Brazil’s New Forestry Sector Policies Put External Climate Finance Support At-Risk

Spotlight Activity: Brazil’s New Forestry Sector Policies Put External Climate Finance Support At-Risk

Brazil was one of the most ambitious countries in its goals for the Paris Agreement, serving as an example and “pulling other Nations”. The country committed itself, by 2025, to reduce greenhouse gas emissions by 37% below 2005 levels. In this way, climate change mitigation measures for the country must also be bold, and this involves one of the main pillars of the Paris Agreement, which is climate finance.

Today, the country uses a mix of national and international credit funds to finance its climate projects. It is, therefore, a borrower and has the Green Climate Fund (GCF) as one of the main sources of funds. The GCF finances two major projects in Brazil, which are the Financial Instruments for Brazil Energy Efficient Cities (FinBRAZEEC) and the Geeref Next. The first presents anticipated 17.4m tonnes of CO2 equivalent avoided and it focuses on promoting energy efficiency to help Brazil meet its NDC goal by reducing energy demand. It was approved in March of 2018 and has duration of 15 years, being 7 for its implementation. The total volume of funding approved is USD 1.3 billion, 4.9% funded by GCF (Loan, USD 186.0 M, Grant, USD 5.0 ​​M, Grant, USD 4.0 M) and 85.1% co-financed (Private lenders, Loan, USD 400.0 M; Bank of America, Loan, USD 180.0 M; Concessionaires, Equity, USD 330.0 M; World Bank IPF Contingent Loan, Guarantee, USD 200.0 M; World Bank, Grant, USD 1.0 M).

The second GCF-funded project, Geeref Next¸ was approved in April 2017, and has a 15-year duration, with 5 years to be implemented. GEEREF NeXt is structured as a fund of funds, with the aim of being a first investor in renewable energy/energy efficiency (RE/EE) investment funds and encouraging other investors to co-invest. It is intended not only for Brazil, but also for the regions of Latin America and the Caribbean, Africa, Eastern Europe and Asia-Pacific. The total approved financing volume is USD 765 M, 34.6% funded by GCF (Equity, USD 250.0 M, Grant, USD 15.0 M) and 65.4% co-financed (EIB, Equity, USD 30.0 M, Others investors, Equity, USD 470.0 M).

In addition to these two funds, the country also has a national climate fund, the Amazon Fund, which had USD 1,034 M pledged in 2011, and USD 901.4 deposited ($895.8 foreign resource) has been guaranteed. Between 2012 and 2014, an amount of USD 390.9 has already been approved. Another form of financing which has been taking place in the country is the promotion by the competent bodies of green bonds. The total of 9 Brazilian green bonds have been issued, amounting to $ 3.67bn, five of which were issued internationally until 2017.

Status: Right Direction

Brazil is a recipient country with commitments from donor countries to support its climate change goals. However, recently the country has been changing its environmental approach. For example, in exchange for political support the current Brazilian government has been signaling the increase in deforestation by landowners, putting the country’s contribution to the Paris Agreement at risk. Such behavior may jeopardize the country’s ability to accomplish the commitments from donors.

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Ministry of the Environment (MMA), Edson Duarte 

Tel: +55 (61) 2028-1057/1289/1422
Head of Gabinet, Heitor Matallo Júnio
Esplanada dos Ministérios, Bloco B, 5º andar
70068-900 – Brasília – DF
Email: heitor.matallo@mma.gov.br
Tel: +55 (61) 2028-1201
FAX: 2028-1756

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