Why should funding Amazon forest sustainability be the world’s top priority? (commentary)

According to a 2020 study, private philanthropy, at that time, dedicated to Amazon forest conservation amounted to about $100 million a year. That is about one ten thousandth of estimated global philanthropy. This number should be higher given the Amazon’s role as a central pump of the global water cycle and its vulnerable state today, at the edge of a critical precipice.

Numerous studies warn about the Amazon tipping point, the moment when deforestation catalyzes a collapse of the forest’s water cycle, trees die back, and global rain patterns destabilize, as far away as Tibet. The process could exterminate thousands of species, lower water tables, make leading cities unlivable, degrade major bread baskets, threaten global food security, cause new pandemics, release over 90 gigatons of carbon into the atmosphere and more.

In 2018, leading scholars, Thomas Lovejoy and Carlos Nobre, argued that deforestation of 20%-25% of the Amazon could create a tipping point. Some believe it could be reached by 2025, others suggest we have longer, while others argue that it has already been reached with the news that the forest is transitioning from a carbon sink to a carbon source. Either way, there is already evidence of a long term ecosystem collapse and a drying out process that is visible in parts of the forest today. Whether the problems are imminent or longer term, they are preventable and action is urgently needed.

Amazon collapse would lead to multiple follow-on catastrophes. Locally it would hit hard, given that 70% of South America’s GDP is produced in regions that receive rain from the Amazon. One study suggests that the Western United States, and specifically the Sierra Nevada snowpack, which hydrates California and surrounding regions, could lose 50% of its precipitation. Another study outlines how Amazon deforestation threatens global food security while others assert that Amazon collapse could cause the next global pandemic. Even sunlight absorption, at a planetary level, may be disrupted. Tropical forests produce clouds, improve the surface albedo of the planet, and reflect sunlight. Loss of the Amazon would significantly disrupt this ecosystem service, with unknown impacts on planetary warming.

With burdens of climate change evident everywhere, many are searching for the most affordable carbon sequestration and emission-avoidance strategies. Amazon conservation may be among the most cost effective solutions.

According to one article by the Center for Global Development, between 2004 and 2013, CO2 emissions were reduced in the Brazilian Amazon by 80% at a cost of between $1.09 to $3.25 per ton through conservation efforts. By comparison, according to one Harvard Study, on-shore wind energy operations can reduce CO2 emissions at cost of $25/ton, soil management at $57/ton, livestock management at $71/ton, China/India solar power expansion at $100/ton, etc.  Amazon-related carbon is among the most affordable options, by far.

Jumpstarting the region’s bioeconomy could create a permanent solution by shifting local financial incentives away from deforestation.

Philanthropy for Amazon bioeconomy development could only be necessary for several years.  Catalytic funding could enable the economies of forest protection and regeneration to outcompete the economies of deforestation. A 2021 study demonstrates how a transition from soy and cattle ranching to agroforestry could create numerous new jobs and swell local incomes by 1000% while generating billions of dollars in new wealth, restoring canopies and replenishing water cycles. The study points out that cattle earns only $250/hectare/year, while a grove of guava trees can earn over $10,000/hectare/year.

Philanthropic investments to help launch Amazonian carbon markets could be similarly catalytic. In 2019, Amazonian cattle earned farmers an estimated $13 billion on a footprint of 53 million hectares. If regional land can sequester 11 tonnes of CO2/hectare/year and farmers can get a price of over $30/tonne (accessible already in the carbon markets of Australia, California, and the EU), they could earn $330/hectare or $17.5 billion per year, in total, across the region. With the prospect of expanding local incomes by 35% over cattle ranching, carbon could soon outpace beef. Such possibilities are not far off. A recent Wall Street Journal article estimated that the Brazilian carbon market could earn $120 billion by 2030. Even if the carbon market is not yet mature enough today to finance replacement of the entire herd of Amazonian cattle, it is certainly large enough to offset the annual opportunity cost of not expanding cattle into new parts of the Amazon. Valued at $2 billion last year, the voluntary carbon market could easily offset a cattle growth rate of 1.8% and theoretical Amazonian revenues of $234 million. Moreover, intensification of cattle production can also produce more beef in less area.

From a macroeconomic perspective, carbon market and/or philanthropic investing in Amazon conservation could have a return on investment over 3000%. According to the US government, the average social cost for 1 ton of CO2 emissions is about $100 (calculations range between $51, from 2021 estimates, and $190, for 2022 estimates). Given that 550 tons of CO2 are released from one hectare of Amazon deforestation, prevention should be worth $55,000 to the global economy. Given that 2 million hectares were deforested in 2020, approximately $110 billion in damages were done that year. Therefore, if prevention of Amazon deforestation cost between $1.2 and $3.6 billion annually (according to prices in the CGD article cited above), it would save $110 billion per year, offering an ROI of between 3100% and 8600%.

Reducing deforestation is possible. Many have studied how the Brazililan presidential administration of Luiz Inacio Lula da Silva reduced deforestation by 85% between 2004 and 2014. New philanthropy is needed to help make forest protection efforts successful today, and bioeconomy philanthropy in particular is needed to help make solutions permanent.

Starting later this year, the Amazon Investor Coalition will launch a new program to match donors with some of the most cost effective bioeconomy strategies in the region.  Donors and allies can learn more here.

Header image: The Amazon rainforest in Peru. Photo credit: Rhett A. Butler for Mongabay.

This piece was originally published on the Amazon Investor Coalition web site.

See related:

Infrastructure defines the future: Chapter 2 of “A Perfect Storm in the Amazon”