How can Payment for Environmental Services contribute to the environmental regularization of rural properties?
25/10/23 - Erika de Paula Pedro Pinto
low carbon | Environment | Politics | food safety | Land Use
Strategies to increase the resilience of production systems and environmental integrity in a climate crisis scenario.
Environmental regularization of rural properties has been a challenge. Brazil has approximately 20 million hectares of vegetation that must be restored within rural properties, according to the Forest Code Observatory (OCF, 2022). Given the vulnerability of the agricultural sector to the impacts of climate change, environmental regularization can be seen as a strategy for adapting to climate change, with the potential to reduce future risks of crop losses and ensure food and water security.
The country's ability to continue producing food depends on a balanced climate. Researchers estimate that warming and the dry season in the Amazon-Cerrado region, which accounts for half of the country's agricultural production, have already made 28% of agricultural land unviable. By 2060, this percentage could reach 74% (Rattis et al., 2021). The Brazilian agricultural system depends on a stable climate to sustain its production (ANA, 2017). In this sense, the restoration of degraded areas, such as pastures, and the maintenance of forest remnants are strategies to be pursued.
Rural economic development can no longer be dissociated from efforts aimed at maintaining and/or restoring environmental integrity. In the Amazon, researchers estimate that one hectare of deforested forest corresponds to the loss of up to US$ 737 in ecosystem services (Strand et al., 2018). Meanwhile, the return from livestock farming, the main driver of deforestation, is around 30 to 100 dollars per hectare per year in the region (Nobre & Nobre, 2020). Despite its intrinsic value, including its biodiversity and the existence of indigenous and traditional peoples (Fearnside, 2021), the Amazon has already lost around 20-25% of its forest cover.
The Native Vegetation Protection Law (No. 12.651), or New Forest Code, was instituted in 2012 with the aim of establishing general rules for the protection of vegetation, including Permanent Preservation Areas (APP) e Legal Reserve (RL). Despite restricting the area of rural property destined for agricultural production, the law also provides economic instruments to increase productivity in already consolidated areas and for the maintenance and/or recovery of ecosystem services (Lopes et al., 2023).
To regularize rural properties with environmental liabilities, i.e., with RL or APP that must be restored, the law requires rural property owners to join the Environmental Regularization Program (PRA) by submitting a Project for the Recovery of Degraded and Altered Areas (PRADA) to the responsible environmental agency. In the case of APP vegetation of watercourses, springs and lakes, recovery can be done through natural regeneration, planting of native species or a combination of natural regeneration with planting of native species. In Legal Reserves, it is also possible to restore vegetation using agroforestry systems (Lopes et al., 2023).
To encourage compliance with the rules, Article 41 of Law 12.651 provides for a program to support and encourage environmental conservation and the adoption of technologies and good practices that reconcile agricultural and forestry productivity with a reduction in environmental impacts. To this end, the law recognizes the Payment for Environmental Services as a reward, monetary or otherwise, for activities to conserve and improve ecosystems and which generate environmental services, such as:
a) the sequestration, conservation, maintenance and increase of the stock and the reduction of the flow of carbon;
b) the conservation of natural scenic beauty;
c) the conservation of biodiversity;
d) conservation of water and water services;
e) climate regulation;
f) cultural appreciation and traditional ecosystem knowledge;
g) soil conservation and improvement;
h) maintenance of Permanent Preservation Areas, Legal Reserves and restricted use areas.
Payment for Environmental Services is also recognized by Law 14.119/2021, which established the National Policy on Payment for Environmental Services. Although both regulations have not been regulated at the date of publication of this article, several initiatives have been implemented at the subnational level contributing to the environmental regularization of rural properties and using economic incentives such as PSA to achieve their goals. It is worth mentioning:
- Reforestation Program (ES) – an initiative by the government of Espírito Santo that compensates, through monetary and non-monetary resources, efforts to conserve native vegetation and recover degraded areas in rural properties. Between 2015 and 2019, the program had established 3.795 contracts, corresponding to an area of 9.779 hectares in recovery process. Each contract under the Reflorestar Program enables, on average, the restoration of 2,5 hectares of forest per rural property, which requires an investment of approximately 20 thousand reais (Rodrigues et al., 2019).
- Water Conservation Program (PA) - inspired by the Conservador das Águas project in Extrema (MG), the municipality of Brasil Novo (PA) instituted legislation to promote conservation and recovery actions on rural properties in the Jaruçu River Basin. The preservation of these areas rich in springs and watercourses is essential to guarantee the public supply. To this end, the municipality linked ICMS Verde resources to the Municipal Environmental Fund and encouraged the regeneration of APPs through payment for environmental services to rural property owners (Pinto et al., 2021).
It is worth noting that the role of ICMS Verde as an economic instrument of environmental policy is still little “explored” at the local level. It plays a compensatory role when it is transferred from states to their municipalities according to their performance in relation to environmental criteria established at the state level. However, the state cannot arbitrate on how the municipality will apply the resource. Therefore, in order to exercise its role of encouraging change, ICMS Verde, when entered into the municipality’s accounts, needs to be linked to a specific fund and, preferably, to a specific program of payment for environmental services, as the municipality of Brasil Novo did (Pinto et al., 2018).
Regardless of the source of funding, it is important to emphasize that economic incentives such as PSA cannot guarantee the sustainability of results in the long term if implemented in isolation. It is essential to integrate incentives with other public policies and development strategies. In efforts to regularize the environment in rural properties, producers who need to restore their degraded areas, for example, also need access to technical guidance and technology. To scale up initiatives, strengthening associations and cooperatives can be essential, reducing production costs and facilitating access to the consumer market. Furthermore, generating income in restored areas through the use of species for economic purposes is a strategy that should be considered with a view to promoting improvements in the quality of life of families.
In the current climate emergency scenario, it is a priority to make the necessary investments viable for the recovery of native vegetation on a large scale and the adaptation of rural properties to Brazilian environmental legislation. Investors are increasingly interested in nature-based solutions. At a global level, it is estimated that these new business models could generate US$800 billion in annual revenues by 2050 (Economics, 2020).
Furthermore, by taking the lead in the changes that are necessary in their territories, rural producers expand their business opportunities and access to other economic instruments. By becoming more environmentally efficient, producers prepare their production systems for the changes in rainfall and temperature patterns that will intensify with the climate crisis. Public and private incentives are crucial to stimulate and coordinate this transition with the necessary urgency.
References:
ANA - National Water Agency. Irrigation Atlas: Water Use in Irrigated Agriculture. 2017.
Economics, V. 2020. An investor guide to negative emission technologies and the importance of land use. With assistance of Inevitable Policy Response.
Fearnside, PM 2021. The intrinsic value of Amazon biodiversity. Biodiversity and Conservation 30: 1199–1202.
Lopes, CL, Machado L. and Chiavari J. Where are we in the implementation of the Forest Code? X-ray of the CAR and PRA in the Brazilian states – 2022 Edition. Rio de Janeiro: Climate Policy Initiative, 2023.
Nobre I. & Nobre C., 2020. Amazon 4.0: a third way for the Amazon. Futuribles Volume 434, Issue 1, 2020, pages 95 to 108.
Pinto, E.; Braga, L.; Stabile, M.; Gomes, J. 2021. Economic incentives for the environmental adequacy of rural properties in the Amazon states. Amazon Environmental Research Institute.
Pinto, E., Crisostomo, AC, Souza, ML, Azevedo, A., Pereira, D., and Antoun, C. Green ICMS as an incentive for environmental conservation in municipalities in Pará. Amazon in Focus Bulletin no. 9. IPAM. Brasília, 2018
Rattis, L., Brando, PM, Macedo, MN, Spera, SA, Castanho, AD, Marques, EQ, ... & Coe, MT (2021). Climatic limit for agriculture in Brazil. Nature Climate Change, 11(12), 1098-1104.
Strand J. et al. Spatially explicit assessment of the Brazilian Amazon forest's ecosystem services. Nature Sustainability, London, v.1, p. 657-664, 208.
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GLOSSARY
Protected area, covered or not by native vegetation, located along rivers or any watercourse. Their purpose is to preserve water resources, biodiversity and landscape, in addition to protecting the soil and ensuring human well-being.
Area of rural property with pre-existing human occupation on July 22, 2008.
A voluntary transaction, through which a payer of environmental services transfers financial resources or another form of remuneration to a provider of such services, under agreed conditions, in compliance with the relevant legal and regulatory provisions.
These are the direct and indirect contributions of ecosystems to the economy and human well-being, that is, benefits of nature for the population. They are classified into four categories:
1) Provision services (supply of goods for human consumption);
2) Cultural services (tourism, recreation, education, aesthetic appreciation of the landscape, etc.);
3) Support services (soil formation, nutrient cycling, primary production, etc.);
4) Regulatory services (regulation of ecosystem processes, such as water, climate, disease regulation, etc.).
Percentage of area covered by native vegetation located within a rural property or possession in Brazil, with the objective of ensuring the economic and sustainable use of natural resources. Based on the New Forest Code, the percentage of RL in rural properties was defined as follows: I) 80% property located in forest areas in the Legal Amazon; II) 35% property located in the Cerrado; and III) 20% property located in other biomes and general fields.
Individual or collective activities that favor the maintenance, recovery or improvement of ecosystem services.
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