Bringing the forest to market: Structuring avoided deforestation projects
As national leaders continue to negotiate the scope of a post-2012 global emission reduction regime, the role that reducing emissions from deforestation and forest degradation (REDD) will play in any such framework is high on the agenda. At the same time, the voluntary carbon market is emerging as a valuable testing ground for REDD, with both public actors and the private sector beginning to inject significant capital into developing avoided deforestation projects, despite the absence of established regulatory frameworks. Baker & McKenzie’s experience advising on avoided deforestation deals in Indonesia, Malaysia, Papua New Guinea, Madagascar, Costa Rica and Brazil indicates that there are significant legal and practical issues which must be addressed to ensure that the carbon asset generated from such projects is robust, and that the project is economically viable. The issues which must be grappled with are diverse, and include the status of, and legal title to, the carbon rights and environmental benefits generated by the project, the security of legal title to the land on which the project is conducted, as well as the need to ensure the additionality and permanence of a project, prevent leakage and manage associated community benefits and needs. Early consideration of these issues at a practical, project level is vital, as it is likely to inform the international negotiations surrounding the development of a global legal framework to reduce emissions from deforestation and degradation that are currently taking place under the UNFCCC.