Brazil’s new forest certificates market: Achieving environmental goals through economic incentives

Chris Linder

Brazil’s emerging forest certificates (CRA) market is an internal mechanism that allows landowners to offset restoration obligations by paying to maintain native vegetation elsewhere. The system not only confers monetary incentives but also sparks environmental co-benefits, according to a new paper published today in the journal PLOS ONE. Building on earlier work published in the journal Science, the new study highlights the fact that, despite initial losses for environmental conservation, Brazil’s new Forest Code (revised in 2012) has the potential to become a net positive for ecosystem services.

Using a suite of models driven by geographic data for the entire country, a team of scientists analyzed the economic potential of the regional markets for forest certificates.

According to Prof. Britaldo Soares-Filho of Brazil’s Federal University of Minas Gerais and lead author of both papers, “Although it granted amnesty to illegal deforesters, the new Forest Code has opened the door to ecosystem services payments.” Explains Prof. Soares, “The creation of these forest certificates offers a way toward both environmental conservation and sustainable livelihoods. Landowners can show responsible stewardship while also having opportunities to expand their enterprise in compliance with the policies.”

Among the co-authors of both studies are WHRC scientists Marcia Macedo and Michael Coe. “The approach fostered under these policies,” says Dr. Coe, “offers an exciting glimpse at innovations to come in pairing market incentives with environmental outcomes around biodiversity, water resources, and forest carbon.” And, he adds, “bringing economic forces to bear in this way suggests the combination of tools that will be needed to achieve environmental goals and outcomes that support growth and sustainable communities.”

The researchers note that for the forest certificates market to be successful, Brazil must rapidly advance the implementation of the Forest Code. “These markets have the potential to conserve over 4 million hectares of forests and savannas, with a gross value of over US$9 billion,” notes Dr. Macedo. “But that potential will only materialize if Brazil acts quickly to establish a national land registry, strengthen monitoring and enforcement, and develop the rules and regulations needed to govern CRA trading,” she adds.

Environmental improvements, such as the protection of watersheds that supply Brazil’s large urban centers with fresh water, would be a major benefit of the market. The researchers also contend that an expanded certificates market could be part of Brazil’s strategy for Reducing Emissions from Deforestation and forest Degradation (REDD+) as the Green Climate Fund becomes operational. It would also add to Brazil’s declared intention for climate change mitigation as one of the signatories of the Paris Agreement.

“Our study shows that the forest certificates market has enormous potential,” says Prof. Raoni Rajão, of Federal University of Minas Gerais and co-author of both papers, “but it must be implemented with great care and be connected to other programs for payments for environmental services such as Brazil’s REDD+ strategy. Otherwise, the market will be overwhelmed by cheap certificates that do not provide environmental stimulus, and it will die before reaching its potential.”

Link to article: Brazil’s market for trading forest certificates

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