Climate Agenda as an Agenda for Development in Brazil

A Policy Oriented Approach

Srgio Abranches

To be presented to the Panel: It's Not Easy Going Green, of the divisions on Science, Technology and Environmental Politics and Comparative Politics of Developing Countries, at the 2009 Annual Meeting of the American Political Science Association, Toronto September 3-6, 2009

Advanced draft for comments Rio de Janeiro, 2008

I am grateful to climatologist Carlos Nobre, biologist Fabio Olmos, political scientist Eduardo Viola, and economist Jos Eli da Veiga, for the careful and generous reading of an earlier version of this paper and their very helpful comments. I have stubbornly maintained some of my opinions, but the text was very much improved by the corrections I made following their advice.

Electronic copy available at: http://ssrn.com/abstract=1456701

SUMMARY
New models of development will be required to contemplate, simultaneously, avenues for low and carbon-free production and consumption; as well as adaptation to the emerging effects of climate change. The crucial transitional choices regarding how much further climate change we are willing to contract will be made in the 2009-2030 period. A low-carbon society should not necessarily pose absolute, long-run limits to human development and general welfare. In Brazil, moving in a very few decades towards a low-carbon society would represent a qualitative breakthrough that could reduce the costs of transition from a high-carbon emerging economy to a low-carbon developed one. The agenda for change in this direction is in effect a development agenda, rather than a matter of limits to growth. It will require new patterns of land, natural capital, and energy use. It would entail more, rather than less, global integration and networking while, at the same time, relying on regionally specific productive, developmental and adaptive capabilities. The dynamic matrix of this new development paradigm will necessarily be knowledge-based, but framed by the historic, structural and physical specific properties of local societies. In Brazil, that would call for a long-run shift from mechanical and metallurgical industries to a new low-carbon biotechnological industry, capable of producing low-carbon feedstock, and second and third generation biopharmaceuticals, biofuels, and biopolymers. The central and special focus of this strategy ought to be the Amazon. No low-carbon future could be envisaged to Brazil unless she can stop deforestation in a very few years. To sustain a zero-deforestation strategy Brazil has to occupy the Amazon with unobtrusive science and technology, replacing soybean plantations and pastures.

2 Electronic copy available at: http://ssrn.com/abstract=1456701

Climate Agenda as an Agenda for Development in Brazil: A Policy Oriented Approach Srgio Abranches Political Scientist www.ecopolitica.info Climate change and development The scientific consensus about climate change has drawn the boundaries of credible risk, radically redefining the terms for the discussion of different economic development models aiming at improving societal welfare. Global climate challenge has become an unavoidable leading factor for collective choice about human welfare. Not accounting for it only means a greater cost and pain within a a decade or two. Human society has, today, very likely, only two paths towards future sustainable welfare: either to adopt deliberate policies for maximum possible reduction of greenhouse gases (GHG) emissions and the best possible adaptation to irreversible climate change; or to face the full and progressively strong tragic consequences of global warming.1 The best available scientific indications are that present patterns of production and consumption will fully show how unsustainable they already are within the next 15 to 20 years. Global climate change may reach a tipping point as early as 2050, if there is no global shift towards new low-carbon patterns of production and consumption. A point of no return might be reached even sooner, if the pace of emissions continues to increase at present rates, disregarding the warnings about the acceleration of global warming.2 The IPCC synthesis represents the modal consensus. Relevant dissent is not on the contrarian side. The most scientifically sound criticism of IPCC comes from scientists whose models show even more cataclysmic results. They claim that the threat is even greater and the time and targets to mitigate the risk of irreversible, perhaps
1

For an analysis of tragedy as a tool for civic action on climate change see Srgio Abranches - The Tragedy of Ecology, The Brazilian Journal of Nature Conservation, 2005, October, volume 3, number 2, pp. 114-128.
2

A recent paper by James Hansen and associates, based on paleoclimate data, asserts that we will have to set 350 ppm CO2 as a limit to atmospheric concentrations to avoid irreversible cataclysmic effects. They claim that the current level of 385 ppm is already in the dangerous zone, requiring prompt and far-reaching policy changes. Cf. James Hansen et allii - Target Atmospheric CO2: Where Should Humanity Aim?, Columbia University, March, 2008 (unpublished pdf document).

catastrophic, climate change are respectively shorter and more demanding, than the UN scientific panel acknowledges. In other words, there are respectable scientific voices claiming that the IPCC consensus may underestimate both the magnitude of danger posed and the breadth of policy change required by global climate change. Even admitting some underestimation of the severity of the danger ahead, the last IPCC report makes it clear enough that: prompt action is needed; it is still possible to partially mitigate climate change with available and foreseeable technology, but a significant amount of change has already become and will continue to be irreversible; the costs of mitigation are negligible, when compared to the costs of future adaptation to immoderate climate change.3 It urges World leaders to implement immediate policies aiming at attaining the required mitigation of emissions, as well as adaptation and preparedness measures regarding irreversible climate change, due to past and present levels of GHG concentration in the atmosphere. The IPCC report emphatically makes the point that we have the economic potential to reduce emissions to recommended levels until 2030 and that the technologies required for the changes are already available (a point contended by Pielke Jr. et all4 ). Even accepting that the IPCC report underestimates the technological challenge posed by climate change, as Pielke Jr et al. argue, we can still do a lot with available technologies to meet far more ambitious emissions reductions targets than those we are aiming at today. One should say aiming at and failing to meet. After a first cycle of change, with available technologies, as the report states, scientific and technological progress can be accelerated by higher rates of investment, both public and private, to make bolder targets possible subsequently. The change of patterns of resource use and the growth of low-carbon production and consumption would represent a powerful incentive to the development and use of new, low-carbon and carbon-free technologies.
3

On a private e-mail commentary, Brazilian climate scientist Carlos Nobre, argued that one can never over-stress the need for significant investment on adaptation and that the IPCC reports should not be taken as a conservative rendition of climate change. He considers, for instance, the scenario on species extinctions to be an alarming one.
4

Roger Pielke Jr, Tom Wigley and Christopher Green - Dangerous Assumptions, Nature, Vol 452/3 April 2008, pp 531-2, argue that the technological advances needed to stabilize carbon-dioxide emissions may be greater than we think, and that the IPCC overestimates the possibilities of change using existing technologies.

The Critical Years Assessments of technology development that could soon make available more efficient alternatives to present energy and resource use indicates that around 2030 a whole new technological arsenal will likely be ready to gain full market scale. That means that the crucial transitional choices regarding how much further climate change we are willing to contract will be made in the 2009-2030 period. Even if we achieve the more demanding levels of GHG emissions, some large-scale effects of irreversible climate change are already unavoidable. They will dramatically affect large areas of the poorer regions of the World, but will also reach considerable areas in rich countries such as the US, Canada, The Netherlands, Japan and Australia, for instance. This unescapable environmental change demands sizable investment in adaptation and preparedness measures. New models of development will be required to contemplate, simultaneously, avenues for low and carbon-free production and consumption; as well as adaptation to the emerging effects of climate change. A fair amount of population displacement will likely take place, both within and across countries, and there will be a significant demand for aid and protection to climate refugees. A low-carbon society should not necessarily pose absolute, long-run limits to human development or general welfare. There is no reason whatsoever to presume that, in the long run, the path towards a low-carbon society will require significant permanent sacrifice of human development and welfare levels. There are no implicit and irreducible limits to human development inherent to envisaged new patterns of low-carbon production and consumption. There are, though, several paths leading to low-carbon economies and societies, at different levels of cost and sacrifice, depending on natural capital endowments, geographic position and breadth of collective choices. Most of these low-carbon models of development are totally compatible with high, or increasing, levels of human welfare, in the long run. However, the transition to a low-carbon model of human development will eventually lead to very different, though temporary, cost and sacrifice levels, depending on the point

of departure of each economy and on the quality and effectiveness of their plans of action. The degree and time span of sacrifice will vary widely. The paths towards a low-carbon economy are resource-dependent and the starting-point defines very different trajectories at very different cost levels. Some countries, due to their geographical position, present levels of natural capital endowment, and the overall carbonintensiveness of their economies, may have much softer transitions towards a low-carbon model. The Path towards a low-carbon Brazilian model It is my conviction that this is the case of Brazil. In Brazil, moving rapidly, in a very few decades, towards a low-carbon society would represent a qualitative breakthrough that could reduce the costs of transition from a high-carbon emerging economy to a low-carbon developed one. The agenda for change in this direction is in effect a development agenda, rather than a matter of limits to growth. To abandon the old 19th-20th centuries industrial development paradigm, adopting a new regionally specific, low-carbon paradigm, contemporary to the challenges and possibilities of climate-changeframed 21st century living could represent a very satisfactory path towards full-development, quality democracy and welfare to the Brazilian society. This new development paradigm would not turn Brazil immune from the carbon-emission limits posed by climate change. It will require new patterns of land, natural capital, and energy use. It would entail more, rather than less, global integration and networking while, at the same time, relying on regionally specific productive, developmental and adaptive capabilities. The dynamic matrix of this new development paradigm will necessarily be knowledge-based, but framed by the historic, structural and physical specific properties of local societies. In Brazil, that would call for a long-run shift from mechanical and metallurgical industries to a new low-carbon biotechnological industry, capable of producing low-carbon feedstock, and second and third generation biopharmaceuticals, biofuels, and biopolymers. The major investment required for this bio-industrial revolution in Brazil is on education and scientific research and development,
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creating the basis for a knowledge economy. The main constraint would not be capital investment. A fundamental reform of fiscal policy would create space for the public investment in the infrastructure for basic education and science. There is plenty of investment capital in the market to be attracted, provided there is an adequate policy, institutional and regulatory environment. Even the lack of R&D culture by domestic companies could be circumvented by the creation of new knowledge oriented ventures, applying the right structure of market and societal inducements. The country still has a huge stock of natural capital. Human capital, however, is scarce. One cannot improvise an educated labor force, able entrepreneurs or a research and development network combining public and private institutes and private companies.5 Converting to a low-carbon economy may not require a great sacrifice of well-being. It does, however, require much change and collective effort. Depending on the levels of development and carbonization of a given society, the process rather than demanding limits, would call for poverty reduction, opening new opportunities for social and occupational mobility, investment in education, science and technology, and improved governance. The main endeavor would be to change behavior, institutions and the consumption of high-carbon resources and final goods to adjust economic satisfaction to lower indices of carbon-intensiveness. Emphasis on the possible recessionary effects of such a conversion and on sacrificing the level of development already achieved, especially in developing or emerging countries, might be misleading in many cases. It only adds strength to contrarian arguments. There are several low-cost actions that could help to make transition softer, such as: incentives to energy efficiency and the use of local alternative energy sources to reduce the demand for high-carbon on-grid electricity; local renewable energy solutions could satisfy household needs, while saving on-grid large scale energy solutions to industrial use; better transit planning and better mass-transportation logistics; improved waste management.
5

For the Amazon region, for instance, such a new model would require investment in education, science, technology and IT, as argued by climatologist Carlos Nobre, geographer Berta Becker and mathematician Jacob Palis, on the proposal by the Brazilian Academy of Science for a New Development Model for the Amazon, Amaznia: Desafio Brasileiro do Sculo XXI - A Necessidade de uma Revoluo Cientfica e Tecnolgica, Rio de Janeiro, Academia Brasileira de Cincias, 2008.

No model of transition can be generalized. Each will require very specific local solutions to face the major global problem of our time. The costs and sacrifices of transition towards a low-carbon society will greatly depend on the carbon-matrix of each society. To convert an economy that is highly dependent on a coal-based electricity grid, such as Chinas, to a low-carbon model, does involve great costs and trade-offs. The conversion of an economy that has 80% of its electric grid based on hydropower, such as the Brazilian, could be far less demanding. Additionally, the pace and weight of transition will also depend on the pattern of carbon emission of each country. In Brazil, 70% of carbon emissions come from wildfires, deforestation and other land use changes. To reduce emissions through avoided deforestation is less a matter of cost and sacrifice as it is a question of better governance and ensuring rule of law.6 The shape of transition will also depend on the present degree of sustainability and carbon-intensity of the transportation system of each country. Brazil has 100% of its gas stations equipped with ethanol pumps, side by side with gas and diesel pumps. It means that there are no obstacles to the use of 100% biofuel by the entire personal and commercial fleet. Today, 28% of Brazilian cars run on alcohol or have totally flexible engines (that run on any desired mix of alcohol and gasoline). By 2013 flex engines will represent 54% of the total. Flex-car sales in 2007 and 2008 represented 84% of total sales. All gasoline sold in Brazil already has a 25% alcohol mix.7 Brazilian macro-logistics, however, is not only carbon-intensive, but also highly inefficient in both logistic and energy counts. It is almost totally dependent on roads and diesel-run trucks for cargo transportation even for distances well over 1000 Km. Railways and

See Brenda Britto and Paulo Barreto - Enforcement against Illegal Logging in the Brazilian Amazon, Imazon, paper presented to the 4th IU, 2005. Danielle Celetano and Adalberto Verssimo have persuasively shown that present economic activity in the Amazon region has never led and will not lead to development. A temporary boom of local incomes is followed by socioeconomic collapse, when resource or land exhaustion determines the migration of these activities to new areas, causing new deforestation. Cf. Danielle Celetano and Adalberto Verssimo - The Amazon Frontier Advance: From Boom to Bust, The State of the Amazon Indicators, Imazon, Belm, 2007.
7

Source: ANFAVEA - National Association of Producers of Automotive Vehicles.

coastal navigation have always been neglected by Brazilian transportation policies. Metropolitan collective transportation systems as well as intercity and interstate passenger bus transportation have also extremely negative environmental and climate effects due to flawed public policies and lack of law enforcement. Subway lines do not provide an adequate alternative to bus transportation, and the majority of the metropolitan, intercity and interstate bus systems are inadequately planned and ill-regulated. There are no working controls to regulate equipment age, or emission levels. Railway interstate passenger carriers are negligible as an alternative to bus transportation and many lines have been discontinued due to disincentives built into governmental action. Biofuels by themselves are no indisputable means to achieve a lowcarbon transportation system. First-generation biofuels have a doubtful carbon balance; corn-based ethanol being the worst case. Sugarcane alcohol has a much better balance. Energy productivity, is greater due to sugarcane photosynthetic properties. However, the overuse of fertilizers has not yet been fully taken into account in the Brazilian alcohol carbon balance. Due to our reliance on flex cars, there is no motivation to use hybrid ones.8 There is a potentially negative component to land-use change if the expansion of sugarcane plantations for alcohol production would displace other crops and cattle raising to forested areas, leading to deforestation in the Amazon, the Wetlands (Pantanal) and the Midwestern rich Savannah (Cerrado) regions. There has also been some pressure on the Amazon forest borders from sugarcane producers. Sugarcane productivity in very hot regions seems to be much lower, though, and probably will not become a major vector of deforestation. But one should never underestimate the power of government and price incentives.9 Nevertheless, its major
8

Although preliminary calculations show that sugar cane production use relatively low levels of fertilizers and related N2O emissions are also correspondingly low, see Isaas de Carvalho Macedo et al - Balano das Emisses de Gases de Efeito Estufa na Produo e no Uso do Etanol no Brasil, SMA/GESP, 2004.
9

I have discussed biofuels use in lowering the carbon content of the economies in more detail in O Futuro dos Biocombustveis, O Eco, 26.02.2008: http://oeco.com.br/ index.php/sergio-abranches/35-sergio-abranches/16588-oeco_26278l . For a more technical discussion, see Timothy Searchinger et allii - Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land-use Change, Science, 29 February 2008: Vol. 319. no. 5867, pp. 1238 - 1240, and Joseph Fargione et allii - Land Clearing and the Biofuel Carbon Debt, Science, 7 February 2008: pp. 1-4.

contribution would likely be indirect, through crop and grazing displacement. Creative displacements The collective decision to reduce the carbon intensiveness of an economy, when translated into a coherent set of public policies, does create a new matrix of incentives to investment and innovation. These incentives, in turn, would likely prompt secondary and tertiary investment decisions that would create new jobs and occupations. Conversion might entail progress rather than recession, specially when evaluated over a larger time span. Conversion to a low carbon society could, in the mid run, say around 2030-2035, lead to a new economy. A low-carbon economy would be centered on a cluster of industries very different from the core industries of the 20th century high-carbon paradigm. The emergence of a new economy through the process of conversion from high-carbon to low-carbon patterns of production and consumption would require a major, though gradual, replacement of physical capital. Physical capital renovation comes together with a shift of technological profile through a cycle of innovation. It is very likely that such a mutually reinforcing chain of structural events would generate a long wave of economic expansion, even as carbon-intensive sectors decline. (See diagram below)
Figure 1: Emerging Low-Carbon Economy
DEVELOPMENT AND ADOPTION OF NEW LOW-CARBON TECHNOLOGIES ECONOMY BECOMES LOW-CARBON

LONG LOW-CARBON BOOM MARKET AND REGULATORY INDUCEMENTS TO CONVERSION TO A LOW-CARBON ECONOMY

GROWING DEMAND FOR LOW-CARBON PRODUCTS

RENEWAL OF PHYSICAL K CREATION OF LOW-CARBON JOBS

MARKET AND REGULATORY CONSTRAINTS TO HIGHCARBON ACTIVITIES

DESTRUCTION OF USING EXISTING HIGH-CARBON JOBS TECHNOLOGIES AND EFFICIENCY MECHANISMS TO REDUCE CARBON-INTENSITY DISPLACEMENT AND DISPOSAL OF HIGHCARBON TECHNOLOGY

10

Several thousands of carbon-dependent jobs will be destroyed. This is likely to be happening already, because several high-carbon segments are in sunset industries. Entire segments of the highcarbon economy are already in decay. It is, however, even more likely that several thousands new low-carbon and green-collar jobs will be created during the process of conversion, which will take from two to three decades to complete. Unavoidable social costs are likely to be entirely concentrated on the time lagging between job destruction and job creation, and that will vary largely from country to country. The pains of transition will be highly correlated to the pace and duration of transition. From the middle to higher stages of transition, it is very likely that low-carbon job creation will more than offset high-carbon job destruction, especially in countries, like Brazil, where the low-carbon economy will have a large component of bio-industries and bio-services, not to mention jobs related to the protection and conservation of ecosystem services. It would not be a new phenomenon. During the downsizing and restructuring wave following the fiscal crisis and steady loss of productivity of the 1980s, the United States economy has lost 44 million jobs (most public spending dependent) while the economic adjustment process created 73 million new private-sector jobs. Adjustment took less than a decade and by 1998, 55% of the total US workforce were in a new job, a large majority earning above average wages.10 This process of change was the basis for the long-boom of the 1990s, that only now might be in jeopardy due to the sub-prime crisis. Over this long period of growth, even after the dot-com bubble bust there is a sizable number of solid, dynamic and innovative companies still leading the ongoing telecomm, IT and other knowledge-based sectors technological revolution. Most of the predicted media convergence was delayed by the crisis, but is now under progress likely destroying and creating more jobs on the go. Presently, a wave of investment, mergers and acquisitions in the renewable energy market, in the US and Europe may be the beginning of a new investment attracting, job-creating, long duration cycle. Conversion entails changing patterns of both resource use and allocation trough new production models and consumer behavior,
10

Cf. Mortimer B. Zuckerman - A Second American Century, Foreign Affairs, May/June, 1998, pp. 18- 31 (especially pages 18-19).

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rather than reducing levels of development. It is to a large extent about technological development and adoption of new technology by corporations, usually under government regulation and stimulated by public as well as market incentives. It will probably go by stages in some sectors - such as energy and fuels - as new and better technological solutions appear; and be more straightforward in other sectors, where it will require discontinuation of plants, or activities. A classic mix of market inducements and regulatory constraints that has already led to technological and institutional breakthroughs in the past will probably become the model for many conversion paths around the globe. Brazilian structural specificities Policy alternatives open to a country like Brazil are both feasible and reasonable. Resistance comes from entrenched interests on the old order, rather than from a true concern about peoples welfare. The basket of policy decisions required to convert Brazil into a lowcarbon society over the next 20-30 years, when adjusted to the domestic levels and sources of carbon emissions, has comparatively low social cost, and high social benefits. It should not represent a noticeable sacrifice of either economic growth or welfare. This specificity of the Brazilian path for conversion to a low-carbon system comes from its predominantly hydro-based electric matrix and from the size and importance of the remaining Amazon tropical forest. A hydropower-based matrix, a very high wind and photovoltaic power potential and the natural capital represented by the rainforest help to moderate the degree of change required by conversion. Again, the bottleneck lies in the education, domestic scientific capabilities and lack of an adequate scientific, technological, and private R&D infrastructure.11

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Scientific capabilities are low due to low-quality scientific education and a number of scientists in the required areas much lower than required. The countrys infrastructure for scientific research is also lacking, especially in the Amazon region. There is no R&D infrastructure in the Amazon region to apply its biocapital in the development of a bioindustry.

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CHART 1: BRAZIL - SOURCES OF CARBON EMISSIONS

75% 1%

9% 7% 6% 2%

Land use change and forestry Fuel combustion transport Fuel combustion industry Fuel combustion other sectors Industrial processes Fugitive emissions
SOURCE: MINISTRY OF SCIENCE AND TECHNOLOGY - FIRST ASSESSMENT OF BRAZILIAN EMISSIONS OF GREENHOUSE GASES - 1999

As 75% of her emissions come from deforestation, wildfires and other forms of land use change, improved governance could lead to a fast reduction of Brazilian emissions. A 5-year plan towards eliminating illegal logging and land clearing is perfectly feasible. To make zero illegal deforestation sustainable, a 10-year plan for investment in the development of a new bio-economy for the region would be both a requirement and a bonus to its population.12 Reducing emissions by eliminating deforestation would buy time for investment in new energy, and most importantly, on a new bioeconomy that could be the dynamic driving force of Brazilian development in the 21st century.

12

The Brazilian Academy of Sciences has recently detailed what would constitute the public, scientific and technological face of this bio-industrial infrastructure that would require more scientific institutions, more qualified scientists in the region and more investment in education, science and technology. Cf. Nobre et al. op. cit.

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Old-fashioned energy policies The fact that land use change and forestry, together with transportation are the two critical points for curbing carbon emissions in Brazil, does not mean that domestic energy policies should not be substantially reviewed. The hegemony of the hydroelectric paradigm in Brazil has crystallized the idea that hydropower plants are a totally clean source and the most costeffective solution for electric power supply in the country. There is an entrenched bias built into the Brazilian electric power policy decisions that simply discards from analysis any alternative source of future power supply. There also is a strong bias towards large hydro-plants, supported both by the sectors technical elite (mainly formed by electric engineers) and highly influential contractors with strong political ties, that discourages building small hydroplants. The corollary is an exclusive accent on on-grid energy solutions that requires huge sums of capital and, given the distances and the environmental conditions - especially when the Amazon hydropower resources are concerned - a large percentage of on grid energy loss. Hydropower advantage is not as absolute as some claim in Brazil. There are several hydropower plants that emit as much GHGs as an equivalent fossil fueled thermoelectric plant. Planning and design errors coupled with the lack of environmental and emissions criteria to evaluate the costs and benefits of hydroelectric plants explain the worst mistakes. Brazilian exploitation of her hydroelectricity power requires better assessment of locations, fully accounting for emissions from its reservoirs, valuating the costs of water usage, and considering all its environmental consequences, including the costs of reparation. Only fully accounting for all these factors one could effectively appraise their comparative advantage vis--vis wind, biomass, small hydro, and photovoltaic sources. CO2 and methane emissions from hydropower plants should be carefully estimated and measured, in the reservoirs as well as in the water flow. There is research and development under way looking for technological solutions to capture emissions at both points. Depending on the technological choice, location, and size of the reservoir, well-planned hydropower plants continue to be a major

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low-carbon solution to electricity generation in Brazil, though not the only feasible one.13 The chart below shows that some of the Brazilian hydropower plants are as big emitters as equivalent coal-fired, diesel-fired, and gasfired thermoelectric plants, sometimes bigger.14
CHART 2: HYDROPOWER EMISSIONS COMPARED TO EQUIVALENT FOSSIL EMISSIONS

Tucuru Samuel Xing Serra da Mesa Trs Marias Miranda Barra Bonita Itaipu Segredo
0,01 0,01 0,01 0,02 0,02 0,03 0,09 0,09 0,10 0,01 0,01 0,02

0,56 0,58

1,00 2,25 2,33 4,05

0,64 0,66

1,15 1,24 1,29 2,23

0,89 0,92 0,96

-0,100 HE/CTE

1,333 HE/DTE

2,767 HE/NGTE

4,200

HE/CTE = Emissions from Hydroelectric Plant/Emissions from Coal Fired Thermoelectric Plant; HE/TDE = Emissions from Hydro/Emissions from Diesel Fired Thermoelectric Plant; HE/NGTE = Emissions from Hydro/Emissions from Natural Gas Fired Thermoelectric Plant. Source: Luiz Pinguelli Rosa et allii - Emisses de Dixido de Carbono e Metano pelos Reservatrios Hidreltricos Brasileiros, Brasil, Ministrio da Cincia e Tecnologia, 2006.

13

Cf. Fernando M. Ramos et alli - Extreme event dynamics in methane ebullition fluxes from tropical reservoirs, Geophysical Research Letters, Vol. 33, L21404, 2006. The government has officially declared that the countrys remaining hydro potential is entirely in the Amazon region, meaning. Producing hydroelectricity in the Amazon means not only more deforestation, but implies using rivers with a high level of organic sediment, therefore increasing GHG emissions. Not to mention the cost and land clearing related to expanding the grid through the rainforest. The environmental damage and costs associated with the lines that will make feasible the new plants to be built on the recently licensed Madeira river project have not been taken into account when evaluating their costs and benefits.
14

Luiz Pinguelli Rosa et allii - Emisses de Dixido de Carbono e Metano pelos Reservatrios Hidreltricos Brasileiros, Brasil, Ministrio da Cincia e Tecnologia, 2006. See also, Marco Aurlio dos Santos - Inventrio de Emisses de Gases de Efeito Estufa derivadas de Hidreltricas, Doctoral Dissertation, COPPE, UFRJ, Rio de Janeiro, March, 2000; Phillipe Fearnside - Greenhouse-gas emissions from Amazonian hydroelectric reservoirs: the example of Brazil's Tucuru Dam as compared to fossil fuel alternatives, Environmental Conservation, 1997, 24: 64-75; and Jim Giles Methane quashes green credentials of hydropower, Nature, 444, 524-525 (30 November 2006).

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Brazil is presently making all possible mistakes in the energy field. Planning of hydropower development lacks proper environmental appraisal, neglects the decisively critical factor of emissions minimization, and never considers alternative non-hydro renewable sources as more suitable substitutes, especially at the regional and local level. Besides, government policy induces and subsidizes the use of coal as a resource for electricity production. Brazil does not, however, have an energy dilemma as complex as India, China and many European countries do. It is a case of energy policy failure. The country has plenty of alternative sources of energy including many adequate sites for additional hydropower plants of variable sizes, to seek for the best energy mix possible with the aim at reducing total energy-related GHG emissions. Energy planning however puts absolute and preemptive emphasis on large hydropower plants and bundles all other non-hydro and small hydro possibilities on a lateral, smaller alternative energy program. Renewables, other than large hydropower plants are not a part of the central plan for expanding electric power generation. The Amazon Challenge The Amazon constitutes the paramount factor in the current relationship between climate change and development in Brazil. It is the countrys major source of GHG emissions, it is the largest land

16

or carbon sinks 15, and it has an important role in the regional, if not the global, climate system, apart from its role in power generation, as commented above.16 The Brazilian Amazon region is a vast tract of mainly, but not solely, forested land, submitted to a marked cycle of wet months, when a large portion of the forest is flooded, and dry months. It lies in the territory of nine South American countries, but 60% belong to Brazilian territory. Its total area is larger than Europes, with a population of about 20 million people, an index of human development below the countrys average index and a rate of

15

Cf. Carlos Nobre - Amazonian tropical forests: carbon source or sink?, in Verweij, P.A. (editor) - Understanding and capturing the multiple values of tropical forest, Proceedings of the International Seminar on Valuation and Innovative Financing Mechanisms in support of conservation and sustainable management of tropical forest, Torbendos International, 2002, pp 43-48. Although there is an ongoing debate on the size of the Amazon carbon sinks, recent studies show that they should be far more relevant than earlier studies suggested. More evidence from ongoing research using more adequate technology will probably settle this question in favor of the hypothesis stating that they are very significant to the atmospheric carbon balance. See - Yadvinder Malhi et al - Climate Change, Deforestation and the Fate of the Amazon, Science, 319, January, 2008, pp. 169-172; Britton B. Stephens et al - Weak Northern and Strong Tropical Land Carbon Uptake from Vertical Profiles of CO2, Science, 316, June 2007, pp. 1732 - 1735; and David F. Baker - Reassessing Carbon Sinks, Science, 316, June 2007, pp. 1708-1709. Britton Stephens and his colleagues conclude that northern terrestrial uptake of industrial CO2 emissions plays a smaller role than previously thought and that, after subtracting land-use emissions, tropical ecosystems may currently be strong sinks for CO2. A. Subramaniam et al. argue that fresh water discharged by large rivers such as the Amazon is transported hundreds to thousands of kilometers away from the coast by surface plumes. The nutrients delivered by these river plumes contribute to enhanced primary production in the ocean, and the sinking flux of this new production results in carbon sequestration. Here, we report that the Amazon River plume supports N2 fixation far from the mouth and provides important pathways for sequestration of atmospheric CO2 in the western tropical North Atlantic (WTNA). They also argue that the Amazon River plays an important role in enhancing primary production far beyond the continental shelf by supporting diazotrophs and thereby providing a significant source of new N. Although the Amazon represents the largest riverine input to the tropical ocean, there are numerous other tropical rivers that deliver large volumes of water with excess P and Si to this biome. Carbon sequestration by DDAs associated with excess nutrients supplied by tropical river plumes may be a globally significant phenomenon. This role critically depends on the integrity of the forest surrounding the rivers that provide most of the nutritive sediments. Cf. A. Subramaniam et al. - Amazon River enhances diazotrophy and carbon sequestration in the tropical North Atlantic Ocean, Proceedings of the National Academy of Sciences - PNAS, vol. 105, no. 30, Juky 2009, pp. 1046010465.
16

For a good updated synthesis of the loss associated to deforestation in the Amazon, see Y. Malhi et al - cit.

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deforestation far beyond any measure of sustainability, threatening the forest systems resilience.17 The main challenge regarding mitigation of GHG emissions is to radically reduce deforestation.18 It is a Herculean challenge. Anyone who has seen real-life deforestation forces at work in the Amazon knows it is a major endeavor to eliminate or neutralize them.19 The Amazon region is a complex one, and there are very different situations: in Para, in Amazonas, in Roraima. There is, however, a common factor uniting them all: lack of a working system of legalized and formal land-rights. The chaotic situation of land-rights serves as an excuse for every abuse in land use. It is no easy matter to bring order to decades of land-rights disorder, landgrabbing, corruption, and inefficacy of the Federal land-rights and colonization agency, INCRA.20

17

See, for instance, Carlos Nobre et al - Amazonian deforestation and regional climate change, Journal of Climate, vol. 4, Issue 10, pp.957-988; Carlos Nobre and Marcos Daisuke Oyama - A new climate-vegetation equilibrium state for Tropical South America, Geophysical Research Letters, Vol. 30, no. 23, 2199.
18

Cf. Georgia Carvalho, Paulo Moutinho et all - An amazon Perspective on the ForestClimate Connection: Opportunity for climate mitigation, conservation and development?, Environment, Development and Sustainability, 6: 163174, 2004; Gordon B. Bonan et al - Forests and Climate Change: Forcings, feedbacks, and the climate benefits of forests, Science, 320: 1444-1449, 2008.
19

I have recently discussed the issue in the state of Para with people representative from the local political elite, of the techno-scientific elite, with timber producers, loggers, cattleraisers, charcoal producers and workers on all these activities. Many are committed to stop deforestation. They simply dont know how and keep waiting for solutions from the Federal government that may never come. I heard a lot about corruption, even from government officials. Ive also seen people from Ibama and ICMBio, federal environmental agencies, who are not willing to concede and are indignant about corruption. It is a complex situation, no single description really depicts the diversity of factors that drive deforestation. A diversity that somehow reflects the forest wealth of diversity. But resilience is declining both in the forest and in society as well.
20

See for the most recent and complete appraisal of land rights in the Amazon Paulo Barreto, Andria Pinto, Brenda Brito and Sanae Hayashi - Quem Dono da Amaznia: Uma anlise do recadastramento de imveis rurais, iMAZON, Belm, march, 2008.

18

CHART 3: LAND ENTITLEMENTS IN THE AMAZON

Million Hectares
Entitled Private Land Presumed Public Land without Entitlment Presumed Private Land without entitlement Protected Public Entitled Land

20 209 158

104

Source: Paulo Barreto et allii - Quem Dono da Amaznia? Imazon, 2008.

The chart shows that 53% of all Amazon land has no entitlement, and no clear legal status, therefore being very much up for the grabs.
CHART 4: POPULATION OF LARGER AMAZON STATES CAPITAL CITIES 3000000 2250000
1688524 2043000

1500000 750000 0

922477 1011403

1129000 827000 291777 526126 765247

Manaus

1980

Belm 1990

Campo Grande 2006

Over the last decade there has been a metropolitan boom in Brazil and several mid-sized capital cities have reached the 1,5-2,0 million people line. This is clearly noticeable in Amazon cities like Belm and Manaus, that have become more active sources of pressure over the rainforest and the regions rivers. Other cities in the region are growing too fast and will soon reach this point, among them Campo Grande, in Mato Grosso do Sul, also shown on the chart above. Manaus has grown 83% between 1980 and 2007; Belm has grown 147%, over the same period; and, Campo Grande, 162.3%. This growth has also generated more complex rule-of-law problems, typically urban, that add new dimension of illegal action to deforestation, noncompliance to forest management regulations,

19

river pollution, invasion and destruction of conservation units, and trafficking of protected species. There are clear signs that better international air traffic control by the radar system CINDACTA 4 has reduced illegal international air traffic in the Amazon. The side effect was the migration of transportation of illegal merchandise to the unprotected river ways, where drug traffic meets traffic of timber and protected species, mostly Chelonia and ornamental fishes. Youngsters from the urban peripheries of these cities are recruited by these illegal merchants and end up into drug use or drug dealing.21 Despite all the complexity it is quite clear that an agenda to eradicate illegal deforestation in the Amazon sets no limits to the regions development. On the contrary, the present model, besides being predatory, is highly inefficient as far as land-use, natural capital valuation, and labor and human rights are concerned. Because this mode of economic expansion is intimately linked to illegal behavior on a cycle of mounting gravity and societal danger it is clearly unacceptable both economically and in human welfare terms. The present situation degrades not only natural capital but mainly the regions social capital. Average yearly deforestation of 15,000 squared kilometers results almost totally from illegal clearing, creating a market for dirty labor and human exploration. It degrades labor, corrupts private capital and public authorities. It is a
21

Cindacta 4 has made control of international air traffic over the entire Amazon possible for the first time. Before that, illegal international air traffic was uncontrollable and an air drug route was created linking Colombia to European and US markets over the Brazilian Amazon. With full radar coverage, repression of illegal air traffic has increased exponentially and most of the drug transportation has been transfered to the regions unprotected and unmonitored waterways. The Negro river waterway linking Manaus to the river port of So Gabriel da Cachoeira, 1700 km upriver, located in the Brazilian-Colombian border, on the so-called Dog Head region, is believed to have become the main route for cocaine paste from Colombia to the vicinities of Manaus, Amazon State. Federal Police officers suspect that there are clandestine coke refining nearby Manaus. Cocaine thus obtained would then go to Belm, State of Par, and embarked to overseas markets. Ive heard several accounts from officials in the Amazon region referring to increasing linkages between illegal logging, smuggling of protected species and drug trafficking. An interviewee told me, for instance, that gang youths from the periphery of Manaus are recruited to do illegal logging in the reserves and bring the result to the outskirts of the city, where they are paid with coca paste or cocaine. The central connector of this rising illegal network is the waterway. This convergence of environmental crime and drug trafficking has been confirmed to me by both the Military Commander for the Amazon, general Augusto Heleno, and the Director-General of the Federal Police, Luiz Fernando Corra. See Srgio Abranches - Drogas Desvastam na Amaznia, O Eco, August 6, 2008 (www.oeco.com.br).

20

sharp snapshot of low-grade institutions and low-quality democracy at work. Developing a knowledge-based bioindustry in the region, together with other high-tech clean industries would lead to significant gains in all these dimensions. The Political Economy of Deforestation CHART 5: AMAZON DEFORESTATION Deforestation Best Case 30.000 22.500 15.000 7.500 0 Worst Case Intermediate Case

1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Source: 1988-2007 - INPE; worst case estimate based on a scenario of failed government action and an acceleration of the pace of logging over the remaining four drier months; intermediate case estimate based on the hypothesis that the 12-month pace of clearing will be the same as the pace observed over the last eight months; best case estimate based on experts consensus.

The chart above shows a sharp decrease of deforestation from 2004 to 2006. The Federal Government has claimed that it represented a reversal of the historical trend, due to an intensification of command and control actions, and the creation of new conservation units and extractive reservations. A brief look at the data, though, shows that it coincided with falling prices for both soybean and beef, of -33.4% and -12.0%, respectively. The correlation between land-clearing and the soybean and cattle industries in the Amazon is part of the deforestation trend since these activities have replaced logging and colonization as the main driving forces in land-use change in the Amazon, in the late 1980s, early 1990s.
21

Recent evidence shows an increase in deforestation since the end of the second quarter of 2007. This resurgence of deforestation coincides with the increase of both demand and prices for the two Amazon-produced commodities. It seems that the cyclical nature of deforestation, linked to the fate of the Amazon agribusiness has not yet been broken. The pressure from soybean production may have been weakened by an agreement, triggered by Greenpeace actions in Europe and the US, among government, producers and corporate consumers to bar beans from land cleared after January 2005. Low-productivity cattle-ranching and land-grabbing to form pasture for future sale to ranchers or newcomers may have become the main leading factors driving deforestation. What the data shows, though, is that the correlation between soybean prices in reais and deforestation continues to hold. Soybean prices are very sensitive to the exchange rate and to the demand for grain and feedstock. Immediately after the Real Stabilization Plan, a boom in domestic consumption, particularly of beef and poultry, has compensated for the exchange rate, and has led to higher soybean domestic revenues. Deforestation reached its highest point ever. The Brazilian agriculture was in dire straits in 1997 and 1998, when the exchange rate was really harmful to exporters and the economy started to give signs of impending breakdown. The soybean index from CEPEA/ESALQ dropped sharply, between 1997 and 1998. The chart above also shows a significant decrease in deforestation. After the 1999 devaluation, soybean revenues in domestic currency started to recover: while dollar prices increased 34% from 1999 to 2004, prices in reais increased 133%.22 Deforestation increased 58.5%. Soybean prices dropped 9.8%, in dollars, and 33.4%, in reais, from 2004 to 2006. The rate of deforestation was 45% smaller. The first time deforestation has not followed the movement of soybean prices was in 2007: prices increased 38% in dollars, and 23%, in reais, respectively, while deforestation dropped 18% over 2006. 23
22 23

In both cases year average per bushel. Source for soybean prices CEPEA/ESALQ, and for deforestation data INPE.

22

This result could be attributed to a relative and topical efficacy of more intensive command and control policies and to the agreement in the soybean industry. It didnt last long, though. In 2008, with prices rising even faster than last year (57% in dollar values and 35% in reais on average, from January to August) deforestation is on the rise again. The 2007-2008 season will probably close with a deforestation rate about 10% to 25% higher than the 2006-2007 one, that registered 11,532 Km2 of forest clearing. Preliminary satellite evidence from INPEs Deter system of real time deforestation monitoring, as well as from Imazons monthly monitoring system, show that deforestation has increased over the same period last year. The price movement in the Amazon cattle economy has been slightly different, but with the same overall effects. From 1999 to 2003 they moved in the same direction observed for soybean prices, although showing a larger difference between values in dollar and in domestic currency. Prices in dollar have increased 4.2%, while in reais, theyve jumped 68.4%.24 From 2004 to 2006, however, cattle prices increased 15.4% in dollars, but have retracted 12%, in reais. In the first 8 months of 2008, compared to the 2006 yearly average, they have increased as fast as soybean prices: 67%, in dollar terms, and 39% in reais. The chart below sumarizes the last two moments of this cycle.25

24 25

Source for cattle prices CEPEA/ESALQ: year price averages in R$/@ and $/@.

Source of chart data CEPEA/ESALQ; soybean prices are the year average in R$/bushel, cattle prices are the year average in R$/@; deforestation in sq. km.

23

CHART 6: RATES OF CHANGE OF SOYBEAN PRICES, CATTLE PRICES AND DEFORESTATION

150,0 112,5 75,0 37,5 0 -37,5 -75,0 1999-2004 Soybean 2004-2006 Cattle 2006-2007 Deforestation %
26

The fact that soybean production does not appear in most of the studies as a primary deforestation factor, does not mean that mechanized grain production is not a driving force in the dynamics of the political economy of deforestation. It has been a paramount factor. As agriculture occupies older pasture land it enters the economic calculus for land value, even from the standpoint of landgrabbers doing illegal land clearing. They know the land will first be used for grazing and, afterwards, for grain production. Cattle ranchers also know they will be able to sell or rent the unused land to agricultural producers and hence increase economic returns of their low-productivity, low-profitability activity. This expectation works as a market incentive to deforestation. Obviously, the main incentives are public, and come from the wide range of disguised and open subsidies given to Brazilian agriculture in general, and to Amazon agriculture in particular. 26

Cf. Sergio Margulis - As Causas do Desmatamento da Amaznia Brasileira, World Bank Brazil, June, 2003; Ane Alencar et al. Desmatamento na Amaznia: indo alm da emergncia crnica, IPAM, Manaus, 2005; Leando Valle Ferreira et al. O desmatamento na Amaznia e a importncia das reas protegidas, Estudos Avanados, Jan./Apr. 2005, vol.19, no.53, p.157-166; Daniel Cohenca - A expanso da fronteira agrcola e sua relao com o desmatamento detectado em imagens Landsat TM e ETM+ na regio norte da BR-163, Par entre os anos de 1999 a 2004, Dissertation presented to the Department of Forestry Sciences, Federal University of Lavras, December 2005; Santiago Palacios Noguera - Modelagem da Dinmica de Desmatamento a diferentes escalas espaciais na regio nordeste do estado de Mato Grosso, Dissertation presented to the Graduate Program in Tropical Biology and Natural Resources, INPA/UFAM, Manaus, 2006.

24

There has also been primary deforestation by grain producers. Only after the agreement between the large agents of the Amazon soybean economy, reaching producers, exporters and importers, triggered by Greenpeace pressure over major importers in Europe and the USA, the contribution of soybean to deforestation both direct and indirect has decreased. The agreement called for a ban on grains produced on land cleared after January 2005. The fact that all major agents were a part to the agreement does explain, to a large extent, why the pace of deforestation in grain producing areas did not accelerate as much as in cattle-dominated areas during the recent boom of commodities prices. Deforestation has increased, but mainly due to pasture conversion, logging, and small farm activities.27 The Amazon is a critical geopolitical frontier, and a matter of national-security. Lawlessness and robber-tycoons control a significant portion. They explore the land to its limits and leave behind a track of sand and poverty.28 The impact of an agenda to stop illegal deforestation on regional development would be, rigorously speaking, highly positive, rather than negative. The development of the Amazon region has been so far of very low-quality. It is a model that creates almost no opportunity for the social advancement of the poorer sectors of its society. The traditional forest people are supposed to remain forever as gatherers in a primitive extractive economy. The young people, looking for better income, become easy pray to intermediaries that offer labor power to loggers, planters and cattle ranchers, feeding a long and unacceptable chain of slave and degrading labor. Now they are also being recruited to work in the drugs supply chain. This model destroys a natural asset that has high economic, scientific and environmental value, without generating a proportional level of well-being to the population. On the contrary it maintains poverty in the long run and corrupts social capital, human rights and the civic culture. Imazon researchers have demonstrated that there is a high qualityof-development deficit in the region, despite or because of economic growth. Using 17 indicators to measure the regions progress on the
27

As shown by the series Transparncia Florestal, based on data from the SAD Sistema de Alerta de Desmatamento, developed by Imazon (www.imazon.org.br).
28

This boom-bust cycle has been very clearly and precisely explained by Danielle Celentano and Adalberto Verssimo op. cit.

25

Millennium Development Goals to 2015, the study shows that gains in the majority of the indicators between 1990 and 2005 have been very unsatisfactory. The Amazon region continues to be in a critical situation regarding the level of poverty, the incidence of malaria fever, maternal mortality and access to water treatment and sanitation. Two indicators have worsened in the period: the rate of deforestation and the number of cases of AIDS. Only in one among the 10 Millennium Goals evaluated, the region has met the target: gender equality of access to education.29 The Biofuture of the Amazon Deforestation represents 70% of total Brazilian GHG emissions. The Amazon region hosts 20 million people and is the countrys major forest asset still largely preserved. The Amazon forest is not only a major natural asset, but also a geopolitical resource and a matter of national and environmental security with clear global ramifications. The forest faces two relevant sources of risk today: deforestation and climate change. These two risk-drivers are not only correlated but also mutually reinforcing: deforestation leads to more climate change, climate change threatens forest survival.30 The Amazon agenda will necessarily be in the center of the Brazilian development agenda for the 21st Century. To stop illegal deforestation would be the first, essential, step in the implementation of a far more sophisticated low-carbon development agenda for the region and for Brazil as a whole. There is, however, no permanent countervailing force against the drive towards deforestation other than a new economic and social model of regional development. Its mainstay would be an advanced knowledge-based bioeconomy. This new model would require sustained and significant investment in education, scientific and technological development in the region, certainly far beyond what the Federal, state and local governments are prepared or able to provide. REDD and other models of compensation for avoided deforestation and preservation could become important sources to finance a significant part of this investment, together with private ventures, especially in the
29

Cf. Celentano and Verissimo - op.cit. Women have increased their schooling levels all over the country and today they have, on average, more years of study than men.
30

Cf. Yadvinder Malhi et allii - Climate Change, Deforestation, and the Fate of the Amazon, 2008, Science, Vol. 319, January, pp. 169-172.

26

technological and industrial sides of the model. These high valueadded activities propitiated by the educational, scientific and technological advancement of the region, as well as the attendant demand for skilled labor, would lead to a far greater index of human development than the present low-productivity, inefficient and predatory economic activity that dominates the region. This is no easy task. Only the public basic infrastructure for this future Amazon knowledge economy, is estimated by the Brazilian Academy of Sciences to require around R$1.0 billion ($600 million) a year, to finance the creation of new public universities, scientific and technological research and training institutes, strengthening and expanding graduate studies in the region and establishing a wideband regional information network. The idea behind this plan is to increase the scale and quality of regional academic training and basic research and to significantly increase the volume of highly qualified scientific and technical professionals working permanently in and about the Amazon.31 The Academy of Sciences plan sets the public foundations for the bioeconomy of the Amazon region, but much more is needed. We ought to look at the infrastructure required for the private side of this economy, because a state-centered bioeconomy would not create a new structure of incentives to discourage investment in the present predatory model and to induce capital and labor to choose the new bioeconomic model. The foundations of this new bioeconomy would be incomplete, if private R&D institutes are not established in close connection with the public basic research and training facilities. This public-private infrastructure, to be viable, will require a cluster of private ventures, dedicated to market the final result of its scientific and technical endeavor, at the same time creating demand for people with scientific and technical qualification. One of the historical obstacles to the productive dialogue between public universities and private companies in Brazil is that Brazilian academic institutions educate people fundamentally to work at academic institutions. A biotech network would need that training facilities also qualify people to work on private market-oriented R&D and to perform scientific, technical, and managerial tasks demanded by private companies. This will certainly demand a significant
31

Cf. Nobre, Becker and Palis - cit.

27

degree of international cooperation. It is something that Brazilian academic institutions, with a very few exceptions, still have to learn. Creating the adequate scientific and policy capacity will demand a network for cooperation and partnership with centers of excellence in Brazil and elsewhere, the strengthening of existing centers, and establishment of new ones. 32 The Amazon is in a situation that could be described as quasideinstitutionalized. No institution fully works in the region. The environmental regulatory framework is disregarded by private and public agents to a worrisome degree. Land rights are in total disarray. There are 144 lawsuits regarding Indians lands or reserves pending adjudication by the Supreme Court. The scope of illegal activities is amplifying. This environment of institutional disorder is not conducive to advanced, long-run private investment. A bioeconomy requires a fully working, carefully designed institutional framework to regulate the ethical implications of biotechnological research and applications; intellectual property rights; public-private relations; co-research and co-production; the use of biodiversity; waste disposal, among several other regulatory and legal issues.33 Rule of law, working institutions and a a proper regulatory framework are sine qua non for the development of an advanced bioeconomy in the Amazon. It is obviously also a prerequisite for an advanced sustainable economy in Brazil as whole. A second fundamental condition for the development of the Amazon bioeconomy is a cultural one. Brazilians have a totally abstract view of biodiversity. The vast majority of the Brazilian informed and educated public is not able to grasp the value content of biodiversity. Brazilians do not understand biodiversity as a source of value that can be collectively as well as privately appropriated without depleting the source. This sort of nondestructive appropriation of the biodiversity commons is only possible through its transformation into knowledge rather than directly into physical products. An advanced bioeconomy is not an extractive economy, but a conservation economy, where the majority of the physical

32

Peter A. Singer, et al. - Harnessing Genomics and Biotechnology to Improve Global Health Equity, Science 294, 87, 2001, pp. 87-89.
33

Cf. Philipp Aerni, Public policy responses to Biotechnology, CID Policy Discussion Paper, Center for International Development, Harvard University, Cambridge Mass. 2000.

28

products are mediated products, the result of the application of genomics knowledge. The fact remains that to ensure social support for the investment and compliance of the rules required to develop the Amazon bioeconomy, the Brazilian politically active and informed public have to be able to see the use and exchange values of biodiversity, not only its intrinsic bio-value. To put it more bluntly, as E. O. Wilson did far ago: they have to learn how to draw more income from the wildlands without killing them 34 The diagram below shows the contours of the institutional system that would create the conditions for the development of biotech industrial poles aiming at turning the biotech industry the center of the Brazilian economy of the future.
FIGURE 2: THE BIOTECH SYSTEM
STOCK FEEDING AGRICULTURE AND FORESTRY AGROBIOCHEMICALS POLICY AND REGULATORY SUPERSTRUCTURE

WASTE-PROCESSING

ENERGY RESEARCH AHD DEVELOPMENT FOOD & STIMULANTS PHARMACEUTICALS COMPANIES KNOWLEDGE BASE EDUCATIONAL INFRASTRUCTURE BIOMEDICINE

BIODIVERSITY

APPLICATIONS

BASIC RESEARCH

TEXTILES BIOFIBERS

FINE BIOCHEMICALS

NEW BIOMATERIALS

The Amazon will hardly be saved from a muddling-through, incremental approach that seeks to remediate the worst features of its present economy. Simply making this economy a bit more sustainable, and its people a bit less poor is to choose degradation in the mid to long run, not preservation. Preservation seems only feasible by turning the Amazon into a pole of high-tech development of the Brazilian 21st century economy, becoming a sort of Silicon Valley of a new bioeconomy.

34

E. O. Wilson - The Diversity of Life, Cambridge, Harvard University Press, 1992, pp. 282-283.

29

This would correspond to a paradigmatic shift, a quality breakthrough that depends on investment and persuasion on a large scale. To become a biotech pole the Amazon has also to become a knowledge society enabled to use knowledge-based skills in a productive way; a social environment founded on high levels of investment in education, training R&D, software and information systems.35 The Emerging Brazilian Biotech Industry Biotechnology is not entirely new to the Brazilian economy. We have some successful experiences in agriculture, forestry, and health. In the agriculture and health areas there is a strong participation of state-agencies like Embrapa, Instituto Butant and BioManguinhos/ Instituto Oswaldo Cruz. Embrapa is behind our commodity revolution, not always with sound environmental consequences, though. Butant and Manguinhos are important centers for the production of vaccines. Forestry biotech experiences are mainly private, especially after the privatization of Vale, that has had an important role in forestry biotechnological development as a stateowned company. There are some private companies, in the biotech health industry, frequently spin-offs from the development of producers of generics pharmaceuticals.36 The private biosciences industry is, however, small, measured by the number of companies or by their median income size. A survey conducted by the Biominas Foundation 37 showed that there are 71 companies in the biotech industry. 110 companies have their main activities directly related to animal and human health, agriculture and the environment, such as pre-clinical tests, or clinical essays; companies that sell third party diagnostic kits or instruments for research labs. These 181 firms would together comprise the

35

Deepa L. Persad et al. - Enabling knowledge societies in developing countries: the example of genomics, International Journal of Biotechnology, Vol. 8, Nos. 1/2, 2006, pp. 4-22; and Elizabeth Dowdeswell, Peter A. Singer and Abdallah S. Daar - Increasing human security through biotechnology, International Journal of Biotechnology, Vol. 8, Nos. 1/2, 2006, pp. 119-131.
36

The research on the health biotech industry in India, China and Brazil greatly helps to understand the obstacles and possibilities for the development of a bioeconomy in Brazil. See, for instance, Peter A. Singer, et al. - op. cit. and Rahim Rezaie et. al. - Brazilian health biotechfostering crosstalk between public and private sectors, Nature Biotechnology, Volume 26, Number, 6, June, 2008, pp. 627-644.
37

Fundao Biominas - Estudo de Empresas de Biotecnologia do Brasil, Belo Horizonte, 2007.

30

emerging Brazilian bioscences industry. The biotech companies are biosciences companies, but the other 110 biosciences companies are not considered as biotech companies, because they but are not strictly producers of biotechnological products, or biotechnological services.38 These biosciences companies are concentrated in a very few states, as the chart below shows.
CHART 7: BIOMINAS - STATE DISTRIBUTION OF BRAZILIAN BIOSCIENCES COMPANIES

11% 1% 3% 3% 6% 7% 35% Minas Gerais Paran So Paulo Amazonas

35%

Rio Grande do Sul Outros

Rio de Janeiro

Pernambuco

The survey has listed only two such companies in the Amazon, both in the state of Amazonas, none strictly a biotech venture. As the chart following shows, the biotech industry is strongly concentrated in the Southeastern region, where the basic research and academic training facilities are stronger and more numerous.
CHART 8: BIOMINAS - REGIONAL DISTRIBUTION OF BRAZILIAN BIOTECH COMPANIES 4% 5% 11%

80% Sudeste Sul Nordeste Centro-Oeste

The sectoral distribution of the companies reflects the historical strengths of the industry.

38

Op. cit. p. 15.

31

CHART 9: BIOMINAS - SECTORAL DISTRIBUTION OF BRAZILIAN BIOTECH FIRMS

20%

3%

22% 4%

18% 14% Agriculture and forestry Environment, bioremediation Other

20%

Bioenergy Animal Health

Reagents, enzymes, DNA kits Human Health

The three larger segments of the biotech industry, with roughly 20% of the companies are: agriculture and forestry; human health; and reagents, enzymes and DNA kits. Animal health and environment/bioremediation have 18% and 14% of the firms, respectively. The bioenergy segment has a relatively smaller number of companies, representing only 4% of the total. The study also found that it is an emerging industry. Most its companies are relatively young: 72% are 10 years old or less; 1/4 were founded on or after 2005; 1/2 on or after 2002; and 3/4 of the total sample are approximately 10 years old. Companies are still small-sized: 75% of the total report revenues of US$ 500,000.00/ year or less.39 Incubators have a very important role and are responsible for a growing number of biotechnology companies in several states throughout the country: 35% were incubated biotech companies.40 As the Brazilian health biotech sector becomes more innovative, deficiencies in R&D infrastructure and inadequate institutional performance are starting to surface, another study points out.41 The main problems identified were missing linkages among private enterprises and with universities, the lack of a dedicated health biotech policies and an inefficient patenting system. Problems that affect biotech firms in all other segments of this industry. The study by Biominas has identified regulatory and intellectual property protection problems, lack of a qualified labor force, marketing skills,

39 40

Id. p. 5. Ibid. Rahim Rezaie et al. op. cit. p. 637.

41

32

and of adequate financial mechanisms as obstacles to the advancement of the industry. The need for creative financial mechanisms is a major requirement for the development of this industry. Clearly the industry cannot rely exclusively on public financing. To attract venture capitals the regulatory and rule of law problems have to be solved beforehand. Even the public infrastructure proposed by the Academy of Sciences paper would need additional sources of finance to complement public investment. A proper institutional and legal environment would certainly attract private investors given the immense possibilities and potentials of a biotech pole in the Amazon and in other biodiversity rich regions as the Pantanal (wetlands) and the Cerrado (Savannah).42 A credible REDD mechanism could provide the complementary source of finance for the public basic research and training infrastructure and help to enlarge and improve the regional educational system. As with venture capital, a credible REDD mechanism also requires an adequate and accountable institutional and legal environment.43 The Brazilian potential for a biotech industry that taps the wealth of its biodiversity can hardly be exaggerated. Most of this wealth is unknown due to the lack of adequate research coverage, but there are examples that show the possibility of having dynamic biotech poles exploring the biodiversity of the Amazon, the Atlantic Forest an extremely rich and endangered fragment - and the Cerrado/ Pantanal. The major problem, apart from this potential being unknown, is that there are missing links between basic, upstream research and downstream research. In some areas it is possible to turn basic research into quasi-applied research and in many of
42

There is also the possibility of firms that benefit from the biodiversity of an area, paying for the preservation of the area. Graciela Chichilnisky and Geoffrey Heal, report an experience of this kind in Costa Rica, where the pharmaceutical firm Merck has access of biological prospecting of an area of forest which it conserves and will pay royalties on the the products developed from this prospection. Cf. Economic returns from the biosphere, Nature, Volume 391, 12 February, 1998, pp. 629-623. Merck markets products extracted from the Dimorphandra sp (favela), a Leguminosae from the Cerrado, which has a substance used in the treatment of glauchoma and another one effective in treating hypertensive disfunctions. It also has a sugar used by the food industry. Part of the favela comes from the Grande Serto Veredas Park, but I dont think Merck helps to finance its conservation and it certainly pays no royalties.
43

The Federal Government still opposes the REDD concept and, yet, it needs more study of an interdisciplinary nature to examine all relevant dimensions of its application in Brazil, the institutional and rule of law requirements, as well as its adaptation to the scale and specificities of the Amazon region.

33

them this has happened in Brazil. In other areas, though, this route is not that straightforward. Let me briefly give some examples of this potential. Animal species have an enormous knowledge about their surrounding biodiversity, and they use that knowledge for practical and medical purposes. Michael A. Huffman has pioneered studies about self-medicative behavior of primates - in his case chimpanzees - that served as basis for a considerable development of the zoopharmacognosy, that can be appropriated by the medical and biotech industries.44 Karen Strier, studying the Atlantic Forest Muriquis in a reserve in Minas Gerais, found that two of the Leguminosea fruit species they eat at the onset of the breeding season were known to contain phytoestrogens, and others (same genera but different species) were known to contain antihelminthic agents.45 One can only imagine the wealth of possibilities locked into the unstudied behavior of these and other Brazilian primates with the focus on finding tracks that could lead to advancements in health, fertility and nutrition biotech applications. Embrapa has identified 10 plant species from the Cerrado that are resistant to extreme water stress (drought) and extreme variations of temperature. Some can even resist to fire. They could be a very important factor in adapting cultures to climate change, preventing the future loss of agricultural production.46 There are already several examples of innovative products developed by the Brazilian emerging biotech industry. In the health segment, for instance, a tropical natural anti-inflammatory extracted from the Cordia curassavica; a natural latex membrane derived from the plant Hevea brasiliensis containing a vascular endothelial growth factor (VEGF) for the treatment of skin lesions; a
44

See, for example, Michael Huffman - Self-medicative Behavior in the African Great Apes: An Evolutionary Perspective into the Origins of Human Traditional Medicine, BioScience, Vol. 51, No. 8, August, 2001), pp. 651-661; and Current evidence for selfmedication in primates: A multidisciplinary perspective, American Journal of Physical Anthropology, Volume 104, Issue S25, December, 1998, pp. 51-71; also Sabrina Krief, Michael A. Huffman et al. - Bioactive properties of plant species ingested by chimpanzees (Pan troglodytes schweinfurthii) in the Kibale National Park, Uganda, American Journal of Primatology, Volume 68, Issue 1, January, 2006, pp. 51-71.
45

Part of these findings are related in Karen B. Strier - Menu for a Monkey, Natural History Magazine, Volume 102 Issue 3, pp. 34-43, March, 1993. I am grateful to Karen Strier for introducing me to Michael Huffmans studies on zoopharmacognosy.
46

I am grateful to Eduardo Assad, agroclimatologist at Embrapa, for this information, on a private interview.

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recombinant protein for treatment of melanoma as well as an antihypertensive and analgesic peptide, both isolated from snake venom.47 Industrial applications of biotechnology have emerged as a spin-off from progress on other fields, mainly the pharmaceutical sector. Some students of industrial biotechnology suggest that among other things the dominance of physical and chemical technologies as source concepts for the design of industrial plants limits the scope for introducing biological processes. They argue that prospecting for biological organisms of industrial value will increase as bioprocessing gains momentum, resulting in new generations of chemicals and polymers that will compete directly with bulk petrochemical products. 48 The development of more complex innovative products is hindered by the firms lack of R&D capabilities and they have to partner with Brazilian public universities and research institutes. These links are, however, still scarce and concentrated in some areas where there is a clear cut notion of application possibilities, or depend on the firms finding the right partners to fit their demands.49 The analysis of the Brazilian biotech industry clearly shows the scientific strength of some public universities and institutes, but also highlights the concentration of scientific, technical and entrepreneurial capacities in just a few States of the SouthSoutheastern region. The areas with greater biodiversity, the Amazon and the Cerrado/Pantanal (Savannah/Wetlands), are not yet endowed with these capacities, that are critical for their future sustainable development. The Southeast, although having scientific and organizational resources to develop a strong biotech industry, also lacks mechanisms to link the preservation of the Atlantic Forest to the prospection of its biodiversity. It is not an easy way. Apart from the considerable investment required in education, science and technology, as well as for the establishment of productive ventures, there are several obstacles yet to face. It is a long-course steeplechase-like challenge that calls
47 48

Rahim Rezaie et al. - cit. pp. 631-632.

Calestous Juma and Victor Konde - The New Bioeconomy: Industrial and Environmental Biotechnology in Developing Countries, UNCTAD, Ad Hoc Expert Group Meeting, Palais des Nations, Geneva, 1516 November 2001.
49

Id. p. 633-634.

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for institutional development, long run planning, clearly defining the frontiers of state and private action and creating a proper environment for long-term, risk investment. At the same time where there already is a developed university structure and a working research and technology system, industry-university relations are only partial and uninspiring. Industry collaboration is also deficient, requiring better coordination and communication among firms. There is consensus among the students of the biotech industry in Brazil that creating an expedite, merit-based patenting system is of paramount importance. Private firms need to exercise a culture shift that would lead to a substantial increase of their investment in R&D, employing more qualified scientific and technical people. To develop regional biotech clusters it is necessary to identify the human capital requirements in specific disciplines and technical specialties, creating the training programs to meet these needs. There is also a need for MBA programs focused on the managerial, marketing and financial specificities of the biotech industries.50 Setting forth on this path will depend on persuasion, developing technical policy solutions, and designing appropriate finance mechanisms. Only a persuasive policy model, supported by a broad coalition of relevant players, can master the political resolve necessary to make it happen. This prospect for long-term sustainable development of the Amazon shows how a low-carbon target does not imply trading preservation against development. It really means abandoning an economic path that is based on low quality investment, production and labor, to a knowledge based path of development of higher economic, social and environmental quality. It is not a question of limits, it is a matter of upgrading development. This model also perfectly applies to other biodiversity rich regions equally endangered by deforestation and extensive occupation such as the Cerrado and the Pantanal. Over the long run and already pushed by the dynamics of a changing economic model, Brazil could develop biotechnological clusters in different regions, each adapted to the regions pool of resources. This shift towards biotechnology would also help the country to solve most of the problems of converting our industry to a low-carbon standard.

50

Cf. Rahim Rezaie et al. - op. cit. pp. 641-643.

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I am fully convinced that the development of Brazilian biotechnological comparative advantages, shifting our economic model from its emphasis on hardware-based, carbon intensive industries, to a knowledge-based bioeconomy, will help to create the solutions for the conversion of most of our industrial base. The time horizon for this shift is a rather long one. Meanwhile some localized solutions should be implemented to stop destruction of the biodiversity upon which our future will be based. The hotspots are obvious, the Amazon, due to its size, and climate change implications comes first but is not alone. The Pantanal and the Cerrado are perhaps under even more immediate danger of irreversible harm. Measures such as agreements banning deforestation, as happened with the production of soybean in the Amazon could be reproduced in other areas. An agreement could be worked out to ban illegal charcoal production in the Amazon, the Cerrado (Brazilian Savannah) and the Pantanal (The Wetlands), that today benefits large, competitive mining and steel companies in the supply chain. Zoning should be adopted to prevent, for instance, the sugar cane/ethanol system to move towards the Amazon and the Pantanal (The Wetlands). A faster, technology based, solution for property demarcation and lands rights entitlement should be a priority in the institution-building process leading to this new model of development. The design of an adequate REDD mechanism, adapted to the Amazon specificities would help to produce part o the finance for the scientific and bioeconomic breakthrough in the Amazon, that could be reproduced in other critical biodiverse regions of the country. By reducing deforestation and better regulating agricultural production and land use Brazil would be able to accept mandatory, reliable and bold emission targets. This is our major source of emissions and its control would place the country on a very advantageous position vis vis other emerging nations, to meet more demanding emissions reduction targets. The other area Brazil could and should invest immediately to start reducing emissions is in the transportation system. We are already nearing a logistics blackout and this is the time to totally review our transportation policies, to design a 21st century sustainable logistics model. Shifting towards a multimodal model with a strong focus on railway and coastal navigation, especially for long distance transportation, would dramatically reduce the carbon intensiveness of our logistics, while creating a much more competitive, rational and manageable one.
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Poor unsustainable logistics Brazilian GHG emissions from the cargo and passenger transportation system are significantly lower than the average emissions rates for developed countries. However, the carbonquality of the Brazilian transportation system is much lower, when compared to the macro-logistics of developed countries with a large territory, such as the US, Canada, New Zealand and Australia. In Brazil road transportation accounts for more than 60% of cargo hauling; railways account for around 20%; and shipping for 14%. A study led by Paulo Fernando Fleury has showed that, at the end of the 1990s, the rate of energy efficiency of cargo transportation was 29% lower than the US rate. NOx emissions of the Brazilian road transportation system were 37% greater than in the US and CO2 emissions 2.7 times greater (see charts 4 and 5).

CHART 10: GDP Energy Efficiency in Transportation

90000 67500 45000 22500 0

BTU spent to US$ added to GDP

Brazil (1999)

USA (1996)

Source: Paulo Fernando Fleury, Center for the Study of Logistics-COPPEAD, UFRJ, based on data by Balano Energtico Nacional - 2000/MME; Transportation Statistics Annual Report 2000 BTS; Department of Energy, Energy Information Administration, Monthly Energy Review, July 2000.

Real rates are probably higher and have very likely increased in the 2000s. CHART 11: NOx and CO Emissions by TKU

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Brazil
1,500 1,125 0,750 0,375 0

USA

NOx Emissions Gram/TKU

CO Emission Gram/TKU

Source: Paulo Fernando Fleury, Center for the Study of Logistics-COPPEAD, UFRJ.

All the incentives built into the present transportation policy discourage the use of transport modals other than roads. The cost of coastal navigation has become prohibitive after the government forced companies to buy domestically produced ships that cost 2 to 3 times more than imported ones, to foster and protect a highly inefficient industry.51 Diesel is heavily subsidized, continues to be monopolistically distributed by the state-owned Petrobrs, even after the new Constitution abolished state oil monopoly, in 1988. The level of sulphur in the Brazilian diesel is higher than in any developed country (2000 ppm for non-metropolitan regions and 500 ppm for metropolitan regions).52 The average age of the Brazilian truck fleet is 18 years. Projections from the Center for the Study of Logistics show that the truck fleet will be on average 21 years old in 2013. The fleet is old and maintenance is poor. Most of the truckers are small proprietors, owning from one to three vehicles. Independent truckers, acting as third parties to the main contractors, take 60% of the cargo committed in Brazil, as a means to reduce freight costs 53. Brazil is the only country with a very large territory that concentrates most
51

I am grateful to biologist Fabio Olmos for reminding me of that, on a private comment to a prior version of this paper.
52

The Brazilian National Council for the Environment has determined that these levels are reduced to 50 and 500, respectively, by 2009, but Petrobrs has refused to complain. The company has recently issued a note to the press saying it will comply, after widespread public opinion and media pressure. European standards today are at 50 ppm, and set not to exceed 10 ppm by 2009.
53

Paulo Fernando Fleury, personal communication of data from the Center for the Study of Logistics, COPPEAD, UFRJ.

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of its long-distance cargo transportation on roads. Highways and roads have poor maintenance, except for a few privatized ones. The countrys main major pathways connecting production centers to export-ports are in very poor shape. There is a historic neglect of railways and both coastal and river navigation systems. All these distortions add-up to making the Brazilian transportation system highly inefficient and a high potential GHG emitter. Radically changing our transportation model would demand no sacrifice. It would entail economic and efficiency gains to add to development goals. The growth of the Brazilian economy and the increase of our trade volume demands a new cycle of investment in transportation infrastructure. The country is on the verge of a logistics breakdown. This demand for new investment creates the opportunity for the thorough redesign of Brazilian logistics already adapting it to a lowcarbon pattern. The Brazilian passenger transportation system has a clear bias towards private cars. Efficiency, coverage and quality of mass transportation systems are poor. Bus fleets are also old, particularly for city transportation. Use of fuels is highly inefficient, regulation and control of emissions very poor. It is an all diesel-based model and, as pointed out, the Brazilian diesel has a high-sulphur content. Levels of air pollution are higher, compared to the standards for developed countries, and air quality is very poor in all major metropolitan regions.54 Any scenario of sustained high economic growth is associated with a high probability of a logistic collapse, due to the exhaustion of the countrys transportation system. It would also lead to a substantial increase of GHG emissions. A low carbon agenda for Brazil would have to address a major change of its transportation system for both cargo and passengers, towards a sustainable logistics that substantially reduces its dependency on truck hauling.

54

An opinion survey sponsored by the Hewlett Foundation in the six larger Brazilian metropolitan regions, has shown that the metropolitan population is well aware of the poor quality of the air in their cities. People are willing to contribute to the reduction of air pollution and a significant proportion have said that they or someone in their families has chronic heart and lung diseases due to air pollution, requiring permanent medical assistance, recurrent hospitalization and continued use of medicines. See, Srgio Abranches - Qualidade do Ar e Opinio Pblica, Instituto O Eco, June, 2007.

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This agenda for change has a clear roadmap: a sharp reduction of the use of roads and highways, and substantially increasing the use of railways, river and coastal navigation. Brazil does not have a logistic view of the transportation system. Its transportation policy is nothing more than a budget for highway construction and maintenance with scant provisions for other modes of transportation. A logistical system would rationalize cargo transportation, increasing delivery as well as fuel efficiency. Improving urban mass transportation systems, increasing the coverage of urban train and subway systems, and better long-range planning and regulation would significantly enhance the quality of urban living, especially for the lower middle classes and lower income groups. This agenda would mean no limit to growth, nor any welfare sacrifice. Improved logistics would make room for greaer competitiveness and more development. Reduced carbonization would lead to an improvement of air quality in the cities, with a positive effect on both public health and on health care expenditure. Last, but most importantly, the Brazilian highway bias poses a major threat to the Amazon. Road-building represents a serious obstacle to a zero-deforestation agenda.55 Roads are the main path to occupation and clearing of new areas of untouched forest in the Amazon. Every satellite photo of the Amazon would show he fishbone pattern of deforestation having roads as the backbone. The Federal Government plan for accelerating development has set the completion of a large and disastrous net of roadways in the Amazon at high priority. Abandoning this inefficient, obsolete and environmentally hazardous transportation paradigm would also very much help achieving, and sustaining a zero-deforestation target. The zero-deforestation and low-carbon transportation agendas converge, because of the clear interaction between road-building and deforestation. No limits to development

55

Stephen Perz et allii - Road building, land use and climate change:prospects for environmental governance in the Amazon, Philosophical Transactions of the Royal Society, 2008 May 27;363(1498):1889-95; P. Fearnside - Containing destruction from Brazils Amazon highways: Now is the time to give weight to the environment in decisionmaking, Environmental Conservation 33(3): 181-183; P. Fearnside - Brazil's CuiabSantarm (BR-163) Highway: the environmental cost of paving a soybean corridor through the Amazon, Environmental Management, 2007 May;39(5):601-14;

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A low-carbon model for Brazil would require additional change on other dimensions of land use; the agricultural production standards, waste management and, in the industrial sector. Brazilian industry is no model of low emissions, but it is the economic sector most vulnerable to regulation, social control and external competitive pressure. It has clearly modernized more rapidly than the sectors not subjected to foreign competitive strain. It would require far less domestically built inducements and constraints to decarbonize. The development of biotech poles would pave the way for the emergence of bio-industries offering low-carbon substitutes to fossil-based products in several industrial sectors. Changing to a low-carbon model would be a promising way to accelerate Brazilian human development and to increase the efficiency and competitiveness of the Brazilian economy. Brazil has clear comparative and competitive advantages to make a relatively rapid transition to a low-carbon economy. Our hydropower base can be substantially improved and its energy efficiency significantly increased by better reservoir maintenance; reforestation of the river basins serving their reservoirs; restoration and preservation of riparian vegetation; and the adoption of CO2 and methane sequestration technologies. Her hydropower potential is declining but there is still a considerable unused capacity left, especially for small hydropower plants for corporate and local use, provided their environmental specifications are improved. Large hydropower plants are too costly, the sites left are mainly in the Amazon. The characteristics of the region and the high level of sediment of the Amazon rivers increase their environmental side-effects and lower their energy efficiency. Alternatively, the country has a very high untapped potential for the use of wind, solar, and biomass to generate power and produce energy. Local, small business and residential demand for electric power could be met by alternative, even off-grid sources, including small hydroelectric plants, leaving large-plant, on-grid power to industrial intensive use. The countrys transportation system is both exhausted and obsolete, requiring a complete overhaul and expansion to support sustained growth of both imports and exports, as well as increased demand for cargo transportation within the country. This fact gives Brazil the advantages of backwardness, to use and old and clever notion conveyed by Alexander Gerschenkron56. Instead of investing
56

Alexander Gerschenkron - Economic Backwardness in Historical Perspective, Harvard University Press, Boston, 1966.

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in renovating an obsolete, high-carbon, inefficient system, the country would highly benefit from investment in a totally new, lowcarbon high-efficiency system, adequate to 21st century requirements of sustainability and productivity. Stopping deforestation is almost synonymous to imposing the rule of law in the Amazon region; eradicating illegal activities and illegal businesses; combating organized crime; increasing the quality of democracy; and promoting human rights. Zero-deforestation means more human development, more democracy, and more efficient use of forest resources and land. All these advantages reduce the costs of transition to a low-carbon model and raise its benefits, especially for the poorer regions of the Northern and Northeastern parts of the country. The North has our forest and biodiversity wealth. It can become one of the strategic dynamic centers for a new biotech, knowledge-based, 21st century Brazilian economy. The Northeast has a high potential for wind and photovoltaic power, as well as biofuel production without competing with land for food production. A low-carbon, zero illegal deforestation agenda corresponds to a new development agenda with a higher component of human advancement and higher levels of progress in education, science and technology. The Brazilian Federation is too concentrated to be a fully democratic one. The Central Government in Brasilia concentrates most of the tax-extraction capabilities, has almost full monopoly of regulatory power, and controls almost all the public finance resources. Most of the responsibility for carbon reduction policies lies today in the Central Government. The omission or the absence of the Federal Government in the Amazon is equal to the almost total lack of state power. It explains most of the lawlessness and disorder prevailing in the region that feeds deforestation. Decentralization of power, in both fiscal and regulatory terms, would very much improve the capability of local and state governments to implement local and regional agreements to end deforestation. Decentralization, however, can only be viable if the less developed regions gain economic muscle. The conversion to a low-carbon economy provides the best opportunity possible to decentralize high value-added economic activities on a win-win basis.

43

In the transportation sector, more meaningful local and state action would also mean an expansion of the opportunities to develop local and regional social capital. Creating the political and institutional means for a low-carbon agenda would definitely improve the quality of Brazilian democracy. Other countries will face far more sacrifice and will get far less immediate benefits from converting to a low-carbon society. This is not the case of Brazil. In Brazil, the mere act of formulating and implementing a low-carbon agenda would mean an immediate gain in quality of living and quality of democracy. A low-carbon path is the most promising one to Brazilian full development in the 21st Century.

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