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Regulatory Framework for Forest Concessions: Coalition Proposals for Regulation

Forest concessions are an important mechanism for reconciling business opportunities and revenue with the conservation, protection, and maintenance of forests, particularly in the Amazon region.

Between 2020 and 2023, the Task Force (FT) Forest Concessions created by the Brazilian Coalition on Climate, Forests and Agriculture had a proactive role in carrying out essential actions to improve forest concessions in Brazil. The Coalition was initially engaged in discussions on Bill 5,518/2020 with the Brazilian Chamber of Deputies and made a significant contribution towards the development and improvement of Provisional Measure (MP) 1,151/2022, which was later approved by the Federal Senate as Conversion Bill (PLV) 7/2023. 

Since the publication of Law 14,590 last May, which concerns forest concessions and amends the legal framework for public forest management, the Coalition’s TF has been working on proposals for its regulation, which are currently being presented as follows.

Both economically and legally, the Decree aims to provide secure grounds for forest restoration projects and recovery of degraded areas, consistent with the paradigms of ecological transition to which Brazil has committed itself, nationally and internationally.  

To be more specific, it systematizes, on a clear basis, allowing public authorities to benefit from a range of instruments in partnership with the private sector to promote forest restoration and recovery of degraded public areas, leveraging potential economic benefits from the removal of greenhouse gasses and other environmental services provided for by law.

The prospects for these partnerships have gained relevance since the enactment of Law 14,590, of May 24, 2023, which expressly allowed forest concession contracts to provide for mechanisms to share credits from environmental contributions, including those from economic instruments that encourage sustainable practices, such as carbon credits and Payments for Environmental Services (PES). 

The new law has made clear the possibility of sharing the economic benefits resulting from economic instruments that encourage sustainable practices between the public and private partners (as well as local communities and traditional populations).

Nevertheless, none of the legislation in force has addressed in any detail the possibility of making forest restoration and the recovery of native vegetation in public areas viable, including Full Protection or Sustainable Use Conservation Units, either by means of partnerships – funded in whole or in part by carbon credits or other environmental services. Law 11,284, dated June 2, 2006, as amended by Law 14,590/2023, only mentions the possibility of restoration being one of the obligations provided in a forest concession contract, the main purpose of which, however, corresponds to the exploitation of forest products and services in exchange for the preservation of public forests. Furthermore, it only applies to public forests, and not to all types of conservation units or other public areas. 

The Decree seeks to provide adequate focus for restorative activities, considering a range of partnership instruments capable of making this activity viable. More than that, it intends to allow partnerships to focus on forest restoration and recovery of degraded areas, recognizing the particularities of this type of environmental service provision, even when combined with other activities such as sustainable forest management, the exploitation of timber or non-timber products, and the protection and conservation of green areas.

As for the term of each partnership, the Decree stipulates that the limits set by law for each type of partnership shall be complied with and the ecosystem’s revival needs shall be considered and combined within the cycle required to obtain carbon credits or other forms of economic benefit for the environmental services provided. 

Furthermore, the Decree establishes modalities for granting payments that are in line with the rationale of the regulated projects, allowing such payments to correspond to the environmental services provided or to the obligations assumed by the private partner in terms of investments. This acknowledges and favors the public interest, creating a virtuous cycle of investments and uses the instruments that the state has at its disposal to encourage its main purpose with this type of partnership: forest restoration and recovery of degraded areas.

In addition, the specific nature of restorative activity means that the obligations of public and private partners vary over time. These projects’ regulations shall cover these particularities, recognizing that intensive activities are needed at the beginning of the process, followed by monitoring activities in subsequent years, including those required to ensure the longevity of the carbon credits generated and the payment for environmental services.

Brazil has extensive tracts of degraded land which, if restored, can make significant environmental contributions to the country and the world by sequestering atmospheric CO2 and improving regional microclimates, in addition to generating economic benefits through carbon credits and environmental service credits. 

It is estimated that investments in restoring Brazil’s more than 12 million hectares of currently degraded ecosystems could generate 2.5 million jobs, remove 4.3 billion tons of CO2 from the atmosphere and produce BRL 776.5 billion in revenue¹. 

It is evident that these initiatives are attractive to the national private sector. More than just a regulation, the Decree aims to stimulate private sector collaboration in forest restoration, recognizing and promoting the use of economic instruments that foster sustainable practices, such as carbon credits and Payments for Environmental Services (PES), as a key instrument in promoting these projects’ sustainable economy. It also strives to standardize the legal approach to the consolidation of these opportunities, in line with previous legislative efforts, especially Law 14,590/2023. 

This regulatory framework is crucial for forest concessions in Brazil. By joining legislative efforts from Bill 5,518/2020 to the enactment of Law 14,590 in May 2023, the Coalition has shown an unmistakable commitment in creating sustainable opportunities. By addressing legal loopholes and providing solid foundations for public-private partnerships in forest restoration and recovery of degraded areas, this decree aims to align economic interests with the country’s ecological transition goals. Not only does the document outline the payment modalities and deadlines for partnerships, but it also recognizes the specificities of restorative activity. By promoting the restoration of more than 12 million hectares of degraded ecosystems.

See here, in table format, a model decree in Portuguese prepared by the Forest Concessions Task Force of the Brazilian Coalition.

¹ Source: https://www.terra.com.br/noticias/brasil/brasil-quer-envolver-empresas-em-recuperacao-florestal-por-meio-de-concessoes-de-terra,c5e558afe4b63de85ea34e73dda0557fbhvixchr.html

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