Market News

 February 27, 2020
Who owns the Amazon?

 When local artists this fall painted a portrait of Swedish activist Greta Thunberg on the underpass of a notorious highway that slices across the Amazon, the backlash was swift. As one of the most recognized figures in the international environmental movement, the teen's portrait was so covered in graffiti that authorities had it painted over.

Today, as trucks carrying soy and corn rumble down the BR-163 in the town of Sinop at a gateway of the Amazon, the mural now depicts red and blue macaws. They may be perched tranquilly in the flora, but they stand as a symbol of fraught Amazonian politics.

Ever since settlers carved out the rainforest and turned this state, Mato Grosso, into one of the world's agricultural powerhouses, tension between development and preservation has persisted. But the gulf has widened since Brazilian President Jair Bolsonaro came into office with a pro-development stance on the Amazon that critics say is emboldening legal and illegal deforestation. At the same time, mounting urgency around global warming has many looking to the preservation of the world's largest tropical rainforest as a global, high-stakes battle.

Yet current polarization threatens to alienate some of the most important players in the Amazon: conservation-minded farmers who say their preservation work is underappreciated and crucially underfunded.

"The people say, 'The forest is not bringing me anything. It has no value. Everyone says it is important, but we don't see it,'" says Fernando Sampaio, the executive director of the PCI Institute -- which stands for produce, conserve, and include -- in the state capital Cuiabá. The group is devising statewide carbon market strategies to incentivize conservation at a time when clearing remains far more profitable. "So that is the question, how can we create a kind of economy where these environmental assets, like standing forests, are able to generate opportunities for them?"

The BR-163 passes Cuiabá as it cuts through the state of Mato Grosso, across the Amazonian biome at Sinop, and finishes at the Amazon River, where products are loaded for export. It was built in the '70s by Brazil's military dictatorship to settle the vast territory; the last of the paved portion of the highway was completed in November, helping fill the commodities demand, mainly to China. Today the highway is a constantly nerve-wracking drive around and between heavy trucks.

Brazil's leading producer of soy, cattle, and cotton, Mato Grosso has spent lots of time in the limelight as environmental pressure has grown. In the decade between 1995 and 2005, its expanding cattle ranches and soy farms were the main driver of deforestation in the Amazon. While the rates have dropped by 80% since 2005, many fear a new era of vulnerability.

That concern was at the center of a diplomatic spat between President Bolsonaro and France's President Emmanuel Macron this summer. The latter raised alarms over fires in August and demanded more protection of the rainforest. Mr. Bolsonaro shot back, calling out France's "lamentable colonialist stance."

Many here appreciate Mr. Bolsonaro's point of view. Mário Wolf is the owner of Fazenda Gamada, a large-scale soy, feed, and cattle farm in Nova Canaã do Norte. He came here in 1975 at the age of 24, when it was so remote that their only means of communication was sending letters on buses to Cuiabá. He cut through thick rainforest to clear his first 100 hectares of farm.

He considers himself a conservation-minded farmer but is tired of the stigma, especially as laws -- among the strictest in the world -- have tightened around him. "From the outside people say the Brazilian farmer is a destroyer of nature. We are the best preservers in the world," he says, wearing a straw hat and bluejeans behind the wheel of his mud-splattered pickup truck on a recent day.

In accordance with Brazil's Forest Code, his farm is 50% pristine forest, and wildlife abounds. An owl sits perched on a fence post; a coati scurries across the road into a soy plantation; macaws fly overhead. When talking about this summer's dispute between Presidents Macron and Bolsonaro he stops his car and his voice rises. Why, he asks, isn't Mr. Macron scolding Australia as wildfires rage? "The world wants the Amazon for itself but doesn't want to pay anything for it."

He is working with a group called Aliança da Terra, which has worked with PCI and promotes sustainable farming through a membership platform called Producing Right that guarantees buyers, like supermarket chains, the highest environmental and labor standards.

The PCI Institute sees a vibrant carbon market as a way to amplify that kind of incentive to the residents across this state. Current initiatives include monitoring illegal deforestation, intensifying production on cleared pastures, and fostering sustainable production.

More than 60% of the forest remains intact in Mato Grosso. But 41% of preserved forest lies on private property -- an estimated 7 million hectares of which could be legally cleared, says Mr. Sampaio. That's tempting to residents as demand for soy is projected to grow by 65 million metric tons by 2029, 50% of that expected to come from Brazil, according to projections from the Dutch banking firm Rabobank.

"Residents bear all the costs, and are producing a benefit for climate and biodiversity that is for everyone else. But they don't have any compensation for that. That is what makes them angry," he says. "If you go to Texas and tell a farmer that they have to dedicate 50% of their property for conservation, that's unthinkable."

The PCI Institute is receiving financing from some European countries for their emissions reduction work. But they are also eyeing a new standard that was approved by the California Air Resources Board in the fall that could potentially include them in a carbon offsets market down the line.

The Tropical Forest Standard takes a more jurisdictional approach than other big carbon offset models. Rather than focus on single projects, California's program encompasses entire states or countries.

It's a framework that could inspire projects that meet, in California's view, global best practices. It's already helped foster subnational cooperation, such as the Governors' Climate & Forests Task Force, which includes 38 states and provinces, including Mato Grosso, since the network formed in 2009.

If successful, the PCI strategy could keep 4 billion tons of CO2 in Mato Grosso's trees, says Daniel Nepstad, founder of the California-based Earth Innovation Institute, which supports both the PCI strategy and the Tropical Forest Standard. "I think that we've sort of lost the support of conservation-minded farmers for the forest issue," he says. "And this is the first real concrete sign that policy and this network that was launched in 2009 could translate into real incentives for these states and for the farmers in those states."

Steve Schwartzman, senior director of tropical forest policy at the Environmental Defense Fund in Washington, says the Mato Grosso strategy has similar win-win potential to the amendments to the U.S. Clean Air Act of 1963, which reduced sulfur dioxide emissions even as production grew. "That's really the holy grail of emissions reductions," he says.

The Tropical Forest Standard, the PCI, and even carbon offsets are not at the front of minds in and around Mato Grosso. They are abstract notions and feel far off. But historic baggage is very much alive -- as is the need for solutions to the current cycle of shaming and blaming, argues Andre Pagliarini, an expert on Brazilian politics at Dartmouth College.

"The best way for the international community to deal with the issue of the Amazon in Brazil, perhaps ironically, is to talk in some ways less specifically about the Amazon," he says, "but about sustainability, about the commitments that all countries have to each other in fighting climate change, to diffuse the potency of the Amazon as an issue."

Otherwise would-be allies could be lost. Or as Mr. Nepstad puts it: "A lot of them went to the Amazon because they weren't making ends meet, and they're there because they love wildlife, they love forests, they love being in the countryside."

"If we make them into villains," he says, "they will become villains."

Set off a potholed dirt-track road, where wooden planks traverse brooks, stands the Fazenda Rio da Mata. At 5,000 hectares, the cattle and soy farm belongs to the family who founded Alta Floresta; the first outpost of the town sits inside the property. Four thousand hectares are preserved here, running all the way to the edge of the Teles Pires, one of the most important rivers in the Amazon.

José Ailton Faris, the supervisor here, says his parents, like so many others, came from the south, as poor Brazilians lured by cheap land and the hope of better lives. He supports President Bolsonaro like many here, but that doesn't mean that he wants the forest destroyed. In fact, he says he's worked here for 20 years because of the farm's preservation ethos.

He trudges through thick forest of açai, banana, jatoba, and Brazilian nut. "This," he says, looking up at the canopy, "is for the world."

"And," he adds, "it's the responsibility of the world to preserve."