Forest Carbon: Law and Property Rights (November 2009)

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From the Executive Summary:

Investments in reforestation and reducing emissions from deforestation and degradation
(REDD) have the potential to mitigate greenhouse gas accumulation; sustain ecosystem
services that support human and ecological communities; and generate sustainable livelihoods
for poor, forest-dependent people.  But as a new form of property, forest carbon presents legal
complications that no jurisdiction has completely untangled.  

This guide is designed to help community members, government leaders, lawyers, treaty
negotiators, NGO advocates, and carbon investors understand forest carbon as property in
order to support and develop sustainable forest carbon projects.  In this report, sustainable
projects are defined as being: 1) effective, i.e. they work without complication and deliver and
maintain the desired carbon benefits over the long term; 2) synergistic, i.e. they maximize
benefits for local communities, biodiversity, climate, and investors; and 3) equitable, i.e. benefits
are fairly and equitably shared among the various parties (stakeholders) with special attention
paid to the poor and marginalized. The report stresses that equitable forest carbon investments
are not only ethically preferable but will also result in projects that are more sustainable and
financially prudent.  

To do legal due diligence, forest carbon project stakeholders should understand:

*Whether they are working in a common law or civil law jurisdiction.
*What, precisely, is the property being owned.  Carbon properties may take the form of
sequestered carbon; carbon sinks (with different legal rights and responsibilities
potentially attaching to land above ground, land below ground, and trees); carbon
sequestration potential, which should include the right to manage the carbon sink to
maximize this; and carbon credits generated from the project.
*Any usufruct property rights (e.g. easements, leases, concessions, profits a prendre)
that may either enable the project, or interfere with successful carbon sequestration.
*Who may own which property rights in carbon.  Government may reserve certain carbon
property rights for itself.  Private citizens or businesses, sometimes including foreigners,
may have some, all, or no rights to different forms of forest carbon property.  
* Who will benefit from a forest carbon project, and what forms those benefits will take. 
Projects will be sustainable if the profits are distributed equitably, and the precise
conditions should be specified in law or contract.
*Who will bear the liability should the contracted forest carbon not materialize, and how
disputes will be adjudicated.
*How a jurisdiction plans to clarify informal property rights.  In many areas where forest
carbon projects are contemplated, land rights and land tenure remain unclear, potentially
increasing the project’s risk and transaction costs.  Project actors will wish to examine
the laws (and the government’s capacity to carry out those laws) to grant formal title
fairly to those who have been using the land, without giving perverse incentives to those
who would “improve” the land to acquire title.   

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