Can Brazil’s newly-rehabilitated Amazon Fund help turn deforestation around?

João Pedro Caleiro from the Lemann Foundation Programme at Oxford asks the questions based on a new working paper by MPP alumna Lucilla Dias.

Estimated reading time: 4 Minutes
Aerial view of the Amazon rainforest, in the Brazilian state of Amazonas.
Aerial view of the Amazon rainforest, in the Brazilian state of Amazonas. Photo by CIAT International Center for Tropical Agriculture.

If there’s one Brazilian issue that has dominated the world’s attention over past years, it is the destruction of the Amazon rainforest. 

Images of forest fires and the damage wrought to wildlife habitats regularly shock the world as figures on deforestation show an increase of almost 60% in the average annual rate of destruction under the Bolsonaro government (2019-2022) when compared to the average rate in the previous period (2015-2018)[1]. 

President Luís Inácio Lula da Silva, who began a third non-consecutive term as president of Brazil last January, has vowed to turn these numbers around. One of his main tools to do so is to revive the Amazon Fund, first established in 2008 during his second term and abandoned by the Bolsonaro government.

The Amazon Fund is a financing mechanism that receives donations for conservation projects to help contain deforestation and promote sustainable development. Resources are applied under a results-based framework, which means that international donations are contingent on achieving a reduction in greenhouse gas emissions from deforestation and forest degradation in Brazil. 

Between 2009 and 2018, the Fund received US$ 1.3 billion in donations, mainly from Norway and Germany. Between 2019 and 2020, however, the Fund’s institutional structure was distorted beyond recognition, leading to a stand-off with donors. Since then, it has been unable to receive donations and support new projects. 

A recent working paper by Lucilla Dias, a graduate of the School’s MPP programme and a research associate at the Lemann Foundation Programme, examines the Fund through the framework of public institutional integrity developed at the School.

Lucilla has two main short-term recommendations for the new version of Fund: the first is to restore its basic internal rules, and the second is to re-establish ties with its traditional donors (such as Germany and Norway). 

As of now, there are promising signs that these processes are underway, but more can be done, and Lucilla’s paper provides guidance in this respect. With the Fund reinstated by Lula on his very first day in office, US$ 620 million in earmarked resources were immediately unfrozen by Norway. And new contributions to the Fund have already been pledged by the United States (US$ 500 million), the United Kingdom (US$ 100 million) and Germany (US$ 38 million). In comparison, the entire budget for the Ministry of Environment in Brazil in 2022 amounted to around US$ 620 million[2].

This reversal in environmental policy and the new version of the Fund have become central prongs of a diplomatic push by the Brazilian government to restore its reputation as a major player in the fight against climate change. 

What more does the Brazilian goverment need to do?

In the medium term, however, further change will be necessary to make the Amazon Fund fair and effective, as Lucilla pointed out during a discussion about the first 100 days of the new Lula administration, held at the School on 18 April. The Fund could be better integrated with the government’s broader strategy against deforestation, particularly the PPCDAm (Action Plan for the Prevention and Control of Deforestation in the Legal Amazon) whose latest version was launched this June. 

The PPCDAm aims to coordinate federal action for deforestation control in four key areas: monitoring, sustainable practices, land use planning and the use of normative and economic instruments. In this last area, one explicit goal is to expand the Fund’s portfolio. Lucilla’s paper suggests there could be improvements in the project’s selection process as well, with criteria combining the support for long-term structuring policies with more targeted approaches that are able to achieve results in the short and medium term. 

Moreover, ratifying the Fund into law would be a way to help shield it from many of Brazil’s internal political pressures, of which plenty remain. 

Political pressures

The Lula administration faces an enormous challenge reconciling its own policy priorities with the interests of a strongly conservative Congress. The administration’s proposed reorganisation of cabinet powers that would strengthen the Ministry of Environment, for example, was recently blocked by parliamentarians linked to agribusiness. These developments have raised concerns that when disputes arise, the Lula administration will use its limited political capital to preserve resources to other areas while the environment will get the short end of the stick. 

The Amazon Fund was by all accounts a pioneer in climate finance and already serves as a model for other countries seeking a way to support deforestation efforts. In this way, its performance resonates around the world. Indeed, Brazil has already been an example of success in forest management in the past: deforestation rates, which peaked in 2004, were reduced by 84% from that level by 2012 as a result of effective monitoring and policymaking. If the country achieves something similar again, the Amazon rainforest may regain its spot as a symbol of hope for climate policymaking, rather than a source of global concern.

[1] Annual average rate of deforestation of 11,396 km2 under Bolsonaro (2019-2022) compared to an average of 7,145 km2 in the four previous years (2015-2018)

[2] Currency rates on 25 May 2023.

João Pedro Caleiro is Writer-Researcher at the Lemann Foundation Programme at Oxford, a comparative research programme with an emphasis on improving the public sector in Brazil.