Can communities truly benefit from carbon credit projects?

In a peatland in Indonesia, an illegal wildlife poacher turned into a biodiversity officer when he became aware of the devastating impacts of deforestation, which has pushed certain animal species to the edge of extinction.

This was one of the success stories shared by Yani Saloh, a Community Specialist for Southeast Asia at Permian Global - a reforestation business, at the Innovate4Climate conference in Bilbao, Spain in late May. 

Speakers at the conference discussed a new trend has emerged where private businesses are initiating long-term projects in rural areas that actively involve local communities and generate carbon credits. These projects operate within the voluntary carbon markets, with the intention of empowering these communities by creating additional income streams and promoting sustainable living practices.

Carbon credit trading allows individuals and companies to participate in the exchange of verified and quantified emissions allowances of greenhouse gases. These credits are issued when efforts are made to sequester, reduce or avoid greenhouse gas emissions.

Carbon credit trading occurs primarily in two distinct markets: compliance trading and voluntary trading. Compliance trading is subject to government regulations and enforcement, while voluntary trading operates on a voluntary basis without a government mandate.

Communication conflicts

One of the biggest challenges facing these companies, experts at speakers at panel said, involves communication with local communities or indigenous people. 

According to Elisa Lopez Garciz, Blue Carbon Manager at EcoAct Climate Consultancy who spoke at the panel, communities often have reservations about the concept of revenue generation and the market system in the context of carbon credits, and prefer to take control over the determination of the quantity or allocation of carbon credits. "If the [project] developer fails to design a specific scheme for a specific community, the safeguard might fall down," she said.

"It’s not a standard procedure to equal out [the income and carbon credits]. Some communities aren’t comfortable with a business plan. They might not understand how profitable it is," she added. 

Concerns regarding how beneficial these projects often stem from a failure to come to an agreement with local communities and obscurity as to how much greenhouse gases have been offset on the ground.

According to a report from the NGO Compensate, 90 percent of carbon offsetting projects utilising nature-based solutions do not meet sustainability criteria. The report assesses the projects based on their adherence to climate integrity, the well-being of local communities and biodiversity preservation.

Indigenous communities in the Amazon, for example, were said to be taken advantage of in the highly unregulated sector and the deals for carbon credits could be opaque. 

Currently, the estimated 476 million indigenous peoples worldwide make up only 6 percent of the global population, yet they conserve 80 percent of the planet's biodiversity. They are particularly vulnerable to the impacts of human-caused climate change, have a life expectancy of up to 20 years lower than the global average and suffer an poverty rate of one-in-five. 

Deepening our understanding of the traditional customs of local communities is essential, experts said at the panel. 

"[Projects] need a local context," Sandeep Roy Choudhury, Director at VNV Advisory Services, said. "There’s no common thread in deciding a controllable system that can be changed. You need to empower the communities [...] in social and economic inclusion."

Choudhury further highlighted the need for "low-tech" financial tools to effectively communicate with local communities. "Like making straws with coconut leaves to sell to Europe," he said as an example. "Indigenous people deserve to have a better life - better education, access to healthcare, services and economic activities. Given that land use is involved, projects need to be consented by local communities again and again because they are also for the next generation."

In Guyana, for instance, a carbon credits deal implemented through the REDD+ scheme was initially hailed as an empowerment opportunity for indigenous people and a step towards restoring climate justice. However, local communities have expressed doubts and raised concerns as they accused the government of failing to fulfill its promises of providing benefits after resources were extracted from their land.

The Public and private sectors’ roles

Governments’ roles in this sphere remained rather passive so far. A report from Rights and Resources found out that only three countries out of 17 relate carbon rights to land or forest ownership, while seven others have rather vague legal frameworks that recognise communities’ carbon rights.

When communication goes awry, such project developers should think twice before backing down, according to Oliver Forster, Vice President of Sales at Carbon Streaming. "Dissenting voices don’t mean the projects are completely wrong. We can look for good progress and make the judgement later."

Forster added that private investors should work collaboratively with local experts to understand communities’ needs and potential in implementing a voluntary carbon trading system. Rather than solely focusing on the framework, he argued, it is crucial to deeply understand the people involved and acknowledge that such projects are typically long-term investments spanning years, if not decades.

Choudhury agreed:" "The buy side needs to be more educated. If people treat carbon credits only as commodities, if you don’t spend time and effort to understand the projects you are investing in, it’s a problem. There will be a drought or a cyclone during the project, so you have to invest on the side as emergency fund."

"There’s social science behind climate science," Choudhury said.

Image by Annie Spratt.