Home BusinessFinancial Most of the climate finance for land use in Brazil came from domestic sources 

Most of the climate finance for land use in Brazil came from domestic sources 

by Paul Morgan

The majority of climate finance for land use in Brazil between 2015 and 2020 came from domestic sources, with two-thirds of it being private finance. According to a report by the Climate Policy Initiative/Pontifical Catholic University of Rio de Janeiro (CPI/PUC-Rio), rural credit played a significant role in channeling this finance, accounting for almost half of the total climate finance for land use, amounting to US$ 3.2 billion per year.

While rural credit has been crucial in financing activities aligned with climate objectives in Brazil, the report highlights that climate-aligned flows only represent 8% of the total volume of rural credit in the country. The annual average of rural credit in the analyzed period was US$ 42.2 billion, indicating that there is potential for scaling up climate finance within this sector.

The report also revealed that climate finance for agriculture and forests in Brazil increased from US$ 6.6 billion in 2015 to US$ 7.1 billion in 2020, representing a 65% growth in Brazilian reais. However, challenges remain in obtaining sufficient resources to meet climate goals. Agriculture and deforestation together account for almost three-quarters of the country’s greenhouse gas emissions, highlighting the importance of aligning finance with climate targets set under the Paris Agreement.

The analysis of climate finance flows for land use in Brazil showed that public budget accounted for 11% of finance aligned with climate objectives, with the majority directed towards public policies in the forest sector. However, the volume of public budget decreased from US$ 993 million in 2015 to US$ 394 million in 2020.

International finance accounted for 5% of climate finance flows, mainly originating from public sources such as foreign governments, climate funds, and multilateral development banks. The Amazon Fund, which aims to support projects that reduce deforestation in the Amazon rainforest, channeled only 0.7% of the total climate finance for land use in Brazil between 2015 and 2020.

The report emphasized that the inflow of international finance for the climate agenda in Brazil is still far from its full potential. It also highlighted the need to increase climate finance for adaptation, which accounted for only 19% of total flows. Climate finance for adaptation is crucial for managing climate risk in agriculture, improving the resilience of agricultural systems, and reducing the vulnerability of rural producers.

In terms of financial instruments, the agricultural risk management instrument played a significant role in climate adaptation, accounting for US$ 1.1 billion per year in finance aligned with climate objectives. Rural insurance was the most relevant of these instruments, with a total of US$ 625 million per year.

The report identified the crop sector as the main recipient of climate finance, receiving 60% of flows. The forest sector received 25% and cattle received 8%. It emphasized the importance of developing financial strategies that promote a transition to low-carbon agriculture, protect forests, increase climate resilience, and ensure food security.

The findings of this report provide a baseline for understanding financial flows that contribute to land-use-related climate mitigation and adaptation in Brazil. The researchers developed a methodology based on CPI’s international experience in tracking climate finance flows globally.

The report concludes by emphasizing the need to increase finance to match the current climate challenges in Brazil. Climate finance plays a crucial role in supporting the country’s transition to a low-carbon economy and achieving its climate targets.

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