Tragedies surrounding Brazil’s main ‘green product’ – 02/18/2023 – Candido Bracher

The last few weeks have been rich in news related, directly and indirectly, to the fight against global warming. It can be argued whether the final balance is positive or not for the world, but I have no doubt that it is very negative for Brazil.

Global warming results from a situation known in economics as the “tragedy of the commons”. It occurs when many people have access to a collective good, but each one seeks to maximize their individual interest, causing the degradation of the good to the detriment of all.

The theory arose from the English example of the use of community pastures by sheep farmers. Each breeder seeks to put as many animals as possible on pasture, causing their exhaustion. In the end, everyone loses.

In the case of global warming, the pasture is the atmosphere and the sheep are the GHG (greenhouse effect) resulting mainly from the burning of fossil fuels. As the atmosphere is a common good, it was occupied indiscriminately without anyone paying anything for it. Now it is close to exhaustion and it is necessary to reduce GHG emissions to zero by 2050, under penalty of causing a level of warming that seriously compromises living conditions on the planet.

The intuitive and obvious solution is to establish governance that regulates the right to gas emissions, and the simplest way to implement it is through a global price per ton of GHG, in order to discourage emitting processes and encourage the development of alternative technologies and changing habits.

The European Union has been leading this process around the world through the “cap & trade” system, recently improved with an import tax based on the GHG content of each product, the “carbon border tax”.

It happens that other countries strongly resist adopting similar measures, fearing to displease voters. The US Congress, a few months ago, approved an environmental package called the “Inflation Reduction Act” (IRA), which contains a significant volume of subsidies for the development of “clean” technologies, but does not bring a single measure taxing GHG emissions.

It is as if, in the historical example, instead of charging for the use of pasture, subsidies were granted to develop an alternative diet for sheep. The problem, of course, is that the animals keep grazing while waiting for the new menu.

The Davos meeting in January was dominated by discussion of this issue. The president of the European Commission protested against American subsidies, which create an unfair situation of competition, causing European investments and technology companies to flee to the US, where they find more favorable conditions.

Renowned economists, such as Olivier Blanchard, have used the term “trade war” to refer to American politics, and the English newspaper Financial Times reports that investors are pressuring a German company that operates on the technological frontier of clean energy generation, Marvel Fusion, to move to the US to take advantage of IRA subsidies.

As I read about these reactions, I was overcome with dismay and the image of the Tower of Babel came to mind; despite the common objective —the “net zero”— men are incapable of understanding each other to reach it.
Pressured by the facts, some European representatives publicly opined that the European Union should also establish a subsidy policy in response to the American initiative and that some agreement should be negotiated.

The idea is controversial, since the granting of different subsidies by different members of the bloc goes against the fundamentals of the European common market. On the other hand, relevant actors such as Faith Birol, director of the International Energy Agency, considered the IRA “the most important climate initiative since the Paris Agreement in 2015”.

Similar enthusiasm was expressed by many of the businessmen who attended Davos.

Reflecting on these statements, I took for granted the enthusiasm that the IRA arouses. After all, the measure is what is called “forward flight”; instead of going backwards, forward. Instead of reducing activity to contain GHG emissions, increase investments, seeking alternative solutions. After all, who wouldn’t want to lose weight by eating more? It remains to be seen whether the therapy will have good results.

Also in January, Nicholas Stern, a renowned economist involved in the fight against global warming, published a paper in which he predicts that new clean technologies for sectors such as aviation, cement and steel will become competitive in dates ranging from today to 2030.

This set of reactions led me to reconsider the pessimism contained in the Tower of Babel metaphor. I reasoned that mankind owes its progress more often to the competition that animates human ingenuity than to coordinated actions in common endeavors. Why wouldn’t it be like this this time?

I would like to end this column on the positive note of the sentence above. But it remains to deal with the implications for Brazil. The lack of global governance that establishes a price that burdens GHG emissions brings, as a probable counterpart, the absence of remuneration for GHG capture. These resources would be essential to finance the preservation of our forests and recovery of degraded areas.

To make the situation even worse, the English newspaper The Guardian, traditionally concerned with environmental issues, published an extensive report in which it states that more than 90% of carbon credits from tropical forests are worthless. The aforementioned survey points out that the American company Verra, which certifies 75% of all carbon credits traded on the voluntary market, uses flawed evaluation criteria. The company reacted vigorously and other bodies of the scientific community supported it, but the controversy is created and naturally negatively affects the value that can be obtained from the conservation and recovery of tropical forests.

As a result, not only is our main “green product” —the carbon capture potential of our forests— threatened with being left without a market, but the quality of that capture itself lacks adequate certification. Facing this double challenge must be a priority in our environmental policy.
Finally, a much more concrete threat to the preservation of our forests came contained in the revelation of the sub-human conditions of life in the Yanomami reserve, invaded by prospectors counting on the complacency of the State and, unavoidably, of Brazilian society.

The environmental issue pales before the terrible human drama and the shame of seeing renewed in our days the harsh words that Castro Alves addressed to the auriverde banner of our land: “I would rather have you broken in battle than serve a people in a shroud”.