How Nagaland’s forests are attracting global investment in carbon credits

As Nagaland prioritizes community conservation and attracts growing interest from the international community, the state’s vast forest area is seen as a major draw. Recently, countries like Japan, Germany, and the World Bank have expressed interest in investing in Nagaland, likely due to its immense potential in the carbon credit market. Twitter user @Broski_Ash (Ash) explains this complex topic, shedding light on why Nagaland is now a focal point for these foreign investments.”

The trend stems from the 2015 Paris Agreement, where 195 countries pledged to reduce emissions and aim for a net-zero carbon footprint by 2050. Nations can offset their emissions by investing in activities that reduce carbon output elsewhere, which is where carbon credits come into play. Countries and companies exceeding their emissions limits can purchase these credits from regions with significant natural carbon sinks, such as forests that absorb carbon dioxide.

According to Ash, Nagaland, with its lush 600,000 hectares of forest, has become a key player in the global carbon market.

The state could generate up to 150 million carbon credits annually, potentially earning up to $1.5 billion (INR 12,500 crores) each year. This revenue could have a transformative impact on the state’s economy, attracting substantial foreign investment.

Ash points out that Nagaland’s unique forest resource ownership structure contributes significantly to this potential. Unlike other states with larger government-owned forest areas, 88% of Nagaland’s forests are privately owned due to protections granted by Article 371A of the Indian Constitution. In theory, this structure means that the benefits of carbon credits should be shared with the local communities, especially the indigenous groups who have long been stewards of these forests.

“This is why countries from the US to Germany to Japan are so interested in Nagaland. They are investing hundreds of crores in the state,” says Ash. “Even the recent state-of-the-art GIS center is part of this carbon credit project,” he said.

In his tweet, it was also implied that the INR 400 crore Nagaland Forest Management Project signed between the Department of Environment, Forest and Climate Change, Government of Nagaland and Japan International Cooperation Agency (JICA), were all part of the carbon credit project. This project was signed when TR Zeliang was the Chief Minister.

However, concerns have arisen regarding the distribution of profits from carbon credit projects. Ash notes that most of the returns are currently funneled toward foreign investors who funded the initial projects, leaving local communities with minimal benefits. In some cases, such as a pilot project in Tseminyu district, carbon credits are earning just $1 per credit.

These issues could potentially lead Nagaland to fall victim to the “resource curse,” where nations rich in natural resources suffer from slow economic growth due to corruption and an overdependence on a single resource. Countries like Nigeria and Venezuela have experienced this, where foreign corporations and political elites benefited from resource extraction while the local population remained impoverished.

However, he notes, there are successful models Nagaland can emulate. Norway, for example, avoided the resource curse after discovering oil. Instead of letting foreign corporations control its resources, Norway pooled its oil earnings into a national fund that benefits all citizens. Today, this fund is worth over $1.4 trillion, with each Norwegian citizen receiving a share of the nation’s wealth.

Similarly, Gabon has developed a centralized system for managing its carbon credits, ensuring that every citizen benefits from the country’s natural resources. Ash suggests that if Nagaland were to adopt a similar approach, the state could generate INR 12,500 crores annually, which could translate to INR 56,818 for every resident. If carbon prices hit $100 per ton, that figure could rise to as much as INR 5.7 lakhs per person per year. Such a system could provide a form of universal basic income for Nagaland’s residents.

Ash also highlights the broader economic opportunities tied to forest conservation. Nagaland’s partnership with the World Bank through initiatives like the RAMP (Raising and Accelerating MSME Performance) project is designed to fund young entrepreneurs and Micro, Small, and Medium Enterprises (MSMEs). By starting businesses related to horticulture, food processing, cold storage, and sustainable forest management, locals can create jobs that contribute to forest conservation efforts.

In addition to this, the state’s rich biodiversity presents numerous opportunities for auxiliary businesses. These could range from drone-based forest fire prevention and tree nurseries for reforestation to IoT-based wildlife fencing and sustainable charcoal production. As Ash notes, “The possibilities are endless.” However, to fully capitalize on these opportunities, Nagaland must first address its infrastructure challenges. Reliable electricity, roads, and water systems are essential for these businesses to thrive, and investment in these areas will be crucial to the state’s success.

MT