Special Law on Forest Carbon Transactions for Climate Justice

PURPOSE. This Law is of public order and is intended to establish the legal, administrative, technical and financial norms for the utilization and distribution of the environmental, social and economic benefits generated from the sustainable management of forest carbon sinks based on results.

DEFINITIONS. For the purposes of application of this Law, the following terms are defined:

• 1)

  Carbon Bond: Financial compensation for reductions or removals of emissions of carbon dioxide equivalent to the atmosphere through the application of policies and initiatives for mitigation of Greenhouse Gases (GHG).

• 2)

  Carbon Market: It is a system of national and international trade through which national and local governments, natural or legal persons or individuals can acquire or sell units of reduction of emissions of Greenhouse Gases (GHG) in order to comply with current and future obligations.

• 3)

  Carbon Credit: Unit represented by one ton of carbon dioxide equivalent, absorbed or reduced in emission that can be commercialized.

• 4)

  Greenhouse Gas: gaseous component emitted from the earth's surface to the atmosphere, as a result of natural or anthropogenic actions, that absorbs and emits radiation at certain wavelengths of the terrestrial radiation spectrum.

• 5)

  Reduction of Emissions from Degradation and Deforestation (REDD+): Approaches to policies and positive incentives on issues related to the reduction of emissions from deforestation and forest degradation, conservation, sustainable management of forests and improvement of forest carbon reserves as established by the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement.

• 6)

  Verification: Set of procedures performed during the planning and development, or after the completion of a carbon flux inventory, which can help establish the reliability of estimates and associated uncertainties.

• 7)

  Monitoring: Sustainable and operational process of collection, processing and integration of data to produce information about the state, dynamics and trends over time of forest carbon fluxes.

• 8)

  Report: Issuance of notifications or reports on emissions and absorptions of Greenhouse Gases (GHG) from carbon stocks fixed in forest carbon sinks. The Secretary of State in the Office of Natural Resources and Environment (SERNA) is responsible for the corresponding report.

• 9)

  National Balance of Greenhouse Gases (GHG) for the LULUCF Sector: Difference between emissions and removals of greenhouse gases at the national level in a specific period.

• 10)

  Reservoir: It means a component or components of the climate system where a greenhouse gas or a precursor of a greenhouse gas is stored, with the owner being responsible.

• 11)

  Sink: A reservoir of natural origin or resulting from human activity, in soils, oceans or plants, that absorbs a greater quantity of greenhouse gas, an aerosol or a precursor of a greenhouse gas than the quantity it emits, which must be accounted for considering all inputs of the process.

• 12)

  Contract: An agreement, which should generally be in writing, by which two (2) or more parties mutually commit to respect and comply with a series of conditions.

• 13)

  Paris Agreement: It is an internationally binding Treaty on climate change. It was adopted by 196 Parties at COP21 in Paris on December 12, 2015 and entered into force on November 4, 2016. Its objective is to limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels.

• 14)

  Nationally Determined Contributions: They are the core of the Paris Agreement and the achievement of those long-term objectives. Nationally determined contributions embody each country's efforts to reduce national emissions and adapt to the effects of climate change.

• 15)

  LULUCF: It is understood as land use, land-use change and forestry, has particular relevance for the future evolution of net emissions of Greenhouse Gases (GHG) for the activities of the Forest Sector.

• 16)

  Results-Based Payment: Payment received by governments, natural or legal persons as a result of their activities of reduction or removals of carbon dioxide equivalent emissions duly verified by the United Nations, reported in Honduras' nationally determined contributions and the National Transaction Registry.

• 17)

  Safeguard System: The REDD+ Safeguards are environmental, social and governance measures or guarantees that serve to prevent negative impacts and promote REDD+ benefits in the territory, constitute an international framework of principles that seeks to avoid or mitigate possible risks and enhance benefits associated with the implementation of REDD+ actions, each country must apply them according to its own national context.

• 18)

  Benefit Distribution System: Set of mechanisms, agreements and benefit distribution plans that facilitate the intentional transfer of monetary and/or non-monetary incentives (goods, services or others) to interested parties that hold bonds or credits of carbon dioxide equivalents duly issued by the technical entity.

• 19)

  Observers: Has the function of exercising oversight of actions or decisions that are made in the Technical Commission.

SCOPE. To regulate the administrative, legal and community relations that occur in the context of the management of forest carbon sinks, with an approach oriented toward climate justice based on the results of measurements made regarding the capacity to conserve protected areas and reduce emissions of greenhouse gases.

PRINCIPLES. For the application and implementation of this law, the following principles must always be observed:

• 1)

  Climate Justice: A development model centered on respect for human rights, especially of the most vulnerable populations, which guarantees the equitable distribution of benefits associated with common goods and demands shared and differentiated responsibilities for the impacts of climate change;

• 2)

  Sustainability: It consists of satisfying the needs of current generations without compromising the needs of future generations, while at the same time guaranteeing a balance between economic growth, respect for the environment and social well-being;

• 3)

  Equity: It is a commitment to generate fair access to environmental resources, mitigate the impacts of pollution, natural disasters or climate change suffered by some communities disproportionately and to promote the effective participation of citizens in environmental management;

• 4)

  Participation: The application of "Free, Prior and Informed Consent", will ensure the participation of communities and local populations, which have an essential role in the management and development of natural resources;

• 5)

  In dubio, Pro Natura: It is a principle of action for the benefit of the environment and nature that requires that when there is doubt that an action or omission could affect the environment or natural resources, decisions must be made in the sense of protecting them;

• 6)

  Transparency: The transparency of measurement processes must be:

  • a)

    Complete, in the sense that it includes all information needed to understand forest carbon flows over a period of time;

  • b)

    Consistent, to allow tracking of real progress over time; and, c) Accurate, to avoid any bias and precise, to reduce uncertainty as much as possible; and,

• 7)

  Conventional Congruence: The State of Honduras must promote environmental integrity, transparency, accuracy, completeness, comparability, consistency and ensure that double counting is avoided.

DESCRIPTION OF TECHNICAL CONCEPTS: The technical concepts necessary for the application of this Law will be described in the respective regulations and manuals issued by the regulatory body.

INSTITUTIONALITY OF CARBON TRANSACTIONS. These are comprised of the following:

• 1)

  National Commission for Carbon Transactions;

• 2)

  Technical entity dependent on the Secretary of State in the Office of Natural Resources and Environment; and,

• 3)

  Obligated Institutions.

NATIONAL COMMISSION FOR CARBON TRANSACTIONS. The National Commission is created as a regulatory body composed as follows:

• 1)

  The head of the Secretary of State in the Office of Natural Resources and Environment or the person they designate, who will preside over this Commission;

• 2)

  The head of the Institute of Forest Conservation or the person they designate, who will assume the role of Secretary;

• 3)

  The head of the Secretary of State in the Office of Finance or the person they designate; and,

• 4)

  The Representative of the Protected Area Administrators elected in an Assembly. The Commission must be formed no later than thirty (30) days after this Law enters into force.

FUNCTIONS. The functions of the Commission shall be:

• 1)

  Create the Internal Regulations, technical documents, manuals and all necessary regulations that derive from this Law;

• 2)

  Know and rule on requests for forest carbon transactions;

• 3)

  Promote the strengthening of institutional and sectoral capacities relating to carbon transactions, within the framework of Climate Justice;

• 4)

  Define guidelines to determine the viability and eligibility of proposed transactions;

• 5)

  Declare and vacate temporary moratoria applicable to carbon transactions;

• 6)

  Authorize and Coordinate the participation of other state and non-state instances related to the field of carbon transactions; and,

• 7)

  Define a benefit distribution system in results-based payments.

INSTITUTE OF FOREST CONSERVATION (ICF). Apply the methodology for calculating mitigation potential for project initiatives before accredited entities or companies, following the guidelines of the Intergovernmental Panel on Climate Change (IPCC) and official country reports from updates to the National Forest Inventory, Forest Reference Levels and technical annexes within the REDD+ framework, as well as the enhanced transparency framework.

TECHNICAL ENTITY. This Entity is the technical body of the National Commission for Carbon Transactions, attached to the Secretary of State in the Office of Natural Resources and Environment and subordinate to the National Commission for Carbon Transactions.

FUNCTIONS. The functions of the Technical Entity shall be:

• 1)

  Review, receipt, evaluation and opinion on viability for requests for forest carbon transactions;

• 2)

  Design, creation and implementation of a registry system for forest carbon transactions;

• 3)

  Accreditation of companies or entities providing services in this area;

• 4)

  Registry of transactions before the United Nations Framework Convention on Climate Change;

• 5)

  Accounting of carbon available and committed in the market;

• 6)

  Promote a national carbon market;

• 7)

  Review and present proposals to the administrators of funds to ensure results-based payments; and,

• 8)

  Others that are attributed in this Law or in the regulations created for such purpose.

INSTITUTIONS OF JOINT MANAGEMENT. The Institutions of Joint Management are the following:

• 1)

  Institute of Property (IP);

• 2)

  National Secretary of State in the Office of Science, Technology and Innovation (SENACIT);

• 3)

  National Bank of Agricultural Development (BANADESA);

• 4)

  Secretary of State in the Office of Agriculture and Livestock (SAG);

• 5)

  National Agrarian Institute (INA);

• 6)

  National Institute of Statistics (INE);

• 7)

  Association of Municipalities of Honduras (AMHON);

• 8)

  Secretary of State in the Office of Risk Management and National Contingencies (COPECO);

• 9)

  Honduran Transportation Institute (IHTT);

• 10)

  Secretary of State in the Office of National Defense; and,

• 11)

  Other obligated institutions according to law or convened by the Commission.

CONVOCATION. The Secretary of the Commission shall convoke at the instance of the Secretary of State in the Office of Natural Resources and Environment for the integration of the members of the Commission no later than thirty (30) days after this Law enters into force.

NATIONAL INVENTORY OF GREENHOUSE GASES. The Commission must take the necessary administrative, technical and financial measures to maintain an updated National Inventory of Greenhouse Gases. This inventory must be supported in results-based payments financed with revenues from carbon transaction fees and other associated income.

CARBON TRANSACTIONS. Carbon transactions are authorized as a results-based, technical and environmental legal mechanism, with the purpose of generating comprehensive, sustainable and equitable solutions toward National Climate Justice. All of the above managed under the directives of the regulatory bodies of this Law.

MODALITIES OF CARBON TRANSACTIONS. Carbon transactions are a multimodal mechanism whose purpose is to bring Honduran reality closer to climate justice. Among the permitted modalities are:

• 1)

  Debt-for-Nature and Carbon Swap: Referring mainly to external debt, where, voluntarily, the parties using a financial mechanism that allows the exchange of part of the debt for the conservation and preservation of a natural space or for climate action;

• 2)

  National Carbon Market: National marketing system where national parties commercialize tradeable carbon credits that are equivalent to one ton of carbon dioxide, or the equivalent amount of a different greenhouse gas, that has been reduced, sequestered or avoided; and,

• 3)

  Results-Based Payments: Commercialization associated with the reduction of emissions or increase in removals of forest carbon, in relation to the fulfillment of country goals related to its Nationally Determined Contributions.

AUTHORIZATION. The authorization process shall be governed by the following stages:

• 1)

  Request Admission: The Technical Entity shall admit all requests that comply with the requirements established in this Law and in the Regulation created for such purpose. Requests shall be remediable within a period of ten (10) days;

• 2)

  Remediation: In any case the petitioner may remedy the defects found in the request, having a period of ten (10) business days for this purpose;

• 3)

  Valuation: The Technical Entity once the request is admitted must make legal, technical, administrative and financial assessments in order to form a judgment on what is requested;

• 4)

  Opinion: The Technical Entity, once the pertinent assessments have been made, must issue a technical opinion on viability;

• 5)

  Notification: The Technical Entity must notify the petitioner of the UNFAVORABLE viability opinion no later than three (3) days after it is issued, which shall be made by electronic and physical means. The same period applies to the notification that must be made to the committee regarding FAVORABLE viability opinions.

• 6)

  Resolution: The Commission shall know of the favorable viability opinion issued by the Technical Entity to, once the eligibility analysis is performed, rule on the requested carbon transaction; and,

• 7)

  Certification: The Commission shall issue ex officio the certification of the Resolution adopted.

CONTRACT AND VIABILITY CRITERIA. It consists of the agreement executed by the parties after approval of their project by the National Commission, in which both parties mutually commit to respect and comply with a series of conditions. The viability criteria of the contract are as follows:

• 1)

  Guarantee ecological integrity and avoid double counting;

• 2)

  Clear distribution of benefits for each party, in results-based payments;

• 3)

  That the duration of the contract be proportional to growth in the area to be addressed;

• 4)

  That the contract have scalability mechanisms;

• 5)

  That the contract have compliance guarantee mechanisms; and,

• 6)

  Others that may be established by regulation.

THE PARTIES. The following are parties in a carbon transaction:

• 1)

  The natural or legal person, whatever their nature, provided they hold the title or ownership of the resources subject to carbon transactions;

• 2)

  The natural or legal person, national or foreign who accedes to carry out carbon transactions with the actors included in numeral 1) of this Article;

• 3)

  Natural or legal persons who accredit representation of the actors included in the preceding numerals;

• 4)

  The State of Honduras when acting in a condition analogous to the actors regulated in numeral 1) of this Article;

• 5)

  The State of Honduras in its condition as sovereign holder of resources, assets and environmental patrimonies; and,

• 6)

  Responsible developer and in charge of presenting and monitoring the progress and implementation of the project or activity.

INSTRUMENT FOR CARBON TRANSACTION. The instrument containing carbon transactions must contain at least the following requirements:

• 1)

  It must be executed in the language of the parties and with at least one copy in Spanish, which shall be the reference copy for jurisdictional disputes;

• 2)

  Establish its duration;

• 3)

  Describe in a precise manner the geographic and temporal location, as well as the geolocalized plans of the resources subject to the carbon transaction;

• 4)

  Specify the identity, data and conditions under which each party acts;

• 5)

  Establish clearly the amounts, periods and modalities of the financial relationship;

• 6)

  Establish the environmental, social and economic benefits associated with the communities involved;

• 7)

  Establish the supervision and compliance mechanisms that guarantee the preservation, conservation and restoration of the resources involved; and,

• 8)

  The mechanism for compliance with state fees derived from carbon transactions, which shall be established by regulation. What is mentioned in this Article must be established in the regulations issued for such purpose.

CARBON TRANSACTION FUND. The carbon transaction fund is constituted, whose sources of financing are revenues from fees and other amounts derived from carbon transactions, which shall be allocated to the Fund for Protected Areas and Wildlife (FAPVS), defining that collection shall be reinvested in areas for expansion, improvement of carbon sinks, as well as to sustain the activities of the Commission. This fund shall also be used for the annual update of the national greenhouse gas inventory, design, creation, implementation and sustainability of the Forest Carbon Transaction Registry System. Likewise, it shall be used to sustain the activities of the National Commission for Carbon Transactions.

The Commission has the power to declare non-compliance with commitments assumed by the parties and make the corresponding corrective recommendations. When the party or parties fail to comply with the Commission's recommendations, the latter may suspend by resolution the corresponding carbon transaction. Every transaction suspended by the Commission shall be removed from the Registry System.

JURISDICTION. In cases of controversies of a civil nature derived from the application of this Law, the competent courts and tribunals shall be those established in the Civil Procedure Code. In cases of controversies arising from an act or administrative resolution, the competent administrative contentious courts and tribunals shall be competent. When the contracts establish an arbitration clause, jurisdiction over ordinary courts is waived and the autonomy of the will expressed by the parties in the arbitration clause shall apply.

All contracts, agreements, pacts or other instruments containing carbon transactions that have been executed before this Law enters into force shall be recognized only if they follow the procedure and comply with the requirements of form and substance established in this Decree, in accordance with the authorizing resolution of the Commission, and in the latter case must be included in the Registry System.

Everything not regulated in this Law is governed by the provisions of the Law of Administrative Procedure, Civil Code and the applicable regulations that the Commission issues for such purpose.

Repeal Article 40 of Legislative Decree No. 297-2013 containing the LAW ON CLIMATE CHANGE, published on November 10, 2014, in the Official Gazette "La Gaceta", number 33,577.

Repeal numeral 15) of Article 3 of Legislative Decree No. 98-2007, containing the FOREST LAW ON PROTECTED AREAS AND WILDLIFE, published on February 26, 2008, in the Official Gazette "La Gaceta", Edition Number 31,544.

This Decree shall enter into force from its publication in the Official Gazette "La Gaceta". Given in the city of Tegucigalpa, municipality of the Central District, in the Session Hall of the National Congress, on the twenty-sixth day of the month of July in the year two thousand twenty-three.