climate law 7 (2017) 150-184 brill.com/clla An Analysis of China’s Legal and Policy Framework for the Sustainability of Foreign Forest Carbon Projects Yixin Xu Southwest University of Political Science and Law [email protected] Abstract China’s policymakers regard forest carbon sequestration as one of the most cost- effective ways to combat climate change. Yet, scholars argue that foreign forest carbon projects in developing countries are environmentally and socially unsustainable. This paper explores China’s policy and legal framework for the sustainability of forest car- bon projects that utilize international carbon-certification schemes. It finds that while China’s government has set ambitious climate goals for the forest sector, the appli- cable regulations are not comprehensively developed, and risks of unsustainability ex- ist in practice. The government should undertake comprehensive institutional reform, including reform to establish implementation regulations for redd projects, adjust laws on forest and land to address climate risks, set up regulatory social-impact as- sessments, and create a greater demand for private forest sustainability assessments.1 Keywords cdm and redd in China – foreign investment in forest carbon projects – sustainability assessment 1 1 The field study for this research was conducted with financial support from the China Schol- arship Council while undertaking my doctorate at Erasmus School of Law. I am deeply grate- ful for the support of my supervisors: Professors Michael Faure and Yuwen Li. I would like to express my appreciation for my interviewees for their time and invaluable insights. I am also grateful to Alexander Zahar and to four anonymous referees of this journal for their feedback on earlier versions of this article. © koninklijke brill nv, leiden, 2017 | doi 10.1163/18786561-00702004Downloaded from Brill.com09/28/2021 01:32:55PM via free access <UN> FOREST CARBON PROJECTS IN CHINA 151 1 Introduction In the lead-up to the unfccc’s cop in 2015, China pledged to considerably re- duce carbon emissions in order to combat climate change.2 Chinese policymak- ers consider forest carbon sequestration to be one of the most cost -effective ways to reduce greenhouse gases to combat climate change.3 However, the im- plementation of forest carbon projects in other developing countries has given rise to significant environmental and social sustainability problems.4 Environ- mental issues mainly revolve around the planting of trees that replace natural forests. This results in a deterioration of the local environment and threatens biodiversity.5 Socially, certain projects make the poor even poorer, and projects sometimes exclude local people from their own land.6 This study assesses the extent to which China’s policies and legal frame- work can deliver sustainable forest carbon projects with foreign investment. I consider three aspects of sustainable development and forest sustainabil- 2 3 4 5 ity:6 economic, environmental, and social. This three-pillar approach is also 2 Kate Sheppard, ‘United States, China Announce Deepened Partnership on Climate’, The Huffington Post, 27 September 2015. 3 Zigui Zhou, Yong Zhang, Lanying Li, Tusheng Li, Jun Ru, and Yanfeng Bai, ‘Development Status, Problems and Suggestions for Forestry Carbon Sequestration in Zhejiang Province’ (浙江省林业碳汇发展现状, 存在问题及对策建议), 1(7) Journal of Zhejiang Agricul- tural Sciences 980 (2014), at 980. 4 A forest carbon project refers to a project implementing forest plantation or forest manage- ment activities with the objective to mitigate or to adapt to climate change. 5 Manny Mogato, ‘Calls on Asian Nations to End Deforestation’, 20 June 2008, <www.reuters. com/article/us-philippines-biodiversity-idUSMAN18800220080620>; ‘Open Letter to Hon- duran dna: Approval of Project 3197, Aguán Biogas Recovery from Palm Oil Mill Effluent’, Carbon Market Watch, 17 February 2012; ‘Press Release: un’s Offsetting Project Barro Blan- co Hampers Panama Peace-Talks’, Carbon Market Watch, 15 March 2012; fern, Sinking the Kyoto Protocol: The links between forests, plantations and carbon sinks (Moreton-in-Marsh, uk: fern, 2000), <www.fern.org/sites/fern.org/files/pubs/briefs/sinking.pdf>, at 9–11; fern, fern’s Contribution to 2015 Climate Change Agreement: Shaping International Climate Policy Beyond 2020 (Brussels: fern, 2013), <www.fern.org/sites/fern.org/files/Response%20to%20 2015%20Climate%20consultation_Final.pdf>, at 4–5; and Toby A. Gardner, Neil D. Burgess, Naikoa Aguilar-Amuchastegui, Jos Barlow, Erika Berenguer, Tom Clements, Finn Danielsen, et al., ‘A Framework for Integrating Biodiversity Concerns into National redd+ Programmes’, 154 Biological Conservation 61 (2012), at 62. 6 Markus Kröger, ‘The Expansion of Industrial Tree Plantations and Dispossession in Brazil’, 43 Development and Change 947 (2012), at 948; ‘The Mandate to Protect Human Rights in the cdm (Newsletter No. 17)’, Carbon Market Watch, 4 July 2011; and Esteve Corbera, Manuel Es- trada, Peter May, Guillermo Navarro, and Pablo Pacheco, ‘Rights to Land, Forests and Carbon in redd+: Insights from Mexico, Brazil and Costa Rica’, 2(1) Forests 301 (2011), at 305. climate law 7 (2017) 150-184 Downloaded from Brill.com09/28/2021 01:32:55PM via free access <UN> 152 Xu adopted in international standards and forest principles.7 Economically, I con- sider the direct economic returns of the projects’ contracting parties. Environ- mentally, I consider biodiversity conservation as the major criterion, because forests in developing countries possess most of the tropical forests and contain the world’s greatest territorial biodiversity.8 Furthermore, forests in developing countries are the livelihood of poor people;9 the survival of 1.6 billion people (some of whom are the world’s poorest) depends on forests.10 In terms of social sustainability, I consider poverty alleviation as a major element. This implies fairness and public participation in the project benefit-sharing and decision- making. Overall, laws and regulations regarding sustainable forest carbon proj- ects in developing countries should contribute to, or at least have no negative impact on, biodiversity conservation and poverty alleviation in the local area. Even if, in some cases, the goal to mitigate climate change may conflict with the goal of sustainable development, I argue for the priority of sustainable use of natural resources in forests.11 Forest carbon projects in China can be divided into two groups: one uti- lizes domestic carbon-certification schemes (domestic forest carbon projects); the other relies on international carbon-certification schemes (foreign forest carbon projects).12 Sustainability issues are the same for both domestic and foreign projects. However, in order to receive internationally credible, trad- able forest-based carbon credits, foreign investors require that forest carbon 7 8 9 10 11 12 projects use international certification schemes. Such schemes may have 7 See, for example, cdm, ‘Voluntary Tool for Describing Sustainable Development Co-Benefits of cdm Project Activities or Programmes of Activities’, sd-tool01, Ver- sion 1.1, at 2; Report of The United Nations Conference on Environment and Development, un General Assembly, the Forest Principles, A/conf.151/26 (Vol. iii) (1992); and oecd, ‘Guideline on Sustainability Impact Assessment’, 05 July 2010, <http://dx.doi.org/ 10.1787/9789264086913-en>, at 4. 8 Norman Myers et al., ‘Biodiversity Hotspots for Conservation Priorities,’ 403(6772) Nature 853 (2000), at 855. 9 ‘90 percent of the world’s 1.1 billion poor—those living on 1 us dollar per day or less— depend on forests for at least some of their income’: United Nations Environment Pro- gramme and World Resources Institute in collaboration with United Nations Develop- ment Programme and World Bank, The Wealth of the Poor—Managing Ecosystems to Fight Poverty (Washington, dc: World Resources Institute, 2005), at 35. 10 Mogato, ‘u.n. Calls on Asian Nations to End Deforestation’, supra note 5. 11 For instance, tree species that absorb carbon faster may deteriorate the biodiversity of the project area. See Mingde Cao, ‘Forest Carbon Sink and Biodiversity Conservation: From Legal Perspective’, 1(2) Revista Catalana de Dret Ambiental 1 (2010), at 6–8. 12 International carbon-certification schemes include schemes for the international com- pliance and voluntary carbon markets, such as the cdm and the Verified Carbon Standard (vcs). climateDownloaded law from 7 Brill.com09/28/2021 (2017) 150-184 01:32:55PM via free access <UN> FOREST CARBON PROJECTS IN CHINA 153 special rules on sustainability and apply special implementing regulations in China. The foreign forest carbon projects need to comply with both interna- tional certification schemes and Chinese law. Sustainable development is a significant criterion for cdm forest car- bon projects, redd activities, and other international carbon-certification schemes.13 Previous literature has criticized the sustainability of forest carbon projects in developing countries.14 This literature, however, lacks a focus on, first, forest carbon projects, and, second, China’s national legal framework.15 This study aims to fill these gaps in the literature by focusing on forest proj- ects in China under the international climate change regime. It also aims to serve as a reference for other developing countries tackling similar problems in foreign forest carbon projects. Hence, I generalize the nature of the prob- lems of unsustainability to shed light on the necessary