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Money shades of green

Forest-based carbon-sequestering model has been positioned as a win-win system that connects the developed with the developing economies. While certain conditions are to be met for communities to gain from these projects, the developed countries can continue their lifestyles and business as usual. Is this `green economy’ the world has been talking about?

CDM projects are already coming under severe criticism in most countries. Not without reason, as several projects have only secondary objective of promoting sustainable development in host countries.

Money Grows on Trees may have been an apt phrase reflecting the Year of Forests just gone by. However, the literal sense gets overawed by the discreet reflection that is quite on the contrary. It may have remained an unfulfilled desire for most but not for the communities in some parts of Himachal Pradesh, who will soon shake the trees for some ‘green currency’.

Tucked up in the middle Himalayas, farmers in the mountainous state of Himachal Pradesh will crunch atmospheric carbon to rid the Spaniards of their climate woes. Over next two decades, over 839,582 tons of carbon dioxide equivalents are likely to be sequestered in over 4,000 hectares of variedly degraded agriculture and forest land in the state. For this act of benevolence, each family in 177 village panchayats will earn between US $83 to 145 per hectare per year, helping the counterparts in Spain earn elusive carbon credits to sustain their lavish lifestyles.

As a sub-component of the World Bank supported US $ 75 million Mid-Himalayan Watershed Development Project, the creation of carbon sinks through afforestation are likely to accrue a net gain of US $ 4.1 million to the communities over next 20 years. ‘Fiscal incentive has triggered a renewed interest in protecting the afforested lands,’ says Kushi Ram in Baddi Village in Kangra district. With little concern about where the money comes from, landowner interest is restricted to the shower of, what is touted as, ‘green currency’ from plantation on his 10 hectare area.

However, the transfer of funds between the host country and the client, DNA of Spain, is being brokered by the World Bank, which is a trustee of the BioCarbon Fund. Operative since May 2004, the BioCarbon Fund is a public/private initiative administered by the World Bank that aims to deliver cost-effective emission reductions, while promoting biodiversity conservation and poverty alleviation.

According to a project official, the project is helping farmers to act like a producer company – selling carbon credits to potential clients.

Is this ‘green economy’ the world has been talking about? Of the many variants of green economy, forest-based carbon-sequestering model has been positioned as a win-win system that connects the developed with the developing economies. Further, it helps develop ‘new institutions’ and institutional mechanisms to manage environment and the ecosystem services that accrue from it. Though at its nascent stage, the implications of such initiatives will provide the necessary paradigm shift to brace the emerging environmental challenges.

Upbeat about the first of its kind project in the mountains, it has been argued that not only will the project generate environmental benefits through carbon sequestration but will improve revenuegenerating capacity of small farmers as well. Through restoration of highly vulnerable degraded lands in the districts of Kangra and Bilaspur, silviculture activities are expected to generate 343 person days of employment from each hectare of land as well. No wonder, on the face of it, the project seems a win-win strategy for both the government and the communities.

Conditions apply

That is how it is being projected too. It is being hyped as one of the largest carbon revenue project of its kind, having surpassed the 3,500 hectares Clean Development Mechanism project in China. The recent agreement between the Government of Himachal Pradesh and the World Bank, in force till December 2018, ensures that the carbon revenue will go the village community, providing them the necessary incentive to protect watershed and forests.

Carbon revenue

Land Category Legal title/Land tenure Carbon revenue
Degraded forestland Forest Department 20 % to Gram Panchayat Fund for undertaking works

80 % to user groups responsible for protection

Degraded Community land Forest Department 80 % to user groups responsible for protection

20 % to Gram Panchayat Fund for undertaking works

Private land Individual farmer 90 % to the owner or attorney

However, ten percent of the total carbon revenue will accrue to the Forest Department as overhead charges.

Overtly the revenue sharing arrangement may seem like any ordinary transaction. In reality, computing carbon sequestered both in tree biomass above and the soil below is immensely complicated. Calculated at a modest US $5 per ton of sequestered carbon dioxide, a ton of carbon dioxide converted into biomass under new plantations is counted as one credit.

The carbon credits from such projects are sold as Certified Emissions Reductions (CER). For selling the CER, the villagers get the ‘cash’ whereas the elusive ‘credit’ wrest with the buyer.

Under the provisions of the project, conditions have been stipulated before the actual carbon revenue starts to flow. The landowners need to ensure that the tree density is no less than 1,100 plants per hectare; that no felling of trees from the land under the project shall be permitted; and that no part of the land brought under such plantations shall be diverted for any non-forestry purposes. Given the diversity of land ownership, the net gain at the household level is likely to be truncated on account of differential carbon revenue sharing.

Only from the private lands will the beneficiary be able to draw 90 per cent of the carbon revenue. From village common lands and forest lands, the prime recipient would be the village panchayat which will distribute the revenue in accordance with the rights and obligations of the relevant user groups (see table). The coverage of private land is limited to 533 hectares; in contrast the forest land being covered under the project is as high as 3,177 hectares. The share of common land has been kept at a modest 293 hectares.

Farmers are expectedly awaiting the validity of the project by the UN Framework Convention on Climate Change (UNFCCC) when the institutional mechanism for smooth transfer of carbon revenue at the local level would be put to test.

Grey areas

This green story, like every good story, has shades of grey. The first grey area relates to the Clean Development Mechanism, a central part of the Kyoto Protocol, which has yet to come clear on its intended objectives. Does the mechanism not provide developed countries with a cheap alternative to reducing their own greenhouse gas emissions? It is argued that such projects promote cost-effective carbon reductions through ‘offsetting’ projects located in developing countries while simultaneously allowing developed countries to continue business-as-usual.

Although CDM projects are in the early stages of their evolution, criticism nonetheless has started piling against them in most countries. Not without reason as several projects have only secondary objective of promoting sustainable development in host countries. While the CDM has created the largest carbon offset market, the CER have seemingly remained underpriced. Earning a maximum of US $145 a year from protecting a hectare of afforested land, that the project promises, may not be appealing enough should the land be valued otherwise!

Declaring large tracts, an estimated 2.48 million hectares, as wasteland in the state is a contested issue – the second grey area. It is a piece of statistics that may promise a vast potential that can be tapped for replicating the carbon revenue generating project. In reality, these so-called wastelands have myriad utilities. In effect, developing such projects is a technical nightmare for which donor support seems a pre-requisite. Else, investing limited resources on a project that may generate only $4.1 million (Rs 20 crore) over a period of 20 years doesn’t seem lucrative!

The third grey area relates to the community and the community practices. How will the village panchayats, who are otherwise lush with development funds, value the limited amount of green currency? Given the fact that a limited area has been brought under CDM which would need to be carefully protected, how will communities outside the project area relate to it? Has the change in social dynamics been factored in to avoid future conflicts? Any intervention of the kind alters the prevailing power dynamics at the grassroots, a crucial aspect for long-term sustainability.

In addition to addressing these grey concerns, there is a need to simplify methodologies and expedite the validation process for realizing the potential of carbon sequestration! The project design document has positioned the sale of CERs as a critical incentive to the stakeholders to protect, regenerate and manage the watersheds without drawing comparison with the prevailing and emerging economic scenario in the state. Unless the stakeholders value the carbon revenue mechanism to their competitive advantage, such projects will continue to have limited reach.

Sudhirendar Sharma

Dr Sudhirendar Sharma is a development expert at the Ecological Foundation. He can be reached at 7 Triveni, A6 Paschim Vihar, New Delhi 110063, India.
E-mail: sudhirendarsharma@gmail.com