Part 1: A national payment program

a law project that receives support from the ruralist bench and environmental protection institutes

On June 1, 2023, a public hearing was hosted in the Chamber of Deputies during Environmental Week. Congressman Gabriel Mota (Republicans) requested the hearing to discuss the regulation and implementation of the National Policy on Payment for Environmental Services, which was established by Law 14,119/21.

Were invited Ministers of the Environment and Climate Change, Indigenous Peoples, Agriculture, and Livestock, and representatives from environmental protection agencies, namely IBAMA and ICMBIO. On the agenda was a rare topic that interests agribusiness and environmental protection institutes: establishing a national payment program for environmental preservation.

Farmers, ranchers, and other economic agents see in the payment system the possibility of creating a form of social incentive that indirectly increases the availability of land for agribusiness, as per Deputy Gabriel Mota's interview with TV Câmara.

Environmental preservation institutes are hoping to use the creation of this system to compensate indigenous peoples and traditional communities for their historical efforts in preserving the environment in their territories. This compensation would align with their way of life and provide a positive social and economic impact alternative.

But what are Payments for Environmental Services (PES)?

Payments for Environmental Services (PES) is a mechanism aimed at financially compensating individuals or communities that engage in actions geared towards environmental preservation and restoration. For instance, a farmer who conserves the riverbanks, preventing deforestation and ensuring water quality, could receive payment for the service provided to society.

According to a published article by the World Association for Soil and Water Conservation [(WASWAC)], since the 2000s, Brazil has become one of the countries with the largest number of environmental payment programs in the world. Over the last 20 years, states and municipalities have built several environmental compensation mechanisms, long before the national program.

While 34 programs were registered across the continent in Europe, only in Brazil 51 had been implemented, with more than 70% of these located in the southeast region. In addition to the necessary territorial decentralization, efficient monitoring and inspection practices, ensuring popular participation, reducing bureaucracy, financing and stability are among the main challenges of the programs.

The environmental and economic regeneration

The proposal seeks to benefit both the environment and businesses that prioritize environmental preservation and restoration efforts worldwide. Through economic incentives, PES encourages producers to adopt sustainable practices like reforestation, water conservation, reduced pesticide use, and more to reduce the negative impacts on biodiversity, water resources, and the climate.

In addition, PES initiatives aim to generate economic value for the country, rural producers, and businesses while also preserving the environment. This helps to maintain important ecosystem services, including climate regulation, rainfall formation, water purification, and crop pollination.

Furthermore, its supporters maintain that a national program can promote the generation of economic values for the country, such as, for example, the creation of environmental credits, such as the carbon market. According to estimates by the Ministry of Agriculture and Livestock, by 2030 the country can generate “1 billion tons of CO² equivalent to be delivered by the set of sustainable technologies.”

More than that, traditional peoples and communities are identified as the true recipients of the program, since, in addition to the traditional way of life itself being guided by the perspective of care and preservation of their territories, they can create several other parameters, products, and ecological services.

However, experts point out the need to build solid monitoring and inspection mechanisms, which are essential to combat “greenwashing” practices - environmental marketing to hide unsustainable activities - as shown in a study by the FGV Bioeconomy Observatory, “conceptualizing green requires rigorous, applied and certified metrics and methodologies.”

the challenges and a commitment to the use of Blockchain

Despite the potential of a National Payment Program for Environmental Services, the national secretary of Bioeconomy of the Ministry of the Environment, Carina Pimenta warned about the risks and the need for monitoring and inspection of the initiative:

          “(…) based on regulation, there is an issue that concerns us and on which we are           putting energy. All of this must be in a record because this data needs integrity. It           is good that it is transparent that we are enabling registration (…) monitoring and           it will bring us concrete data about this recognition”

In turn, the General Coordination of Climate Change, linked to the Ministry of Agriculture and Livestock, initiatives are already being studied and one of the applications is the use of Blockchain technology, which through its decentralized, secure, and transparent registration system could allow both the process of registration, monitoring and execution of programs.

In a statement during the public hearing in the Chamber of Deputies, it was pointed out that “there are securities like these, the CPR Verde on the Stock Exchange, provides backing, with all blockchain technology. There is an important financial backing behind it.” The Green Rural Product Certificate (CDP) is a certification for environmental services registered on blockchain and registered on the Stock Exchange, which can be traded and generate gains for its holders.

The possibility of using Blockchain technology to operationalize a National Program may indicate an interest in innovation in the way of recording data, managing the application criteria and parameters for access to benefits, or even the tokenization of environmental assets in a decentralized ecosystem.

Conclusion

The promise of a national payment system for the adoption of regenerative environmental practices can become an important asset for the national economy, in addition to guaranteeing the preservation of our ecosystem wealth and the sustainability of regions and communities with low social development.

However, in addition to the legislative and executive effort to adopt the measure, it will be necessary to create an efficient, transparent, and safe structure that facilitates access for small rural producers and traditional communities and ensures intelligent and effective operationalization.

The use of blockchain technology can result in significant improvements in efficiency and record management. Additionally, using smart contracts, digital tokens, and other assets can lead to diverse derivative applications and even promote the development of a secondary market.

The program's membership and operations will follow the Union's authority to create agreements with States, the Federal District, Municipalities, and public entities, as well as partnerships with civil organizations. Tokenization of real assets and digital certification may play a significant role in making the program more effective.