Rethinking the legal framework for forest carbon projects on public lands

By Erwin L. Tiamson

THERE IS GROWING recognition that forest carbon projects can play a meaningful role in climate mitigation and environmental protection in the Philippines. Despite this interest, however, many such projects struggle to move forward. The hesitation does not arise from opposition to environmental regulation, nor from a lack of technical capacity or financing. It stems from a more fundamental uncertainty: how should these projects be legally understood when they take place on public lands?

At present, forest carbon initiatives will probably be evaluated using legal frameworks designed for entirely different activities. It may be treated as leases of public domain land, subject to the familiar 25-year limitation renewable once. Or it may be assumed to fall within the constitutional regime governing the exploration, development, and utilization of natural resources, thereby raising questions about nationality restrictions and control. These concerns appear cautious, even prudent, but they rest on a basic misalignment between the nature of the activity and the legal categories being applied.

In a previous BusinessWorld article, I discussed how carbon benefits within ancestral domains may be understood as fruits of Indigenous ownership, grounded in the recognition of pre-existing property rights under the Indigenous Peoples’ Rights Act. This discussion turns to a different setting: public forest lands, where ownership remains with the State under the Regalian doctrine. In this context, the legal character of carbon projects is necessarily different. What is involved is not the enjoyment of property, but the performance of a regulated environmental service under continuing State authority.

The difficulty arises because our legal system has long been structured around extractive relationships. Timber licenses, mining permits, and land leases all derive value from the use, consumption, or depletion of resources. In these arrangements, the State transfers some degree of control or enjoyment over land or resources to a private party in exchange for economic return. These are relationships of appropriation, built on the assumption that value is created by taking something from the land and converting it into a marketable product.

Forest carbon projects do not fit within this model. They generate value not by extracting from the land, but by preserving it. Their success depends on restoring degraded areas and ensuring long-term ecological stability. The project proponent does not earn from what is taken out of the land, but from what is demonstrably kept intact and verified through a regulatory process. The governing logic is restraint, not exploitation.

Under civil law, a lease requires the transfer of use and enjoyment. The lessee benefits from the property and derives utility from its productive capacity. In a forest carbon project, the proponent is not allowed to do any of these. There is no right to harvest timber, no authority to convert land use, and no entitlement to extract economic value in the traditional sense. The forest remains under State control, subject to regulatory supervision and strict conditions of protection. The proponent’s presence on the land is instrumental, limited to what is necessary to perform the authorized activity, and the land itself is merely the site of the service, not the object of a right being transferred.

To characterize this arrangement as a lease is therefore to confuse the location of an activity with its legal nature. It is similar to applying leasing arrangement to a contractor hired to maintain or secure a public facility. The contractor may enter the premises and perform defined tasks, but does not “enjoy” the property in the legal sense contemplated by a lease. What is involved is an obligation to perform, not a right to possess, and once this distinction is appreciated, the concern over lease limitations begins to fall away.

A parallel misunderstanding arises in the treatment of carbon credits. They are often described as if they were part of the forest, akin to timber or other natural products. This intuition is misleading. Carbon credits do not exist as physical objects found in nature. They come into existence only after a process of measurement, verification, and certification conducted under a regulatory framework. Without that process, there is no carbon credit to speak of in any legal sense.

In legal terms, carbon credits are best understood as regulatory instruments. They are created to recognize a verified environmental outcome, specifically the reduction or removal of greenhouse gas emissions. Their existence and value depend entirely on compliance with prescribed methodologies and issuance through an authorized registry. They function in the same analytical space as emissions allowances or renewable energy certificates, units generated through regulatory systems rather than extracted from the environment.

Once carbon credits are properly understood in this way, the constitutional framework becomes clearer. The Constitution regulates the exploration, development, and utilization of natural resources, a regime directed at activities involving extraction, depletion, or appropriation of physical assets of the public domain. Forest carbon projects do not fall within this category. They do not diminish the State’s patrimony. On the contrary, they reinforce it by ensuring the continued existence and ecological function of forests. Properly viewed, they align with the State’s obligation under the Constitution to protect the environment and promote a balanced and healthful ecology.

This understanding also addresses concerns regarding foreign participation. In forest carbon projects on public lands, foreign entities do not acquire ownership of land, do not obtain rights over timber or other forest resources, and do not exercise control over the resource base. Their role is typically limited to financing, technical development, project implementation, or the acquisition of carbon credits once issued. Their economic interest lies in a regulatory entitlement, not in the land or natural resources themselves.

The constitutional restriction under Article XII of the Constitution is directed at foreign ownership or control of natural resources. It does not extend to participation in regulatory systems designed to conserve them. To apply nationality limitations to forest carbon projects would be to treat environmental compliance mechanisms as though they were forms of resource exploitation, a conclusion that does not follow from constitutional text.

What emerges from this analysis is not a constitutional barrier, but an institutional gap. Our regulatory tools have not fully adjusted to the emergence of non-extractive environmental services. We continue to rely on concepts developed for land disposition and resource extraction to govern activities that depend on preservation and long-term stewardship. The result is uncertainty, which in turn discourages investment and slows the development of projects that could otherwise contribute to national climate goals.

The way forward does not require new constitutional interpretation. The Department of Environment and Natural Resources already possesses the authority to regulate activities within public forest lands, not only as an administrator of natural resources, but also as a guardian of environmental quality. This dual mandate allows the State to move beyond purely extractive models and to recognize activities that generate value through conservation. Forest carbon projects should therefore be structured as environmental service arrangements authorized through administrative mechanisms, rather than as leases or concessions. Such authorization would allow project proponents to access land for defined purposes without transferring possession or beneficial enjoyment. It would make clear that all rights over land and natural resources remain with the State, while recognizing the role of private actors in delivering measurable environmental outcomes.

This approach preserves the integrity of constitutional principles while enabling practical governance. It maintains State ownership and control over public lands, avoids any implication of resource exploitation, and provides a stable framework within which long-term carbon projects can operate. Most importantly, it aligns legal doctrine with the actual nature of the activity being regulated.

If forest carbon projects are properly classified, the perceived legal obstacles largely fall away. The Constitution does not stand in the way of these initiatives. What is required is a clearer understanding of what they are and what they are not. In a legal system built on careful distinctions, getting the classification right is not a matter of semantics, but the difference between enabling a new class of environmental solutions and constraining them through the continued use of outdated categories.

Atty. Erwin L. Tiamson leads the Indigenous Peoples Property Rights Project of the Foundation for Economic Freedom. He teaches Property and Land Laws at the UP Geodetic Engineering Department and Arellano Law School, and is a policy consultant specializing in land rights, environmental law, and institutional design.