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Amazon Fund Study Case

Background
In 2004, Brazil was the fourth largest greenhouse-gas (GHG) emitter in the
world with national emissions largely sourced from deforestation for agriculture, as
well as fossil fuel combustion (CAIT, 2015). Deforestation, especially in Amazon’s
rainforest, has been highlighted as the reason for half GHG emission in Brazil as can
be seen in the table by comparing the total GHG emissions without consideration of
land-use change and forestry and the total which includes these two factors. A fifth
of Amazon’s rainforest in Brazil has been deforested for over 40 years by 2008
(Reuters 2008) which peaked in 2004 with 27,249 square kilometers of land being
deforested. However, between 2005 and 2009, the country managed to reduce its
national GHG footprint by 25% as deforestation fell by 60%. Continued reduction of
GHG emission has pushed Brazil down on the list of the largest GHG emitter to the
6th position with 1823.24 MtCO2e of emission by 2012. By 2014, deforestation in
that region was reduced by more than 80% from the rate in 2004 (INPE 2015).
Table 1.1. List of Top 10 GHG Emitter Country Based on CAIT Climate Data
Explorer for 2004 and 2012

No
1
1
2
2
3
3
4
4
5
5
6
6
7
7
8
8
9
9
10
10
Total

Country
China
United States
United States
China
India
Russian Federation
Russian Federation
Brazil
Indonesia
India
Brazil
Indonesia
Japan
Japan
Canada
Canada
Germany
Germany
Mexico
Mexico
World

Year
2012
2004
2012
2004
2012
2004
2012
2004
2012
2004
2012
2004
2012
2004
2012
2004
2012
2004
2012
2004
2012

Total GHG
Emissions
Excluding LandUse Change and
Forestry
(MtCO2e)
10975.49869
6839.298862
6235.097159
6658.513564
3013.769931
2129.717302
2322.216741
826.298823
760.8077207
1988.604925
1012.554179
621.0767642
1344.576029
1330.551403
714.1185149
714.0999319
887.2169487
959.2114875
723.8526062
626.3258045
44815.53514

Total GHG
Emissions
Including LandUse Change and
Forestry
(MtCO₂e)
10684.2866
6495.933412
5822.870399
6288.660554
2887.083921
2135.824922
2254.472651
2029.872553
1981.003261
1823.312215
1823.148349
1600.831684
1207.300059
1231.204043
856.2776049
979.1940019
810.2499287
905.7132775
748.9117962
652.2213545
47598.55416

org/faq. 2) The declining commodity prices and a strengthening currency. A payment-for-performance model was later adopted (Forstater and Zadek.34796 40841. which are effectively grants. DC: World Resources Institute. Any use of the Land-Use Change and Forestry or Agriculture indicator should be cited as FAO 2014. 2008).html#q07. Washington. rare and non-formal safeguard systems and increasing marginal difficulty of reducing deforestation with increasing incentive for land change. The process of PPCDAM was led by the President’s Cabinet and participated by 11 ministries of Brazil. This rapid reduction of deforestation from 2005 to 2009 was reportedly driven by two factors: 1) Ministry of the Environment’s series of political actions which started by designing Plan of Action for the Prevention and Control of Deforestation in the Amazon (PPCDAM) that recognized the needs for cross-sectoral approach while recognizing the direct and hidden causes of deforestation. The Amazon Fund then became the largest source of international climate finance in Brazil. creation of significant protected areas and detailed annual analysis of trends and needs were achieved by 2007.org. 2009). Strengthening of law enforcement. The project funding from Amazon Fund is treated as a loan until the end of the project period. Any use of CO2 emissions from fuel combustion data should be cited as CO2 Emissions from Fuel Combustion. Once BNDES verifies that funds have been spent . ©OECD/IEA. 2008). Funds are spent in accordance with the priorities of Brazil’s Plan of Action for the Prevention and Control of Deforestation in the Amazon (PPCDAM) as well as its National Plan for Climate Change (PNMC). Pressures for Brazil to create a global fund to support efforts of slowing down deforestation came mainly from Amazon States themselves and resulted in Brazil’s shifting view on actions related to REDD+ that prior to 2006 was strongly influenced by heavy dependence on fossil fuels and desire to retain sovereignty over the Amazon forest and the proposal for the global fund to support slowing down of deforestation (Silva. FAOSTAT Emissions Database. development of forest monitoring system with real-time information. 2014. It also functions to support Brazil’s National Climate Change Law to cut deforestation rates by 80% between 2005 and 2020. 2012). Available online at: http://cait. in efforts to prevent.06103 2015. social and economic pressures for Amazon Forest deforestation may be still relevant in forms of the complex land tenure systems.World 2004 37607. The Amazon Fund’s initial aim was to raise US$21 billion over 13 years (Goodman. Norway became the first and the largest investor/donator in this fund with a US$1 billion pledge from its International Forest Climate Initiative. The proposal for an “Amazonian Fund” managed by the National Bank for Economic and Social Development (BNDES) to help meet the costs predicted by NGOs for ‘zero deforestation pact’ with technical support from the AVINA Foundation was led by Director of the National Forest Program at the Ministry of Environment. Please Note: CAIT data are derived from several sources. Full citations are available at http://cait. The result of this planning was National Plan for Climate Change (PNMC) in 2008 which targeted the reduction of deforestation rate by 40% between 2006 and 2009 and by 30% for each four-year periods afterwards (Government of Brazil.wri. monitor and combat deforestation. Meanwhile.wri. Tasso Azevedo. The Amazon Fund was created to raise donations for non-reimbursable investments. as well as to promote the preservation and sustainable use of forests in the Amazon Biome.

2010):  To identify and scale up the implementation of effective projects. particularly from the international community. moreover. to support the implementation of Brazil’s national strategy for preventing deforestation. The emission reductions is estimated on the basis of the hectares of avoided deforestation achieved below a reference level (or baseline).  To direct resources. The Amazon Fund model was initially aimed to deliver assurance of significance of the results to the funders– that emission reductions would not have occurred without the finance by presenting a clear relationship between the amount invested and Brazil’s performance in meeting its falling deforestation rate goals. Brazil has secured funding from other multilateral REDD+ initiatives including World Bank’s Forest Investment Program.  To signal support from the international community for existing Brazil’s policies for sustainable development in the Amazon and to strengthen and reinforce the political and institutional forces championing the Amazon in Brazil. The fund will not be able to generate any additional tones if deforestation reached its stabilized point. Moreover. in reality. This model is designed to mediate between Norway’s desire to demonstrate that ex-post payments for verified emission reductions provide the best way to create incentive for emission reductions (Government of Norway. 2012) and Brazil’s policy positions on sovereignty of the Amazon and on REDD+ as previously mentioned. International donors under this system are supposed to provide financial support to deliver the objectives of the fund only as much as the equivalent to the emission reductions achieved.in line with agreed terms. Nonetheless. Brazil proposed US$5 per tonne of CO 2e and it was seen as a reasonable price by considering of the overall value for money of Norway’s donation for Brazil’s accomplishment and relative to carbon prices in the voluntary and statutory markets at the time that would not create additional fears of carbon prices being driven down. However. repayment is cancelled. average carbon stocks and a fixed carbon price. what differentiates Amazon Fund from other sources of funding is their model of payment-for-performance fundraising model. The Amazon Fund built up a stock of emission . It should be noted that there is other source of funding for forest conservation in Brazil aside of Amazon Fund. the application of this resource mobilization approach is naturally self-limiting because it depends on falling levels of deforestation rate which within time would be lowered or even stagnated. The availability of grants seeks to reduce liabilities and risks for project implementers. Stakeholders of the Amazon Fund have articulated three mutually reinforcing objectives and motivations (Zadek et al. The payment-for-performance relationship between money and emissions is moreor-less symbolic due to flawed system and the emission reductions which have been previously amassed by the fund. There is a significant domestic public finance in supporting this mission. the Amazon Fund has not yet been able to mobilize funding at the level that its payment-for-performance model implies. towards catalytic approaches that enable large-scale economic transformation towards sustainable development in the Amazon.

Industry and Foreign Trade. BNDES only received 3% of funding as management fees that only cover expenses such as travel. operational and risk control systems of BNDES. audit. Norway’s payment officially still reward emission reductions achieved in 2006. However. Amazon Fund itself is relatively a very small program for BNDES compared to its other programs. breaking the apparent link between spending funding and performance of Brazil in reducing deforestation rate. Other options to be considered in increasing confidence in the significance of emission reductions and in proportionality of the carbon value are to revise the baseline and value of carbon. This also implies that the value of the emission reduction is much lower than US$ 5/tCO2e. A domestic institution was also predicted to increase national ownership and validate sovereignty compared to an international organization (Forstater and Zadek. By the time of establishment.reductions from 2006 despite Amazon Fund itself being initiated in 2009. The payment-for-performance model actually would be relatively valid as long as deforestation rate is falling and the fund’s increasing allocations and Norway’s continued annual pledges all signal in the same direction. as well as reputation for integrity and impartiality from political processes (Zadek et al 2009). emission reductions were valued at US$ 4 billion. advertising and support for the COFA. but it is a program that brings significant attention and scrutiny from international sector which might . the deforestation appeared to be rising again. In 2014 and 2015. In reality. however. On paper certificates received by Norway from the Amazon Fund. and by 2011 US$ 10 billion worth of emission reductions had been accrued. the level of funding is determined and announced with reference to deforestation in the previous year. Amazon Fund is managed by the Brazilian National Economic and Social Development Bank (BNDES). The advantages of appointing BNDES as the manager include the established governance. 2009). BNDES is a federal-owned public company under the supervision of the Minister of State for Development. It is discussed in the article that unfunded emission reductions are now more than ten times those that will be funded. much lower compared to 10-15% rate for World Bank’s management fees in addition of charged costs on particular project and transactions. however.

Box 1. the Amazon Fund had approved 80 projects which amount to US$ 566 1 Brazil's Amazon Fund bogs down. BNDES itself is criticized over management and funding criteria setting which are technological innovation. sustainable socio-environmental development and the modernization of public deemed as difficult for organizations to achieve in practice. increasing the accessibility of the fund and offering more support for applicants in developing proposals. BNDES was criticized for starting slowly and for supporting projects that and 2011. BNDES emphasizes three factors it projects with paperwork and endless meetings that sometimes it took 19 months for considers strategic: innovation.1 In the same article. other potential donors were also discouraged from investing funds. The poor performance at the independent steering committee.the In any supported lack of communication and rigid procedure which made it hard to access funding. A lack of prioritization within the PPCDAM policy framework was partly reflected from this inability of Amazon Fund to allocate funds quickly as they took more part to act as a filter for projects and organizations that were able to meet BNDES’s administrative criteria. donors frustrated Jan 14. Brazilian decided house the in sustainable BNDES while growth being guided by an projects. Since its foundation. External stakeholders administration. getting approval. stemming from its vast experience allied with the technical capacity of its Byworkforce. With its extensive knowledge. for organizational fiduciary responsibility and monitoring (Hargrave 2012). and now they include support for exports. improvement for funding mechanism was immediately done by simplification of the process. Nonetheless. By the end of 2015. enabling investments in all economic sectors. the BNDES has played a fundamental role in stimulating the expansion of industry and infrastructure in the country.trust. from the analysis phase up to the monitoring. 2012—retrieved from: http://www.create greater effort in managing the environmental and social sectors within the institution. The Brazilian Development Bank The Brazilian Development Bank (BNDES) is the main financing agent for development in Brazil. with another US$ 53 million under contract. local development and socio-environmental development.1. Bank offers several financial support mechanisms Brazilian companies of all sizes and some COFAThe members specifically complained on narrowtooperational criteria. in 1952. Unused fund from Norway at the time were deposited in the Norwegian Central Bank. Additionally. Afterwards rejected project proposals has fallen which shows a level of success in improving the system. its operations have evolved in accordance with the Brazilian socio-economic challenges. the BNDES official also admitted that the fund is not working as well as donors had hoped previously.org/item/?map=brazils-amazon-fund-bogs-down-donors-frustrated/ . the end of Brazil only to used US$ 39Amazon millionFund on 23 the2011. This measure was taken in order to protect the Norwegian funds from time lowered the amount of funding received by the BNDES by half between 2010 being politicized or wasted. as well as public administration entities. Over the course of the Bank’s history. Conservationists were reported in 2012 to saythe that BNDES hindered undertaking.

The balance of power between the Government. The area that may be supported by the Amazon Fund is specified in Decree No. monitoring and inspection. 5) Ecological . 2012). The downstream investment strategy differs from its fundraising strategy because it does not apply payment-for-performance model. 6. traditional communities. BNDES is to be supported by COFA for guidance and AFTC for technical assistance. as key people have come and gone in government and the civil service. However. industry and scientists). The Amazon Fund Guidance Committee (COFA) is a three-block committee comprising the federal government. 3) Sustainable forest management. Ministry of Environment officials maintained a position for policies by establishing innovative linkages with private sectors that permit economic growth and environmental protection to proceed together. Meanwhile. There is no requirement for demonstration of effectiveness in terms of low cost emission reductions or a particular area of hectares conserved. However. Each block holds one vote on committee decision and each member holds one vote inside his block. Officially. NGOs. 527/08: 1) Management of public forests and protected areas. The AFTC issues the certificates of carbon emission reductions and it calculates the amount of carbon per hectare as well as the amount of deforestation avoided. there is also a concern on the possibility of BNDES’s duality in managing Amazon Fund for reduction of deforestation rate and in managing funding for conventional infrastructure in the sensitive area of Amazon region. 2) Environmental control. extendable once for an equal period. update the Board of Directors and Executive Officers annually. of which US$ 39 million (17% of total) was given in 2015. the Amazon Fund Technical Committee (AFTC) is six authoritative technical and scientific experts appointed by the Ministry of Environment for a three yar term. COFA and AFTC’s missions are to gather stakeholders and to utilize their capacity and momentum to provide legitimacy and assurance. and the definition of its priorities. BNDES and COFA is reportedly shifted over time. state government and civil society (including indigenous peoples.million with disbursement totaled to US$ 223 million. in practice these committees seem to have limited roles in decision making. The role of COFA is to establish guidelines and criteria for use of Amazon Fund’s resources. and attest to their application in the Amazon Fund's annual report. The COFA is chaired by the Ministry of Environment as the lead government institution with focus on forest policy that is held accountable to the president for deforestation rates. in particular the monitoring of the implementation of the Fund. strategic guidelines and criteria for applying resources” (Ramos. 4) Economic activities which use forests sustainability. In managing Amazon Fund. whose annual meeting schedule has not been observed. COFA members complained at the difficulty of influencing BNDES’s operational procedures while AFTC members expressed their concerns on being underutilized with limited role of signing off on carbon emission reductions without being able to contribute to the development of investment strategies and priorities. Projects are selected through an ongoing open call for proposals. There is a blatant disregard in conducting the Steering Committee. leading to difficulty in fulfilling their duties. Civil society members in an interview stated that “[the] failure to hold meetings COFA reflects one of the most critical points of the current governance of the Fund. It needs to be brought into attention that no COFA meetings were held in 2012.

6) Preservation and sustainable use of biodiversity and Recovery of deforested areas. such as forest mapping. the minimum requirements of the projects are as the following:  Directly or indirectly contribute to emission reduction through avoided deforestation or forest degradation. including: (1) what exactly determines Norway’s transfers under the Agreement. The example for this is support for large-scale implementation of cadastral registration of private lands under the revised Forest Code. The largest allocations have been for a Payment for Ecosystem Services (PES) scheme in the State of Acre. The Previous Consultation template specifies basic characteristics of the proposed project. and to the Brazilian Forest service for development of the National Forest Inventory. and IPAM. and seeks details on (i) the history and description of the applying organization (ii) information on basic elements of the project (with details elaborated through the analysis phase) such as. which will in turn support a new market that increases the efficiency of land use. and experienced in handling funding from national and international agencies. municipal environmental management and the social projects of NGOs. Larger NGO projects tend to be partnerships with state governments such as the Bolsa Floresta (forest allowance) project managed by the Sustainable Amazon Foundation (FAS) under a mandate from the State of Amazonas. the amounts of funding available to date is considered not large enough to help shift overarching institutional incentives. BNDES appears to be transparent in its agreement with Norway.2 million and projects managed by NGOs averaged at US$7. territorial arrangement and agricultural regulation. However. and (3) how decisions are made on individual proposals. These are assessed by BNDES.  Demonstrate consent from communities or from their representative institutions. and. nonetheless. in order to avoid creating the impression that certain regions or sectors were being favored. . Imazon. Furthermore. by leveraging other resources (in cash or kind). most informants in Brazil often are unable to understand perfectly the terms of the Agreement. using the criteria agreed and annually updated by the COFA in addition to BNDES assessment of the organizations’ management capacity and similar to establish eligibility.and economic zoning. the fund may be better aimed for larger and systemic impacts through policy-level initiatives. There were also strong pressures from public to spend money across different sectors and recipients. and (iii) on legal aspects.9 million. State projects (mainly support for fire departments) average at US$6. state fire-fighting. (2) what types of activities and grantees are eligible for support. The NGOs that have accessed funding from the Amazon Fund tend to be well established organisations such as The Nature Conservancy. That is why stakeholders can request support by submitting a Previous Consultation. Despite the significance of one billion dollar for the environmental sector. several stakeholders viewed the fund’s initial approach as too focused on projects and not sufficiently strategic. Many of Amazon Fund’s projects are focused on important but well-established interventions. area of deforestation envisaged and involvement of local communities and Indigenous peoples.  Demonstrate a multiplying effect on the funds used.  Do not substitute for public budgets earmarked for allocation areas in the Amazon Fund.

. It also has not funded projects that focused on addressing market drivers of deforestation and degradation or any incentives and subsidies that probably support deforestation. and are not yet realizing the systemic changes in capacities and incentives that are needed for REDD+ efforts to be sustainable.The Amazon Fund so far has not focused on advancing the national policy or regulatory environment for addressing deforestation in Brazil. It may even be implied that reduction of deforestation through regulations with command-and-control approach may have reached its limits by looking at the data of increasing deforestation rate. Funding of Amazon Fund may simply replace domestic commitments of funding for a limited period of time. There is also a concern about the risks of the fund’s resources being used inappropriately to subsidize inadequate government budgets. More focus should be put on finding and supporting a strategy of forest-friendly sustainable growth. This means that the projects funded by Amazon Fund may have inadequate level of sustainability in protecting the forest as the Fund is unable to interfere where it matters the most.