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Please cite
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Fearnside,
P.M. 2001. The potential of Brazil's forest
sector for mitigating global warming under the Kyoto Protocol. Mitigation
and Adaptation Strategies for Global Change 6(3-4): 355-372.

ISSN:  1381-2386

Copyright: Springer

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THE
POTENTIAL OF BRAZIL'S FOREST SECTOR FOR MITIGATING GLOBAL WARMING UNDER THE
KYOTO PROTOCOL

Philip M. Fearnside                                           Instituto
Nacional de Pesquisas

da Amazônia-INPA

(National
Institute for Research

in
the Amazon-INPA)

Av. André
Araújo, 2936

C.P.
478

69011-970
Manaus-Amazonas

BRAZIL

Tel:
+55 (92) 643-1822

Fax:
+55 (92) 642-8909

Email: [email-masked]

For
submission to:

Mitigation and Adaptation Strategies for Global Change

10 March
1999

14 March
1999

2 April 1999

8 April 1999

10 April
1999

8 Oct. 1999

11 Oct.
1999

25 Oct.
1999

Revised
2 Feb. 2001

ABSTRACT

Activities
in Brazil's forest sector have substantial potential for mitigating global
warming as well as additional environmental and other benefits.  Silvicultural plantations of different
types, reduced impact logging, and deforestation avoidance all have potential
mitigation roles.  The magnitude of
the annual emission from recent rates of deforestation in Amazonia, which
averaged 392 × 106 Mg C/year over the 1981-1990 period,
presents an opportunity for carbon benefits through reducing current rates of deforestation.  Measures related to Amazonian
deforestation have greater potential carbon benefits than do options such as
plantation silviculture, but much depends on how benefits are calculated.  Procedures are needed for assessing the
environmental and social impacts of Clean Development Mechanism projects.

Key Words: Clean Development
Mechanism, CDM, Emissions trading, Kyoto Protocol, Global Warming,
Deforestation, Brazil, Amazonia

1. INTRODUCTION

Brazil's
forest sector offers unique opportunities for carbon (C) offsets under the
Clean Development Mechanism (CDM), which was created under Article 12 of the
December 1997 Kyoto Protocol to the United Nations Framework Convention on
Climate Change (UN-FCCC, 1997).
Much of the language of the Protocol will require further interpretation
to clarify how CDM projects will function in practice (Schlamadinger and
Marland, 1998; Trexler and Kosloff, 1998; Watson et al., 2000).  Because the Protocol allows CDM projects
to begin earning credits as early as 2001, work on this subject is proceeding
at a frenetic pace.  The nature and
magnitude of opportunities for Brazil will depend on how the Protocol is
interpreted, and how carbon credits will be counted.

Brazil
has both the largest remaining area of high-biomass tropical forests and the
largest current emission from its rate of annual clearing of these
forests.  These facts mean that any
measures that result in a reduction in deforestation rates in Brazil would avoid
greenhouse gas (GHG) emissions and maintain carbon stocks.  Brazil is unique in having a huge stock
of carbon in standing forest that is not at risk of being released into the
atmosphere on the very short term, but which could be expected to be released
over longer time horizons.  If and
how maintenance of such carbon stocks should be credited represents a major
unresolved issue in global climate negotiations (Fearnside, 1997a).  The phrase "enhancement of
sinks," in the sense of increasing the flows into sinks, does not capture
Brazil's most important potential contribution to mitigation, which is in the
maintenance of stocks (i.e., keeping the carbon where it is).  The present paper examines the potential
role of Brazil’s forest sector in mitigating global warming and the
barriers that may greatly reduce the role that the country is willing to play
in the coming decades.

2. DEFORESTATION IN BRAZILIAN AMAZONIA

LANDSAT
satellite data interpreted at Brazil's National Institute for Space Research
(INPE) indicate that by 1998 the area of forest cleared in Brazilian Amazonia
had reached 548.9 X 103
km2 including approximately 100 X 103 km2 of "old"
(pre-1970) deforestation in Para and Maranhao (Brazil, INPE, 1999, 2000).  The originally forested portion of
Brazil's Legal Amazon Region is about the size of Western Europe, and the area
that has been deforested so far is the size of France.  Deforestation rates have varied widely
over time (Fig. 1).

[Figure
1 here]

Interpretation
of the causes of deforestation suggested by Brazilian deforestation data
strongly influences any conclusions that may be drawn regarding whether it is
feasible to reduce deforestation and what countermeasures might be most
effective. Eduardo Martins, the head of the Brazilian Institute for the
Environment and Renewable Natural Resources (IBAMA) interpreted these data as
indicating that deforestation is now primarily the work of landless peasants
and small farmers (Traumann, 1998).
INPE has interpreted the numbers for 1997 and 1998 in the same way (Época,
15 February 1999).  Were this the
case, substantial reductions in clearing rates would not be possible, or would
be difficult and expensive, without aggravating poverty in the region.  However, four independent lines of
evidence indicate that it is still the rich, rather than the poor, who are
responsible for the bulk of Brazil's deforestation:

a.) Macroeconomic changes:
One indication is the close correspondence of the major swings in deforestation
rates with macroeconomic changes that affect investors rather than small
farmers using family labor.  The
decline in deforestation rates from 1987 through 1991 can best be explained by
Brazil's deepening economic recession over this period.  Ranchers simply did not have money to
invest in expanding their clearings as quickly as they had in the past.  At the low point in 1991, investors were
still without access to much of their funds because then-president Fernando
Collor had frozen bank accounts in the country in 1990.  The peak in 1995 is best understood as a
reflection of economic recovery under the "Plano Real", a set of
economic reforms implanted in July 1994 that resulted in larger volumes of
money suddenly becoming available for investment, including investment in cattle
ranches.  The decline in
deforestation rates from 1996 to 1997 is a logical consequence of the Plano
Real having sharply cut the rate of inflation.  Land values reached a peak in 1995, and
fell by about 50% by the end of 1997.
Falling land values make land speculation unattractive to investors.

b.) Spatial distribution of
clearing: The second line of evidence that medium and large ranchers are
the major deforestation agents is the distribution of clearing activity among
the region's nine states; this indicates that most of the clearing is in states
that are dominated by ranchers: the state of Mato Grosso alone accounted for
26% of the 11.1 × 103
km2 total in 1991.  Mato
Grosso has the highest percentage of its privately held land in ranches of 1000
ha or more: 84% at the time of the 1985 agricultural census.  By contrast, Rondonia--a state that has
become famous for its deforestation by small farmers--had only 10% of the 1991
deforestation total, and Acre had 3%.
The number of properties censused in each size class explained 74% of
the variation in deforestation rate among the nine Amazonian states in both
1990 and 1991.  Multiple regressions
indicate that 30% of the clearing in these years can be attributed to small
farmers (properties <100 ha in area), and the remaining 70% to either medium
or large ranchers (Fearnside, 1993).

c.) Size of new clearings:
The third line of evidence is data released by INPE (Brazil, INPE, 1998)
indicating that only 21% of the area of new clearings in 1995, 18% in 1996, and
10% in 1997 were <15 ha in area.
Note that these values refer to the areas of new clearings, as
distinct from the areas of the properties in which the clearings are
located.  Small-farmer families are
only capable of clearing about 3 ha yr-1 using family
labor (Fearnside, 1980), and this is reflected in deforestation behavior in
settlement areas (Fearnside, 1984).

d.) Property-level studies:
The fourth line of evidence is direct observations and interviews with farmers
and ranchers.  A property-level
study of 202 land holdings distributed among different size classes and among
five sub-regions in Brazil's "arc of deforestation" that extends from
Paragominas (Para) to Rio Branco (Acre) concluded that in the 1994-1995 period
only about 25% of the clearing activity was in properties of 100 ha or less
(Nepstad et al., 1999).
Together, these lines of evidence indicate that it is a myth that the
bulk of Brazil's Amazonian deforestation is done by people who are clearing to
feed themselves.  The predominant
role of medium and large ranchers in Brazilian Amazonia means that
deforestation could be substantially reduced without worsening the plight of
the poor.

3. MAGNITUDE OF BRAZILIAN
EMISSIONS

Brazil's
Amazonian deforestation makes a significant contribution to global warming by
any valid calculation.  However, a
long series of official pronouncements has tended to understate the magnitude
of deforestation and the impact that it has on global warming (see Fearnside,
1997b, 1999a).  Just prior to the
1992 United Nations Conference on Environment and Development (UNCED or ECO-92)
in Rio de Janeiro, INPE vice director Gylvan Meira Filho announced that
Amazonian deforestation contributed only 1.4% of global CO2
emissions (Borges, 1992).  Although
highly influential in Brazilian policy circles, the study in question has never
been published in the scientific literature.  My estimates produce values triple this
figure (Fearnside, 1997c, 2000a), mainly because the INPE estimate ignored the
approximately two-thirds of forest biomass that is not oxidized at the time of
the initial burn (Fearnside et al., 1993).  Shortly before the 1997 Third Conference
of the Parties (COP-3) to the UN-FCCC held in Kyoto, INPE acting director
Volker Kirchhoff announced that Brazil produced zero emissions from
deforestation and less than 1% of the global total from all sources (ISTOÉ,
1997).  This remarkable conclusion
(which has also never been published in the scientific literature) was reached
by both ignoring decomposition and other emissions subsequent to the initial
burn and by a belief that the "crops" planted following deforestation
absorb all carbon emitted.
Unfortunately, only about 7% (rather than 100%) of the carbon emitted by
deforestation is eventually reabsorbed by the landscape that replaces the
forest (Fearnside, 1996a, 1997c; Fearnside and Guimarães, 1996).  The landscape that replaces the forest
is a patchwork of land covers, mainly cattle pasture and secondary vegetation
of different ages growing in abandoned pastures.  None of the major uses approaches the
original forest in biomass and carbon store per hectare.

The
two most commonly used ways of expressing GHG emissions from deforestation are
"net committed emissions" and the "annual balance."  Net committed emissions refers to the
long-term net result of converting a given area of forest (such as the 13.8 × 103 km2
cleared in 1990) to the equilibrium landscape that will eventually replace
it.  In contrast, "annual
balance of net emissions" or "annual balance" refers to the
balance in only a single year but covers an entire landscape (such as Brazil's
5 × 106 km2
Legal Amazon), which includes a mosaic of patches cleared in different
years.  Net committed emissions from
deforestation in 1990 was 267-278 ×
106 Mg C yr-1 for low and high trace-gas scenarios, while
the annual balance for deforestation was 354-358 ×
106 Mg C yr-1 for deforestation and 62 × 106 Mg C yr-1
for logging for the 4 ×
106 km2 originally forested portion of Brazil's Legal
Amazon.  The annual balance was
higher than net committed emissions in 1990 because logs were still decaying
from the years of faster deforestation that preceded that year (Fearnside,
1996b).

Because
Brazil's annual deforestation rates have undergone swings of 50% or more over
the past decade, the choice of the inventory period can have a significant
effect on the emissions result (Table 1).
Brazil's national inventory is being done for the 1990-1994 period,
which coincides with the dip in deforestation rates centered on 1991.  Were years either before or after this
interval included, the resulting emissions estimate would be higher.

[Table
1 here]

Net committed
emissions from deforestation can be expected to vary in direct proportion to
the average annual deforestation rate for the period chosen (ignoring slight
differences caused by differences in the amount of biomass present per hectare
at the locations deforested in different years).  The emission from deforestation,
excluding hydroelectric reservoir formation, was 270 × 106 Mg C yr-1 as CO2-carbon
equivalent for the 1990-1994 period being used for Brazil's national inventory
(based on average deforestation rate in the period as compared to 1990, using
the average of low and high trace-gas scenarios from Fearnside, 2000a, updated
from Fearnside, 1997c), while the corresponding value for the 1986-1995 decade
would be 393 × 106
Mg C yr-1.  In addition
to deforestation, there are also emissions from logging and from fire damage to
standing forest, neither of which is to be included in the emissions total for
Brazil's inventory (José Domingos Gonzales Miguez, public statement, 22
October 1998) (Note: affiliations of all cited individuals are given in the
Appendix).  Additional emissions
come from permanent clearing of secondary forests (not counted as deforestation
in INPE's LANDSAT estimates), emissions of trace gases from recurrent clearing
of shifting cultivation fallows and degraded pastures, and clearing of cerrado
(central Brazilian savanna) and of additional ecosystems other than Amazonian
forests.

The
potential net committed emission from converting all of Brazil's Amazon forest
to the landscape that replaces it is very large: 77 × 109 Mg C (Fearnside, 2000a).  This is 10% higher than the 70 × 109 Mg C total
gain that could be obtained from complete implementation of the Kyoto Protocol
plus a decline in Annex B (i.e., developed) country emissions from
fossil fuels from 2010 through 2100 at 1% yr-1 compounded annually
(Marland, 1998)

The
average annual net committed emission from land-use change over the 1981-1990
period was 0.556 X 109
Mg C in Brazil (Fearnside, 2000b).
The total for all of the tropics was 2.4 X 109 Mg C yr-1 (Fearnside, 2000b;
based on reinterpretation of data from FAO, 1993, for countries other than
Brazil).  This value is 50% higher
than the 1.6 X 109
Mg C yr-1 used by the IPCC for this emission (Schimel et al.,
1996) and 41% higher than the 1.7 X
109 Mg C yr-1 used in the IPCC’s Special Report on
Land Use, Land-Use Change and Forestry (Bolin et al., 2000: 32).  Among other reasons for large emissions,
the biomass of many tropical forests (especially in Brazil) is higher than
previous estimates had assumed.
Land-use change emissions from Brazil, which were responsible for 23% of
the total emissions from tropical land-use change over the 1981-1990 period,
are summarized in Table 2.

[Table
2 here]

The magnitude
of this emission is clear from its position as a contribution to global warming
larger by half than the notoriously damaging US emission.  Considering the 6.4 X 109 Mg C yr-1
global fossil fuel emission in 1995 (Marland, 1998), The US percentage of the
8.8 X 109 Mg
C combined total for fossil fuel and 1981-1990 tropical land-use change is 18%,
while the pan-tropical land-use change emission represents 27%.  The size of the contribution of tropical
deforestation offers a great opportunity for mitigation by decreasing the rate
of forest loss, especially in Brazil where most of the clearing is for
low-productivity cattle ranches.

4. OPPORTUNITIES FOR BRAZIL UNDER
THE CDM

4.1. Deforestation Avoidance

Brazil
stands to gain a great deal by finding ways to use efforts to reduce
deforestation as a source of carbon offsets.  Current expectations of the price to be
paid per ton of carbon permanently sequestered range from US $5 to US $35
(Michael J. Walsh, public statement, 10 October 1998).  The net committed emission from each
hectare of deforestation in Brazilian Amazonia was 194 t for deforestation done
in 1990; the value of this parameter can be expected to increase gradually as
the deforestation frontier moves from the cerrado/forest boundary into
the heart of the Amazon where biomass per hectare ("biomass loading"
or "biomass density") is greater (Fearnside, 1997c).  At 194 Mg C ha-1, the value
of avoiding deforestation corresponds to US $970 - 6.790 ha-1
of forest, with a midpoint of US $3.800 ha-1.

The
contrast of these values with current returns from cutting the forest is
clear.  The price of forested land in
Brazilian Amazonia averaged approximately US $150 ha-1 over the
1997-1998 period.  Although
purchasing land is not proposed, the price of land is important as an indicator
of what it can produce under the use options currently open to buyers--that is,
selling the timber and converting the land to cattle pasture.  The land price represents the net
present value (NPV) of the income stream from deforestation, considering the
discount rate employed by investors in their financial decisions.  The value of the carbon benefits from
keeping the forest are 6 to 45 times higher than the value of deforestation,
while the value of the carbon emitted by 1990 deforestation was US $1.3-9.3 billion, and that of
the 1998 was US $1.6-11.4 billion (Fearnside, 2000c).

The
amount potentially available is substantial for any cheap and easily available
mitigation option such as reducing deforestation.  Considering a US $20 t-1
carbon price, the US alone is expecting to spend US $8 billion annually on
the CDM (Article 12) joint implementation (Article 6) and emissions trading
(Article 17) in order to meet its Kyoto targets (Jefferson Seabright, public
statement, 10 October 1998).

4.2. Agroforestry

Agroforestry
offers some possibility of storing carbon in the biomass of the vegetation,
provided the agroforests are established in already deforested areas rather
than cutting down higher-biomass forests.
Some of the benefit claimed for agroforestry comes from avoiding
deforestation that would otherwise be done by the farmers tending the
agroforests.  However, the scope for
this benefit in Brazil is much less than is sometimes assumed because of the
prominence of cattle ranchers in Brazil's deforestation (different from many
other parts of the tropics).  This
means that measures aimed at containing deforestation by promoting agroforestry
among small farmers can never achieve this goal, although agroforestry has
important reasons for being supported independent of efforts to combat
deforestation (Fearnside, 1995a).

4.3. Forest Management

Forest
management for timber theoretically offers a possibility for carbon benefits by
stocking carbon in wood products, while the managed forests regrow removing
carbon from the atmosphere.
Unfortunately, the carbon benefits from this strategy are illusory due
to project effects beyond the boundaries adopted for its accounting (also known
as “leakage”), such as by displacing wood products from other
sources and due to the effect of large short-term emissions from decay of slash
and of trees damaged during harvesting if any value is given to time
(Fearnside, 1995b).
"Leakage" from indirect effects of the project, often outside
of the project's geographical, temporal or subject area boundaries, must be
adjusted for if projects are to have benefits for climate (see Brown et al.,
2000a).

4.4. Reduced Impact Logging

Another
option is through reduced-impact logging.
Simple changes in logging practices can greatly reduce the amount of ancillary
damage and consequent emission (Johns, 1996; Pinard and Putz, 1996; Putz and
Pinard, 1993).

4.5. Avoided Logging

Brazil ranks as the world’s largest consumer of
tropical forest wood, and satisfies 90% of its domestic demand from these
natural forests (Smeraldi and Veríssimo, 1999).  Most of this wood is for plywood,
particle board, concrete forms, pallets, crates, and other uses that could
easily be satisfied from plantation-grown sawlogs.  As long as wood from Amazonian forest
remains free for the taking, this will be cheaper than investing in
plantations.  The inevitable
transition from natural forest to plantation supply for most of these uses will
occur more quickly if areas are made unavailable for logging through creation
of reserves and enforcement of regulations.  Because such a transition is a future
event, decisions relating to discounting of carbon benefits will be critical to
the amount of credit that can be earned for measures that hasten the transition
(eg, Fearnside et al., 2000).

Although avoided logging involves smaller amounts of carbon
than does avoided deforestation, it has great advantages for immediate
implementation under the CDM.  Most
important is the substantially lower uncertainty associated with logging.  Much remains to be decided by the
parties to the Kyoto Protocol regarding what (if any) types of forest-sector
projects will be included under the CDM.
The degree of certainty to be required of carbon accounting is a key
question.  Canada currently has a
proposal before the Kyoto Protocol’s Subsidiary Body on Scientific and
Technical Advice (SBSTA) that would require 95% certainty (Canada, 1998),
which, if adopted, would eliminate many options in the forest sector
(Fearnside, 2000d).

4.6.
Silvicultural Plantations

Brazil's
proposals for combating global warming have tended heavily to plantation
silviculture.  Best known is the
FLORAM Project, proposed by the University of São Paulo in 1990 to plant
20 × 106 ha
of trees, mostly outside Amazonia, to sequester carbon (Ab'Sáber et
al., 1990).  The carbon benefits
of plantations depend heavily on what is done with the harvested wood.  Use for charcoal, which substitutes for
mineral coal in Brazil's iron and steel industry, accrues substantial carbon
benefits through fossil-fuel substitution, while use for pulp has much more
modest carbon benefits (Fearnside, 1995b; Marland and Schlamadinger, 1997;
Schlamadinger and Marland, 1996).

The
expected impacts of climate change will reduce the benefits of plantations and
increase the impacts of achieving given levels of offsets using this option
(Fearnside, 1998, 1999b).  The same
also applies to options in native forest (Fearnside, 1995c).

5. OPPORTUNITIES FOR BRAZIL UNDER
EMISSIONS TRADING

Why
doesn't Brazil join Annex B of the Kyoto Protocol?  While other countries can only reduce
emissions by curtailing use of fossil fuels, thereby reducing industrial
output, over 80% of Brazil's emissions are from deforestation (almost all of
which results in cattle pastures that rapidly degrade and produce little for
the country's economy).  If Brazil
were to join Annex B (and Annex I of the UN-FCCC), it could then be engaged in
emissions reductions under Article 6 of the protocol and in emissions trading
under Article 17, rather than in project-based activities under the CDM of
Article 12.  The problems of
within-country "leakage" from project-based initiatives would be
solved.

The
CDM, which is the only channel available to Non-Annex B countries, applies only
to projects, not to accounting for emissions at the national level.  The carbon sequestered or the emissions
avoided must therefore be shown to have resulted from the specific project that
was implanted with this purpose.  In
the case of reducing deforestation rates, it is very difficult to demonstrate
this effect, which is known as “additionality.”  Moreover, it is still not known whether
this kind of activity will be included in the CDM.  In contrast, countries that are members
of Annex B can engage in emissions trading under Article 17 of the
Protocol.  For this, the calculation
will be based on what is agreed for Articles 3.3 and 3.4, which deal with
deforestation, afforestation and reforestation (Art. 3.3) and “other
activities”, possibly including logging, soils, and other sources.  The quantity of emissions that can be
traded under Article 17 would be based on national inventories, without needing
to prove the effect of specific projects.
The “assigned amount” represents the quantity of carbon that
any given Annex B country would be allowed to emit without penalty and, if less
than this amount is emitted, would result in a surplus that translates into
tradable credits.  For Brazil the
inclusion of emissions from deforestation in the assigned amount is guaranteed
by Article 3.7 (the “Australia clause”), thereby insuring that the
benefits of reducing deforestation would result in tradable credits.  The assurance offered by inclusion of
forests for countries like Brazil under article 3.7 being already decided, as
contrasted with the still-pending decisions on inclusion of native forest
conservation under the CDM, represents a significant difference.

Because
emissions trading will only begin with the first commitment period (2008-2012),
while the CDM could start in 2001 because of the “banking
provision” in Article 12, one might think that countries like Brazil
should stay out of Annex B until just before the beginning of first commitment
period.  This would allow taking
advantage of the CDM while it is the only option available, and then allow
larger benefits to be reaped from emissions trading later.  However, an important reason for joining
now is that non-Annex B countries are largely left out of the discussion and
decision-making on interpretation of the Protocol, particularly in SBSTA where
many of the key decisions are taken.
If Brazil waits until the first commitment period is approaching, many
of the important decisions will have already been made, and Brazil may find
that major opportunities for the country have been closed off (Fearnside,
1999c).

6. ENVIRONMENTAL AND SOCIAL
IMPACTS OF MITIGATION

Some
options under consideration for global warming mitigation would create
substantial environmental and social impacts (Fearnside, 1996c).  An example is silvicultural plantations
for charcoal production.  In Brazil,
a system of "debt slavery" is closely associated with the charcoal
industry, whereby whole families are held (under threat of death) to work in
making charcoal for a patron to whom they owe inexorably mounting debts for food
and other supplies they receive on credit (Fearnside, 1999d; Pamplona and
Rodrigues, 1995; Pachauski, 1994; Sutton, 1994).  One might hope that the possibility of
international carbon benefits could provide an inducement for ending this
system.

Another
important example is the hydroelectric dams proposed for construction on
Brazil's Xingu River.  These dams
would flood extraordinarily large areas of forest and indigenous land (see
Santos and de Andrade, 1990, and Fearnside, 1989a, 1996d for discussions of
impacts).  Belo Monte Dam (formerly
known as Kararaô), the first dam planned, would have modest impact by
itself but would justify construction of the remaining five dams, especially
the one originally known Babaquara, now renamed the “Altamira Dam”
and listed in Brazil’s current decennial plan for completion in 2013
(Brazil, ELETROBRÁS, 1998: 148).
Except for a brief period during the high-water season, a substantial
part of Belo Monte's 11 MW of installed capacity would not be useable without
the highly damaging upstream dams.
Brazil's current system of environmental impact assessment has no
mechanism for dealing with the impacts of a chain of related development
projects, as opposed to the direct impacts of a single project (Fearnside,
2001).

Whether
international review, certification and monitoring would be implemented for
impacts of CDM projects, as opposed to only for carbon benefits, is still an
unsettled issue.  This author has
advocated a broad system of monitoring impacts and mitigation activities
(Fearnside, 1997b).  However, many
professionals involved in debates over the CDM are so involved in their efforts
to combat global warming that they tend to forget that there is more to life
than carbon.  This includes some
international non-governmental organizations (NGOs) in the field, which have
expressed the view that environmental impact studies of CDM projects would be
unnecessary because these organizations would be able to raise such a public
clamor if objectionable projects were proposed that these would not be
executed.  Unfortunately, there is
an element of hubris in thinking that the publicity and lobbying prowess of
NGOs is sufficient to stop any environmentally or socially damaging CDM projects.  Damaging projects are not rare in Brazil
and elsewhere today, even in the absence of additional financing through the
CDM.

In
Brazil, the current system of environmental impact reports (RIMAs), useful
though it is when contrasted to the situation preceding its initiation in 1986,
is not capable of averting major environmental and social impacts (eg.,
Eve et al., 2000; Fearnside and Barbosa, 1996a,b).  The added protections of a procedure for
independent assessment of the environmental and social implications of CDM
projects, and for international approval of projects on this basis, are
therefore not made superfluous by either Brazil's internal environmental
assessment system or the existence of international NGOs.

It
is important to remember that the CDM is not only intended for implementation
in Brazil, but in developing countries worldwide.  Many of the over-150 other countries
that have signed the UN-FCCC have no effective internal environmental controls
at all. It is therefore important that the CDM contain safeguards against
automatic acceptance of local interpretations of what are environmentally and
socially acceptable impacts.

One
objection sometimes raised to having a review of environmental and/or social
impacts is that the bureaucracy necessary for such a filter would make the CDM
unworkable.  However, this fear
would appear to have little basis given the ability of the World Bank and other
multilateral development banks to process and execute large numbers of loans
without dispensing with a review of environmental and social impacts.

Another
objection sometimes raised to including environmental and social impact
assessment in the CDM is that it implies a loss of national sovereignty and
would therefore be unacceptable to developing countries such as Brazil.  However, it should be remembered that
reviews of CDM project impacts are no different than the review process that
already exists for World Bank loans.
Brazil and other countries vie with each other for these loans, such
that it would be more than a little hypocritical for these same countries to
claim that an external environmental review is an affront to their
sovereignty.  In the case of Brazil,
the G-7 Pilot Program to Conserve the Brazilian Rainforest (PP-G7), financed by
the G-7 countries and in large part administered by the World Bank, is
specifically intended to help Brazil reduce deforestation.

Sovereignty
is guaranteed by the fact that all CDM projects will pass though a national
agency, assuring that nothing will be requested that does not meet the
country's criteria for sustainable development and other priorities.  It should be emphasized that the same
sovereignty guarantees should apply on the other side--that is, the Annex B
(developed) countries financing CDM activities have the right to assurance that
their own environmental and social standards will not be violated by the
projects.  There are two largely
overlapping sets of projects: those acceptable to Brazil and those acceptable
to the financing countries.  Most
projects (say, cogeneration from bagasse, energy efficiency improvements, etc.)
will fall in the overlapping area easily accepted by both sides.  If Brazil should consider avoiding
deforestation as too threatening an option to include, then no other country
will be able to force Brazil to accept this.  By the same token, for example, should
Brazil want carbon credits for hydroelectric dams on the Xingu River (a
possibility that has been implied by officials on more than one occasion), then
this would be likely to fall outside the range of acceptable projects for
financing countries.

7. IMPEDIMENTS TO BRAZILIAN
RECOGNITION OF DEFORESTATION

Brazil’s
foreign ministry has so far opposed inclusion of projects to reduce tropical
deforestation in the CDM.  Other
sectors within the Brazilian government have recognized some of the potential
benefits that could be gained for the country from changing this position.  At the
“Meeting of the Ministers of Environment and Forestry of the Amazonian
Countries on Clean Development Mechanism (CDM),” held in Cochabamba,
Bolivia, 14-15 June 1999, the final statement of the meeting recommends that
“conservation of natural forests” be included under the CDM.  This was signed by José Sarney
Filho, Brazil’s Minister of the Environment, although the official
position of Itamaraty (Brazil’s foreign ministry), still opposes
inclusion of this kind of project.

The
conspicuous absence of deforestation from Brazil's official pronouncements on
the CDM and related climate matters needs to be understood in terms of Brazil's
particular sensibilities.  In
Brazil, many--probably most--people believe in the existence of a worldwide
conspiracy intent on taking Amazonia away from Brazil, for example by
"internationalizing" the area under an arrangement similar to that in
Antarctica (e.g., Reis, 1982).   A sociological survey of the
population in Brazilian Amazonia revealed that 71% of respondents agreed with
the statement “I am afraid Amazonia will be internationalized” and
75% agreed that “Foreigners are trying to take over Amazonia” (Barbosa,
1996).  It is natural that people
raised from infancy hearing this theory will accept it as above questioning.

Environmental
concerns over Amazonian deforestation are seen as a mere smokescreen for this
alleged plot.  While a range of
visions exists as to how "internationalization" might occur, a
significant part of the population in all social and educational strata
believes that soldiers (usually assumed to be of US origin) are poised to
invade Amazonia to stop Brazil from developing the region.  Non-Brazilians generally react to this
theory with incredulity and are consequently prone to assume that such a belief
could not possibly cause national leaders to forego billions of dollars in
potential revenue and to maintain development policies that destroy the
country's most valuable resources.
Unfortunately, such an assumption is unwarranted.

Lack
of a real threat of "internationalization" of Amazonia is of little
importance; it is the fact that the "internationalization" theory is
the paradigm through which events are interpreted in Brazil that influences the
course of history.  It is also
important to realize that such paradigms can change.

A
second possible rationale for the Foreign Ministry's resistance to recognizing
the importance of deforestation avoidance as a climate mitigation option is
that Brazil should wait until the price is right. This hypothesis as the
explanation of the Foreign Ministry’s position has been suggested by the
Acre state government’s environmental advisor Carlos Vicente (public
statement, 22 October 1998). It is worth noting that the desire to wait for a
better price for carbon has a possible solution, as shown by the Noel Kempff
Mercado reserve expansion project in Bolivia initiated in 1998 (Brown et al.,
2000b).  In the case of the Bolivian
reserve, half of the carbon credits generated by the project remain the
property of the Bolivian government for future sale at market rates, an
arrangement that contrasts with the fixed payments established in forest
protection carbon offset initiatives now underway in Costa Rica.

The
information in the present paper suggests strongly that recognizing the
importance of deforestation and giving deforestation avoidance a high priority
among global warming mitigation measures would be very much in Brazil's
national interest.

8. CONCLUSIONS

Brazil's
major opportunity for mitigating global warming under the Kyoto Protocol lies
in reducing deforestation.  This
task faces difficult-but-not-impossible hurdles.  While substantial credit could be earned
through the Clean Development Mechanism, the requirement of additionality makes
emissions trading an easier means of gaining credit for reducing deforestation
rates.  Because Brazil’s
deforestation emissions are so large, and because the remaining area of
standing forest that might be deforested is also very large, the total amount
of credit that might be earned in this way is very much greater than what could
be earned through projects such as implanting silvicultural plantations.  To take advantage of emissions trading,
Brazil would have to join Annex B of the Protocol and accept commitments to
limit future emissions.  However, the
meager economic benefits of the ranching system that drives most clearing in
Brazilian Amazonia today mean that these reductions could be achieved if
political will were focused on this task.
The economic value of carbon benefits could be much greater than that
from the sale of traditional commodities derived from deforestation.

ACKNOWLEDGMENTS

An
earlier version of this discussion was presented at the Air & Waste
Management Association (AWMA) Second International Specialty Conference on
Global Climate Change, Washington, DC, 13-16 October 1998 (Fearnside, 1999e).  Brazil's National Council of Scientific
and Technological Development (CNPq AI 350230/97-98 and 523980/96-5) and the
National Institute for Research in the Amazon (INPA PPIs 5-3150 and 1-3160)
provided financial support for the research.  R. Dixon, S.V. Wilson, P.L.M.A.
Graça and two anonymous reviewers made valuable comments.

AFFILIATIONS OF CITED PERSONS

Individuals mentioned and
affiliations at the time of the cited statements:

Volker Kirchhoff: Acting director, National Institute for Space Research
(INPE), São José dos Campos, São
Paulo

Eduardo Martins: President, Brazilian Institute for the Environment and
Renewable Natural Resources (IBAMA), Brasília

Gylvan Meira Filho: Vice
director, National Institute for Space Research (INPE), São José
dos Campos, São Paulo

José Domingos
Gonzalez Miguez: Special Assistant for the United Nations Convention on Climate
Change, Ministry of Science and Technology, Brasília [Responsible for
Brazil’s national inventory]

José Sarney Filho: Minister of the
Environment, Brasília

Jefferson Seabright: Director, Office of Energy, Environment and
Technology, United States Agency for International Development (USAID), Washington,
DC

Michael J. Walsh: Senior Vice President, Environmental Financial
Products, Chicago, Illinois

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FIGURE LEGENDS

Figure 1 – Extent (A) and
rate (B) of deforestation in Brazil’s Legal Amazon region (Fearnside,
1997b; Brazil, INPE, 1998, 1999, 2000).

Table 1:
RELATION OF INVENTORY PERIOD TO DEFORESTATION RATE

Description

Period

Average deforestation rate (103 km2/year)

Change in deforestation rate relative to 1990-1994 (%)

Brazilian national inventory

1990-1994

13.7

0

UN-FCCC standard

1990

13.8

+ 1

FAO (1993) data period

1981-1990

19.6

+ 45

Average since 1990

1990-1998

16.5

+ 20

Decade centered on 1990

1986-1995

19.9

+ 45

Table 2: AVERAGE ANNUAL EMISSIONS FROM LAND-USE CHANGE IN
BRAZIL 1981-1990(a)

Biomass C loading (t C/ha)

Area cleared (103 ha yr-1)

Carbon in biomass cleared (109 t C yr-1)

Carbon in charcoal (106 t C yr-1)

Carbon in replacement landscape (109 t C yr-1)

Soil carbon release to 1 m depth (109 t C yr-1)

Net committed emission (109 t C yr-1)

Above-ground

Below-ground

Total

CLEARING EMISSIONS

Amazon forest

154.3

48.9

203.2

1988.2

0.404

-8.74

-0.025

0.023

0.392

Cerrado

6.9

21.3

28.2

1705.9

0.051

-0.31

-0.008

0.014

0.056

Other ecosystems

17.6

12.1

29.7

432.6

0.013

-0.22

-0.002

0.003

0.014

Total from clearing

79.0

33.6

112.7

4126.7

0.468

-9.27

-0.035

0.040

0.462

CATEGORY CHANGE EMISSIONS

Category changes(b)

0.094

TOTAL EMISSIONS

Total from land-use change

0.556

(a) Data sources and derivation given in Fearnside (nd-a)

(b) Not all logging emissions are captured by changes
among land-use categories as defined by FAO (1993).  For example, thinning a forest from
50% to 30% crown cover will cross the 40% crown-cover limit that distinguishes
open from closed forest, but thinning from 90% to 50% crown cover would be
undetected.

Table 3 : PROJECT-LEVEL FINANCIAL AND CARBON COSTS AND
BENEFITS OF MITIGATION(a)

Activity

Average carbon stock (t C ha-1)(b)

Baseline carbon stock (t C ha-1)(b)

Carbon benefit (t C ha-1)(b)

Establishment cost (US$ ha-1)

NPV ha-1 @ 12% yr-1

Cost/t C (US$ NPV/t C)(c)

IRR (% yr-1)

MITIGATION OPTIONS

Deforestation avoidance

223.9

21.4(d)

202.5

?(e)

?(e)

?(e)

?(e)

Plantations for pulpwood

45.5

21.4(d)

24.1

625

165.93

6.88

14.6

Plantations for charcoal

201.5

21.4(d)

180.1

625

81.34

0.45

13.3

Plantations for sawlogs

64.6

21.4(d)

43.3

625

612.56

14.16

17.6

Avoided sustainable forest management(f)

223.9(g)

209

15.0

0

--

--

--

Sustainable forest management vs unsustainable logging

209

191(h)

18.0

1814.7

-479.19

--

3.8

Avoided unsustainable logging(f)

223.9(g)

191(h)

32.9

0

--

--

--

Sustainable forest management vs forest(f)

209

223.9(g)

-15.0

1814.7

-479.19

--

3.8

BASELINE ACTIVITIES

Remaining forest in 1990

223.9(g)

0

0

--

--

Unsustainable logging

191(h)

1811

961

--

infinite

Extensive ranching

21

307

-261.23(i)

--

-13.7(i)

(a) For supporting documentation and derivation of values,
see Fearnside (1995b).  NPV=net
present value; IRR=internal rate of return.

(b) Soil carbon to a depth of 20 cm under forest or
equivalent under other land uses.

(c) Only values without discounting of carbon are given;
results can be significantly altered by discounting (Fearnside, 1995b).

(d) Deforested landscape.

(e) The cost of slowing deforestation varies widely
depending on the measures taken.
Some of the most obvious measures are free or would save the
government money (Fearnside, 1989b).

(f) Does not include risk of fire, which could greatly
increase the carbon emission of logging in both sustainable and unsustainable
management systems.

(g) Remaining forest in 1990.

(h) Unsustainable logging.

(i) Note that these calculations for ranching do not
include profits from land speculation, logging, remaining government
subsidies, money laundering and other sources of income that can make
seemingly unprofitable ranches attractive.