Building incentives to save Brazil’s forests


Brazilian government ministries, nonprofit groups and businesses are developing an increasingly sophisticated array of incentives for rainforest protection, convinced that long-term progress in reducing Amazon deforestation rates—and in meeting the country’s international climate commitments—might hang in the balance.

The goal is to complement traditional enforcement tools, such as unannounced inspections and fines, with new approaches aimed at encouraging farmers and ranchers to undertake collective forest-protection action and adopt agricultural methods that produce less carbon and consume less land. A number of the new approaches involve positive incentives ranging from grants and low-cost credit to private-equity investment and technical assistance.

While organizers of the initiatives feel they have made important progress, they say their efforts will come to naught if Brazil’s political leaders allow forest-policy backsliding of the type embodied in bills now making their way through Congress. (See “Forest protection rollback starts amid Temer furor”—this issue.)

“These sophisticated approaches to protect Brazil’s Amazon hold promise and demonstrate that fining landowners isn’t the only way to inhibit [them from] illegally clearing their property,” says Lilian Scheepers of Aliança da Terra, or Land Alliance, a nonprofit promoting new approaches. “But they will only safeguard the forest if the government doesn’t push bills through Congress, like those now being voted on, that undermine forest protection.”

The push for new forest-conservation incentives comes amid concern that Brazil’s gains over the past decade in reducing illegal Amazon land clearing might prove fleeting. Evidence of progress is clear: in the 10-year period ending July 31, 2015, the Amazon deforestation rate was 59% lower than in the previous decade. The decline, though, has not been steady—particularly of late. In the 12-month period ending on July 31, 2015, the last year for which definitive official data is available, the rate of Brazilian Amazon land clearing increased 24% relative to the previous year. And government estimates for the year ending July 31, 2016 indicate a 29% increase, which, if confirmed, would mark the first case of back-to-back annual increases in 13 years.

Experts believe that unless a greater range of forest-protection incentives is brought to bear, further gains against deforestation will prove uneven at best. This would prevent Brazil from reaching its Paris climate-agreement pledge to cut carbon emissions by 37% by 2025 and 43% by 2030 compared to 2005 levels. The pledge assumes that by 2030, the country will eliminate illegal deforestation entirely, reforest 12 million hectares (30 million acres), and restore 15 million hectares (37 million acres) of degraded pastureland, partly through sustainable, low-carbon ranching and farming.

Some of the alternative forest-protection strategies to emerge in recent years have taken an indirect approach by targeting the farm-commodities supply chain. For instance, a moratorium negotiated in Brazil by environmental and agribusiness groups prohibits soy traders and processors from buying Amazon soy grown on land cleared after July 2008. And for its part, the government recently conducted its first crackdown on slaughterhouses for buying cattle raised on illegally cleared land. (See “Brazil targets meatpackers in supply-chain action”—EcoAméricas, April ’17.)

A more direct effort to diversify Brazil’s forest-conservation enforcement mix emerged in 2008, when the country’s Environment Ministry established a program called Municípios Críticos, or Critical Counties. Under the program, authorities identified 36 counties in the Amazon region with annual deforestation rates at or above 40 square kilometers (15.4 square miles) and suspended public bank credit for all farming and ranching operations of any size within them.

The ranking, dubbed a “blacklist” by the media, clearly qualifies as a negative incentive. But unlike the customary means of combating illegal land clearing—levying fines of up to $R50 million (US$15.8 million) for deforestation of a single area—the program targets entire counties rather than individual landholders. In doing so, it encourages collective action: landowners only can regain access to public credit by working collaboratively to bring their county’s deforestation below the 40-square-kilometer-per-year threshold. Indeed, during 2010-13 landowners in 11 of the 36 blacklisted counties did just that, spurring forest-protection action that involved the participation of agricultural experts and local governments.

Says Gabriel Lui, deputy director of Environment Ministry’s department of forests and control of deforestation: “Farmers and ranchers in the 11 counties taken off the list intensified production without clearing new areas, research nonprofits presented new yield-increasing technologies to do so, and mayors’ offices helped pinpoint areas of greatest increased deforestation.”

In 2014, the government suspended publication of the list and has not removed additional counties pending a program-criteria review being conducted in light of the recent upticks in deforestation. But authorities and independent experts expect the program to resume and continue fostering positive forest-conservation support systems in counties where land clearing has been most intense.

The county of Paragominas, in the eastern Amazon state of Pará, reduced its rate of land clearing enough to be removed from the Critical Counties list in 2010. The turnaround prompted Pará state Gov. Simão Jatene the following year to launch an initiative aimed at helping other counties get off the Critical Counties’ list. Called Municípios Verdes, or Green Counties, the governor’s initiative forged stronger partnerships between local leaders and stakeholders, ultimately helping five more Pará counties exit the Critical Counties list. It also assisted three others in moving their deforestation rates below the 40-square-kilometer (15.4-sq-mile) annual rate, prompting the state to call on the federal government to take them off the list.

Among the steps Paragominas and the other eight counties took was to encourage landowners to submit land-use inventories of their property, including maps with GPS coordinates pinpointing illegally cut areas, to state authorities. The inventories, called Rural Environmental Registrations (CARs), are required of all landowners in Brazil by Dec. 31, 2017 under the country’s revised Forest Code. Within one year of filing CARs landowners must submit plans providing for reforestation of the illegally cut portions of their property within 20 years.

“By forming a pact with local players, coordinated by mayors’ offices, we have gotten most Pará landowners to file CARs, the main tool the state uses to monitor illegal deforestation,” says Justiniano Netto, coordinator of the Green Counties Program in Pará state. “CARs have become a principal tool the state has used to enable counties that have come off the [Critical Counties] list to stay off it, a sign of its success.”

All six Pará counties exiting the list since 2010, Netto adds, have remained off it, with their average annual deforestation declining from 20 square kilometers (7.7 sq. miles) in 2012 to 14.7 square kilometers (5.7 sq. miles) last year.

Since 2008, Brazil also has begun using REDD+, the UN-backed strategy under which economic incentives are employed to promote forest protection in developing nations as a means of reducing greenhouse-gas emissions. A key initiative in that vein is the Amazon Fund. Managed by Brazil’s Development Bank (BNDES) and funded with US$1.135 billion, mainly from Norway and Germany, the Amazon Fund provides grants for REDD+ projects and other forest-protection efforts. Norway and Germany have pledged further contributions to the Amazon Fund of US$600 million and 100 million euros (US$112 million), respectively, by 2020, if Brazil can show forest-conservation progress.

One REDD+ project, underway since 2012, involves 350 small-scale farming and ranching families along a section of the Trans-Amazonian Highway that cuts through the northern part of Pará state. The farmers have received R$2.36 million (US$760,000) to increase and diversify livestock production, and to do so using existing pasture rather than by clearing more land. Organized by the Amazon Environmental Research Institute (IPAM), a research nonprofit, and a local social-advocacy group called Live, Produce and Preserve Foundation, the project has shown striking results.

“From 2012 to 2016, these farmers increased their income by 50% by boosting cattle productivity in existing pastures and diversifying livestock production to add chicken and pork on the same pastureland and in young secondary forests,” says Lucimar Souza, regional coordinator of IPAM in the Trans-Amazonian Highway region of Pará state. “And in the [310-square-kilometer, or 120-sq-mile] area in which they lived, 90% of properties didn’t cut additional primary forest, legally or illegally. The 10% of properties that did cut primary forests all did so illegally and were expelled from the program.”

Since 2011 the Amazon Fund and the German government’s REDD Early Movers (REM) program, which provides grants for climate-change mitigation, have used the western Amazon state of Acre as a disbursement go-between for projects to combat deforestation. Through the Acre state government, they have given US$53 million to help small-scale cattle ranchers set aside from one to five hectares (2.47 acres to 12.35 acres) to breed chickens or pigs and install small fish farms. The goal is to encourage creation of side businesses that produce protein in ways that require less land and produce less carbon than conventional ranching. Additional income, meanwhile, can be used partly to replant previously cleared property.

“Acre was the first state to intermediate Amazon Fund REDD+ resources in Brazil,” says Dande Tavares, director of the Acre State Development Company for Environmental Services (CDSA), a state-controlled company that promotes low-carbon development. “This helped the state grow and diversify its economy and to conserve and recover its forests.”

In 2012, Kaeté Investimentos, a São Paulo-based Brazilian private equity firm set up in 2011, raised R$100 million (US$32 million) to fund pork, chicken and fish-farm operations on previously deforested Amazon land in Acre as part of the state’s program. Its first investment, of R$40 million (US$13 million) made in 2014, capitalized three Acre companies—Dom Porquito, Acre Aves, and Peixes da Amazonia—that supply the state’s small-scale cattle ranchers with piglets, chicks and juvenile fish to raise.

“This is the first time a private equity fund in Brazil put money into sustainable development projects in the Amazon,” says Luís Laranja, founder and director of Kaeté Investimentos, adding such operations often bring in more income than conventional ranching because they produce up to 20 times more meat per hectare. “Participating ranchers who, as part of these projects, raise low-carbon-protein livestock, have nearly doubled their incomes since 2014.”

Meanwhile, government banks including Banco do Brasil and BNDES have devoted substantial loan capital since 2010 to finance sustainable farming and ranching. Edson Leite, a researcher with Brazil’s Agriculture Ministry, says such lending has contributed to the overall decline in Amazon deforestation. In 2010 the Agriculture Ministry launched a Low-Carbon Agriculture and Livestock (ABC) program that by the end of last year had enabled R$13.8 billion (US$4.4 billion) in low-interest federal government bank credit to farmers and ranchers committed to adopting sustainable practices.

Among these practices is Integrated Crop-Livestock-Forestry Systems (ICLFS), which involves planting crops such as soy or corn along with seedlings for monoculture tree plantations in the same field. Once the trees have two years of growth, crops are replaced with pasture grass and cattle are introduced to graze among them. Eighteen months to two years later, fattened cattle are removed for slaughter and crop farming resumes on the newly enriched soil. Typically after seven years the plantation forest is cut, and a new cycle of integrated agriculture ensues.

Restoring pastureland

The system allows producers to put their land to a variety of uses, thereby diversifying and expanding their operations on existing property rather than clearing more forest. Leite, who helped structure the ABC program, says the initiative has enabled restoration of 7.5 million hectares (18.5 million acres) of degraded pastureland, roughly 40% of it in the Amazon region. Independent experts see great value in the program.

“To make sustainable farming and ranching on already-cleared forest the norm, not the anomaly, it must become more profitable than conventional farming, which is not now the case,” says Dan Nepstad, senior scientist and executive director of the Earth Innovation Institute, a San Francisco-based nonprofit. “Farmers and ranchers who comply with very complex laws, control erosion and forego fire-cleared deforestation incur many costs that conventional producers do not, a difference that price premiums on certified soy or beef do not cover. This is a major challenge to reducing the rate of Amazon deforestation.”

Addressing this challenge, some Brazilian nongovernmental groups have joined the effort to help Amazon farmers and ranchers improve profitability through more responsible land stewardship. Aliança da Terra, a landowners’ nonprofit, was formed in 2004 by John Carter, a U.S.-born rancher in the western Amazon state of Mato Grosso; Nepstad of Earth Innovation Institute; and Ocimar Villela, an agribusinessman.

The group’s main tool is a registry through which small-scale farmers and ranchers commit to adopting sustainable land practices in order to access beef and soy supply chains that demand certain levels of social and environmental responsibility and offer premium prices.

The registry now boasts 1,200 landowners of 5 million hectares (12 million acres) of property registered with the group, whose members have committed US$20 million to restore their land. Aliança da Terra hopes to boost that total by 20 million hectares (49 million acres) through the registration of additional landowners over the next five years.

Aliança da Terra monitors members’ land using satellite images and field teams to verify land restoration, fire-prevention practices and improvement of labor conditions. Among its other initiatives has been a program begun in 2012 to help Mato Grosso settlers engaged in small-scale ranching to use artificial insemination with high-quality bull semen and acquire prime-lineage bulls to produce better-bred calves. Because the resulting calves fetched better prices, settlers’ income increased substantially within two years, yet fewer animals—and less land—was required. Settlers used the extra money to reinvest in cattle breeding, further improving the lineage of their herds as well as their bottom line.

“Since Aliança da Terra began, small-scale farmers and ranchers have increased income by producing higher-quality cattle without cutting more forest for pastureland and, in the process, have reduced the deforestation rate,” says Silvio Packer, director of agriculture in Novo Santo Antônio, a town in a Mato Grosso agricultural region where Aliança da Terra operates.

New credit sources

Such efforts are likely to proliferate if Brazil succeeds in raising more money to help finance deforestation-free sustainable agriculture. The country took an important step in that direction in March, when the Brazilian and Norwegian environment ministers signed an agreement that would make Brazil the first country to access a new Norwegian sustainable-agriculture fund, the Brazilian Environment Ministry says. Norway has pledged to put an initial US$100 million into the fund, which aims to raise a total of $400 million from private, bilateral and multilateral donors by 2020 and whose long-term goal is to leverage over $1.6 billion in investments for deforestation-free agriculture worldwide. The Norwegian fund—provisionally named the Production Protection Inclusion Fund—will cover 25% of high-risk loans that agricultural businesses and associations take out from private or public banks and relend to farmers who meet sustainable-farming criteria.

For many experts, a crucial goal and challenge is to provide substantive forest-protection carrots to go along with conventional enforcement sticks. “Punishment-driven negative incentives against Amazon farmers and ranchers to reduce illegal deforestation can only go so far,” says Nepstad of the Earth Innovation Institute. “They must be complemented by positive, rewards-based measures, some of which require collective action that not only keep forests standing, but also help businesses run more efficiently and profitably.”

- Michael Kepp

Luís Laranja
Founder and Director
Kaeté Investimentos
São Paulo, Brazil
Tel: +(55 11) 3077-4802
Edson Leite
Agriculture Ministry
Brasília, Brazil
Tel: +(55 61) 3218-2448
Gabriel Lui
Deputy Director
Department of Forests and Deforestation Control
Brazil’s Environment Ministry
Brasília, Brazil
Tel: +(55 61) 2028-2139
Dan Nepstad
Senior Scientist and Executive Director
Earth Innovation Institute
San Francisco, CA, United States
Tel: (415) 449-9904
Justiniano Netto
Special Secretary and Coordinator for the Green Counties Program
Civil Chief of Staff’s office, Pará state government
Belém, Brazil
Tel: +(55 91) 3110-2574
Silvio Packer
Director of Agriculture
Novo Santo Antônio, Mato Grosso, Brazil
Tel: +(55 66) 3548-1140
Lilian Scheepers
Project Manager
Aliança da Terra
Goiânia, Brazil
Tel: +(55 62) 3945-6300
Lucimar Souza
Trans-Amazonian Highway Regional Coordinator
Amazon Environmental Research Institute
Altamira, Brazil
Tel: +(55 93) 3515-3510
Dande Tavares
Acre State Development Co. for Environmental Services
Rio Branco, Brazil
Tel: +(55 68) 2102-4388