Position papers
  • 03-Jun
  • 2021

The National Congress overturned, on June 01, 2021, the Partial Veto 5/2021 to the Law No. 14,119/2021, establishing the National Policy, the National Registry, and the Federal Program of Payment for Environmental Services (PES). This step forward is also added to the overthrow of other vetoes in March of this year and, therefore, the country has ensured an attractive, participative, and transparent PES policy.  

The Brazilian Coalition on Climate, Forests and Agriculture, movement formed by more than 300 representatives of agribusiness, civil society, the financial sector and the academy, congratulates the parliamentary leaders who promoted the broad process of dialogue, collective effort and negotiation that resulted in this important accomplishment. The National Congress showed that PES is a priority to Brazil and was steadfast in maintaining the political principles and rescue fundamental aspects that threatened the effectiveness of the norm due to presidential vetoes. 

Thus, the country is now preparing to develop the regulation of this policy, in order to guarantee its implementation, adequate to the practices already existing in Brazil and consistent with the principles that rules the subject. The Brazilian Coalition, once again, will be available to the government to help develop these regulations and attract investments for this agenda. 

 

About the Brazilian Coalition
The Brazilian Coalition on Climate, Forests and Agriculture is a multi-sector movement formed with the objective of proposing actions and influencing public policies that lead to the development of a low-carbon economy, with the creation of quality jobs and the fostering of innovation, Brazil’s global competitiveness and generation and distribution of wealth to the entire society. More than 300 companies, business associations, research institutes and civil society organizations have already joined the Brazilian Coalition - coalizaobr.com.br/en

  • 01-Jun
  • 2021

The Partial Veto 5/2021, affixed to the Bill 5028/2019, which institutes the National Policy for Payment for Environmental Services (PES), is on the agenda of today's session of the National Congress.

The Brazilian Coalition on Climate, Forests and Agriculture, movement formed by more than 300 representatives of agribusiness, civil society, the financial sector and the academy, calls on parliamentarians to overthrow this veto, since the tax incentives are key to attract new sources of funding to PES mainly through the private sector.

The main resistance of some parliamentarians has been the understanding that the tax incentives to the PES would be a form of revenue waiver, which could only be done by an act of the Executive Branch. However, PES-related revenue is still non-existent and, therefore, does not represent a loss of revenue for the Union, nor a financial-budgetary impact.
Taxing payment to the service provider can be detrimental to the effective implementation of the National Policy on PES Payments, as it will reduce the resources that will be transferred - and which are currently low. In this regard, considering that, in order to receive payment, providers will invest in good practices and equipment, the increase in tax revenue will come through the strengthening of the restoration and environmental conservation chain in mid-term.

It is also worth mentioning that environmental services have been gaining attention from the private sector, given the growing representativeness of the concept in important corporate sustainability indexes, such as the Dow Jones Sustainability Index family (New York) and FTSE4Good Index Series (London). In Brazil, the assessment of ecosystem services is considered in the B3’s Corporate Sustainability Index (ISE-B3) since 2018. In addition, major asset management companies in the world, such as BlackRock, also began to evaluate funds based on environmental, social and governance parameters. Thus, to meet investor demand and stand out in the financial sector, fiscal and economic incentives can attract private sector resources for both to boost environmental funds that finance PES, and to increase the range of projects.

Another important aspect of PES programs is that, in addition to the positive impact on the income of landowners, there may be benefits associated with the ecosystem service itself, such as the possibility of selling non-timber products, the reduction in water treatment costs and the issuance of credits for capture or reduction of greenhouse gases emissions, among others. Whereas the incentive can positively impact the entire chain of economic activities already taxed, there will certainly be an increase of fiscal and tax collection.

Therefore, enabling private investment and international cooperation is crucial, especially in a post-pandemic economic recovery scenario.

For this reason, the Brazilian Coalition reinforces its request to parliamentarians to guarantee the economic attractiveness of the PES and, thus, make viable an important tool for protecting forests and valuing rural producers who help preserve the environment.

 

About the Brazilian Coalition
The Brazilian Coalition on Climate, Forests and Agriculture is a multi-sector movement formed with the objective of proposing actions and influencing public policies that lead to the development of a low-carbon economy, with the creation of quality jobs and the fostering of innovation, Brazil’s global competitiveness and generation and distribution of wealth to the entire society. More than 300 companies, business associations, research institutes and civil society organizations have already joined the Brazilian Coalition - coalizaobr.com.br/en

  • 28-Apr
  • 2021

The Senate Bill (PLS, in the Portuguese acronym) #510/2021 has again brought to Brazil’s Congress’ agenda a proposal that may actually cause great damage to public forests and traditional populations of the Brazilian Amazon, despite the fact that it promises to deal with the situation of thousands of rural producers who have been waiting for decades for the title of the land on which they produce.

The Bill in question is virtually a reissue of the first report of Provisional Measure #910/2019, which was immensely criticized by several sectors of Brazilian society, including the Brazilian Coalition on Climate, Forest and Agriculture, a movement formed by over 290 agribusiness, civil society, financial sector, and academia representatives.

We understand that carrying out land regularization of occupations that have existed for decades on public lands is a critical step to avoid conflicts, provide legal security and offer economic inclusion to rural producers, while promoting social justice and allowing good governance in the Brazilian territory. However, this is not what the PLS #510/21 is about.

The changes proposed by the PLS go against what is expected from the land regularization process in the country, especially in the Amazon. The Bill aims to change the deadline again so that invasions of public lands are legalized (moving to 2014) and also to allow larger areas (up to 2,500 hectares) to be assigned to people claiming they are occupiers while dismissing an inspection. This constant flexibilization logic regarding the timeframe and the size of the properties to be titled ends up legitimizing land grabbing practices and encouraging new illegal squatting, which increases the pressure on public forests.
The vast majority of public land occupiers are small producers. Well-established and productive possessions have certainly taken place before 2014, which proves that amending the law is a mistake.

One of the claims is that an authorization for remote sensing use is required to support and streamline the verification of information submitted by the applicant. Since 2009, Brazilian legislation provides for such procedure for land regularization of small producers (installments of up to 4 fiscal modules). These installments are equivalent to 95% of all non-titled assets registered with INCRA (National Institute of Colonization and Agrarian Reform). With this legislation, the federal government issued almost 32 thousand land titles between 2009 and 2018. However, according to data submitted by INCRA to the Supreme Court, figures have dropped dramatically since 2019: over the last two years, only 554 titles were issued.

The PLS 510 seeks to extend law coverage to both medium and large producers, which account for only 5% of the total, but hold 36% of the area, while exempting them from on-site inspection. Since satellite images provide limited information on the area, this change will disproportionately increase the risk of fraud, which may even worsen conflicts over land in the Amazon.

The Brazilian Coalition is of the opinion that land regularization needs to be seen from a broader perspective than just granting public land titles to rural producers. The challenge also includes the titling of agricultural and extractive communities, indigenous lands, quilombola territories, land reform settlements, and the allocation of 64 million hectares (Mha) of public forests, of which 30 million are under the Federal Government responsibility. Given the importance of conserving these areas for the climate, they should be used primarily for forest concession and creation of protected areas.

Unfortunately, organized groups of land grabbers act in concert to invade these public lands and never be punished. In order to finally resolve Brazil's huge land liability, one needs to firmly enforce the existing law and expedite the destination for sustainable use of still standing forests. None of this will be achieved with the Bill in question.

It is an urgent commitment to be taken by the Executive, Legislative and Judiciary Branches against actions that further compromise the fight against the deforestation of Brazilian biomes, especially the Amazon. Our main source of greenhouse gas emissions is proven to be the result of deforestation, which is closely linked to the irregular occupation of public lands. We have reached the threshold of climatic emergency, among other reasons, due to the laxness with illegal behaviors such as land grabbing.

The Brazilian Coalition suggests that the National Congress install a Working Group, with a set deadline and clear mandate, to bring together experts who can provide guidelines and make legislative proposals to improve public forests management. Meanwhile, the Executive Branch should proceed to regularize the land tenure of small possessions, resume the processes of recognition of both indigenous and quilombola lands, and create Conservation Units, based on existing legislation. The Brazilian Coalition will be available to Congress to contribute to this debate.

 

About the Brazilian Coalition
The Brazilian Coalition on Climate, Forests and Agriculture is a multi-sector movement formed with the objective of proposing actions and influencing public policies that lead to the development of a low-carbon economy, with the creation of quality jobs and the fostering of innovation, Brazil’s global competitiveness and generation and distribution of wealth to the entire society. More than 280 companies, business associations, research institutes and civil society organizations have already joined the Brazilian Coalition - coalizaobr.com.br/en

  • 08-Apr
  • 2021

The Brazilian Coalition on Climate, Forests and Agriculture, movement formed by more than 280 representatives of agribusiness, civil society, the financial sector and the academy, expresses the importance of the Brazilian government to expand its climate ambition during the Leaders Summit on Climate, organized by the American government, hosted on April 22nd and 23rd.

The planet's climate is changing fast. The reaction of nations to this change must be broad, permanent, and far more ambitious. Otherwise, the increase in the average temperature on the planet will exceed 1.5 ° C by the end of this century creating an unpredictable climate scenario.

Brazil is considered a key country in the global efforts for the climatic balance of the planet and has already proved what it is capable of. Between 2004 and 2012, Brazil made the largest reduction in greenhouse gas emissions (GHG) ever recorded by a single country, by reducing its deforestation rate by 80%.

This is the time for Brazilians to recover this historic role. For this reason, Brazilian Coalition reaffirms that the country's ambition in this climate agenda needs to be expressive and permanent. Something important not only for the international community, but also for the country to consolidate itself as one of the largest economies in the world. This year, Brazil has a new opportunity to expand its ambition and put itself at the forefront of the negotiations on the fulfillment of the Paris Agreement goals, contributing with innovative and disruptive mechanisms, urgent for a post-COVID-19 world.

With the review of the Nationally Determined Contribution (NDC) in December 2020, Brazil indicated a reduction in the level of ambition. This flag makes the country less attractive for international investments and carbon market mechanisms. Brazil will only receive support and external partnerships for mitigation efforts in return of effective advances in climate agenda. Therefore, it is essential for the country to achieve a significant reduction in GHG emissions, work to eliminate illegal deforestation of its biomes and fighting lawlessness.

Brazil is essential for the planet's climatic balance and the conservation of the Amazon may be key to the achievement of the global goals of the Paris Agreement. It is in the land use sector that Brazil can make major contributions to the climate. Two thirds of national GHG emissions come from this sector, with deforestation as the most prominent. Deforestation alone accounts for 40% of the country's emissions. This sector offers a vast potential for carbon removals, whether through environmental conservation, restoration or sustainable agricultural and forestry production. It also contributes to the generation of jobs and income, urgent in the economic crisis that we are going through, in addition of promoting food and water security. Besides, by environmental conservation in relevant biomes, we can avoid future and tragic pandemics such as the ones we live in, the result of zoonoses from the destruction of ecosystems.

Despite the clear and growing concern of various sectors of society, national and international, the loss of forests in Brazil is advancing rapidly and significantly. It is urgent, therefore, that strong action would be taken over, avoiding a scenario of destruction and fire from recurring or intensify in 2021. To this end, Brazilian Coalition considers it urgent to implement the 6 actions for prompt deforestation halt, launched in September 2020 and handed over to the authorities. The actions being:


• Action #1: Resume and enhance-surveillance, with rapid and exemplary accountability of identified environmental illegalities

In order to resume and enhance enforcement actions, it is necessary to support and expand the use of intelligence and expertise of Ibama (Brazilian Institute of Environment and Renewable Natural Resources), ICMBio (Chico Mendes Institute for Biodiversity Conservation) and Funai (National Indian Foundation), aiming at holding offenders accountable for environmental crimes through agile, broad and efficient punishment. In this sense, full compliance with applicable law, including infield destruction of equipment used by environment criminals is important. The use of technology to implement this action is also crucial. Resuming Ibama’s Remote Control Operation, successfully implemented in 2016 and 2017, should be strongly considered.


• Action #2: To suspend Rural Environmental Registry (CAR) covering public forests and accountability for any illegal deforestation.

Federal and state governments should now start the CAR's streamlined analysis and validation, allowing for faster implementation of PRAs and CRAs. In addition, its credibility is compromised by overlapping records, so it is essential to suspend, immediately, in the cadastral database (SICAR), overlapping records in the areas of public forests (conservation units, indigenous lands, non-designated public forests, etc.) listed in the National Public Forest Registry of the Brazilian Forest Service.


• Action #3: Destination of 10 million hectares for protection and sustainable use.

Select, within 90 days, from the National Register of Public Forests, an area of 10 million hectares that can be designated as a protected area for restricted and sustainable use in regions under strong deforestation pressure.


• Action #4: Granting funding under social and environmental criteria.

The National Monetary Council must require that rural and agricultural credit institutions adopt stricter practices and criteria for checking environmental risks, such as proof of the absence of illegality in properties, including the CAR check and other requirements related to compliance with the Forest Code and overlap in public lands.


• Action #5: Total transparency and efficiency to vegetation clearing authorizations.

State-level environmental agencies must make data on vegetation clearing authorizations public. Therefore, such authorizations must be shared at the Sinaflor (National System for the Control of the Origin of Forest Products). This would elucidate what is legal and illegal.

 

• Action #6: Suspension of all land regularization processes for properties with deforestation after July 2008.

Suspend all land regularization processes for irregularly deforested areas after July 2008 until the areas are fully recovered. Those who deforest in an unregulated area commit environmental crimes and should not benefit from land regularization, as provided in the Forest Code.

 

The Brazilian Coalition believes that only greater ambition on the climate agenda can increase investments, credibility and international respect for the country, factors that are so necessary in the context of the current social, economic and health crisis that we are facing.

 

The PDF document can be found here.

 

About the Brazilian Coalition
The Brazilian Coalition on Climate, Forests and Agriculture is a multi-sector movement formed with the objective of proposing actions and influencing public policies that lead to the development of a low-carbon economy, with the creation of quality jobs and the fostering of innovation, Brazil’s global competitiveness and generation and distribution of wealth to the entire society. More than 280 companies, business associations, research institutes and civil society organizations have already joined the Brazilian Coalition - coalizaobr.com.br/en

  • 10-Mar
  • 2021

Document prepared by the members of the Green Finance Task Force from the Agriculture and Forestry Dialogue Forum in response to Circular Letter No. 1/2021/SPA/MAPA and sent to the Agricultural Policy Secretariat of the Ministry of Agriculture

 

CONTEXT

The Coalition believes that it is necessary to promote a modern, productive, competitive, and responsible agricultural sector in the use of natural resources.

The Coalition's overview is that the rural credit needs to encourage greater productivity of the agricultural sector, so that the most efficient, productive and credit dependent producers have priority accessing funding subsidized with public funds.

The Coalition advocates Safra Plan, as the main instrument for the implementation of Brazilian agricultural policy, completely aligned with Brazil's climate goals, therefore, its portfolio must be fully linked to low carbon emissions practices, just as the Program for the Reduction of Greenhouse Gas Emissions in Agriculture (ABC Program). In addition, it is necessary to ensure that any financed project does not include deforestation or conversion practice of natural areas.

The improvement of rural credit and insurance is a way to consolidate the importance of the climate dimension in risk analysis of financial institutions.
It is also essential to give effectiveness to what is advocated in article 41, II and 1st paragraph of the Forest Code (Law 12.651/2012), which places credit (among other instruments) as a way for environmental regularization of rural properties.
The main Brazilian agricultural policy, the Safra Plan is of paramount importance in directing producers towards these goals. The proposals presented here aim to contribute to the continuous improvement of credit and rural insurance in Brazil.

The credit system efficiency requires the simplification and cutting red tape in programs and funding sources. Dealing with a multitude of rules and different credit lines is costly both for producers and for financial institutions. Reducing the complexity and distortions of rural credit will facilitate access for producers and stimulate competition between financial institutions, improving financing conditions in the market. 

The long-term success of the rural activity is associated with the adoption of sustainable practices and proper preservation of native vegetation. The continuous and productive exploitation of agriculture depends on a balance with natural ecosystems, to preserve the rain patterns that irrigate our agriculture. Thus, the alignment of credit policies with sustainability and environmental conservation goals must be reinforced. 

Credit instruments play a key role in reconciling production and conservation. Studies of the Climate Policy Initiative (CPI/PUC-Rio) together with the Brazilian Central Bank show that an increase in the supply of credit can increase rural productivity and, at the same time, reduce pressures for deforestation. A significant number of producers, generally small ones, face significant restrictions on access to credit and are unable to invest adequately in their operations. An increase in the availability of credit for this group consequently allows them to make more intensive use of the land. The consequence is a smaller expansion of the agricultural area and greater preservation of forests.

The incorporation of sustainability and conservation as explicit and relevant objectives of agricultural policy is also essential for Brazil's success in negotiations and trade agreements. Environmental indicators have been increasingly decisive for Brazil's international insertion and promotion of its exports, being essential for the success of Brazilian agriculture. The growing international concern with the preservation of forests and biodiversity, climate change and the risks of catastrophes requires from Brazil a commitment to sustainable practices and the protection of native vegetation, through effective policies for the sector. 

Recently, Brazilian agricultural policy has made significant progress in aligning financial instruments with sustainable practices. In 2020, the Brazilian Central Bank launched the sustainability dimension of its BC# agenda, with the announcement of the Green Bureau for Rural Credit and the intention to generate incentives to make rural credit greener. Resolution No. 4,824 of the National Monetary Council (CMN) of June 2020 increased the costing credit limit in the Safra Plan 2020-2021 up to 10% for producers with the CAR (Rural Environmental Registry) validated, which is a first step for compliance with the Forest Code. Another important measure of the Safra Plan was to allow the financing of the acquisition of CRA (Environmental Reserve Quotas, whose main function is to serve as a Legal Reserve compensation mechanism). For the Safra Plan 2021-2022, the Banco Central do Brasil indicated the possibility of increasing credit limits for operations with sustainable characteristics up to 20%.

Fiscal restrictions and declining interest rates in Brazil should lead to a reduction in subsidies and credit targeting at aggregate-level. In this context, it becomes more important to ensure that the resources employed are effective and have socially desirable impacts. Therefore, rural credit should focus on increasing productivity and encouraging the adoption of more sustainable practices.

Brazil also needs to keep moving forward in expanding insurance and risk management products to the rural sector. Improving risk management is necessary for the modernization and sustainability of Brazilian agricultural production. Low risk management capacity often leads producers to abandon economically more profitable and less environmentally degrading activities in favor of others with less variation in results. This inefficiency creates economic and environmental costs, such as under-investment, lower agricultural production, and adverse impacts on land use.

Expand the market for rural insurance is an important public policy front. For the agricultural years of 2019/2020 and 2020/2021 were announced significant increases in funding of the Grant Program for Rural Insurance Award (PSR in the Portuguese acronym), reaching BRL 1 billion and BRL 1.3 billion, respectively. However, the availability of rural insurance and other risk management instruments is still limited and difficult to access in many regions. It is important to provide instruments to reduce information asymmetries and allow insurers to better assess the risk of producers. The Green Bureau being built by the Brazilian Central Bank can contribute to this direction by allowing insurers to have reliable information about producers with good management practices and, consequently, with less risk. There is potential for the formation of a virtuous cycle. 

Improve public policies to the rural sector consists in reducing distortions and channeling resources to actions and programs with greater economic, social, and environmental returns. The synergy and coordination of efforts between the various governmental bodies and spheres is essential to make public policy more efficient and effective. The proposals presented below were built with this objective in mind.  


PROPOSALS FOR THE SAFRA Plan 2021/2022

Proposals for the Safra Plan 2021/2022 were developed by Agroicone, being debated, and endorsed by the Green Finance Task Force of the Brazilian Coalition on Climate, Forests and Agriculture. 

The proposals aim to foster productivity growth and adoption of good production practices based on technology adoption, adaptation of production systems and the implementation of the Forest Code. The core premise is that these actions will allow to improve investments in Brazilian agriculture, which is essential to promote innovations in the different productive systems, consolidating Brazil as a major sustainable food producer.

The following proposals are presented for the Safra Plan 2021/2022:

1. Direct the economic grant of rural credit policy for investment, specifically the ABC Program, focused on resilient production systems;

2. Improve the ABC Program by creating the subprogram “Soil Correction” and inclusion of financing for investment in renewable energy in rural properties;

3. Incorporate MODERAGRO into the ABC Program, INOVAGRO and other investment credit lines;

4. Prioritize allocation of investment resources from the Constitutional Funds to improve productivity, income and resilience of rural property (ABC Program);

5. Strengthen risk management instruments for producers that adopt resilient production systems and low carbon technologies (rural insurance).


Regarding the proposals to strengthen the ABC Program (Proposals 1 and 2):

The goals in relation to the ABC Program is to improve it, since it is the only one that allows the financing of productive activities with a systemic view of the properties, promoting the adoption of more resilient and sustainable technologies and productive systems in agriculture, guaranteeing productivity gains throughout the years and steadily. Thus, improving the ABC Program can be a strategic way of channeling public resources to activities that require investments and are justified by the fact that they meet social environmental criteria. Furthermore, they are factors that justify the government's role in subsidizing investment programs within the scope of agricultural policy. In this sense, it is proposed:

a) raise the amount of resources allocated by BNDES in the ABC Program: BNDES directs resources to several financial institutions that operate rural credit. The increase in demand for the ABC Program resources and the depletion of resources at the BNDES before ending the first half of the last crop years show the need to increase the supply of funds through BNDES. This will foster the offer of the ABC Program by several financial institutions to rural producers.

b) direct resources from cooperative banks and credit unions to the ABC Program, as there has been an increase in the hiring of resources from this credit line through these financial institutions in the last five crop years using the BNDES as a source of fund. It is suggested that part of the rural savings granted for Business Investment Bancoob and Sicredi be directed to the ABC Program.

c) create the “Soil Correction” subprogram in the ABC Program, incorporating interventions in the soil (correction, fertilization, protection), regardless of whether it is used by agriculture or livestock, considering that this practice recovers and prevents soil degradation and, consequently, it avoids deforestation, improving the reach of low carbon agriculture.

d) include financing for investment items in renewable energy in rural properties in the ABC Program, such as the use of solar, biomass and wind energy.

 

Regarding the need to simplify credit lines (Proposal 3):

The traditional agricultural policy, through the Safra Plan, finances good agricultural practices through other programs, without, however, being able to label this financing along the lines of the ABC Program. This, in practice, undermines the strengthening of a policy that allows sustainable attributes to be added to the agricultural sector. On the other hand, there are practices that, although not included in the ABC Plan, represent actions consistent with the elements that qualify low-carbon agriculture and adaptation to climate change. Thus, it is suggested to simplify and harmonize investment credit lines that have common goals, specifically incorporating the products financed by MODERAGRO in the ABC, INOVAGRO and other credit lines.

 

Regarding the efficient allocation of investment resources from Constitutional Funds (Proposal 4):

It is sought to propose improvements in resource allocation especially focused on technology adoption, improve productivity and resilience in rural properties. It is worth mentioning that the Constitutional Funds do not operate the investment programs offered by the National Rural Credit System, allocating resources according to the priorities determined by the Regional Deliberative Councils. Thus, it is suggested:

a) allocate resources from the Constitutional Funds in the ABC Program, seeking to foster the recovery of degraded areas, resilient production systems and environmental adequacy of rural properties, as well as allocating part of the investment resources classified as “not linked to a specific program” to finance the investment project entirely, not just specific items.

b) ensure that resources from Constitutional Funds have the same requirements and incentives as SNCR programs to harmonize and simplify rural credit, which should improve resource allocation from the perspective of regional development.


Regarding the proposal for rural insurance (Proposal 5):

In addition to guaranteeing income to producers in the event of a catastrophe, rural insurance is an important instrument for food security. Additionally, rural insurance can be an instrument to increase productivity, as long as it promotes the use of good agricultural practices and technologies. In view of this, we propose to:

a) include insurance companies in the debate on the green credit bureau because, since the bureau will allow differentiating producers by technologies, expected productivity and management practices, this score (exogenous to the insurance system) has great potential to reduce information asymmetry on the insurance market, making room for better pricing of policies;

b) use of the eligibility criteria of the green rural credit bureau to differentiate rural insurance policies by insurers (via rural producer). One suggestion is to issue an official document certifying that the producer has been awarded the credit limit increase (among other incentives) due to meeting the sustainability criteria. Therefore, the insurer has scope to improve the policy conditions, since the information asymmetry is reduced, as well as the risks.

c) joint action of the rural credit policy and the Grant Program for Rural Insurance Award (PSR) using the eligibility criteria of the Green Bureau for Rural Credit, seeking a more synergistic relationship between policies, in the same way as inducing the adoption of good practices and technologies as well as risk mitigation actions, whether financial, climatic, or otherwise, by rural producers.

Each proposal was detailed in technical notes, presented in an annex. In addition, we also present drafts for the CMN Resolution (general rules for rural credit and the definition of interest rates), such that they incorporate the proposed amendments to the Rural Credit Manual presented, as well as the Ministerial Order of the Ministry of Economy, that authorizes the payment of equalization of interest rates for rural credit.


About the Brazilian Coalition
The Brazilian Coalition on Climate, Forests and Agriculture is a multi-sector movement formed with the objective of proposing actions and influencing public policies that lead to the development of a low-carbon economy, with the creation of quality jobs and the fostering of innovation, Brazil’s global competitiveness and generation and distribution of wealth to the entire society. More than 280 companies, business associations, research institutes and civil society organizations have already joined the Brazilian Coalition - coalizaobr.com.br/en

  • 03-Mar
  • 2021

The National Policy of Payment for Environmental Services (PNPSA, in the Portuguese acronym)¹ was established by Law No. 14.119 on January 13, 2021, which aims to encourage the maintenance, recovery or improvement of ecosystems (water, soil, biodiversity, among others), throughout the entire national territory. The policy also aims to preserve the genetic heritage and associated traditional knowledge, climate regulation and the reduction of deforestation and forest degradation, among others.

The subject was under discussion in Congress since 2007 and has been followed by the Brazilian Coalition on Climate, Forests and Agriculture, a movement composed of more than 280 representatives of agribusiness, civil society, the financial sector, and the academy. The text sent by Congress for presidential sanction was the result of an extensive dialogue process carried out in recent years in the Chamber of Deputies and in the Federal Senate, involving representatives of agribusiness, civil society, the financial sector and the academy. Thus, the approved text reflects the balance of positions and opinions among the various sectors of society.

The role played by economic incentives, such as the Payment for Environmental Services (PES), it is essential to encourage the conservation and restoration of natural resources from the valuation of human actions that generate benefits for the environment (or ‘environmental services’), hitherto seen as free of charge. Norms that establish incentives for good practices in Brazil are essential to complement the command-and-control strategies. The enactment of this Law was an important advance for the Brazilian environmental agenda, but it risks losing its effectiveness due to the vetoes imposed on it².

There is a billionaire volume of national and international resources that could be channeled to the Federal Payment for Environmental Services Program (PFPSA). One of the most important potential funders is the Global Environment Facility (GEF³) Trust Fund, which in its seventh edition (2018 - 2022) is mobilizing USD 4.1 billion to support global environmental issues and national sustainable development initiatives4. Another example is the Inter-American Development Bank, which allocates nearly USD 2.5 billion per year to sustainable and ecological development projects5. These funds maintain a strong commitment to achieving measurable results and the highest standards of integrity, transparency and accountability6. That is, to transform this potential into reality and access these resources, PFPSA need to rely on effective and efficient instruments of transparency and social monitoring. Such instruments are foreseen in the approved law, however, they were vetoed by the President.

In Brazil, there are successful examples of PES projects at subnational levels. Only the Programa Bolsa Floresta in Amazonas state, for example, channeled resources (Amazon Fund) of approximately BRL 29 million. It is worth mentioning that the conservation of native vegetation, with the objective of increasing and maintaining carbon stocks, conservation of biodiversity, pollination, climate regulation, water availability, soil protection and fertility, nutrient cycling, among other ecosystem benefits, is already recognized as a rural activity, as provided by Federal Law No. 8.023/1990, art. 2, III, being the same classified in the National Economic Activity Code - CNAE in subclass 0220-9/06, of the Brazilian Institute of Geography and Statistics - IBGE.

The PES approach is attractive to the extent that it allows access to new resources, which would not be available, and has the potential to be sustainable, as it depends on the mutual interest of users and service providers, and not on the availability of financing from the government or donor. In addition, it is an efficient mechanism, since it pays for services whose benefits are greater than the cost paid for them7.

With this Technical Note we want to register our concern about the high risk of loss of effectiveness of PNPSA as a result of these vetoes and present arguments and pleas for them to be overturned by Congress, as follows:


1) Collegiate Body (veto in § 8 of art. 6 and art. 15) – this device is extremely important for social participation in PFPSA, as it defines the creation of a collegiate body to evaluate the program, whose main tasks are to propose priorities and criteria for the application of resources and to monitor the compliance of investments with the objectives and PNPSA guidelines. The section predicts the composition of the body, which adds transparency on the use of public resources with the participation of civil society, the academy, the private sector and producers. This point is of great importance to give credibility to the program and to attract investors. Good practices, participation and governance instruments are aspects increasingly required by international funds and investors to ensure the proper application and impact of the agreed resources.

The program can be managed by existing instances of the Executive (such as, for example, the Secretariat of the Amazon and Environmental Services in the Ministry of the Environment), with the voluntary collaboration of sectors of society, the private sector and the academy, avoiding the creation of new body and, consequently, the increase in expenses.


2) Payments for Environmental Services for Conservation Units (veto in § 1 of art. 8) – this section states that the resources coming from the conservation of native vegetation in Conservation Units (UC, in the Portuguese acronym) will be invested by the competent environmental agency in activities related to land regularization, management plan, inspection, monitoring, sustainable management of biodiversity and others linked to the unit itself (consulting the deliberative council in the case of conservation units of sustainable use). Despite the justification for the veto saying that the text contradicts the public interest in establishing revenue linkage, it is important to note that the clearer and more explicit the proposal for the application of resources, the greater the attractiveness of investments and financing for UCs.

In addition to attracting investors, linking the resource to the unit should support efforts to guarantee the provision of the environmental service, supporting the regulation of articles 47 and 48 of the National System of Nature Conservation Units - SNUC8. Despite the significant social and economic contribution made by these protected areas, their effective implementation is compromised by the reduced resources9. Brazil is among the countries with the lowest financial contributions per protected hectare10 and has one of the worst protected area ratios per employee11. The economic contributions from the PES can significantly exceed the amount allocated by public administrations to maintain UCs12. The PES has the potential to reduce the Union's expenses in view of linking the resource to improve the management of federal CUs.

 

3) National Register of Payments for Environmental Services (veto in Art. 13 and 16) – this section ensures the registration of PES contracts within the scope of the Federal Program, both those that would involve public and private agents. The register guarantees transparency, with the registration of potential areas and the respective environmental services provided, the methodologies and information on plans, programs and projects that integrates the PFPSA. This section also provides for the integration of data at the federal, state and municipal levels and public access to this information. Without registration, transparency about the use of resources and opportunities for information integration are reduced. A national PES registry ensured by law has more normative power than provided for in Ordinance, as justified in the veto. Ordinance No. 288, of July 2, 2020, of the Ministry of the Environment, is a complement, but it cannot be the only legal basis for the implementation of the PES National Register.

In addition, low-cost alternatives linked to information and data management systems can be used. The potential for fundraising is greater than the cost necessary to ensure data registration and transparency. Still, the criticism about the internalization of conservation costs no longer seems burdensome to the consumer when compared to the cost of recovering an ecosystem that fails to provide an essential environmental service.


4) Incentives for schemes of Payment for environmental services (veto in Art. 17, 18 and 19) – by vetoing these articles from the text of the Federal PES Program, the government removes not only the tax benefits and tax incentives, but also the opportunity to promote: 1. credits with differentiated interest rate for recovery activities of degraded areas and restoration of ecosystems in priority areas; 2. technical assistance and credit incentives for the sustainable management of biodiversity and other natural resources; 3. environmental education program aimed especially at traditional populations, family farmers and rural family entrepreneurs; 4. purchases of sustainable products associated with conservation actions and provision of environmental services.

The justification for loss of revenue is misplaced. Tax incentives and others taken from the text could attract new sources of funding through mainly private sector. Environmental services have been gaining attention from the private sector, given the growing representativeness of the concept in important corporate sustainability indices, such as the Dow Jones Sustainability Index family13 (New York) and FTSE4Good Index Series14 (London). In Brazil, the assessment of ecosystem services is considered in the B3’s Corporate Sustainability Index15 (ISE-B3) since 2018. In addition, major asset management companies in the world, such as BlackRock16, also began to evaluate funds based on environmental, social and governance parameters. Thus, in order to meet investor demand and stand out in the financial sector, fiscal and economic incentives can attract private sector resources for both to boost environmental funds that finance PES, and to increase the range of projects.

Another important aspect of PES programs is that, in addition to the positive impact on the income of landowners, there may be benefits associated with the ecosystem service itself, such as the possibility of selling non-timber products, the reduction in water treatment costs and the issuance of credits for capture or reduction of greenhouse gases emissions, among others. Whereas the incentive can positively impact the entire chain of economic activities already taxed, there will certainly be an increase of fiscal and tax collection. Regarding the validity of the tax benefit, which must be a maximum of 5 years, as established in art. 137, of Budget Law No. 14.116/202017, this can be easily corrected without making the incentive unfeasible.

 

In our opinion, if these vetoes are maintained, the implementation, effectiveness and impact of the National Policy of Payments for Environmental Services will be strongly affected, and Brazil will lose historic opportunity to recognize and value the work of the millions of citizens who take care of our environmental assets.

A robust, efficient and transparent Federal PES Program is a key strategy to turn conservation and forest restoration into a good business for rural producers, for society and for public coffers. For the reasons explained above, the Brazilian Coalition on Climate, Forests and Agriculture requests that the National Congress overturn these vetoes and demonstrate that Brazil has an effective commitment to the environmental, productive and climate emergency agendas, and that it has efficient and reliable mechanisms of governance and transparency to attract the necessary investments so that the country can reach its goals and follow as a reference for the world in the conciliation of production with environmental protection.


1 http://www.planalto.gov.br/ccivil_03/_Ato2019-2022/2021/Msg/VEP/VEP-10.htm
2 http://www.planalto.gov.br/ccivil_03/_Ato2019-2022/2021/Msg/VEP/VEP-10.htm
3 https://www.thegef.org/about/funding
4 https://www.thegef.org/about/funding
5 https://www.greenclimate.fund/ae/idb
6 https://www.iadb.org/pt/sobre-o-bid/visao-geral
7 Pagiola et al., 2013
8 http://www.planalto.gov.br/ccivil_03/leis/l9985.htm
9 According to Medeiros and Young (2011)
10 CNUC, 2010
11 CNUC, 2011
12 Pavani et al. (2018)
13 https://www.spglobal.com/esg/csa/indices/index
14 https://www.ftserussell.com/products/indices/ftse4good
15 http://www.b3.com.br/pt_br/market-data-e-indices/indices/indices-de-sustentabilidade/indice-de-sustentabilidade-empresarial-ise.htm
16 https://www.blackrock.com/br/quem-somos/sustentabilidade-corporativa
17 http://www.planalto.gov.br/ccivil_03/_Ato2019-2022/2020/Lei/L14116.htm