Unlocking the Potential of the Amazon Rainforest for Business

The Amazon rainforest in Brazil offers a wealth of opportunities for businesses, especially in the realm of environmental protection and the green transition. As the region takes center stage on the political agenda, the market for voluntary carbon credits has emerged as a particularly exuberant sector. However, doing business in the Amazon is no easy feat, with complex regulations, opaque land rights, and the prevalence of unlawful practices. In this article, we explore the challenges and potential of conducting business in the world’s largest rainforest, delving deeper into the issues surrounding voluntary carbon credits and land grabbing.

The Allure of Voluntary Carbon Credits

The Brazilian section of the Amazon biome covers over 400 million hectares and presents a unique opportunity for developers to generate carbon credits through forest conservation or reforestation efforts. These credits are then sold to major international companies seeking to offset their emissions. With a study predicting potential revenues of $120 billion by 2030, the market for voluntary carbon credits appears promising both economically and as a means to combat climate change.

The Complexities of Doing Business in the Rainforest

While the potential for profit in the voluntary carbon credit market is significant, navigating the intricate landscape of the Amazon presents numerous challenges. Rules and regulations are often ambiguous, making it difficult for businesses to operate within a clear legal framework. Land rights issues further complicate matters, with the region plagued by unlawful practices such as land grabbing.

The Scandal in Pará: An Exposé of Land Grabbing

A scandal in the state of Pará has exposed the extent of land grabbing in the Amazon rainforest. Prosecutors have taken legal action against three carbon credit projects, revealing that little-known companies had seized public lands to generate credits and profits. The alleged crime of “grilagem,” or land grabbing, not only undermines the integrity of the market but also raises concerns about the treatment of local and indigenous communities.

Unveiling the Complexities of Land Ownership

One of the root causes of the challenges in the Amazon is the lack of clear land ownership claims. Many communities have occupied land for generations without proper documentation, creating a complex web of overlapping rights and competing interests. Thorough due diligence is essential when engaging in business activities in the region, requiring a deep understanding of the local dynamics and potential risks.

The Role of Multinational Buyers

The involvement of multinational companies in purchasing carbon credits brings greater attention to the issue. Non-governmental organizations have long raised concerns about project developers’ aggressive behavior towards local communities, exacerbating tensions and contributing to social unrest. The certification of allegedly questionable projects by industry-leading standards bodies further highlights the need for stricter regulations and oversight.

The Path to a Mandatory Carbon Market

While the voluntary carbon credit market operates with limited public oversight, there are signs of change on the horizon. The Brazilian Congress is moving towards creating a legal framework for a mandatory carbon market, which will likely impact the voluntary market as well. Establishing clear rules and regulations is crucial for ensuring the integrity of the market and preventing further exploitation of the Amazon rainforest.

An Expert Perspective

Pedro Brancalion, a professor of forestry sciences at the University of Sao Paulo, emphasizes that navigating the Amazon rainforest is not for amateurs. He highlights the need for in-depth expertise and understanding of the complexities involved in conducting business in the region. To succeed in the Amazon, businesses must navigate legal challenges, respect local communities, and prioritize environmental sustainability.

Conclusion

The Amazon rainforest presents tremendous opportunities for businesses looking to make a positive impact on the environment while pursuing profitable ventures. However, the path to success is fraught with challenges, including complex regulations, opaque land rights, and issues of land grabbing. Navigating these hurdles requires expertise, due diligence, and a commitment to sustainable practices. As Brazil moves towards establishing a legal framework for a mandatory carbon market, it is imperative that businesses operating in the Amazon prioritize environmental conservation, social responsibility, and transparency to ensure the long-term preservation of this invaluable ecosystem.

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Brazil is not for amateurs, says the country’s old motto. This sentiment – ​​sometimes a nod to Brazil’s chaotic complexity – is doubly true for doing business in the Amazon rainforest, most of which lies within the Latin American country’s borders.

With the return of Luiz Inácio Lula da Silva to the presidency this year, environmental protection has risen to the forefront of the political agenda – and with it the rush to seize the commercial opportunities that accompany the green transition.

The most exuberant market has been that of voluntary carbon credits. Covering more than 400 million hectaresThe Brazilian section of the Amazon biome offers developers an unprecedented opportunity to generate carbon credits through the conservation of existing forests or the reforestation of denuded lands.

These credits are then typically sold to major international companies seeking to offset their emissions, with prices negotiated between buyer and seller. The market’s potential has left many breathless, with a study last year optimistically predicting the potential revenues of 120 billion dollars by 2030. If done well, advocates say, the market can also help in the fight against climate change by preserving ecosystems that store carbon dioxide or reforesting.

But doing business in the rainforest is a tall order. At best, rules and regulations are opaque and land rights are complicated and require serious due diligence. At worst, the region is lawless.

These complexities have been laid bare by a deepening scandal in the huge Amazonian state of Pará, where prosecutors have brought legal action against three carbon credit projects.

Investigators say the little-known companies behind the projects had seized public lands to use in their bid to generate carbon credits and profits. In local parlance, the alleged crime is grilagemor land grabbing.

Then a investigation local media group Globo reported that not only had the credits been certified by Verra, the industry’s leading standards body, but they had been sold to a number of major Western companies, including Boeing, Air France and Liverpool Football Club.

These companies are not subject to lawsuits. Key people named in the documents said they would work with the court to correct any potential irregularities. And in a statement, Verra said it took the claims “very seriously” and that three projects were currently under review. Boeing said it was determining next steps, but that it purchased “through a globally recognized agency to access designs registered with three widely recognized standard-setting bodies.” Air France and Liverpool FC did not respond to requests for comment.

The involvement of multinational buyers has raised the profile of the issue. But non-governmental organizations have long complained about project developers in general and, in particular, their use of aggressive behavior towards local and indigenous communities to secure land.

Much of the problem stems from the region’s confusing land ownership claims. The situation is also complicated by the fact that communities can often occupy land for generations without any proper documentation. The market requires thorough due diligence.

An investigation by Hernandez Lerner & Miranda Advocacia, a law firm, fueled further concerns about the integrity of the market and the ubiquity of land grabbing. Using geospatial imagery, the company analyzed 56 carbon credit projects in the Amazon and found that 33 of them partially or fully overlapped public lands.

The lack of clear rules for the voluntary carbon market means there is “little to no public oversight,” said Mario Braga, political risk analyst at Control Risks. “Companies [buying credits] they are often based on international best practices and limited third-party verification. Especially in the Amazon, some peculiarities can represent significant obstacles, such as widespread land expropriation.”

The situation, however, could improve in the coming months as the Brazilian Congress moves to create a legal framework for a mandatory carbon market. Braga said this will likely establish rules that will impact the voluntary market.

“Carbon credit projects are not intended for well-intentioned organizations that do not have a good level of expertise,” said Pedro Brancalion, a professor of forestry sciences at the University of Sao Paulo. “It’s complicated territory. It’s not for amateurs.”

bryan.harris@ft.com

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