Social Integrity in Forest Carbon Investments: What Is It, and Why Do We Need It? Written by Naomi Basik Treanor

Finance for nature-based solutions is on the upswing. The voluntary carbon market (VCM) and carbon investments have seen remarkable growth, particularly for projects that incentivize protection of forests and other landscapes in carbon-rich regions such as the Mekong, and is projected to mobilize up to US$5 billion annually in the next decade. Yet, like any credible market, the VCM must be inclusive, grounded in an enabling policy environment, and with mutual benefits for people, nature, and climate. But the price of carbon has taken a plunge in recent years (Forest Trends 2024, World Bank 2024) as a result of a host of issues and concerns that are summarized as a lack of environmental and social “integrity.” Though not all forest-based carbon projects have come under scrutiny, they currently command weaker prices than many other sectors, signaling a lack of market confidence.  

REDD+ (Reducing Emissions from Deforestation and Degradation, plus conservation, sustainable development, enhancement of forest carbon stocks) is a framework to pay developing countries to reduce carbon emissions from forests. With nearly two decades of REDD+ readiness and implementation in Cambodia, Lao PDR, and Viet Nam, we can draw lessons learned on the benefits – and risks – of accessing climate finance for all stakeholders involved: governments negotiating deals to supply forest carbon credits, investors and other demand-side actors looking to purchase credits, and communities and smallholders with customary tenure rights to forests and land, who steward some of the Mekong’s most carbon- and biodiversity-rich, and most threatened, landscapes. The governance of forest carbon in CLV countries is the result of different (and evolving) national contexts including legal frameworks, government policies and priorities, stakeholder interests and ultimately the broader economic and financial conditions of each country. Forest carbon projects take different forms, including jurisdictional REDD+ projects with earmarked results-based payments (RBPs), and private projects with emissions reductions earmarked for offsetting their (or other party’s) carbon emissions.  

Yet questions remain. How do legal frameworks define rights over forest carbon – who owns it, who can benefit from its sale, and who can transfer for use in the market? How do local communities stand to benefit from the VCM, how can benefits be shared equitably, and how can benefit-sharing mechanisms be designed in a transparent and accountable manner? How can Free, Prior, and Informed Consent (FPIC) be ensured? And, when disputes arise, how can grievances be resolved? These uncertainties add to the risks, which diminish market confidence. A decade since the REDD+ readiness process opened up a discourse around rights, the concept of “high integrity” has gained acceptance in global circles among suppliers and buyers of carbon credits alike.  

While this is quite a new concept for Mekong stakeholders, looking forward, there is keen interest among all three countries in engaging with the market for transacting forest carbon and meeting market standards which put a premium on integrity. Many government officials in the Mekong region would like to scale rapid investment in carbon projects but lack awareness about the risks to governments, investors and communities associated with these projects. Good practices and experiences from neighboring countries can support their efforts to ensure integrity in carbon markets. To succeed in establishing viable markets and deliver needed investment to the region, the infrastructure, capacity, mechanisms, guidance, and narratives must be in place. This will significantly improve the credibility and robustness of the market, scaling up climate finance and bringing benefits to communities and the climate. 

Recognizing this pivotal moment, MRLG co-organized three national dialogues on social integrity and forest carbon in Cambodia (in collaboration with Wildlife Conservation Society), Lao PDR, and Vietnam (both in collaboration with FAO under the UN-REDD Programme), culminating in a regional exchange in Luang Prabang, co-hosted by the Department of Forestry and chaired by Dr. Somvang Phimmavong, Director General of DOF.  Country-level exchanges targeted key decision makers and experts, began with scene-setting presentations on national engagement with forest carbon markets to date, global market trends, and movement towards social integrity. Each aimed to increase understanding of the risks to local communities’ access and rights to forests, land, and carbon stored within, vis-à-vis the enabling environment for forest carbon investment.  

The regional event, with participation from all three countries, fostered frank discussions on what social integrity is – and the risks of a lack of social integrity – and best practice across borders, culminating in a visit to two villages in Xieng Ngeun district, Luang Prabang province, participating in “Implementation of the Lao PDR Emission Reductions Program through improved Governance and sustainable Forest landscape management” (I-GFLL). I-GFLL is a jurisdictional REDD+ project with backing from the Green Climate Fund and Forest Carbon Partnership Facility, spanning the six northern Lao provinces and expected to benefit over 300,000 people and reduce emissions by over 5 million tCO2eq. These dialogues are expected to make a valuable contribution to influence the direction of policies around forest carbon to anticipate and address social risks that may otherwise remain unaccounted for in the current push to attract investments.  

MRLG acknowledges that good land and forest governance cannot be achieved without addressing the climate crisis, including through market-based mechanisms to mitigate climate change such as REDD+. Recognizing local communities’ rights to land, forests, and the carbon within these landscapes is a proven climate solution with a growing evidence base, without which markets will fail to bring investment where it is most needed. 

This article was written by Naomi Basik Treanor. To hear more about Naomi’s work, find her LinkedIn here.