In the Brazilian Amazon, deforestation has been driven by agricultural practices, converting primary forests into pastures and soy fields.1 In the early 2000s, high deforestation rates created national and international pressure on the Brazilian government to take action. Annual forest loss began to decline in 2005 and remained at relatively low levels for the next decade. This success was due to a mix of conservation law enforcement measures first introduced in 2004, including a “list of priority municipalities”, which publicly lists the names of Amazonian municipalities with the highest chronic deforestation rates since 2008.2
Listed municipalities faced intensified monitoring and stricter enforcement of environmental regulations, leading to a decline in annual forest losses in those regions.3 At the same time, public pressure led to private-sector-based actions: In 2006, a report published by an international environmental organization placed responsibility on US- and EU-based traders for dealing with large amounts of deforestation-contaminated soy from the Amazon.4 These traders quickly agreed to the so-called Soy Moratorium, pledging to stop buying soy from deforested areas in the Amazon biome. This voluntary agreement was quite effective5 and even led to further agreements such as the Beef Moratorium6.
The priority list opened a new pathway for a sustainable transformation: Public scrutiny creates reputational risk for producers and traders and this might push them to engage in more sustainable actions, such as stopping forest-to-soy conversion. Equally, it may simply lead to risk-minimizing strategies, like sourcing soy from less scrutinized regions and/or exporting soy to regions where consumers have fewer environmental concerns.
To disentangle these potential outcomes, we examine producer and trader behavior after the introduction of the priority list using remotely-sensed land-cover data from MapBiomas7 and soy supply-chain data from Trase.8
Location of priority list municipalities in the Brazilian Amazon
From a producer perspective, the data confirms that deforestation rates decreased in listed municipalities mainly due to a rapid slowdown of pasture expansion for cattle ranching. Pastures entail low profits per hectare, but also low costs, which is why they historically have been used for land speculation in the Amazon.9 The priority list arguably increased the expected costs of agricultural expansion into natural habitats (through law enforcement and reputational risks). At the same time, soy, being a more profitable per-hectare proposition, became a more attractive agricultural activity on land already under production. This led to a staggering 100% increase in the average expansion rate of soy production in listed municipalities. Importantly, more than 98% of soy expansion was onto pastures and other croplands, rather than into virgin forests.
Overall, substantial soy expansions in listed municipalities were still possible, without compromising primary forests. This shows that agriculture and forest conservation are not necessarily a trade-off10, and that agricultural productivity increases are still possible in regions like the Amazon, by converting low-intensity, low-productivity pasture to more intensive and profitable agricultural uses. However, this is only effective as a sustainability measure together with broader conservation measures to ensure that deforestation does not simply relocate to less scrutinized areas.
From the trader perspective, it becomes clear that the new Amazonian soy production was predominantly exported to China and, to a lesser extent, other non-EU destinations. This is likely because traders sought to minimize business risks by exporting to less critical destinations, even though soy expansion had become more sustainable. So while none of the large western traders canceled their ties in listed municipalities, increased soy production has mostly been absorbed by smaller opportunistic Brazilian and Asian traders since 2009 (see next figure). This shows that a reputational risk likely exists for established traders. A recent study11 found that large soy traders in Brazil usually exhibit a “sticky” behavior, keeping long term partnerships after having made substantial investments in processing and transport infrastructure (e.g., silos, crushing facilities, and ports). Such large sticky traders could be instrumental to leverage more sustainable production patterns, for example through zero-deforestation commitments, if they cover relevant market shares12. Otherwise, flexible and opportunistic traders could redirect high deforestation risk commodity flows towards destinations with low levels of due diligence.
Overall, this data provides new insights into the behavior of producers and traders along the agricultural commodities supply-chain. Producers responded to intensified law enforcement and increased public scrutiny by reducing deforestation and expanding soy production almost exclusively on previously cleared lands, and traders minimized potential business risks by diversifying soy exports to destinations with lower levels of environmental awareness. However, reputational risks from the priority list did not stifle agricultural activity, as producers and traders seized legal business opportunities in one of the world’s most popular and scrutinized forests.
This raises questions on the potential effectiveness of unilaterally imposed due diligence legislation by the EU, considering continuous growth in non-EU markets. EU demand for deforestation-free soy could easily be supplied by regions with low or no deforestation risk, without actually reducing deforestation in the Amazon region. Sustainability standards for soy and other internationally traded commodities must therefore be designed such that they also provide tangible incentives for sustainable production in regions with high deforestation.
On the other hand, the priority list approach represents a promising blueprint for such a design. The EU’s due diligence law classifies countries (or parts of countries) as having a low, standard or high risk of deforestation. Such a list, if made public, could serve as a kind of priority list to increase public scrutiny. Clear entry and exit rules, informed by remote-sensing based deforestation monitoring, could incentivize jurisdictions to take targeted action towards reducing the risk of being temporarily excluded from access to EU markets.
Finally, protecting the world’s largest tropical forest requires investments and stable funding into the long-term future, which cannot be shouldered by Brazil alone. Due diligence requirements must therefore be aligned with international financial mechanisms that make forest conservation effective, equitable, and socially acceptable. As long as global commodity trade is only partially under the scrutiny of binding due diligence regulations, national environmental policy remains the most effective means to end illegal deforestation. Cost-effective and spatially targeted policy instruments, like the Brazilian priority list, can contribute towards this goal.13
Disclaimer: The views expressed in this article are those of the authors based on their experience and on prior research and do not necessarily reflect the views of UNIDO (read more).
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