Posted: July 17, 2023

A Primer on Carbon Rights and Local Stakeholders

The voluntary carbon market's (VCM’s) existence shows how we place value on greenhouse gas mitigation. People are increasingly willing to pay a lot of money for it, which is great news for the fight against climate change.

But how do we determine who benefits from that value?

That depends on something called ‘carbon rights.’

What Are Carbon Rights?

Basically, holding carbon rights means having the right to benefit from mitigating that carbon.

That’s not the same as having a carbon credit, but they’re related. The right to benefit from emissions removals includes the right to benefit from the trade or sale of the carbon credits they generate.

How Do You Get Carbon Rights?

Generally, carbon emission rights flow from:

  • Legal control of the activity that reduces or removes emissions (like a VCM project); or
  • Legal control of the underlying asset (like land, a forest, or other carbon-busting infrastructure).

In the first case, you have carbon rights because you own the thing that’s happening. Specifically, you must show you “enable and control” the mitigation activity. Who might claim such rights, and for what?

  • Project Developers and Financiers, who provide services, finance, or technology
  • Local communities, who actively participate in the mitigation activities
  • Governments, via their regulatory power

With technology-based (non-nature-based) projects, most carbon rights are based on control of the activity. With nature-based projects (NbS), project developers often undertake mitigation activities on land they don’t own, in return for all or a portion of the carbon rights.

In the second case, you have carbon rights because you own where that thing is happening. So you’d need to demonstrate property rights or entitlements — ownership, management, access, or other use rights — over the asset that underpins the whole mitigation operation.

This is where things can get tricky, especially with NbS, if:

  • Whoever’s controlling the asset isn't the same as the whoever’s controlling the activity
  • Land titles and forest tenure are unclear, uncertain, otherwise weak, or entirely absent
  • Carbon rights related to land become highly contested, or even politically charged

It can be intense, but there are helpful tools. Certainly, secure and clear land tenure makes assigning rights easier. Even when that’s difficult, the best projects will include robust and transparent benefit sharing agreements.

Benefit sharing simply means that the proceeds from the commercialization of carbon credits is allocated fairly to all local stakeholders involved in a carbon project.

Why Local Stakeholders Matter

Involving local stakeholders can be vital to a project’s success, especially with NbS — so much so that some of the most important stakeholders get their own acronym: IPLC, which stands for Indigenous Peoples and Local Communities.

Globally, IPCLs are often managers — either formally, or by custom or ancestry — of large landscapes and forest areas. These are often territories that exhibit some of the highest rates of carbon storage and biodiversity.

Unfortunately, many countries fail to recognize the rights of IPLCs, even though such recognition has been shown to reduce emissions and make for healthier forests. Keep in mind, some 36% of the world’s intact forest ecosystems are on Indigenous Peoples’ land.

The full and equitable participation of IPLCs is critical to the success of any VCM project that takes place on their land. There are a few ways that can happen:

  • IPLCs can directly engage in the development of projects on their territories. Often in cooperation with NGOs or the private sector, they can determine a project’s design, implementation, and terms.
  • IPLCs can choose to enter into benefit sharing agreements with those proposing the project. Any high-quality (there’s that term again) project will include transparent benefit sharing agreements with IPLCs and other local stakeholders.

Here’s the bottom line: potential rights of IPLCs over land, resources, or carbon must be considered from the very beginning.

It’s not just a nice-to-have. For any projects that engage or impact IPLCs, the carbon standards will require that those communities be consulted at every stage of a project's development.

There’s more: project proponents must be able to demonstrate compliance with the right to Free, Prior and Informed Consent (FPIC), as required by the UN Declaration on the Rights of Indigenous Peoples. FPIC gives Indigenous Peoples the right to grant or withhold consent to projects that will impact them or their territories.

But far from being a burden, that’s an opportunity to make a better project. Through effective engagement — investing sufficient time and resources to build trust with local communities — VCM projects can strengthen the position of IPLCs in maintaining land and resource rights and, often as a result, countering the degradation of their ecosystems.

So when we say ‘Driving capital back to nature,’ we also mean driving capital, or other benefits, back to the people who’ve been the stewards of those natural ecosystems for decades or even centuries.

That kind of participatory approach can ensure a project’s quality and maximize its climate and social benefits — a win-win for those communities, and for the planet.

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