Rio de Janeiro. A patchwork of regional legislation and complex rules governing land ownership have so far kept Brazil from cashing in on what could potentially be the world’s biggest carbon offset market.
The country, home to the much of the planet’s rain forest, has struggled to come up with a national strategy to make money protecting its vast ecosystem with projects that Reduce Emissions from Deforestation and Degradation, also known as REDD.
Although not an official theme of the United Nations’ Conference on Sustainable Development, REDD has been a hot topic this week in Rio de Janeiro, where policymakers from more than 190 nations are meeting to discuss environmental sustainability.
The idea is to get the private sector and governments to pay to reduce deforestation, which accounts for up to 17 percent of global greenhouse gas emissions.
Advocates say REDD is needed to keep the planet from heating up and causing widespread famine and drought, a key objective at UN climate conferences.
“You cannot address climate change without including REDD,” says Arild Angelsen, an environmental economist with the Center for International Forestry Research and a professor at the Norwegian University of Life Sciences.
But Brazil, which could potentially produce 58 percent of global REDD credits according to the World Bank, risks falling behind African and Asian nations in attracting private and public investment.
“We have some 19 state-level legislations on climate and REDD and we will have to find a way to harmonize these rules under a national strategy,” Brazilian Climate Change Secretary Carlos Klink said. “We know there is great potential, but also a huge difficulty to move ahead.”
Emission reductions from anti-deforestation projects are not eligible for carbon credits under the international UN framework. They are also not allowed in mandatory emissions trading programs in Europe and New Zealand.
Currently, only Japan and the US state of California have said they might accept REDD credits for compliance with their carbon reduction programs.
In 2010, the UN asked countries to develop national strategies, baselines and monitoring systems, while discussions continued to include these credits in a new climate regime that could take effect in the next decade.
That triggered a rush in some nations, such as Malaysia, Indonesia and Congo, which were quick to map out national strategies to attract large corporate buyers seeking greener images who want reduce their carbon footprints.
Marco Antonio Fujihara, a consultant with Key Associados, manages two low-carbon funds in Brazil and said financial resources for the few REDD projects that exist have so far originated from donations. When this money runs out, the number of projects will decrease, unless private-sector buyers can be found.
But some investors seeking to buy up land rights lasting decades have in the past been caught short by Brazil’s complex land laws. Earlier this year, Brazil moved to cancel more than 30 such deals unless they had the express permission of the government.
Plinio Ribeiro, executive director of trading and consulting company Biofilica, said investors need clarity or they will stay away.
“The risk is pretty high right now to invest in REDD projects in Brazil,” he said. “A national strategy that is linked to a future national emissions market and that deals with the land ownership issue, would greatly reduce risk and attract a lot of people to these initiatives.”
Round of talks
In a bid to get things moving, the Brazilian government announced this week a new round of meetings between officials from states that already have some REDD legislation, such as Acre, Amazonas, Par and Mato Grosso.
Acre has one of the most-advanced policies and has already clinched a deal with California to trade future carbon credits from its cap-and-trade scheme, which is scheduled to start next year.
Said Monica de los Rios from Acre’s Climate Change Institute: “We spent the last two years defining legal structures in the state, but now we run the risk of not fitting in a future national framework.”