Model requires regulatory overhaul to be feasible
09/19/2022
The Brazilian Development Bank (BNDES) has started studies to enable forest concessions based on the sale of carbon credits. The state-owned bank already operates in environmental projects, with the bidding of parks for tourism and forests focused on sustainable management. The idea now, however, is to expand the ways of generating revenue from preservation, said Pedro Bruno Souza, head of social infrastructure partnerships and environmental services.
To make this model viable, it will be necessary to structure a regulatory and legal framework for the contracts since today there are restrictions – legislation forbids the sale of carbon credits in forest concessions, for example.
The initial stage is expected to be concluded by December so that specific initiatives can be structured starting in 2023. The bank’s initial estimate is to carry out three pilot projects with about 1.6 million hectares, which have not yet been defined yet.
“Brazil’s potential for this market is huge, but first it must guarantee legal security for the model,” Mr. Souza said.
He highlighted that carbon credits are only one potential source of revenue. “It is possible to generate credits for the conservation of a drainage basin, for the preservation of endemic species in the region. All of this has value. And there is a growing number of companies willing to pay for it. The question is how to price a guarantee of preservation.”
In parallel to these studies, the BNDES has moved forward with new forest concession projects based on sustainable management, that is, the extraction of timber and non-timber forest products in a controlled manner – something that is already a reality in Brazil.
The bank plans to launch later this year the public notice for Block 1 of national forests, with three assets in the South region. The project is under analysis by the Federal Court of Accounts (TCU), but the auction would only be feasible in 2023.
There are still two other lots of Amazon forests being structured by the bank, but in a less advanced stage. The projects are being carried out in partnership with the Ministry of Environment, and federal regulation is up to the Brazilian Forestry Service.
The idea of concessions is that concessionaires make investments to support inspections – which remain the responsibility of public authorities – with the construction of infrastructure and purchase of equipment, including guard posts and monitoring equipment.
In addition, the concessions must allocate resources and support the communities that live in the areas. “There is no point in telling illegal loggers they can’t do that anymore. You have to create a way for this person to migrate to preservation activity. So technical assistance for agroforests, to teach that planting certain products will yield more, is one obligation.”
None of the projects under analysis by the BNDES includes indigenous territories.
The forest concessions model, authorized by law in 2006, has been well regarded as a way to stimulate preservation, said Leonardo Sobral, with the forest chains and restoration team at Imaflora, a non-profit organization.
“It is proven that the model serves as a barrier to deforestation. If an area has no use, the chance of it being invaded is greater. From the moment the concession is established, there is a series of actions that prevent the problem from increasing,” he said. In his view, concessions could have advanced more in the past few years. “This agenda must be strengthened.”
In relation to the carbon credit model, Mr. Sobral believes that it can be an interesting way to expand the viability of the concessions if done well. He highlights, however, that it is necessary to guarantee a good execution of the project, with an adequate mapping of the traditional communities in the area and an adequate calculation of the benefits generated.
“In an area that is under deforestation pressure, additionality is relevant. But if it is a region with difficult access, which is not under pressure, there is no additionality,” he said. He is referring to cases in which the project would not have any positive impact from the preservation standpoint. “This regulation will have to be discussed.”
*By Taís Hirata — São Paulo
Source: Valor International
