200 they earn a week.
When a carbon credit company offered to help build a school and health centre, even that wasn’t enough to convince her.
“It’s not that transparent,” she said. “We can’t see how it would give us a secure life. We’re always on the back foot, fearing the consequences.”
Because of these stories we heard, we decided not to sign a contract.”
Many problems arise because the state is so absent in the Amazon – public services are weak, and people feel abandoned. And that’s when companies often come in to fill that gap – for good and bad.
“When the state isn’t there, it creates a no man’s land where anything can happen,” says prosecutor Eliane Moreira.
Partnering with the right carbon credit company is critical
On the other side of Ilha do Marajó, Hernandez Pantoja proudly shows off his açai and cacao plantation.
Carbonext, a Brazilian carbon credit company that has received investment funding from Shell, provided the machinery and training.
Shell aims to increase its use of nature-based carbon offsets, including forestation projects, to 120 million tonnes annually by 2030.
According to Reuters, Shell’s former CEO, Ben van Beurden, envisions its nature-based offset solution portfolio growing to 300 million tonnes annually.
It invests around $100 million a year in the sector and is looking to sell Carbon, Capture, and Storage (CCS) technology to other emitters.
The community will also get a share of the credits.
“Just last year, we chucked out five illegal sawmills from our land,” he says.
But partnering with a company with the funds behind it and a plan to ensure sustainable forestry is the only way forward.
The community knows that defending their territory from illegal logging is a challenge.
Royal Dutch Shell has acquired extensive forests in Brazil, Spain, and the Netherlands in recent years and plans to expand globally.
“We want support to look after our forest – we don’t want to cut down trees anymore.”
For Carbonext, empowering the communities to look after their land is essential. So too, is empowering the region as a whole.
“When the global north comes to the global south and says, ‘I have the solution,’ we’re like, ‘Really? Have you been to the Amazon?'” says CEO Janaína Dallan.
“How can you solve that problem if you’ve never been there? You don’t have your boots on the ground. So it’s very easy to say, ‘I have the solution.'”
People on the ground in the Amazon – and those at the summit this week – are determined to make South America’s voice heard regarding climate change.
