1. INTRODUCTION
Climate change is a global environmental issue, yet various domestic policies have also been employed to address it,Footnote 1 including some at the subnational level.Footnote 2 Brazil and the United States (US) provide interesting examples. Subnational policies in the US have resulted from a divergence with the federal government;Footnote 3 in Brazil, states in the Amazon region have made efforts to promote the principles of Reduction of Emissions from Deforestation and Forest Degradation (REDD) in trying to influence the country’s national position on the issue.Footnote 4
California (US) has been at the forefront of subnational climate policy, and it has also been active in the transnational arena, having recently joined its cap-and-trade programme with that of the Canadian province of Québec.Footnote 5 Moreover, California has led the creation of the Governors’ Climate and Forests Task Force (GCF)Footnote 6 and it subsequently concluded, in 2010, a memorandum of understanding (MOU) with the Brazilian state of Acre and the Mexican state of Chiapas relating to the linkage of programmes in those states with the Californian climate change policy.Footnote 7
This cooperation is interesting because of the role that these three subnational jurisdictions perform within their respective federations. California is well known as a trendsetter in environmental legislation in the US.Footnote 8 In Brazil, Acre is one of the birthplaces of the country’s contemporary environmental movement.Footnote 9 In Mexico, Chiapas has been employing carbon-related programmes since at least 1995.Footnote 10 The cooperation has the potential to influence international climate change negotiations. Moreover, being based on REDD, this process also mobilizes a full range of REDD opponents and supporters.
Since the linkage is still developing, this commentary aims to provide a general overview of the process from the perspective of international law. It will focus on California and Acre, given that their negotiations are the most advanced. Firstly, it will present the climate change policies of California and Acre, followed by a discussion of the general contours of the linkage process. Finally, it will consider some challenges to the process and its potential influence in Brazil, the US, and multilateral climate negotiations.
2. CALIFORNIA’S CLIMATE CHANGE POLICY
California has a history of pioneering environmental legislation within the US;Footnote 11 environmental policies are often tested there before gaining traction at the federal level.Footnote 12 Therefore, its policies on climate change may play a pivotal role in shaping future climate change policy in other US states and at the federal level.
California has been addressing climate change since at least 1988,Footnote 13 but its current policy started to take shape in 2005 with the establishment of greenhouse gas (GHG) emissions reduction targets.Footnote 14 In 2006, the State Legislature enacted Assembly Bill No. 32 (AB 32), which provided for a comprehensive climate change policy. AB 32 establishes an emissions level equal to that of 1990 as a target to be achieved by 2020,Footnote 15 and also lays down a framework for adopting targets thereafter.Footnote 16 To meet these targets, the California State Air Resources Board (CARB) employs various tools, such as the adoption of fuel standards, the mandatory recycling of various goods, the establishment of renewable energy targets for electricity, and a cap-and-trade programme.
California’s cap-and-trade programme has been in operation since 2012 and is scheduled to remain in force until at least 31 December 2020,Footnote 17 with three compliance periods: 2013–14, 2015–17, and 2018–20. The programme allows the use of various compliance instruments, including offsets generated out of California.Footnote 18 For the moment, the only external allowancesFootnote 19 and offsetsFootnote 20 permitted are those originating from the Canadian province of Québec,Footnote 21 in respect of which an actual bilateral exchange takes place.Footnote 22 In the case of Acre (and Chiapas), what is envisaged instead is a unilateral flow of offsets to the Californian market.
The key to this linkage lies in the somewhat vague expression ‘sector-based credits recognized by the CARB’,Footnote 23 which is used to describe an emissions reduction programme in a developing country, or a jurisdiction within a developing country, and covering a specific economic sector. So far, only REDD plans may generate such sector-based credits.Footnote 24
REDD+ – defined as ‘Reduction of Emissions from Deforestation and Forest Degradation, and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks’Footnote 25 – was developed under the auspices of the United Nations Framework Convention on Climate Change (UNFCCC)Footnote 26 to cope with deforestation in developing nations. It can be traced to 2005, when a proposal for Reducing Emissions from Deforestation (RED) was presented at the 11th Conference of the Parties (COP) to the UNFCCC.Footnote 27 In 2007, it was broadened to include forest degradation (REDD).Footnote 28 From 2009 the ‘role of conservation, sustainable management of forests and enhancement of carbon stocks’ (the ‘+’ in REDD+) has been included in official UNFCCC documents.Footnote 29 In essence, REDD+ would be a way to foster GHG emissions reductions from forestry through results-based finance flowing from developed to developing countries.Footnote 30 In the case of California, the use of RED, REDD, or REDD+ depends solely on the scope of the programme adopted by the state, and thus the term REDD is hereinafter used.
Despite its conceptual simplicity, certain problems must be addressed before and during the design and implementation of REDD, particularly in the case of a linkage with a cap-and-trade market. Firstly, given that offsets need to be based on actual GHG emissions reductions, forestry emissions reductions need to be greater than those that would normally take place,Footnote 31 leading to the need to define reference levels for compensating for the additional effort as well as establishing robust measurement, reporting and verification procedures.Footnote 32 Secondly, mechanisms for guaranteeing the permanence of such reductions over time need to be employed.Footnote 33 Thirdly, social safeguards are essential in light of often overlapping rights and uses related to forests.Footnote 34 Fourthly, environmental safeguards are also necessary in order to avoid distortions that could arise from a narrow focus on GHG emissions reductions (such as the introduction of exotic species to address forest degradation).Footnote 35 Lastly, but not least, it is important to consider that many potential REDD recipients lack the institutional capacity to deal with deforestation,Footnote 36 or may be unable to implement the rule of law in forest areas within their national borders.Footnote 37
Given California’s influence in the US, its efforts to link with a subnational jurisdiction from a developing country in order to insert REDD into its climate change policy may provide a proof of concept that may influence similar initiatives in the future.Footnote 38
3. ACRE’S ‘STATE SYSTEM FOR ENVIRONMENTAL SERVICES’
The Brazilian state of Acre is one of the birthplaces of the contemporary Brazilian environmental movement as a result of the legacy of its native Chico Mendes.Footnote 39 Since 1999, Acre has experimented with public policies designed to provide a sustainable forest-based economy to the state,Footnote 40 and has thus been hailed as a leader in REDD initiatives.Footnote 41
Acre witnessed the birth of the rubber tappers movement in the 1970s, which was a reaction to government policies that led to the occupation of lands where rubber tappers traditionally lived and worked. The movement, mostly non-violent, soon faced violent reaction: in 1980, Wilson Pinheiro, a leader of the rubber tappers movement, was killed.Footnote 42 In 1988, another leader – Francisco Alves Mendes Filho, known as ‘Chico Mendes’ – was shot dead three days before Christmas.Footnote 43
The widespread reaction to this second murder in the international press surprised Brazilian authorities,Footnote 44 and helped to galvanize the environmental movement in the country.Footnote 45 In Acre, it led to the emergence of a new political/cultural/ideological movement known as florestania,Footnote 46 which later became the dominant political force in the state and also influenced Brazilian national politics.Footnote 47
Based on the idea of florestania, the state has focused its development policies on the sustainable use of forest resources, which is how the state’s drive to REDD came about.Footnote 48 In October 2010, State Law n. 2308/2010 was enacted, establishing the State System of Incentives for Environmental Services (SISA) ‘with the aim of promoting the maintenance and expansion of supply of various ecosystem products and services’,Footnote 49 which provides the framework for REDD in Acre.Footnote 50 In order to implement the SISA, various institutions were created. These included a public and private joint stock company,Footnote 51 which is to be the main vehicle through which the state may transact with private investors to sell carbon credits.
By establishing a comprehensive framework for dealing with REDD at the subnational level, Acre has been hailed as a leader in the field. In addition to working with California, Acre has engaged the Brazilian states of São Paulo and Rio de Janeiro in order to link its programme with their respective climate policies.Footnote 52 In 2013, Acre reportedly sold REDD-based early action credits to the German bank, KfW,Footnote 53 although it was thought in 2012 to be at least three years away from being able to issue credits based on REDD.Footnote 54 Nevertheless, various issues – such as the non-acceptance of REDD credits by compliance markets (including the Californian market), and the low price of carbon in voluntary markets – have prevented Acre from issuing REDD-based credits.Footnote 55
4. LINKING THE POLICIES OF ACRE AND CALIFORNIA
The process of linking the REDD programme in Acre with the Californian GHG cap-and-trade programme is based on Acre’s introduction of emissions offsets from REDD into the Californian programme. The MOU between the states of California, Acre and Chiapas authorized the creation of a working group of experts on REDD to provide recommendations on this process. The group, eventually named the REDD+ Offset Working Group (ROW), is composed of ten experts, one facilitator and three state observers.Footnote 56 The group’s final report was released in July 2013 and contained a set of recommendations to the CARB on the design options for REDD and on the legal frameworks and linkage options.Footnote 57 It is likely that these recommendations will influence the debate on REDD regulation in California, although it is not clear whether California will ultimately move towards incorporating REDD into its climate change policy.Footnote 58
4.1. Direct Engagement between Acre and California
Direct engagement between subnational jurisdictions may be called ‘paradiplomacy’, a term referring to international activity performed by subnational governments.Footnote 59 Paradiplomacy is not new and can be traced back to early networks of subnational governments that sought to facilitate cross-border cooperation by influencing the decision-making processes conducted by sovereign entities.Footnote 60 However, what is remarkable about the emerging linkage between California and Acre is the fact that, if concluded, it would establish a formal, legally binding system of rights and obligations, crafted through the acts of non-sovereign subnational jurisdictions located in different sovereign states. This system is most likely to be established through the use of legislative harmonization and mutual recognition of rights, institutions and procedures, given that both the BrazilianFootnote 61 and AmericanFootnote 62 Constitutions disallow states from entering into international treaties. An indirect linkage would also be possible, making use of a third-party standard, in which case California could provide recognition to all REDD credits that conform with a certain standard established by a third party, and Acre could generate credits conforming to this standard.Footnote 63
This system of rights and obligations between California and Acre may be understood as:
(a) the right of Acre to issue offset credits based on its REDD programme, and the right of entities in California to buy these credits;
(b) the right of entities in California to use these credits as part of their AB 32 compliance efforts, combined with the duty of California to recognize such credits from Acre as compliance instruments in its cap-and-trade programme;
(c) the duty of Acre to rectify losses sustained by Californian entities in the event of non-permanence of emissions reductions (such as in the case of a forest fire).
Acre’s right to issue emissions reduction credits deriving from its REDD programme would be based on its domestic lawFootnote 64 and on the fact that there is no known prohibition against such issuance under Brazilian law.Footnote 65 The Californian entities’ right to use credits from Acre as part of their AB 32 compliance efforts, as well as the corresponding duty of California to recognize such credits as compliance instruments within its cap-and-trade programme, would be based on the current provisions for sector-based offset credits,Footnote 66 complemented by further regulation from CARB. As in the case of the linkage between California and Québec,Footnote 67 a specific provision regarding offsets from Acre could be added to the California regulations. If linkage were to proceed, private entities in California would be able to use credits from Acre to fulfil a small part of their mandated GHG emissions reduction targets (up to 2% in the first and second compliance periods, and 4% in subsequent periods).Footnote 68
The duty on the part of Acre to rectify losses sustained by Californian entities in the event of non-permanence of emissions reductions would be likely to rely on contract law and on Acre’s domestic law. This issue is more complex, and may be clarified by comparing it with the way in which non-permanence is addressed in forestry projects in California. In such projects, the remedy for non-permanence depends on whether the non-permanence is intentional. A portion of credits originating from forestry projects is placed into a Forest Buffer account.Footnote 69 In the event of non-intentional non-permanence, credits are reversed from this account to replace the invalidated credits without any penalty imposed on the forest owner.Footnote 70 However, in the event of intentional non-permanence, the forest owner is liable and must make up the shortfall.Footnote 71
In the case of REDD in Acre, if the linkage with California is to proceed, an equivalent solution must be found since it is unlikely that private entities in California would be interested in credits without guarantees against non-permanence. Also, Californian law itself establishes that all cap-and-trade credit instruments from sector-based offset crediting programmes must be enforceable,Footnote 72 and the linkage of California with another GHG emissions reduction programme may come into being under Californian law only if the State Governor finds that enforcement is at least equivalent to what is possible under that domestic law.Footnote 73
It is likely, therefore, that Acre would have to employ a mix of measures, such as the establishment of a state-wide REDD buffer account, insurance, and instruments of contract law (such as liquidated damages and penalty clauses). In the latter case, given the constraints of contracting directly with the state, the private and public joint stock corporation created by AcreFootnote 74 is likely to become the entity to contract with private actors in California.
Although paradiplomacy would not, in itself, establish this system of rights and obligations, it would be the means through which California and Acre manifest their political will and coordinate domestic actions in order to make the proposed linkage possible. Nevertheless, whenever paradiplomacy is used, there is a risk of disapproval by central governments.Footnote 75 In the case of California and Acre, the approval of (or non-objection by) their respective central governments is essential, given that investments and liabilities would be exchanged between both states.
California has been acting internationally on the issue of climate change for many years and has concluded a linkage with Québec (Canada), without facing federal government opposition.Footnote 76 Acre has already sold REDD credits, apparently without federal opposition.Footnote 77 However, in 2013, Brazil officially stated, along with representatives of other developing countries, that REDD should not be used to offset mitigation commitments from developed countries.Footnote 78 Given that the approach sought by California is precisely the use of REDD as a way to partially offset its mitigation commitments, it is still unclear whether the national Brazilian government would allow the California–Acre linkage, as illustrated by the conflicting positions of the Brazilian national government and of some Brazilian states on the issue during the 20th UNFCCC COP in Lima (Peru), in December 2014.Footnote 79
In fact, the use of markets to finance forest conservation has been a contentious issue for Brazil. The first attempt within the UNFCCC framework to address deforestation through market mechanisms took place during the discussion of the rules to govern the Clean Development Mechanism (CDM);Footnote 80 this restricted forestry projects to afforestation and reforestationFootnote 81 and avoided deforestation projects which were ruled out ‘for technical reasons’,Footnote 82 based mostly on Brazilian and European opposition.Footnote 83 European countries argued that carbon in forests could potentially always end up in the atmosphere because of the risk of non-permanence.Footnote 84
The opposition from Brazil has historically derived from the perception that there is a conspiracy to ‘internationalize’ the Amazon, as with Antarctica; inserting the Amazon rainforest into a carbon-based system of payments was seen as a step towards such internationalization.Footnote 85
The Brazilian position persisted during the debate on REDD. However, Brazil’s official stance obscures internal divisions in the country, notably between the Ministry of Environment (MMA), and the Ministries of Foreign Affairs (MRE) and Science and Technology (MCT).Footnote 86 Governors from states located in the Brazilian Amazon, such as Acre, have favoured the use of all types of approach to REDD, including those of a market-based nature. Such divisions and internal pressure from Amazonian states apparently led Brazil eventually to soften its stance on the matter,Footnote 87 although the country’s position in 2013 indicates a return to its former position.Footnote 88 The fact that Acre has signed the New York Declaration on Forests,Footnote 89 whereas Brazil has not, also sheds some light on this divergence of opinions within the country.
Therefore, the linkage of a Brazilian subnational jurisdiction with the Californian GHG cap-and-trade mechanism could have repercussions in the REDD negotiations within the UNFCCC framework. Furthermore, given the international interactions of California, this may lead to a similar inclusion of REDD in other cap-and-trade markets in the future, given that the Californian example could provide a blueprint to be followed by other cap-and-trade programmes.Footnote 90
More broadly, in the US this linkage may serve as a testing ground for future federal policy. It should be noted that there have been attempts to include REDD in American federal policy on climate change, through the now defunct Waxman-Markey and Kerry-Lieberman bills.Footnote 91 The former specifically provided for the use of REDD offset credits,Footnote 92 including those from subnational programmes.Footnote 93
Despite reports of fading private interest in REDDFootnote 94 and doubts about its viability,Footnote 95 the support of various market actors and NGOs in a letter to the chairman of the CARB and the Governor of California suggests that demand for REDD credits would exist if the California–Acre linkage were to occur.Footnote 96 However, it should be acknowledged that there are actors in both Acre and California opposed to this linkage, especially those concerned for the well-being of communities in CaliforniaFootnote 97 and of indigenous and traditional populations in Acre.Footnote 98
5. CONCLUDING THOUGHTS
California and Acre have been moving towards linking their respective climate change policies. This effort is interesting because it is being pursued directly between two subnational jurisdictions located in different countries.
From California’s perspective, the inclusion of REDD in its cap-and-trade programme can be considered as an additional way through which private entities in the state would be able to achieve their GHG emissions reduction targets while simultaneously providing a contribution to the conservation of the Amazon rainforest. From the perspective of Acre, REDD can be seen as the cornerstone of its climate policy, and as a logical consequence of its location in the Amazon and its pursuit of a development model based on the sustainable use of its forest resources.
Given that both California and Acre are subnational jurisdictions, there is the risk of federal pre-emption or of other sorts of federal action against these states. For instance, domestic provisions from the two states could be superseded by federal legislation forbidding or restricting the issue, trade in, or use of REDD offsets. Also, political tools could be used to thwart this linkage, such as the imposition of high federal tax rates for financial operations related to REDD+ credits, a reduction in federal investment in the state, an increase in federal red tape related to REDD+, and similar.
If Acre, a Brazilian subnational jurisdiction, were to successfully manage to insert its REDD regime into a cap-and-trade programme, and obtain good results from doing so, it could persuade the Brazilian federal government to change its position on the use of market mechanisms to fund REDD+. In the case of California, a successful inclusion of REDD in its programme could influence future federal climate change action in the US and provide an example upon which other developed countries could draw when defining their positions on the issue.
This linkage could also have an influence on international negotiations on REDD+ within the UNFCCC framework, given that it would touch upon several pressing issues, most notably REDD+ scale and financing. In terms of scale, it has been agreed by the parties to the UNFCCC that REDD+ is to be performed at the national level, although subnational REDD+ could be pursued as an interim measure.Footnote 99 In terms of financing, there seems to be a preference by the parties for financing REDD through the UNFCCC’s Green Climate Fund, although the use of market mechanisms has not been completely ruled out.Footnote 100 Therefore, by being implemented on the subnational scale and relying on offsets-based financing, this linkage could lead to changes in the positions of parties to the UNFCCC with respect to REDD+ if it is successful.
Finally, but of no less importance, a further interesting aspect of this process arises from the potential repercussions it might hold for international law from a theoretical and practical point of view, given that obligations of an international character would be created by acts of non-sovereign governments, thus providing a platform for ongoing discussion on such issues as the role and importance of transnational law, the involvement of non-state actors in the establishment of international law, and the nature of international law itself.
1. INTRODUCTION
Climate change is a global environmental issue, yet various domestic policies have also been employed to address it,Footnote 1 including some at the subnational level.Footnote 2 Brazil and the United States (US) provide interesting examples. Subnational policies in the US have resulted from a divergence with the federal government;Footnote 3 in Brazil, states in the Amazon region have made efforts to promote the principles of Reduction of Emissions from Deforestation and Forest Degradation (REDD) in trying to influence the country’s national position on the issue.Footnote 4
California (US) has been at the forefront of subnational climate policy, and it has also been active in the transnational arena, having recently joined its cap-and-trade programme with that of the Canadian province of Québec.Footnote 5 Moreover, California has led the creation of the Governors’ Climate and Forests Task Force (GCF)Footnote 6 and it subsequently concluded, in 2010, a memorandum of understanding (MOU) with the Brazilian state of Acre and the Mexican state of Chiapas relating to the linkage of programmes in those states with the Californian climate change policy.Footnote 7
This cooperation is interesting because of the role that these three subnational jurisdictions perform within their respective federations. California is well known as a trendsetter in environmental legislation in the US.Footnote 8 In Brazil, Acre is one of the birthplaces of the country’s contemporary environmental movement.Footnote 9 In Mexico, Chiapas has been employing carbon-related programmes since at least 1995.Footnote 10 The cooperation has the potential to influence international climate change negotiations. Moreover, being based on REDD, this process also mobilizes a full range of REDD opponents and supporters.
Since the linkage is still developing, this commentary aims to provide a general overview of the process from the perspective of international law. It will focus on California and Acre, given that their negotiations are the most advanced. Firstly, it will present the climate change policies of California and Acre, followed by a discussion of the general contours of the linkage process. Finally, it will consider some challenges to the process and its potential influence in Brazil, the US, and multilateral climate negotiations.
2. CALIFORNIA’S CLIMATE CHANGE POLICY
California has a history of pioneering environmental legislation within the US;Footnote 11 environmental policies are often tested there before gaining traction at the federal level.Footnote 12 Therefore, its policies on climate change may play a pivotal role in shaping future climate change policy in other US states and at the federal level.
California has been addressing climate change since at least 1988,Footnote 13 but its current policy started to take shape in 2005 with the establishment of greenhouse gas (GHG) emissions reduction targets.Footnote 14 In 2006, the State Legislature enacted Assembly Bill No. 32 (AB 32), which provided for a comprehensive climate change policy. AB 32 establishes an emissions level equal to that of 1990 as a target to be achieved by 2020,Footnote 15 and also lays down a framework for adopting targets thereafter.Footnote 16 To meet these targets, the California State Air Resources Board (CARB) employs various tools, such as the adoption of fuel standards, the mandatory recycling of various goods, the establishment of renewable energy targets for electricity, and a cap-and-trade programme.
California’s cap-and-trade programme has been in operation since 2012 and is scheduled to remain in force until at least 31 December 2020,Footnote 17 with three compliance periods: 2013–14, 2015–17, and 2018–20. The programme allows the use of various compliance instruments, including offsets generated out of California.Footnote 18 For the moment, the only external allowancesFootnote 19 and offsetsFootnote 20 permitted are those originating from the Canadian province of Québec,Footnote 21 in respect of which an actual bilateral exchange takes place.Footnote 22 In the case of Acre (and Chiapas), what is envisaged instead is a unilateral flow of offsets to the Californian market.
The key to this linkage lies in the somewhat vague expression ‘sector-based credits recognized by the CARB’,Footnote 23 which is used to describe an emissions reduction programme in a developing country, or a jurisdiction within a developing country, and covering a specific economic sector. So far, only REDD plans may generate such sector-based credits.Footnote 24
REDD+ – defined as ‘Reduction of Emissions from Deforestation and Forest Degradation, and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks’Footnote 25 – was developed under the auspices of the United Nations Framework Convention on Climate Change (UNFCCC)Footnote 26 to cope with deforestation in developing nations. It can be traced to 2005, when a proposal for Reducing Emissions from Deforestation (RED) was presented at the 11th Conference of the Parties (COP) to the UNFCCC.Footnote 27 In 2007, it was broadened to include forest degradation (REDD).Footnote 28 From 2009 the ‘role of conservation, sustainable management of forests and enhancement of carbon stocks’ (the ‘+’ in REDD+) has been included in official UNFCCC documents.Footnote 29 In essence, REDD+ would be a way to foster GHG emissions reductions from forestry through results-based finance flowing from developed to developing countries.Footnote 30 In the case of California, the use of RED, REDD, or REDD+ depends solely on the scope of the programme adopted by the state, and thus the term REDD is hereinafter used.
Despite its conceptual simplicity, certain problems must be addressed before and during the design and implementation of REDD, particularly in the case of a linkage with a cap-and-trade market. Firstly, given that offsets need to be based on actual GHG emissions reductions, forestry emissions reductions need to be greater than those that would normally take place,Footnote 31 leading to the need to define reference levels for compensating for the additional effort as well as establishing robust measurement, reporting and verification procedures.Footnote 32 Secondly, mechanisms for guaranteeing the permanence of such reductions over time need to be employed.Footnote 33 Thirdly, social safeguards are essential in light of often overlapping rights and uses related to forests.Footnote 34 Fourthly, environmental safeguards are also necessary in order to avoid distortions that could arise from a narrow focus on GHG emissions reductions (such as the introduction of exotic species to address forest degradation).Footnote 35 Lastly, but not least, it is important to consider that many potential REDD recipients lack the institutional capacity to deal with deforestation,Footnote 36 or may be unable to implement the rule of law in forest areas within their national borders.Footnote 37
Given California’s influence in the US, its efforts to link with a subnational jurisdiction from a developing country in order to insert REDD into its climate change policy may provide a proof of concept that may influence similar initiatives in the future.Footnote 38
3. ACRE’S ‘STATE SYSTEM FOR ENVIRONMENTAL SERVICES’
The Brazilian state of Acre is one of the birthplaces of the contemporary Brazilian environmental movement as a result of the legacy of its native Chico Mendes.Footnote 39 Since 1999, Acre has experimented with public policies designed to provide a sustainable forest-based economy to the state,Footnote 40 and has thus been hailed as a leader in REDD initiatives.Footnote 41
Acre witnessed the birth of the rubber tappers movement in the 1970s, which was a reaction to government policies that led to the occupation of lands where rubber tappers traditionally lived and worked. The movement, mostly non-violent, soon faced violent reaction: in 1980, Wilson Pinheiro, a leader of the rubber tappers movement, was killed.Footnote 42 In 1988, another leader – Francisco Alves Mendes Filho, known as ‘Chico Mendes’ – was shot dead three days before Christmas.Footnote 43
The widespread reaction to this second murder in the international press surprised Brazilian authorities,Footnote 44 and helped to galvanize the environmental movement in the country.Footnote 45 In Acre, it led to the emergence of a new political/cultural/ideological movement known as florestania,Footnote 46 which later became the dominant political force in the state and also influenced Brazilian national politics.Footnote 47
Based on the idea of florestania, the state has focused its development policies on the sustainable use of forest resources, which is how the state’s drive to REDD came about.Footnote 48 In October 2010, State Law n. 2308/2010 was enacted, establishing the State System of Incentives for Environmental Services (SISA) ‘with the aim of promoting the maintenance and expansion of supply of various ecosystem products and services’,Footnote 49 which provides the framework for REDD in Acre.Footnote 50 In order to implement the SISA, various institutions were created. These included a public and private joint stock company,Footnote 51 which is to be the main vehicle through which the state may transact with private investors to sell carbon credits.
By establishing a comprehensive framework for dealing with REDD at the subnational level, Acre has been hailed as a leader in the field. In addition to working with California, Acre has engaged the Brazilian states of São Paulo and Rio de Janeiro in order to link its programme with their respective climate policies.Footnote 52 In 2013, Acre reportedly sold REDD-based early action credits to the German bank, KfW,Footnote 53 although it was thought in 2012 to be at least three years away from being able to issue credits based on REDD.Footnote 54 Nevertheless, various issues – such as the non-acceptance of REDD credits by compliance markets (including the Californian market), and the low price of carbon in voluntary markets – have prevented Acre from issuing REDD-based credits.Footnote 55
4. LINKING THE POLICIES OF ACRE AND CALIFORNIA
The process of linking the REDD programme in Acre with the Californian GHG cap-and-trade programme is based on Acre’s introduction of emissions offsets from REDD into the Californian programme. The MOU between the states of California, Acre and Chiapas authorized the creation of a working group of experts on REDD to provide recommendations on this process. The group, eventually named the REDD+ Offset Working Group (ROW), is composed of ten experts, one facilitator and three state observers.Footnote 56 The group’s final report was released in July 2013 and contained a set of recommendations to the CARB on the design options for REDD and on the legal frameworks and linkage options.Footnote 57 It is likely that these recommendations will influence the debate on REDD regulation in California, although it is not clear whether California will ultimately move towards incorporating REDD into its climate change policy.Footnote 58
4.1. Direct Engagement between Acre and California
Direct engagement between subnational jurisdictions may be called ‘paradiplomacy’, a term referring to international activity performed by subnational governments.Footnote 59 Paradiplomacy is not new and can be traced back to early networks of subnational governments that sought to facilitate cross-border cooperation by influencing the decision-making processes conducted by sovereign entities.Footnote 60 However, what is remarkable about the emerging linkage between California and Acre is the fact that, if concluded, it would establish a formal, legally binding system of rights and obligations, crafted through the acts of non-sovereign subnational jurisdictions located in different sovereign states. This system is most likely to be established through the use of legislative harmonization and mutual recognition of rights, institutions and procedures, given that both the BrazilianFootnote 61 and AmericanFootnote 62 Constitutions disallow states from entering into international treaties. An indirect linkage would also be possible, making use of a third-party standard, in which case California could provide recognition to all REDD credits that conform with a certain standard established by a third party, and Acre could generate credits conforming to this standard.Footnote 63
This system of rights and obligations between California and Acre may be understood as:
(a) the right of Acre to issue offset credits based on its REDD programme, and the right of entities in California to buy these credits;
(b) the right of entities in California to use these credits as part of their AB 32 compliance efforts, combined with the duty of California to recognize such credits from Acre as compliance instruments in its cap-and-trade programme;
(c) the duty of Acre to rectify losses sustained by Californian entities in the event of non-permanence of emissions reductions (such as in the case of a forest fire).
Acre’s right to issue emissions reduction credits deriving from its REDD programme would be based on its domestic lawFootnote 64 and on the fact that there is no known prohibition against such issuance under Brazilian law.Footnote 65 The Californian entities’ right to use credits from Acre as part of their AB 32 compliance efforts, as well as the corresponding duty of California to recognize such credits as compliance instruments within its cap-and-trade programme, would be based on the current provisions for sector-based offset credits,Footnote 66 complemented by further regulation from CARB. As in the case of the linkage between California and Québec,Footnote 67 a specific provision regarding offsets from Acre could be added to the California regulations. If linkage were to proceed, private entities in California would be able to use credits from Acre to fulfil a small part of their mandated GHG emissions reduction targets (up to 2% in the first and second compliance periods, and 4% in subsequent periods).Footnote 68
The duty on the part of Acre to rectify losses sustained by Californian entities in the event of non-permanence of emissions reductions would be likely to rely on contract law and on Acre’s domestic law. This issue is more complex, and may be clarified by comparing it with the way in which non-permanence is addressed in forestry projects in California. In such projects, the remedy for non-permanence depends on whether the non-permanence is intentional. A portion of credits originating from forestry projects is placed into a Forest Buffer account.Footnote 69 In the event of non-intentional non-permanence, credits are reversed from this account to replace the invalidated credits without any penalty imposed on the forest owner.Footnote 70 However, in the event of intentional non-permanence, the forest owner is liable and must make up the shortfall.Footnote 71
In the case of REDD in Acre, if the linkage with California is to proceed, an equivalent solution must be found since it is unlikely that private entities in California would be interested in credits without guarantees against non-permanence. Also, Californian law itself establishes that all cap-and-trade credit instruments from sector-based offset crediting programmes must be enforceable,Footnote 72 and the linkage of California with another GHG emissions reduction programme may come into being under Californian law only if the State Governor finds that enforcement is at least equivalent to what is possible under that domestic law.Footnote 73
It is likely, therefore, that Acre would have to employ a mix of measures, such as the establishment of a state-wide REDD buffer account, insurance, and instruments of contract law (such as liquidated damages and penalty clauses). In the latter case, given the constraints of contracting directly with the state, the private and public joint stock corporation created by AcreFootnote 74 is likely to become the entity to contract with private actors in California.
Although paradiplomacy would not, in itself, establish this system of rights and obligations, it would be the means through which California and Acre manifest their political will and coordinate domestic actions in order to make the proposed linkage possible. Nevertheless, whenever paradiplomacy is used, there is a risk of disapproval by central governments.Footnote 75 In the case of California and Acre, the approval of (or non-objection by) their respective central governments is essential, given that investments and liabilities would be exchanged between both states.
California has been acting internationally on the issue of climate change for many years and has concluded a linkage with Québec (Canada), without facing federal government opposition.Footnote 76 Acre has already sold REDD credits, apparently without federal opposition.Footnote 77 However, in 2013, Brazil officially stated, along with representatives of other developing countries, that REDD should not be used to offset mitigation commitments from developed countries.Footnote 78 Given that the approach sought by California is precisely the use of REDD as a way to partially offset its mitigation commitments, it is still unclear whether the national Brazilian government would allow the California–Acre linkage, as illustrated by the conflicting positions of the Brazilian national government and of some Brazilian states on the issue during the 20th UNFCCC COP in Lima (Peru), in December 2014.Footnote 79
In fact, the use of markets to finance forest conservation has been a contentious issue for Brazil. The first attempt within the UNFCCC framework to address deforestation through market mechanisms took place during the discussion of the rules to govern the Clean Development Mechanism (CDM);Footnote 80 this restricted forestry projects to afforestation and reforestationFootnote 81 and avoided deforestation projects which were ruled out ‘for technical reasons’,Footnote 82 based mostly on Brazilian and European opposition.Footnote 83 European countries argued that carbon in forests could potentially always end up in the atmosphere because of the risk of non-permanence.Footnote 84
The opposition from Brazil has historically derived from the perception that there is a conspiracy to ‘internationalize’ the Amazon, as with Antarctica; inserting the Amazon rainforest into a carbon-based system of payments was seen as a step towards such internationalization.Footnote 85
The Brazilian position persisted during the debate on REDD. However, Brazil’s official stance obscures internal divisions in the country, notably between the Ministry of Environment (MMA), and the Ministries of Foreign Affairs (MRE) and Science and Technology (MCT).Footnote 86 Governors from states located in the Brazilian Amazon, such as Acre, have favoured the use of all types of approach to REDD, including those of a market-based nature. Such divisions and internal pressure from Amazonian states apparently led Brazil eventually to soften its stance on the matter,Footnote 87 although the country’s position in 2013 indicates a return to its former position.Footnote 88 The fact that Acre has signed the New York Declaration on Forests,Footnote 89 whereas Brazil has not, also sheds some light on this divergence of opinions within the country.
Therefore, the linkage of a Brazilian subnational jurisdiction with the Californian GHG cap-and-trade mechanism could have repercussions in the REDD negotiations within the UNFCCC framework. Furthermore, given the international interactions of California, this may lead to a similar inclusion of REDD in other cap-and-trade markets in the future, given that the Californian example could provide a blueprint to be followed by other cap-and-trade programmes.Footnote 90
More broadly, in the US this linkage may serve as a testing ground for future federal policy. It should be noted that there have been attempts to include REDD in American federal policy on climate change, through the now defunct Waxman-Markey and Kerry-Lieberman bills.Footnote 91 The former specifically provided for the use of REDD offset credits,Footnote 92 including those from subnational programmes.Footnote 93
Despite reports of fading private interest in REDDFootnote 94 and doubts about its viability,Footnote 95 the support of various market actors and NGOs in a letter to the chairman of the CARB and the Governor of California suggests that demand for REDD credits would exist if the California–Acre linkage were to occur.Footnote 96 However, it should be acknowledged that there are actors in both Acre and California opposed to this linkage, especially those concerned for the well-being of communities in CaliforniaFootnote 97 and of indigenous and traditional populations in Acre.Footnote 98
5. CONCLUDING THOUGHTS
California and Acre have been moving towards linking their respective climate change policies. This effort is interesting because it is being pursued directly between two subnational jurisdictions located in different countries.
From California’s perspective, the inclusion of REDD in its cap-and-trade programme can be considered as an additional way through which private entities in the state would be able to achieve their GHG emissions reduction targets while simultaneously providing a contribution to the conservation of the Amazon rainforest. From the perspective of Acre, REDD can be seen as the cornerstone of its climate policy, and as a logical consequence of its location in the Amazon and its pursuit of a development model based on the sustainable use of its forest resources.
Given that both California and Acre are subnational jurisdictions, there is the risk of federal pre-emption or of other sorts of federal action against these states. For instance, domestic provisions from the two states could be superseded by federal legislation forbidding or restricting the issue, trade in, or use of REDD offsets. Also, political tools could be used to thwart this linkage, such as the imposition of high federal tax rates for financial operations related to REDD+ credits, a reduction in federal investment in the state, an increase in federal red tape related to REDD+, and similar.
If Acre, a Brazilian subnational jurisdiction, were to successfully manage to insert its REDD regime into a cap-and-trade programme, and obtain good results from doing so, it could persuade the Brazilian federal government to change its position on the use of market mechanisms to fund REDD+. In the case of California, a successful inclusion of REDD in its programme could influence future federal climate change action in the US and provide an example upon which other developed countries could draw when defining their positions on the issue.
This linkage could also have an influence on international negotiations on REDD+ within the UNFCCC framework, given that it would touch upon several pressing issues, most notably REDD+ scale and financing. In terms of scale, it has been agreed by the parties to the UNFCCC that REDD+ is to be performed at the national level, although subnational REDD+ could be pursued as an interim measure.Footnote 99 In terms of financing, there seems to be a preference by the parties for financing REDD through the UNFCCC’s Green Climate Fund, although the use of market mechanisms has not been completely ruled out.Footnote 100 Therefore, by being implemented on the subnational scale and relying on offsets-based financing, this linkage could lead to changes in the positions of parties to the UNFCCC with respect to REDD+ if it is successful.
Finally, but of no less importance, a further interesting aspect of this process arises from the potential repercussions it might hold for international law from a theoretical and practical point of view, given that obligations of an international character would be created by acts of non-sovereign governments, thus providing a platform for ongoing discussion on such issues as the role and importance of transnational law, the involvement of non-state actors in the establishment of international law, and the nature of international law itself.