26 August, 2009

Major Brazilian corporations signed a call for action on climate change

Sergio Abranches

A group of major Brazilian corporations met in the city of São Paulo this Tuesday to sign a “Letter to Brazilians on Climate Change,” during a workshop called “Brazil and Climate Change: opportunities for a low carbon economy.”

It may be a historical moment, when a representative portion of the Brazilian business elite finally adhered to sound climate change policy. It can also turn out to be a hoax. Promises are of little value until they start being fulfilled.

The letter, however, provides a way to hold them accountable to their promises. They commit to direct actions. They’re not entirely specified it’s true, but clear enough to enable watchdogs to watch and challenge their statements. And there were plenty of watchdogs in the room.

The letter was signed by adhesion to its principles, not by negotiating its terms. Among the corporations that signed it are giant mining company Vale, the association of São Paulo’s ethanol producers, Unica, major pulp and paper companies, as Aracruz, and Suzano, the largest Brazilian supermarket chain Pão de Açúcar, and 17 others. On the list we find the largest heavy construction Brazilian companies, all participating on the most environmentally controversial government construction projects. Many of these companies are big exporters, some, as Vale, are already globalized, having business in several countries, across the continents. These are already getting the signs from the market and previewing raising climatic and environmental barriers to trade and investment.

Major foreign corporations asked to sign the letter but there was a political decision to only admit the adhesion of Brazilian-owned firms, to prevent reactions saying the movement was inspired by foreign interests.

According to Ethos Institute’s head, Ricardo Young, “it is a formal pact”. Ethos is a non-governmental organization that promotes business ethics, and has a leading part on the mobilization of Brazilian business elite to support green initiatives. It was Ethos that led the drafting of the letter, together with the Amazon “think-act” tank, Imazon, that gave the technical and scientific support to the drafting process. Vale’s CEO Roger Agnelli led the movement of business leaders to adhere and sign the letter.

The companies that signed it formally agreed:

“To publish the annual report of Greenhouse Gases emissions of our companies, and the actions we are taking to mitigate these emissions and adapt to climate change.

To adopt as a strategic guideline on our investment decisions the choice for the best option available to help reducing GHG emissions from our processes, products, and services.

To seek the continuous reduction of specific GHG emissions and of the net balance of CO2 emissions of our companies, through direct actions aiming at reducing emissions from our production process, investing in carbon capture and/or supporting reductions of emissions from deforestation and degradation (REDD) to offset emissions.

To actively work within our supply chain to induce emissions reductions from our suppliers and our clients.

To engage the government, and act with civil society and within our industries do enhance the understanding of the consequences of climate change within the geographical areas we operate, and of the required adaptation measures.”

These are promises they can soon be held accountable for.

Roger Agnelli, CEO of Vale argued that the “world is changing fast, and we have to change too, if we want to be competitive.” He insisted that “all companies will have to report their emissions, and the government has also to publish a national emissions report every year.” Agnelli sees the “world already on a clear transition to a green economy.”

His company is far from being a green business, though, and he will have to promote deep changes to match the commitments he so actively advocated over the last two months. Several CEO’s publicly acknowledged they were answering to Agnelli’s call for action.

The co-chair of Natura’s board, Guilherme Leal, also a signatory, said that Brazil is still following a partly 19th, partly 20th century growth model, and “the country will not be competitive with this model.” He also argued that GDP is a “poor indicator of quality of life and equitable development”, when criticizing the government “Plan for Acceleration of Growth”. Ricardo Young, from Ethos agreed. He has an active role on the Brazilian side of the World Economic Forum, and said he is sure “that in Davos, during the next World Economic Forum, we are going to discuss alternative measures to GDP to really account for development of quality.”

Adalberto Veríssimo, of the “think-act” tank Imazon, who had a significant participation in drafting the letter, as a technical advisor, sees the need for “a place for an continuing conversation among corporations, environmentalists, and government on the low carbon economy,” as a means to implement and further advance overall commitment to an ambitious climate change program. He also alerted that the Amazon “needs a zero-deforestation target to 2014, the only way to save the rainforest, and reduce emissions. The government target is a 70% reduction of deforestation by 2020.

The less interesting, and less eventful part of the workshop was staged by the government authorities. The Minister of Science and Technology, responsible for national emissions reporting, showed no real commitment to disclose the data on emissions he claims to have. “They’re only not published on a book, but everybody knows the figures.” In fact, everybody works with the balance of emissions published in 1995, with ten year emissions to 1994. The minister said his ministry will “soon” publish an update version of the Brazilian carbon emissions report with data from 1994 to 2004. It will not account for the emissions of the later high growth years 2005-2008.

Minister Carlos Minc announced that his ministry is doing research on emissions and will publish a more up to date report on industrial emissions very soon. Secretary for Climate Change of the Environment Ministry, Suzana Kahn, one of the Brazilian members of IPCC, told me the report may become public next week. Subsequently the Environment Ministry will publish its own estimate for the emissions of all other relevant sectors of the economy. Forestry and land use change, and transportation will probably be the next on line.

The Environment Minister also announced that Brazil will go to Copenhagen with a cooperative attitude, and will commit to a quantitative cap for its emissions, a measurable and verifiable target. On an interview especially recorded to be broadcasted during the event, the Minister of Foreign Affairs, Celso Amorim said he did not oppose to Brazil committing to a quantitative cap on emissions “compatible with its development needs.” The ministry is the official climate change negotiator. Luiz Alberto Figueiredo, the Secretary for Climate Change in the ministry of Foreign Affairs, and chief climate change negotiator, told the audience that Brazil was not changing attitude, but “converging to a quantifiable and verifiable commitment, at the end of the negotiations.” He also argued that this number could not be considered a target, “something that goes into a written international protocol.”

Alan Charlton, UK ambassador to Brazil, told me he was impressed by the assertiveness of the CEOs, and that he was seeing some signs that the Brazilian official position might move ahead.

For the first time there was a sentiment that if the government has not yet changed its position, it is about to change. But serious doubts remains about whether the Brazilian official position in Copenhagen will really be one of cooperation and commitment.

Senator Marina Silva, former Environment Minister during Lula’s first term, and likely presidential candidate, told me that “the people of the forest wants an ambitious climate change deal, zero-deforestation, and that REDD is at the core of the new climate deal. The experts and scientists are also calling the government to be bolder and lead the emerging powers into an ambitious deal. The governors of the Amazon are asking the same from president Lula. Now, the business elite is doing the same. Only the government is lagging behind.” It has less than 100 days to change its attitude, before the COP-15 in Copenhagen begins.

The Brazilian government is actually far from having a proper standing on climate change and environmental matters. The Minister of Environment is about to loose on a major policy issue. He is confronting all other ministers, including president Lula’s candidate to the presidential bid in 2010, his Chief of Staff, Dilma Roussef on license requirements for thermoelectric plants. They are asking him to cancel a decision from the Brazilian Environmental Agency, IBAMA, requiring heavy carbon compensation to license coal and diesel-fired thermoelectric power plants. Several influential companies are heavily lobbying in support of the change, arguing that environmental compensation makes the projects too costly.

The Ministry of Energy has used a technically flawed cost/benefit analysis on the energy auctions that turns coal and diesel-fired thermoelectric plants unrealistically competitive, all the major independent energy experts claim. By asking for compensations, the Environment Agency is correcting this undue competitive advantage for the use of fossil fuels in electric power generation, at the same time it is making sure that emissions will effectively be offset.

Investors should be tapping the country’s enormous wind and photovoltaic potential. They should be demanding from the government a new energy policy with incentives to renewable sources, rather than to coal and oil. Unfortunately, due to pressure from inside the government, environmental officials are already studying how to make the rule more flexible.

Corporations – mainly large constructors – the Minister of Transportation, the Chief of Staff, and the president himself, are also annoyed with the Environment Minister for his tough standing regarding the 319 Road the government wants to build. It crosses the core of an extensive area of pristine rainforest in the Amazon, linking Porto Velho, capital city of the state of Rondonia, and Manaus, capital city of the state of Amazonas. The Minister doesn’t want the road built, in the first place. He has told me that much very recently. But, he argues, “as the president ordered the road to be built, the least we can do is to ask for several precautionary and compensatory measures, before giving the license.” He also told me that his people have already detected deforestation and degradation at the site where the first stage of the road is being built by the Army Corps of Engineering to speed up construction works.

The road is both a logistic and environmental blunder. All evidence runs against it. The Minister of Transportation wants to run for governor of the state of Amazonas, and is pressing hard for the road. This only increases suspicion as to the real motivations behind the plans for several Amazon roads.

Professor of logistics Paulo Fernando Fleury, of the Federal University of Rio de Janeiro, and from ILOS – Institute of Logistics and Supply Chain has just made public a study showing how Amazon roads are the worst possible modal option for bulk transportation of goods in the Amazon. Roads failed his tests on logistics, environmental, and economic criteria. They have a freight cost per ton 1.7 times higher than railroads, and 2.3 times higher than waterways. The time of return on investment for Amazon roads is 14 years, whereas it is 9 years for railroads, and 3 years for waterways. Road-related emissions are higher for all greenhouse gases studied, when compared to both railways and waterways. The data is clear, when compared to railways, road-related emissions of N2O are 5.5; NOx, 5.6; CO2, 3.4; and CO, 3.0 times higher. When compared to waterways, emissions of: N2O are 16.7; NOx, 15.9; CO2, 5.0; and CO, 8.3 times higher.

The dominant mood within the Brazilian government is still highly antagonistic to the idea of a development agenda having as its central goal moving towards a low carbon economy as fast as possible. This negative mood regarding climate change policies is directly related to president Lula’s own personal convictions about what economic development really is about. He envisions development as the result of large and visible construction works – dams and roads in particular – and fast GDP growth. The president is concerned with the level of employment, but seems rather skeptical about the creation of green jobs. His skepticism is probably due to the different skill requirements of green jobs, compared to “grey” jobs. He understands what it is necessary to raise blue-collar jobs, but not what is required to create green-collar jobs. Besides, he values blue-collar jobs, while green jobs are an unknown entity to him.

Brazil still has a long way to go, before one can really say it is taking the route to a low carbon economy.

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