Neoliberals Do The Amazon

Ever since its opening to the double edged sword known as “development,” debates over the Amazon rainforest repeatedly have degraded into an international tragi-comedy of hypocrisy and shirked responsibilities. Development’s fate, in reality, has been shaped by two contradictory trends: on the one hand, shrill opposition to ecological destruction from large swathes of the developed conservation-minded world, and on the other, runaway deforestation. This duality has intensified in recent years, with ever greater awareness of the importance of the rainforest failing to hold the line against the prevention of the acceleration of its destruction.

The precarious state of the Amazon rainforest was starkly highlighted by data released in early 2008, which showed a rapid increase in Brazil´s deforestation rate in the second half of 2007. This alarming fact was caused primarily by high demand for such products as beef, soya, and timber, as well as the impact of various developments which had the effect of pushing small landholders deeper into the forest. Claims made in the early 1990s by free market economists that an opening of markets and reduction of inflation would reduce incentives to clear forests, have been long forgotten. If it were ever true that deforestation was, in its earlier stages, driven by government subsidies and the distortions of an inflationary economy, this is no longer necessarily the case. If anything, the opening of Latin America´s economies has left its natural habitats more vulnerable to the global demand for products that necessitate the clearing of forests on a prodigious scale.

Recent developments in the Amazon demonstrate the limits of “ecological modernization” theory, which claims that human development will, via technological improvements, require an increasingly “rational” use of resources, de-linked from environmental destruction. But recent technological advances in the region have done exactly the opposite. Eradication of foot-and-mouth disease, and agricultural innovations, for example, that allow for new monocultures, have only intensified the pace of the rainforest’s destruction. Current predictions suggest that up to 50% of Brazil´s rainforest could be lost by 2030, releasing between 15 and 26 billion tons of carbon into the atmosphere. Expected side effects such as the warming of the world´s climate and disruption of water supplies raise a point of the greatest urgency that has long been ignored by policy makers: environmental degradation will have a significant negative impact on both the market economy that helps cause it, and on human well-being.

Reduced Emissions from Deforestation and Degradation – REDD

In spite of the failure of market economics to deliver a rational relationship with the environment, most proposals for conserving the forest focus on market-based instruments. This appears to be the case with “Reduction of Emissions From Deforestation and Degradation” (REDD), a new scheme originally proposed by developing countries like Costa Rica and Papua New Guinea, and now adopted by international institutions such as the World Bank and the United Nations. The core thesis behind REDD is that deforestation can only be significantly reduced if existing environmental laws and regulations are accompanied by significant economic incentives to conserve the forest. These incentives would be provided by funds coming from developed countries, reaching governments, private entities, and local communities in the “rainforest nations” of the developing world. The scheme has mustered significant international backing, primarily because developed countries and development agencies view avoided deforestation as one of the most cost-effective ways of combating climate change. At the same time, many South American countries view REDD as a means of securing financing for the environmental services they offer to the world. Given the history of many of the region´s governments of subsidizing the clearing of forests, this could mark a fundamental about-turn in the relationship between incentive structures and avoidable environmental damage in the Amazon region.

Saving the Forest by Making Money

Daniel Nepstad, a highly respected scientist and conservationist, maintains that REDD can encourage all agents of deforestation, from small landowners to large scale ranchers, to dramatically reduce their destructive activities. Payments would have to be considerable, and sustained, to ensure it is worthwhile for these actors to forego such activities. As yet, it is not absolutely clear whether such funds predictably could be raised by South American governments and private entities inserting themselves into the international carbon markets, or whether they would more likely come from voluntary donations. It is known, however, that many of the biggest movers behind REDD (for example, the World Bank), are openly committed to using carbon markets to generate funding for avoided deforestation. Supporters such as Dr Tom Lovejoy of the Heinz Centre envisage a system whereby financiers and businessmen would guarantee the survival of the Amazon rainforest simply by seeking to make a profit from selling its “environmental services.” In anticipation, some firms already are investing, like the London-based Canopy Capital, which has purchased the rights to environmental services generated by the 371,000 hectare Iwokrama Reserve in Guyana.

Shouldn´t the Polluter Pay?

This focus on “for profit” motives, among other things, has invited a high degree of criticism from some environmental groups. Two recent reports, one from Friends of the Earth International (FOEI), and another by the Forests and European Union Resource Network (FERN) and the Forest People´s Program, accuse REDD as it is currently constituted, of failing both the Amazon rainforest and its inhabitants. FOEI points out, for example, that REDD allows governments and corporations to continue destructive activities by putting plantations in the same category as forests. This is perverse from an environmental and social perspective, given that plantations only account for about 20% of the carbon stored by forests, reduce biodiversity and often have been linked to the displacement of local communities.

Both reports assert that REDD is, by attempting to pay off some of the biggest destroyers of the Amazon rainforest, contrary to basic environmentalist principles. FOEI claims that the greatest beneficiaries would be those nations, companies, and individuals currently engaged in some significant degree of deforestation. In order to preserve the largest areas of forest possible, REDD would indeed target large-scale landowners, essentially by paying them enough to make it economically rational for them not to contribute in any important way to cutting down the forests. It will come as little surprise that the Maggi brothers, soya growers renowned for causing severe deforestation in the Brazilian state of Matto Grosso, have pronounced themselves in favor of the concept. Such a policy infuriates environmentalists the world over for riding rough-shod over one of the most basic principles of environmental protection: that the polluter must pay.

Nepstad, though, believes that it is precisely because people like the Maggis are predisposed to the work of REDD that the concept might just work. He claims that prohibitive measures have proven unsuccessful in protecting the natural environments across the planet against its foes. It is well known, for example, that the landowners in Matto Grosso regularly ignore government mandates to maintain forest coverage on 50-80% on their land, and any attempts to enforce such laws without a change in incentive structures would only raise the risk of leading to a state of civil disobedience. Nepstad claims that such landowners can, however, be readily encouraged to comply with environmental regulations if they are offered the carrot of funds along with greater market access. He comments positively on recent initiatives by some landowners to reduce the damage done; for example, an agreement among soya farmers to have a moratorium on new forest clearance. However, any advances achieved via REDD would still be highly dependent on the sustained inputs of funds, and it is not clear what would happen if and when such financing dried up. Nepstad claims that after a certain point, payments would indeed decline, but he does not tackle the issue why deforestation would not return to its previous rate in the absence of such finance.

Can Carbon Markets be Trusted?

Can any market really be relied upon to generate the long-term conservation of natural environments? And even if it can, wouldn´t this just allow developed countries to use REDD as a means by which to “buy their way out” of making necessary emissions cuts in their own countries? Indeed, this fear was the main reason that environmental groups like the World Wildlife Fund opposed the inclusion of deforestation in the original Kyoto Treaty, a position they have now reversed. Philip Fearnside, a researcher for the National Institute for Research in the Amazon, claims this preoccupation should not be an argument against REDD, rather it should induce efforts to form a strong policy framework with a clear limit on the number of worldwide credits which may be available. This would link REDD to wider global efforts to reduce emissions and prevent forestry carbon credits from causing a collapse of global carbon prices. Recent developments in Europe have shown, however, that carbon markets are extremely fickle: recent price reductions have often meant a cutback on clean energy development projects.

Moreover, opponents argue that such funding would not in any way address the root cause of deforestation: global demand for environmentally destructive products. Even if landowners such as the Maggis were to transfer their activities to selling “environmental services” on a significant scale, this could have the effect of increasing commodity prices for products like timber, beef, and soya, thereby encouraging greater deforestation in other areas, either by the same people or by new actors. An open market approach could prioritize certain areas of rainforests where carbon is cheap, without discouraging deforestation across the board. Proponents of market based instruments argue that financial incentives and increased market access could be used as carrots to encourage ranchers to comply with environmental laws and encourage better technology, in order to keep expanding output without deforesting. For example, Nepstad points out that advanced grazing systems could allow an eight-fold increase in grazing capacity, thereby meeting rising demand and allowing countries like Brazil to keep benefitting from their export industries without bringing on further deforestation. Such claims, though, have to be treated with caution, given that historical evidence regarding such examples of “ecological modernization” suggests that an absolute demand for resources frequently outweighs the constructive effects of greater technology and efficiency.

Implementation Problems

Implementation of REDD has been laden with problems. Again, Europe´s experience in carbon trading is armed with warnings, showing that such systems can be remarkably susceptible to being picked off by corporate lobbying. This has included the financing of dubious “clean development projects” in developing countries, and the allocation of significant quantities of money by polluting companies without any significant reduction in emissions. This, added to the fact that the majority of “rainforest nations” are institutionally weak, means that REDD can be assumed to be prone to manipulation by landowner and rancher interests alike. Any successful application of REDD would involve a significant degree of monitoring to ensure that participants receiving funds were generally reducing deforestation levels. This is theoretically possible, given that governments such as Brazil´s have improved the technology and efficiency of resources spent on prohibiting illegal logging. Also, any successful deforestation proposal, regardless of whether or not it has been dependent on market-based instruments, would be equally as dependent on extensive improvements in transparency, monitoring, and implementation.

Amazonian Populations: Salvation, or Environmental Imperialism?

REDD´s implications for South America´s indigenous and peasant communities are being highly contested. Supporters claim that it could benefit indigenous groups who have prevented environmentally destructive activity on their land. Nepstad claims that the program is inherently “pro-poor”, and that over 200,000 low-income rural families in Brazil would have their incomes doubled and social needs looked after, if they would either maintain or switch over to forest-based livelihoods. However, many indigenous organizations are suspicious of REDD, fearing that by increasing the value of forests, REDD could trigger competition in controlling indigenous and peasant land, to the detriment of the people currently living there. Such fears are understandable, but there is no inherent reason why such negative impacts must be a consequence of REDD. In the last decade, Amazonian indigenous communities have won legal recognition of their ownership of large forest parcels. As long as REDD is implemented in a way which does not way dilute such gains, communities could indeed stand to receive considerable resources from REDD. Nepstad goes even further and envisages that the percentage of Brazilian Amazon forest under indigenous or peasant ownership would actually rise from 27% to 40% in the next 10 years.

On the other hand, very few supporters or even critics of the proposal appear willing to challenge the cultural desirability of paying people simply for not exploiting a resource. Evidence from existing policies indicates the tendency for such communities to become dependent on such funds for their economic viability: like in the case of the rubber tapper reserves in Acre, for example. While such schemes may reduce deforestation levels, it is clear, according to many, that advances are solely dependent on the handouts on offer, and do not automatically constitute a genuine shift towards a non-environmentally destructive economy. As the UN has pointed out, REDD will only be considered a success if it manages to alter economic strategies in ways that permanently reduce pressure on the forest. As yet, there is no clear blueprint for how this could be achieved. Nepstad proposes that finance would need to be directly linked to the development of non-destructive economic activities, but it is not clear how these activities would remain profitable once the financing declines.

Are South America´s Governments Waking up to the Issue?

While the world´s international agencies have been trying to develop methods of reducing deforestation, there are also signs of South America´s governments waking up to many aspects of the issue. Until recently, traditionally a defensive reaction to international criticism of deforestation in the Amazon has been taken. There has long existed a broad regional consensus that the region’s forests and natural resources are the legitimate property of the nation, and that governments therefore have the right to use them for colonization, resource extraction, and the development of industries such as logging and cattle ranching. International criticism has frequently been denounced as being hypocritical on the grounds that Western countries had long destroyed their native forests, and therefore had no right to lecture the south on such issues.

Now, however, these very same countries are increasingly aware that protecting their natural heritages is essential for the long term security of their own human populations, and such countries are responding with eye-catching schemes designed to reduce deforestation with the enlightened help of developed countries. The most notable of such plans has been Brazil`s establishment of a fund to raise $21 billion from international donors by 2021. The donations would be on a voluntary basis, something which reflects Brazil´s opposition to the use of carbon trading (on the basis that it could allow developed countries to keep contaminating in their own countries, and threatens the national sovereignty of other nations). The Norwegian government has responded to the Brazilian challenge by making an offer of $1 billion with remarkably few conditions attached. Peru quickly followed suit, aiming to achieve “zero deforestation” in 10 years, although unlike Brazil´s fund, Peru explicitly aims to raise funds via the sale of carbon credits on the international market.

United in Hypocrisy

Despite such moves, there are still serious doubts over the sincerity of such governmental initiatives. The faith of the Brazilian and Peruvian governments has been called into question by environmental campaigners. Both retain the right to intensify traditional development projects in the region, a position which prompted the resignation of Marina Silva, a staunch defender of the Amazon, from Brazil´s Ministry of Environment earlier last year. Peru´s President Alan Garcia, notorious for his untrustworthiness on such matters, repeatedly has attempted to alter laws which protect indigenous territory from sale to energy companies, and even denied the existence of the country´s voluntarily isolated indigenous people, in order to further justify gas and oil exploitation in Peru´s Amazon. Given these caveats, it is suspected that governments are using such schemes to lend legitimacy to opening up the area.

If indeed it is the case that the Brazilian and Peruvian governments are essentially seeking to boost aspects of environmental protection in order to legitimize further degradation through development projects and natural resource extraction, they could not be considered any more hypocritical than any of the other debased actors. The World Bank, for example, may be increasingly encouraging conservation projects and carbon emissions reduction, but the funds it designates are still negligible in comparison to the amount it spends on encouraging environmentally destructive activities. It even made a loan to the Bertin meat-packing plant in Brazil. Critics leap on such examples of double standards as proof that the World Bank has not structurally changed from the dark old days of the 1970s and 80s, when it provided loans for destructive road-building, mining and hydroelectric dam projects, and then wrung its hands over the ensuing ecological disasters.

Whatever Happened to the Yasuní-ITT?

Amidst the hype aroused by REDD and the Brazilian and Peruvian conservation funds, the most innovative proposal of all – that made by the Ecuadorian President Rafael Correa – has slipped out of the limelight virtually unnoticed. Correa, in September 2007, amazed the world by adopting a long standing proposal from Ecuador´s environmentalist movement to forsake oil development in the Ishpingu Tambacocha Tiptuni oilfield, located in the highly bio-diverse Yasuní National Park, in return for international “compensation” to offset half of the estimated lost revenue. The Ecuadorian initiative went much further than the Brazilian and Peruvian conservation funds by explicitly tackling the link between large scale natural resource extraction and environmental degradation, and by confronting climate change at its root – avoiding carbon emissions by leaving resources underground. However, despite receiving an avalanche of praise from various European countries, the international community´s contribution has, to date, been woefully inadequate. With the economic recession already underway, it appears likely that the ITT will be exploited sooner or later. It should be noted that in spite of its leftist inclinations, the Ecuadorian government has openly promoted the proposal on the basis of selling climate credits on both voluntary and involuntary climate markets. The level of indifference from the developed world, though, demonstrates that carbon markets as they are currently constituted do not necessarily work. Any effective carbon market would have made the “carbon bonds,” as offered by the Ecuadorian government, a fantastic bargain. The probable failure of the ITT Initiative shows that while it is relatively easy for developed countries to channel funds towards the Amazon, it is a totally different issue to support any policy which threatens the root cause of climate change: unsustainable levels of consumption in the developed world.

What Would a Sustainable Planet Actually Look Like?

Despite a flurry of rhetoric and initiatives about the Amazon, it is far from clear whether deforestation can, and will, be reduced in the long term. Actors on all sides present themselves as committed environmentalists, while lustily rejecting any innovations which demand anything resembling sacrifice. While the current international economic recession may, paradoxically, offer the Amazon some respite due to falling demand for its products, it would be morally perverse to consider this development positive per se, and it certainly does not guarantee against an upswing in deforestation in the near- or middle-term future.

Perhaps the main problem is that the troubled legacy of development and economic growth in the Amazon is so profound that few people, including both proponents and opponents of REDD, can genuinely envisage a world system which could meet the needs and desires of its human population without irrevocably destroying the natural base upon which such advances are based. Focusing exclusively on large scale actors such as transnational corporations and international agencies is valid up to a point, but it can also lead discussants to ignore the uncomfortable reality that the majority of human beings have a short term, material stake in continued environmental destruction. This is made clear by the fact that most developing countries are themselves unwilling to directly confront environmentally destructive industries that are key to their own economic growth. Investigations reveal that even indigenous communities, so often lauded as being “guardians of the forest,” have frequently opted to cooperate with environmentally destructive activities and institutions in order to guarantee their own incomes. In the absence of a clear articulation of what an environmentally sustainable world would look like, the only option is to implement policies which genuinely confront the overwhelming scientific evidence of the need to make serious changes, ensuring that the burden of such policies do not fall on the world´s poor. In spite of good grounds for legitimate doubts, initiatives like REDD could be an effective way of doing this.

Carbon Markets Need to have Teeth.

Rather than the ideological issues which have proved so unpalatable to sectors of the environmental movement, the key issue regarding REDD is the nature of the details, implementation and regulation. Controlling the amount of carbon credits being offered, tight monitoring and regulation, along with key guarantees on land rights could address many legitimate criticisms, while reducing the level of polarization that exists between the supporters and critics of REDD. For this to happen, though, there needs to be a recognition by REDD proponents that it can only ever work if they make a good faith effort to accept and comprehensively deal with the failures of carbon trading to date. For many people, carbon trading would be better described as an under-regulated, easily manipulated, poorly implemented scam, rather than an effective tool for tackling climate change. Too often, carbon trading and REDD advocates talk about such game plans as if they were painless “win-win” scenarios, capable of saving the world without affecting anyone´s lifestyle.

It should by now be clear that any rational response to the problem will, at some level, place restrictions on unsustainably high levels of consumption in developed countries along with high usage levels by the elite classes of developing ones. If we follow the optimists’ line that carbon trading is indeed the most rational way of combating climate change, then they must also accept that the amount of available carbon credits must be consistent with scientific evidence rather than determined by political and economic expediency. It is axiomatic that the demand for environmentally damaging products must be repressed, and that all forms of “offsets” must be religiously monitored and regulated, with serious fines leveled at offenders. Moreover, if the market is indeed to be the savior, it will need to incorporate other fundamental aspects of a market economy; this means an escalating tax on, and ending of all subsidies in favor of, destructive fossil fuel extraction and consumption.

These policies could also fund REDD, and already have at least the ostensible support of many developing countries. Along with the transition from a voluntary carbon market to an obligatory one, environmental taxes would ensure the price of carbon remains high. The responsibility for ensuring the implementation of REDD and that carbon trading has the required teeth would fall on all actors, but predominantly on the private sector, international agencies, and governments which most strongly support them; if they continue to dilute such components enough so that they are either ineffective or grossly unequal, then such systems are bound to lose legitimacy, and the most vociferous critics will have been proved right. More importantly, the flag bearers of globalization will have missed a fleeting opportunity to save it from its own contradictions and the skepticism of its critics.

RACHEL GODFREY WOOD is a research fellow at the Council on Hemispheric Affairs, where this piece originally appeared.