The Looming Land Grab For Carbon Credits

Courtesy of The Financial Times, an article on how countries might soon be able to trade emission reductions with other governments, but experts warn the market is already being exploited in developing countries:

One day in late October, leaders from more than a dozen towns across Liberia’s Gbi-Doru rainforest crammed into a whitewashed, tin-roofed church.

They had gathered to hear for the first time about a deal signed by their national government proposing to give Blue Carbon, a private investment vehicle based thousands of miles away in Dubai, exclusive rights to develop carbon credits on land they claim as theirs. 

“None of them were aware of the Blue Carbon deal,” says Andrew Zeleman, who helps lead Liberia’s unions of foresters. 

Only two of the leaders were even remotely familiar with the concept of a carbon credit, he adds — the tradeable instrument that can be obtained when a tonne of carbon is removed from the atmosphere or avoided, for example because a forest has been planted, or protected from deforestation.

Blue Carbon, a private company whose founder and chair Sheikh Ahmed Dalmook al-Maktoum is a member of Dubai’s royal family, is in discussions to acquire management rights to millions of hectares of land in Africa. The scale is enormous: the negotiations involve potential deals for about a tenth of Liberia’s land mass, a fifth of Zimbabwe’s, and swaths of Kenya, Zambia and Tanzania.

Blue Carbon’s intention is to sell the emission reductions linked to forest conservation in these regions as carbon credits, under an unfinished international accounting framework for carbon markets being designed by the UN. In a market that is being designed for and by governments, Blue Carbon is among the most active private brokers.

Climate negotiators meeting in the United Arab Emirates for the COP28 summit this week have been looking to finalise this framework, with the aim of sounding the starting gun on a new market in carbon credits which would allow countries to shrink their own carbon footprints by buying emission reductions from others.

The trade is supposed to be simple. The 195 countries that have signed the 2015 Paris climate agreement committed to setting targets for reducing their carbon emissions by 2030. If a country exceeds these or future targets — for instance through switching to renewables, or reforesting territory that increases carbon stocks — it can sell those additional emission reductions to another country.

The UAE, alongside other governments such as Switzerland and South Korea, has been betting that these international carbon markets could be a central pillar in the climate solutions offered to world leaders at COP28.

The existing international market for carbon credits is worth about $2bn, with roughly four in 10 credits sold based on nature restoration projects. Private buyers, from companies to individuals, can buy offsets for their own emissions to meet their own reduction goals. Brokers similar to Blue Carbon obtain rights to buy and sell credits, taking a cut of their value.

Until recently, governments had steered clear of buying and selling directly into this market. But as targets to cut national emissions by 2030 speed into sight, importing carbon credits at scale has become increasingly attractive. And as plans for a national scheme have emerged, there has been a new rush for access to resources in countries rich in biodiversity.

South Korea, Switzerland, Japan, the UAE and Singapore are among the states to have struck 95 preliminary deals since the start of 2021 to buy future emission reductions from countries including Ghana, Vietnam and Senegal, according to data from MSCI carbon markets. 

A carbon credit boom could channel money towards poorer countries with smaller carbon footprints and higher financing needs, to help them address the effects of increasingly extreme weather and temperature changes.

But the scale and speed of dealmaking between countries over available land have sparked concern about a lack of guardrails around this system. 

Seller countries are not being given enough time to develop a natural resource strategy that would promote a fair trade in carbon credits, say community leaders and activists in the countries where Blue Carbon is active.

Key issues include revenue-sharing, land rights and the potential impact on the host countries’ ability to hit its own climate target. 

“The [methods] of exploitation might be new but the consequences are not so different to the last 200 years of land grabs in Liberia,” says David Young, an independent expert on civil society’s role in forest governance in the country. “The promises to the communities are vague and unpredictable and it’s like logging or mining or palm oil all over again.”

Scientists have also warned about the broader risk to the planet of giving big polluters a green light to continue pumping oil and gas based on purchases made from the existing unregulated market for credits.

And scientists including Thales West, of Vrije Universiteit Amsterdam’s Institute for Environmental Studies, have argued the market is underpinned by tenuous accounting standards, based on scenarios that overestimate both volumes of carbon removed from the atmosphere and the permanence of these removals. 

“We are fooling ourselves when we purchase these offsets,” West has said.

The race for deals

Carbon credits are part of the UAE’s official strategy to cut its national emissions by 2030, alongside other investments including in hydrogen gas and decarbonising steel production.

After the country pledged $450mn to help develop African carbon markets in September, Mohamed Ben Salem, who leads on voluntary carbon markets for the UAE’s presidency of the climate conference, announced in October the UAE would like to see a 50-fold increase in the size of this market globally.

“Voluntary carbon markets can drive real, on the ground effective climate action . . . with significant co-benefits to climate, local communities and nature,” he said at a conference in London. 

And reforestation is likely to be a central part of future carbon markets. A peer-reviewed study published in Nature journal last month estimated that 139 gigatonnes of carbon could be removed from the atmosphere by better protecting existing forested areas where relatively few people live or work.

This is more than six times the carbon that the UN’s environment programme has said needs to be cut from annual emissions by 2030 to limit global warming to 1.5C above pre-industrial levels.

For François Megret, head of carbon trading at First Abu Dhabi Bank — which is the UAE’s biggest lender, an official partner of the COP28 summit and a backer of Blue Carbon — carbon trading between states should start as soon as possible. “We don’t have 20 years and we don’t want to lose these two years or three years to activate something,” he said at the same conference.

But some of the earliest deals are being criticised for their lack of transparency and accountability. Liberia, unlike other countries approached by Blue Carbon, does not yet have a law governing the sale and taxation of carbon credits.

A copy of Blue Carbon’s memorandum of understanding with Liberia, dated July and seen by the Financial Times, proposed to give the Dubai-based company exclusive rights to generate and sell carbon credits on about 1mn hectares of Liberian land. It would receive 70 per cent of the value of the credits for the next three decades, and sell these tax-free for a decade. The government would receive the other 30 per cent, with some of this going to local communities. 

Community consultation was due to take place between August and November, according to the document. But Zeleman says that the local leaders he engages with on the land have still not been consulted about the deal.

Blue Carbon denies failing to consult with communities and says it will follow all government “laws, rules and regulations . . . once formal binding agreements are entered into”. It adds: “Blue Carbon is mindful of all community and human rights including land rights in Liberia.”

Some activists have heavily criticised the proposed deal. Allowing a foreign company to manage such a big portion of Liberian land would endanger the livelihoods and community land ownership of up to a million people, groups including the Rainforest Foundation UK, Friends of the Earth and Earthsight wrote in a letter earlier this year.

The government was “handing over decisions about how a substantial part of its carbon emissions for the next 30 years are to be managed [to] a UAE firm that has existed for less than a year, and which has no track record in carbon trading,” they said in the letter. 

No contract with Blue Carbon has yet been signed, says Wilson Tarpeh, head of Liberia’s Environmental Protection Agency, who flew to Dubai over the summer to discuss the proposal. Liberia’s government is working on developing a legal framework for carbon developers that highlights “carbon belongs to the state”, he says, and is also consulting with civil society on the Blue Carbon project. “We value their position.” 

Tarpeh estimates that Liberia had 2bn tonnes of carbon dioxide locked into its forest, absorbed through photosynthesis. “The size of the carbon stock is huge, so anybody will be tempted to sell our carbon,” he says. “But it has to be a rules-based system. It’s not like buying a candy bar.” 

Other countries approached by Blue Carbon have been in a stronger position to respond.

The foreign and environment ministers of South America’s Suriname, another small country almost entirely covered in tropical forest, received a similar offer to that of Liberia when they flew out for pitch meetings with al-Maktoum in Blue Carbon’s offices in the Burj Al Salam skyscraper in Dubai in August. 

Suriname’s gross domestic product per capita is about 10 times greater than Liberia’s and its government has more than a decade of experience engaging with financing mechanisms for emission reduction, including under the UN’s ill-fated Clean Development Mechanism, which had its roots in the 1997 Kyoto protocol eventually superseded by the Paris agreement. 

So the ministers were better able to push back against Blue Carbon’s initial proposal to take a significant cut of future carbon credit revenues, according to an adviser to Suriname on the deal who asked not to be named. Panellists at COP28 in Dubai. 

A person close to Suriname’s environment ministry confirmed that it was still considering Blue Carbon’s latest updated offer, alongside other offers for its 4.8mn credits tied to national deforestation reduction.

But such offers can be hard to turn down. “[Blue Carbon’s] pitch is that they have untold wealth from the royal family,” the adviser says, a powerful incentive for poorer countries looking to insure themselves against volatility in carbon pricing. 

Approached by the FT about its offers to Suriname, Blue Carbon said it wanted to investigate “these false allegations”, but did not specify details. 

Other countries have moved to put protections around their arrangements. In Tanzania, a tough taxation regime for carbon credit trading came into force shortly before Blue Carbon signed a memorandum of understanding for future development of 8mn hectares of forest in February with the country’s forestry agency. Local authorities receive 61 per cent of revenues from carbon credit sales.

Blue Carbon has not said what proportion of the credits it develops in Liberia, Kenya and elsewhere it would sell to the UAE versus selling these on to other countries, or potentially other companies. The investment vehicle told the FT it expects a “diverse customer and buyer base”, and operated separately to the government.

‘It’s about climate justice’

As negotiators from each country present at COP28 battle over how best to strengthen the framework for governments to trade carbon credits, one priority is to avoid repeating mistakes made by corporate buyers and sellers on issues of accounting and human rights.

Dirk Forrester, head of the International Emissions Trading Association, representing carbon traders and developers, says developing countries are losing investment because of a slowdown in appetite for carbon credits in voluntary markets. “It’s like someone hit the great reset button in the sky . . . and [the pull back] appears to be slowing climate action rather than accelerating it.” 

In particular, scientists have pointed to several flaws in the idea of issuing credits to reward a developer for protecting a forest from hypothetical future deforestation, as Blue Carbon is expected to do.

Verra, the largest accreditation body for voluntary credits, has denied claims that it over-credited projects based on inflated projections of future deforestation. But at the same time it says it is rethinking its methodology for forest-based credits. The UN supervisory bodies tasked with rewriting the rules for the international carbon credit market hope negotiators at the summit convene on a common standard.

“I think there is no moral justification for independent standards to exist,” Olga Gassan-zade, head of one of the bodies, told the FT before the start of the summit. She hopes the UN’s mechanisms would one day eclipse the private sector approval systems for credits that have been tarnished by controversies in the past year. “We are able to move forward on nature-based [credits] and learn from their mistakes.”

Under the UN’s nascent system, governments must cancel out any emission reductions sold within their borders by inflating their own carbon footprint, to avoid double counting between countries. This could boost public confidence in the stated climate benefit of carbon credits, analysts say. But it would also heighten political risk for foreign developers of carbon credits, because each credit sold makes it harder for a government to hit its own climate target.

No matter the fairness of the terms, poorer countries will continue to be attracted to carbon credit deals because of the scarcity of other financing to help pay for the effects of climate change, argues Gilles Dufrasne, a policy lead at the non-profit Carbon Market Watch.

“Richer countries have not delivered the climate finance [developing countries] need so they are turning to what they can access . . . and the only system that seems mainstream and hyped at the moment is carbon credits.”

In defining what counts as a carbon credit and who should profit from them, the stakes are high. Honduras has already deployed a tenth of its standing army to protect its forest stock and to boost its chances of selling deforestation reduction credits to richer countries in future.

“It’s about climate justice”, says Lucky Medina, the country’s minister for natural resources and the environment. “The vision is that the money [from carbon credits] is for the countries, not individuals . . . in a sovereign market, the carbon cowboys or brokers should not exist.”

This entry was posted on Sunday, December 10th, 2023 at 2:09 pm and is filed under Uncategorized.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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Seeds Of A Revolution is committed to defining the disruptive geopolitics of the global Farms Race.  Due to the convergence of a growing world population, increased water scarcity, and a decrease in arable land & nutrient-rich soil, a spike of international investment interest in agricultural is inevitable and apt to bring a heretofore domestic industry into a truly global realm.  Whether this transition involves global land leases or acquisitions, the fundamental need for food & the protectionist feelings this need can give rise to is highly likely to cause such transactions to move quickly into the geopolitical realm.  It is this disruptive change, and the potential for a global farms race, that Seeds Of A Revolution tracks, analyzes, and forecasts.

Educated at Yale University (Bachelor of Arts - History) and Harvard (Master in Public Policy - International Development), Monty Simus has long held a keen interest in natural resource policy and the geopolitical implications of anticipated stresses in the areas of freshwater scarcity, biodiversity reserves & parks, and farm land.  Monty has lived, worked, and traveled in more than forty countries spanning Africa, China, western Europe, the Middle East, South America, and Southeast & Central Asia, and his personal interests comprise economic development, policy, investment, technology, natural resources, and the environment, with a particular focus on globalization’s impact upon these subject areas.  Monty writes about freshwater scarcity issues at and frontier investment markets at