Brazil Beyond Kyoto

Report, 2006

The major share of Brazilian greenhouse gas emissions come from land use and land use change (i.e. deforestation) in the Brazilian Amazon. Most studies estimate this source of carbon dioxide (CO2) to comprise about two thirds of the country’s total CO2 emissions, or between 140 and 250 MtC annually. This is equivalent to a few per cent of global CO2 emissions from fossil fuel use. Reducing these emissions, by reducing deforestation rates, could therefore play a not insignificant role in the mitigation of global warming. However, the Kyoto protocol does not create any incentives for reduced deforestation in non- Annex I countries, since “avoided deforestation” was not accepted as an eligible activity under the Clean Development Mechanism (CDM). This decision has been the source of much debate and disappointment among scientists and environmental organizations in Brazil and elsewhere. The Brazilian government, however, has strongly argued that the inclusion of “avoided deforestation” runs the risk of jeopardizing the environmental integrity of the protocol. The aim of this study is to investigate how one should treat emissions from deforestation in the Brazilian Amazon in a future commitment period where Brazil has binding commitments. More specifically we analyze (i) how deforestation rates may be affected if Brazil takes on emission targets that include emissions from deforestation, (ii) how the environmental integrity of an international climate agreement might be affected by the large uncertainties in baseline emissions from deforestation in the Brazilian Amazon, and (iii) what constraints the participation of Brazil in a climate agreement with binding emission targets put on the treatment of land use, land use and forestry emissions in the agreement. Our main conclusions are as follows: (i) The judgment of most scientists in the area, as well as Brazilian officials and environmental organizations, is that it is very difficult to reduce deforestation rates. This is due to the many interacting forces behind current land use patterns, lack of resources for effective enforcement of current legislation, corruption and conflicting views on this issue between the federal government and individual Amazonian states with large sovereignty. Thus, though even a low price on carbon would make most land clearings in the Amazon unprofitable , the complexity of the issue makes it very hard to assess what consequences a carbon price would have on deforestation rates, counter to emissions from the energy sector. (ii) The risk that one introduces “tropical hot air” in the global carbon market, as a result of overestimating future emissions from Amazonian deforestation, is imminent if Brazil gets binding commitments that includes this emission source. We estimate that the quantity of “tropical hot air” in 2020 may amount to more than the annual EU target under the Kyoto protocol. Conversely, a similar underestimation of deforestation rates will put Brazil in a position were the country has to acquire the same amount of carbon credits on the global market. We also show that the amount of hot air from uncertainties in deforestation rates is even larger if the overall emissions target is set in intensity terms, i.e. total emissions per GDP, but only if deforestation rates are independent of the economic growth rate. (iii) From our assessment of different schemes for the treatment of emissions from land use change in future commitment periods, we conclude that so called full carbon accounting is unreasonable, since Brazil cannot be held responsible for the large variations in the carbon balance in the Amazon, both due to indirect human perturbations and to natural variations. A Kyoto-like compromise (article 3.3) seems to be a viable option, but it is likely that Brazil under such a regime would demand a generous allocation of emission rights to cover emissions from deforestation, over which they perceive they have little control. Thus, such an approach runs the risk of creating “tropical hot air” as concluded above. The most promising option seems to be the adoption of non-binding commitments for emission from deforestation. This would reduce the risk of creating hot air while at the same time creating an incentive for the Brazilian government to reduce deforestation rates. The argumentation behind these conclusions can be found in section 4 in the report. Sections 2 and 3 offer a background to role of Brazil in international climate negotiations and to the issue of deforestation. Section 5 presents the results from interviews of important Brazilian actors in this field.