Environmental Assets and Carbon Markets: Could It Be Amazônia’s New Belle Époque?

Which triggered, for instance, several break-up states projects and a popular referendum on the division of Pará State in three other ones (Pará, Carajás e Tapajós), in 2011, that was rejected, above all, by the dissenting vote of the people who live in the metropolitan zone of the capital of the state, Belém. In the affected areas by the creation of the new states, the votes in favor of the division were more than 90%.

Both have proved disastrous because not only the proposals were not achieved (creation of transport infrastructures, road links to urban centers of other regions, creation of agrarian settlements, among other initial intentions), but it also created several economic and social problems that had never existed before.

An increase is observed not only in the number of conflicts, but also in the violence rate. Despite the fact that the North Region has a small population if compared to other Brazilian areas, it sees a serious increase of the violence rate, much faster than the more populated regions (FBSP and IPEA 2016).

The already low level of funding for fighting against deforestation had been reduced in 72% between 2010 and 2014 (Leite 2015) and in 2017, there was a reduction of more than 50% in the Ministry of the Environment’s budget—from 911 million (Ministério da Fazenda 2017), to R$ 446 million (Gesisky 2017; Moutinho and Guerra 2017). Meanwhile, the Federal Government has provided R$ 190.25 billion to the Agricultural and livestock plan 2017/2018, more than the R$ 185 billion available for the 2016/2017 Plan (Peduzzi 2017). The amounts invested in the agricultural plan represent more than 426 times the current budget of the Ministry of the Environment, which is the responsible for the federal environmental monitoring of the whole country, not only of the Amazônia.

The North Region, that corresponds to almost the total of the Brazilian Legal Amazônia, has seven states, representing 45.25% of the national territory (IBGE 2016); however, it relies only on 65 of the 513 parliamentarians from the House of Representatives, since the population is proportionately represented, but this number is outdated and does not match the actual population—Amazônia would have more deputies if the division of places was updated. Nowadays, only the state of São Paulo has more than 70 representatives, 5 more than all states from the North Region together.

Weinstein (1993), describing the negative fall in the prices of rubber latex in the international market, during the first decades from the 20th century, demonstrates that the lack of political power from the North Region is an old problem in Brazil: “(…) It is essential to consider the political component of the economic obstacles from the region. Since it needs political support at the national level, the elite of Amazônia failed many times in offering support to programs that intended to combat the devastating effects of price fluctuations. Moreover, their appeals for emergency assistance right after the collapse were largely ignored”.

Based upon the economic growth, environmental preservation and improvement of the social conditions.

The geographic importance of Belém was demonstrated, for instance, by the air links to Europe and to the USA, which were set up from Belém and not from São Paulo.

With particular situations like, for example, rich families from Belém used to have the laundry done in Paris (Weinstein 1993) and the use of large and warm clothing in a region where the temperatures remain constantly above 30 °C during the whole year.

Curiously, that is the name of a traditional store, which still works at the same place since 1900 in a building in the downtown of Belém.

Regarding the existing problems in Amazônia for the wealth coming from the latex transition to a more industrialized economy—as it did not turn out to be, see Weinstein (1993).

For more details on the relationship between Brazil and the USA, due to the importance of Amazônia for producing rubber latex during the World War II and the immigrating and economic impact to the region, see Garfield (2009, 2010).

Weinstein (1993) states that it was the main reason behind the economic decline in Amazônia with the rubber price collapse, if compared to São Paulo, which also suffered from the coffee crisis effects, but it became industrialized: with no internal market of products, based upon wage labor, Amazônia did not have other options besides the latex extraction. That excessive dependency on a single product, without establishing a productive market, led it to its economic ruin.

The proof lies in the fact that the richest period of time of the region history was based in a renewable and non-predatory product, with almost no deforestation, and without serious environmental impacts. On the other hand, currently the environmental degradation is noticeable, either because of mining, livestock or logging activities, while the population remains miserable.

Amazônia is unique and, therefore, different from other Brazilian realities. The soil type, the rivers dimensions, the features of the weather are, sometimes, impossible challenges to solve traditionally. Examples of failed initiatives that did not take into account those elements are several: Madeira-Mamoré railway, which was not concluded due to project problems that brought a huge distress initially and due to the death of several workers who developed tropical diseases; Balbina hydroelectric, in the state of Amazonas, which has a reservoir similar to the one of Tucuruí hydroelectric power plant, in Pará, but that has about 3,3% of the energy produced in Tucuruí; the roads BR-163 (Cuiabá-Santarém) and BR-230 (Transamazônica) with no completion until nowadays, besides many other examples.

The debate on the topic has begun with Aristóteles, who considered it in the “Nicomachaen Ethics”, especially in Chaps. 4 and 5 of its 5th book. Still on that, there are works like the “Discours sur l'origine et les fondements de l'inégalité parmi les hommes” by Jean-Jacques Rousseau, e “A Theory of Justice”, by John Rawls. In the Brazilian context, it is important to mention “Oração aos Moços” (Addressing the Young), by Rui Barbosa.

Until these days, the effective popular participation is a huge democratic challenge, even in developed regions. In Amazônia, it is particularly difficult, and there are studies and proposals with possible replication, as the one carried out by Folhes et al. (2015). However, it is necessary to emphasize that Amazônia is diversified and that not all designed models for it will have the same effects in different zones. Moreover, the participation model has to be defined properly and planned along with the community, considering each case specifically (Klautau de Araújo and Lima 1997a, b).

Wolford (2016) points out some notes about the used strategies by the military governments for Colonization in Amazônia: “INCRA was created on July 9, 1970, as an autonomous agency tied to the Ministry of Agriculture (Decree-Law 1110, Article 4, July 9, 1970). The military government in power at the time created the agency to oversee the colonization and settlement of Brazil’s vast and “underpopulated” northwestern frontier. The march westward was expected to fulfill Brazil’s promise as a developed, modern nation, which meant extinguishing peasant protests in the Northeast and dealing with the presumed threat of communist guerrillas known to be hiding out in the Amazon rain forest (Martins 1984, 41; Bunker 1985). Colonization was also a means of combating external influence; the slogan “integrar para não entregar” (integrate to avoid delivering [the Amazon to foreigners]) was part of the substantial publicity campaign that accompanied frontier development (Reel 2010, 36). In the early 1970s, Brazilian theaters showed films weekly documenting the bulldozers and trucks cutting through the jungle to build new highways (Drosdoff 1986, 60–74). (…) Buttressed by a sense of manifest destiny, INCRA employees moved west to settle “men without land in a land without men,” carving out thousands of 100-hectare plots, building houses and towns, and leading markets into relatively untapped regions of the Amazon rain forest (Hecht and Cockburn 1989, 108)”.

Including two that have left a trail of unprecedented environmental destruction: the Transamazônica and the Cuiabá-Santarém roads, already mentioned in the footnote 16.

“The endless soil fertility of Amazônia, announced by natives and visitors of the region, has proven to be one of the several legends fostered by the luxurious and thick forests from the region. As a matter of fact, the soil of Amazônia highland, like the tropical soil in general, is thin and with nutrients easily exhausted as soon as the forest cover exposes it to the rain. After that, only the intense fertilizer application will facilitate the growing/cultivation. Regarding the small part of Amazônia surface classified as alluvial plain, that is less susceptible to leaching and hardening than the ‘dry land’, but can also burn out under intensive cultivation” (Weinstein 1993).

Even though the described facts have occurred during the military dictatorship time, lack of concern about Amazônia features still remains, and the governments, successively, keep on ignoring the basic aspects of the region context. Recently, for example, school buses were donated to Afuá city, in Marajó archipelago, Pará; but in Afuá, known as “Marajoara Venice”, there are no streets, since all its buildings are on stilts and there are lowland soils and floodplains in which the use of motor vehicles is forbidden (Meirelles Filho 2015).

As in Paragominas, State of Pará, where with strong participation from the mayor, managers and society, the context of social and environmental degradation of the city was changed, and Paragominas is an interesting example to be examined. See more in Klautau de Araújo (2014).

And, if we consider the terrible road construction, especially in Amazônia, the numbers are more negative: due to the bad quality of the pavement, more than 77,488 million liters of diesel fuel are spent unnecessarily every year, which represents 2.07 MtCO₂ of additional emissions (CNT; SEST; SENAT 2016).

The sociologist José Mariano Klautau de Araújo started to debate about the need of the Environmental Assets sustainable use in Amazônia since the 1970s, when the projects for national integration and settlement were at the top. His discussions, subsequently published on books and papers, added to the Socioenvironmental Method, written by him, are interesting points of reference to understand the historical and institutional background of public policies for Amazônia since the 1950s until nowadays. The Socioenvironmental Method was the pedagogical foundation for Escola Bosque, an initiative awarded internationally and that can be read in much more details in Klautau de Araújo and Lima (1997a, b, c), Klautau de Araújo (2016) and Lima (2013).

As it can be seen in more depth in Seymour and Busch (2016), according to the different types of environmental assets classified by the authors.

A huge Brazilian cosmetics company was accused of using, without permission, traditional knowledge from herb medicine women from the Ver-o-Peso market, in Belém (Weis 2006; Soares 2016); after a great controversy, there was then a refund for that (Soares 2016), and a soap and essential oils factory from that company was opened in the metropolitan region, in 2014 (Kafruni 2014).

Products like açaí, cupuaçu, cumaru, camapu, among other fruits, plants, herbs and seeds derived from Amazônia have awakened a great international interest due to their nutritional, aesthetic and therapeutic properties. However, the most part of those products, with rare exceptions, is collected in the region, and the end products are produced somewhere else, with no return to the local people.

In this context, the BM&F Bovespa.

The problem in this case was the legal system inconsistency. That was because the Law 6385/76, about the securities, has a strict list in its art. 2º. Therefore, the Securities and Exchange Commission expressed its opinion, asserting that “Carbon Credits are securities issued by an organization associated with the United Nations which represent no-emission of certain amount of gas that cause global warming. The CVM discusses matters related to the carbon credits and why they must not be considered derivatives or collective investment securities—thus, they are not securities, but assets and they are marketed to reach the targets of carbon emission reduction or aiming the investment. In addition, The CVM understands that it would be inconvenient to classify the carbon credits as securities through the edition of the law regarding the arrangement of those instruments. The Securities and Exchange Commission also discusses the features of some financial products derived from the carbon credits, that, depending on their characteristics, might be defined as securities. The assessment of each financial product will be done by the Securities and Exchange Commission” [highlighted by us] (CVM 2009). Although that issue may appear to be a simple detail, it may be decisive in the future concerning the tax matters, fundraising from the Carbon Market and the legal certainty/validity of the contracts. More than that, by failing to amend the Law 6385/76 or to consult the Securities and Exchange Commission about the legal nature of an obligation modality that would be ruled by that institution shows the regulator’s negligence and weakens the applicability of the law.

Although Brazil holds 5% of the world’s Carbon Market, while 20% was expected initially (Brasil 2012).

That, according to the art. 6° of the Decree 7390/2010, means to reduce between 1168 million of tonCO₂eq and 1259 million of tonCO₂eq of emissions.

The art. 6°, §1 of Decree 7390/2010 lists ten actions to be taken to make feasible the accomplishment of the goal, being foreseen and implemented by sectorial plans.

Lopes et al. (2015) and Pinheiro Pedro et al. (2015) emphasize the importance of the Law 12187/2009 to the establishment, at first, of a voluntary market and of a mandatory one later, after adopting the compulsory measures of emissions reduction. Nevertheless, we understand that the enactment of the above mentioned law was only an attempt of political response to the national and international pressures/expectations and not a practical step indeed. The Brazilian legal experience in the last decades demonstrates that law enactments without regulation (or their ineffective regulation) has been a strategy of the governments in order to avoid the responsibility of polemic or complex issues (Klautau de Araújo 2014, 2016). Due to that, we believe that a norm with inconsistencies, omissions and inaccuracies is not able to substantiate a whole system of combating measures, mitigation and adaptation to climate change.

One of the legislative provisions of the Forestry Code is the Environmental Reserve Quota (CRA), that consists in a portion of non-deforested land which exceeds the law requirements. It may be considered as an Environmental Asset because it may be negotiated with other landowners who have not fulfilled the minimal legal size of vegetation in their areas. It is provisioned by the articles 44 to 50 of the law 12651/2012. There is a recent study developed by Brito (2017) about more efficient regulations of that legal institute so that there is not an excess supply, pulling down the prices and inhibiting the restoration of the areas, taking Pará state as a reference for additional regulation to the recommended by the Forestry Code.

Although there is not any law project about it, we should consider the ENREDD+, the “REDD strategy development” planned by the Ministry of the Environment (Ministério do Meio Ambiente 2016).

Legal devices like the articles 61-A, §§ 5° e 6°, 67, 68, among others from the new Forestry Code, reduce or leave behind the demand for reforestation of the Legal Reserve (minimum of native vegetation to be kept on the estate) or Permanent Protection Area (vegetation surrounding rivers and sources, for example) for several contexts, which means relaxation of the environmental rules and legalization of the irregular situations. The message to be understood is that the environmental rules may be not followed, since, at any time, there will be tolerance of validations of the illegalities in the name of the economic issues.

However, after extreme national and international pressure, the President Michel Temer has gone back on his own proposal and has vetoed provisional measures 756 e 758, that established the reduction of the area. In a new twist, the Government sent a proposed law to the National Congress, reducing once again the area of Jamanxim National Forest, not in 486,000 hectares, but now in 349,000 hectares, that will be protected areas, with a few restrictions, if the project is approved (G1 PA 2017).

Near Portugal’s territory dimension, which has a little bit more than 90,000 km², including its islands.

Especially after the withdrawal of the United States from Paris Treaty. It is early to analyze the impacts and consequences of that decision, even with the response of leaders in the European Union and China reaffirming their commitment to the international agreement (Lusa 2017; Gomes 2017).

The bureaucracy, the low values charged by the fines, added to the almost endless possibility of lodging an appeal create a sense of impunity and, at times, is more profitable to do something illegal and then pay or contest the possible fines (Klautau de Araújo 2016).

“When people in a poor society are given a choice between staying alive in lessened misery or increasing the probability that certain species of flora and fauna will not go extinct, it is understandable that they may reveal a preference for the former choice. Once a society achieves certain average levels of well-being and affluence, it is reasonable to suppose that citizens will democratically decide to forego some calories and marginal private consumption enjoyments in favor of helping to preserve certain forms of life threatened by extinction.” (Samuelson 1976).

Acre and Amazonas are disputing a 12,000 km², while Mato Grosso contests for 22,000 km² with Pará, and Ceará complains about 2821 km² with Piauí (Mariani et al. 2016).

Referring to the public land ownership.

Without the Agrarian Reform and a standardization of the securities, all proofs of ownership modalities are accepted, if the necessary requirements at the time of the alleged purchase are met. It happens that, if there is no control of the registers, it is possible, for example, to have a land title document from the sixteenth century validated. That is one of the reasons why a very common fraudulent practice in Brazil used to be the document forgery, putting the papers inside drawers with crickets, because their secretion would make them appear older than they actually are. That practice was called “grilagem”, a nickname given, nowadays, to all kinds of fraudulent attempts of land regulation.

Especially because it already exists, but it is not based on laws, as we will confirm later in this paper.

Art. 23, VI and VII of the 1988 Federal Constitution.

There is also legislative concurrent competence/authority to the Union, states and Federal District, regarding “forest, hunting, fishing, fauna, conservation of nature, soil and natural resources preservation, protection of the environment and pollution control”, according to the art. 24, VI from 1988 Federal Constitution.

“Art. 225. Everyone has the right to an ecologically balanced environment, which is an asset of common use and essential to a healthy quality of life, and both Governments and community shall have the duty to defend and preserve it for present and future generations.”

In another study (Klautau de Araújo 2016), by the use of the game theory and an adaptation of one game, it was pointed out that when all the constitutional powers are generically shared it is likely that none of the agencies act. That is because all tasks might be shared, but not the budgets. Without a clear division of competences and tasks, it is almost impossible to demand an agency responsibility in case of default since it is stated that you cannot blame a single absent agency for the unsuccessful public policies when other agencies did not act either.

Not only for public entities, but also for individuals. The Carbon Market is an alternative for obtaining economic income from preserved areas required by law inside the states, as the Legal Reserve, which currently are unpaid. Concerning that, the then-Senator and current foreign minister Aloysio Nunes stated that: “the Carbon Market would be a stimulus for the grower to maintain his legal reserve, so that he can generate income from that. It would fulfill our goals not only internationally, but also inside Brazil, implementing an important law, welcome by the whole world, that is the Forestry Code law” (Altafin 2016).

In the discussions on this topic, this point was also raised by Senator Jorge Viana: “who can trade the carbon absorption in the forests? Is that the country and in a centralized manner? Or are the states, which are guardians of the forests? There is almost no regulation of it. It is a new market, not widely-known, which is part of climate change” (Altafin 2016).

The areas with higher biodiversity in Brazil are those in which the people have lower incomes and little provision of public services (Kageyama 2009; Klautau de Araújo 2016).

As it is used, for instance, in the division of the State Participation Fund (FPE) and in the Municipalities Participation Fund (FPM). For further details, read: art. 159 of the 1988 Federal Constitution; art. 34, §2°, I, II and III of the Transitory Constitutional Disposition Act; the arts. 90, 91 e 92 of the Law 5172/66 (National Tax Code); and the Complementary Laws 62/89 and 91/2001.

Consequently, with less economic activity, lower GDP (gross domestic product) growth, and higher monitoring costs and forest conservation.

What, in practice, would work as though the Union had bought the carbon credits from the states and cities and had resold them in the market with its own credits.

This system is regulated by the law 7990/89 and 8001/90 and distribute the royalties obtained with mining as it follows: 65% to the cities where the production occurs (and to the Federal District, if applicable), 15% to the states (or the Federal District) where the production occurs, 15% to the cities and to the Federal District affected by the mining activity, and 10% divided between Federal Agencies. Observe that, different from the oil royalties, only the producer states and cities (and those which are not producers, but are directly affected by mining infrastructures) receive a financial compensation.

In 2016, a serious corruption scheme was uncovered involving the National Department of Mineral Production (DNPM), dismantled by the Federal Police, through Operação Timóteo, in 11 states and the Federal District (G1 DF 2016; Affonso et al. 2016). This department is responsible for collecting and distributing the mining royalties in Brazil and handled approximately R$ 1.6 billion in 2015. In this specific case, the corruption scheme was related to the amounts which would be allocated directly to municipalities.

Klautau de Araújo (2016) points out that one of the biggest problems of the public policies implementation process in Brazil is the centralization in the planning and decision-making processes and the dispersion of the implementation. In that context, the situation is similar: the concentration of power in few agents attracts strong political interest, makes the proper use of the money difficult and increases the possible deviations from ethical conduct.

The event at the National Department of Mineral Production had to do with it: there were late payments and the agents from the department received bribes (concealed by law and consultancy offices) in order to speed up the money deposits and to increase the values.

If we analyze the examples of the developed countries, the technology, the productive processes, the entrepreneurial dynamics, the environmental awareness and planning are more connected to the success of the economy than to the plenty of natural resources. Japan, for instance, relies on few natural resources, has a rough ground, hard to be used, besides being a group of islands, what would make its development difficult. However, despite all those facts, it is one of the most developed economies, a balanced society and with low level of poverty.

Even though the study of Public Administration in Law courses, most of the times, recommends to consider corruption in the spheres of government as an exception, not as a rule, the Brazilian experience shows us that the reality is different and that the current political system has many examples of a corrupt governance. There are denouncements against all the political spectra and against almost all political parties. Therefore, the planning of alternatives to the country must be designed in a way that the flaws may be minimized and the public funds may be protected.

The satellite surveillance, inspection activities, among others, intend to punish the responsible for the environment damage, what is valid, but if the damage has already been done, the environmental restoration is hard, even with the modern procedures of reforestation, due to the maintenance of ecological balance and biodiversity, it is best to keep the original wood instead of reforesting a cleared area.

A brief comment on the popular participation and interaction effectiveness is welcome: they are possible only if there is an open, transparent and accessible language. The overuse of technical terms, jargons, acronyms and abbreviations makes the documents reading unpleasant and sets up a bar for any person who is not in the limited circle of “specialists”. Even the Law or Environmental field professionals who are unfamiliar with the Carbon Market and the Environmental Assets experience serious difficulties when dealing with this topic due to the language unnecessarily tight, the challenge is greater to, for instance, a person from Amazônia countryside with poor education and with no access to public services, a very common profile found in the local community (brought about by the indifference of the governments). In order to make those people—who have so much to contribute to the understanding and preservation of their areas—participate in the debate, clarity, respect and transparency from the specialists are demanded and they may learn a lot about Amazônia with its natives. Unfortunately, until the present moment, frequently, the decision-making processes and the explanations of open initiatives to the participation of local people are not arranged in that way, resembling an accession model in which the “knowledge” is taken to the people; there is no dialogue, there is no participation.

Weinstein (1993), regarding the Belle Époque period, highlights that: “The fast growth of the main port of the area established a market for some few local industries; it promoted, also, the development of public works and of municipal improvements that transformed Belém in one of the most impressive capitals of state of Brazil. However, it seems to have created an interest larger in non-productive activities, such as the real estate speculation and the import of luxury goods". That concentration of activities, which made the collapse of the rubber cycle even worse, with no alternative economic sectors was due to the close monitoring of the rubber elite on the poorest population that was involved in the productive chain and that acted against any development that could transform the extractive economy (Weinstein 1993).

That is the reason why we also understand that international donations for preservation funds, such as the donation of US$ 1 Billion from Norway to the Amazônia Fund—assessed by some scholars (Birdsall et al. 2014)—is not as beneficial as it sounds. This is because the donation of values ​​from other countries is a one-off aid, which causes dependence on the outside, without generating value for the forest, and without causing the necessary cultural change on the value of living forest for the local populations. Governments may need money to keep the forests preserved. However, people living in these places need sustainable alternatives to avoid predating the forest, living with dignity and helping to preserve the environment. An Environmental Assets Market can provide this; international donations, no. Donations without other supports (scientific, medical or technological) may cause dependence of the poor countries, and it may hinder their development (Deaton 2017).

There are, also, bills that seek to allow the purchase of lands for foreigners, almost without limits (Estadão Conteúdo 2017). The content of the proposals does not include that permission when the biomes demand Legal Reserve of 80%, that it is the case of Amazônia, but for being just of a project, that provision can be dropped easily.

As it was seen in the areas where there was mining, for instance, or huge agricultural projects. The population was no longer the owner of the lands and experienced living on activities related to the flow of people attracted by the area. However, that flow of people brought violence, overload of the facilities and of the public services, marginalizing the local populations.

Such as that seen in the second rubber cycle, in Fordlândia project (Pará), in the exploration of manganese at Serra do Navio (Amapá), amongst other examples.