Brazilian Natural Capital Initiative The Economics of Ecosystems and Biodiversity - EEB Brazil

Secretariat of Biodiversity and Forests, Ministry of the Environment Brazilian Natural Capital Initiative The Economics of Ecosystems and Biodiversity - EEB Brazil International Workshop Business and Natural Capital: Dialogues for a sustainable partnership May,2014 1

Guiding points: 1. Introducing the Brazilian Natural Capital Initiative EEB Brazil 2. 2013/14 Update of EEB Brazil 3. Outlook for 2014 2

Flight Plan 1. Introducing the Brazilian Natural Capital Initiative EEB Brazil 2. 2013/2014 Update of EEB Brazil 3. Outlook for 2014 3

Our goal The purpose of EEB Brazil is to identify and highlight the economic benefits derived from the conservation and sustainable use of biodiversity and ecosystem services in the country, as well as to evaluate the costs of their losses 4

Starting points Not just a study, but a process Studies are not enough, only starting points to better engage key-actors at all levels Keep it simple Need to take into consideration the political opportunities and viability in the scoping process Contribution to the implementation of: Aichi Targets in Brazil (especially targets 1, 2, 3); Governmental action plan for biodiversity 5

Policymix:economic instruments in Brazil IN PLACE / ONGOING 1. Environmental compensation schemes (infrastructure projects) 2. Environmental funds (Fundo Amazônia & FUNBIO) 3. State and Municipal PES Laws and schemes 4. Green procurement 5. Forest allowance programs (Bolsa Floresta and Bolsa Verde) 6. National Accountability of Natural Capital (SEEA-UN) PERSPECTIVES / ON STUDY 1. Federal PES Law 2. Green Infrastructure Bonds 3. Tradable conservation certificates (Native Veg Protection Law) 4. Paying for ES of Protected Areas for providing hydroenergy and water supply. 5. Amazon Ecosystem Services Valuation Study World Bank 6

National environmental accounting: Brazil System of Environmental Economic Accouting (UN) SEEA-Water Project IBGE-MMA-ANA: Consolidation of first biophysical data and indicators It is necessary to build a hidrologic-economic language culture, understandable by hydrologists and economists. Better understand how the variation of the natural capital stock affects the balance of national accounts 7

1. Introducing the Brazilian Natural Capital Initiative EEB Brazil 2. 2013/2014 Update of EEB Brazil 3. Outlook for 2014 8

All representatives from the three different componentsl Brazilian Natural Capital Initiative Coordinating Comitee Articulation with National Biodiversity Strategy and Action Plan (NBSAP), the National Commission for Knowledge and Use of Biodiversity (CONABIO) and network researches Working Group EEB for National Policy Makers Ministries: Environment (MMA) Finance (MF) Science, Technology and Innovation (MCTI) Institute for Applied Economic Research (IPEA) Secretariat of Strategic Affairs (SAE) Brazilian Institute of Geography and Statistics (IBGE) TEEB Regional and Local Project Focused on small and medium-size companies Ministry of the Environment National (MMA) Confederation of Industries (CNI) German Technical Cooperation (GIZ) TEEB for Business Focused on large corporations Conservation International Brazil WCMC UNEP-Brazil 9

Brazilian Natural Capital Initiative Coordinating Comitee Working Group EEB for National Policy Makers TEEB Regional and Local Project TEEB for Business Ministries: Environment (MMA) Finance (MF) Science, Technology and Innovation (MCTI) Institute for Applied Economic Research (IPEA) Secretariat of Strategic Affairs (SAE) Brazilian Institute of Geography and Statistics (IBGE) Ministry of the Environment National (MMA) Confederation of Industries (CNI) German Technical Cooperation (GIZ) Conservation International Brazil WCMC UNEP-Brazil 10

EEB for National Policy Makers Scoping phase Currently at final scoping phase: elaboration of products and activities to be developed by the initiative for each of the (4) selected themes: 1. Promotion of sustainable production chains through the potential of public procurement and contracting 2. Economics of forest restoration (related to Native Vegetation Protection Law old Forest Code) 3. Map of Ecosystems 11

EEB for National Policy Makers Selected themes Promotion of sustainable production chains through the potential of public procurement and contracting What are the costs and benefits of including criteria for BSE in sustainable procurement? How to change the "culture" of bidding that prevents incorporation of sustainability criteria among public managers? What are the challenges and opportunities for inclusion of BSE in public bidding in the construction sector? 12

Brazil has alot of degraded natural ecosystems...

Where native vegetation deficits are in Brazil Source: SAE, 2013

Millions ha 21 Mha deficit across multiple biogeographical regions 9 8 7 6 5 4 3 2 1 0 8 6 Amazônia Mata Atlântica Cerrado Caatinga Pantanal Pampa 5 2 Source: IBGE, 2004 Source: SAE, 2013

Vision Recover native vegetation in permanent preservation areas, legal reserves, and low-productive lands on at least 12 Mha within 20 years

Benefits sought Brazil s Native Vegetation Protection Law compliance Poverty alleviation and job creation Economic development for farmers Water security Climate security Biodiversity conservation Global leadership on sustainable development Achieve large-scale recovery Reduce recovery cost per hectare (e.g., natural regeneration where possible) Enable economic benefits to landowners Contribute to REDD+ and CBD commitments

Background: Brazil s Native Vegetation Protection Law Requires landowners to conserve native vegetation on their rural properties, setting aside a Legal Reserve (LR) that occupies 80% of the property area in the Amazon and 20% in other biogeographical regions Designates environmentally sensitive areas as Areas of Permanent Preservation (APPs), aiming to conserve water resources and prevent soil erosion APPs include both Riparian Areas that protect riverside forest buffers, and Hilltop Preservation Areas at hilltops, high elevations, and steep slopes 20

Background: Brazil s Native Vegetation Protection Law Source: Soares-Filho et al. Cracking Brazil s Forest Code. Science, vol. 344, 2014. 21

Native vegetation tradable conservation certificates FC introduces Tradable conservation certificates - (Portuguese acronym, CRA) CRA: a tradable legal title to areas with intact or regenerating native vegetation exceeding the FC requirements. The CRA (surplus) on one property may be used to offset a LR debt on another property within the same biome and, preferably, the same state. Implementating the CRA could create a trading market for forested lands, adding monetary value to native vegetation. 22

Potential for forest compensation of LR debts via CRAs: 56% Potential for forest compensation of LR debts via the CRAs within the same biogeographical region (colors) and state (horizontal axis). Positive numbers indicate a reduction (offset) in the LR debt using CRAs and negative numbers indicate the remaining debt after offset. Source: Soares-Filho et al. Cracking Brazil s Forest Code. Science, vol. 344, 2014. 23

Native vegetation tradable conservation certificates Given the high costs of forest restoration, exchange of CRAs could become a cost-effective way to facilitate compliance, meanwhile protecting forest surpluses that might otherwise be legally deforested. A balanced use of CRAs should focus on improving functional and ecological attributes of forested landscapes in a landscape conservation approach, e.g., habitat integrity (and thus biodiversity), carbon stocks, and water balance regulation, crucial for maintaining hydroelectric power generation and water supply in Brazil 24

Level the playing field Low-productive Cattle Ranching Restored Ecosystem Perceived Value Not Perceived Value Subsidies 25

To further level the playing field Low-productive Cattle Ranching Restored Ecosystem Perceived Value Not Perceived Value Subsidies Partial PES 26

The current playing field 27

Developing commercially viable systems Tropical forest restoration: show us the money P.H.S. Brancalion, R.A.G. Viani, B.B.N. Strassburg & R.R. Rodrigues 28

I EEB - EEB for for National Policy Policy Makers Selected Scoping themes phase Economics of forest restoration (related to Native Vegetation Protection Law) Analyze the costs and benefits of restoration and different land uses and the economic viability of restoration programs Identify the most appropriate economic and financial instruments to encourage the restoration for institutions and organizations at different scales, ensuring connectivity and the provision of ecosystem services Ecosystem services - eg.: Water and slope protection in the Atlantic Forest 29

I EEB - EEB for for National Policy Policy Makers Selected Scoping themes phase Map of Ecosystems Initially for water: map of indicators of availability and quality of water, using as a starting point map of watersheds from ANA Generate reference scenarios and trends of ecosystem services in order to serve as a guide for future studies and public policy guidance. First: Set priorities for topics to be included in the mapping of SE at national and regional level, according to demands to policymaking. Partnership with IBGE 30

Regional and Local TEEB Project Brazil-Germany intergovernmental negotiations: EEB Brazil concept project, managed by the Ministry of Environment in Brazil with GIZ technical support Implementation: 4 years (until October 2016) Operational planning: from August, 2013. Budget: 6 Mi EUR (3.5 Mi EUR BMUB + 2.5 Mi EUR Brazilian counterpart) Priority Biogeographical domains: Amazon, Atlantic Forest and Cerrado Proponent: MMA Partner: CNI Technical Cooperation: GIZ Regional and Local level: priority states and municipalities; civil society; companies 33

Highlights of Regional and Local TEEB Project (2014-2015) Development of pilot studies at regional level (states) for: - Implementation of economic instruments for the conservation of BSE - Mapping and evaluation of BSE (relation with risk management and climate change; connection with environmental damage valuation) - Incorporation of biodiversity and ES at land planning and management instruments (EEZ, RBMP, others) Definition of an engagement strategy for business and financial sectors Articulation with GVces TeSE Project Trends in Ecosystem Services guidelines for economic valuation of ES and for reporting environmental externalities (business sector) and pilot studies with some companies 34

Highlights of Regional and Local TEEB Project (2014-2015) Articulation with Gvces Ecosystem Services and Finance Project Expected outcomes: provide a method and considerations for the decision making process in finance (financial sector and corporate finance) that takes into account the risks associated to ecosystems services. 1) Method: the well known Net Present Value (NPV) based on a project s cash flow projections and the appropriate discount rate (valuation); - How does a project s NPV change when variables regarding natural resources and ecosystem services are included in the valuation model? 2) Considerations regarding the connection among finance, natural resources and ecosystem services at: Firm level The financial sector level, related both to credit and investment decisions; Policy making level. Methodology: multiple case studies Time frame: 2 years 35

Highlights of Regional and Local TEEB Project (2014-2015) Capacity-building workshops - Inputs from government, industry and regional and local key-actors - Fostering a broad involvement of technical staff at the Ministry of Environment and National Confederation of Industry Preparation, publication and dissemination of information (manuals and other materials ) about the TEEB approach and on economic instruments for conservation of biodiversity and ES Promoting knowledge through development of background studies and their dissemination: - biodiversity and ES mapping and valuation in land management and environmental licensing - modeling studies for maximizing results from Forest Code implementation 36

1. Introducing the Brazilian Natural Capital Initiative EEB Brazil 2. 2013/2014 Update of EEB Brazil 3. Outlook for 2014/15 37

National Policy Makers Scope of EEB finished Contributions to Native Vegetation Protective Law defined and actions started Regional-Local TEEB Project Engagement and capacity training for decisionmakers promoted Baseline studies partnerships with local governments and industries established TEEB for Business Study results disseminated in business sector Communication of economic benefits of sustainable practices in the sector 38

Thank you! Carlos Alberto de Mattos Scaramuzza, PhD in Ecology Luana Duarte, André Jardim Ministry of the Environment Secretariat of Biodiversity and Forests Department of Biological Conservation carlos.scaramuzza@mma.gov.br 39