Cash-Strapped Tribes Struggle With Moral Dilemmas of Entering Carbon Markets

The rush is on, and CO2 could be the new gold.

Or is it another scheme to appropriate tribal land and resources without addressing the root cause of climate change?

The complicated world of carbon markets could mean millions of dollars for tribal communities across Indian Country that are willing to sell carbon dioxide credits for their untapped lands and pristine forests.

For some, carbon dioxide — a key component in climate change — could replace gaming as a key economic force. Others fear tribes are being manipulated to allow continuing destruction of the world’s climate.

It’s a key point of discussion at the United Nation’s Climate Conference, known as COP26, underway now through Nov. 12 in Glasgow, Scotland, where world leaders are working to find ways to halt the rapid changes in climate.

A number of Indigenous activists and organizations will be on hand at COP26 for several days holding informational events and protests at the conference’s public Green Zone to call attention to what they describe as false solutions such as carbon markets to addressing climate change.

“How can we put a price on the air we breathe?” asked Tom Goldtooth, Dine’ and Dakota, executive director of the Indigenous Environmental Network who is attending COP26 in Glasgow.

Goldtooth said carbon markets allow industries to continue polluting by paying for allowances or reductions elsewhere.

Bryan Van Stippen, however, a citizen of the Oneida Tribe of Wisconsin and program director for the National Indian Carbon Coalition, said the answer is not that simple.

“Carbon markets are not the final solution but at least they give tribes opportunities to develop additional practices and protect and preserve their natural resources,” Van Stippen said.

What is undisputed in the Wild West of emerging carbon markets, however, is that tribal lands hold great interest for investors. Not only do tribes own large swaths of lands capable of sequestering tons of CO2, companies that partner with them accrue added social corporate responsibility benefits to bolster a climate-friendly image.

And while much about the carbon markets remains uncertain — including rules, regulations and procedures — big business isn’t waiting for the dust to settle. The carbon market is on track this year to break an annual value of $1 billion, according to Ecosystem Marketplace, a forest trends nonprofit organization.

In a recent interview with Indian Country Today, Fawn Sharp, president of the National Congress of American Indian and citizen of the Quinault Nation, compared carbon markets to gaming in terms of financial potential for tribes.

“As with gaming, there is potential for carbon markets to transform Indian Country,” Sharp said.

What Are Carbon Markets?

Eyes are now focused on the COP26 talks in Glasgow as parties attempt to finalize the remaining piece of the Paris Agreement, an international treaty reached by participating countries at COP21 in 2015.

The final provision, known as Article 6, addresses rules and frameworks for countries to use carbon markets as a means to help achieve the goals of the agreement.

Under the Paris Agreement, 196 parties or countries agreed to reduce their emissions in order to limit global warming to well below 2 degrees Celsius, preferably below 1.5 degrees Celsius, to reach a climate-neutral world, or net-zero, by the middle of the 21st century.

Many countries and companies maintain that in order to achieve net-zero, pollution will have to be balanced by an equal amount of carbon reliably captured elsewhere, such as through forests or technological means.

That makes the Article 6 rules crucial to the plan. Although countries could reach their own carbon targets by financing carbon-cutting projects in other countries, the rules governing transparency, accounting and ways to prevent double-counting need to be created and agreed upon.

Establishing a truly international carbon market presents an opportunity to raise money through transaction fees, but the question of who would manage those remains unresolved.

Indigenous and other environmental activists, however, say carbon markets are an example of “green washing,” attempts by polluting industries to use cosmetic changes to cover up the harm they are doing while appearing environmentally responsible.

According to “Hoodwinked in the Hothouse,” a publication created by the Indigenous Environmental Network and other organizations, carbon markets represent a false solution to the climate crisis by allowing industry to continue producing high levels of CO2 rather than focusing on reducing emissions and reliance on fossil fuels.

According to Carbon Market Watch, however, the bottom line is that trading of emission reductions will happen regardless of whether there is a deal on Article 6 at COP26. An agreement, however, could impact private sector carbon markets by sending a political signal about what is or isn’t acceptable.

Meanwhile, carbon traders are beating down the doors of tribal leaders as tribal governments and citizens rush to navigate the emerging market.

Competing Carbon Markets

Carbon dioxide is produced by animals, including humans, and is absorbed by plants and oceans. But burning coal, oil and natural gas since the late 19th century has far oustripped what plants and oceans can remove from the air. Excess CO2 is one of the main causes of global warming.

In addition to reducing their output of CO2, companies are turning to carbon trading or markets to offset their production. There are a variety of markets for trading carbon, and carbon credits accrued in one market might not be valued in another.

It’s a complicated system, with self-styled compliance and voluntary markets.

Compliance markets, such as California’s Regional Greenhouse Gas Initiative, issue industries a certain allocation of carbon credits for each ton of CO2 emitted annually.

Companies that are unable to stay within their credit allotments can acquire them from other companies within the initiative or purchase carbon credits or offsets from organizations that sequester carbon. That would include tribes that operate forestry, agriculture or any program that protects resources on tribal lands.

Van Stippen said there are requirements and restrictions for tribes participating in compliance markets.

“We’ve run across three major issues for tribes entering compliance markets. One, there is a 100-year time commitment to putting lands into a carbon project,” he said. “Two, participation requires a limited waiver of tribal sovereign immunity, and three, tribes may have concerns that since the oil and gas industry are clients, the market allows polluters to continue to pollute.”

Credits in the compliance market are sold via auction. Since these offsets experience commodity pricing, they are priced according to supply and demand and are usually priced higher than credits acquired in voluntary markets.

Several tribes, including the Yurok Tribe in California, participate in the California compliance market. The tribe was awarded the Equator Prize by the U.N Development Programme in 2018 for its climate mitigation work associated with the market.

The tribe dedicated a large portion of its forest for carbon sequestration; with the profits, they have supported housing and road improvement and bought back tens of thousands of acres of their traditional territory.

As of September 2020, 78.9 million carbon offset credits were issued to tribes or Alaska Native Corporations for forest projects through California’s program.

There are a number of risks associated with compliance markets for tribes. For example, if a tribe sold carbon credits under a forest project and the forest burned down, the tribe could potentially be on the hook for the cost of the credits. Although a “buffer pool” of extra land is usually included in the agreements to offset such disasters, critics say the size is seldom enough to cover the losses.

Voluntary markets allow companies to offset emissions by buying carbon credits from projects that reduce CO2 from the atmosphere.

Buyers participate either individually or as part of an industry-wide program. Unlike compliance markets, voluntary markets are not restricted by geographical boundaries and are not limited to certain industries. According to the Taskforce on Scaling Voluntary Carbon Markets, the worth of these markets could reach $50 billion by 2030.

Although carbon credits in the voluntary markets are usually priced lower than in the compliance markets, they generate additional benefits such as addressing the U.N. Sustainable Development Goals that include improving life for local populations or reducing poverty.

Credits in the voluntary markets may also represent what market insiders call “charismatic value.” Buyers, for instance, may pay a premium to be associated with projects representing Native cultural and/or land restoration.

For tribes, voluntary markets require only a 40-year commitment for a project and have no requirement for waiver of sovereign immunity. Van Stippen prefers to work with voluntary markets.

“We work with socially responsible organizations in the purchase of carbon credits rather than selling them through auction methods,” he said. “Tribal councils have some say in who purchases their credits.”

Van Stippen works with tribal leadership, staff and membership to ensure they understand the complexities of the markets and the differences.

“Oftentimes we get into conversations with tribes and they say they aren’t comfortable entering the market at this time,” he said. “I’m fine with that. Now they have the data and maybe sometime in the future they may want to participate.”

In addition to oil and gas companies, industries such as Apple, Amazon, Google, Disney and General Mills are joining the market as they voluntarily set their own net-zero targets.

Some voluntary markets participate in private verification organizations such as Verra, Gold Standard or American Carbon Registry. Currently, however, there is no government regulation for voluntary carbon markets.

Overall, however, carbon markets have been criticized for overvaluing carbon credits, bad accounting and offering prices that are too low to be effective. Part of the work at COP26 will be creating regulations and ways to verify carbon credits in the global market.

Hard Choices

Although carbon markets hold allure for cash-strapped tribes especially during the COVID era, many communities struggle with the moral implications of such deals.

In 2018, citizens of the Menominee Tribe of Wisconsin — which manages its vast forest through Menominee Tribal Enterprises — had a strong emotional response when leaders brought carbon market proposals to the table.

The Menominee Forest is frequently described as the largest tract of virgin timberland in the Great Lakes region. The tribe’s management, which includes traditional knowledge along with scientific methodology, is seen as an exemplary example of responsibility and sustainability.

In the 1960s the federal government terminated the tribe’s status as a sovereign nation, partially motivated by the belief that the Menominee’s successful forestry and timber operations could support the tribe economically.

The results were devastating for the tribe, and in an historic, divisive battle, they managed to regain their status as a federally recognized tribe in 1973. Subsequently, Menominee citizens are very protective of their forest and sovereignty and any attempts seen as threatening those assets.

“People had a very emotional response to suggestions that we enter carbon markets,” said Jasmine Neosh, a Menominee citizen. “It got really serious. People were talking about running people out of town.”

Neosh is a former student worker at the College of Menominee Nation’s Sustainable Development Institute. The college helped offer background information to the community about climate change and carbon sequestration and how the two are related, Neosh said.

“Since Termination and Restoration, we are like the ultimate fine print readers,” Neosh said. “The more we dug into the details of carbon markets, the less we liked it.”

People were concerned about protecting the tribe’s sovereignty and worried that entering carbon markets would allow polluters to use the tribe as an excuse to keep polluting.

“There was a moral aspect to it,” Neosh said. “Plus, the proposal was like a modern-day version of historic treaty negotiations in which we often didn’t have all the information in front of us when the government offered us money for our land.”

In the end, the community decided not only to opt out of the carbon market but passed legislation banning any further consideration or implementation of any forest carbon offset or cap-and-trade program.

But the reality is that the tribe needs money.

“I wanted to explore the carbon markets and invited a company to give us a presentation,” said Doug Cox, chairman of the Menominee Tribe. “But people didn’t take time to listen.”

Citizens misinterpreted the presentation as leadership’s commitment to enter carbon markets, according to Cox.

“We wanted to see if the venture might be right for us but membership thought we’d already signed the contracts,” Cox said. “People were afraid of the unknown and afraid that if we got into carbon markets, we would essentially be letting an external entity manage our forest.”

The legislation has put a hold on entering carbon markets for now, he said.

“Like any government, we have the right to change legislation,” Cox said. “It could happen in the future.”

Neosh agrees that carbon markets are a hot subject.

“I think it’s beneficial for tribes to understand what they are getting themselves into,” she said.

“Gaining a Seat at the Table”

Sharp, a vice president and former president of the Quinault Nation, envisions carbon markets as a means for tribes to confront the existential threat of climate change.

Sharp has a long history of fighting threats posed by climate change to her own tribe and across Indian Country.

In 2020, she proposed a carbon fee on businesses operating on Quinault lands, describing it as a way to hold polluters responsible for generations of exploitation that has contributed to the forced relocation of tribal citizens in the village of Taholah in Washington state.

The Quinault Nation is in the process of relocating its tribal operations to higher ground because of rising sea levels, warming temperatures and coastal erosion.

In July, the U.S. House Appropriations Committee voted to pass a funding package to help with relocation costs caused by climate change for both the Quileute and Quinault villages in Washington.

In April, the state of Washington passed a carbon cap-and-trade measure that puts a price on carbon emissions and includes a 5-cent increase of the gas tax. Businesses can sell extra credits or buy them from others in Washington’s carbon market. Money collected would go toward projects that include energy conservation, transportation and assistance for a transition to clean energy.

Sharp and others lobbied hard for and won a mandate in the bill that sets 10 percent of carbon revenue aside for Washington tribes.

According to Sharp’s senior advisor Matthew Randazzo, the legislation is especially noteworthy because 10 percent of Washington’s land base is directly under governance of the state’s 29 federally recognized tribes.

“There’s a huge resource deficit and inequity in how tribal lands and especially how environmental projects are funded,” Randazzo said. “This law is key because it actually mandated equivalent funding dollar-for-dollar for tribal lands across the state.”

According to Sharp, tribes have rights as sovereign governments to choose how and if they participate in carbon markets, both nationally and internationally.

“Tribes are gaining a seat at the world’s diplomatic table,” Sharp said. “We’re going to continue to advance a clear agenda for Indian Country.”

Smack Down in Glasgow

The hard work of negotiating the details of Article 6 is now happening at COP26, and the outcome will have an impact on U.S. carbon markets and tribes.

“Tribal nations have their own concerns and powers to determine how best to redefine our new green economy,” said Sharp, who is meeting with world leaders in Glasgow at the conference. “We are supporting all of those options and ensuring that the agenda that’s being advanced is inclusive.”

One of the big sticking points is something called “additionality.” Currently, projects forwarded for participation in carbon markets need to show that without funding from carbon credits the projects would harm the ecosystem or land. This concept, according to experts, doesn’t align with the values of tribes. They say that tribes should have a special standing to monetize the carbon value being delivered from their lands so they can do more to protect them.

Another concern is double-counting by countries such as Brazil. Although Brazil’s President Jair Bolsonaro initially promised during his 2018 campaign to allow greater access to the Amazon’s vast forest and resources, downplaying Indigenous rights, he has since promised to eliminate illegal deforestation in two to three years.

Bolsonaro also supports double-counting carbon credits for Brazil’s forests, allowing both Brazil and countries buying offsets to count the credits.

Although the world’s Indigenous peoples represent a high level of charismatic investor power in carbon markets and nature-based solutions, they are among the most vulnerable to the impacts of climate change and hold the least political and economic power over these lands.

Despite being only 5 percent of the world’s population, they manage 80 percent of the planet’s biodiversity. In the preamble of the landmark 2015 UN Paris COP21 agreement binding member countries together to battle climate change, parties acknowledge that action should be guided by knowledge of Indigenous peoples.

But that doesn’t mean officials always listen.

On Nov. 1, however, the United Kingdom, the U.S., Germany, Norway and the Netherlands announced at COP26 that they are pledging $1.47 billion directly to Indigenous peoples to reverse forest loss and degradation by 2030.

“We are happy with the financial announcement but we will be watching for concrete measures,” Tuntiak Katan, of Ecuador’s Shuar people, told The Guardian. “The U.K is at a crossroads; they can either use our presence as a photo op or they can choose to become a global champion for Indigenous peoples and local economies.”

Looking Ahead

As Article 6 negotiations get into high gear in Glasgow, U.N. leaders are facing tough questions from the press, non-governmental organizations and climate activists.

Under the Paris Agreement, countries can use carbon markets to achieve their carbon emissions goals. Under Article 6, countries can use market mechanisms or non-market approaches such as development aid.

Market mechanisms include creating a new U.N.-governed international carbon market in which credits could be generated by a renewable power plant or restoration of forest. Countries could also sell excess through emission cuts to countries that haven’t achieved their goals.

In a recent statement, the Environmental Defense Fund, Conservation International, the Nature Conservancy and the International Emissions Trading Association called for “robust, clear guidance” on Article 6 rules. They also called for rules preventing double-counting of mitigation efforts and comprehensive reporting and transparency.

On Nov. 2, the first day of negotiations on Article 6, COP26 President Alok Sharma fielded questions from reporters during a press conference.

“Should investors be making a profit from solving a problem for which they are partly responsible?” one reporter asked.

Sharma responded that over the last few years, private investors and financial services have been making a move to go green.

“There is a big momentum from the private sector to pursue green growth; this is something we should welcome,” Sharma said.

Sharma also responded to questions about the lack of a clear methodology to figure out what financing carbon emissions means and what offsets could be used and when. He said the rules would require business to include science-based targets.

“This is about working together collectively to ensure that we can reach an agreement,” Sharma said. “There is clear agreement that climate change doesn’t recognize borders; it transcends what I would call normal politics.”

The Associated Press contributed to this article.