According to the World Economic Forum (2020), there are three basic forms of acquiring carbon credit: reduced carbon emissions, removed emissions, and avoided emissions. The credit is redefined as a transferable certificate or permit that has been certified by governments or independent certifying organizations to reflect a reduction in CO2 emissions of one metric tonne or an equivalent quantity of other greenhouse gases (Carbon Offset Guide, 2020). The key idea behind this concept of carbon offset credit is based on the fact that, since all greenhouse gases mix in the atmosphere, it does not matter from where they are reduced. Therefore, there is a high demand for carbon credits since companies can buy them from elsewhere.
With this in mind, the Indigenous communities in the Amazon play an essential role in cooling the globe and mitigating climate change by keeping carbon dioxide from entering the atmosphere, and this could generate profitable carbon credits in the market. The Indigenous people from the Puyanawa community are located in the northwestern part of Brazil in the state called Acre, and they are highly contributing towards a carbon-free world. Their social carbon credit is generated by utilising existing degraded regions for agricultural activities, regenerating the forest, avoiding deforestation, and strengthening agroforestry gardens as well (Zanon, 2021). Due to its noticeable importance and high demand for carbon credits yet low supply, research made by Embrapa (Brazilian Agricultural Research Corporation) shows that Indigenous people could start selling those credits (Zanon, 2021).
The 528/2021 Bill
The Brazilian carbon credit market had been envisioned by Law 12.187/2012, which defined the Brazilian National Climate Change Policy, but it was only on February 23, 2021, that Bill 528/2021, which intends to regulate it, was proposed by a Federal Representative. Mentioning the United Nations Framework Convention on Climate Change, the Kyoto Protocol and the Paris Agreement, its author – representative Marcelo Ramos (2021), from the Liberal Party/State of Amazonas – states that the Bill aims to, among other goals, economically stimulate environmental conservation and protection.
As of October 2021, the Bill is under the analysis of the Environment and Sustainable Development Commission of the Brazilian House of Representatives after being approved (with changes) by the Economic Development, Industry, Trade and Services Commission . Although the Liberal Party is formally aligned with the Federal Administration, Representative Ramos stated in a recent interview that some legislators from the Government Base believe that the Bill should only be approved after the 2021 United Nations Climate Change Conference, to be held in Glasgow, UK, between October 31 and November 12 (Simões, 2021).
According to the Bill, a carbon credit is an intangible, immaterial, tradeable, fungible asset representing the reduction or removal of a ton of carbon. It also defines equivalent carbon ton as a metrical measure to compare different greenhouse effect gases (Brazilian House of Representatives, 2021). These definitions follow the universally accepted system established by the 1997 Kyoto Protocol.
Bill 528/2021 establishes a voluntary market, which is defined as a system for trading verified emission reductions unrelated to any legal obligation from the market participants. Within a five year transition period, the Ministry of Economy must elaborate regulations for a compulsory compensation program based on carbon credits (Brazilian House of Representatives, 2021). It has been claimed that this project had only gone forward due to a change of stance from the heavy industry sector, unified by the National Industry Confederation, which has always been cautious on carbon-pricing projects (Viri, 2021).
If approved, hopes are for this Bill to foster economic benefits based on corporate social-environmental responsibility, avoidance of possible emission taxes, and a source of economic revenues. The carbon credit policy will generate wealth by protecting, and not destroying, the forest, representative Ramos claims (Simões, 2021). Nonetheless, the Bill does not inform how or where the carbon credits will be traded.
We have yet to see how the system will be implemented. In any case, it is important to notice a change of mentality not only by government-aligned members of parliament (bearing in mind that the current Federal Administration possesses a notorious disregard for the environment), but also by large businesses and other relevant economic actors.
Carbon Credit Trade in Practice: Other examples
The concept of carbon credits trade has been used around the world for some time now. Ever since the 1997 Kyoto Protocol, there has been a universal system that regulates this new market. Bill 528/2021 is now establishing such a market in Brazil, yet there have been informal projects that included carbon credits trade before. These projects thrived between 2013 and 2017 and are the main reason why Indigenous communities are now being involved in this upcoming market. These former projects, which went by the name REDD+, were initiated by the United Nations and served as a tool to reduce the emissions from deforestation in “developing countries” . This project resulted in the first voluntary emission trades, which meant that tons of emissions were exchanged for newly planted trees that compensated for the emitted gases by industrial actors or countries (Wenzel, 2021).
Currently, the Brazilian state wants to regulate such a market and make carbon credits trade feasible for Brazilian companies and private actors. This is an important opportunity to enhance the ties between corporations and Indigenous communities. This could be a win-win situation because the joint-venture between them offers opportunities for industries to compensate for their harm to the environment and reduce their ecological footprint, while Indigenous communities strengthen their socio-economic position and prevent deforestation, land degradation, and other environmental harm (Zanon, 2021). However, before this recommendation can be made, this article will show how the carbon credits trade has developed itself around the world since 1997.
In the continuation of the Kyoto Protocol in 1997, the first attempts for carbon credits markets were made, mostly in Europe and the USA. The idea was based on the cap-and-trade market, meaning there is a maximum established, by a third regulatory party (the EU for example), for every country or company. This means that if a company exceeds the number of tons of emission that is capped for them, they have to buy carbon credits to compensate. In the case of the EU, the price for the credit is paid to the EU itself. This differs greatly from the Brazilian carbon credits trade. In Brazil, the compensation is paid to finance the reforestation of the Amazon, meaning that the number of tons that are emitted too much is balanced out by the number of trees that capture the CO2 and compensate for the emission (Gerretsen, 2021).
In Europe, the focus remains on capping the emission of companies and countries because of the different international treaties on the environment (mainly Kyoto and Paris). How successful has the attempt to create a global carbon credits market been? Within Europe, the cap-and-trade market system has proven to be impactful because the system reduced the emission of CO2 by billions of tonnes, as has been argued by Bayer and Aklin (2020).
Because of the successes in Europe, the 2015 Paris climate treaty stated that a global market on voluntary emission would be established. After 6 years, there is still no consensus on how to create that global market and how the carbon credits market should be executed. This November in Glasgow, the attempts at finding consensus between world leaders are being continued once again (Gerretsen, 2021).
Small scale projects, global impact
The foundation of the idea behind Bill 528/2021 is that the regulated market of carbon credits will engage Indigenous or rural communities with global actors, such as banks, airlines, or industrial companies who want to reduce their ecological footprint. The creation of a regulated market will solve the issues that existed earlier with the REDD+ projects because the lack of a global, regulated market made it very difficult for buyers and sellers to find each other. Examples from other countries show similar issues. In Panama and Colombia for example, the lack of buyers brought the price of carbon credits down significantly. This was paired with the problem that selling the credits appeared to be complex and a long-lasting procedure (Crezee, 2017). In Indonesia, the lack of regulation means that companies have to take matters into their own hands when it comes to buying credits. The main reason is that the government has not regulated caps for emission, which means that the carbon credits are now bought in Singapore (Thomas, 2021).
A successful case study is the carbon trade market that enhanced the socio-economic position of rural communities in Timor-Leste. The concept of carbon credits trade is executed in that context as “carbon farming”, which means that rural communities use their farming abilities to reforest their land and become a supplier for carbon credit. The capture of carbon has been a drive for their economy and has improved the ecological condition drastically (EEAS, 2021).
Indigenous communities preservation forest
Indigenous and local communities manage approximately a quarter of the world’s lands and care for almost 80 percent of Earth’s biodiversity (Nerger, 2021). Out of Brazil’s 214 million population, less than 1% is Indigenous with more than two-thirds of the Indigenous population living in rural areas, largely in the Amazon region. Brazil’s Amazon region is the largest among South American countries, constituting 509 million hectares. Among the issues that surround the Amazon rainforest such as deforestation, carbon emissions and other climate-related challenges, Indigenous communities have proven over the years to be the best guardians of the forest and to possess valuable knowledge in mitigating these problems. To specify, forest clearing and degradation add to one-tenth to one-seventh of global greenhouse gas emissions and for the past twenty years, Indigenous communities have come up as progressively influential figures in attempts to devote effort to this increasingly prevalent issue (Blackman & Veit, 2018). Research establishes that with a considerably smaller budget the conservation results of Indigenous communities amount to the results achieved by government – run protected lands (Nerger, 2021). Contemporary research showcases that Indigenous communities managing the land have a legal title on aid in preventing carbon and forest emissions. Moreover, it is indicated that inside legally recognized Indigenous communities (ICs), the rates of deforestation are lower than outside. For instance, between 2000 and 2012, inside the Brazilian Amazon’s IC’s deforestation rates were seven times lower than rates outside (Blackman & Veit, 2018). Contributing to previous examples, Nolte et al. (2013) established within the period between 2000 and 2005, especially in areas with high deforestation pressure, several Indigenous communities in Brazil prevented substantial deforestation (Nolte et al., 2013). In addition, the study by Blackman & Veit (2018) concludes that Indigenous communities managed in Brazil, Bolivia and Colombia to cut down on forest carbon emission and deforestation, therefore, being drivers in the action against climate change.
In addition, relating to the issue of carbon emissions, territories owned collectively by IC’s in Brazil, Bolivia and Colombia, averted between 42.8 and 59.7 million metric tons (MtC) of CO2 emissions each year, which is comparable to removing between 9 and 12.6 million vehicles for one year. Moreover, concurring with a FAO/FILAC report, the costs of securing Indigenous lands are substantially lower than the regular cost of avoiding CO2 through storage for gas and coal fired power plants and fossil carbon capture. Furthermore, Indigenous communities and tribal peoples have proven to be priceless agents against climate change with their continuous action for protecting biodiversity. Brazil’s Indigenous territories harbor more species of reptiles, birds, amphibians and mammals than all protected areas outside these lands in the country (Food and Agriculture Organization of the United Nations, 2021).
Following from previous arguments, it is necessary for governments and organisations to support and sustain opportunities for local practices to be protected. The Indigenous systems of the aforementioned communities for agricultural and forest management are recognized for possessing profound expertise of biodiversity, fire management, and ecological processes. Results show that local practices based on Indigenous philosophy and wisdom can lead to promoting natural regeneration of forest areas. Traditional knowledge has been proved helpful for forest succession management, reforestation, preserving agricultural productivity, soil recovery, resistance to fires, and maintaining cultivation practices (Schmidt et. al, 2021).
In sum, the carbon credits market has proven to be successful in some regions of the world. Especially in Europe, the establishment of the market and the cap-and-trade system have been impactful for the emission and the environment. The problem with the carbon credits system is that it has to be implemented globally to be effective. For this to become reality, many steps have to be taken. The lesson from other cases where a market is established between (industrial, financial, or corporate) buyers of credits and sellers of credits, is that regulation by a government was necessary. The initiative by the Brazilian state to introduce Bill 528/2021 is an important step in the right direction. The implementation of the carbon credits market has been tested in the past through the REDD+-projects, which gives hope for the future. Therefore, the question is not if Indigenous communities should engage in carbon credit market systems, but how.
- Bayer, P. & M. Aklin (2020) ‘The European Union Emissions Trading System reduced CO2 emissions despite low prices’ PMC 117: 8661. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7183178/
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- Blackman, A., & Veit, P. (2018). d Amazon indigenous communities cut forest carbon emissions. Ecological Economics, 153, 56-67.
- Brazilian House of Representatives. (2021). Projeto de Lei 528/2021, de 23 de fevereiro de 2021. https://www.camara.leg.br/proposicoesWeb/prop_mostrarintegra?codteor=1965628
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- Gerretsen, I. (2021) ‘ How trading CO2 could save the climate’ BBC October 19th, 2021. https://www.bbc.com/future/article/20211018-climate-change-what-is-the-global-carbon-market
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- Nerger, M. (2021, 16 juli). The World’s Best Forest Guardians: Indigenous Peoples. Rainforest Alliance. Accessed on 25 October 2021. Retrieved from: https://www.rainforest-alliance.org/insights/indigenous-peoples-the-best-forest-guardians/
- Nolte, C., Agrawal, A., Silvius, K. M., & Soares-Filho, B. S. (2013). Governance regime and location influence avoided deforestation success of protected areas in the Brazilian Amazon. Proceedings of the National Academy of Sciences, 110(13), 4956-4961.
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- Wenzel, F. (2021) ‘Inação do governo provoca boom no mercado voluntário de créditos de carbono’ Mongabay. https://news.mongabay.com/2021/09/indigenous-land-in-the-brazilian-amazon-is-a-brake-on-deforestation-and-may-start-generating-carbon-credits/
- Zanon, S. (2021) ‘Indigenous Land in the Brazilian Amazon is a brake on deforestation and may start generating carbon credits’ Mongabay. https://news.mongabay.com/2021/09/indigenous-land-in-the-brazilian-amazon-is-a-brake-on-deforestation-and-may-start-generating-carbon-credits/