The organization/ department in brief

Secretary of Natural Resource Extraction and Rural Sustainable Development /Ministry of the Environment – Brazil

Why was this undertaken?

There is a set of public policies in Brazil that aims to consolidate important chains of the socio-biodiversity products. Socio-biodiversity is the set of traditional knowledge from traditional populations that lives in forested landscapes, which they use to manage their environment, for the development of their communities and preservation of their culture and life habits. Socio-biodiversity involves a set of interactions between ecosystems and their ecological processes, added to the socio-cultural diversity and products derived from these relations.

One federal instrument to encourage the sustainable use of biodiversity products and consolidate socio-biodiversity products chains is the ‘Minimum Guaranteed Price Police for Socio-biodiversity Products’ (PGPMBio in Portuguese), which offers incentives for market regulation for these products, which fluctuate significantly over time and in many cases are not not well remunerated.

One of the limitations of this policy is the lack of consideration of the value of the environmental services that are effectively provided to society when choosing this type of production. In order to consider the conservation of ecosystem services in the payment of minimum prices for these products, the Brazil-Germany bilateral cooperation through the Regional Local TEEB Project and the Green Markets Project, supported by the National Supply Company (Conab), the Ministry of environment and the Special Secretariat for Family Agriculture and Agrarian Development (SEAD) conducted research to analyze the incorporation of an additional environmental component to the calculation of the minimum price in the policy (PGPMBio +).

What was the scope?

The Guaranteed Price Policy establishes a subsidy to the suppliers of nature based products, covering the difference between the value in the market and the value of the minimum price defined by Conab. It provides incentives for suppliers to remain in their activities, even with temporary low levels  in market prices, thus contributing to the sustainable use of forests and maintaining the indirect benefits generated by them. However, it doesn’t take into account the environmental services that are effectively provided by the suppliers.

Therefore a research was made aiming to evaluate ecosystem services economic values that were related to their use. Scenarios constructed from participatory workshops held with key local actors in three case studies: (i) rubber extraction in the region of Tapajós, Belterra and Santarém; (ii) açaí extraction, in the region of Curralinho, Marajó; and (iii) babassu extraction in the region of the middle Mearim.

The study sought to answer two central issues about the Guaranteed Price Policy, considering environmental costs and benefits:

  • Benefits: What value would society be willing to pay to avoid a decrease in the flow of benefits provided by ecosystems in the supplying regions?
  • Costs: How much would society have to pay to prevent suppliers from leaving their current activities to move to less sustainable activities?

Thus the proposal to incorporate an additional environmental component into the Guaranteed Price Policy  was based on the economic concept of willingness to pay, identifying the maximum value that society would be willing to pay for the maintenance of the ecosystem services generated, considering the value of the opportunity cost of the activities that would be developed if supply were replaced by agriculture and illegal logging, for example.

What was the role of the Government?

The government is evaluating the possibilities of adopting these new criteria. It is also up to the Brazilian government to carry out the transfer of funds if the change is integrated into the existing program.

What were the results?

Results showed that scenarios depended on a series of decisions, from both suppliers, dealing with market incentives (the comparison of income from economic activities that they can develop), and from the government, dealing with market failures through of economic incentives (whether it is worth or not, intervening in the suppliers decision).

The study also identified the appropriate amount for the additional compensation for the payment for environmental services (PES) provided by suppliers from estimating the value of benefits to society that are generated by the activity.

The research demonstrated that this additional incentive for Payment for Ecosystem Services can actually improve the policy performance. Values for Guaranteed Price Policy below what is needed to cover the opportunity cost are ineffective as economic instruments, if the opportunity cost is not fully covered, the environmental effectiveness of the Guaranteed Price Policy can be seriously compromised, not ensuring that the forest land cover, for example, will be maintained.

The viability of investing in the maintenance of the standing forest is more feasible when it is possible to extract income from its forest products through the market. In this context, the Guaranteed Price Policy is responsible for an additional payment to what is already paid by the market, allowing environmental results to be achieved with a reduced cost.

The Ministry of Environment shared these results  in an international event to exchange experiences among countries on the advances regarding the integration of biodiversity agendas (“The path we face, progress in compliance with the Cancun, Mexico declaration on mainstreaming biodiversity for well-being”, in Mexico City).

Next steps

The possibility of implementing this type of incentive is still being studied by federal government. The results of this study have already been referenced in planning and implementation process of measures that aim to encourage the good use of natural resources and sustainable regional and local development.

If we consider that socio-biodiversity products are not currently valued for their environmental characteristics, but only for their nutritional, medicinal or aesthetic characteristics, it is justified that there is a governmental intervention to increase the supply of these products, internalizing the positive externalities of extractive production. However, it is also necessary to study the impacts of increased extractive activity if it is done without a proper management.

The environmental success of this type of initiative depends not only on the additional value but on the monitoring and differentiation of more environmentally desirable management systems so that they can be encouraged in relation to less sustainable systems. For future studies, it is recommended to evaluate the impact of an additional subsidy to extraction activities on the pattern of land use, which has not yet been analyzed in detail by the literature in the Amazon.