Carbon Rights Policy

7/24/2019 Carbon Rights Policy

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WHO OWNS THE CARBON IN THE TREES? APRIL 2013

Who owns the carbon in the trees?1Clarifying carbon rights in the Philippines and guidance in benet sharing arrangements

Climate-relevant Modernization of Forest Policy and Piloting of REDD in the Philippines

A POLICY BRIEF

Te Philippine National REDD-Plus Strategy(PNRPS) has identified carbon ownership asan area of concern. At present, there are noPhilippine laws that explicitly define carbonrights, identify its claimants and regulatetransactions relating to such claims. However,parties have entered and continue to enter

into carbon rights agreements without thebenefit of a specific law that would governand safeguard the rights of the parties and theState. Tis could be dangerous because, first,there is no assurance that the beneficiaries ofthese contracts are in fact the rightful parties toassert such claims or whether the proponentsare entitled to enter into such contracts. Tedanger is that these contracts may infringe onexisting resource rights holders or impugn therights of its true and lawful claimants. Second,

there is no guarantee that these contracts arenot onerous. Tird, it is not certain whetherthese contracts would actually contribute to thebroader goals of the PNRPS.

Relevant to this, the Department ofEnvironment and Natural Resources (DENR)

Secretary has issued a Memorandum on theInterim Policy on Forest Carbon rading andRegistry of REDD-Plus Activities, enjoiningall DENR officials and employees not toentertain any initiative on forest carbon tradingpending the issuance of guidelines on forestcarbon.

Prior to any significant national-level REDD-Plus developments, it is necessary to clarifycarbon ownership and tenure. Considering thatmillions of people are dependent on the forestand its resources, the questions who owns thecarbon? and who can sell carbon? becomecrucial. Potential REDD-Plus areas are locatedinside forest areas where communities holdvarying and, sometimes, overlapping tenurialinstruments. REDD-Plus areas are located in

ancestral domains, Community-Based ForestManagement Agreements (CBFMAs) areas andProtected Areas Community-Based ResourceManagement Agreements (PACBRMAs) areas,among others.

1 This summarizes the ndings and recommendations of a study on Clarifying Carbon Rights as part of a series of policystudies undertaken in the Philippines under the project Climate-relevant Modernization of Forest Policy and Piloting of REDDin the Philippines funded under the International Climate Initiative of the German Federal Ministry for the Environment, NatureConservation and Nuclear Safety (BMU) and Non-Timber Forest Products-Exchange Programme (NTFP-EP) through the ASEANSocial Forestry Network supported by the Swiss Agency for Development and Cooperation (SDC).

Context


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One of the major prerequisites for REDD-Plusis to ensure that tenure rights of indigenouspeoples and local communities to forestlandand resources are recognized in the nationallegal regime. REDD-Plus activities allow forthe entry of new and powerful actors thatseek to take advantage of the new economic

opportunity available and may put communitiesin a vulnerable position. If community tenurerights to the forests are unclear, REDD-Plusprojects may result in their marginalization anddisenfranchisement. Tus, indigenous peoplesand local communities based in the forestsmust have tenurial security before REDD-Plusprograms commence.

Carbon rights as an integral aspect of the

bundle of rights

Tere are numerous existing laws and regulationsthat already govern the preservation, utilizationand development of the countrys naturalresources. Analyzing carbon rights within thePhilippine legal regime must be based on arights-based approach, treating carbon rightsas part of a bundle of rights that should notbe segregated from the forest tenure holder.Most importantly, carbon rights should be partof the broader policy direction of forest tenurereform, and any prospective law pertainingto carbon rights must be read in conjunction

with the existing laws to prevent conflict andcurtailment of existing rights.

It is a policy of the State to protect andadvance the right of the people to a

balanced and healthful ecology in accord

with the rhythm and harmony of nature,2

promote social justice in all phases of nationaldevelopment,3 and recognize and promotethe rights of indigenous cultural communities(ICC) within the framework of national unityand development.4

Te Philippine Constitution provides thatall natural resources are owned by the State;an exception will be indigenous peoples andtheir ancestral domains. Te exploration,development and utilization of these natural

resources are done either by direct undertakingof the State or co-production, joint ventureor production sharing agreements underthe States full control and supervision, withFilipino citizens and Filipino corporations5

for a period not exceeding 25 years, which isrenewable for another 25 years. Tis meansthat foreign entities cannot enter intoagreements for carbon sequestration becausethese involve the exploration, developmentand utilization of natural resources.Te only exceptions for this nationalityrule are financial or technical assistanceagreements for exploration of minerals.

2Art. II, Sec. 16, 1987 Constitution. 3Art. II, Sec. 10, 1987 Constitution. 4Art. II, Sec. 22, 1987 Constitution. 5Corporations or associations at least sixty per centum of whose capital is owned by Filipino citizens.

WHO OWNS THE CARBON IN THE TREES?A POLICY BRIEF APRIL 2013


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Te Regalian Doctrine or state ownership of

natural resources should be interpreted togetherwith other provisions of the Constitution; oneis the application of agrarian principles ofstewardship in the disposition or utilizationof other natural resources. Te intention ofthe Constitution in this provision is to favorcommunities and people in the area in grantingrights to use and develop natural resources.Foreigners or foreign-owned corporationscannot utilize rights to the carbon.

All projects relating to the exploration,development and utilization of naturalresources are projects of the State and can neverbe purely private endeavors.6

Land is the single biggest major resource7in the Philippines. Te Constitutionprescribes its ownership, distributionand utilization. Land is neither classifiedaccording to its use nor its actual state.8

Tis explains why although 15 millionhectares are classified as forestland,9

only an estimated 700,000 hectares actuallyhave primary forests.10

Te 1987 Constitution classified lands intofour agricultural, forest timber, mineral and

national park and actual identification of landclassification is exclusively given to the ExecutiveDepartment. It is worth noting, however, thatonly agricultural lands may be alienated.11

Te reality is that classifications are not

always clear-cut. Te State upholds the

policy of multiple land use, toward the end

that the countrys natural resources maybe rationally explored, developed, utilized

and conserved.12 Tis means that based

on actual use, mining rights may overlap

with forest rights and private rights over

the land; forest rights may overlap with

ancestral domain claims; and ancestral

domain claims may overlap with national

parks.

Community-Based Forestry Management

Agreements (CBFMA)Te constitutional concept of stewardshipof natural resources is exemplified in theCommunity-Based Forestry Management, anational strategy to achieve sustainable forestryand social justice. Te CBFMA holder is grantedexclusive occupation and use of the forestlandcovered by the CBFMA and the forest productstherein. Te CBFM holder privilege extends tothe right to receive all income and proceedsfrom the sustainable utilization of forestresourceswithin the CBFMA area and to enterinto agreements or contracts with private orgovernment entities for the development ofthe whole or portions of the CBFMA area,provided, that public bidding and transparentcontracting procedures are followed;providedfurther that development is consistent withthe Community Resource ManagementFramework of the CBFMA area.

Given the following, carbon is deemed includedin the broad definition of forest resources

covered under the CBFM agreement. Forestresources is defined as all natural resources,

whether biomass such as plants and animalsor non-biomass such as soil and water, as wellas the intangible services and values presentin forestlands or in other lands devoted forforest purposes.Hence, the CBFMA holder

6PICOP Resources, Inc. v. Base Metals Mineral Resources Corp., G.R. No. 163509, December 6, 2006.7Bernas, J. 1996. The Constitution of the Republic of the Philippines: A Commentary, p. 1018.8In the case of Heirs of Amunategui v. Director of Forestry, the Supreme Court pronounced: The classication is descriptive ofits legal nature or status and does not have to be descriptive of what the land actually looks like.

9Forestland has acquired a technical meaning different from forest and generally refers to land of the public domain.10Forest Management Bureau, Forestry Statistics at a Glance, 2009.11Land may either be public or private. Private lands are those which have been acquired by virtue of some title or grant, andinclude those lands that have been held since time immemorial (Carino v. Insular Government, No. 72, February 23, 1909, 212 U.S.449, 53 L. Ed. 594). Everything else falls within the realm of public domain. Lands of the public domain are further classied intotwo types: alienable and non-alienable.12PICOP Resources, Inc. v. Base Metals Mineral Resources Corp., G.R. No. 163509, December 6, 2006, citing PD 705, Sec. 2 andRA 7942, Secs. 72, 76.



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may claim incomes and proceeds from the

utilization thereof. Te holder may likewiseenter into agreements for the development ofthe CBFMA area.

Other forestry agreementsOther forestry agreements like Integrated ForestManagement Agreement (IFMA), Forest LandGrazing Management Agreement (FLGMA)and other arrangements only grant specificrights particularized in the agreement. It doesnot grant broad rights over forest resources and

cannot imply that carbon rights are included incontractual rights granted by the State.

Te Revised Forestry Code of the Philippines,or Presidential Decree 705, states that no personmay utilize, exploit, occupy, possess or conductany activity within any forestland unless thatperson has been authorized to do so under alicense agreement, lease, license or permit.13

Tese instruments are mere privileges. TeSupreme Court has time and again declaredthat a license or permit, particularly atimber license, is not a contract, propertyor a property right protected by thedue process clause of the Constitution.Hence, it may be revoked anytime.14

In addition, because of the importance offorests to the nation, the States police powerhas been wielded to regulate the use andoccupancy of forest and forest reserves.15

Mineral agreementsA mineral agreement grants the exclusive right

to conduct mining operations and to extractall mineral resources found in the contractarea for a period of 25 years, renewablefor another term not exceeding 25 years.16

Contractors are granted auxiliary miningrights relating to timber, water, easement,

possession of explosives and entry into

private lands and concession areas.17As a general rule, mining companies donot have rights over forest resources exceptin relation to auxiliary right to cut treesor timber within the mining area as maybe necessary for operation. Tus, miningcompanies do not have any right to the forestindependent of their mining operations.

Although the law provides for obligations ofthe mining company to reforest its mining area,

it does not provide for any right to use forestresources and benefit from the conservationof the forest area. Moreover, there is noprovision in the present laws, regulationsand also in existing mining contracts toshow that mining companies have rights tobenefit from the conservation of the forest,including the rights to the carbon.However,note that the right of mining companies toenter land may be deemed as a limitation toall carbon sequestration contracts that wereentered into after the enactment of Republic

Act 7942 on areaswith overlapping mineralagreements.

Protected areas are placed under the control andadministration of the DENR.18 Te DENR,

upon the recommendation of the Protected AreaManagement Board (PAMB), may enter intoProtected Area Community-Based ResourceManagement Agreement (PACBRMA) withtenured migrant communities19 of protectedareas.20 Interested ICC/IPs may likewise

13P.D. 705, Chapter III, Sec. 20.14Alvarez vs. PICOP Resources, Inc., G.R. Nos. 162243, 164516, 171875, December 3, 2009, citing Oposa v. Factoran, Jr., G.R. No.101083, 30 July 1993, 224 SCRA 792, 812; Tan v. Director of Forestry, 210 Phil. 244 (1983).

15Director of Forestry vs. Munoz, G.R. Nos. L-24796.and L-25459, June 28, 1968.16Section 26, Rep. Act No. 7942.17Chapter XII, Secs. 72-76, Rep. Act No. 7942.18Rep. Act No. 7586, Sec. 10.19Tenured migrants are those who actually and continuously occupied a portion of a protected area for ve years before itsdesignation as protected area and solely dependent therein for subsistence.20DENR AO 26-08, Rule 15, December 24, 2008.



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participate in community-based programs

in protected areas.21 Te tenure instrument,or PACBRMA, shall be issued only withinmultiple use, sustainable use and buffer zones.

Ancestral domain

Te right of indigenous peoples or indigenouscultural communities (ICC/IPs) to theirancestral domains and ancestral lands emanatesfrom their time immemorial claim. Teserights to ancestral domains of ICCs/IPs byvirtue of native title exist regardless of paperCertificate of Ancestral Lands/Domains itle(CAL/CAD). Tis right includes the rightto develop lands and natural resources.22

It also includes, among others, the right tobenefit and share the profits from allocationand utilization of the natural resourcesfound therein and the right to negotiatethe terms and conditions for the exploitationof natural resources in the areas.23

Other private landsTe New Civil Code likewise recognizesprivate ownership of woodlands24and bestowsupon them the bundle or rights concurrent

with ownership including the right (i)to enjoy and dispose of a thing, withoutother limitations than those established

by law25; and (ii) to exclude any personfrom the enjoyment and disposal thereof.26

Although these statutes recognize private rightsof ownership, they also explicitly provide theStates right to wield its police power to regulatethe use and occupancy of forest reserves.27

Te LGUs share with the national governmentthe responsibility in the management andmaintenance of ecological balance withintheir territorial jurisdiction, subject to theprovisions of the Local Government Code andnational policies. Tey have the right to share

in the national wealth, and the latter refersto all natural resources situated within thePhilippine territorial jurisdiction, includingforest products.

Tis share is equivalent to 40% share of the grosscollection derived by the national governmentfrom taxes, fees or charges from any agreementin the utilization and development of nationalresources within their territorial jurisdiction.Te 40% share is distributed as follows: 20%for the province, 45% for the componentcity/municipality and 35% for the barangay.Proceeds from the share in national wealthmust be applied to development and livelihoodprojects.

21DENR AO 32-04, Section 3, August 31, 2004.

22Rep. Act No. 8371, Sec. 7(b).23Id.24Article 577 of the New Civil Code provides for the rights of a usufructuary of woodland. 25 New Civil Code, Art. 428.26New Civil Code, Art. 429.27Id.



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In a nutshell, with the exception of carbonrights in the ancestral domain, which is aprivate property of the indigenous people,carbon rights are state owned, but suchrights should be given to communities, whoact as stewards of the forest. Tis right shouldbe treated as part of the bundle of rights ofthe tenure holder. Te local governmentright shares in carbon revenues are akin toits share in the distribution of income fromnational wealth.

Transparency and accountability right to

informationTe Constitution expressly provides that theState shall recognize the right of the peopleto information on matters of public concern

and this includes access to official recordsand documents pertaining to official acts,transactions or decisions, subject to limitationsprescribed by law. Tis means that governmentagencies cannot exercise discretion in refusingdisclosure of, or access to, information ofpublic concern. It must be noted that theright to information primarily pertains toinformation in the possession of government.In the context of carbon rights contracts, someinformation may be in the possession of the

private contractors; this may no longer be

within the ambit of the constitutional right

to information. However, such information isessential for the exercise of indigenous peoplesand local communities of their right to Free andPrior Informed Consent. Tere is a pendingFreedom of Information Act in Congress.

Full and effective participation ofstakeholdersRight to participation is enshrined in the1987 Constitution. Art. XIII, Section 16 ofthe Constitution provides for the right of the

people and their organizations to effectiveand reasonable participation at all levelsof social, political and economic decision-making. Similar to the right to information,the Supreme Court has also held that thisright is self-executing and does not need anyimplementing legislation.28

Free and Prior Informed Consent (FPIC)Te Cancun decision requires full andeffective participation of indigenous and local

communities. Tus, FPIC must be required forcarbon rights projects insofar as they affect bothindigenous peoples and local communities.IPRA already mandates the conduct of FPICfor IPs; the need is to enact guidelines for FPICfor non-IPs.

28Legaspi v. Civil Service Commission, G. R. No. 72119, May 29 1987.



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Te legal instrument must follow arights-based approach.

Te legal instrument must uphold thestewardship principle under ArticleXII, Sec. 6 of the Constitution.

Te rights of indigenous peoples and

local communities under internationaland national law must be recognized.

Recognition of carbon rights must bepart of the broader forest tenure reformpolicy.

Carbon rights must be part of a bundleof rights of tenure rights holders and

should not be segregated as a separateright from the tenure instrumentswithin the forest.

Rights holder must be specificallyidentified in the legal instrument inorder to avoid potential conflicting

claims. Any legal instrument on carbon rights

must not result in displacement of localcommunities and indigenous peoples.

Mechanisms to address conictingclaims must be established.

Recommendations for policy makersIt is imperative to enact a legal instrument that will clarify carbon rights in relation toforests, adopting the following framework:



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929Forest Carbon Partnership Facility, Background Note on Benet Sharing for REDD+ regional dialogue, June 2012: Note 1,, accessed on June 18, 2012.

Te advent of REDD-Plus has revivedinterest in forest conservation andpreservation from various stakeholdersbecause of the benefits and incentivesthat may be derived from entering intoforest carbon agreements. In the contextof REDD-Plus, benefit sharing is said toinclude intentional transfers of financial

payments and goods and services todesignated beneficiaries.29

At present, indigenous people and localcommunities continue to enter into forestcarbon contracts without state regulation.Tis leaves them vulnerable to enteringlopsided agreements. For example, oneindigenous community had entered into

an agreement that only gives them 10%share. In another instance, the indigenouscommunity had not been fully informedthat the cost of initial technical survey mayfar outweigh the benefits of the agreement.

Tere are existing guidelines on benefitsharing under the Local Government

Code, NIPAS and Mining Law, among

others, that can be used as a reference forformulating benefit sharing agreements;however, they do not adequately addressthe peculiarities of the REDD-Plus.

Tere is a need to determine whether or notbenefits should be given across stakeholdersboth vertically and horizontally. In the

Philippines, for example, one of theimportant areas to examine is the role of localgovernments in REDD-Plus activities and

whether or not they will receive some formof benefit from the REDD-Plus projectsin the area. In one of the case studies thatthis research examined, a latent conflict wassparked between the local government andthe project proponent because they wanted

to claim the benefits for the carbon projectinstead of the community.

o address the current situation, it isnecessary to enact specific guidance onminimum standards or models for a benefitsharing arrangement. Tis must reflect thefollowing principles:

Guidance in benet sharing



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1. Te goal of benefit sharing is thesustainable development of thecommunity;

2. Benefits must go directly to communities

who actually protect the forest;

3. Benefit sharing must also be dividedfairly and equitably within thecommunity;

4. Communities must be aware of thebasis of the benefit sharing;

5. Over and above financial benefits,non-monetary benefits should also be

included;

6. Funds and other benefits should beunder the control of the community;and

7. Vertical and horizontal benefit sharing

should be ensured.Said guidance on a benefit sharingarrangement shall be based on the specificallocation of carbon rights vis--vis tenureholders in forestlands as provided by acarbon rights law.


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Aside from the principles on benefit

sharing, safeguards should be in place bothduring the negotiation process and uponimplementation of the benefit sharingagreements:

Support services should be available forcommunities negotiating agreements toensure that they get a fair deal from theproject, e.g. legal support.

ere should be a period for readinessand capacity-building.

Establish a review mechanism forbenefit sharing agreements to safeguardthe rights of the ILCs, e.g. a clearinghouse mechanism.

Trust fund mechanisms may be proposedto ensure that the long-term benefits tothe community are in place.

Mechanisms should be established toensure that government officials do nottake advantage of the local communities.

e introduction of monetary benets

may sometimes change communitydynamics and behavior. Strengtheningcommunity mechanisms and ensuringsocial cohesiveness will help in ensuringequitable distribution of benefits at thecommunity level.

Address the practice of power brokersor agents who represent communitiesand in exchange get huge amounts from

the benefits.

Culturally sensitive transparency andaccountability mechanisms.

Government should monitor theimplementation of the agreementincluding the benefit sharingarrangements.


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For more information

Dr. Bernd-Markus Liss

Principal AdvisorDeutsche Gesellschaft fr InternationaleZusammenarbeit (GIZ) GmBH

Department of Environment and NaturalResources, Climate Change Ofce2nd Floor, FASPO BuildingVisayas Avenue, Quezon City 1101Philippines

Phone+63 2 929 6626 local 207Fax+63 2 892 [email protected]

Department of Environment

and Natural Resources

Documents

Carbon Rights Policy