The revolution in the financing the conservation of the Amazon rainforest

Amid the discussions that will take the stages of COP27, which this year will take place in Egypt, there is a lot of talk about the environment and sustainability, but still few pay attention to a true revolution that is underway in the Amazon. It is an intense and accelerated process of financial valorization of the forest. This dynamic is one of the most important tools for combating climate change, a solution that is a very important asset for Brazil. In other words: the evolution of carbon credits is helping to make it more advantageous to keep the forest standing than to cut it down, breaking the pernicious circle in which the depreciation of spaces in the Amazon favors deforestation.

There are many components to this revolution. One is the sheer magnitude of conservation projects. Some reach around 150,000 hectares, the size of the city of S?o Paulo, or 2x NYC. The remuneration for an area of this size tends to average $ 100 per hectare per year (US$ 9 million per year). The dissemination of this data is vital to encourage conservation work and the sale of carbon credits related to the Amazon region.

At the same time, several monitoring and mapping initiatives in Brazil are being carried out, all with global excellence. Unfortunately, they are still little known to the general public. It is worth mentioning, for example, MapBiomas. It is an initiative of the Climate Observatory, co-created and developed by a multi-institutional network (made up of universities, NGOs and technology companies) with the purpose of mapping Brazil's land cover and use and monitoring changes in the country's territory. .

MapBiomas maps and validates, with a thorough fieldwork, aspects of the territory and vegetation such as density, amount of carbon and land use. The result constitutes a fundamental tool for software developers and technological solutions for the Amazon (such as monitoring via satellite images) to be able to audit and verify the conservation and generation of environmental assets. Undoubtedly, Brazil's image in conservation and environmental issues gains a lot from the knowledge generated by projects such as MapBiomas.

On the government side, emphasis is given to the performance of BNDES (the Brazilian Development Bank), which has already made two bids — a first for $2 million and a second, in October 2022, for $20 million — for the sale of credits generated in the future via “offtake” contracts. ” (fixed-price purchase commitments). These purchases not only validate the carbon credit model with a public entity: they significantly mitigate the risk of placing possible credits — and, therefore, benefit the return of conservation projects.

In the private sector, large amounts of resources have been allocated to projects linked to the carbon credits agenda. Recently, companies in the oil sector, such as Shell, and large banks, such as Santander, have invested in developers and financed certification costs. It is estimated that US$ 100 million is already spent on buying companies and financing the sector. This means that one of the main barriers — access to capital — is being drastically reduced.

The main bottleneck in the process of certification and valuation of forests via carbon credits is the combination of duration and cost of certification. The process is still very bureaucratic and manual — therefore, very expensive (more than US$ 1 million per project, regardless of its area) and inaccessible to most Brazilians. The good news is that the use of technology — such as lower-cost, higher-resolution satellite imagery, big data from federal government databases for environmental and land issues, process automation, and the use of artificial intelligence to read maps and prepare of information and documents for auditing and certification — has led the carbon solution to scale and become more accessible.

Following the premonition of Alfredo Sirkis, a great environmentalist, journalist, activist and Brazilian politician, who died in 2020, the use of blockchain for security and transparency in carbon credit transactions is also an improvement that is here to stay and facilitate carbon issuance and transactions. Sirkis said in 2019:

“If governments, central banks and multilateral agencies are unable to do so, we have to create a climate cryptocurrency. One based on less-carbon ballast as if it were the new gold. It is something much more doable and useful than bitcoin, and if governments, central banks and multilateral agencies cannot – or do not want to – do it, it will be up to society itself, hackers, popstars to start a global movement on the internet. If climate change is humanity's biggest problem and it's getting more and more dramatic, less carbon is the new gold.”

Recently, the largest global credit registries have endorsed the adoption of this technology. For Brazil, this is a gift: the monetization of the country's natural assets, generating remuneration and socioeconomic returns for the guardians of the forest. In time, it is worth remembering that there are several Brazilian and international companies working together with forest owners to remunerate conservation and avoid deforestation, creating alternatives to burning for soy and livestock.

Brazil's current challenge in this context is to better communicate this potential, to capture the huge amount of money the world is willing to pay for Amazon conservation. The instruments and the ways, after all, are given.