Workshop summary: The importance of community involvement in carbon markets

Summary report from the inFUSE Accelerator Carbon Market workshop in Jakarta, 20th August 2024.

Disclaimer: Views, opinions and analysis provided by guest speakers and participants are their own. Reproducing them on our website does not imply that they are endorsed by Neyen.

Setting the scene

Jeremy Buhain, a consultant from Neyen, provided a scene-setting presentation on the concept of benefit sharing. In carbon markets, benefit sharing can be interpreted as how and to what extent the benefits from carbon credit sales are shared with those implementing the projects and the local communities where the projects are located. Benefit sharing can be done as monetary contributions (e.g., cash transfer); non-monetary benefits (e.g., community projects); or both. An example of non-monetary benefits sharing can be through providing access to clean water, healthcare, or education for local communities.

“…Parties should, when taking action to address climate change, respect, promote and consider their respective obligations on human rights, the right to health, the rights of indigenous peoples, local communities, migrants, children, persons with disabilities and people in vulnerable situations and the right to development, as well as gender equality, empowerment of women and intergenerational equity.” – Preamble of the Paris Agreement.

Country-level Implementation

In country-level implementation, regulations are pertinent to dictate clear benefit sharing mechanisms. Several approaches can be used as a framework to regulate benefit sharing, such as:

  1. Mandate a percentage of proceeds to go to the community through regulation,
  2. Mandate a percentage of proceeds to go to the community, as negotiated on a case-by case basis,
  3. Mandate the development of a social plan or a community-based program.

Countries like Zimbabwe, Malawi and Kenya have provided stipulations for benefit sharing mechanisms with details as follows.

50% share of project revenue.

12.5% of the proceeds will go to the government, together with the share of proceeds to the local entrepreneurs.

The aggregate earnings of the previous year will be managed and disbursed for the benefit of the community provided that:
  1. in land-based projects, the contribution shall be at least 40% of the aggregate earnings
  2. in non-land-based projects, the contribution shall be at least 25% of the aggregate earnings

Benefit Sharing Examples from Projects in Indonesia

Local Communities: More than as “Beneficiaries”

Yani Witjaksono, Director of Yayasan Bina Usaha Lingkungan, highlighted the importance of community involvement in implementing carbon markets. With the high potential of credit generation from multiple sectors, Indonesia needs to take advantage of embracing local communities to maximize the implementation of carbon projects across the country. Yani added, that involving local communities in carbon projects can bring benefits such as enhanced transparency and credibility through public monitoring, higher opportunity for credit generation, and compliance with financier requirements.

In the Q&A session, participants had an active discussion on the right approaches to involve local communities as part of carbon projects. Participants, mostly project developers, shared concerns about finding the balance between avoiding exploitation risk and profitability. In this regard, socialization and early-stage involvement of local communities are crucial as social and environmental safeguarding measures. Indonesia’s Government Regulation No. 23 of 2021 addresses several key issues about the participation of local communities, including social forestry management in achieving community welfare and environmental balance. However, several CSOs, including Indigenous Peoples’ Alliances of Nusantara, have questioned the concept of carbon markets and raised concerns over the rights of local communities, especially on customary forests.

Benefit Sharing: Concept, examples & challenges

presented by Jeremy Buhain, Consultant, Neyen

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