Diagnostic, opportunities and challenges of implementing the new Brazilian Forest Code

BVRio, March 2016

BVRio Institute is an organisation with the institutional mission to promote the use of market mechanisms to facilitate compliance with environmental laws and support a green economy in Brazil. The following text is the first of a series that aims to bring information to society about the scenarios and feasibility of the implementation of environmental laws and regulations in Brazil.

Since its founding, iBVRio has acted on several fronts related to the effort to promote the implementation of the new Brazilian Forest Code, which is why dedicated this first text on this issue.

OPPORTUNITY

The new Brazilian Forest Code (Forestry Law 12,651, 2012) is one of the most important environmental policy instruments today. The law was adopted after a long and exhausting political process where the results reflect a nationwide compromise between the various sectors involved.

Implementation of the law has would result in a significant improvement of governance related to land use and a substantial contribution to biodiversity conservation and carbon storage on a landscape scale, placing the Brazilian agricultural sector at the forefront of global sustainability. If fully implemented, the Forest Code has the potential to protect more than 150 million hectares of native vegetation in Brazil, storing about 100 Gt CO2.

Its Rural Environmental Registry system (Cadastro Ambiental Rural – CAR), a georeferenced digital registry connected to satellite images that enables monitoring and mapping of land use in rural properties, will increase transparency and the enforcement capacity of Brazilian government agencies on issues related to land use and planning. At the same time, the innovative environmental Compensation Mechanisms created by the Code, including Forest Reserve Credits (Cotas de Reserva Ambiental – CRAs) and Conservation Area Offsets (Compensação em Unidades de Conservação – UCs), make compliance easier and less onerous, while creating the conditions for environmental markets based on the direct remuneration of landowners for the maintenance of native vegetation.

A series of factors, however, have delayed the implementation of the Code and have the potential to diminish its expected positive effects. Failure to implement the law would be a waste of a valuable opportunity to turn land use in Brazil.

On the other hand, the effective implementation of the law could provide the basis for a comprehensive social and economic development plan for rural areas, transforming the paradigm of sustainable development and low carbon economy at the landscape level. We see this as an opportunity to establish a new development model based on agribusiness, forestry and environment, revitalizing the rural economy, creating jobs and a new industry of environmental services. In summary, a Brazilian “Green New Deal”.

Consequently, implementation of the Code deserves a sense of urgency and requires a national effort to engage different actors, sectors, tools and instruments to overcome the various challenges, and benefit from the opportunities, that it creates. Without a well-coordinated effort, with complementary and integrated actions at the national level, it is hard to imagine that the Code will be implemented in their entirety, wasting an opportunity and diluting its potential social, environmental and economic benefits.

THE CHALLENGE

The new Forest Code creates a series of obligations for rural landowners, including the registration of rural properties in the Rural Environmental Registry (CAR), the need for restoration of millions of hectares of Permanent Protection Areas, and the maintenance of Forest Legal Reserve areas within farms, among others. Enrolment with the CAR, compulsory for all rural properties, is an essential step to ensure compliance with the Code.

Four years after its approval in Congress, implementation of the Forest Code still faces challenges. These include incomplete regulation of the law, differing interpretations regarding some of its provisions, lack of enforcement by environmental agencies, as well the absence of economic instruments to support farmers on the process of compliance with its obligations.

There are more than 5.6 million rural properties across the country that need to comply with the Forest Code and remain uncertain as to the requirements and regulations relating to it. Society is waiting for a specific date on which the law needs to be implemented, including the deadline for registration of farms in the Rural Environmental Registry (CAR), the rules of the Environmental Adjustment Programmes (PRA) of individual states, and the deadline for financial institutions to require enrolment in the CAR as a precondition for granting agricultural loans.

WHERE ARE WE?

The first requirement of the Code, registration of rural properties in the CAR, is already regulated by the Federal Government. According to the Federal Government, 66% of the total area subject to registration was registered with the CAR by January 2016. Of the total of ca. 398 million hectares that need to be include in the CAR, however, there are 135 million hectares that still needs to be registered.

The second step in the process of compliance with the Code is for landowners to engage in the Environmental Adjustment Program (PRA) of their respective state. For this reason, the government regulated the PRA at the federal level, but it also needs to be regulated by each state in the country. Until March 2016, the PRA was regulated by 14 states, out of 26 in the federation. It is necessary that the other states engage in this process. It is also important that these regulations fully adhere to the requirements of the Forest Law, to ensure that the implementation of the Code occurs consistently throughout the national territory.

As of March 2016, specific provisions of the Code still need to be regulated to enable the effective implementation of the Law. In particular, it is essential that the government urgently regulates the environmental Compensation Mechanisms (Forest Reserve Credits – CRAs, and Conservation Offsets – UCs) and creates other economic incentives for the implementation of the Forest Code.

The process of the regulation of CRAs, however, has stalled. This is due, in our view, to the differing understandings (or lack thereof), interpretations and interests of the various parties that are lobbying this regulation. This delay, unfortunately, penalizes farmers – those who most benefit from these mechanisms. And, at the same time, it fails to provide financial incentives for the maintenance of existing areas of native vegetation. In addition to delays in the regulatory process, there has been no enforcement of the requirements of the Forest Code. It should be noted that no CRA was issued by the federal government to date.

A number of factors can be listed for having contributed to the stalemate in implementation of the Forest Code. The most deleterious, perhaps, is the multiplicity of interests from non-rural stakeholder groups, such as associations of public notaries, the financial sector and politicians that actively advocate for provisions that benefit their sectors. At the same time, given the severe political and economic crisis that the country is going through, the government does not have the political will to enforce a law that creates obligations to the agricultural sector – one that contributes to over 20% of Brazil’s Gross Domestic Product (GDP).

WHAT TO DO?

Given the current scenario, it is essential that the country does not turn back on the accomplishments to date. According to the law, the deadline for registration in the CAR will end in May this year. By January 2016, over 2.2 million rural properties were enrolled in the CAR, representing 66% of the total area. These figures demonstrate that a significant number of farmers have engaged with the CAR. Their efforts cannot be ignored.

It is important, therefore, not to give in to the demands of a minority group of farmers that have not yet joined the CAR, to postpone the deadline for compliance with this obligation. An extension of this deadline would result in a loss of credibility of the new Forest Code and, above all, a serious disregard for the farmers that complied within the established deadline. At the same time, monitoring efforts should focus on rural properties that are not registered in the CAR, with an emphasis on larger rural properties in which the burden of compliance is on the landowner (as opposed to smallholdings, where CAR registration has to be made by the government).

Another crucial element to ensure the proper implementation of the Law is to confer full transparency to the information provided in the CAR. Transparency is directly proportional to the effectiveness of the tool in promoting the implementation of the Forest Code, as it would allow participation of civil society and environmental agencies in monitoring compliance with the Code. At the same time, it would be extremely helpful if landowners had access to the high-resolution satellite images already acquired by the Government, as this would speed up the process (and improve the quality) of entering the information needed for the CAR.

Other required actions include the regulation of Environmental Adjustment Programs (PRAs) and of the Compensation Mechanisms (CRAs and UCs); the creation of economic instruments to encourage compliance with the law; provision of training, capacity building and dissemination of information on the Forest Code and its instruments; as well as the support for the implementation of the Forest Code in settlements, smallholdings and traditional community lands.

Given the complexity of these needs, it is essential that Brazil develops and adopts a National Plan for the Implementation of the Forest Code. Since its approval in congress, in 2012, iBVRio has advocated for the development of such a plan. This should be created from a diagnostic of the needs and difficulties (technical, physical, institutional, operational, legal, technological, financial, etc.) and serve as a basis for a broader rural development program integrated with the various economic, environmental and conservation sectors.

In our view, the combination of the measures listed above would enable the Forest Code to fulfil its potential of transforming the rural landscape in Brazil. This, in turn, would allow Brazil to achieve the greenhouse gas emission reduction targets set in the UN Conference on Climate Change, while preparing the country for a transformational shift in sustainable land use management, agricultural production and inclusive rural economy.

 

For more information: info@bvrio.org