Climate Agenda as an Agenda for Development in Brazil - A Policy Oriented Approach

8/13/2019 Climate Agenda as an Agenda for Development in Brazil - A Policy Oriented Approach

1/44Electronic copy available at: http://ssrn.com/abstract=1456701

Climate Agenda as an Agenda forDevelopment in Brazil

A Policy Oriented Approach

Sérgio Abranches

To be presented to the Panel: “It's Not Easy Going Green”, of the divisions on Science,Technology and Environmental Politics and Comparative Politics of Developing Countries, atthe 2009 Annual Meeting of the American Political Science Association, TorontoSeptember 3-6, 2009

Advanced draft for comments

Rio de Janeiro, 2008

I am grateful to climatologist Carlos Nobre, biologist Fabio Olmos, political scientistEduardo Viola, and economist José Eli da Veiga, for the careful and generous reading of anearlier version of this paper and their very helpful comments. I have stubbornlymaintained some of my opinions, but the text was very much improved by the correctionsI made following their advice.


2/44Electronic copy available at: http://ssrn.com/abstract=1456701

SUMMARY

New models of development will be required to contemplate,simultaneously, avenues for low and carbon-free production andconsumption; as well as adaptation to the emerging effects of climatechange. The crucial transitional choices regarding how much furtherclimate change we are willing to contract will be made in the 2009-2030period.

A low-carbon society should not necessarily pose absolute, long-run limitsto human development and general welfare.

In Brazil, moving in a very few decades towards a low-carbon societywould represent a qualitative breakthrough that could reduce the costs oftransition from a high-carbon emerging economy to a low-carbondeveloped one. The agenda for change in this direction is in effect adevelopment agenda, rather than a matter of limits to growth.

It will require new patterns of land, natural capital, and energy use. Itwould entail more, rather than less, global integration and networkingwhile, at the same time, relying on regionally specific productive,developmental and adaptive capabilities. The dynamic matrix of this newdevelopment paradigm will necessarily be knowledge-based, but framedby the historic, structural and physical specific properties of localsocieties.

In Brazil, that would call for a long-run shift from mechanical andmetallurgical industries to a new low-carbon biotechnological industry,capable of producing low-carbon feedstock, and second and thirdgeneration biopharmaceuticals, biofuels, and biopolymers. The central andspecial focus of this strategy ought to be the Amazon. No low-carbonfuture could be envisaged to Brazil unless she can stop deforestation in avery few years. To sustain a zero-deforestation strategy Brazil has tooccupy the Amazon with unobtrusive science and technology, replacingsoybean plantations and pastures.

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Climate Agenda as an Agenda for Development in Brazil:A Policy Oriented Approach

Sérgio AbranchesPolitical Scientistwww.ecopolitica.info

Climate change and development

The scientific consensus about climate change has drawn theboundaries of credible risk, radically redefining the terms for thediscussion of different economic development models aiming atimproving societal welfare. Global climate challenge has become an

unavoidable leading factor for collective choice abo u t humanwelfare. Not accounting for it only means a greater cost and painwithin a a decade or two. Human society has, today, very likely,only two paths towards future sustainable welfare: either to adoptdeliberate policies for maximum possible reduction of greenhousegases (GHG) emissions and the best possible adaptation toirreversible climate change; or to face the full and progressivelystrong tragic consequences of global warming. 1

The best available scientific indications are tha t present patterns of

production and consumption will fully show how unsustainable theyalready are within the next 15 to 20 years. Global climate changemay reach a tipping point as early as 2050, if there is no global shifttowards new low-carbon patterns of production and consumption. Apoint of no return might be reached even sooner, if the pace ofemissions continues to increase at present rates, disregarding thewarnings about the acceleration of global warming. 2

The IPCC synthesis represents the modal consensus. Relevantdissent is not on the contrarian side. The most scientifically soundcriticism of IPCC comes from scientists whose models show evenmore cataclysmic results. They claim that the threat is even greaterand the time and targets to mitigate the risk of irreversible, perhaps

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1 For an analysis of tragedy as a tool for civic action on climate c hange see SérgioAbranches - “The Tragedy of Ecology”, The Brazilian Journal of Nature Conservation ,2005, October, volume 3, number 2, pp. 114-128.

2 A recent paper by James Hansen and associates, based on paleoclimate data, assertsthat we will have to set 350 ppm CO 2 as a limit to atmospheric concentrations to avoidirreversible cataclysmic effects. They claim that the current level of 385 ppm is “already in

the dangerous zone”, requiring prompt and far-reaching policy changes. Cf. James Hansenet allii - “Target Atmospheric CO 2: Where Should Humanity Aim?”, Columbia University,March, 2008 (unpublished pdf document).

http://www.oeco.com.br/http://www.oeco.com.br/http://www.oeco.com.br/


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catastrophic, climate change are respectively shorter and moredemanding, than the UN scientific panel acknowledges. In other

words, there are respectable scientific voices claiming that the IPCCconsensus may underestimate both the magnitude of danger posedand the breadth of policy change required by global climate change.

Even admitting some underestimation of the severity of the dangerahead, the last IPCC report makes it clear enough that: promptaction is needed; it is still possible to partially mitigate climatechange with available and foreseeable technology, but a significantamount of change has already become and will continue to beirreversible; the costs of mitigation are negligible, when compared

to the costs of future adaptation to immoderate climate change. 3 Iturges World leaders to implement immediate policies aiming atattaining the required mitigation of emissions, as well as adaptationand preparedness measures regarding irreversible climate change,due to past and present levels of GHG concentration in theatmosphere. The IPCC report emphatically makes the point that wehave the economic potential to reduce emissions to recommendedlevels until 2030 and that the technologies required for the changesare already available (a point contended by Pielke Jr. et all 4 ).

Even accepting that the IPCC report underestimates thetechnological challenge posed by climate change, as Pielke Jr et al.argue, we can still do a lot with available technologies to meet farmore ambitious emissions reductions targets than those we areaiming at today. One should say aiming at and failing to meet.

After a first cycle of change, with available technologies, as thereport states, scientific and technological progress can beaccelerated by higher rates of investment, both public and private,to make bolder targets possible subsequently. The change ofpatterns of resource use and the growth of low-carbon productionand consumption would represent a powerful incentive to thedevelopment and use of new, low-carbon and carbon-freetechnologies.

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3 On a private e-mail commentary, Brazilian climate scientist Carlos Nobre, argued thatone can never over-stress the need for significant investment on adaptation and that theIPCC reports should not be taken as a conservative rendition of climate change. Heconsiders, for instance, the scenario on species extinctions to be an alarming one.

4 Roger Pielke Jr, Tom Wigley and Christopher Green - “Dangerous Assumptions”, Nature ,

Vol 452/3 April 2008, pp 531-2, argue that “the technological advances needed to stabilizecarbon-dioxide emissions may be greater than we think”, and that the IPCC overestimatesthe possibilities of change using existing technologies.


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The Critical Years

Assessments of technology development that could soon makeavailable more efficient alternatives to present energy and resourceuse indicates that around 2030 a whole new technological arsenalwill likely be ready to gain full market scale. That means that thecrucial transitional choices regarding how much further climatechange we are willing to contract will be made in the 2009-2030period.

Even if we achieve the more demanding levels of GHG emissions,

some large-scale effects of irreversible climate change are alreadyunavoidable. They will dramatically affect large areas of the poorerregions of the World, but will also reach considerable areas in richcountries such as the US, Canada, The Netherlands, Japan andAustralia, for instance. This unescapable environmental changedemands sizable investment in adaptation and preparednessmeasures.

New models of development will be required to contemplate,simultaneously, avenues for low and carbon-free production and

consumption; as well as adaptation to the emerging effects ofclimate change. A fair amount of population displacement will likelytake place, both within and across countries, and there will be asignificant demand for aid and protection to climate refugees.

A low-carbon society should not necessarily pose absolute, long-runlimits to human development or general welfare. There is no reasonwhatsoever to presume that, in the long run, the path towards alow-carbon society will require significant permanent sacrifice ofhuman development and welfare levels. There are no implicit andirreducible limits to human development inherent to envisaged newpatterns of low-carbon production and consumption.

There are, though, several paths leading to low-carbon economiesand societies, at different levels of cost and sacrifice, depending onnatural capital endowments, geographic position and breadth ofcollective choices. Most of these low-carbon models of developmentare totally compatible with high, or increasing, levels of humanwelfare, in the long run. However, the transition to a low-carbonmodel of human development will eventually lead to very different,though temporary, cost and sacrifice levels, depending on the point

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of departure of each economy and on the quality and effectivenessof their plans of action.

The degree and time span of sacrifice will vary widely. The pathstowards a low-carbon economy are resource-dependent and thestarting-point defines very different trajectories at very differentcost levels. Some countries, due to their geographical position,present levels of natural capital endowment, and the overall carbon-intensiveness of their economies, may have much softer transitionstowards a low-carbon model.

The Path towards a low-carbon Brazilian model

It is my conviction that this is the case of Brazil. In Brazil, movingrapidly, in a very few decades, towards a low-carbon society wouldrepresent a qualitative breakthrough that could reduce the costs oftransition from a high-carbon emerging economy to a low-carbondeveloped one. The agenda for change in this direction is in effect adevelopment agenda, rather than a matter of limits to growth.

To abandon the old 19th-20th centuries industrial developmentparadigm, adopting a new regionally specific, low-carbon paradigm,

contemporary to the challenges and possibilities of climate-change-framed 21st century living could represent a very satisfactory pathtowards full-development, quality democracy and welfare to theBrazilian society.

This new development paradigm would not turn Brazil immune fromthe carbon-emission limits posed by climate change. It will requirenew patterns of land, natural capital, and energy use. It wouldentail more, rather than less, global integration and networkingwhile, at the same time, relying on regionally specific productive,developmental and adaptive capabilities. The dynamic matrix of thisnew development paradigm will necessarily be knowledge-based,but framed by the historic, structural and physical specificproperties of local societies.

In Brazil, that would call for a long-run shift from mechanical andmetallurgical industries to a new low-carbon biotechnologicalindustry, capable of producing low-carbon feedstock, and secondand third generation biopharmaceuticals, biofuels, and biopolymers.

The major investment required for this bio-industrial revolution inBrazil is on education and scientific research and development,

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creating the basis for a knowledge economy. The main constraintwould not be capital investment. A fundamental reform of fiscal

policy would create space for the public investment in theinfrastructure for basic education and science. There is plenty ofinvestment capital in the market to be attracted, provided there isan adequate policy, institutional and regulatory environment. Eventhe lack of R&D culture by domestic companies could becircumvented by the creation of new knowledge oriented ventures,applying the right structure of market and societal inducements.The country still has a huge stock of natural capital.

Human capital, however, is scarce. One cannot improvise an

educated labor force, able entrepreneurs or a research anddevelopment network combining public and private institutes andprivate companies. 5

Converting to a low-carbon economy may not require a greatsacrifice of well-being. It does, however, require much change andcollective effort. Depending on the levels of development andcarbonization of a given society, the process rather than demandinglimits, would call for poverty reduction, opening new opportunitiesfor social and occupational mobility, investment in education,

science and technology, and improved governance. The mainendeavor would be to change behavior, institutions and theconsumption of high-carbon resources and final goods to adjusteconomic satisfaction to lower indices of carbon-intensiveness.

Emphasis on the possible recessionary effects of such a conversionand on sacrificing the level of development already achieved,especially in developing or “emerging” countries, might bemisleading in many cases. It only adds strength to contrarianarguments. There are several low-cost actions that could help tomake transition softer, such as: incentives to energy efficiency andthe use of local alternative energy sources to reduce the demandfor high-carbon on-grid electricity; local renewable energy solutionscould satisfy household needs, while saving on-grid large scaleenergy solutions to industrial use; better transit planning and bettermass-transportation logistics; improved waste management.

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5 For the Amazon region, for instance, such a new model would require investment ineducation, science, technology and IT, as argued by climatologist Carlos Nobre,geographer Berta Becker and mathematician Jacob Palis, on the proposal by the Brazilian

Academy of Science for a New Development Model for the Amazon, “Amazônia: DesafioBrasileiro do Século XXI - A Necessidade de uma Revolução Científica e Tecnológica”, Riode Janeiro, Academia Brasileira de Ciências, 2008.


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No model of transition can be generalized. Each will require very

specific local solutions to face the major global problem of our time.The costs and sacrifices of transition towards a low-carbon societywill greatly depend on the carbon-matrix of each society. To convertan economy that is highly dependent on a coal-based electricitygrid, such as China’s, to a low-carbon model, does involve greatcosts and trade-offs. The conversion of an economy that has 80%of its electric grid based on hydropower, such as the Brazilian, couldbe far less demanding.

Additionally, the pace and weight of transition will also depend on

the pattern of carbon emission of each country. In Brazil, 70% ofcarbon emissions come from wildfires, deforestation and other landuse changes. To reduce emissions through avoided deforestation isless a matter of cost and sacrifice as it is a question of bettergovernance and ensuring rule of law. 6

The shape of transition will also depend on the present degree ofsustainability and carbon-intensity of the transportation system ofeach country. Brazil has 100% of its gas stations equipped withethanol pumps, side by side with gas and diesel pumps. It means

that there are no obstacles to the use of 100% biofuel by the entirepersonal and commercial fleet. Today, 28% of Brazilian cars run onalcohol or have totally flexible engine s (that run on any desired mixof alcohol and gasoline). By 2013 “flex engines” will represent 54%of the total. “Flex-car” sales in 2007 and 2008 represented 84% oftotal sales. All gasoline sold in Brazil already has a 25% alcoholmix. 7

Brazilian macro-logistics, however, is not only carbon-intensive, butalso highly inefficient in both logistic and energy counts. It is almosttotally dependent on roads and diesel-run trucks for cargotransportation even for distances well over 1000 Km. Railways and

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6 See Brenda Britto and Paulo Barreto - “Enforcement against Illegal Logging in theBrazilian Amazon”, Imazon, paper presented to the 4 th IU, 2005. Danielle Celetano andAdalberto Veríssimo have persuasively shown that present economic activity in the Amazonregion has never led and will not lead to development. A temporary boom of local incomesis followed by socioeconomic collapse, when resource or land exhaustion determines themigration of these activities to new areas, causing new deforestation. Cf. Danielle Celetanoand Adalberto Veríssimo - “The Amazon Frontier Advance: From Boom to Bust”, The Stateof the Amazon Indicators , Imazon, Belém, 2007.7 Source: ANFAVEA - National Association of Producers of Automotive Vehicles.


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coastal navigation have always been neglected by Br aziliantransportation policies.

Metropolitan collective transportation systems as well as intercityand interstate passenger bus transportation have also extremelynegative environmental and climate effects due to flawed publicpolicies and lack of law enforcement. Subway lines do not providean adequate alternative to bus tr a nsportation, and the majority ofthe metropolitan, intercity and interstate bus systems areinadequately planned and ill-regulated. There are no workingcontrols to regulate equipment age, or emission levels. Railwayinterstate passenger carriers are negligible as an alternative to bus

transportation and many lines have been discontinued due todisincentives built into governmental action.

Biofuels by themselves are no indisputable means to achieve a low-carbon transportation system. First-generation biofuels have adoubtful carbon balance; corn-based ethanol being the worst case.Sugarcane alcohol has a much better bala nce. Energy productivity,is greater due to sugarcane photosynthetic properties. However, theoveruse of fertilizers has not yet been fully taken into account in theBrazilian alcohol carbon balance. Due to our reliance on flex cars,

there is no motivation to use hybrid ones. 8

There is a potentially negative component to land-use change if theexpansion of sugarcane plantations for alcohol production woulddisplace other crops and cattle raising to forested areas, leading todeforestation in the Amazon, the Wetlands (Pantanal) and theMidwestern rich Savannah (Cerrado) regions. There has also beensome pressure on the Amazon forest borders from sugarcaneproducers. Sugarcane productivity in very hot regions seems to bemuch lower, though, and probably will not become a major vector ofdeforestation. But one should never underestimate the power ofgovernment and price incentives. 9 Nevertheless, its major

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8 Although preliminary calculations show that sugar cane production use relatively lowlevels of fertilizers and related N 2O emissions are also correspondingly low, see Isaías deCarvalho Macedo et al - Balanço das Emissões de Gases de Efeito Estufa naProdução e no Uso do Etanol no Brasil , SMA/GESP, 2004.

9 I have discussed biofuels use in lowering the carbon content of the economies in moredetail in “O Futuro dos Biocombustíveis”, O Eco , 26.02.2008: http://oeco.com.br/index.php/sergio-abranches/35-sergio-abranches/16588-oeco_26278l . For a moretechnical discussion, see Timothy Searchinger et allii - “Use of U.S. Croplands for Biofuels

Increases Greenhouse Gases Through Emissions from Land-use Change”, Science , 29February 2008: Vol. 319. no. 5867, pp. 1238 - 1240, and Joseph Fargione et allii - “LandClearing and the Biofuel Carbon Debt”, Science , 7 February 2008: pp. 1-4.

http://arruda.rits.org.br/oeco/servlet/newstorm.ns.presentation.NavigationServlet?publicationCode=6&pageCode=83&textCode=26278&date=currentDate&contentType=htmlhttp://arruda.rits.org.br/oeco/servlet/newstorm.ns.presentation.NavigationServlet?publicationCode=6&pageCode=83&textCode=26278&date=currentDate&contentType=htmlhttp://arruda.rits.org.br/oeco/servlet/newstorm.ns.presentation.NavigationServlet?publicationCode=6&pageCode=83&textCode=26278&date=currentDate&contentType=htmlhttp://arruda.rits.org.br/oeco/servlet/newstorm.ns.presentation.NavigationServlet?publicationCode=6&pageCode=83&textCode=26278&date=currentDate&contentType=htmlhttp://arruda.rits.org.br/oeco/servlet/newstorm.ns.presentation.NavigationServlet?publicationCode=6&pageCode=83&textCode=26278&date=currentDate&contentType=html


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contribution would likely be indirect, through crop and grazingdisplacement.

Creative displacements

The collective decision to reduce the carbon intensiveness of aneconomy, when translated into a coherent set of public policies,does create a new matrix of incentives to investment andinnovation. These incentives, in turn, would likely prompt secondaryand tertiary investment decisions that would create new jobs andoccupations. Conversion might entail progress rather thanrecession, specially when evaluated over a larger time span.

Conversion to a low carbon society could, in the mid run, sayaround 2030-2035, lead to a new economy. A low-carbon economywould be centered on a cluster of industries very different from thecore industries of the 20th century high-carbon paradigm. Theemergence of a new economy through the process of conversionfrom high-carbon to low-carbon patterns of production andconsumption would require a major, though gradual, replacement ofphysical capital. Physical capital renovation comes together with ashift of technological profile through a cycle of innovation. It is very

likely that such a mutually reinforcing chain of structural eventswould generate a long wave of economic expansion, even ascarbon-intensive sectors decline. (See diagram below)

MARKET AND REGULATORY

INDUCEMENTS TO CONVERSION

TO A LOW-CARBON ECONOMY

MARKET AND REGULATORY

CONSTRAINTS TO HIGH-

CARBON ACTIVITIESUSING EXISTING

TECHNOLOGIES AND EFFICIENCY

MECHANISMS TO REDUCE

CARBON-INTENSITY

DEVELOPMENT

AND ADOPTION OF

NEW LOW-CARBON

TECHNOLOGIES

GROWING DEMAND FOR

LOW-CARBON PRODUCTS

ECONOMY BECOMES

LOW-CARBON

RENEWAL OF

PHYSICAL K

DISPLACEMENT AND

DISPOSAL OF HIGH-

CARBON TECHNOLOGY

DESTRUCTION OF

HIGH-CARBON JOBS

CREATION OF

LOW-CARBON

JOBS

LONG

LOW-CARBON

BOOM

Figure 1: Emerging Low-Carbon Economy

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Several thousands of carbon-dependent jobs will be destroyed. Thisis likely to be happening already, because several high-carbon

segments are in sunset industries. Entire segments of the high-carbon economy are already in decay. It is, however, even morelikely that several thousands new low-carbon and green-collar jobswill be created during the process of conversion, which will takefrom two to three decades to complete. Unavoidable social costs arelikely to be entirely concentrated on the time lagging between jobdestruction and job creation, and that will vary largely from countryto country. The pains of transition will be highly correlated to thepace and duration of transition. From the middle to higher stages oftransition, it is very likely that low-carbon job creation will more

than offset high-carbon job destruction, especially in countries, likeBrazil, where the low-carbon economy will have a large componentof “bio-industries” and “bio-services”, not to mention jobs related tothe protection and conservation of ecosystem services.

It would not be a new phenomenon. During the downsizing andrestructuring wave following the fiscal crisis and steady loss ofproductivity of the 1980’s, the United States economy has lost 44million jobs (most public spending dependent) while the economicadjustment process created 73 million new private-sector jobs.

Adjustment took less than a decade and by 1998, 55% of the totalUS workforce were in a new job, a large majority earning aboveaverage wages. 10

This process of change was the basis for the long-boom of the1990s, that only now might be in jeopardy due to the sub-primecrisis. Over this long period of growth, even after the dot-combubble bust there is a sizable number of solid, dynamic andinnovative companies still leading the ongoing telecomm, IT andother knowledge-based sectors’ technological revolution. Most ofthe predicted media convergence was delayed by the crisis, but isnow under progress likely destroying and creating more jobs on thego. Presently, a wave of investment, mergers and acquisitions in therenewable energy market, in the US and Europe may be thebeginning of a new investment attracting, job-creating, longduration cycle.

Conversion entails changing patterns of both resource use andallocation trough new production models and consumer behavior,

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10 Cf. Mortimer B. Zuckerman - “A Second American Century”, Foreign Affairs , May/June,1998, pp. 18- 31 (especially pages 18-19).


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rather than reducing levels of development. It is to a large extentabout technological development and adoption of new technology

by corporations, usually under government regulation andstimulated by public as well as market incentives. It will probably goby stages in some sectors - such as energy and fuels - as new andbetter technological solutions appear; and be more straightforwardin other sectors, where it will require discontinuation of plants, oractivities.

A classic mix of market inducements and regulatory constraints thathas already led to technological and institutional breakthroughs inthe past will probably become the model for many conversion paths

around the globe.

Brazilian structural specificities

Policy alternatives open to a country like Brazil are both feasible andreasonable. Resistance comes from entrenched interests on the oldorder, rather than from a true concern about people’s welfare. Thebasket of policy decisions required to convert Brazil into a low-carbon society over the next 20-30 years, when adjusted to thedomestic levels and sources of carbon emissions, has comparatively

low social cost, and high social benefits. It should not represent anoticeable sacrifice of either economic growth or welfare.

This specificity of the Brazilian path for conversion to a low-carbonsystem comes from its predominantly hydro-based electric matrixand from the size and importance of the remaining Amazon tropicalforest. A hydropower-based matrix, a very high wind andphotovoltaic power potential and the natural capital represented bythe rainforest help to moderate the degree of change required byconversion. Again, the bottleneck lies in the education, domesticscientific capabilities and lack of an adequate scientific,technological, and private R&D infrastructure. 11

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11 Scientific capabilities are low due to low-quality scientific education and a number ofscientists in the required areas much lower than required. The country’s infrastructure for

scientific research is also lacking, especially in the Amazon region. There is no R&Dinfrastructure in the Amazon region to apply its “biocapital” in the development of abioindustry.


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SOURCE: MINISTRY OF SCIENCE AND TECHNOLOGY - FIRST ASSESSMENT OF BRAZILIAN EMISSIONS OF GREENHOUSE GASES - 1999

As 75% of her emissions come from deforestation, wildfires andother forms of land use change, improved governance could lead toa fast reduction of Brazilian emissions. A 5-year plan towardseliminating illegal logging and land clearing is perfectly feasible. Tomake zero illegal deforestation sustainable, a 10-year plan for

investment in the development of a new bio-economy for the regionwould be both a requirement and a bonus to its population. 12

Reducing emissions by eliminating deforestation would buy time forinvestment in new energy, and most importantly, on a newbioeconomy that could be the dynamic driving force of Braziliandevelopment in the 21st century.

2%

CHART 1: BRAZIL - SOURCES OF CARBON EMISSIONS

Land use change and forestryFuel combustion transportFuel combustion industryFuel combustion other sectors

Industrial processesFugitive emissions

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12 The Brazilian Academy of Sciences has recently detailed what would constitute the

public, scientific and technological face of this bio-industrial infrastructure that wouldrequire more scientific institutions, more qualified scientists in the region and moreinvestment in education, science and technology. Cf. Nobre et al. op. cit.


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Old-fashioned energy policies

The fact that land use change and forestry, together withtransportation are the two critical points for curbing carbonemissions in Brazil, does not mean that domestic energy policiesshould not be substantially reviewed. The hegemony of thehydroelectric paradigm in Brazil has crystallized the idea thathydropower plants are a totally clean source and the most cost-effective solution for electric power supply in the country. There isan entrenched bias built into the Brazilian electric power policydecisions that simply discards from analysis any alternative source

of future power supply. There also is a strong bias towards largehydro-plants, supported both by the sector’s technical elite (mainlyformed by electric engineers) and highly influential contractors withstrong political ties, that discourages building small hydroplants.The corollary is an exclusive accent on on-grid energy solutions thatrequires huge sums of capital and, given the distances and theenvironmental conditions - especially when the Amazon hydropowerresources are concerned - a large percentage of on grid energy loss.

Hydropower advantage is not as absolute as some claim in Brazil.

There are several hydropower plants that emit as much GHGs as anequivalent fossil fueled thermoelectric plant. Planning and designerrors coupled with the lack of environmental and emissions criteriato evaluate the costs and benefits of hydroelectric plants explain theworst mistakes. Brazilian exploitation of her hydroelectricity powerrequires better assessment of locations, fully accounting foremissions from its reservoirs, valuating the costs of water usage,and considering all its environmental consequences, including thecosts of reparation. Only fully accounting for all these factors onecould effectively appraise their comparative advantage vis-à-viswind, biomass, small hydro, and photovoltaic sources.

CO2 and methane emissions from hydropower plants should becarefully estimated and measured, in the reservoirs as well as in thewater flow. There is research and development under way lookingfor technological solutions to capture emissions at both points.Depending on the technological choice, location, and size of thereservoir, well-planned hydropower plants continue to be a major

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low-carbon solution to electricity generation in Brazil, though notthe only feasible one. 13

The chart below shows that some of the Brazilian hydropower plantsare as big emitters as equivalent coal-fired, diesel-fired, and gas-fired thermoelectric plants, sometimes bigger. 14

CHART 2: HYDROPOWER EMISSIONS COMPARED TO EQUIVALENT FOSSILEMISSIONS

Tucuruí

Samuel

Xingó

Serra da Mesa

Três Marias

Miranda

Barra Bonita

Itaipu

Segredo

-0,100 1,333 2,767 4,200

0,03

0,01

0,96

0,10

2,23

1,15

0,02

4,05

1,00

0,02

0,01

0,92

0,09

1,29

0,66

0,01

2,33

0,58

0,02

0,01

0,89

0,09

1,24

0,64

0,01

2,25

0,56

HE/CTE HE/DTE HE/NGTEHE/CTE = Emissions from Hydroelectric Plant/Emissions from Coal Fired ThermoelectricPlant; HE/TDE = Emissions from Hydro/Emissions from Diesel Fired Thermoelectric Plant;HE/NGTE = Emissions from Hydro/Emissions from Natural Gas Fired Thermoelectric Plant.Source: Luiz Pinguelli Rosa et allii - Emissões de Dióxido de Carbono e Metano pelosReservatórios Hidrelétricos Brasileiros , Brasil, Ministério da Ciência e Tecnologia,2006.

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13 Cf. Fernando M. Ramos et alli - “Extreme event dynamics in methane ebullition fluxesfrom tropical reservoirs”, Geophysical Research Letters , Vol. 33, L21404, 2006. The

government has officially declared that the country’s remaining hydro potential is entirelyin the Amazon region, meaning. Producing hydroelectricity in the Amazon means not onlymore deforestation, but implies using rivers with a high level of organic sediment,therefore increasing GHG emissions. Not to mention the cost and land clearing related toexpanding the grid through the rainforest. The environmental damage and costsassociated with the lines that will make feasible the new plan ts to be built on the recentlylicensed Madeira river project have not been taken into account when evaluating theircosts and benefits.

14 Luiz Pinguelli Rosa et allii - “Emissões de Dióxido de Carbono e Metano pelosReservatórios Hidrelétricos Brasileiros”, Brasil, Ministério da Ciência e Tecnologia, 2006.See also, Marco Aurélio dos Sa ntos - Inventário de Emissões de Gases de EfeitoEstufa derivadas de Hidrelétricas , Doctoral Dissertation, COPPE, UFRJ, Rio de Janeiro,March, 2000; Phillipe Fearnside - “Greenhouse-gas emissions from Amazonian

hydroelectric reservoirs: the example of Brazil's Tucuruí Dam as compared to fossil fuelalternatives”, Environmental Conservation, 1997, 24: 64-75; and Jim Giles “Methanequashes green credentials of hydropower”, Nature , 444, 524-525 (30 November 2006).


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Brazil is presently making all possible mistakes in the energy field.Planning of hydropower development lacks proper environmentalappraisal, neglects the decisively critical factor of emissionsminimization, and never considers alternative non-hydro renewablesources as more suitable substitutes, especially at the regional andlocal level. Besides, government policy induces and subsidizes theuse of coal as a resource for electricity production. Brazil does not,however, have an energy dilemma as complex as India, China andmany European countries do.

It is a case of energy policy failure. The country has plenty ofalternative sources of energy including many adequate sites foradditional hydropower plants of variable sizes, to seek for the bestenergy mix possible with the aim at reducing total energy-relatedGHG emissions. Energy planning however puts absolute andpreemptive emphasis on large hydropower plants and bundles allother non-hydro and small hydro possibilities on a lateral, smaller

“alternative energy program”. Renewables, other than largehydropower plants are not a part of the central plan for expandingelectric power generation.

The Amazon Challenge

The Amazon constitutes the paramount factor in the currentrelationship between climate change and development in Brazil. It isthe country’s major source of GHG emissions, it is the largest land

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or carbon sinks 15 , and it has an important role in the regional, if notthe global, climate system, apart from its role in power generation,

as commented above.16

The Brazilian Amazon region is a vast tract of mainly, but not solely,forested land, submitted to a marked cycle of wet months, when alarge portion of the forest is flooded, and dry months. It lies in theterritory of nine South American countries, but 60% belong toBrazilian territory. Its total area is larger than Europe’s, with apopulation of about 20 million people, an index of humandevelopment below the country’s average index and a rate of

17

15 Cf. Carlos Nobre - “Amazonian tropical forests: carbon source or sink?”, in Verweij, P.A.(editor) - Understanding and capturing the multiple values of tropical forest ,Proceedings of the International Seminar on Valuation and Innovative FinancingMechanisms in support of conservation and sustainable management of tropical forest,Torbendos International, 2002, pp 43-48. Although there is an ongoing debate on the sizeof the Amazon carbon sinks, recent studies show that they should be far more relevant

than earlier studies suggested. More evidence from ongoing research using more adequatetechnology will probably settle this question in favor of the hypothesis stating that they arevery significant to the atmospheric carbon balance. See - Yadvinder Malhi et al - “ClimateChange, Deforestation and the Fate of the Amazon”, Science , 319, January, 2008, pp.169-172; Britton B. Stephens et al - “Weak Northern and Strong Tropical Land CarbonUptake from Vertical Profiles of CO 2”, Science , 316, June 2007, pp. 1732 - 1735; andDavid F. Baker - “Reassessing Carbon Sinks”, Science , 316, June 2007, pp. 1708-1709.Britton Stephens and his colleagues conclude that “northern terrestrial uptake of industrialCO2 emissions plays a smaller role than previously thought and that, after subtractingland-use emissions, tropical ecosystems may currently be strong sinks for CO2”. A.Subramaniam et al. argue that “fresh water discharged by large rivers such as the Amazonis transported hundreds to thousands of kilometers away from the coast by surfaceplumes. The nutrients delivered by these river plumes contribute to enhanced primaryproduction in the ocean, and the sinking flux of this new production results in carbonsequestration. Here, we report that the Amazon River plume supports N2 fixation far fromthe mouth and provides important pathways for sequestration of atmospheric CO2 in thewestern tropical North Atlantic (WTNA).” They also argue that “the Amazon River plays animportant role in enhancing primary production far beyond the continental shelf bysupporting diazotrophs and thereby providing a significant source of new N. Although theAmazon represents the largest riverine input to the tropical ocean, there are numerousother tropical rivers that deliver large volumes of water with ‘‘excess’’ P and Si to thisbiome. Carbon sequestration by DDAs associated with excess nutrients supplied by tropicalriver plumes may be a global ly significant phenomenon.” This role critically depends on theintegrity of the forest surroun ding the rivers that provide most of the nutritive sediments.Cf. A. Subramaniam et al. - “Amazon River enhances diazotrophy and carbon sequestrationin the tropical North Atlantic Ocean”, Proceedings of the National Academy ofSciences - PNAS , vol. 105, no. 30, Juky 2009, pp. 10460–10465.

16 For a good updated synthesis of the loss associated to deforestation in the Amazon, seeY. Malhi et al - cit.


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deforestation far beyond any measure of sustainability, threateningthe forest system’s resilience. 17

The main challenge regarding mitigation of GHG emissions is toradically reduce deforestation. 18 It is a Herculean challenge. Anyonewho has seen real-life deforestation forces at work in the Amazonknows it is a major endeavor to eliminate or neutralize them. 19 TheAmazon region is a complex one, and there are very differentsituations: in Para, in Amazonas, in Roraima. There is, however, acommon factor uniting them all: lack of a working system oflegalized and formal land-rights. The chaotic situation of land-rightsserves as an excuse for every abuse in land use. It is no easymatter to bring order to decades of land-rights disorder, land-

grabbing, corruption, and inefficacy of the Federal land-rights andcolonization agency, INCRA. 20

18

17 See, for instance, Carlos Nobre et al - “ Amazonian deforestation and regional climatechange”, Journal of Climate , vol. 4, Issue 10, pp.957-988 ; Carlos Nobre and MarcosDaisuke Oyama - “A new climate-veg et ation equilibrium state for Tropical South America”,Geophysical Research Letters , Vol. 30, no. 23, 2199.

18 Cf. Georgia Carvalho, Paulo Moutinho et all - “An amazon Perspective on the Forest-Climate Connection: Opportunity for climate mitigation, conservation and development?”,Environment, Development and Sustainability , 6: 163–174, 2004; Gordon B. Bonan

et al - “Forests and Climate Change: Forcings, feedbacks, and the climate benefits offorests”, Science , 320: 1444-1449, 2008.

19 I have recently discussed the issue in the state of Para with people representative fromthe local political elite, of the techno-scientific elite, with timber producers, loggers, cattle-raisers, charcoal producers and workers on all these activities. Many are committ ed to stopdeforestation. They simply don’t know how and keep waiting for solutions from the Federalgovernment that may never come. I heard a lot about corruption, even from governmentofficials. I’ve also seen people from Ibam a and ICMBio, federal environmental agencies,who are not willing to concede and are indignant about corruption. It is a complexsituation, no single description really de picts the diversity of factors that drivedeforestation. A diversity that somehow re flects the forest wealth of diversity. Butresilience is declining both in the forest and in society as well.

20 See for the most recent and complete appraisal of land rights in the Amazon PauloBarreto, Andréia Pinto, Brenda Brito and Sanae Hayashi - Quem é Dono da Amazônia: Uma análise do recadastramento de imóveis rurais , iMAZON, Belém, march, 2008.


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CHART 3: LAND ENTITLEMENTS IN THE AMAZONMillion Hectares

Source: Paulo Barreto et allii - Quem é Dono da Amazônia? Imazon, 2008.

The chart shows that 53% of all Amazon land has no entitlement,and no clear legal status, therefore being very much up for thegrabs.

Over the last decade there has been a metropolitan boom in Braziland several mid-sized capital cities have reached the 1,5-2,0 millionpeople line. This is clearly noticeable in Amazon cities like Belémand Manaus, that have become more active sources of pressureover the rainforest and the region’s rivers. Other cities in the regionare growing too fast and will soon reach this point, among themCampo Grande, in Mato Grosso do Sul, also shown on the chartabove. Manaus has grown 83% between 1980 and 2007; Belém hasgrown 147%, over the same period; and, Campo Grande, 162.3%.This growth has also generated more complex rule-of-law problems,typically urban, that add new dimension of illegal action todeforestation, noncompliance to forest management regulations,

Entitled Private Land Presumed Private Land without entitlement

Pr esum ed Public Land with out En titlmen t Protected Public En titled L an d

0

750000

1500000

2250000

3000000

Manaus Belém Campo Grande

765247

2043000

1688524

526126

11290001011403

291777

827000922477

CHART 4: POPULATION OF LARGER AMAZON STATES CAPITAL CITIES

1980 1990 2006

19


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river pollution, invasion and destruction of conservation units, andtrafficking of protected species.

There are clear signs that better international air traffic control bythe radar system CINDACTA 4 has reduced illegal international airtraffic in the Amazon. The side effect was the migration oftransportation of illegal merchandise to the unprotected river ways,where drug traffic meets traffic of timber and protected species,mostly Chelonia and ornamental fishes. Youngsters from the urbanperipheries of these cities are recruited by these illegal merchantsand end up into drug use or drug dealing. 21

Despite all the complexity it is quite clear that an agenda toeradicate illegal deforestation in the Amazon sets no limits to theregion’s development. On the contrary, the present model, besidesbeing predatory, is highly inefficient as far as land-use, naturalcapital valuation, and labor and human rights are concerned.Because this mode of economic expansion is intimately linked toillegal behavior on a cycle of mounting gravity and societal danger itis clearly unacceptable both economically and in human welfareterms.

The present situation degrades not only natural capital but mainlythe region’s social capital. Average yearly deforestation of 15,000squared kilometers results almost totally from illegal clearing,creating a market for dirty labor and human exploration. Itdegrades labor, corrupts private capital and public authorities. It is a

20

21 Cindacta 4 has made control of international air traffic over the entire Amazon possiblefor the first time. Before that, illegal international air traffic was uncontrollable and an airdrug route was created linking Colombia to European a nd US markets over the BrazilianAmazon. With full radar coverage, repression of illegal a ir traffic has increasedexponentially and most of the drug transportation has been transfered to the region’sunprotected and unmonitored waterways. The Negro river waterway linking Manaus to theriver port of São Gabriel da Cachoeira, 1700 km upriver, located in the Brazilian-Colombianborder, on the so-called “Dog Head” region, is believed to have become the main route forcocaine paste from Colombia to the vicinities of Manaus, Amazon State. Federal Policeofficers suspect that there are clandestine coke refining nearby Manaus. Cocaine thusobtained would then go to Belém, State of Pará, and embarked to overseas markets. I’veheard several accounts from officials in the Amazon region referring to increasing linkagesbetween illegal logging, smuggling of protected species and drug trafficking. Aninterviewee told me, for instance, that gang youths from the periphery of Manaus arerecruited to do illegal logging in the reserves and bring the result to the outskirts of thecity, where they are paid with coca paste or cocaine. The central connector of this risingillegal network is the waterway. This convergence of environmental crime and drugtrafficking has been confirmed to me by both the Military Commander for the Amazon,

general Augusto Heleno, and the Director-General of the Federal Police, Luiz FernandoCorrêa. See Sérgio Abranches - “Drogas Desvastam na Amazônia”, O Eco, August 6, 2008(www.oeco.com.br ).

http://www.oeco.com.br/http://www.oeco.com.br/


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sharp snapshot of “low-grade” institutions and low-qualitydemocracy at work. Developing a knowledge-based bioindustry in

the region, together with other high-tech clean industries wouldlead to significant gains in all these dimensions.

The Political Economy of Deforestation

CHART 5: AMAZON DEFORESTATION

Source: 1988-2007 - INPE; worst case estimate based on a scenario of failed governmentaction and an acceleration of the pace of logging over the remaining four drier months;intermediate case estimate based on the hypothesis that the 12-month pace of clearingwill be the same as the pace observed over the last eight months; best case estimatebased on “experts consensus”.

The chart above shows a sharp decrease of deforestation from 2004to 2006. The Federal Government has claimed that it represented areversal of the historical trend, due to an intensification ofcommand and control actions, and the creation of new conservationunits and extractive reservations.

A brief look at the data, though, shows that it coincided with fallingprices for both soybean and beef, of -33.4% and -12.0%,respectively. The correlation between land-clearing and the soybeanand cattle industries in the Amazon is part of the deforestationtrend since these activities have replaced logging and “colonization”as the main driving forces in land-use change in the Amazon, in thelate 1980s, early 1990s.

Deforestation Worst Case Intermediate CaseBest Case

0

7.500

15.000

22.500

30.000

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

21


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Recen t e vidence shows an increase in deforestation since the end of

the second quarter of 2007. This resurgence of deforestationcoincides with the increase of both demand and prices for the twoAmazon-produced commodities. It seems that the cyclical nature ofdeforestation, linked to the fate of the Amazon agribusiness has notyet been broken.

The pressure from soybean production may have been weakened byan agreement, triggered by Greenpea ce actions in Europe and theUS, among government, producers and corporate consumers to barbeans from land cleared after January 2005. Low-productivity

cattle-ranching and land-grabbing to form pasture for future sale toranchers or newcomers may have become the main leading factorsdriving deforestation. What the data shows, though, is that thecorrelation between soybean prices in reais and deforestationcontinues to hold.

Soybean prices are very sensitive to the exchange rate and to thedemand for grain and feedstock. Immediately after the RealStabilization Plan, a boom in domestic consumption, particularly ofbeef and poultry, has compensated for the exchange rate, and has

led to higher soybean domestic revenues. Deforestation reached itshighest point ever. The Brazilian agriculture was in dire straits in1997 and 1998, when the exchange rate was really harmful toexporters and the economy started to give signs of impendingbreakdown. The soybean index from CEPEA/ESALQ dropped sharply,between 1997 and 1998. The chart above also shows a significantdecrease in deforestation.

After the 1999 devaluation, soybean revenues in domestic currencystarted to recover: while dollar prices increased 34% from 1999 to

2004, prices in reais increased 133%.22

Deforestation increased58.5%. Soybean prices dropped 9.8%, in dollars, and 33.4%, inreais, from 2004 to 2006. The rate of deforestation was 45%smaller.

The first time deforestation has not followed the movement ofsoybean prices was in 2007: prices increased 38% in dollars, and23%, in reais, respectively, while deforestation dropped 18% over2006. 23

22

22 In both cases year average per bushel.23 Source for soybean prices CEPEA/ESALQ, and for deforestation data INPE.


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This result could be attributed to a relative and topical efficacy of

more intensive command and control policies and to the agreementin the soybean industry. It didn’t last long, though. In 2008, withprices rising even faster than last year (57% in dollar values and35% in reais on average, from January to August) deforestation ison the rise again. The 2007-2008 season will probably close with adeforestation rate about 10% to 25% higher than the 2006-2007one, that registered 11,532 Km 2 of forest clearing. Preliminarysatellite evidence from INPE’s Deter system of real timedeforestation monitoring, as well as from Imazon’s monthlymonitoring system, show that deforestation has increased over the

same period last year.The price movement in the Amazon cattle economy has beenslightly different, but with the same overall effects. From 1999 to2003 they moved in the same direction observed for soybeanprices, although showing a larger difference b et ween values indollar and in domestic currency. Prices in dollar have increased4.2%, while in reais, they’ve jumped 68.4%. 24 From 2004 to 2006,however, cattle prices increased 15.4% in dollars, but haveretracted 12%, in reais. In the first 8 months of 2008, compared to

the 2006 yearly average, they have increase d as fast as soybeanprices: 67%, in dollar terms, and 39% in reais. The chart belowsumarizes the last two moments of this cycle. 25

23

24 Source for cattle prices CEPEA/ESALQ: year price averages in R$/@ and $/@.

25 Source of chart data CEPEA/ESALQ; soybean prices are the year average in R$/bushel,cattle prices are the year average in R$/@; deforestation in sq. km.


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-75,0

-37,5

0

37,5

75,0

112,5

150,0

1999-2004 2004-2006 2006-2007

CHART 6: RATES OF CHANGE OF SOYBEAN PRICES, CATTLE PRICES AND DEFORESTATION

%

Soybean Cattle Deforestation

The fact that soybean production does not appear in most of thestudies as a primary deforestation factor, does not mean thatmechanized grain production is not a driving force in the dynamicsof the political economy of deforestation. It has been a paramount

factor. As agriculture occupies older pasture land it enters theeconomic calculus for land value, even from the standpoint of land-grabbers doing illegal land clearing. They know the land will first beused for grazing and, afterwards, for grain production. Cattleranchers also know they will be able to sell or rent the unused landto agricultural producers and hence increase economic returns oftheir low-productivity, low-profitability activity. This expectationworks as a market incentive to deforestation. Obviously, the mainincentives are public, and come from the wide range of disguisedand open subsidies given to Brazilian agriculture in general, and to

Amazon agriculture in particular. 26

24

26 Cf. Sergio Margulis - As Causas do Desmatamento da Amazônia Brasileira , WorldBank Brazil, June, 2003; Ane Alencar et al. Desmatamento na Amazônia: indo além daemergência crônica , IPAM, Manaus, 2005; Leando Valle Ferreira et al. “O desmatamentona Amazônia e a importância das áreas protegidas”, Estudos Avançados , Jan./Apr. 2005,vol.19, no.53, p.157-166; Daniel Cohenca - A expansão da fronteira agrícola e suarelação com o desmatamento detectado em imagens Landsat TM e ETM+ naregião norte da BR-163, Pará entre os anos de 1999 a 2004 , Dissertation presentedto the Department of Forestry Sciences, Federal University of Lavras, December 2005;Santiago Palacios Noguera - Modelagem da Dinâmica de Desmatamento a diferentes

escalas espaciais na região nordeste do estado de Mato Grosso , Dissertationpresented to the Graduate Program in Tropical Biology and Natural Resources, INPA/UFAM,Manaus, 2006.


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There has also been primary deforestation by grain producers. Onlyafter the agreement between the large agents of the Amazon

soybean economy, reaching producers, exporters and importers,triggered by Greenpeace pressure over major importers in Europeand the USA, the contribution of soybean to deforestation bothdirect and indirect has decreased. The agreement called for a banon grains produced on land cleared after January 2005. The factthat all major agents were a part to the agreement does explain, toa large extent, why the pace of deforestation in grain producingareas did not accelerate as much as in cattle-dominated areasduring the recent boom of commodities prices. Deforestation hasincreased, but mainly due to pasture conversion, logging, and small

farm activities. 27

The Amazon is a critical geopolitical frontier, and a matter ofnational-security. Lawlessness and robber-tycoons control asignificant portion. They explore the land to its limits and leavebehind a track of sand and poverty. 28

The impact of an agenda to stop illegal deforestation on regionaldevelopment would be, rigorously speaking, highly positive, ratherthan negative. The development of the Amazon region has been so

far of very low-quality. It is a model that creates almost noopportunity for the social advancem e nt of the poorer sectors of itssociety. The traditional forest people are supposed to remain foreveras gatherers in a primitive extractive economy. The young people,looking for better income, become easy pray to intermediaries thatoffer labor power to loggers, planters and cattle ranchers, feeding along and unacc e ptable chain of slave and degrading labor. Now theyare also being recruited to work in the drugs supply chain. Thismodel destroys a natural asset that has high economic, scientificand environmental value, without generating a proportional level ofwell-being to the population. On the contrary it maintains poverty inthe long run and corrupts social capital, human rights and the civicculture.

Imazon researchers have demonstrated that there is a high quality-of-development deficit in the region, despite or because of economicgrowth. Using 17 indicators to measure the region’s progress on the

25

27 As shown by the series Transparência Florestal , based on data from the SAD -Sistema de Alerta de Desmatamento, developed by Imazon (www.imazon.org.br).

28 This “boom-bust” cycle has been very clearly and precisely explained by DanielleCelentano and Adalberto Veríssimo op. cit.


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Millennium Development Goals to 2015, the study shows that gainsin the majority of the indicators between 1990 and 2005 have been

very unsatisfactory. The Amazon region continues to be in a criticalsituation regarding the level of poverty, the incidence of malariafever, maternal mortality and access to water treatment andsanitation. Two indicators have worsened in the period: the rate ofdeforestation and the number of cases of AIDS. Only in one amongthe 10 Millennium Goals evaluated, the region has met the target:gender equality of access to education. 29

The Biofuture of the Amazon

Deforestation represents 70% of total Brazilian GHG emissions. TheAmazon region hosts 20 million people and is the country’s majorforest asset still largely preserved. The Amazon forest is not only amajor natural asset, but also a geopolitical resource and a matter ofnational and environmental security with clear global ramifications.The forest faces two relevant sources of risk today: deforestationand climate change. These two risk-drivers are not only correlatedbut also mutually reinforcing: deforestation leads to more climatechange, climate change threatens forest survival. 30 The Amazonagenda will necessarily be in the center of the Brazilian

development agenda for the 21st Century.

To stop illegal deforestation would be the first, essential, step in theimplementation of a far more sophisticated low-carbon developmentagenda for the region and for Brazil as a whole. There is, however,no permanent countervailing force against the drive towardsdeforestation other than a new economic and social model ofregional development. Its mainstay would be an advancedknowledge-based bioeconomy.

This new model would require sustaine d and significant investmentin education, scientific and technological development in the region,certainly far beyond what the Federal, state and local governmentsare prepared or able to provide. REDD and other models ofcompensation for avoided deforestation and preservation couldbecome important sources to finance a significant part of thisinvestment, together with private ventures, especially in the

26

29 Cf. Celentano and Verissimo - op.cit. Women have increased their schooling levels allover the country and today they have, on average, more years of study than men.

30 Cf. Yadvinder Malhi et allii - “Climate Change, Deforestation, and the Fate of theAmazon”, 2008, Science , Vol. 319, January, pp. 169-172.


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technological and industrial sides of the model. These high value-added activities propitiated by the educational, scientific and

technological advancement of the region, as well as the attendantdemand for skilled labor, would lead to a far greater index of humandevelopment than the present low-productivity, inefficient andpredatory economic activity that dominates the region.

This is no easy task. Only the public basic infrastructure for thisfuture Amazon knowledge economy, is estimated by the BrazilianAcademy of Sciences to require around R$1.0 billion ($600 million)a year, to finance the creation of new public universities, scientificand technological research and training institutes, strengthening

and expanding graduate studies in the region and establishing awideband regional information network. The idea behind this plan isto increase the scale and quality of regional academic training andbasic research and to significantly increase the volume of highlyqualified scientific and technical professionals working permanentlyin and about the Amazon. 31

The Academy of Sciences plan sets the public foundations for thebioeconomy of the Amazon region, but much more is needed. Weought to look at the infrastructure required for the private side of

this economy, because a state-centered bioeconomy would notcreate a new structure of incentives to discourage investment in thepresent predatory model and to induce capital and labor to choosethe new bioeconomic model.

The foundations of this new bioeconomy would be incomplete, ifprivate R&D institutes are not established in close connection withthe public basic research and training facilities. This public-privateinfrastructure, to be viable, will require a cluster of privateventures, dedicated to market the final result of its scientific andtechnical endeavor, at the same time creating demand for peoplewith scientific and technical qualification.

One of the historical obstacles to the productive dialogue betweenpublic universities and private companies in Brazil is that Brazilianacademic institutions educate people fundamentally to work atacademic institutions. A biotech network would need that trainingfacilities also qualify people to work on private market-oriented R&Dand to perform scientific, technical, and managerial tasks demandedby private companies. This will certainly demand a significant

27

31 Cf. Nobre, Becker and Palis - cit.


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degree of international cooperation. It is something that Brazilianacademic institutions, with a very few exceptions, still have to learn.

Creating the adequate scientific and policy capacity will demand anetwork for cooperation and partnership with centers of excellencein Brazil and elsewhere, the strengthening of existing centers, andestablishment of new ones. 32

The Amazon is in a situation that could be described as “quasi-deinstitutionalized”. No institution fully works in the region. Theenvironmental regulatory framework is disregarded by private andpublic agents to a worrisome degree. Land rights are in totaldisarray. There are 144 lawsuits regarding Indian’s lands or

reserves pending adjudication by the Supreme Court. The scope ofillegal activities is amplifying.

This environment of institutional disorder is not conducive toadvanced, long-run private investment. A bioeconomy requires afully working, carefully designed institutional framework to regulatethe ethical implications of biotechnological research andapplications; intellectual property rights; public-private rel at ions;co-research and co-production; the use of biodiversity; wastedisposal, among several other regulatory and legal issues. 33 Rule of

law, working institutions and a a proper regulatory framework aresine qua non for the development of an advanced bioeconomy inthe Amazon. It is obviously also a prerequisite for an advancedsustainable economy in Brazil as whole.

A second fundamental condition for the development of the Amazonbioeconomy is a cultural one. Brazilians have a totally abstract viewof biodiversity. The vast majority of the Brazilian informed andeducated public is not able to grasp the value content ofbiodiversity. Brazilians do not understand biodiversity as a source ofvalue that can be collectively as well as privately appropriatedwithout depleting the source. This sort of nondestructiveappropriation of the biodiversity commons is only possible throughits transformation into know ledge rather than directly into physicalproducts. An advanced bioeconomy is not an extractive economy,but a conservation economy, where the majority of the physical

28

32 Peter A. Singer, et al. - “ Harnessing Genomics and Biotechnology to Improve GlobalHealth Equity”, Science 294, 87, 2001, pp. 87-89.

33 Cf. Philipp Aerni, “Public policy responses to Biotechnology”, CID Policy DiscussionPaper , Center for International Development, Harvard University, Cambridge Mass. 2000.


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products are mediated products, the result of the application ofgenomics knowledge.

The fact remains that to ensure social support for the investmentand compliance of the rules required to develop the Amazonbioeconomy, the Brazilian politically active and informed public haveto be able to see the use and exchange values of biodiversity, notonly its intrinsic bio-value. To put it more bluntly, as E. O. Wilsondid far ago: they have to learn how “to draw more income from thewildlands without killing them” 34 The diagram below shows thecontours of the institutional system that would create the conditionsfor the development of biotech industrial poles aiming at turning the

biotech industry the center of the Brazilian economy of the future.

KNOWLEDGEBASE

BIODIVERSITY

RESEARCH AHDDEVELOPMENT APPLICATIONS

FOOD &STIMULANTS

PHARMACEUTICALS

AGROBIOCHEMICALS

FINE BIOCHEMICALS

WASTE-PROCESSING

BIOMEDICINE

TEXTILES BIOFIBERS

ENERGY

NEW BIOMATERIALS

AGRICULTURE ANDFORESTRY

STOCK FEEDING

EDUCATIONALINFRASTRUCTURE

BASIC RESEARCH

POLICY ANDREGULATORY

SUPERSTRUCTURE

COMPANIES

FIGURE 2: THE BIOTECH SYSTEM

The Amazon will hardly be sav ed from a muddling-through,incremental approach that seeks to remediate the worst features ofits present economy. Simply making this economy a bit moresustainable, and its people a bit less poor is to choose degradationin the mid to long run, not preservation. Preservation seems onlyfeasible by turning the Amazon into a pole of high-techdevelopment of the Brazilian 21st century economy, becoming asort of “Silicon Valley” of a new bioeconomy.

29

34 E. O. Wilson - The Diversity of Life , Cambridge, Harvard University Press, 1992, pp.282-283.


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This would correspond to a paradigmatic shift, a qualitybreakthrough that depends on investment and persuasion on a

large scale. To become a “biotech pole” the Amazon has also tobecome a knowledge society enabled to use knowledge-based skillsin a productive way; a social environment founded on high levels ofinvestment in education, training R&D, software and informationsystems. 35

The Emerging Brazilian Biotech Industry

Biotechnology is not entirely new to the Brazilian economy. We havesome successful experiences in agriculture, forestry, and health. In

the agriculture and health areas there is a strong participation ofstate-agencies like Embrapa, Instituto Butantã and BioManguinhos/Instituto Oswaldo Cruz. Embrapa is be hind our “commodity”revolution, not always with sound environmental consequences,though. Butantã and Manguinhos are important centers for theproduction of vaccines. Forestry biotech experiences are mainlyprivate, especially after the privatizatio n of Vale, that has had animportant role in forestry biotechnological development as a state-owned company. There are some private companies, in the biotechhealth industry, frequently spin-offs from the development of

producers of generics pharmaceuticals. 36

The private biosciences industry is, however, small, measured bythe number of companies or by their median income size. A surveyconducted by the Biominas Foundation 37 showed that there are 71companies in the biotech industry. 110 companies have their mainactivities directly related to animal and human health, agricultureand the environment, such as pre-clinical tests, or clinical essays;companies that sell third party diagnostic kits or instruments forresearch labs. These 181 firms would together comprise the

30

35 Deepa L. Persad et al. - “Enabling knowledge societies in developing countries: theexample of ge nomics”, International Journal of Biotechnology , Vol. 8, Nos. 1/2, 2006,pp. 4-22; and Elizabeth Dowdeswell, Peter A. Singer and Abdallah S. Daar - “Increasinghuman security through biotechnology”, International Journal of Biotechnology , Vol.8, Nos. 1/2, 2006, pp. 119-131.

36 The research on the health biotech industry in India, China and Brazil greatly helps tounderstand the obstacles and possibilities for the development of a bioeconomy in Brazil.See, for instance, Peter A. Singer, et al. - op. cit. and Rahim Rezaie et. al. - “Brazilianhealth biotech—fostering crosstalk between public and private sectors”, NatureBiotechnology , Volume 26, Number, 6, June, 2008, pp. 627-644.

37 Fundação Biominas - Estudo de Empresas de Biotecnologia do Brasil , BeloHorizonte, 2007.


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emerging Brazilian “bioscences” industry. The biotech companiesare biosciences companies, but the other 110 biosciences

companies are not considered as biotech companies, because theybut are not strictly producers of biotechnological products, orbiotechnological services. 38 These biosciences companies areconcentrated in a very few states, as the chart below shows.

The survey has listed only two such companies in the Amazon, bothin the state of Amazonas, none strictly a biotech venture. As thechart following shows, the biotech industry is strongly concentratedin the Southeastern region, where the basic research and academictraining facilities are stronger and more numerous.

The sectoral distribution of the companies reflects the historicalstrengths of the industry.

11%1%3%3%

6%7%

35%

35%

CHART 7: BIOMINAS - STATE DISTRIBUTION OF BRAZILIAN BIOSCIENCES COMPANIES

Minas Gerais São Paulo Rio Grande do Sul Rio de Janeiro PernambucoParaná Amazonas Outros

4%5%11%

80%

CHART 8: BIOMINAS - REGIONAL DISTRIBUTION OF BRAZILIAN BIOTECH COMPANIES

Sudeste Sul Nordeste Centro-Oeste

31

38 Op. cit. p. 15.


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The three larger segments of the biotech industry, with roughly20% of the companies are: agriculture and forestry; human health;and reagen ts , enzymes and DNA kits. Animal health andenvironment/bioremediation have 18% and 14% of the firms,respectively. The bioenergy segment has a relatively smallernumber of co m panies, representing only 4% of the total.

The study also found that it is an emerging industry. Most itscompanies are relatively young: 72% are 10 years old or less; 1/4were founded on or after 2005; 1/2 on or after 2002; and 3/4 of

the total sample are approximately 10 years old. Companies are stillsmall-sized: 75% of the total report revenues of US$ 500,000.00/year or less”. 39 Incubators have a very important role and areresponsible for a growing number of biotechnology companies inseveral states throughout the country: 35% were incubated biotechcompanies. 40

“As the Brazilian health biotech sector becomes more innovative,deficiencies in R&D infrastructure and inadequate institutionalperformance are starting to surface”, another study points out. 41

The main problems identified were missing linkages among privateenterprises and with universities, the lack of a dedicated healthbiotech policies and an inefficient patenting system. Problems thataffect biotech firms in all other segments of this industry. The studyby Biominas has identified regulatory and intellectual propertyprotection problems, lack of a qualified labor force, marketing skills,

3%20%

18%

14%

20%

4%

22%

CHART 9: BIOMINAS - SECTORAL DISTRIBUTION OF BRAZILIAN BIOTECH FIRMS

Agriculture and forestry Bioenergy Reagents, enzymes, DNA kitsEnvironment, bioremediation Animal Health Human HealthOther

32

39 Id. p. 5.

40 Ibid.41 Rahim Rezaie et al. op. cit. p. 637.


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and of adequate financial mechanisms as obstacles to theadvancement of the industry.

The need for creative financial mechanisms is a major requirementfor the development of this industry. Clearly the industry cannotrely exclusively on public financing. To attract venture capitals theregulatory and rule of law problems have to be solved beforehand.Even the public infrastructure proposed by the Academy of Sciencespaper would need additional sources of finance to complementpublic investment. A proper institutional and legal environmentwould certainly attract private investors given the immensepossibilities and potentials of a biotech pole in the Amazon and in

other biodiversity rich regions as the Pantanal (wetlands) and theCerrado (Savannah). 42 A credible REDD mechanism could providethe complementary source of finance for the public basic researchand training infrastructure and help to enlarge and improve theregional educational system. As with venture capital, a credibleREDD mechanism also requires an adequate and accountableinstitutional and legal environment. 43

The Brazilian potential for a biotech industry that taps the wealth ofits biodiversity can hardly be exaggerated. Most of this wealth is

unknown due to the lack of adequa te research coverage, but thereare examples that show the possibility of having dynamic biotechpoles exploring the biodiversity of the Amazon, the Atlantic Forest -an extremely rich and endangered fragment - and the Cerrado/Pantanal. The major problem, apart from this potential beingunknown, is that the re are missing links between basic, upstreamresearch and downstream research. In some areas it is possible toturn basic research into “quasi-applied” research and in many of

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42 There is also the possibility of firms that benefit from the biodiversity of an area, payingfor the preservation of the area. Graciela Chichilnisky and Geoffrey Heal, report anexperience of this kind in Costa Rica, where the pharmaceutical firm Merck has access ofbiological prospecting of an area of forest which it conserves and will pay royalties on thethe products developed from this prospection. Cf. “Economic returns from the biosphere”,Nature , Volume 391, 12 February, 1998, pp. 629-623. Merck markets products extractedfrom the Dimorphandra sp (favela), a Leguminosae from the Cerrado, which has asubstance used in the treatment of glauchoma and another one effective in treatinghypertensive disfunctions. It also has a sugar used by the food industry. Part of the favelacomes from the Grande Sertão Veredas Park, but I don’t think Merck helps to finance itsconservation and it certainly pays no royalties.

43 The Federal Government still opposes the REDD concept and, yet, it needs more study

of an interdisciplinary nature to examine all relevant dimensions of its application in Brazil,the institutional and rule of law requirements, as well as its adaptation to the scale andspecificities of the Amazon region.


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them this has happened in Brazil. In other areas, though, this routeis not that straightforward. Let me briefly give some examples of

this potential.

Animal species have an enormous knowledge about theirsurrounding biodiversity, and they use that knowledge for practicaland medical purposes. Michael A. Huffman has pioneered studiesabout self-medicative behavior of primates - in his casechimpanzees - that served as basis for a considerable developmentof the zoopharmacognosy, that can be appropriated by the medicaland biotech industries. 44 Karen Strier, studying the Atlantic ForestMuriquis’ in a reserve in Minas Gerais, found that two of the

Leguminosea fruit species they eat at the onset of the breedingseason were known to contain phytoestrogens, and others (samegenera but different species) were known to contain antihelminthicagents. 45 One can only imagine the wealth of possibilities lockedinto the unstudied behavior of these and other Brazilian primateswith the focus on finding tracks that could lead to advancements inhealth, fertility and nutrition biotech applications.

Embrapa has identified 10 plant species from the Cerrado that areresistant to extreme water stress (drought) and extreme variations

of temperature. Some can even resist to fire. They could be a veryimportant factor in adapting cultures to climate change, preventingthe future loss of agricultural production. 46

There are already several examples of innovative productsdeveloped by the Brazilian emerging biotech industry. In the healthsegment, for instance, a tropical natural anti-inflammatoryextracted from the Cordia curassavica ; a natural latex membranederived from the plant H evea brasiliensis containing a vascularendothelial growth factor (VEGF) for the treatment of skin lesions; a

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44 See, for example, Michael Huffman - “Self-medicative Behavior in the African GreatApes: An Evolutionary Perspective into the Origins of Human Traditional Medicine”,BioScience , Vol. 51, No. 8, August, 2001), pp. 651-661; and “Current evidence for self-medication in primates: A multidisciplinary perspective”, American Journal of PhysicalAnthropology , Volume 104, Issue S25, December, 1998, pp. 51-71; also Sabrina Krief,Michael A. Huffman et al. - “Bioactive properties of plant species ingested by chimpanzees(Pan troglodytes schweinfurthii) in the Kibale National Park, Uganda”, American Journalof Primatology , Volume 68, Issue 1, January, 2006, pp. 51-71.

45 Part of these findings are related in Karen B. Strier - “Menu for a Monkey”, NaturalHistory Magazine , Volume 102 Issue 3, pp. 34-43, March, 1993. I am grateful to KarenStrier for introducing me to Michael Huffman’s studies on zoopharmacognosy.

46 I am grateful to Eduardo Assad, agroclimatologist at Embrapa, for this information, on aprivate interview.


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recombinant protein for treatment of melanoma as well as an anti-hypertensive and analgesic peptide, both isolated from snake

venom.47

Industrial applications of biotechnology have emerged as a spin-offfrom progress on other fields, mainly the pharmaceutical sector.Some students of industrial biotechnology suggest that amongother things the dominance of physical and chemical technologiesas “source concepts for the design of industrial plants limits thescope for introducing biological processes”. They argue thatprospecting for biological organisms of industrial value will increaseas bioprocessing gains momentum, resulting in “new generations of

chemicals and polymers that will compete directly with bulkpetrochemical products.” 48

The development of more complex innovative products is hinderedby the firms’ lack of R&D capabilities and they have to partner withBrazilian public universities and research institutes. These links are,however, still scarce and concentrated in some areas where there isa clear cut notion of application possibilities, or depend on the firms’finding the right partners to fit their demands. 49

The analysis of the Brazilian biotech industry clearly shows thescientific strength of some public universities and institutes, but alsohighlights the concentration of scientific, technical andentrepreneurial capacities in just a few States of the South-Southeastern region. The areas with greater biodiversity, theAmazon and the Cerrado /P antanal (Savannah/Wetlands), are notyet endowed with these ca pacities, that are critical for their futuresustainable development. The Southeast, although having scientificand organizational resources to develop a strong biotech industry,also lacks mechanisms to link the preservation of the Atlantic Forest

to the prospection of its biodiversity.

It is not an easy way. Apart from the considerable investmentrequired in education, science and technology, as well as for theestablishment of productive ventures, there are several obstaclesyet to face. It is a long-course steeplechase-like challenge that calls

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47 Rahim Rezaie et al. - cit. pp. 631-632.

48 Calestous Juma and Victor Konde - “The New Bioeconomy: Industrial and EnvironmentalBiotechnology in Developing Countries”, UNCTAD, Ad Hoc Expert Group Meeting, Palais desNations, Geneva, 15–16 November 2001.49 Id. p. 633-634.


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for institutional development, long run planning, clearly defining thefrontiers of state and private action and creating a proper

environment for long-term, risk investment. At the same timewhere there already is a developed university structure and aworking research and technology system, industry-universityrelations are only partial and uninspiring. Industry collaboration isalso deficient, requiring better coordination and communicationamong firms.

There is consensus among the students of the biotech industry inBrazil that creating an expedite, merit-based patenting system is ofparamount importance. Private firms need to exercise a culture shift

that would lead to a substantial increase of their investment in R&D,employing more qualified scientific and technical people. To developregional biotech clusters it is necessary to identify the humancapital requirements in specific disciplines and technical specialties,creating the training programs to meet these needs. There is also aneed for MBA programs focused on the managerial, marketing andfinancial specificities of the biotech industries. 50

Setting forth on this path will depend on persuasion, developingtechnical policy solutions, and designing appropriate finance

mechanisms. Only a persuasive policy model, s upported by a broadcoalition of relevant players, can master the political resolvenecessary to make it happen.

This prospect for long-term sustainable development of the Amazonshows how a low-carbon target does not imply trading preservationagainst development. It really means abandoning an economic paththat is based on low quality investment, production and labor, to aknowledge based path of development of higher economic, socialand environmental quality. It is not a question of limits, it is amatter of upgrading development. This model also perfectly appliesto other biodiversity rich regions equally endangered bydeforestation and extensive occupation such as the Cerrado and thePantanal. Over the long run and already pushed by the dynamics ofa changing economic model, Brazil could develop biotechnologicalclusters in different regions, each adapted to the region’s pool ofresources. This shift towards biotechnology would also help thecountry to solve most of the problems of converting our industry toa low-carbon standard.

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50 Cf. Rahim Rezaie et al. - op. cit. pp. 641-643.


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I am fully convinced that the development of Brazilianbiotechnological comparative advantages, shifting our economic

model from its emphasis on hardware-based, carbon intensiveindustries, to a knowledge-based bioeconomy, will help to createthe solutions for the conversion of most of our industrial base. Thetime horizon for this shift is a rather long one. Meanwhile somelocalized solutions should be implemented to stop destruction of thebiodiversity upon which our future will be based. The hotspots areobvious, the Amazon, due to its size, and climate changeimplications comes first but is not alone. The Pantanal and theCerrado are perhaps under even more immediate danger ofirreversible harm. Measures such as agreements banning

deforestation, as happened with the production of soybean in theAmazon could be reproduced in other areas. An agreement could beworked out to ban illegal char

Climate Agenda as an Agenda for Development in Brazil - A Policy Oriented Approach

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