Finance for nature-based solutions is on the upswing. The voluntary carbon market (VCM) has seen remarkable growth, particularly for projects that incentivize protection of forests and other landscapes in carbon-rich regions such as the Mekong, and is projected to mobilize up to US$5 billion annually in the next decade. Yet, like any credible market, the VCM must be inclusive, grounded in an enabling policy environment, and with mutual benefits for people, nature, and climate.
REDD+ (Reducing Emissions from Deforestation and Degradation, plus conservation, sustainable development, enhancement of forest carbon stocks) is a framework to pay developing countries to reduce carbon emissions from forests. With nearly two decades of REDD+ readiness and implementation in Cambodia, Lao PDR, and Viet Nam, we can draw lessons learned on the benefits – and risks – of accessing climate finance for all stakeholders involved: governments negotiating deals to supply forest carbon credits, investors and other demand-side actors looking to purchase credits, and communities and smallholders with customary tenure rights to forests and land, who steward some of the Mekong’s most carbon- and biodiversity-rich, and most threatened, landscapes. The governance of forest carbon in CLV countries is the result of different (and evolving) national contexts including legal frameworks, government policies and priorities, stakeholder interests and ultimately the broader economic and financial conditions of each country. Forest carbon projects take different forms, including jurisdictional REDD+ projects with earmarked results-based payments (RBPs), and private projects with emissions reductions earmarked for offsetting their (or other party’s) carbon emissions.
Yet questions remain. How do legal frameworks define rights over forest carbon – who owns it, who can benefit from its sale, and who can transfer for use in the market? How do local communities stand to benefit from the VCM, how can benefits be shared equitably, and how can benefit-sharing mechanisms be designed in a transparent and accountable manner? How can Free, Prior, and Informed Consent (FPIC) be ensured? And, when disputes arise, how can grievances be resolved? These uncertainties add to the risks, which diminish market confidence. Recently, a surge in media coverage of exploitative practices in the VCM has driven a direct pullback in carbon investment – specifically, a 56% decline in the volume of reported transactions from 2022 to 2023 – but with it, a greater demand for environmental and social integrity and calls for more resources to meet the moment. A decade since the REDD+ readiness process opened up a discourse around rights, the concept of “high integrity” has gained acceptance in global circles among suppliers and buyers of carbon credits alike.
While this is quite a new concept for Mekong stakeholders, looking forward, there is keen interest among all three countries in engaging with the market for transacting forest carbon and meeting market standards which put a premium on integrity. Many government officials in the Mekong region would like to scale rapid investment in carbon projects but lack awareness about the risks to governments, investors and communities associated with these projects. Good practices and experiences from neighboring countries can support their efforts to ensure integrity in carbon markets. To succeed in establishing viable markets and deliver needed investment to the region, the infrastructure, capacity, mechanisms, guidance, and narratives must be in place. This will significantly improve the credibility and robustness of the market, scaling up climate finance and bringing benefits to communities and the climate.
Recognizing this pivotal moment, from July to September 2024, MRLG co-organized three national exchanges on social integrity and forest carbon in Cambodia (in collaboration with Wildlife Conservation Society), Lao PDR, and Vietnam (both in collaboration with FAO under the UN-REDD Programme). These invitation-only exchanges, targeting key decision makers and experts, began with scene-setting presentations on national engagement with forest carbon markets to date, global market trends, and movement towards social integrity. Each aimed to increase understanding of the risks to local communities’ access and rights to forests, land, and carbon stored within, vis-à-vis the enabling environment for forest carbon investment. A regional exchange in northern Laos is planned for November 2024 in Luang Prabang, which will enable exchange of best practice across borders. These dialogues are expected to make a valuable contribution to influence the direction of policies around forest carbon to anticipate and address social risks that may otherwise remain unaccounted for in the current push to attract investments.
MRLG acknowledges that good land and forest governance cannot be achieved without addressing the climate crisis, including through market-based mechanisms to mitigate climate change such as REDD+. Recognizing local communities’ rights to land, forests, and the carbon within these landscapes is a proven climate solution with a growing evidence base, without which markets will fail to bring investment where it is most needed. (Naomi Basik Treanor, MRLG Regional RAI Adviser)
