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Brazil’s environment minister has urged greater caution from international buyers of carbon credits, after police in the South American country uncovered allegedly fraudulent emissions-offset schemes on stolen land in the Amazon.
Marina Silva said recent revelations about criminal enterprises suspected to have illegally sold millions of dollars of carbon certificates from the world’s largest rainforest were a “serious problem” that could harm the reputation of a tool supporters say helps fight global warming.
“The countries or companies that seek these credits have to be very vigilant, so they do not play into the hands of those who unscrupulously carry out this type of crime,” she told the Financial Times in an interview.
The issue “could damage the credibility [and] integrity of this mechanism”, said Silva, 66, a life-long environmental campaigner. “It’s harmful for developing countries that have a large amount of carbon stock and are also carbon sinks, [and therefore have an] opportunity to create the means to protect their forests and communities”.
Carbon credits or offsets are generated by projects that avoid greenhouse gas emissions or remove them from the atmosphere, such as tree planting or forest preservation, or the issue of cleaner cook stoves in Africa. Businesses buy the credits to cancel out their carbon dioxide emissions.
Home to roughly 60 per cent of the Amazon, Brazil is touted as a potentially massive source of offsets that could be worth billions of dollars. The ecosystem is considered a bulwark against climate change because it absorbs and stores vast amounts of carbon.
But non-governmental organisations have long complained about the behaviour of some project developers towards local and indigenous communities in their attempts to secure land.
Brazil’s leftwing president Luiz Inácio Lula da Silva has made the environment a priority following a surge in Amazon deforestation under his predecessor, rightwing populist Jair Bolsonaro.
The country’s federal police arrested five people and executed dozens of search warrants in June as part of a probe into the suspected irregular sale of carbon credits worth an estimated R$180mn ($32mn).
Investigators claim the decade-long conspiracy resulted in the misappropriation of 538,000 hectares of public land — more than three times the size of Greater London. It involved the bribing of officials, falsification of property deeds and illegal logging, according to police.
Buyers of the credits included multinational companies and they are being treated as possible victims, said police.
Silva said the authorities were working to stamp out such unlawful practices.
“We already have a series of crimes involving land grabbing, logging, illegal gold mining and now on top we have this category. We are very attentive — both the federal police and environmental agencies — because it is unacceptable to have yet another front for crime.”
The projects under suspicion operated within the so-called voluntary carbon market, where the use of credits is not legally required or regulated by government.
Draft legislation is before Brazil’s congress to create a mandatory carbon system that would force polluters in the country to reduce emissions or buy credits to compensate. “We hope [the bill] will be approved as soon as possible, precisely to prevent this type of crime,” added Silva.
The creation of a regulated carbon market should help reduce fraud, said Caroline Dihl Prolo, head of climate stewardship at investment firm fama re.capital, because companies required to control their emissions will also be able to buy credits from the voluntary market up to a certain limit.
“To do so, those voluntary credits will have to meet rules yet to be determined by the government for the regulated market. In practice, that should set an effective floor for standards across both segments,” said Dihl Prolo.
Critics argue the climate impact of Brazil’s carbon market proposals may be limited as they do not cover its booming agricultural sector, responsible for a quarter of national emissions.
Verra, the largest accreditation body for voluntary offsets, has launched a formal review into the three projects implicated in the police investigation and has suspended the issuance of credits to them pending its outcome.
Additional reporting by Beatriz Langella
Climate Capital
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