Conservation Finance and the burning Amazon
The Amazon Basin and the Brazilian government are making headlines for all the wrong reasons. The lungs of the planet are burning – 74,000 fires in Brazil from January to July, and 9,507 new fires last week, according to reports. President Jair Bolsonaro, who sounds like a piece of work, blamed the fires on “greenies” and “NGOs” out to embarrass him. More likely is deforestation on a vast scale by loggers and agriculturists.
The environmental damage is the focus, of course. But reports also mention that Brazil stands to suffer financial losses. This is surprising and welcome, to those of us who grew up in an era when environmental destruction was always financially rewarding. That era is far from over, but it is a great thing to read, even once, that there is money in NOT demolishing forests.
So what’s the consequence? Instinctively we might look for a prosecution or a fine, for breach of some international agreement. But jurisdiction for anyone to levy fines on Brazil, or whoever is damaging Brazil, is pretty limited. The world is instead flexing two levers which are more assertive, and less process-riddled, than fines.
One lever is trade. Europe and Brazil have signed a trade pact that includes linkage to the 2015 Paris Accord dealing with greenhouse gas emissions mitigation. The Paris Accord has few teeth … until it’s linked to trading rights. Bolsonaro doesn’t give a damn what the world thinks about deforestation, but Brazilian cattle, sugar and other exports take a hit if the consequence is a decline in trade terms.
The other lever is loss of global funding for the Amazon Fund. The world pays Brazil to protect the Amazon. If Brazil doesn’t deliver its end of the contract, it doesn’t get paid. The Amazon Fund is what’s known as a REDD agreement, (reducing emissions from deforestation and forest degradation). Donors like Norway and Germany are buying environmental goods – carbon sequestration, cleaner air, more benign weather - from Brazil.
This is Conservation Finance in action. I firmly believe funding for good conservation outcomes should and will emerge on market-based principles. The world places value on environmental goods and is willing to pay for them. Despite the sophisticated financial instruments at our disposal, the market structures that value environmental goods are in their infancy. Australia had an emissions trading scheme for 5 minutes until it was scrapped by Tony Abbott, who is just as anti-market as he is anti-environment. But we will get there.
In future posts I’ll talk about the different types of Conservation Finance in operation in Australia. Please get in touch via the website, at email@example.com or 0438 378 399.