To meet climate commitment, Brazil needs to revise the BRL 32 billion foreseen to support the agricultural sector

 

During the COP28 meeting, Brazil reinstated its commitment to reduce greenhouse gas (GHG) emissions by 48.4% until 2025. But to achieve this goal, the country urgently needs to transform its relationship with the agricultural sector, whose expansion is the main cause of changes in land use, which, in turn, is the major source of GHG emissions in the country. This transformation involves the redirection of public resources: in 2022 alone, BRL21.1 billion in financing and over BRL10.8 billion in tax benefits and subsidies were granted for agricultural activities in the states of the Legal Amazon and Matopiba, as shown by data from a study by Instituto Escolhas.

The Constitutional Financing Funds of the North, Northeast and Midwest regions (FNO, FNE and FCO) earmarked a total of BRL 16.9 billion for the Legal Amazon and the Matopiba region. BNDES, the National Social Development Bank, also destined BRL 4.2 billion, with BRL 2.4 billion alone for Mato Grosso. The study estimates that, in the North region, the agricultural sector received BRL 5.9 billion in tax benefits and BRL 4.4 billion in subsidies from the Brazilian government.

“Agricultural expansion in the Legal Amazon has the footprint of cattle and grain production as main vectors. Grains, notably soybeans and corn, are also the focus of agricultural production in the Matopiba region by large monocultures, focused on the production of commodities, with low commitment to good production and marketing practices. Meeting Brazil’s goals for the challenge of climate change requires a series of new commitments, including the guarantee of more resources, the so-called climate financing, to promote a more sustainable agricultural production model,” advocates Jaqueline Ferreira, research director at Instituto Escolhas.

The study also identified that the agricultural sector also benefits from cross-subsidies from the Energy Development Account (CDE), which is paid by all electricity consumers through higher tariffs on the electricity bill. The CDE resources fund, for instance, the universalization of energy services and tariff discounts, such as incentivized sources and irrigation. For agriculture, BRL 2.2 billion was allocated throughout Brazil, comprising the sum of two types of subsidies: BRL 1.2 billion for irrigation & aquaculture, besides BRL 1.1 billion for rural activities in general. The total resources for agriculture via CDE reached BRL 204.4 million in the states of the Legal Amazon and BRL 366.6 million in the states of the Bahia and Piauí, which belong only to the Matopiba region.

Read the full study here.