Brazil developers shun indigenous areas amid legal uncertainty

Quantum Commodity Intelligence – Several forest carbon project developers have decided to pull out of indigenous areas in Brazil because of ongoing uncertainty about their status under Brazil's Paris Agreement climate goals in its nationally determined contribution, while others have vowed to stay in these lands.

Brazil counts more than 700 indigenous territories, of which about 500 are officially recognised by the state, spanning 14% of Brazil's surface area.

Many of these territories have attracted the attention of land grabbers and are therefore particularly relevant for carbon projects.

But last year, Brazil's indigenous affairs agency Fundação Nacional do Índio (Funai) issued guidance discouraging carbon developers from entering these lands until firmer regulations are established at the federal level.

And in March, federal prosecutors declared that carbon contracts with indigenous communities should be made null and void for the same reason, amid ongoing uncertainty about if and when Brazil will pass a new carbon market law.

Developers have said for some time they consider such projects a "sensitive matter" due to the risk of being criticised by NGOs and media outlets, and as these schemes require trained anthropologists and special protocols to engage with communities as well as a substantial amount of work.

The wariness seems to have escalated further in the last few months with many developers now saying openly they have closed the door to indigenous projects until further notice, largely because of the legal uncertainty.

This is the case of Carbonext, one of the country's largest nature-based investment firms, which told Quantum during a recent meeting that it has shut all activities in these areas.

The São Paulo-based company was lambasted in the Brazilian press last year for a project in the Kayapó indigenous lands, in the south of Pará state, although the company said the project was never at the stage where formal negotiations were on the table, adding that the issue was blown out of proportion by the local press.

Legal uncertainty

Indigenous lands have a special status in the Brazilian constitution.

While ownership of the land, and therefore the carbon credits linked to it, is with the federal state, recognised indigenous tribes have the right to use and care for the land on which they reside, a right known as usufruct.

This, along with the urgency to protect these lands in the face of mounting deforestation, has been used by some to justify the creation of voluntary carbon projects.

Brazil is in the process of examining a carbon market bill that will regulate these issues more fully.

A draft passed by the Chamber of Deputies, the lower house of the country's National Congress, last year addressed indigenous communities' rights over their territory, effectively seeking to regulate the practice.

Any project developed in an indigenous territory must give communities at least 40% of the carbon credits generated under reforesting activities and 60% under forest conservation (REDD+), according to the draft.

It also states that the project developer must consult the communities before any action can be taken and will need to pay for all the expenses incurred during that process.

However, experts have stated that the draft is likely to be amended before the law is adopted, with some calling for less specific guidelines on indigenous lands and for preserving a higher level of flexibility.

In the meantime, some developers have maintained activities in indigenous areas.

Legendary explorer

In March, US entrepreneur Michael Greene said he was behind 13 such projects in Brazil under Colombian standard CerCarbono that have been in the works for more than a decade.

The developer used a unique approach, whereby it does not own the project itself and works directly with indigenous groups to train them on the process of setting up a REDD+ scheme, called Indigenous Carbon.

Greene said the indigenous communities directly manage the projects and are responsible for free, prior and informed consent.

"I spoke to the indigenous and they stated they are not worried about (the current legal uncertainty), and some of the groups have already presented to Funai and the Ministério Público," Greene told Quantum.

Funai's predecessor, the Indian Protection Service, was created by legendary Brazilian explorer Cândido Mariano da Silva Rondon in 1910.

Rondon was the first prominent public servant to argue for the inclusion of indigenous tribes in the Brazilian nation at a time when many in the country were openly calling for their destruction.

The explorer worked for decades with indigenous tribes, notably the Bororo and Nambikwara, to build telegraph lines through the Amazon rainforest, and was so successful at it that an entire Brazilian state was named after him: Rondônia.

Some of the tribes that are part of Greene's Indigenous Carbon project, such as the Cinta Larga, were first encountered by an expedition composed of Rondon himself and former US president Theodore Roosevelt in 1913.

In March, Quantum spoke to several members of the Cinta Larga community, situated in Rondônia, via a weblink.

They own the Joao Bravo REDD+ project, which covers 327,458 hectares and has already issued 5.4 million carbon credits, and the Rio Roosevelt REDD+ project, which covers 221,876 hectares and has issued 3.2 million credits.

They told a story of empowerment via carbon credits and of being better able to fight external threats such as mining and agriculture.

"We started this project 12 years ago. At the time, it was very difficult to know what a carbon credit project was. Over time we worked with NGOs, with another company, but we were unsuccessful," said Elizabete Cinta Larga, a representative for the community.

"We've now restarted this project and we did all the steps, free and informed consent, assemblies with the Cinta Larga, where the project was 100% accepted. And we believe in this, and now that we're in the credit sales phase, we're anxious," she added.

Most conservative way possible

A second set of projects is operated by the Brazilian branch of Colombian developer Biofix.

The firm's Kaa Pyahu project is being developed under US-based registry Verra's Verified Carbon Standard and is based in the northern Brazilian state of Maranhão, covers an area that includes 269 indigenous villages, and will deliver 220,000 tonnes of carbon dixoide equivalent of emissions reductions (tCO2e) a year, according to the developer's estimates.

Approximately 1,500 indigenous leaders were consulted about the Kaa Pyahu project, and they unanimously voted in favour of it, according to Jeronimo Roveda, legal director at Biofix.

"There are a lot of resources that could be directed [to indigenous communities]," Roveda told Quantum in an interview.

"We know the needs of these populations, but both from the public and private sector, there is a fear of a reputational risk of putting money in these communities," he said.

A second project, Ilha do Bananal+, which is registered with CerCarbono, is located in Tocantins, benefits 42 indigenous villages, and expects to generate 884,046 tCO2e a year.

Beyond the two initiatives, Roveda said Biofix is currently performing viability studies on a further three projects in indigenous lands.

Biofix brings a team of anthropologists to analyse a project's social viability in cases where communities do not have a formal document, such as a publicly notarised statute, defining their decision-making process, according to Roveda.

The team reviews how the local communities organise themselves, who oversees those decision-making processes, and the pre-existing conflicts within those groups to establish who should have a say in authorising the project's implementation.

Moreover, Biofix interacts with the indigenous people in their native language, again with support from the anthropologists, to give confidence to the communities and bypass criticisms from Brazilian authorities over previous projects in which contracts were written in English.

"Is there a risk? Yes, there is [but] we are not doing anything illegal," added Roveda.

"The constitution allows them [indigenous people] to develop projects, within their autonomy, self-determination and within the guarantees for natural resources that it provides them within indigenous territories," he said.

"And we do the free consultation process in the most conservative way possible," he added.