Transition to a Conservation Economy in the Amazon

Economist João Tezza Neto, Ph.D. candidate at the Federal University of Amazonas (Brazil), visited the Governors’ Climate & Forests Task Force (GCF) Secretariat at CU Boulder’s Laboratory for Energy & Environmental Policy Innovation (LEEP). The lecture he delivered, titled “Transition to a Conservation Economy in the Amazon: Economic Perspectives of Zero Deforestation,” made the case for how zero deforestation and conservation management can effectively generate greater wealth for Brazil than the current economic model, which is driving deforestation (much of it illegal). Mr. Tezza's presentation slides can be downloaded here.

Contextualizing the Problem

Mr. Tezza first emphasized the scale of deforestation in the Amazon. During the 60 minute presentation and discussion, the Amazon lost the equivalent to 90 football fields of forest. While agriculture is the main driver of this deforestation across the Amazon (responsible for 99% of forest loss), it yields very little economic value - the economy of Northern Brazil contributes only 5% of the national GDP. In short, we must ask: how can such a large area that is so rich in natural resources, biodiversity, and environmental services be sacrificed for such a poor overall economic return? It is reasonable to continue with business as usual?

Mechanisms Needed to Achieve Zero Deforestation & the Agriculture Paradox

Command and control measures prohibiting deforestation are not effective in isolation, argued Mr. Tezza, if actors continue to have sufficient incentives to risk illegal deforestation. The solution will have to be multi-faceted and include a greater understanding and valuation of the economic benefits and positive externalities of conservation.  Validation of an economy based on conservation of the Amazon includes the challenging issue of properly valuing ecosystem services, such as the provision of water across South America. However, there are more easily quantifiable benefits, including the Amazon’s rich biodiversity - an endless source of non-timber forest products and laboratory for biochemistry, engineering, and natural design research. Altering the social perception of forests and aligning economic incentives with forest conservation will also enable the government to spend fewer resources policing and enforcing command and control measures.

Mr. Tezza explained that another key to reducing deforestation is to double agricultural production on lands already used for cattle ranching. Instead, the agriculture industry is harming its own interests by expanding deforestation in the Amazon and threatening the region’s water supply. The trees of the Amazon are essential to the region’s water cycle and create what are known as “flying rivers,” which contribute to water availability and affect weather patterns and climate throughout South America and beyond. As deforestation continues, water shortages will worsen – creating serious pressures on livestock and agriculture. As Mr. Tezza summarized “we can produce agriculture without more land, but not without water.”

How Do We Transition to this New Economy?

The core of Mr. Tezza’s research is to develop an economic model and financial mechanisms to fund the Amazon region’s transition to an economy based on eco-efficiency and conservation, and to validate this new economy’s potential to generate wealth for Brazil. Using the average productivity of deforestation in the Amazon (approximately USD 205 per hectare per year from agriculture and livestock) and projected deforestation (using average 2007-2017 rates), Tezza estimates the cost of zero deforestation would be USD 8 billion through 2050. He noted that this amount is not extraordinary in relation to Brazil’s total budget, but is significant relative to the sustainable development agenda of the Amazon. As a reference point, the necessary contribution for 2018 would be USD 160 million or the cost of operating Brazil’s National Congress for 18.3 days. The budget for the entire Ministry of Environment for Brazil is USD 620 million.

Using conservative estimates, Mr. Tezza has demonstrated that the productive capacity of a properly conserved and managed forest economy, in a zero-deforestation scenario, can surpass the economic value of a business as usual scenario. To fund this transformation, Mr. Tezza is currently focusing on two ideas:

1.       Implementation of a model used by the Brazilian Agricultural Research Corporation (EMBRAPA) since the 1970’s, which would involve the federal government provided financing equal to the productive capacity of the business as usual scenario through 2050. The total funding through 2050 would be 8 billion dollars. Tezza estimates the government would end up earning money on this investment.

2.       A new taxing mechanism like the current federal tax in Brazil that subsidizes fossil fuels called Contributions of Interventions in the Economic Domain (CIDE) – CIDE could fund the transition by adding only USD 0.15 to Brazilians’ monthly energy bills, which average USD 60.

Ultimately, Mr. Tezza’s research lays the groundwork for convincing government, society, and industry that a zero deforestation economy will produce more wealth for Brazil, and the world, than continuing down a path of deforestation.

“In the presence of the gift of such a wealth of natural resources, and the ability to utilize natural mechanisms to protect humanity’s fragile existence in the universe, how can we act so negligently with the exclusive focus on the permanent and systematic growth of the exploitation of natural resources while provoking and accelerating global entropy?” pondered Mr. Tezza as the lecture came to a close.

The lecture was sponsored by CU’s Laboratory for Energy and Environmental Policy innovation (LEEP), the Environment and Society Program at CU’s Institute of Behavioral Science, and the Governors’ Climate and Forests Task Force.