- Brazil could generate $10 billion or more from the global voluntary carbon market over the next four years through the sale of credits from Amazon states’ jurisdictional REDD+ programs; some states are already finalizing long-term purchase agreements.
- This funding would flow to those who are protecting the forest – Indigenous peoples and traditional communities, farmers, businesses, and government agencies – and the prospect of this funding could mobilize collective action to reduce emissions from illegal deforestation and degradation.
- Rapid progress in reducing emissions from Amazon deforestation and forest degradation – which represent half of Brazil’s nation-wide emissions – would also position Brazil to capture significant international funding for its national decarbonization process through the regulated carbon market that is under development through the UN Paris Agreement.
- This post is a commentary. The views expressed are those of the authors, not necessarily of Mongabay.
Brazil has an unprecedented opportunity to secure $10 billion dollars or more over the next four years to move the Amazon region towards an equitable, forest-maintaining economy. The very real prospect of significant, agile funding that rewards and finances forest-maintaining activities across rural sectors could motivate Amazon societies to eliminate illegal deforestation and encourage forests to regenerate on marginal lands. This potential could be realized if it is widely understood among Amazon stakeholders that large-scale carbon market revenues are a real possibility, but only if carbon emissions from deforestation and forest degradation decline significantly across Brazil’s giant Amazon states and if indigenous peoples and local communities are co-creators of the REDD+ programs.
Brazil’s Municípios Críticos program of 2008, designed and implemented under President Lula’s previous administration, demonstrated the potential of collective action and peer-to-peer pressure to slow deforestation when benefits for many depend upon success measured across an entire jurisdiction. The program suspended farmer access to public credit lines in municípios with high deforestation rates, which led to successful collective action to slow deforestation in six municípios. Some farm leaders complained, however, that their efforts led to the re-establishment of access to public credit lines, but nothing more.
This Brazilian Amazon carbon market opportunity is the result of a confluence of important new market trends. The voluntary carbon market is expanding rapidly as many companies with “net zero” commitments seek high-quality carbon credits. A much larger regulated carbon market is coming to fruition through the Article 6 framework of the Paris Agreement. Another critical development is the entry of high-integrity credits from jurisdictional REDD+ programs into the voluntary market. The first J-REDD+ credits were issued in the voluntary market in December 2022 by Guyana, verified under the new J-REDD+ standard, ART/TREES.
There are also growing international market signals, such as the EU policy on imported deforestation, favoring agricultural commodities grown without deforestation.
The allocation of carbon revenues among stakeholders will be determined within each state by benefit-sharing agreements following transparent consultation processes required by J-REDD+ standards. The funds would be used for programs developed by each state’s rural sectors, including indigenous peoples and local communities, farmers, forest management enterprises, and government law enforcement programs. This funding could also include strategic investments that foster a systemic transition towards a new regional forest-maintaining economy including processing facilities and new technologies, funding for bioeconomy start-ups, business plans to attract new investment, and blended finance instruments to make current credit programs such as the Low Carbon Agriculture (ABC) program more attractive.
Steep emissions reductions in the Amazon also position Brazil to be a major player in the new mechanism under development within the Article 6 framework of the UN Paris Agreement. This mechanism will facilitate cooperation between nations that are striving to reach their “Nationally Determined Contribution” (NDC) to the Paris Agreement. Countries with excess emissions reductions–that is, ER’s beyond their NDC targets–will be allowed to sell these credits to other countries that are falling short of their NDC targets. Double counting of the ER’s is avoided since only the buying country can claim the ER’s. Brazil is extremely well-positioned to have surplus ER’s if the Amazon state J-REDD+ programs succeed. The scenario of Amazon forest carbon emissions reductions presented in Figure 1 would allow Brazil to sell approximately three billion tons of emissions reductions (assuming emissions from other sectors remain constant) from 2025 through 2029 into the regulated Article 6 market at a price of $30 to $50 per tonne of CO2.
To unlock this carbon market opportunity, state and national governments must collaborate to bring emissions from Amazon forest loss and degradation down steeply, armed with a special new weapon: the promise of significant revenues for those who are helping to keep the forest standing. Amazon Governors could play an important role in mobilizing rapid action across sectors with the promise of significant rewards around the corner, putting into practice their commitments to a new forest economy under the Manaus Action Plan for a New Forest Economy signed in 2022 by all of Brazil’s Amazon governors.
Several state governments of the Brazilian Amazon are negotiating contracts for the advance purchase of credits from their J-REDD+ programs. One state–Tocantins–is seeking to sell credits in 2023 for emissions reductions already achieved that could be worth several hundred million dollars. As sales come to fruition, other states will likely accelerate their progress to do the same. Amazon states have been waiting more than a decade for the market for credits from their J-REDD+ programs to be ready and need proof that this market is finally here.
Brazilian states have the legal right to sell J-REDD+ credits in the voluntary carbon market. Some are reluctant to do so, however, until the federal government formally recognizes this right. The federal government must also rapidly re-design the national REDD+ strategy to accommodate these state-level transactions in the voluntary carbon market as it completes discussions and moves towards implementation of a national emissions reduction trading system and registry, as outlined in legislative bill 412/2022.
Internationally, demand must grow for credits from J-REDD+ programs. In this regard, it is important to highlight the fundamental ways in which J-REDD+ programs avoid the problems that have plagued credits from private projects–something that is poorly understood in part because these credits only became available in late 2022. For example, J-REDD+ programs measure emissions across vast territories, with little room for inflating baselines–a problem that has eroded the legitimacy of many private carbon projects. Credits from J-REDD+ programs and private projects that are nested within these programs should gain value going forward because of their higher integrity.
A growing demand for high quality forest carbon credits is good for the Amazon forest and its people. Companies should be encouraged to both purchase high quality credits from J-REDD+ programs while aggressively reducing their own emissions to meet net-zero goals.
Daniel Nepstad, PhD. is the President and Executive Director of the Earth Innovation Institute. Monica de los Rios is the National Coordinator of the Earth Innovation Institute’s Brazil Program. Ronaldo Seroa da Motta, PhD is a Professora the Universidade do Estado de Rio de Janeiro.