Brazil seeks to cancel US$180mn carbon credit agreement with LEAF Coalition

Brazil’s federal prosecutors seek to cancel a US$180 million carbon credit deal between a corporate coalition and the Amazonian state of Pará, for allegedly violating the country’s carbon market rules and failing to gain prior informed consent from Indigenous communities.

In a lawsuit filed this week, the Federal Prosecution Office (MPF) says the agreement – signed last September between the LEAF Coalition (which includes Amazon, H&M and Walmart) and the State of Pará for the purchase of up to 12 million tonnes of forest carbon credits – allows for the anticipated sale of credits, which is prohibited by Brazil’s carbon market law.

Prosecutors also argue that the deal was closed without the previous, free and informed consent of local Indigenous communities – a claim supported by complaints shared by Indigenous groups last October.

The lawsuit is a blow to the carbon market, which sees jurisdictional forest projects like this one, signed in partnership with governments, as the way forward for greater impact and integrity. It comes despite the fact that Brazil’s National Council of Public Ministry recently suspended a previous joint-recommendation issued by both State and Federal Prosecutors that the contract should be cancelled for the same reasons.

‘Fully aligned with Brazil’s carbon market law’

Responding to the lawsuit, Emergent Climate, the organisation behind the LEAF Coalition, said “the agreement is fully aligned with Brazil’s new carbon market law”. 

CEO Eron Bloomgarden explained: “Proceeds from the agreement will be shared with Indigenous Peoples and Local Communities on the front line of the fight against deforestation, supporting communities, providing livelihoods and protecting forests and nature. 

“These funds will be distributed in accordance with benefits sharing plans that are currently in development via a robust consultation process, which began in May and will include 47 consultations – making it one of the largest listening and dialogue processes with traditional peoples and communities ever conducted in Brazil, according to the government of Pará.”

He added that  credits will only be issued and payments made if the robust criteria of the ART TREES standard, which include consultations with Indigenous Peoples and clear benefits sharing mechanisms, are “met in full and independently verified”.

US$35mn fine for ‘moral damages to society’

In the filing, the MPF also requests a fine of BRL200 million (US$35.6 million) against the State of Pará for “moral damages to society”, due to the anticipated sale of environmental resources from Indigenous territories without previous, free and informed consultation.

It argues that the Pará is pressuring traditional and Indigenous communities to approve the rules of its state carbon market before the start of COP30 this November, despite the fact that more dialogue is needed.