1 For the complete study, access:

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1 POLICY BRIEF IMPACTS OF THE CONSTRUCTION OF HYDROPOWER PLANTS ON DEFORESTATION IN THE AMAZON NEW STUDY SHOWS THAT BUILDING PLANTS DOES NOT ALWAYS STIMULATE DEFORESTATION Brazil faces an ongoing debate about the construction of hydropower plants in the Amazon, which often environmentally and socially disrupts areas where they are built, resulting in deforestation, migration, and the flooding of forests and properties. On the other hand, the power generated by hydropower plants provides an essential part of Brazil s energy matrix, producing about 60% of the electricity currently used in the country. For over a decade, Brazil has concentrated policy efforts on curbing deforestation. Thus, the development of infrastructure projects in the Amazon raises an important question: does the arrival of hydropower plants drive deforestation? Not necessarily. Analysis conducted by researchers at Climate Policy Initiative (CPI) 1, with INPUT and in cooperation with the Brazilian Development Bank (BNDES), shows diverse results for 10 plants built between 2003 and 2011 in the Legal Amazon. This region has been on the forefront of the policies to combat and prevent deforestation 2 (Figure 1). While some hydropower plant projects stimulate deforestation, others help to avoid it. The study results show how important it is for policymakers to understand the details of specific plants, as well as how behaviors and circumstances lead to such different consequences. This understanding is crucial to formulating public policies that ally economic development and environmental protection 3. 1 For the complete study, access: 2 Two other criteria guided the analysis: the plant must have received BNDES financing and must be located more than 100 km away of any other plant. 3 CPI researchers also analyzed socioeconomic local effects of construction of hydropower plants in Brazil: publicacoes/efeitos-socioeconomicos-locais-da-construcao-de-hidreletricas-no-brasil/?lang=en 1

2 Figure 1: Hydropower plants built in the Amazon between 2003 and 2011 Ferreira Gomes Sto. A. do Jari Belo Monte Estreito Jirau Santo Antônio Dardanelos Teles Pires Colíder São Salvador Group 1 - Hydropower plants that stimulated deforestation Group 2 - Hydropower plants that avoided deforestation Belo Monte dam Accumulated deforestation between 2001 and 2014 Note: The figure shows all hydropower plants studied, by those that caused and avoided deforestation, respectively. The figure also shows the accumulated deforestation between 2001 and It can be seen that hydropower plants are generally located in areas with high deforestation rates, along the so-called Arc of deforestation but they are not necessarily one of its drivers. As such, for a better understanding of the impact caused by these plants, it is necessary to understand deforestation trends before construction. 2

3 MAIN RESULTS Between the beginning of construction of the hydropower plants in the study s sample and 2013, just over one million hectares of forest were cleared in a 100 km radius around the 10 plants. Of these, the plants directly contributed to the clearing of 222,000 hectares. This means that the contribution of the 10 plants to the total amount of deforestation is lower than the combination of all other factors: only 22% of deforested area around all the plants together can be attributed to their construction. Results on the impact of the plants are very uneven. While in some cases construction led to more deforestation, in other regions, forest clearing would have been higher without the construction. For instance, around the Santo Antônio and Jirau dams, the loss of forest was two times higher than what would have occurred had they not been built. Yet, near the Teles Pires dam, deforestation was 40% lower than what would have occurred in the dam s absence. ANALYSIS FOR POLICY MAKERS The CPI study identified two different patterns around the construction of hydropower plants in the Amazon: while some plants stimulate deforestation, others prevent deforestation that would have occurred in the areas where they were built. The wide variation shown in the cases studied illustrates that discussions about hydropower plants cannot be reduced to broad evaluations of the impact of these developments on deforestation. The different degrees of deforestation that occurred because of the dam construction suggest that nuances need to be incorporated in the licensing procedures of future projects and, more generally, in related public policies. Only through a deeper understanding of conditions associated with the construction of hydropower plants can policymakers begin to mitigate the environmental risks and impact associated with the development of these projects. The results of the two different patterns are summarized below. The deforestation calculations used in the analysis include forest clearing needed for construction that were authorized by the government and illegal clearings. 3

4 Group 1: Santo Antônio and Jirau, Estreito, São Salvador and Colíder The analysis of the Santo Antônio and Jirau, Estreito, São Salvador and Colíder plants shows that over 175,000 hectares of forest were cleared in a radius of 100 km of these dams because of construction. Of the 10 plants studied, Santo Antônio and Jirau plants triggered the most deforestation. The analysis shows that forest clearing around these hydropower plants was twice what would have occurred if they had not been built. Total clearing in a 100 km radius was 208,000 hectares in the first six years after construction began. Of those, 96,000 can be attributed to the plant. Researchers at CPI suspect that deforestation in those cases might be due to the dams proximity to a large city (Porto Velho), resulting in large migration movements. However, the data do not allow for verification of this hypothesis. In Estreito, of the 119,000 hectares cleared, more than 30% are attributed to the construction of the dam. The São Salvador plant was also responsible for more than 30% of the total 92,000 hectares cleared in the area. Finally, about 11,000 hectares of forest were cut down because of the construction of Colíder dam, representing 12% of total deforestation in the area. Group 2: Teles Pires, Ferreira Gomes, Santo Antônio do Jari and Dardanelos Contrary to what happened with the plants of the previous group, the analysis of Teles Pires, Ferreira Gomes, Santo Antônio do Jari, and Dardanelos hydropower plants reveals that an additional 51,000 hectares in a radius of 100 km would have been cleared in the absence of their construction. In this group, UHE de Teles Pires dam stands out: an area significantly larger would have been cleared had the plant not been constructed. As a consequence of the construction, it is estimated that over 30,000 hectares retained their native vegetation. That means that the Teles Pires dam reduced the clearing that would have happened by 40%. All other plants in this group also had a positive balance on deforestation. Ferreira Gomes avoided 12,000 hectares of forest clearing, a reduction of more than 26% of what would have occurred; Santo Antônio do Jari avoided over 2,000 hectares (7% reduction); and Dardanelos, around 3,000 hectares (2% reduction). This positive balance in the hydropower plants from Group 2 might have happened because of increased control and monitoring by public institutions of the areas around the plants. This official presence might have restrained the action of land grabbers and squatters in those areas who would have likely contributed to much higher forest destruction totals. Yet, only a case-by-case analysis of these projects could confirm this hypothesis. 4

5 Figure 2, below, compares the results for Groups 1 and 2, showing the year average of estimated and observed forest clearing in a radius of 100 km around each plant. Figure 2: Estimated and observed forest clearing in a radius of 100 km around each plant Negative numbers indicate that the presence of the hydropower plant helped avoid forest clearing and thus deforestation would have been greater had the plant not been constructed Contribution to observed deforestation (%) Santo Antônio e Jirau 54 Estreito 34 Hydropower Plants São Salvador Colíder Dardanelos Santo Antônio do Jari Ferreira Gomes Teles Pires Thousand hectares Numbers reflect the yearly average of deforestation observed and estimated after the beginning of construction estimated deforestation in the absence of the plant observed deforestation 5

6 THE BELO MONTE DAM Forest clearing around the Belo Monte plant occurred in a very particular way in the period preceding construction in Specifically, between 2007 and 2009 there was a large increase in deforestation in the area around the place where the plant would be constructed that is not comparable with any other in the region during the same period. Consequently, there is no appropriate comparison group, which limited the application of the methodology to this particular plant. Promotional photo/ May 2014 CONCLUSION CPI s results provide some of the first evidence that isolates the impact that dam construction has on deforestation in the Amazon. This evidence allows researchers and policymakers to take a more nuanced view of what is happening and calls for an understanding of why the outcomes vary. and the expansion of agriculture stimulated by the development of waterways. Noncompliance with environmental legislation during the construction and differences in the levels of compensation measures may also explain why some plants contributed to more forest loss. Part of the associated deforestation from dam construction comes from what government officials authorize in the licensing procedures. However, numerous other causes often make the impact more acute, including migration, proximity to urban areas and settlement projects, road construction, As Brazil plans to expand it hydroelectric power capacity, further analysis that examines these factors and isolates specific causes is necessary for policymakers to proactively mitigate environmental damage. 6

7 ABOUT THE DATA Methodology The study uses a rigorous economics method that allows for the comparison of different areas and the construction of contrafactuals. The method is known as synthetic control for compared studies (Abadie, 2010 and 2013). For each area around a hydropower plant, the researchers used an algorithm that generates a comparison area based on other locations with hydropower potential where dams have not been built. The comparison area is designed in a way that mirrors the trajectory of deforestation of the affected area in the period before construction of the plant. The effect of the plant is calculated as the difference between the affected area and its respective comparison area. Limitations CPI s analysis allowed for successful measurement of the impact of new hydropower plants on deforestation in the Amazon. However, although the researchers have hypotheses, the study does not allow for an understanding of the mechanisms behind the deforestation caused by the plants. The analysis is blind to certain local realities that could only be captured in case studies about each specific plant. Due to data availability, the study analyzes only the effects of hydropower plants on forest clearing. There are other relevant environmental indicators, such as biodiversity and quality and quantity of water downstream. However, systematic data that would permit an analysis of the impact of dams on those other indicators, similar to the approach used for forest coverage, do not exist. Sources Remotely sensed data from Hansen et al. (2013) Geographic information system from the Energy Sector (SIGEL), ANEELL 7

8 AUTHORS Juliano Assunção Climate Policy Initiative (CPI) & Núcleo de Avaliação de Políticas Climáticas da PUC-Rio (NAPC/PUC-Rio), Department of Economics, PUC-Rio Dimitri Szerman Climate Policy Initiative (CPI) & Núcleo de Avaliação de Políticas Climáticas da PUC-Rio (NAPC/PUC-Rio) Francisco Costa Escola Brasileira de Economia e Finanças da Fundação Getúlio Vargas (EPGE/FGV) francisco.costa@fgv.br Media Contact Mariana Campos mariana.campos@cpirio.org January/ 2017 The Land Use Initiative (INPUT Iniciativa para o Uso da Terra) is a dedicated team of specialists who work at the forefront of how to increase environmental protection and food production. INPUT engages stakeholders in Brazil s public and private sectors and maps the challenges for a better management of its natural resources. Research conducted under INPUT is generously supported by the Children s Investment Fund Foundation (CIFF) through a grant to the Climate Policy Initiative. This study is also the result of a partnership between CPI and BNDES that contributed with data on hydropower plants as well as technical support and comments. 8