PES Payments in Brazil

Payments for environmental services (PES) are capable of ‘buying out’ more than half of predicted Amazonian deforestation. But the institutional conditions necessary for an efficient and equitable PES system are not adequate, reducing this figure by 75 percent.

Furthermore, the majority of the money set aside to conserve the forests would go to the region’s wealthiest landowners, who are responsible for 80% of deforestation still going on in the Amazon.

Policymakers need to be better informed about where and under which circumstances PES is likely to contribute to effective and equitable outcomes, says a new report entitled ‘Direct conservation payments in the Brazilian Amazon: Scope and equity implications’.

What is PES:

As the UN programme on reducing emissions from deforestation and forest degradation (REDD) becomes increasingly dominant in the environmental debate, all eyes are turned towards the Amazon, which holds the world’s largest tropical rainforest and is also suffering the world’s fastest rate of deforestation.

Many REDD proponents embrace the idea of a payment system in which forests left standing become a paid-for environmental service. A structure such as this – in comparison with ‘command-and-control’ and other policies used to confront deforestation – is seen as a more effective way of reaching local land users and persuading them to conserve their forests. Farmers are paid the same amount or more than they would make by converting their forests to agriculture, in return for keeping their forests intact.

Structural problems:

A scoping study looked at trends and profits created by land-use and land-use change across the arc of deforestation, finding that 55% (12.5million hectares) of all threatened forests produced net returns that could be compensated for by payments reflecting current carbon market prices.

The analysis used the average value of temporary carbon offsets in the Chicago Climate Exchange. High-impact, low profit cattle ranchers and small-scale landholders who use slash-and-burn farming techniques would be the primary source of focus. At this price, however, the report says it would be impossible buy out more lucrative agriculture such as palm oil, soy beans, land extraction of the high value, or perennial crops like black pepper. Even with an average carbon price substantially higher, such as that offered by the European market, a significant amount of land would have opportunity costs higher than could be compensated for by PES.

PES schemes rely on secure tenure and the legal right of the owners to permit or deny competitors control of the assets the property has to offer. But the study notes how two- thirds of deforestation between now and 2050 is predicted to take place in areas that have poorly defined or insecure tenure. Another quarter of future deforestation is projected to occur in strictly protected areas, indigenous territories, sustainable use areas and land reform settlements.

“The way the Brazilian government has devised payment schemes for environmental services, payment cannot be used to stop deforestation on illegally appropriated lands, nor on lands where private tenure is disputed,’ said Jan Börner, CIFOR scientist and a co-author of the report. ‘Land-tenure chaos represents the single largest impediment for using on-the-ground payments to implement REDD in Brazil on a large scale.’ He added.

Equity issues:

Concerns have been raised for several years regarding the moral hazards of a payment system that would accrue to larger landholders, particularly those who have been involved in deforestation.

PES only makes environmental sense when it addresses areas of forests already under threat from deforestation. As compensation payments are tied to reductions in deforestation, large landowners who are responsible for about 80% of all deforestation would reap the highest awards. Indigenous people, whose impacts on their surroundings are minimal, would have no way of accessing these funds.

“If you want to stop deforestation, then these people need to get a lion’s share of the money” said Sven Wunder, co-author of the report, describing the process as ‘a necessary evil’ in the scramble to achieve desired emissions reductions.

In recent years there has been a worldwide trend towards the recognition of tenure rights, devolving management over forests from governments to local people and communities. Together, these transitions have encouraged tenure reform in many countries and have often been proved to boost carbon storage, while resulting in better incomes in a number of developing nations.

PES relies on centralised command-and-control measures, as the risk of non-payment resulting from local failures in forest management prompts central governments to increase control. CIFOR is currently performing research for IBAMA, the Brazilian Ministry of the Environment’s enforcement agency, to see how much they would need to invest as they step up their field presence to achieve greater forest protection.

As funding for implementing REDD projects flowed through government departments, fears exist that a new, recentralised form of forest governance could undermine local communities’ rights.