Why is land tenure so complex in rainforest context? And why should you care if you deal with carbon credits?
The Economist illustrates very well one of the most pressing problems in the Brazilian Amazon: Land Tenure, or better put Tenure Security, which is not exactly the same thing.
This is not an issue that can be solved by an often-proposed silver bullet solution: Tech. Online databases exist, but the raw data to feed them have in many cases never been digitised. To really know for sure, physical trips to local notaries are needed. And then usually the hard conclusion comes to surface: overlapping claims, missing documents, conflicting data.
Don’t be fooled. Tech does not overrule courts. A vaste majority of forest lands will only be designated to one clear owner after a court settles the overlapping claims. Finding plots of forests that are truly legally stable in Amazonas state Brasil are so rare that after studying more than 500 offers, we noticed that less than 2% got through our Land Tenure Stability Index.
It can be subtle. The ownership chain may seem legitimate at first sight, but transactions may have been unlawful in the past. We have seen cases where local municipalities sold federal government land to the private sector which at the moment of the transaction they didn’t even own in the first place.
Now, it is worthwhile to ask yourself if you are developing or buying carbon credits, how risky they are to hold on to. If the underlying agreement on which they are based has been made with an entity that believes they are an owner, when in reality they may not be, then what does that mean for the carbon credit you buy? The chance that a lack of legal integrity occurs to your credits, is according to this article quite high. What are you doing to protect yourself against this risk?
Tech can be a strategic enabler to scale, but some of the key challenges in Nature Based Solutions, being Legal and Social, cannot be tackled with it. Luckily tech is not the only thing that scales. The sweet spot is using tech where it enables you and build scale in another way where it does not. Project size can hold scale in and of itself, and financial innovation can scale as well as tech.
Legal integrity is a key component for high value NBS. It is not impossible to achieve. But it requires exceptional diligence. We have studied more than 1300 forests in Latam by now (Q1, 2024) and we realise that less than 5% is relatively stable from a legal point of view (Legal in the broad sense, also taking into account non-written land holding of local stakeholders).
With our Land Tenure Stability Methodology we even discovered that a lot of currently active trading carbon credit projects are not organised on sold legal grounds (13 out of 14 in a sample testing). Some gurus in the industry claim that you can solve this through a lease, which is ridiculous. A lease is just putting a wall between yourself and your neighbour with the hopes of not hearing his barking dogs.
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