Benefit Sharing Agreements (BSAs): Building Trust with Communities
Introduction
Carbon projects are not just about trees, emissions, or credits—they are about people. At the heart of every forest, mangrove, or clean energy initiative are the communities and Indigenous Peoples whose daily lives are most affected by project activities. Without their support, even the most ambitious projects risk collapse.
This is where Benefit Sharing Agreements (BSAs) come in. A BSA is a structured way to distribute the financial and non-financial benefits of carbon projects to local communities. Done well, it builds trust, ensures fairness, and strengthens the durability of carbon projects. Done poorly, it can lead to disputes, loss of credibility, and even project failure.
In this blog, we’ll explore what BSAs are, why they matter, the different models used, challenges in implementation, and best practices for designing fair and transparent agreements.
What are Benefit Sharing Agreements?
Benefit Sharing Agreements are formal arrangements that define how revenue and benefits from carbon credits are shared between project developers, governments, and communities. They cover:
-Monetary benefits: A share of revenue from the sale of carbon credits.
-Non-monetary benefits: Jobs, healthcare, infrastructure, training, or ecosystem services.
-Governance mechanisms: How decisions are made, who participates, and how disputes are resolved.
The idea is simple: communities that help protect or restore ecosystems must receive a fair return. This not only rewards them for their stewardship but also ensures long-term sustainability.
Why BSAs Matter
- Community Buy-in: Projects cannot succeed without the support of Indigenous Peoples and Local Communities (IPLCs). BSAs create trust and cooperation.
- Fairness and Justice: Communities often bear the opportunity costs of conservation, such as giving up land-use options. Benefit sharing compensates them fairly.
- Sustainability: Projects with equitable benefit-sharing are more resilient, reducing risks of leakage, conflict, or non-compliance.
- Investor Confidence: Transparent BSAs enhance the credibility of projects, making them more attractive to buyers and financiers.
Types of Benefit Sharing Models
Benefit sharing can take different forms depending on context:
1. Fixed Payments
-Communities receive a guaranteed annual or periodic payment.
-Provides certainty, but may underrepresent future credit value.
2. Revenue-Sharing Percentage
-Communities receive a fixed percentage of credit revenue.
-Aligns incentives but exposes communities to price fluctuations.
3. Hybrid Models
-Combines fixed payments with revenue-sharing.
-Provides stability with upside potential.
4. In-Kind Benefits
-Communities receive benefits in non-cash forms: schools, clinics, roads, or water systems.
-Useful in areas with weak financial infrastructure.
5. Community Development Funds
-Revenue pooled into a fund managed by community representatives.
-Funds projects like livelihood programs, health, or education.
Key Principles of Effective BSAs
Based on the Carbon Finance Playbook and global best practices, effective BSAs should:
- Fairness: Ensure equitable distribution of benefits.
- Engagement: Involve communities in agreement design.
- Transparency: Clearly communicate revenue flows and decision-making.
- Long-Term Commitment: Support communities beyond initial project years.
- Flexibility: Adapt agreements to changing market or community conditions.
Challenges in Implementing BSAs
Despite their importance, BSAs face challenges:
-Power Imbalances: Developers or governments may dominate negotiations.
-Lack of Legal Clarity: In some countries, carbon rights are not well defined.
-Capacity Gaps: Communities may lack financial literacy to manage funds.
-Monitoring Difficulties: Ensuring benefits actually reach all households can be difficult.
-Corruption Risks: Without transparent governance, funds may be misused.
Case Studies
Mozambique
Mozambique’s carbon projects have pioneered community benefit-sharing, often directing 50% of revenues to local communities. While promising, challenges remain in ensuring transparency and equitable distribution.
Kenya – Cookstove Projects
In Kenya, improved cookstove projects share benefits through lower household fuel costs, health improvements, and a share of carbon revenues. Community organizations play a central role in managing funds.
Indonesia – Forest Conservation
Indonesian REDD+ projects often use hybrid BSAs combining direct cash payments with community development programs, such as schools or livelihood projects.
Tools to Strengthen BSAs
-Participatory Governance Models: Involve communities in boards or decision-making bodies.
-Third-Party Audits: Independent verification of revenue distribution.
-Digital MRV (dMRV): Technology to track benefit distribution in real time.
-Legal Frameworks: Clear recognition of carbon rights at national and local levels.
-Capacity Building: Training communities in finance, governance, and monitoring.
The Role of Donors and Investors
Donors and investors can strengthen BSAs by:
-Providing early-stage grants for capacity building.
-Supporting independent monitoring systems.
-Requiring transparent BSAs as a condition for funding.
-Offering insurance or guarantees to protect community benefits.
The Way Forward
For carbon projects to achieve credibility and long-term impact, benefit sharing must move from tokenistic gestures to structured, transparent systems. Communities need to see tangible improvements in their lives for projects to endure.
Future improvements will depend on:
-Integration of BSAs into ICVCM’s Core Carbon Principles.
-Greater alignment with Article 6 frameworks.
-Adoption of digital tools for transparency.
-Recognition of IPLC rights in national legislation.
Conclusion
Benefit Sharing Agreements are not optional—they are essential. They ensure that communities who are stewards of forests, land, and ecosystems are fairly compensated. Beyond fairness, BSAs are about building trust, reducing risk, and making projects sustainable.
For developers, BSAs mean stronger projects. For investors, they mean credibility and risk reduction. For communities, they mean justice and opportunity. And for the world, they mean that carbon projects can truly deliver both climate impact and social equity.
About Anaxee:
Anaxee drives large-scale, country-wide Climate and Carbon Credit projects across India. We specialize in Nature-Based Solutions (NbS) and community-driven initiatives, providing the technology and on-ground network needed to execute, monitor, and ensure transparency in projects like agroforestry, regenerative agriculture, improved cookstoves, solar devices, water filters and more. Our systems are designed to maintain integrity and verifiable impact in carbon methodologies.
Beyond climate, Anaxee is India’s Reach Engine- building the nation’s largest last-mile outreach network of 100,000 Digital Runners (shared, tech-enabled field force). We help corporates, agri-focused companies, and social organizations scale to rural and semi-urban India by executing projects in 26 states, 540+ districts, and 11,000+ pin codes, ensuring both scale and 100% transparency in last-mile operations. Connect with Anaxee at sales@anaxee.com