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Brazil is not for amateurs, goes an old bon mot in the country. The sentiment — a nod to Brazil’s chaotic complexity at times — is doubly true for doing business in the Amazon rainforest, the lion’s share of which sits within the borders of the Latin American country.
With the return of Luiz Inácio Lula da Silva to the presidency this year, environmental protection has shot to the forefront of the political agenda — and with it a rush to seize the commercial opportunities accompanying the green transition.
Most exuberant has been the market for voluntary carbon credits. Covering more than 400mn hectares, the Brazilian section of the Amazon biome offers an unparalleled opportunity for developers to generate carbon credits via the preservation of standing forest or the reforestation of denuded lands.
These credits are then typically sold to major international companies that are seeking to offset their own emissions, with prices negotiated between the buyer and seller. The potential for the market has left many breathless, with one study last year optimistically forecasting potential revenues of $120bn by 2030. If done right, proponents argue, the market can also aid in the fight against climate change by preserving ecosystems that store carbon dioxide or by reforesting.
But doing business in the rainforest is a fraught endeavour. At best, rules and regulations are opaque and land rights are complicated and require serious due diligence. At its worst, the region is lawless.
These complexities have been laid bare by a deepening scandal in the huge Amazonian state of Pará, where prosecutors have filed lawsuits against three carbon credit projects.
The investigators allege the little-known companies behind the projects had seized public land to use in their bid to generate carbon credits and profits. In local parlance, the alleged offence is grilagem, or land grabbing.
Then an investigation by local media group Globo reported that not only had the credits been certified by Verra, the key industry standards body, but they had been sold to a host of prominent western companies, including Boeing, Air France and Liverpool Football Club.
These companies are not a target of the lawsuits. Key individuals named in the filings said they would co-operate with the court to correct any potential irregularity. And in a statement, Verra said it took the claims “very seriously” and that three projects were currently under review. Boeing said it was determining the next steps, but that it bought “through a globally recognised agency to access projects that are registered with three widely recognised standard-setting bodies”. Air France and Liverpool FC did not respond to requests for comment.
The involvement of the multinational buyers raised the profile of the issue. But non-governmental organisations have long complained about project developers in general and, in particular, the use of aggressive behaviour towards local and indigenous communities in order to secure land.
Much of the issue stems from the region’s messy land ownership claims. It is also complicated by the fact that communities can often occupy land for generations without any proper paperwork. The market requires deep due diligence.
An investigation by Hernandez Lerner & Miranda Advocacia, a law firm, fuelled further concerns about the integrity of the market and the ubiquity of land grabbing. Using geospatial imagery, the firm analysed 56 carbon credit projects in the Amazon and found that 33 of them overlapped either partially or totally with public lands.
The lack of clear rules for the voluntary carbon market means there is “little to no public oversight”, said Mario Braga, a political risk analyst at Control Risks. “Companies [buying credits] often rely on international best practices and limited third-party verification. Especially in the Amazon, some peculiarities can represent significant obstacles, such as widespread land-grabbing.”
The situation, however, could improve in the coming months as Brazil’s Congress moves to create a legal framework for a mandatory carbon market. Braga said this was likely to establish rules that would impact the voluntary market.
“Carbon credit projects are not for well-intentioned organisations that don’t have a good level of expertise,” said Pedro Brancalion, a professor of forest sciences at the University of São Paulo. “It’s complicated territory. It’s not for amateurs.”