65866 CaRBon RIghts In BRazIl a Case study by thiago Chagas Carbon Rights in Brazil I Key Points Legislation on REDD+ is currently under development in Brazil. This clarifies which types of activities are eligible for REDD+, creates a committee to oversee REDD+ implementation and creates different types of REDD+ credits for fund and market based REDD+ systems. Key issues relevant to indigenous peoples include: • Ownership of CREDDs (the tradable REDD+ credits) would likely follow the ownership of the land and forest. • The Bill explicitly mentions some participatory rights and benefit-sharing rules to protect the rights of indigenous peoples, traditional communities and small rural producers, including the observation of the principle of prior and informed consent. • The Bill makes progress by announcing the creation of a dedicated dispute settlement procedure for REDD activities which re-affirms traditional communities’ rights to participation in accordance with international agreements ratified by Brazil, and introduces specific provisions to deal with areas occupied by traditional communities and indigenous peoples which are not yet formally recognized by the federal government as such. Despite these developments there is still some debate as to whether indigenous peoples can autonomously engage in, and benefit from REDD+ in Brazil. Whilst the proposed REDD Bill recognizes the rights of traditional communities, there are still some concerns that it cannot really guarantee that they will be the beneficiaries of REDD initiatives. THE WORLD BANK II Carbon Rights in Brazil The findings, interpretations, and conclusions expressed herein are those of the author(s), and do not necessarily reflect the views of the funders. Supporting research for this document was carried out from July to October 2010. Cover photo by Julio Pantoja Background In the absence of particular legal treatment, general provisions of constitutional and civil Brazil does not have a national law that law are applied to define initial ownership of specifically addresses the legal nature and these credits or rights. The Brazilian Civil Code ownership of carbon credits or rights to states that the ownership right shall include greenhouse gas (GHG) emission reductions the right to use, dispose of , and legally defend and/or removals. It is however expected the property against unlawful possession. The that the implementation of the Brazilian Civil Code further states that the accessories or Climate Change Policy, which promotes the products derived from “a thing� belong to the development of an organized Brazilian carbon owner of that thing unless stipulated otherwise market overseen by the Brazilian Securities and by specific rule or contract (e.g., the rights to Exchange Commission, will lead to an eventual accessories and products may be transferred via clarification of the precise nature and ownership usufruct, lease or the grant of surface rights). of tradable carbon rights. As a general rule this implies that the right to Some legislation at state-level already exploit GHG benefits associated with a certain refers to rights derived from measures that activity rests with the owner (or rightful holder) reduce or remove GHG emissions, but stops of the physical asset or process that generates short of clearly stating how these rights to emission reductions are to be treated outside the governmental programs they create. For Box 1 instance the Amazonas State Climate Change the legal nature of emissions reductions Policy establishes the general legal framework and carbon credits in Brazil for promoting carbon offset projects and Legislative proposals already introduced in the Brazilian Lower House payments for ecosystem services within land in 2007 attempted to bring some clarity over the legal nature of owned by the State, and assigns the rights to emission reductions and carbon credits. These bills of law equated exploit environmental products and services certified emission reductions (CERs) from the Clean Development (implicitly including carbon rights) to a public- Mechanism to securities for tax and financial regulation purposes, private institution created for this purpose.1 making CER transactions subject to the oversight of the Brazilian Securities and Exchange Commission. However, this position has been criticised by the Brazilian Securities and Exchange Commission 1 See Law 3.135 of 5 June 2007 establishing the Amazonas as being ill-suited for CERs. Arguments for this included the clear State Climate Change, Conservation and Sustainable Development Policy, article 14, and Law 3.184 of 13 distinction between a CER and a derivative and the fact that November 2007. The latter provides for an ‘onerous investors and project developers would gain little or no additional assignment’ of the rights to exploit environmental services regulatory certainty from such characterization. Additional debate and products from the State to a private foundation, Fundação Amazonas Sustentável. With respect to other over ownership of CERs has been triggered under the Brazilian state-level initiatives and carbon rights, see also Sao Paulo alternative renewable energy program (Proinfa), where a Federal State Decree further regulating Law 13.798 of 9 November Decree regulating the program assigned the rights to revenues 2009 establishing the State Climate Change Policy, article 32, available at: http://www.saopaulo.sp.gov.br/spnoticias/ from the sale of CERs from projects subsidized by the Proinfa to lenoticia.php?id=210829 Eletrobrás (Brazil’s chief public energy utility). Carbon Rights in Brazil 1 the climate benefit. In the specific context of via the filing of the relevant legal instruments forest-related credits there is a presumption that with the competent real estate registry that serves any GHG rights are initially held by those that as a depository of all relevant information related either directly own the forest resource or are to land (including ownership and any other entitled to exercise certain powers of ownership securities or property interests that may fall upon over the forest resource. the land or real estate). When the transfer of land and/or real estate property is not given publicity via the recording of the transaction with the Rights to land and forest appropriate real estate registry, such transfer can only generate inter-personal rights (i.e., While the Brazilian Federal Constitution rights and obligations as established between clearly embraces the right to private property the contracting parties) and will not allow for and ownership, it also defines its limits by full legal protection against third-party interests. asserting the principle of “social destination� According to the Brazilian Civil Code, whoever of the property (Brazilian Civil Code). For rural owns the soil is also presumed to own the sub- properties, the social destination principle soil,3 the surface and forest resources above embodies the surface.4 Ownership of forest may however 1. rational and adequate use (including of be separated from the ownership of the land natural resources); through contractual arrangements (e.g., lease 2. preservation of the environment; and agreements, concession of usufruct and surface rights). 3. compliance with labour laws and provisions The Brazilian Forest Code, a federal law on workers’ welfare. regulating the use of forests in the national In addition, the Constitution explicitly elevates territory, defines forests as ‘common-interest’ key biomes in Brazil (such as the Amazon Rain resources which can be privately owned Forest and the Atlantic Forest) to the category provided the relevant norms in the Forest Code of ‘national heritage’, imposing on both society and elsewhere are observed. This includes, and the State the obligation to preserve and for instance, restrictions on the exploitation of the right to use the natural resources contained forest resources in legal reserve and permanent therein.2 preservation areas (see Box 2), and in land Acquisition of land in Brazil is made effective occupied by indigenous communities. In 3The sub-soil does not extend to minerals and fossil fuel 2 See Federal Constitution, article 225. The right to use natural resources has to be exercised within the limits deposits that are owned by the state. Landowners can, and principles established in the Constitution. However, however, use certain minerals found in the immediate this right can clash with the obligation to preserve. This is subsoil for e.g. construction. mostly seen through controversial debates surrounding the 4 The ownership right does not include however rights implementation of large infrastructure projects such as large to the mineral and water resources in the sub-soil. See hydropower projects. Brazilian Civil Code, article 1230. 2 Carbon Rights in Brazil addition, the use of private (primary) forests Box 2 is conditioned on the issuance of specific Forest management requirements in legal environmental authorization or permits by reserves and permanent preservation areas the relevant governmental authority, and The legal reserve is an area located within rural properties the adoption of adequate forest management set aside for the purposes of conservation and sustainable techniques (Forest Code). use of natural resources. The portion of the rural property Forests located in public lands are deemed that must be set aside as legal reserve varies from 20% to public forests and their management by private 80%, depending on where the property is located. Permanent entities is subject to a specific public concession preservation areas, in turn, are areas explicitly defined by regime (Antoani 2005). The rights to forest law where exploitation of forest resources may only occur in cases of declared public interest. These include, for instance, resources under the concession regime are riparian areas, areas sustaining endangered fauna and flora, confined to those expressly foreseen in the and summits of hills or mountains. Note, however, that concession agreement and exclude, among changes to the Brazilian Forest Code are currently being others, the right to trade or market carbon debated in the Congress. Modifications being discussed credits that may be derived from avoided include a potential decrease of permanent preservation deforestation activities.5 areas adjacent to river banks, withdrawal of the obligation to maintain a minimum forest set aside for small landowners, and the concession of amnesty to rural producers who have illegally deforested their lands prior to the enactment of the Indigenous lands new law. Lands traditionally occupied by indigenous peoples are deemed public lands. These natural resources present in the soil, rivers and lands are, by virtue of constitutional rights, lakes (and its products and accessories) and inalienable (Federal Constitution, article to benefit from the proceeds of such use and/ 231). Indigenous communities have exclusive or exploitation. An expansive interpretation usufruct of the land in which they reside, while of these provisions would endow indigenous the Federal Government retains the right to peoples with rights to carbon sequestered intervene in such areas for reasons of recognized in their lands, a position defended by some national interest (e.g. sovereignty protection, legal practitioners in Brazil and thus far not national development and exploitation of challenged by the Federal Government (see box mineral resources) (Federal Constitution, article 3) (Federal Constitution, article 231 and Law 231 and Law 6.001, article 24). 6.001, article 24). The exclusive land usufruct by indigenous peoples includes the right to use and exploit REDD specific legislation 5 See Law 11.284 of 2 March 2006, article 16. While the law refers to “carbon credits�, the law fails to define what carbon Brazil is discussing the implementation of a credits are. It may, however, allow for the commercialization of carbon credits related to reforestation activities. national system to promote efforts to reduce Carbon Rights in Brazil 3 Box 3 a national REDD system and defines some Can indigenous peoples autonomously basic rules on eligibility and approval of REDD engage in REDD+? activities in Brazil.7 This bill has been revised, and the most Some studies concerning the rights of indigenous peoples and forestry projects have emphasized that the exclusive usufruct recent and more detailed version of the bill (the enjoyed by indigenous peoples can be equated to a de facto REDD Bill) provides a more comprehensive ownership of the land and its resources. While originally belonging regulatory framework by addressing some to the state, indigenous lands are subject to a very confined use of the key aspects which were left out in the regime and their exploitation by public authorities is limited to original version. The REDD Bill clarifies that very special circumstances prescribed in law. Hence, indigenous REDD activities shall encompass conservation peoples would be the de facto owners of the forest and other natural measures, sustainable management of forests resources found in indigenous lands, including any rights that may be derived from carbon sequestered and removed. There is however and enhancement of carbon stocks (jointly still some debate as to whether indigenous peoples would have REDD+) and also foresees the creation of a autonomous legal capacity to negotiate and conclude carbon-related committee to oversee and further regulate the agreements and to what extent they would need to be assisted by implementation of REDD+ activities. the State for participating in REDD+ projects (Telles do Valle, 2009). The REDD Bill also proposes the creation In this context, it is important to note that the REDD Bill currently of two different types of REDD units as a way being discussed in the Brazilian Congress (see below) requires the mandatory participation of a public entity responsible for promoting to address the dichotomy between market and and protecting the rights of indigenous peoples in Brazil whenever non-market based funding. A general category indigenous lands are used for hosting REDD+ initiatives. of REDD units, known as UREDD, entitles holders to receive benefits from national and international funding other than market-based emissions from deforestation and forest (i.e. national and international funding in the degradation (REDD) via the use of both public form of grants). UREDDs would be non-tradable funding and market-based mechanisms.6 Bill registerable units each representing one tonne of law 5.586/2009, currently making its ways of verified emission reductions or removals through the Brazilian Lower House, establishes from eligible REDD+ activities. A share of UREDDs could potentially qualify to generate 6 Note that after heavy lobbying of some Amazon states, certified REDD units (“CREDDs�), which are the Federal Government seems to be gradually re-visiting defined as tradable intangible rights. In contrast its position towards the use of market incentives and offsetting strategies for REDD. A task force to discuss to UREDDs, CREDDs can be used as offsets for financing options for REDD (known as “Task Force on REDD compliance both domestically (in the event of and Climate Change�) created by a joint effort of the nine Amazon region States (and with support from the Federal Government) announced that consensus is emerging that 7 Available at http://www.camara.gov.br/sileg/Prop_Detalhe. Brazil should support at least three forms of funding for asp?id=441407. This original (and shorter) version of REDD: (i) direct public sector funding; (ii) market-linked this bill, proposed by Congresswoman Lupercio Ramos, funding without the creation of tradable carbon units; and explicitly defined REDD units as a security. This definition (iii) carbon market funding with the creation of tradable however has been dropped in the newer and more carbon units. comprehensive draft of the bill. 4 Carbon Rights in Brazil “Brazil is discussing the implementation of a national system to promote efforts to reduce emissions from deforestation and future state and municipal targets), as well as internationally (e.g. under foreign emissions forest degradation (REDD) trading programs or to assist in the achievement via the use of both public of a country’s GHG reduction commitments under the UNFCCC). A REDD committee would funding and market-based be responsible for determining the quantitative mechanisms.� and qualitative criteria for the generation of CREDDs.8 Although not specified, ownership of CREDDs would likely follow the ownership of the land and forest. CREDDs could be received with the project must be applied in transferred through contractual arrangements the area of the project in a way that prioritizes and title would be recorded via registration with actions of protection and of sustainable a Brazilian REDD registry system. Importantly, development, with an emphasis on beneficiary the Bill seems to treat the rights and obligations residents and neighboring beneficiaries� associated with REDD+ in a similar way to (REDD+ Bill, article 12). For REDD projects real property rights by determining that the developed in private lands, however, the Bill link between the REDD activity and land shall simply states that benefit-sharing arrangements be maintained, regardless of the changes in should be made with local communities ownership of the land. This means that a new when these communities have contributed owner of the land would become responsible to the REDD efforts. This has already raised for taking forward the REDD activities on the some concerns from environmental and social acquired land. NGOs, because whilst the proposed REDD Bill In addition, the REDD Bill explicitly recognizes the rights of traditional communities, mentions some participatory rights and benefit- it cannot really guarantee that they will be the sharing rules to protect the rights of indigenous beneficiaries of REDD initiatives.9 While it peoples, traditional communities and small is true that the current Brazilian land tenure rural producers, including the observation of situation in the Amazon region coupled with the principle of prior and informed consent. For the government’s relatively weak enforcement activities carried out in conservation units and capabilities make this a real risk, the recently indigenous lands, “at least 70% of the resources 9 See news piece available at http://www.socioambiental. 8 Article 8 of the REDD+ Bill already advances two org/nsa/detalhe?id=3143 (accessed on 18 August 2010). conditions for the creation of CREDDs: (i) that the overall Note that a previous version of the substitutive stated that, rate of deforestation and forest degradation in the country in case of REDD+ projects developed in private lands, at is actually reducing; and (ii) in the event of a CREDD being least “10% of the resources gained with the project must be used as an offset to emissions of a foreign country, such directed to neighbouring beneficiaries, in accordance with country has put in place comparable GHG mitigation efforts. the programs and actions of sustainable development.� Carbon Rights in Brazil 5 Photo by Julio Pantoja published version of the REDD Bill makes groundwork for further regulation of key material progress in the protection of indigenous aspects associated with the development peoples and traditional communities by and operation of REDD projects or programs. announcing the creation of a dedicated dispute Note that the REDD Bill is, at the time of settlement procedure for REDD activities. This writing, under debate at the environment and re-affirms traditional communities’ rights to sustainable development commission and still participation in accordance with international has to undergo assessment by other relevant agreements ratified by Brazil, and introduces commissions and wider consultation with civil specific provisions to deal with areas occupied society and the private sector. by traditional communities and indigenous peoples which are not yet formally recognized by the federal government as such. Conclusions Overall, the proposed REDD Bill is a REDD specific regulations are being designed step forward in the regulation of carbon in several states in Brazil. There is increasing forest activities in Brazil. It allows for support for promoting a regulatory system some harmonization among federal, state that acknowledges and rewards REDD actions and municipal levels10 and establishes the not only at the national, but also at the 10 Apart from the state of Amazonas, which has already subnational and jurisdictional levels. While established procedures for supporting REDD+ activities in public lands, other states such as Mato Grosso, Acre and state and municipal level legislative initiatives Para are also considering enacting specific legal frameworks provide some assurance and guidance for for REDD+. 6 Carbon Rights in Brazil local project developers and traditional References communities participating in REDD activities, Antoani, F., 2005. Gestão Florestal na Amazônia the introduction of a specific federal legislation, Brasileira – avanços e obstáculos em um sistema as currently being discussed in the REDD Bill, federalista. CIFOR and CIID/IDRC (2006), citing Ferreira would set the general legal framework and bring and Almeida, “O Desmatamento na Amazônia e a clarity to several aspects related REDD. These Importancia das areas protegidas�, Estudos Avançados, 9 (53) include issues such as eligible areas and actors, benefit-sharing arrangements, responsibilities Tackacs, D., Forest Carbon – Law + Property Rights, of project proponents, re-affirmation of the Conservation International. rights of indigenous peoples and traditional Telles do Valle, R., and Yamada, E., 2009. Brasil: communities, legal treatment of REDD activities Titularidade Indígena sobre Créditos de Carbono in the event of transfer of land and land tenure gerados por Atividades Florestais em Terras Indígenas, available at www.socioambiental.org (last accessed on disputes, and allocation of carbon credits 20 July 2010). and rights to REDD payments. A common federal guidance on these issues is key to the promotion of an environment conducive to the legislation implementation of REDD and would help filling the legal vacuum in relation to who may exploit Brazilian Civil Code, articles 1228-1232. Brazil, Law 10.406 (10January 2002), articles 1228-1232, available the benefits associated with GHG reductions at http://www.planalto.gov.br/ccivil_03/Leis/2002/ and removals achieved through REDD. L10406.htm. Federal Constitution, articles 225 and 231. Brazil, Federal Constitution (1988), articles 225 and 231, available at http://www.planalto.gov.br/ccivil_03/ Constituicao/Constituicao.htm. Forest Code, articles 2-5, 16 and 19. Brazil, Law 4.771 (16 September 1965), articles 2-5, 16 and 19, available at http://www.planalto.gov.br/ccivil_03/Leis/L4771. htm. Law 3.135, article 14. 2007. Amazonas, Law 3.135 (5 June 2007), article 24, available at http://www. fmc.am.gov.br/docs/LEI_3135_05_2007_CLIMA_ assinatura.pdf. Law 3.184. 2007 Amazonas, Law 3.184 (13 November 2007), article 8, available at http://www. sefaz.am.gov.br/areas/opcaosistemas/silt/normas/ legisla%E7%E3o%20estadual/Lei%20Estadual/ Ano%202007/Arquivo/LE%203184%2007.htm. Carbon Rights in Brazil 7 Law 6.001, article 24. 1973. Brazil, Law 6.001 (19 December1973), article 24, available at http://www. planalto.gov.br/ccivil_03/Leis/L6001.htm. Law 11.284 article 15. 2006. Brazil, Law 11.284 (2 March 2006), article 16, available at http://www. planalto.gov.br/ccivil_03/_Ato2004-2006/2006/Lei/ L11284.htm. Brazil, Law 12.187 (29 December 2009), article 9, available at http://www.planalto.gov.br/ccivil_03/_ Ato2007-2010/2009/Lei/L12187.htm. REDD+ Bill, Article 8 and 12. Brazil, Bill of Law 5.586 (2009), Article 8 and 12, available at http://www. camara.gov.br/sileg/integras/791239.pdf. Sao Paulo State Decree. 2009. Sao Paulo, Decree 55.947 (24 June 2010), available at http://www. ambiente.sp.gov.br/pemc/decreto_55947_2010.pdf. Carbon Rights in Brazil 9 THE WORLD BANK 1818 H Street, NW Washington, D.C. 20433 USA Telephone: (202) 473-1000 Internet: www.worldbank.org/sdcc 10 Carbon Rights in Brazil Email: socialdevelopment@worldbank.org.