The urgent need for implementation of the Forest Reserve Compensation Mechanisms of the Brazilian Forest Code

Given their importance for facilitating compliance and implementation of the new Brazilian Forest Code, there is an urgent need to create the necessary conditions for using the Forest Legal Reserve Compensation Mechanisms of the Code. In particular, it is essential that these mechanisms be regulated by state and federal government agencies, as without it, these will not be used.

Forest Legal Reserve compensation – how does it work

The new Brazilian Forest Law1 requires that all rural properties in the country maintain a certain amount of land under native vegetation (called Forest Legal Reserves – Reserva Legal in Portuguese). The size of Forest Legal Reserves can vary from 20% to 80% of rural properties, according to the type of vegetation (biome) and the region in which the properties are located2. With the support of the newly created 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, the government will now be able to enforce compliance with this legislation and require rural producers to fulfil their obligations.

According to IBGE (Brazilian Institute of Geography), there are more than 5 million rural properties in Brazil, all of which need to comply with this legislation. It is estimated, however, that about 4 million properties don’t have sufficient area of Legal Reserve. After matching those with surplus and deficit, it is estimated that there is still a net Legal Reserve ‘deficit’ of around 16 to 30 million hectares3.

Those who do not have sufficient area of Legal Reserve can comply with the law in different ways. One option is to plant or regenerate areas within the rural property itself. However, this requires landowners to set aside areas currently used for other agricultural activities and engage in the expensive activity of forest restoration. Alternatively, the forest law also enables landowners to comply with this requirement through two offsetting mechanisms – Forest Reserve Credits (or CRAs, from the Portuguese ‘Cotas de Reserva Ambiental’) or Consolidation of Conservation Areas Offsets.

Forest Reserve Credits (CRAs) are instruments created by the Brazilian Forest Code to allow for Legal Reserve offsetting among rural properties. CRAs can be created in areas containing existing native vegetation or in areas that are in a process of recovery (unless the regeneration or restoration of the area is considered unfeasible or unlikely). Each CRA represents one hectare (1 ha) of forest legal reserve that is surplus to the amount required by law to be maintained in any given rural property. CRAs can be used to compensate for the lack of legal reserve in another rural property provided the latter is located in the same biome and in the same State where the CRAs are created.

The use of CRAs provides a streamlined mechanism for compliance with the Forest Law while also contributing to the conservation of biodiversity in existing areas of native vegetation. At the same time, the maintenance of these existing forest areas (and/or the regeneration of degraded forests) will result in vast amounts of carbon storage and sequestration.

One of the prerequisites for the establishment of CRAs is that rural properties have been included in the Rural Environmental Registry (CAR). Indeed, adherence to the CAR is one of the main priorities of the federal government, because it provides the means to enforce the forest legislation and sustainable land use management practices. Given that each Forest Reserve Credit transaction requires that both the buyer and the seller are registered in the CAR, this market will help accelerate adherence to this important aspect of the Law.

Advantages of using Compensation Mechanisms

For Legal Reserve compensation to generate its full benefits, it is necessary that the economic, environmental and institutional objectives of the various actors involved are aligned.

For rural producers that have deficit of Legal Reserve, Compensation Mechanisms provide an affordable alternative for compliance with the law, allowing for the continuation of productive use of their land while reducing the costs related to restoration of natural vegetation.

For those with surplus of Legal Reserve, Compensation Mechanisms provide a method for remuneration for the conservation of natural vegetation remnants in private properties. This is particularly important for the Brazilian circumstances where, from a total of 537 million hectares of existing native vegetation, only 170 million ha are located in public lands4. Any conservation strategy has to rely on mechanisms to remunerate private individuals for the conservation of natural vegetation. The Compensation Mechanisms created by the Forest Law meet this requisite.

Another positive aspect of the Compensation Mechanisms is that they result in higher carbon stocks and conservation of biodiversity, as opposed to the alternative of forest restoration. Furthermore, if properly managed by environmental agencies, the compensation of Legal Reserve creates the possibility of formation of ecological corridors and conservation of large areas of natural vegetation.

Urgency needed for the implementation of the Compensation Mechanisms

As of March 2016, specific provisions of the Code still need to be regulated to enable the effective implementation of the Law. The process of the regulation of the Compensation Mechanisms, 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.

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, to enable it to fulfill its full potential of transforming the rural landscape in Brazil.

Notes

  1. Law n. 12.651 of May 25, 2012.
  2. Specifically, properties with forest cover located in the Amazon region need to hold 80% of legal reserve while properties in other biomes (Atlantic Forest, Cerrado, Pampa, Caatinga and Pantanal) need to keep only 20% of native vegetation. An exception is the case of properties containing Cerrado vegetation located in the Amazon region, which need to maintain 35% legal reserve.
  3. See, for instance, Britaldo Silveira Soares Filho, 2013: “Impacto da Revisão do Código Florestal – Como viabilizar o grande desafio adiante”, or Gerd Sparovek et al., 2011: “A revisão do Código Florestal Brasileiro, Novos Estudos 89”, and “Código Florestal, Aplicação e cumprimento na prática”, paper presented at the Conference ‘Código Florestal, Estratégias para implantação e cumprimento, 2013’.
  4. Sparovek, G. Caminhos e escolhas na revisão do Código Florestal: quando a compensação compensa? Visão Agrícola, p. 25-28, 2012.