Climate financing in Brazil focuses on agriculture – 09/18/2023 – Environment

When talking about climate finance in Brazil, a lot is said about foreign investments, especially in relation to what goes to forests. But what if they told you that the majority of climate financing in the country comes from our own coffers, goes to agriculture and is private resources directed by public policies?

This is the photo revealed by an extensive survey, to which Sheet had exclusive access. The study was carried out by researchers from the CPI (Climate Policy Initiativ) at PUC-Rio.

The survey takes into account climate finance related to land use. Focusing on this area is not free. The largest share of Brazilian greenhouse gas emissions (70%) comes from deforestation (especially in the Amazon) and agricultural activities.

The research shows that, from 2015 to 2020, climate financing linked to land use was, on average, R$25.1 billion annually. There was a jump from the first year to 2020, however, going from around R$22 billion to R$36.5 billion.

Rural credit is part of the explanation for the concentration of money in the agricultural sector. According to the survey, which will be released this Monday (18), around two thirds of Brazilian domestic climate financing — the equivalent of R$15.9 billion annually — comes from private resources.

The reason for this is that financial institutions are obliged to allocate funds to rural credit.

“It’s not that private agents in Brazil are voluntarily allocating resources. We have a huge rural credit policy”, says Priscila Souza, senior manager of public policy evaluation at CPI/PUC-Rio, citing the more than R$400 billion in last Harvest Plan.

Souza explains that part of the Safra Plan’s resources come directly from the Treasury, but that another large portion is derived from mandatory allocation of bank checking and savings accounts.

According to the study, of the total financing observed, 95% (R$23.8 billion per year) comes from domestic sources.

As a result, the researchers observed that the agricultural sector was the one that received the majority of climate financing for land use, amounting to just over R$15 billion per year, or 60% of the financial flows observed from 2015 to 2020. Livestock, in turn, received R$ 2 billion per year, and bioenergy and fuels with R$ 1.3 billion. Another R$6.3 billion, or 25%, went to the forestry sector.

When talking about forests and climate finance, many in Brazil will already associate it directly with the Amazon Fund.

Within the 5% of financing that comes from international sources, which is equivalent to around R$1.3 billion per year, the majority comes from international governments, followed closely by climate funds, which depend on donations.

In this context, the Amazon Fund, which was suspended during the Bolsonaro government and resumed under Lula, is the largest climate fund channeling resources. On average, R$183 million was allocated per year to projects — around 0.7% of total climate financing for land use in the country from 2015 to 2020.

In any case, the study observed that the main source of resources for the forestry sector is the public budget itself. But there is a problem. Despite the centrality of the forest issue to national climate action —after all, without controlling deforestation, the country will not be able to fulfill its commitments to the Paris Agreement—, average annual financing for this sector shrank in the period analyzed.

“This issue loses importance in terms of the public budget within the government over the period [analisado]”, says Joana Chiavari, research director at CPI/PUC-Rio.

Chiavari mentions that such financing, in part, goes to the budgets of Ibama, ICMBio and Funai, national bodies directly linked to the fight against deforestation and the protection of indigenous peoples.

According to the researcher, the study helps to show a very complex financing ecosystem in the country, with a great diversity of actors.

This fragmented scenario, say the authors, required an effort to search for different sources of data and systematize criteria to be able to see the path of money, from its sources to its final alignment, or not, with climate mitigation and adaptation objectives. .

It is worth mentioning that, as international reports point out, in Brazil, a smaller portion of the funds is directed to adaptation efforts, that is, to actions that adapt the country to climate change, such as the construction of infrastructure that is more resistant to extreme rainfall. There are only 19% per year in the category (there are also flows that mix greenhouse gas mitigation with adaptation measures, representing another 13%).

Among the various sources, the researchers also observed a series of obstacles, especially related to transparency.

“There is no clarity and transparency in different databases. There is no standardization”, says Souza. “There needs to be a concern to increase transparency and accounting of what is actually being used and for what purpose.”

There are some points, however, in which the country has already evolved, such as in rural credit. The researchers highlight the suspension of credit for embargoed areas in the Amazon. In the current Safra Plan, this cancellation was expanded to cases of embargo in any biome. BNDES (National Bank for Economic and Social Development) also started to stop credit for properties with deforestation alerts.

“If you start to think, you say: ‘hey, but was public policy providing subsidies to those who were working in an embargoed area?’, highlights Souza.

For Chiavari, these steps are essential to, in addition to not favoring illegal activities, expand the possibility of attracting international financing.