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Forest Carbon, Cash and Crime: New report from Global Witness

Forest Carbon, Cash and CrimeA new report by Global Witness reveals two conflicting views of REDD. First, forests are near the top of the global political agenda and REDD is an “unprecedented opportunity” to address deforestation. Second, “The potential for criminality is vast and has not been taken into account by the people who set it up,” as Interpol’s Peter Younger pointed out in 2009.

The report is titled, “Forest Carbon, Cash and Crime: The Risk of Criminal Engagement in REDD+”, and can be downloaded here (pdf file 1.2 MB). The first photograph in the report illustrates one dimension of the problem. A forest guard in Cameroon stands in a blue uniform and green beret next to a hastily painted sign: “Controle des Eaux et Forests”. He is responsible for policing hundreds of thousands of hectares of forest in which several well-financed European logging companies operate, yet, Global Witness notes, “he has no vehicle, no radio, and his shoes are several sizes too small”.

Writing in Environmental Finance about the new report, Davyth Stewart from Global Witness notes that billions of dollars have already been invested in REDD, including US$5 billion from northern governments. Once REDD is up and running payments could increase to many times this amount. “Of particular concern to Global Witness”, Stewart writes, “is whether these new investments will achieve genuine forest protection, or simply make things worse.”

Global Witness’s report indicates how serious the problems associated with trading forest carbon are, by highlighting six areas of the forest sector where REDD is vulnerable to criminal exploitation:

    (i) Illegal logging;
    (ii) Illegal land grabs;
    (iii) Ownership of and trading in “carbon rights”;
    (iv) Poor regulation of a carbon market for REDD+;
    (v) Theft and misappropriation of REDD+ funds; and
    (vi) Manipulating the measurements for the amount of carbon stored in forests.

In its report, Global Witness writes that,

Poor regulation and oversight with the forest sector provides the legal loopholes that allow criminal activity (such as illegal logging, fraud and corruption) to continue in developing countries.

This is not, however, only a call for new legislation in the countries where illegal logging takes place:

Increased regulation puts a correspondingly increased burden on forest law enforcement agencies to enforce those rules. If sufficient resources are not invested in law enforcement, leaving forestry officials over-stretched, it is anticipated we will see an increasing amount of illegal logging, particularly amongst those logging operations that are already operating on the margins of the law.

Addressing illegal logging also means that timber importing countries have to improve their legislation and law enforcement. Examples are the Lacey Act in the USA, which puts the emphasis on making importers of timber responsible for making sure the timber is legal. The European Commission’s Forest Law Enforcement, Governance and Trade (FLEGT) initiative aims at making sure that only legally harvested timber is imported to the EU.

Things become even more complicated when carbon trading is involved. “Fraud in the trade of forest carbon can be easy to conceal, and difficult to monitor and control,” Global Witness points out.

In July 2008, Interpol and the World Bank started an investigation into illegal logging called Project Chainsaw. A document produced in October 2010 under this project (pdf file 1.1 MB) briefly looks at REDD. “There is an inescapable nexus between emissions trading, illegal logging and organized crime,” Interpol’s report notes. Interpol gives an example in an unnamed country where “a number of individuals, including persons in positions of authority, have been formally charged with crimes associated to Carbon Credits and Forestry.”

The accused purchased tracts of forest with boundaries either nonexistent or poorly marked, which they then on sold to companies they owned.
The Carbon credits available from the ownership of the forests were then sold to the provincial agency responsible for offering the emission carbon bonds to industrialized countries.
The crime was discovered after the true owners of the forest approached the authorities.
In order to facilitate this crime those involved used fraudulent documents and have subsequently been charged with counterfeiting and misuse of public and private instruments.
Authorities estimate the value of the fraud at USD80 million.
The complexity of this particular case, involving, fraudulent documents, remote forest areas with unclear records as to ownership, and subsequent trade in the carbon credits has seen this investigation last two years to date. It is still ongoing.

“It is inevitable,” Interpol comments, “that criminals, particularly targeting developing or poorly resourced countries, will see the issue of Carbon Credits and their potential when related to forests and as an internationally tradable commodity as an opportunity for exploitation.”

If we add to this mix the poor regulation of carbon markets, the possibility of theft and misappropriation of REDD funds and the manipulation of the measurements of carbon stored in forests, the future’s looking bright. If REDD becomes a carbon trading mechanism, that is. And if you’re a criminal.

Full Disclosure: REDD-Monitor has in the past received funding from Global Witness. Click here for all of REDD-Monitor’s funding sources.

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