There has long been a perceived tradeoff between the economic benefits of agriculture and the environmental benefits of conservation. Large-scale implementation of climate-smart agriculture (CSA) holds promise to harmonize these objectives by integrating crop production with conservation efforts.
These efforts have been shown to mitigate and adapt to the effects of climate change while also improving harvests and incomes for farmers. Major players in Brazil are mobilizing CSA implementation, sending signals to investors.
Reading the Signs
Climate change is linked to agriculture. According to the FAO, land use contributes to the majority of Brazil’s greenhouse gas emissions. Crop and animal production is the key driver.
For this reason, CSA, which emphasizes ‘low-carbon’ farming practices such as intensification through crop-livestock-forest integration, is becoming an increasingly important part of Brazil’s ongoing climate commitments, according to a series of interviews with Brazilian officials working in this field.
CSA practices maximize environmental services such as reduced erosion, soil fertility, carbon sequestration, and water conservation. These practices also create economic opportunities.
According to Roberto Waak, founder of Amata, a sustainable timber producer, these economic opportunities hold significant promise for Brazil’s agriculture and forest-product markets, which are moving in this direction.
Coordinated national efforts in implementing CSA could position Brazil to gain competitive advantage in the low-carbon agricultural markets of the future.
Brazil is a major supplier for many large international companies. Waak said external pressure from foreign markets for supply-chain sustainability has been mounting in recent years. The new Forest Code also creates substantial internal pressure to which companies are liable to respond.
Navigating the Legal Landscape
Brazil already has major legislation in place that supports conservation by requiring land owners – agribusinesses and smallholders – to have a certain amount of legal reserves.
In addition, Brazil’s national climate plan (INDC) presented at the climate negotiations in Paris resulted in a legal commitment to restore and reforest 12 million hectares by 2030.
Landowners are struggling to understand and implement these national commitments. While agribusinesses must ensure that all of their suppliers are legal under these laws, smallholders are often reluctant to register their land for fear of not being able to use it.
According to the Brazilian Coalition on Climate, Forests and Agriculture, CSA can be integrated into Brazil’s restoration efforts which could then also qualify as legal reserves, dealing with the liability of the Forest Code while also creating income.
Existing national plans have explored how CSA can be a part of these efforts, including the Sectorial Plan on Agriculture and Climate Change (ABC Plan). Most of the money for these initiatives currently comes from public funds, but many smallholders are not aware of how to access this money.
Andre Ramalho, technical advisor at CEBDS, the Brazilian counterpart to WBCSD, said that rural farmers in Brazil’s interior don’t know about this line of credit and smallholders that do have difficulty understanding the process, which is bureaucratic and also provides unattractive terms for banks.
According to Annelise Vendramini, sustainability senior lecturer at FGV Escola de Administração de Empresas de São Paulo, these plans are also sparse on describing enforcement and implementation mechanisms. Economic tools to value ecosystem services, standardized practices, technologies, metrics and monitoring strategies are not yet in place. Ultimately, these pieces are key to implementing CSA and unlocking additional investment.
Innovating to Implement Conservation and Climate Commitments
Initiatives are now mobilizing to put these mechanisms in place that will help enable new investment in CSA. The aforementioned Brazilian Coalition on Climate, Forests and Agriculture is a multi-sector movement formed by over 100 companies, civil society organizations, and research centers in Brazil, including all major players of land use as well as investors such as big pension funds, institutional investors, and banks.
The coalition, created to inform Brazil’s INDC, is now expanding its partnerships to address gaps in implementation and barriers to investment. WBCSD, in partnership with CEBDS, recently integrated its efforts, expanding the network and launching innovative programs related to low-carbon technology.
Discussing New Technologies
Waak said the Paris conference held major conversations on how investors in pension funds now have the mandate to invest in new low-carbon technologies. This was seen as too risky a few years ago. If they increased their investments from 1 to 3 percent of their portfolio, billions of dollars would be reallocated without much risk. However before this can happen, the private sector needs to have clear understanding of the rules, which are not very clear yet.
According to CEBDS, the efforts of the coalition and its partners to date have focused on technological and institutional elements. But the focus is connected to the finance sector and explores enabling conditions. The objective is to make CSA as competitive as mainstream production and make returns as attractive as possible while minimizing risk. Banks and corporate members of the coalition help to ensure strategies they employ speak the language of the mainstream investment community and address their concerns in terms of procedures and operations.
Vendramini said that there is a need to create economic models using different ecosystem-service valuation strategies in order to understand different financial outcomes. This is a necessary first step in order to create standard economic metrics that will enable measurement and legal security.
There are plenty of possible markets that could be designed to foster private funds. A priority for the coalition this year has been carbon pricing and trading for environmental services.
Vendramini notes that there is a big discussion right now on Cota de Reserva Ambiental (CRA), a market instrument which could have the properties of an asset. Companies are interested in these tools, but no market has yet been launched. FGV/CES and others are currently working to develop these models and their relationship to liability under the Forest Code.
In addition, members of the coalition emphasize that there is great need to specify which technological efforts the government intends to adopt. These might include soil carbon management through biological nitrogen fixation, intensification of cattle, or recovery with native tree plantations.
Under the Forest Code, funds can only be applied for specific areas. Projects and investors require that the technology be a reliable investment. Smallholders need systematic guidance on qualifying practices. To this end, the coalition has working groups consisting of universities, NGOs, and the government R&D organization looking at the carbon results of different technologies.
The implementation of the coalition’s strategies depend on the inclusion of smallholders. Waak said that the coalition is strong on this front, as organizations representing smallholders have been members of coalition from the beginning and are some of the major forces. One of these organizations is Apremavi.
In the next two weeks, there will be a training program for small-scale landowners. It is focused on their integration into the Forest Code and the prospects of low carbon agriculture.
These efforts are meant to be a message to the government and to investors that people are already working on these specifications. These efforts need to receive additional funds to develop technologies and discuss legal changes.
Implementing Finance Measures
CSA is a new idea for Brazilian farmers. Implementing this on a larger scale will require massive investment. Waak estimated a 50 -100 billion dollar investment that goes beyond the scope of impact investment. This should come from both public and private funding.
According to the coalition members, the best short-term goal would be to enable easier access to Bank of Brazil funding because they already have credit lines for low-carbon farming with different interest rates for different kinds of producers.
Moving forward, key environmental performance indicators must be adopted which can be used to guide smallholders and collect data to be used for continuous improvement of low-carbon technology. Standardized technology platforms then must be established, endorsed and adopted by government, making them official under the forest code and more appealing to investors.
WBCSD is well positioned through its member organizations to communicate with smallholders about implementing these technologies. According to Ramalho, CEBDS is currently discussing building a smallholder capacity-building workshop model paid for by companies.
Companies have an interest in helping to develop smallholder capacity. WBCSD (via CEBDS) as well as members of the coalition can help facilitate this process and share new technologies on the ground.
In the longer term, market development, and additional financing will follow, with possibility to spur preferential contracts for farmers that use low-carbon agricultural practices.
Brazil’s moves are pushing the interdependency agenda of agriculture and forests. Conservationists and investors alike should stay tuned.
Note: World Business Council on Sustainable Development is a partner of Yale Center for Business and the Environment. Donors and partners outside CBEY and CFN do not review our articles or editorial calendar, but interviewees can review their quotes and Q&As.