Law update to end restrictions seen as positive by specialists
06/21/2022
The Bolsonaro administration is betting on a bill being considered by the Chamber of Deputies to update the law on forest concessions and unlock the auction of nine areas this year. The proposal, authored by an oppositionist federal deputy, has already been approved by two committees and allows the use of these forests for the carbon market, which is growing rapidly worldwide.
The current legislation prohibits forests under a concession from being used in the carbon market (in which interested companies pay to maintain the vegetation of a place and, by doing so, offset their own emissions). The bill ends with this restriction, a move specialists understand as positive to draw interest in the sustainable exploration of these forest areas.
Jaqueline Ferreira, a portfolio manager at Instituto Escolhas, says that countries like Peru and Bolivia already explore the carbon market in the Amazon and that Brazil “is lagging behind.” “These are areas that need revenue to maintain themselves and the concessionaires themselves need diversification of income sources to maintain them,” she said. A study by the institute shows that in the region there are 37 areas with the potential to generate R$125 million per year in this market – revenue that, according to the project, will be shared with the federal government.
She regrets, however, that the Environment Committee in the Chamber of Deputies has removed from the blueprint the possibility of periodic review of the contracts. “One of the main problems of the concessions is precisely price volatility. Today the main activity is the sustainable management of wood and there is a lot of competition with the illegal market. The possibility of reviewing the amounts paid, logically with rules, would be an important gain,” she said.
One author of the project, Deputy Rodrigo Agostinho (Brazilian Socialist Party, PSB, of São Paulo) defends that concessions are the best model to protect forests against illegal logging and deforestation. “I know that it will be criticized by environmentalists who think that this means selling the forests, but today there are two very efficient strategies in the world to keep forests standing: payment for environmental services, in the case of private areas, and concessions, in the case of public areas,” said Mr. Agostinho, part of the opposition to the government.
For Mr. Agostinho, the current law is very bad and has slowed down these operations. He points out that the government estimates that it is possible to grant 43 million hectares to the private sector, an area larger than the entire territory of Germany, but that only 1 million hectares have been granted after more than a decade. “And these contracts are very focused on the extraction of wood, which suffers with the illegal market. In the world, what has been working well are concessions for tourism, for the production of medicines and cosmetics or forest agriculture, like heart of palm, chocolate and açaí,” he highlighted.
The proposal modernizes the rules for the bidding and environmental licensing of these areas. One of the main changes is to invert the order of the bidding process. Today, the documents of each company are analyzed, with possible contestations, before the proposals are checked. If the project is approved, only the winning company would have its documents checked.
In addition, the project transforms the forest allocation plan prepared by the government from annual to multi-year, every four years. The objective is to allow the employees of the Brazilian Forest Service (SFB) dedicated to this task to be free to take care of other functions, such as the inspection of the concessions.
The Finance and Taxation Commission approved the bill last week, with Deputy Sanderson (Liberal Party, PL, of Rio Grande do Sul) as rapporteur. The federal government put the matter on its list of priorities for the year and even accepted, in order to approve it, the voting of other proposals with which it disagreed, such as updating the revenue ceiling for companies included in the Simples Nacional, a simplified tax regime for small businesses. “The government is very interested in speeding up this project to attract private-sector companies to a business that, with the current legislation, is prohibitive. There are areas waiting for this to go to auction,” Mr. Sanderson said.
The Bolsonaro administration included 22 projects in the Investment Partnerships Program (PPI) in 2020, but so far only four areas have been tendered and contracted. According to PPI data, the 18 contracts signed so far had yielded R$70 million in grant payments and helped preserve forests with sustainable management.
The bill’s consideration in Congress is not yet fully defined. Two ways are being discussed: to vote in the Constitution and Justice Commission (CCJ), where the blueprint would have conclusive approval, without needing to go through the plenary; or to present an urgent request to take it directly to the plenary, which Chamber of Deputies Speaker Arthur Lira (Progressive Party, PP, of Alagoas) has already signaled he agrees with if there is a consensus among the parties.
*By Raphael Di Cunto — Brasília
Source: Valor International