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POLÍTICA
AMBIENTAL
Nº 8 • June 2011
green economy
Challenges and
opportunities

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GREEN ECONOMY
Challenges and
opportunities
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Política Ambiental
Green economy: challenges and opportunities
Nº 8 • June 2011
Editorial coordination: Camila L. Gramkow
Paulo Gustavo Prado
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(Pages 24 to 35, 96 to 107, 120 to 126 - Elza Suely Anderson)
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Nº 8 • June 2011
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ISSN 1809-8185
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content
Acronyms ............................................................................................................. 4
Preface ................................................................................................................. 6
Executive Summary ............................................................................................ 9
Delineations of a green economy
Helena Pavese ..................................................................................................... 16
The necessarily systemic character of the transition to a green economy
Alexandre D’Avignon and Luiz Antônio Cruz Caruso ............................................ 24
Green economy and/or sustainable development?
Donald Sawyer ..................................................................................................... 36
International perspectives of the transition to a low-carbon green economy
Eduardo Viola ....................................................................................................... 43
Green economy in Latin America: the origins of debate in ECLAC work
Márcia Tavares ..................................................................................................... 57
The role of inclusive growth for a green economy in developing countries
Clóvis Zapata ....................................................................................................... 69
Brazil and the green economy: a panorama
Francisco Gaetani, Ernani Kuhn and Renato Rosenberg ..................................... 76
Growth potential of the green economy in Brazil
Carlos Eduardo F. Young ..................................................................................... 86
Brazil and the green economy: foundations and strategy for transition
Cláudio Frischtak ................................................................................................. 96
Innovation and technology for a green economy: key issues
Maria Cecília J. Lustosa ...................................................................................... 108
Agriculture for a green economy
Ademar R. Romeiro ............................................................................................. 120
Green economy and a new cycle of rural development
Arilson Favareto ................................................................................................... 127
Deforestation of the Brazilian Amazon rainforest: causes and solutions
Bastiaan P. Reydon .............................................................................................. 138
The transition to a green economy in Brazilian law:
perspective and challenges
Carlos Teodoro Irigaray ........................................................................................ 151
Market mechanisms for a green economy
Peter H. May ........................................................................................................ 165
Nº 8 • June 2011
Valuation and pricing of environmental resources for a green economy
Ronaldo Seroa da Motta ...................................................................................... 174
The role of financial institutions in the transition to a green economy
Mário Sérgio Vasconcelos .................................................................................... 186
Measurement in policies for transition to a green economy
Ronaldo Seroa da Motta and Carolina Dubeux .................................................... 192

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acronyms
BASIC – Brazil, South Africa, India and China
BNDES – National Bank of Economic and Social Development
BRIC – Brazil, Russia, India and China
CNI – National Industrial Confederation
CU – Conservation Unit
ECLAC – Economic Commission for Latin America and the Caribbean
EMBRAPA – Brazilian Agricultural Research Company
GDP – Gross Domestic Product
GE – Green Economy
GMO – Genetically Modified Organism
FAO – United Nations Food and Agriculture Organization
FEBRABAN – Brazilian Federation of Banks
GHG – Greenhouse Gases
HIV/AIDS – Human immunodeficiency virus/acquired immunodeficiency
syndrome
IBAMA – Brazilian Institute of Environment and Renewable Natural
Resource
IBSA – India, Brazil, South Africa
IBGE – Brazilian Institute of Geography and Statistics
ICMBio – The Chico Mendes Institute for Biodiversity Conservation
Imazon – Amazon Institute of People and the Environment
INCRA – National Institute of Colonization and Agrarian Reform
INPE – National Institute for Space Research
IPCC – Intergovernmental Panel on Climate Change
IPC-IG - International Policy Center for Inclusive Growth
IPEA – Institute of Applied Economic Research
Nº 8 • June 2011
MCT – Ministry of Science and Technology
MDA – Ministry of Agrarian Development
Mercosul – Southern common market

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Siglário
MMA – Ministry of the Environment
MME – Ministry of Mines and Energy
NGO – Non-Governmental Organization
OECD – Organization for Economic Co-operation and Development
OTCA – Amazon Cooperation Treaty Organization
R&D – Research and Development
PES – Payment for Environmental Services
REDD – Reducing Emissions from Deforestation and Forest Degradation
REDD+ – Reducing Emissions from Deforestation and Forest Degradation,
including conservation, sustainable forest management, afforestation and
re-forestation.
Rio 92 – United Nations Conference on Environment and Development
Rio+10 – World Summit on Sustainable Development that took place in 2002
in Johannesburg
Rio+20 – United Nations Conference on Sustainable Development that will
be held in 2012 in Rio de Janeiro
TEEB – The Economics of Ecosystems and Biodiversity
UN – United Nations
UNASUR – Union of South American Nations
UNIDO – United Nations Industrial Development Organization
UNDP – United Nations Development Programme
UNEP – United Nations Environment Programme
Nº 8 • June 2011

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Preface
Environmental issues have become increasingly incorporated in the
scientific agendas of the most diverse fields of knowledge and in local, national,
regional and global political agendas. Its growing relevance originates from the
widespread understanding that environmental sustainability is indispensable
to the long term development of societies. On one hand, from an alarmist
perspective, neglecting this issue would probably result in perverse effects on
human beings and development, as pointed out currently by many studies 1 .
From a strategic perspective, possibilities and opportunities have been identified
deriving from its effective incorporation, once it could contribute to achieving
more sustainable development processes in various dimensions (economic,
social and environmental) 2 .
The challenge of moving towards a more egalitarian and sustainable society
is, more than ever, on the agenda. It is in this context that the green economy
concept has emerged. Defined by the UNEP as that which “results in improved
human well-being and social equality, while significantly reducing environmental
risks and ecological scarcity” 3 , green economy will be one of the key topics 4
of Rio+20, the United Nations Conference on Sustainable Development that
will take place in 2012 in Rio de Janeiro.
The challenge is not simple and discussions are only beginning. Despite
having a formal conceptualization, precise delineations are still to be determined.
After all, what is a green economy? Which economies are closer to reaching it?
How to measure the degree of “greening” of an economy? What does it mean,
concretely, to achieve transition to a green economy? What is the role of the
state in this transition? How to finance the transition? Which sectors will be
most affected? Which will be most benefitted? How would the transition affect
the daily lives of citizens? What are the risks of not transforming to a green
economy? And in the case of Brazil, what has the country done and what is
left to do to advance towards a green economy? How is the country doing,
compared to the others? What are the main obstacles and challenges? How to
address them? What would a transition mean for society, productive sectors,
for government, for consumers? How can developed and developing countries
cooperate in this transition? How can international promotion and cooperation
organizations align themselves with these objectives? How can United Nations
Nº 8 • June 2011
1. In global terms, see Stern (2007) and IPCC (2007). For an analysis of the Brazilian case, see
World Bank (2010), Marcovitch (coord.) (2010) and NAE (2005).
2. TEEB (2011) and UNEP (2011).
3. UNEP (2011).
4. The two key topics to guide the Conference are: (i) green economy in the context of
sustainable development and poverty eradication; and (ii) institutional framework for
sustainable development.

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Preface
priority international initiatives, such as the Climate Change and the Biodiversity
Conventions, encourage and implement common agendas aimed at achieving
these objectives?
Green economy raises many questions that do not have simple and straight
answers. We know, however, that the transition requires substantial efforts
and engagement from all segments of society, especially government and the
private sector. It demands that governments level the playing field for greener
products by removing perverse incentives, revising policies and incentives,
strengthening market infrastructure, introducing new market mechanisms,
redirecting public investment and “greening” public procurement. The private
sector, on the other hand, will need to respond to these policy reforms through
increased financing and investments, as well as by creating innovation skills
and capabilities to make the best of green economy opportunities.
The timing to discuss an alternative paradigm, where the generation of
wealth does not increase social disparities or produce environmental risks,
nor ecological scarcities, could not be more opportune. The 2008 crisis, from
which the global economy is still trying to recover, could be an opportunity to
think about and formulate the economic model that we wish to follow.
The transition to a green economy could benefit Brazil in various ways. The
green economy demands greater social equity, something that is especially
necessary in Brazil, which is among the ten countries with the worst income
distribution on the planet 5 . The transition could, thus, serve as a platform for
poverty eradication. Furthermore, Brazil has greatly favorable natural conditions:
the richest biodiversity on the planet, ample water resources, large continental
and coastal areas, ocean resources yet to be discovered; that is, a natural that
albeit threatened is still abundant. In a green economy, natural capital becomes
an asset that generates dividends and produces a competitive edge. Thus, the
pre-requisites are in place that enable Brazil to be more than a beneficiary, but
rather capable of leading the green economy transition, and assuming a role
as global agent for change.
Nº 8 • June 2011
Change can already be seen in various parts of the world 6 . The transition to
a green economy is both a global and a national movement, where cooperation
and coordination are paramount. The reversal of the processes of natural capital
loss and increased social inequality require the efforts of all nations. These
efforts tend to convert themselves into competitive advantages, a situation that
already has become reality in some economies and sectors today. Developing
countries, as keepers of a large portion of the planet’s natural capital, could
exercise a more strategic role. Developed countries, despite already having
consumed a large share of their natural capital, are developing significant
5. UNDP (2010).
6. TEEB (2011).

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Preface
advances in so-called green technologies, which tend to be a differential.
Political, technical, scientific-technological, financial and economic cooperation
between the two, in the more than necessary race towards a green economy,
could generate mutual benefits.
This special edition presents ideas for advancing in the direction of a green
economy. It brings reflections from some of the main Brazilian specialists – and
‘Brazilianists’ – on the subject, in a search to respond to the key questions raised
by the green economy in general and in a country such as Brazil. Eighteen
articles gather the contributions of experts from diverse affiliations and origins.
Elements that may form the basis for the green economy discussion in Brazil
are hereby released.
Enjoy the reading!
References
World Bank (2010). Estudo de baixo carbono para o Brasil. Available at: .
IPCC (2007). IPCC fourth assessment report: climate change 2007. Available at: .
Marcovitch, Jacques (coord.) (2010). Economia da mudança do clima no Brasil: custos
e oportunidades. São Paulo: IBEP Gráfica.
NAE - Núcleo de Assuntos Estratégicos da Presidência da República (2005). Cadernos
NAE, série mudança do clima, n. 3, February. Brasília: Núcleo de Assuntos
Estratégicos da Presidência da República, Secretaria de Comunicação de Governo
e Gestão Estratégica.
Stern, Nicholas (2007). The Economics of Climate Change: the Stern review. Cambridge:
Cambridge University Press.
TEEB (2011). The economics of ecosystems and biodiversity: mainstreaming the
economics of nature: a synthesis of the approach, conclusions and recommendations
of TEEB. Available at: .
UNDP (2010). Actuar sobre el futuro: romper la transmisión intergeneracional de la
desigualdad. Informe regional sobre desarrollo humano para América Latina y el
Caribe 2010. New York: UNDP.
UNEP (2011). Towards a Green Economy: Pathways to Sustainable Development and
Poverty Eradication - A Synthesis for Policy Makers. Available at: .
Nº 8 • June 2011

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Executive Summary
The first article, written by Helena Pavese, puts forth the concept of green
economy and main results of the report “Towards a green economy: pathways to
sustainable development and poverty eradication”, launched in February 2011.
Starting from the finding of elevated levels of ecosystem services degradation
and, therefore, of natural capital, the author presents the Green Economy
Initiative, launched with the intention of identifying the social and economic
risks and costs generated by current standards of excessive natural resource
use, as well as the opportunities for a transition to more sustainable practices.
From this Initiative, the Report on green economy emerged, whose main results
Pavese succinctly outlines. It is concluded that green economy is possible and
desirable, as it is capable of aligning income and employment generation with
poverty eradication and natural capital conservation.
Alexandre D’Avignon and Luiz Antônio Cruz Caruso analyze the UNEP report
from a critical perspective. They affirm that the Report represents a qualitative
leap in the sense of introducing values that go beyond maximizing utility.
They reveal the necessity of thinking about the green economy transition in a
systemic way, where human activities are merely a subsystem of civil society,
which in turn is a subsystem of the universe (or the biosphere and its set of
living and inanimate matter). They argue that other theoretical lines, in addition
to the neo-classical theory, can provide important insights about the issues
in question. Ecologic economics would offer a more systemic approach and
schumpeterian and neo-schumpeterian theories could assist in rethinking the
economy from the perspective of technology as a vector of transformation of
human societies. These approaches give consideration to alternative solutions
that are flexible and of a local character, and conducive to an effective transition
to a green economy.
Nº 8 • June 2011
Donald Sawyer analyzes the relationship between green economy and
sustainable development concepts. Sawyer draws attention to the risk of
green economy acquiring an exclusively economic (or economistic) shape,
where market instruments and pricing of natural resources would prevail to
the detriment of measures of a different nature. Thus, Sawyer asserts that
other dimensions are relevant to the green economy, such as social, ethical,
cultural, political and judicial, etc. The author claims that the green economy
should necessarily be public in a greater sense, implemented through policies
that guarantee rights to all and maintain ecosystem functions interlinked, so that
this concept becomes concrete, instrumental and popular, in complementarity
to and connection with the sustainable development concept, that is more
abstract, diplomatic and governmental.

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Executive Summary
Eduardo Viola presents a panorama of current international circumstances in
terms of transition to a green economy with a focus on low-carbon characteristics.
Based on recent GHG emissions data of large and medium powers, Viola
presents the main policies and measures that these groups of countries have
practiced, and indicates future prospects based on the current juncture. The
large powers, the United States, China and the European Union, are countries
that: provide elevated contributions to global emissions, possess essential
technological and human capital for decarbonizing the economy and have veto
power over international agreements. The medium powers, such as India and
Brazil, have limited influence on the aspects considered. A similar exercise
is carried out for South America in particular, where the triple negative effect
of deforestation in the region (loss of natural heritage, informality and public
demoralization) and the favorable position of the region, whose economies are
not extensively based on fossil fuels, with some exceptions, are highlighted.
The author also surveys the main techno-economic vectors of a low-carbon
transition, and concludes with a reflection on future prospects.
Márcia Tavares surveys the main contributions of ECLAC to the green
economy field due to its role in drafting documents and leading research and
through its function as political mediator for the Latin American and Caribbean
countries in international discussions. The author describes, in chronological
order, the documents produced and their political and historical contexts.
Tavares argues that these documents enable us to evaluate the complexity
of environmental problems in the region and their direct links with economic
and social structures and processes, an indispensable step to advance in
solving the environmental, economic and social problems of the region. It is
concluded that in order for Latin America to effectively transition to a green
economy, there must be coordination between actors and institutions in different
spheres, removal of barriers to change and strong and permanent institutions
that prioritize sustainability.
Nº 8 • June 2011
Clóvis Zapata highlights the role of inclusive growth in the transition to a
green economy in developing countries. The author starts from the observation
that there are similarities between the UNEP green economy concept and the
concept of inclusive growth. Zapata defends a holistic approach in which the
transition to a green economy should be thought out and planned according to
its various dimensions (environmental, social, economic, political, etc), which
have different windows of opportunity that should be taken into appropriate
consideration. The author argues that policies of a social nature and policies
of an environmental nature have not been sufficiently coordinated, when in
fact, they should act in complementarity. Zapata asserts that promotion of
structured policies is necessary, as exemplified by the analysis of the Brazilian
Biodiesel Program. The author also highlights the importance of South-South
debate, and concludes with a reflection on the importance of inclusive growth

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Executive Summary
and the contributions of international organizations and the private sector to
the transition to a green economy in developing countries.
Francisco Gaetani, Ernani Kuhn and Renato Rosenberg provide an overview
of the situation in Brazil with regards to green economy. They argue that Brazil
is an environmental energy power, due to the abundant availability of natural
resources and policies and measures aimed at environmental conservation.
From an international perspective, the authors claim that the country has one
of the highest GHG emissions in the world, but that Brazil is changing this
situation by assuming voluntary emissions reduction targets. They outline the
main actions that Brazil has been implementing in the direction of a green
economy in sectors such as forestry, solid waste treatment, water resources,
among others. The main challenges of the transition are also presented. The
authors conclude that Brazil starts from a privileged position in the transition to
a green economy from various aspects, but that most of the current actions can
be considered as the beginning of the institutional structuring and creation of
economic mechanisms that compose the agenda of a country that is increasingly
focused on the development of markets related to a green economy.
Carlos Eduardo F. Young carries out analytical exercises that aim to study the
impact of a “greening” of Brazilian economy, that is, the transition to a growth
model driven by sectors with low environmental impacts, on the economic and
social performance of the country. Based on the finding that, over the past ten
years, there has been a re-specialization in primary products of Latin American
and Brazilian export bundles, Young shows evidence that there has also been
a specialization in pollution, since the sectors with the most pollution potential
have grown above average. From the results of an input-output matrix model,
the author arrives at the conclusion that the greening of the Brazilian economy
could bring better results in employment and income generation than the current
model specialized in exporting natural resources through predatory extraction
or industrial goods with high levels of pollution in production processes. The
author concludes that, based on the results obtained, the dichotomy between
economic growth and environmental conservation is false.
Nº 8 • June 2011
Cláudio Frischtak analyzes the foundations and strategies of the transition to
a green economy in Brazil. The author starts with the proposal that this transition
requires an inversion of the dominating logic that well-being and intensive (and
unsustainable) use of natural resources are inseparable; and adopt the idea
that higher growth becomes (necessarily) dependent on and is accompanied
by increased conservation or sustainable resource use. Frischtak develops an
analytical structure composed of supply (market or structured) and demand
(induced or spontaneous), that results in a 2x2 matrix. From that analytical
structure, the transition towards a green economy is analyzed with a focus on
certain topics (ecosystem conservation, transportation, sanitation, energy and
product life-cycles). The author also proposes transition strategies based on the

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Executive Summary
establishment of a working group, a reference framework, a set of norms and the
restoration of natural capital. It is concluded that a new paradigm is emerging
and that, with support from adequate government policies, Brazil is fully capable
of being one of the first countries to enter into a green economy.
Maria Cecília J. Lustosa analyzes the importance of environmental
innovations as means of changing the current technological model, intensive
in raw materials and energy from fossil fuels, in a more ecologically correct
direction. Lustosa presents the historical emergence of environmental issues
and their relations to economic production. Then, the author highlights the
importance of the innovative process in technological change and paradigm shift,
and presents the circumstances under which such changes could occur and in
which directions, with a focus on EST (Environmentally Sound Technologies).
Internal and external constraints of the capabilities of businesses to become
innovative are also presented. Lustosa further conducts analysis of innovation
linked to environmental issues in Brazilian businesses, and identifies its main
characteristics. Ultimately, the author concludes that environmental innovations
are necessary to enter into a green economy and that building business capacity
is fundamental, and when appropriate, associated with incentives promoted
by the State. In the case of Brazil, low innovation investment in the productive
sector is certainly a factor that further inhibits the search for environmental
innovation.
Ademar R. Romeiro investigates the topic of agriculture in a green economy.
The work offers a description of what agriculture should be in a green economy.
Romeiro begins with the definition of what is understood as green economy from
the perspective of a given long-term sustainability concept, and moves on to
presenting the conditions for making agriculture compatible with this definition of
a green economy. The author seeks to show that an agriculture that is sufficiently
productive to attend to current agricultural production needs is scientifically
and technologically possible, but is chiefly based on management by farmers
of the very forces of nature in order to obtain ecosystem services. The main
agricultural policy recommendation that results from the analysis is to amplify
agro-ecological research efforts by the large public research institutions.
Nº 8 • June 2011
Arilson Favareto brings the new cycle of rural development topic to the
discussion, by analyzing how it aligns with the green economy. The new cycle
of rural development, happening at different intensities around the world and
whose distinguishing feature is the transition from an agrarian and agricultural
paradigm to a paradigm organized around the environmental rooting of
rural development, is in line with the transition to a green economy. Modern
agriculture, intensive in natural resource use, generates a lot of income but
little employment. Favareto presents the main characteristics of new rurality
and analyzes the situation in Brazil, identifying that here, as in the rest of the
world, agriculture has a declining tendency in relation to other activities and

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Executive Summary
that rural regions are no longer experiencing a general exodus, but rather a
heterogeneity of its demographic profile, with elevated levels of schooling and
greater social differentiation. The author concludes with ideas for an agenda
that aligns this new cycle with the transition to a green economy.
Bastiaan P. Reydon conducts an analysis of the causes of and solutions to
deforestation in the Brazilian Amazon. Reydon begins by presenting data on
deforestation in the Amazon, and highlights the main causes attributed to this
deforestation. The author argues that deforestation results from the continued
tradition of expanding the Brazilian agricultural frontier, which generally takes
the following steps: occupation of virgin land (private or public), extraction of
hardwood, installation of livestock farming and, ultimately, development of
modern farming and cattle raising. Reydon proposes that land speculation is
the principal engine of deforestation in the Amazon rainforest, and presents
empirical data that deforestation is associated with land valuation. The author
conducts an analysis of the Amazon land tenure situation in its various
categories, pointing to the inability of the Brazilian state to govern over the
lands in the region. The reasons for which the land issue is not appropriately
dealt with in the country are evaluated through a recapturing of the historical
evolution of the associated Brazilian institutional framework. Reydon concludes
that adequate, participative and effective governance is a necessary, but
insufficient, condition to contain deforestation in the region.
Carlos Teodoro Irigaray analyzes the prospects and challenges of Brazilian
law in the transition to a green economy. Irigaray starts by contextualizing
green economy in the realms of sustainable development. The author argues
that, from a legal perspective, the transition to a green economy requires
measures that involve the structuring of a system that can effectively guide
public policy, combining the use of economic instruments and command and
control mechanisms, that, necessarily, should be informed by some ethical
principles such as environmental justice and intra and intergenerational
equity. In the context of Brazil, Irigaray identifies three main challenges to
the transition: poverty, deforestation, and agriculture. The author asserts that
Brazil already has a solid regulatory framework, and highlights the recognition
of the fundamental right to an ecologically balanced environment associated
with government and collectivity duty of defending and preserving this right.
Nevertheless, some adjustments are necessary, such as institutionalizing
REDD. Furthermore, the legislative advances are weakly reflected in practice.
In this sense, contradictions between the policies of the Brazilian government
are especially relevant.
Nº 8 • June 2011
Peter H. May brings up the issue of market mechanisms for a green economy.
May claims that, from the perspective of ecological economics, instruments
of natural resource management are based on two variables: the relative
non-substitutability of the resource in question and its resilience (capacity to

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Executive Summary
recover from stress or degradation). The author asserts, without ignoring the
difficulty of precise their understanding, that these two variables reveal, without
resorting to devices of market valuation, the biophysical constraints of human
intervention. It is argued that command and control mechanisms can drive the
direct regulation of resources, by establishing ceilings for levels of appropriate
use (that could be null). Once caps are established, the market can act in a
way to achieve efficient allocation (trade). The author specifically analyzes
PES and REDD instruments. It is concluded that market mechanisms should
assume an important role in the transition to a green economy, in a way that
this role is mediated by regulation that defines the criteria of access and control
of natural resources, reflected by biophysical limits backed by science and
ample previous consultations with populations whose sustenance depends
on those resources.
Ronaldo Seroa da Motta presents the topic of valuation and pricing of
environmental resources in a green economy. It is argued that, due to the lack
of secure property and usage rights of natural resources, externalities are not
totally captured by the price system, which consequently becomes imperfect and
causes inefficient allocations of these resources. Seroa da Motta reveals the
components of the Economic Value of Environmental Resources (EVER): the
use value (direct use, indirect use, and option) and the non-use (or existence)
value. Categories of environmental services are also presented (provision,
regulation, support and cultural), and related to the EVER components. The
author reveals the environmental economic evaluation methods, which can be
grouped into production function methods and demand function methods, and
presents the complexity that such exercises involve. Seroa da Motta analyses
the possibilities of internalizing environmental externalities by charging or
creating markets. The author concludes with an evaluation of the limits to the
potential of valuation and economic pricing of the environment.
Nº 8 • June 2011
Mário Sérgio Vasconcelos analyzes the role of financial institutions in the
transition to a green economy in Brazil. The author argues that starting in
the 1990’s, a series of voluntary commitments and self-regulation has been
implemented by the sector. He asserts that Brazil exhibits a distinguished
performance among emerging countries. The author surveys the main
pacts and commitments assumed by domestic banks. The Green Protocol
is emphasized as an effort to adopt socio-environmental policies that are
precursory, multiplicative, demonstrative or exemplary of banking practices
and that are in line with the objective of promoting sustainable development.
Vasconcelos presents some measures that Brazilian banks have taken to
promote sustainability in the country. The author argues that these activities
result from the fact that environmental risks have generated an actual and
growing impact on the four large risks faced by banking institutions. The main

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Executive Summary
challenges of the sector are also identified. It is concluded that banks no longer
play the passive role of monitoring, but rather an active role of identifying
entrepreneurs, technologies and new business models.
Ultimately, Ronaldo Seroa da Motta and Carolina Dubeux conduct an analysis
of the measurements of policies for the transition towards a green economy.
The authors argue that it is possible to understand sustainability as that which
allows us to maintain the capital stock, which defines the future fluxes of goods
of services, at least constant. They defend that the capacities of ecosystems to
generate services have limits, which, once surpassed, cause a collapse. The
definition of these limits (that is, the critical level of natural capital) determines
the sustainability trajectory of an economy. The green economy is that which
produces a continuous increase in the stock of natural capital. The authors
analyze the creation of institutional capacity to integrate environmental policies
with economic policies and a system of environmental indicators that would be
capable of measuring and monitoring the benefits of natural capital investments.
They propose, in this sense, a systematization of environmental indicators, the
amplification of economic instruments and the removal of perverse incentives.
It is concluded that environmental regulation should not be seen as a problem
and that, beyond a solution, it could represent a source of economic and social
benefits for Brazil.
Nº 8 • June 2011

16
GREEN ECONOMY
Challenges and
opportunities
Delineations of a green
economy
Helena Boniatti Pavese 1
In t r o d u c t io n
Over the past 50 years, human beings have been altering ecosystems at an
increasingly accelerated and intensive pace than in any other period of human
history, especially due to the increasing demand for natural resources, such as
food, water, timber, fibers and fuels 2 .
Despite the significant contribution to economic growth and to promoting
social well-being, the excessive extraction of these resources led to irreversible
losses of global biodiversity and services provided by ecosystems, many of
which are considered essential to human survival.
Wh a t a r e e n v ir o n m e n t a l s e r v i c e s?
According to the Millennium Ecosystem Assessment Report (MEA) 3 ,
environmental (or ecosystem) services are defined as “the benefits people
obtain from ecosystems”.
They can be divided into four categories:
(i) provisioning services, such as food, water and timber, etc.;
(ii) regulating services, such as those that affect climate, flooding,
diseases, water quality, among others
(iii) cultural services, related to recreational, esthetic and spiritual; and
(iv) supporting services, which include soil formation, photosynthesis and
nutrient recycling.
Also according to the report, close to 60% of these services have been
degraded or used unsustainably, including fresh water, purification of air and
water, and local and regional climate regulation 4 . These alterations increase
the probability of accelerated, abrupt and irreversible changes with significant
consequences for human well-being, and threaten the survival of many
communities, especially in developing countries, where in some cases close
to 90% of GDP is linked to nature or natural resources 5 .
Nº 8 • June 2011
1. Environmental Policy Manager at Conservation International Brazil and former Regional
Coordinator for Latin America and the Caribbean at the World Conservation Monitoring
Center of the United Nations Environment Programme (WCMC/UNEP).
2. Millennium Ecosystem Assessment (2005).
3. Millennium Ecosystem Assessment (2005), p. V.
4. Millennium Ecosystem Assessment (2005), p.1.
5. UNEP (2011a).

17
GREEN ECONOMY
Challenges and
opportunities
Delineations of a
green economy
Helena Pavese
Despite the proven intrinsic relationship between human well-being and
natural resources, unsustainable economic activities still prevail. Currently,
around 1-2% of the global GDP are destined to substituting practices that, in
many cases, lead to the degradation of natural resources, such as fishing and
agriculture 6 .
These investments are motivated by the rapid accumulation of physical,
financial and human capital, disregarding natural capital, and thus generating
a vicious cycle through which negative impacts exerted on natural resources
consequently lead to negative impacts on human well-being and the escalation
of poverty.
This article aims to point out the main advances in the delineations of a
green economy. Beyond this introduction, the article consists of three sections.
The first elaborates on the Green Economy Initiative, and the output Report on
green economy, launched in February 2011. The second presents some main
results raised in this Report. Ultimately, are the final remarks.
Th e Gr e e n Ec o n o m y Initiative
Seeking to raise evidence about the social and economic risks and costs
generated by current standards of excessive resource use as well as highlight
opportunities for a transition to more sustainable practices, the United Nations
Environment Programme (UNEP) launched the Green Economy Initiative (GEI)
in 2008. The main objective of this initiative is to support the development of a
global plan for the transition to a green economy that is dominated by investment
and consumption of goods and services that promote the environment.
Wh a t is a g r e e n e c o n o m y?
Green economy is understood as “one that results in the improvement
of human well-being and social equity, while significantly reducing
environmental risks and ecological scarcities”. 7
A green economy is based on three main strategies: (1) the reduction
of carbon emissions, (2) enhanced energy and resource efficiency and
(3) the prevention of loss of biodiversity and ecosystem services.
Nº 8 • June 2011
To become viable, these strategies must be catalyzed and supported
by targeted public and private investments as well as by political reforms
and regulatory changes. Also, natural capital should be maintained,
enhanced and, when necessary, rebuilt, especially for poor people whose
livelihoods and security depend on nature.
6. UNEP (2011a). p.1.
7. How is a Green Economy Defined? (n.d.) Retrieved from: .

18
GREEN ECONOMY
Challenges and
opportunities
Delineations of a
green economy
Helena Pavese
The GEI flagship is the development of the Report about green economy,
launched in February 2011, “Towards a green economy: pathways to sustainable
development and poverty eradication”. The document contains an analysis
of macroeconomic aspects and issues linked to sustainability and poverty
reduction related to investments in a range of sectors from renewable energy
to sustainable agriculture. It is expected that such analysis will support the
formulation of policies that can catalyze an increase in investments in these
green sectors. In addition to analyzing this content, GEI provides consulting
services to countries and regions and produces research products as well
as promotes the establishment of partnerships with a wide range of actors,
including academia, non-governmental organizations, the private sector, among
others, for the effective promotion and implementation of green economy
strategies.
“To w a r d s a g r e e n e c o n o m y: p a t h w a y s to
s u s t a in a b l e d e v e l o p m e n t a n d p o v e r t y e r a d ic a t io n”
Produced by the UNEP in partnership with global economists and specialists,
the report “Towards a green economy: pathways to sustainable development
and poverty eradication” seeks to defend the proposal that making economies
green does not necessarily imply a reduction in economic growth and
employment levels. On the contrary, such a transition would allow growth to
be strengthened through the generation of descent jobs 8 and would consist
of a vital strategy to eliminate poverty. It is hoped that the evidence raised by
this study will encourage decision makers to develop favorable conditions for
increased green economy investments, based on three main strategies:
1. Stimulate a change in investments, both public and private, seeking to
encourage critical sectors in the transition to a green economy;
2. Demonstrate how a green economy can reduce persistent poverty through
a wide range of important sectors, including agriculture, forestry, fishery, water
and energy; and
3. Provide guidelines on policies that permit this change; through the
elimination of perverse subsidies, identification of market failures, establishment
of regulatory frameworks or stimulus for sustainable investments.
Nº 8 • June 2011
The report seeks to demystify the idea that there is an inevitable trade-off
between social development, economic growth and environmental sustainability
and dispel misconceptions that green economy is a luxury whose costs only
developed countries can bear. The principal message highlighted by the Report
is that:
8. Employment that provide an adequate salary, social welfare and respect of workers’ rights
that allow workers to express their opinions about decisions that affect their lives. Source: OIT
(2009).

19
GREEN ECONOMY
Challenges and
opportunities
Delineations of a
green economy
Helena Pavese
“An investment equivalent to 2% of the global GDP in ten key sectors
can combat poverty and generate greener and more efficient growth”.
According to the Report, such an investment could be the initial kick-off for
the transition to a green economy with efficient resource use and low carbon.
The authors claim that this amount corresponds to only 1.3 trillion dollars per
year and would drive global economic growth to levels that are probably higher
than those of current economic models 9 .
Agriculture, construction, fishery, forestry, energy supply, industry, tourism,
transport, waste and water management are the 10 sectors evaluated in the
study and identified as fundamental for making the global economy more
green.
For these sectors to transition to a greener economy, in general terms, the
study puts forth the following allocation of resources 10 :
• Agriculture: US$ 108 billion, includes small farms
• Buildings: US$ 134 billion, applied to energy efficiency programs
• Energy (supply): Above US$ 360 billion
• Fisheries: US$ 110 billion, includes reducing the capacity of global fleets
• Forestry: US$ 15 billion to combat climate change
• Industry: US$ 75 billion
• Tourism: US$ 135 billion
• Transport: US$ 190 billion
• Waste management: US$ 110 billion, includes recycling
• Water: a similar amount, includes basic sanitation
The report also presents results and recommendations for specific sectors,
highlighting sectoral opportunities generated by the transition to a green
economy, including poverty reduction, job creation, strengthened social equity
and the maintenance and restoration of natural capital. Among these, the
following stand out:
Agriculture
Nº 8 • June 2011
Reducing deforestation and increasing reforestation generate benefits
for agriculture and rural communities, through the use of economic
mechanisms and existing markets, such as, certifications for wood, payments for
ecosystem services and potential benefits from REDD+ mechanisms, strategies
that can currently be found in national and international discussion forums .
9. UNEP (2011b), p.4.
10. UNEP (2011a).

20
GREEN ECONOMY
Challenges and
opportunities
Delineations of a
green economy
Helena Pavese
Greener agriculture ensures food supply for a growing global population
without harming the resource base of this sector. This can be done through
the transition from industrial and subsistence agricultural practices to more
sustainable models, with more efficient use of water, extensive use of organic
or natural soil nutrients and integrated pest control 12 .
The transition to a green economy also requires strengthened
institutions and the development of infrastructure in rural areas of
developing countries. This aspect includes the removal of ecologically
perverse subsidies and the promotion of regulatory reform that incorporates
the cost of degradation into food and commodity prices 13 .
Greening agriculture in developing countries, concentrating on small
properties, can reduce poverty while permitting investment in natural
capital on which the poorest depend. The adoption of sustainable practices
(such as agroforestry, integrated management of nutrients and pests) is one of
the most efficient ways to increase the availability of food and facilitate access
to emerging international markets for green products. Adopting such practices
can move agriculture from the position as major greenhouse gas emitter to a
neutral position, and also contribute to reducing deforestation and water use
by 55% and 35%, respectively 14 .
Water
The growing scarcity of water can be mitigated through fomentation
policies and investments aimed at improving the provision and efficiency
of water use 15 .
Investments in the provision of drinking water and sanitation services
for the poor represent a great opportunity to accelerate the transition to
a green economy in many developing countries. Annual investments of
0.15% of the global GDP would enable global water use to be maintained at
sustainable levels as well as the achievement of the Millennium Development
Goals related to water by 2015 16 .
The supply of jobs in the water sector would suffer temporary
adjustments due to the necessity of recovering water resources.
Improvements in efficiency and reductions in consumption would reduce
total water consumption by 20% and employment opportunities by 25% by
2050 compared to current rates. However, such forecasts do not capture new
Nº 8 • June 2011
11. UNEP (2011b), p.6.
12. UNEP (2011b). p.7.
13. UNEP (2011b). p.7.
14. UNEP (2011b). p.9.
15. UNEP (2011b). p.8.
16. UNEP (2011b). p.10.

21
GREEN ECONOMY
Challenges and
opportunities
Delineations of a
green economy
Helena Pavese
job opportunities generated by infrastructure developments aimed at water
efficiency 17 .
Energy sector
Renewable energy presents great economic opportunities. “Greening”
the energy sector requires a substitution of investments in carbon intensive
energy sources to investments in clean energy, as well as improvements in
energy efficiency. Many of these investments would be rewarded in the future,
considering the growth in the market for renewable technologies and the
growing concern over the social costs generated by technologies based on
fossil fuels 18 .
Government policies play an essential role in strengthening incentives
for investments in renewable energy, including time-bound incentives, feedin
tariffs (payments for renewable energy that users produce), direct subsidies
and tax credits 19 .
A minimum allocation of 1% of the global GDP to increase energy
efficiency and expand the use of renewable energy would create additional
jobs and produce more competitive energy 20 .
An annual investment of around 1.25% of the global GDP in energy
efficiency and renewable energy could reduce global primary energy
demands by 9% by 2020 and 40% by 2050 21 .
Tourism
The development of tourism, when well designed, can strengthen local
economies and reduce poverty 22 .
Fisheries
Investments in the fisheries management, including the creation of
protected marine areas, and deactivation and reduction in fleet capacity
can recuperate the fishery resources of the planet. Such recuperation entails
an increase in catches from the current 80 million tons to 90 million as well as
the creation of a significant number of jobs in the sector by 2050 23 .
Nº 8 • June 2011
17. UNEP (2011b). p.13.
18. UNEP (2011b), p.14.
19. UNEP (2011b), p.15.
20. UNEP (2011b), p.12.
21. UNEP (2011a).
22. UNEP (2011b), p.11.
23. UNEP (2011a).

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GREEN ECONOMY
Challenges and
opportunities
The benefits from a transition of the fishing industry exceed 3 to 5 times
the investment necessary for this transition 24 .
The job supply in the fishery sector would suffer temporary adjustments
due to the necessity of recovering fish stocks. “Greening” the fisheries
sector would result in job losses in the short and medium terms, but the long
term supply would go back up due to the recuperation of fish stocks 25 .
Delineations of a
green economy
Helena Pavese
Waste management
With a 108 billion dollar annual investment in “greening” the waste sector,
the global recycling of waste could triple by 2050. This would imply a reduction
of more than 85% of the amounts currently deposited in landfills 26 .
Such investments may result in full recycling of electronic wastes, as
compared to current levels of 15% 27 .
A 10% increase in the life-spans of all products produced would lead
to a similar reduction in the volume of extracted resources.
The job supply in the waste management sector would grow as a result
of the increased waste generated by population and income growth, but
the challenges related to the generation of descent employment in this
sector are considerable. Currently, recycling generates around 12 million
jobs in only three countries (Brazil, China and the United States) 28 . In green
investment scenarios, projected growth of the job supply in the waste sector
would be 10% compared to current trends.
Transport
Annual investments of 0.34% of the global GDP up to 2050 could reduce
the use of petroleum by 80%, compared to current patterns, and elevate
employment rates by 6% 29 .
The environmental and social costs generated by the transport sector
are currently at around 10% of the GDP of a country or region.
A “greening” of the transport sector requires the creation of policies to
foster the utilization of public and non-motorized transport, fuel efficiency
and the development of less polluting vehicles.
Nº 8 • June 2011
24. UNEP (2011b), p.11.
25. UNEP (2011b), p.13.
26. UNEP (2011a).
27. UNEP (2011a), p.1.
28. UNEP/ILO/IOE/ITUC (2008).
29. UNEP (2011b), p.23.

23
GREEN ECONOMY
Challenges and
opportunities
Delineations of a
green economy
Helena Pavese
Gr e e n e c o n o m y: p o s s i b l e a n d d e s ir a b l e
The final message transmitted by the report is that a green economy is both
desirable and possible. This concept possesses the potential to promote the
much desired sustainable development and poverty eradication, rapidly and
effectively. A green economy favors growth with the generation of income and
jobs.
However, such a transformation is subject to two great changes: in the way
our economy is structured and in the recognition that the environment forms the
basis of our physical goods, which should be managed as sources of growth,
prosperity and well-being 30 .
Green investments have great potential to strengthen sectors and technologies
that could be the main promoters of economic and social development in the
future, including technologies for renewable energy, energy efficient construction
and low-carbon transport systems 31 .
Thus, in addition to technologies, complimentary investments in human capital
would also be necessary, which includes generating and sharing strategies,
mechanisms and policies that promote a transition to a green economy 32 .
Therefore, the transition to a green economy triggers, according to the
Report, a series of desirable results in the long term, whether in economic,
social or environmental terms. The Report offers clear directives of what can
be done in each of the ten sectors analyzed to bring about such a transition.
The document supports the proposition that a transition to a green economy
would bring benefits in the long term that would compensate for possible short
term losses.
References
Millennium Ecosystem Assessment (2005). Ecosystems and Human Well-Being:
Synthesis. Washington, DC: Island Press, p.1.
OIT (2009). Programa Empregos Verdes. Brasília: OIT.
UNEP (2011a). Rumo a uma economia verde: caminhos para o desenvolvimento
sustentável e a erradicação da pobreza, Press Release United Nations Environment
Programme. Retrieved from: .
UNEP (2011b). Towards a Green Economy: pathways to sustainable development and
poverty eradication. United Nations Environment Programme, p.4.
UNEP/ILO/IOE/ITUC (2008). Green jobs: towards decent work in a sustainable, lowcarbon
world. Nairobi: UNEP.
Nº 8 • June 2011
30. UNEP (2011b), p. 37.
31. UNEP (2011b), p. 37.
32. UNEP (2011b), p. 37.

24
GREEN ECONOMY
Challenges and
opportunities
The necessarily systemic
character of the transition
to a green economy
Alexandre d´Avignon 1
Luiz Antônio Cruz Caruso 2
The green economy as defined in the United Nations Environment
Programme’s (UNEP) publication, “Towards a green economy: pathways to
sustainable development and poverty eradication”, brings a series of challenges.
This economy seeks human well-being and social equity, while reducing
environmental risks and resource scarcity, and is characterized by low carbon
intensity. Certainly this was not the first expression that captures the aspirations
of those who seek structural changes in the capitalist economy, focused on
values other than the maximization of profits, in a perfectly competitive market
tending to equilibrium. The breakthrough of this approach is essentially in its
overcoming the anthropocentric view of nature and the planet, in which these
must serve humankind and attend its needs. As René Passet (1991) pointed,
the order and the cycles of nature must be respected so as not to exhaust its
potentialities and energy sources.
Nº 8 • June 2011
The biosphere and the interactions of its subsystems (atmosphere,
lithosphere, hydrosphere and biota) determine the conditions under which
human activities can take place, whether social or economic. Ultimately, it is
the biosphere that will determine the limits and possibilities of mutual influence
between living beings and the planet. Humans are part of this whole, and an
important part because of their ability to intervene in the environment, but there
is not a hierarchy in which humans are at the top. The relationship between
human societies and the biosphere cannot be reduced to economic or even
social dimensions. Human activities such as are analyzed in economics through
the relations of production, exchange, consumption, etc. represent only a first
sphere of human practices in an ordainment with specific rules established,
included in a broader social sphere, civil society, the state, ideologies etc. Yet
the latter is circumscribed, in turn, by an even broader universe consisting of
inanimate and living matter, which surrounds and extends beyond. It is within
these three spheres – modes of production, formation of society and the
1. Professor of the Program for Public Policies, Strategies and Development of the Economics
Institute of Federal University of Rio de Janeiro (PPED/IE/UFRJ) and researcher at the
Program for Energy Planning (COPPE/UFRJ).
2. Doctoral student at the Program for Public Policies, Estrategies and Development of the
Economics Institute of Federal University of Rio de Janeiro (PPED/IE/UFRJ).

25
GREEN ECONOMY
Challenges and
opportunities
The necessarily
systemic character
of the transition to a
green economy
Alexandre d'Avignon
Luiz Caruso
biosphere – that human activities are inserted. The reproduction and functioning
of each sphere are regulated by the other two. Due to the relationship between
these three spheres of inclusion, it can be affirmed that the elements of the
economic sphere belong to the biosphere and obey its laws, but that all elements
of the biosphere do not belong necessarily pertain to the economic sphere of
economy and are not subject to its rules. As James Lovelock (2001) states, the
earth became what it is through its habitation by living beings and these have
been the means but not the purpose for the planet’s development.
It is interesting to observe, however, that at UNEP’s homepage on the internet,
where the above publication can be accessed, is a statement in small print:
“environment for development.” Is this not a contradiction of the perception
of the program regarding the proposed definition of green economy in the
publication?
Painting neoclassical economics green is not the solution. We need a
structural change in the “household management” (oikos = house + nomia =
management, study or laws, according to Houaiss, 2001), referring to the planet
as the home of all living beings and, as such, needing to be preserved and
respected. Making the conventional economy green, from UNEP’s perspective,
is to prioritize growth of income and employment. The latter are to be stimulated
by public and private investments that reduce carbon emissions and pollution
and promote the efficient use of energy and natural resources, preventing the
loss of ecosystem services and biodiversity. These investments will be catalyzed
and supported by public policy reforms and regulatory changes. The proposed
route of development should maintain, enhance and, where necessary, restore
natural capital, since it is a critical economic asset that generates public benefits,
especially for poor people whose livelihoods and security depend essentially
on nature.
Nº 8 • June 2011
Encouraging public and private entities to assume primary responsibility,
in which the action of external private or public agents is proposed as the
solution, is precisely the approach criticized by Elinor Ostrom (2008). According
to her, this option comes from a metaphorical and specific view contained in
the “Tragedy of the Commons”, described by Garrett Hardin in 1968, and the
Prisoner’s Dilemma model proposed by the same author, as well as the “Logic
of Collective Action” developed by Mancur Olson with the idea of free riding in
joint activities in a community for the public good. Ostrom questions currently
fashionable approaches involving intervention by coercive or regulatory state
action or by the definition of ownership through privatization. Empirically, such
approaches are associated with a huge list of failures. In Ostrom’s view, solutions
should always be defined on a case-by-case basis through agreement among
stakeholders, for managing what she calls the use of common resources, i.e.,
public goods. The author describes a number of real alternative solutions to
external intervention.

26
GREEN ECONOMY
Challenges and
opportunities
The necessarily
systemic character
of the transition to a
green economy
Alexandre d'Avignon
Luiz Caruso
In the UNEP publication, biodiversity, as an example of a public good,
would not be valued properly in neoclassical economics. Nor can neoclassical
economics properly value environmental services, which contribute to human
welfare and family livelihoods and could provide a source of new skilled
jobs. Estimating the economic value of ecosystem services is essential for
the identification of natural capital. This is one of the dimensions that would
support the transition to a green economy, stimulating a change in conventional
economic indicators and leading them to account for the loss of natural capital
as negative and not positive components of national accounts. Is the correct
valuation of these services associated with favorable conditions sufficient
conditions for this transition?
How can one assign new parameters to a green economy, if the essential
discussion of equity and local participation is kept on the sidelines? The
voracious consumption of energy and natural resources characteristic of
industrialized countries shows that this is not a development model that
respects the biosphere, its principles and pace of regeneration. The legacy left
by development based on fossil fuels has brought to the forefront global issues
such as climate change and ozone layer destruction, revealing economic options
that were imposed, causing the abandonment of innovations that could have
been stimulated by national innovation systems, which would involve R&D,
legal framework of incentives and patent system. An important example would
be the intensive use of biomass through the BTL (Biomass to Liquid) or BTG
(Biomass to Gas) at a growth rate appropriate to the regenerative capacity of
natural resources. Energy from solar and photovoltaic sources, wind power,
hydrogen, more efficient batteries were not adequately exploited due to current
technological route, causing the abandonment in the past of other options.
It is worth recalling that Rudolf Diesel patented his engine to work with
vegetable oils, in this case of peanuts, and even before his presentation at
the Paris World Fair in 1898, there were manufactures of vehicles with electric
motors. The latter have proliferated in public transport with trams, which were
later replaced by internal combustion vehicles in several cities. If there had not
been an imposition by specific economic sectors, these technologies could
have persisted and received a share of investments from national innovation
systems. In this case, the options nowadays in terms of development of
technologies considered as alternatives would have been much more promising,
comprehensive and widespread.
Nº 8 • June 2011
This short historical account raises other issues related to the green economy.
Could the problems generated by the economy practiced today be overcome by
adopting the recommendations proposed by UNEP, during the next 20 years,
as indicated by the scenario options displayed in “Towards a Green Economy:
Pathways to Sustainable Development and Eradication Poverty”? Shouldn’t

27
GREEN ECONOMY
Challenges and
opportunities
The necessarily
systemic character
of the transition to a
green economy
Alexandre d'Avignon
Luiz Caruso
the economic model proposed have been adopted years ago due to the global
issues we face today such as global warming? Isn’t it now too late?
In addition to the balanced access to natural and energy resources by the
planet’s population, there is a need for the development of technologies based
on regional vocations and not the imposition of a technological pathway derived
from economies of scale and short-term profits. The technologies relating to
the burning of liquid or solid fossil fuels in thermodynamic cycles generally
capable of using no more than 30% of energy supplied, rather than more
elegant alternatives, such as the manufacture of polymers, is an example of
the imposition of a single pathway, dominated by large global organizations.
Cogeneration of power and fixed systems integrated to generate electricity
and heat, for example, are much more efficient and would provide yields up to
50% in automobile engines.
Temporal equity is another important element to be taken into account, since
it brings us to the origin of the concept of sustainable development contained
in “Our Common Future”, a publication resulting from the 1987 Brundtland
Report. This book provides as one definition of the concept: “Development that
seeks to meet the needs of the present generation without compromising the
ability of future generations to meet their own needs.” This means enabling
people, now and in the future, to achieve a satisfactory level of social and
economic development and human and cultural accomplishment, making, at
the same time, reasonable use of land resources with preservation of species
and habitats. The latter element does not appear explicitly in the green economy
concept proposed by UNEP, but it does appear when it proposes to prevent
loss or depletion of environmental services and biodiversity.
Nº 8 • June 2011
The United Nations´ Framework Convention on Climate Change (UNFCCC),
while incorporating concepts such as the precautionary principle and of
common but differentiated responsibilities, also promotes another concept
related to an international economy favorable and conducive to sustainable
growth and development, particularly in developing countries. This perception
of international cooperation is essential for a structural transformation in the
economy. The creation of national innovation systems that are integrated
with international systems, promote environmentally sound technologies
aimed at conserving biodiversity and ecosystem services and reversing the
planet´s degradation and is patents free, is increasingly imperative. Market
mechanisms or governmental regulations lack the necessary vitality to drive
the radical transformations required to implement a planet-level management
that harmonizes the interaction between human activities and the biotic and
a-biotic environments. These mechanisms do not provide adequate information
or, as in the case of market-defined prices, or do not have enough information,
especially in the case of governments. Moreover, these mechanisms do not
seem feasible to keep pace with the urgent needs of reversing degradation,

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GREEN ECONOMY
Challenges and
opportunities
The necessarily
systemic character
of the transition to a
green economy
Alexandre d'Avignon
Luiz Caruso
eliminating poverty and providing quality of life for the biosphere´s inhabitants.
A national system of information with the specific objective of creating agreed
alternatives, associating the interested stakeholders, could develop research
and technologies with a sustainable and environmentally harmonious bias.
Schumpeterian and neoschumpeterian approaches provide some important
elements for rethinking the economy. They focus on technology as a vector
for transformation of human societies and emphasize the concept of creative
destruction, aligned with the idea of using crises as levers for transformation.
They do not view an economy as tending toward equilibrium, but as an everchanging
system that is redesigned whenever new options or other technological
paradigms emerge. In the case of evolutionary economics, the replacement
of old technologies with new ones could provoke disruptions to conventional
paradigms. From an environmental perspective, the main impulse leading to
disruptions would be increasingly clean technological options, which would
replace those that have become environmentally and climatically “obsolete.”
This approach certainly would not bring extraordinary profits to entrepreneurs
because they would still lack scale and competitiveness, but it would take into
account the negative externalities caused by conventional, environmentally
obsolete technologies. It would require temporary incentive mechanisms for
the new technological to gain scale and autonomy. Such incentives would be
extracted from the negative impacts, or in other words, the negative externalities
of conventional technologies. For example, the value of hospitalizations caused
by the use of private transport in large cities would no longer be paid by the
government, if such transport were substituted by collective options without
emissions.
In the reflections contained in the UNEP publication, the transition to a green
economy involves two types of myths. The first refers to a lack of simultaneous
co-existence between economic growth and environmental sustainability. The
second concerns an interpretation that the transition is a way for rich countries
to perpetuate poverty in developing countries. To question the validity of these
myths, the paper’s authors used the projection model T-21 (Threshold 21)
and simulated the behavior of some variables, generating scenarios for a
green economy. In addition, they compared these results with the results of a
business-as-usual trend and concluded that there are numerous advantages
to investing in natural capital. The use of scenarios to explore future trends
based on current conditions is a useful tool, but it is quite fragile over a 20-year
timeframe, as in the present case.
Nº 8 • June 2011
According to the authors, the T21 model was designed to support a
comprehensive and integrated planning process for countries. It consists of
three pillars: economic, social and governmental. It is important to emphasize
that the economic pillar includes the agriculture, industry and service sectors,
which are characterized by Cobb-Douglas production functions with inputs of

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Luiz Caruso
labor, capital and technology (Mahmoud and El Sebaei, 2005). In this general
equilibrium model variations were introduced in the dynamics of some sectors
to see the impact on future GDP, employment, the intensity of resources used,
emissions and environmental impacts. Eight major sectors were chosen as
those capable of setting trends for transition to an economy characterized by
poverty alleviation, investment in the maintenance and restoration of natural
capital, job creation and improved social equity, incentives for renewable energy
and energy efficiency, and urban mobility and sustainability.
The first sector analyzed was forestry. The transition in this sector would
require: reduced deforestation and expansion of reforestation; certification of
forest products; payment for environmental services; and REDD+, assuming
legal changes and modifications in local governance. Certainly, this would be a
promising path, but it is important to remember that there has been no regulation
of REDD+ and that the conventional activities such as production of livestock
and export led monocultures are large-scale vectors that are basically contrary
to this approach. Other related measures would be necessary to encourage the
practice of semi- or full-confinement of livestock to reduce pressure on forests, to
encourage using animal waste and plant residues for energy generation, etc.
The second sector, agriculture, would require changes in family farming
and agribusiness in the direction of: practices for managing soil fertility; more
sustainable and efficient use of water, seed diversification; management
of animal and plant health; appropriate level of mechanization; integrated
management of pesticides; and integrated management of nutrients. The
reduction or elimination of subsidies that distort the real cost of agricultural inputs
is also required. It is interesting to emphasize that the integrated activities, such
as agro-silvo-pastoral systems, are non-conventional solutions that, similar to
bio-digesters for producing biogas and bio-fertilizer, deserve proper attention.
Remember that integrated systems can meet most of a rural activity´s needs
for energy and raw materials, both in a family and in a business operation. The
wastes and residues, when properly used in rural activities, become sources
of energy and fertilizer.
Nº 8 • June 2011
The third sector is related to the scarcity of water and requires improvements
in managing its supply and efficient use. In developing countries, such
improvements frequently need to focus on reservoirs and sanitation, associated
with changes in institutional arrangements. In this case, the main focus would
be the care of water bodies currently threatened by pollution caused by poor
sanitation. This would certainly be the main vector for reducing waterborne
diseases and creating the necessary conditions to improve the quality of life
for the poor in most developing countries.
In the fourth sector, fishing, the sustainable management of fisheries
is paramount. Steps toward sustainable management of fisheries include
strengthening management and financing the reduction of excess fishing

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The necessarily
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Luiz Caruso
capacity worldwide. Such steps clearly involve external intervention, which
might hinder innovative solutions related to sea culture and other practices
aimed at restocking the oceans, rivers and lakes.
The fifth sector, ecotourism, improvements would lead to local economic
development and poverty reduction. The greening of the sector would increase
local community participation, especially the poor, in the tourism value chain,
thereby reducing poverty. Tourism activities often have no commitment to local
activities and, instead, frequently degrade areas where local communities carry
out those activities. It will be necessary to provoke a fairly sharp transformation
in the culture of this sector to ensure that tourism becomes a vector for poverty
alleviation.
With respect to renewable energy and energy efficiency, the sixth sector,
the growing supply from renewable sources reduces the risks of increasing the
volatile prices characteristic of fossil fuels, and also helps to mitigate emissions
of greenhouse gas emissions. There would be considerable potential for growth
in this sector, through investments in renewable energy, including second
generation bio-fuels. In this case, greening would require that investments
migrate from carbon-intensive technologies to clean energy and energy
efficiency improvements. Investments in renewable energy and energy policies
could improve the living standards and health of populations.
Until the outbreak of economic crisis, investments in alternative sources
of renewable energies and energy efficiency (excluding nuclear sources and
large hydropower projects) were steadily growing. In 2004, they totaled US$ 46
billion and had multiplied almost five times by 2008, reaching US$ 173 billion,
or nearly 10% of global investments in energy infrastructure according to the
UNEP publication. Just in power generation, renewable and energy efficiency
achieved 42 GW of the capacity installed in 2008, nearly a quarter of the total
(190 GW) installed that year. The growth of investments, which range from
private and public R&D to programs in private companies and government
agencies, were closely associated with distributed generation, in which the
small decentralized units are prioritized over centralized production.
Nº 8 • June 2011
According to the IPCC, to stabilize CO 2 e concentrations at a level of 450 ppm
by 2030 will require a reduction of 60% in CO 2 e emissions in relation to 1990.
This challenge means that, within a few decades, a complete restructuring of the
planet´s energy infrastructure will be required. Although not precisely estimated,
according to the Stern Report these changes would absorb approximately 1% of
global GDP. If we take into account the overall GDP of 2007 of US$ 54 trillion,
this would mean required investments of US$ 540 billion per year. Another
estimation in 2008 by the International Energy Agency indicates a need for
annual investments of US$ 550 billion in alternative renewable energy sources
through 2030 to stabilize concentrations at 450 ppm CO 2 e. In the case of New

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The necessarily
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of the transition to a
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Luiz Caruso
Energy Finance’s Global Futures, the estimated average annual investment
is US$ 515 billion.
Certainly these figures are much higher today than those observed in the
years before the crisis, and it would take at least three years of growth at 50%
per year to reach the required levels just in the energy sector, taking into account
the level of 2009 investments (US$ 162 billion). Forms of distributed power
generation associated with other economic activities would be critical for this
transition. For distributed generation, this means easing taxation to encourage
decentralization and stimulate self-generation.
In transport, the seventh sector, improving the energy efficiency of the different
modes of transport is a fundamental requirement in the evolution from private
to public transport and to non-motorized transport. Urban mobility is closely
linked to spatial occupation across the landscape by people. In developing
countries, the high urban growth and concentration observed in recent decades
undermines the sustainability of cities, which wind up “dominating” areas far
beyond their borders. Planning of urban land occupation and incentives to
reverse the flow of migrants seem crucial to halt the continued growth of vehicles
and the continued deterioration of public health in these centers. The use of
high quality, electric public transport and other alternatives is fundamental for
transition to take place.
Finally, in the manufacturing industry, the central strategy would be to extend
the life of the manufactured products by increased emphasis on redesign,
remanufacture and recycling, which constitute the core of closed-circuit
production. This eighth sector would be of vital importance. But how to slow the
pace of production growth for a population that continues to grow? Respecting
nature’s cycles and generating waste at a pace that can be absorbed by those
cycles seems the best path. It is necessary, however, to make use of more
sophisticated tools such as life cycle analysis to increase the efficiency in the
use of natural resources and, sharply decreasing the amount of raw materials
in consumer goods and durables and, as a result, the amount of energy used in
manufacturing processes. The European Union has already adopted a 4-factor
reduction, i.e. a quarter of the amount of raw materials for new products. Some
countries already show a 10-factor reduction. Changing the current preferences
from unused to recycled commodities generates substantial conflicts in some
sectors. Likewise, changing the established pace of growth in the production of
iron ore, soybeans and meat is a Herculean task. Dematerializing contemporary
society still seems a distant dream.
Nº 8 • June 2011
Using changes in the variables proposed by the publication and applying them
to the T21 model, result in the scenarios that point to a green economy growing
faster than the business-as-usual while also maintaining and restoring natural
capital and promoting poverty reduction (UNEP, 2011). This application bears
resemblance to the World 3-91 program, established to formulate “The Limits to

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The necessarily
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of the transition to a
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Alexandre d'Avignon
Luiz Caruso
Growth”, first published in 1972, later reissued as “Beyond the Limits” in 1992
and finally republished in 2004 under the title “Limits Growth: 30-Year Update”,
which showed that there was still hope because we had not yet exceeded the
limits of no return. The limits model, based on the systems dynamics of Jay
Forrester, operated in a highly aggregated fashion without taking into account
political changes, war or widespread shortages.
The second myth discussed in the UNEP publication – that the transition
would be a way for rich countries to perpetuate poverty in developing countries
– has thornier issues to address. According to Kemp and Soete (1992), we
are already in a transition from a fossil fuel-based economy to a low-carbon
economy. In this phase, greener economic activities would primarily use end
of pipe technologies and some cleaner technologies. Moving toward a lowcarbon
economy requires investments in the generation and diffusion of cleaner
technologies. The diffusion of a range of cleaner technologies is subject to
changes in the institutional framework that supports economic activities. A
reorientation of policies related to education, and science and technology, and
the integration of environmental policies with those of other sectors, would also
be necessary.
In the long term, many green economic activities will derive from the
convergence of technologies such as nanotechnology, biotechnology and
information and communication technologies. The UNEP publication calls
attention to the fact that the transition from the current economy to a green
economy requires a well-planned regulatory framework that creates incentives
to drive green economic activities, as well as to remove barriers to green
investments. However, the transition depends not only on institutional but
also technological innovations. Some of these innovations are complex,
multidisciplinary, and require complementarities between companies and
research institutes. Miles and Leite (2010), on citing Roco (2007), identify
four generations in the process of developing nanotechnologies: passive
nanostructures; active nanostructures; systems of three dimensional nanosystems;
and nano-systems comprised of heterogeneous molecules. Only in the
first generation do we find some evidence of efforts in research and generation
of innovations in developing countries.
Nº 8 • June 2011
According to Fonseca, Bianchi and Stallivieri (2010), the core of modern
biotechnology is built around the basic knowledge of genetic engineering, i.e.,
molecular biology, genomics and proteomics. In 2009, however, of the total
projects in genomics, 91% were concentrated in the United States, Britain,
Japan, France and Germany. If this indicates a trend toward domination of new
technologies by developed countries, it is appropriate to add a further reflection
regarding socio-technical transition. According to Geels and Schot (2007),
the socio-technical regime is an extended version of the technological regime
of Nelson and Winter (1982), which refers to shared cognitive routines in an

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The necessarily
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of the transition to a
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Alexandre d'Avignon
Luiz Caruso
engineering community that explain development patterns along technological
trajectories. Sociologists of technology expanded this explanation, arguing that
scientists, political decision makers, users and special interest groups also
contribute to the standardization of technological development.
If there is a technological regime dominated by developed countries that
strongly condition the technological development of developing countries,
windows of opportunity could be built that would be particularly conducive to
the development of cleaner technologies in nanotechnology and biotechnology.
Certainly there is no guarantee that this will be done, since the ownership of
the technology and the pathways for its development adds value to the product
of developed countries.
Concerning professional training and qualifications, the UNEP publication
emphasizes the need to retrain the workforce as part of the restructuring process
needed to transition to a green economy. This emphasis is particularly important
for the change in the energy matrix that is taking place in developed countries.
The publication also highlights that the withdrawal of investments in fishery
assets will generate a need to retrain the workers in this sector. Furthermore,
it is worth noting that, according to the OECD (2011), qualified people play a
crucial role in innovation through the new knowledge that they generate, how
they adopt and adapt existing ideas, and their ability to learn new skills and
adapt to a changing environment. The OECD also highlights the importance of
becoming familiar with the different types of skills that contribute to innovation
and better ways to build them, so as to design policies that contribute to the
sustainable development of such skills.
Nº 8 • June 2011
In this sense, the OECD also points out that the qualifications for innovation
could be any skill, proficiency, competency or attribute that contributes to the
implementation of new products, processes, marketing methods or methods
to organize the workplace. When it comes to establishing some type of
measurement, the focus is on the group known as human resources in science
and technology (HRST). The HRST are the people involved or who have
adequate training to be involved in the production, development, dissemination
and application of systematic scientific and technological knowledge. Within
the HRST, researchers are an important group, because the effectiveness of
spending on R&D critically depends on the efficient allocation of workers directly
involved in its implementation. The number of these workers is therefore an
important indicator of a nation´s scientific and technological capacity. In 2006
there were about four million researchers working in R&D in OECD countries,
i.e., a ratio of 7.4 researchers per 10,000 employees (OECD, 2011).
Although there is not an equivalent indicator for developing countries, and
since their rates of completing higher education are lower, we can infer that these
countries show a significant difference in their ability to generate innovations in
relation to developed countries. Thus, if developing countries do not have clear

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Luiz Caruso
policies, and in the absence of international regulations that promote technology
transfer from developed countries to developing countries, the second myth
could become a reality.
The UNEP document raises another delicate point in discussing this concept
and associating it with the sectors that generate the greatest emissions of
anthropogenic greenhouse gases in developing countries, such as agriculture
and forests, related to land use. Developed countries as a group are still those
that emit more and the sectors responsible for most emissions in these countries
– such as conventional power generation using coal, transport and buildings
– were practically out of the discussion, with the exception of transport and
renewable energy. It is necessary to provide greater details on the emissions
of developed countries and suggest solutions to decarbonize their economies,
as well as mechanisms to contribute effectively to “greening” the economies
of developing economies.
In sum, the UNEP document seems to present an overly optimistic vision
about the transition to a green economy. An effective transition would occur
if there were a change in the prevailing view about the solutions contained in
the UNEP report, such as those associated with the need for governmental
regulations or the definition of property rights through privatization as proposed
by neoliberals.
Local solutions seem to provide a clue and may become an important driver of
innovations in the workplace, in association with interest groups. The search for
flexible solutions, in which there is greater participation of affected communities,
seems to be a decisive factor for a desired transition. The questioning of
developed countries´ voracity for energy and natural resources, to the detriment
of developing countries, appears to be another essential element. Equity in the
use of these resources would build the solidarity required for a transition to an
economy that is more harmonious with the environment, while seeking other
theoretical lines, beyond the neoclassical, that provide a conceptual foundation
for alternatives to the degrading pathway which we are currently following.
Nº 8 • June 2011
References
Debier, J. C., Deléage, J. P. and Hermery, D. (2002). Uma história da energia. Brasília:
Edunb.
Fonseca, M. G. D., Bianchi, C. and Stallivieri, F. (2010). Biotecnologia no Brasil: uma
avaliação do seu potencial empresarial e industrial. Brasília: SENAI.
Geels, F. W. and Schot, J. (2007). Typology of sociotechnical transition pathways.
Research Policy, Amsterdam, 36, 399-417.
Houaiss, A. (2001). Dicionário Houaiss da Língua Portuguesa. Rio de Janeiro: Ed.
Objetiva.
Kemp, R. and Soete, L. (1992). The greening of technological progress: an evolutionary
perspective. Futures, 24(5), 437-457.

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opportunities
The necessarily
systemic character
of the transition to a
green economy
Alexandre d'Avignon
Luiz Caruso
Lovelock, J. (2001). Gaia – um modelo para dinâmica planetária e celular. In W. I.
Thompson (org.), Gaia, uma teoria do conhecimento. 3ª ed. São Paulo: Gaia.
Mahmoud, A. S. and El Sebaei, N. M. (Ed.) (2005). Proceedings of the Workshop T21
Model as a tool for studying the future of development in developing countries. Cairo:
Center for Future Studies.
Meadows, D. and Randers, J. (2007). Limites do crescimento, a atualização de 30 anos.
Rio de Janeiro: Qualitymark.
Miles, I. and Leite, E. (2010). Nanotecnologia: oportunidades para a indústria e novas
qualificações profissionais. Brasília: SENAI.
Nelson, R. R. and Winter, S. G. (1982). An Evolutionary Theory of Economic Change.
Belknap Press, Cambridge, Mass. and London.
Nobre, M. and Amazonas, M. C. (2002). Desenvolvimento sustentável: a
institucionalização de um conceito. Brasília: IBAMA.
OECD (2011). Skills for innovation and research. Paris: OECD.
ONU (1994). CQNUMC.
Ostrom, E. (2008) Governing de commons, the evolution of institutions for collective
action, 22nd printing. Cambridge: University Press.
Passet, R. (1979). L´économique et le vivant. Paris: Payot.
UNEP (2011). Towards a Green Economy: Pathways to Sustainable Development and
Poverty Eradication - A Synthesis for Policy Makers. Retrieved from: .
Nº 8 • June 2011

36
GREEN ECONOMY
Challenges and
opportunities
Green economy and/or
sustainable development?
Donald Sawyer 1
Green Economy, in addition to international governance and poverty
eradication, will be a central theme of the Rio+20 conference in 2012 (UN,
2011). This term, which first emerged in the context of the Earth Summit in 1992
(Adams, 1997), was recently elaborated upon in a United Nations Environment
Programme report published in six languages (UNEP, 2011). In short order,
an apparent global consensus was reached (Belinky, 2011). Green Economy
seems to be an alternative to Sustainable Development, which had been
acclaimed in Rio de Janeiro in 1992.
Green Economy is directly related to climate change: low carbon, energy
efficiency, renewable energy etc. (Gouvello, 2010; ESMAP, 2010). In order
to compensate for the strong emphasis on climate since 2007, biodiversity
and ecosystems were reincorporated in the international discourse through
an initiative called The Economics of Ecosystems and Biodiversity (TEEB),
organized by UNEP and funded by the European Commission and European
governments 2 (Sukhdev, 2010, 2011). However, the environmental impacts of
industrial pollution and urban waste (the “brown agenda”) as well as oceans,
surface and ground water (the “blue agenda”) are not receiving the attention
they deserve. Flows of atmospheric water (“aerial rivers”), which could be the
focus of a “white agenda”, remain invisible in the policy arena (Salati, 2009;
Arraut et al., 2011).
The treatment given to Green Economy will make big differences for public
policies, the role of the State (the governance that we have now) and production
and consumption patterns. It will generate a wide variety of repercussions
throughout Brazil and the world. The expected positive effects may not
materialize and various unexpected negative effects could lead to unpleasant
surprises if there is not adequate analysis of all the relevant factors at play.
Nº 8 • June 2011
1. Professor at the Center for Sustainable Development of the University of Brasília (CDS/
UnB) and Associate Researcher at the Institute for Society, Population and Nature (ISPN).
The research was carried out with support from the European Union, through the projects
on “Eco-social Links among Brazilian Forests: Sustainable Livelihoods in Productive
Landscapes” (FLORELOS) and “Environmental Governance in Latin America and the
Caribbean” (ENGOV), among other sources, but does not necessarily represent the
viewpoints of these institutions or sources, being the exclusive responsibility of the author.
2. Germany, the Netherlands, Norway, Sweden and the United Kingdom.

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GREEN ECONOMY
Challenges and
opportunities
Green economy and/or
sustainable development?
Donald Sawyer
Caution is required in use of the term Green Economy, apparently instead of
Sustainable Development, a term sometimes considered worn out and misused
(FASE, 2011). Great care must be taken to avoid outcomes that are insignificant
or even perverse, especially by diverting attention to issues and territories that
are of secondary importance, without maintaining diverse ecosystems functions
or attending to present and future human needs.
Despite the similarities, Green Economy runs great risks of being transformed
into something very different from Sustainable Development. Although it is
vague, the term Sustainable Development (Brundtland, 1987) and its explicit
meaning (meeting present needs without compromising the ability of future
generations to meet their own needs) were approved by all the countries in
the world in 1992. It must be remembered that any consensual diplomatic
language, especially as a result of global agreements, is necessarily vague.
Green Economy, in addition to lacking strong political support, may be worse
than Sustainable Development in terms of its implicit meaning and its possible
uses and abuses.
Since it requires meeting the needs of present and future generations, i.e
establishing both intra- and intergenerational equity, Sustainable Development
is necessarily systemic in space and time and among sectors. Green Economy,
on the other hand, may not go beyond superficial inclusion of a few new sectors
or additional layers. Green activities or projects currently in fashion might not go
far beyond photovoltaic panels, wind turbines, remote national parks, recycling
schemes, organic farms and jungle lodges, without changing what really
counts: unsustainable production and consumption patterns. Green Economy
can easily be turned into cosmetic greenwashing, not to mention doing little or
nothing to reduce poverty.
Green Economy, based on monetary valuation and economic instruments,
tends to reduce everything to monetary values, foreseeing payments made
by polluters and received by environmental service providers (World Bank,
2010). This does not necessarily imply “market environmentalism” (FASE,
2011), but it is not true that everything in life is or should be commodities. We
cannot avoid cost-benefit calculations and the reality of the financial world, but
not everything in society, the population and nature can be reduced to goods
or services. There are no markets for human beings, cultures, rights, health,
flora, fauna or ecological functions.
Nº 8 • June 2011
Worse yet is the probability that there will never be enough money in Brazil
or the world to pay for all the existing environmental services. For example, if
the Legal Reserves and Permanent Preservation Areas defined in the Brazilian
Forest Code have a total area of 100 million hectares and the owners receive
only $200 per hectare per year to not deforest these areas, a conservative
estimate, the annual total cost would be $20 billion. The Brazilian Family Grant

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GREEN ECONOMY
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Green economy and/or
sustainable development?
Donald Sawyer
(Bolsa Família) program costs $10 billion per year. Would government ever
spend more on payments for environmental services than on family grants?
The World Bank estimates that Brazil would need $21 billion per year to reduce
carbon emissions (Agência Brasil, 2010; World Bank, 2010). Others estimate
$13 billion (EFE, 2010). Meanwhile, the government is trying hard to cut $30
billion from its budget.
Payment for Environmental Services (PES) has great appeal, but raises
various questions (Amazonas, 2010; Pirard et al., 2010). One of the risks of
paying producers for their services provided is that it suggests that anyone else
not receiving these payments is not obliged to behave correctly. Another risk
is the implication that anyone who receives PES has the right to destroy the
environment if and when payments are no longer received. Moreover, there
is the problem of “free-riders”. In this case, rural producers who do not protect
nature benefit for free from the services provided by producers that sacrifice
production for the benefit of nature.
There are also fundamental ethical questions. Is it correct to pay someone
not to harm others? Should the costs of negative externalities not be assumed
by producers, rather than being passed on to taxpayers or consumers? On
the other hand, do positive externalities require remuneration? In the event of
compensation, as could happen with international payments, is there not a sort
of “indulgence”, i.e. paying a fee to continue living in sin (polluting)?
As for international transfers of new and additional financial resources
from developed to developing countries, it is certainly possible to make such
demands, but it would be unwise to expect much actual payment, especially
in the case of relatively developed countries like Brazil, which aspires to play a
role of global leadership. It is clear that donors are now giving priority to small
islands and Africa.
It is important to perceive the economic interests underlying the new
proposals. On the one hand, changing the noun from “development,” with
its multiple dimensions (at least social and environmental, if not others) to
“economy” limits the scope to only one of the dimensions. This tends to empower
economists and their “economic instruments” as opposed to state regulation,
which is denigrated as “command and control”. Nature becomes “natural
capital”. This approach seems to be based on professional class interests. On
the other hand, many governments, entrepreneurs and NGOs seek to jump on
the bandwagon or gravy train of opportunities for green business and managing
the new funds.
Nº 8 • June 2011
International or global governance, in turn, tends to empower UNEP or
another agency to receive generous funding and become a specialized
international super-agency, with potential international police powers. However,
such an agency would be subject to the interests of the donors.

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GREEN ECONOMY
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Green economy and/or
sustainable development?
Donald Sawyer
At the same time, international or global governance contradicts sovereignty,
a fundamental and practically sacred principle. Although problematic in
practical terms, sovereignty should only be questioned in extreme cases of
grave violations, not in diffuse, routine affairs. It would be more coherent and
defensible if international interventions were approved by the United Nations,
not by a specialized agency.
The appeal of the adjective “green” seems to have been taken over from
political movements, including green parties and environmental movements
such as Greenpeace, which share few or none of the principles on which
the Green Economy is based. At a first glimpse, “green” would have more in
common with the environment than sustainability, but in reality it narrows the
scope in various ways. Sustainability is not just green, but includes a whole
range of colors, if not lying somewhere over the rainbow.
The Green Economy discourse is well developed in terms of natural
capital, poverty reduction, low carbon, energy efficiency, innovation and global
governance, all of which are interesting features. However, it should be noted
that all these concepts or terminologies can also be ingenious ways to replace
or relegate sovereignty, equity, nature, ecological functions, sustainable use,
fundamental human and citizenship rights and reduction of emissions (which
can include use and sequestration of carbon), among other important values.
In practice, topical “green” changes can constitute alternatives that avoid
systemic change. Green Economy runs the risk of being limited to tokenism
that actually maintains the status quo in environment, society and the economy.
It could perpetuate the almost exclusive focus on the Amazon rainforest to the
detriment of other biomes and urban areas where the majority of the population
lives. Ultimately, it lets governments get off the hook instead of doing what they
should or have committed to doing.
Thus, there are various possible perverse and unexpected effects of the
Green Economy approach that should be taken into account. Existing proposals
seem to ignore rebound and backfire effects resulting from increased efficiency.
Did the Industrial Revolution not increase efficiency and unleash consumption?
A few green jobs, albeit entirely positive when seen in isolation, can eliminate
many conventional jobs through the substitution of labor by modern technology
(capital).
Nº 8 • June 2011
More than promoting innovation and patents, a discourse used to justify
investments in scientific research (MCT, 2010a, 2010b), countries like Brazil
need application of technologies that are already known. They are in greater
need of competence than innovation. Brazil does not have enough engineers,
qualified construction workers, truck and tractor drivers, trained electricians
and teachers at all levels. Bridges and roads collapse or become blocked,
electric power is subject to frequent blackouts and the quality of education is

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GREEN ECONOMY
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Green economy and/or
sustainable development?
Donald Sawyer
far from sufficient. Improving this situation does not require new technologies
transferred from developed countries.
In the final analysis, the Green Economy may favor the rich and central
countries. It seems to be a strategy to promote sale of technology from the
North to countries of the South. Although it does not confuse “sustained growth”
with Sustainable Development, which is a common error, growth in GDP
continues to be the top priority, as long as it is uncritically classified as green
(Latouche, 2005). Green Economy leaves out vulnerability and adaption to
climate change (Lahsen, 2010) and justifies incentives or subsidies for various
green lobbies.
In sum, in order to contribute significantly to Sustainable Development rather
than avoiding it, Green Economy cannot be limited to isolated, business-oriented
initiatives supported by policies with such a narrow focus. Private enterprise
needs to be involved, but policies and programs would have to be public in
terms of guaranteeing fundamental rights and maintaining interdependent
ecosystem functions. Green Economy would have to be a social-ecosystemic
strategy adopted by the State and covering all sectors and territories.
Some of the participants in the process are aware of these issues. The
Chinese diplomat responsible for coordinating the organization of Rio+20,
Secretary-General Sha Zukang, insists that we are dealing with Green Economy
in the context of Sustainable Development and poverty reduction. To him, who
has strong political support, the conference is not about an isolated Green
Economy, but one that exists within a broader economic and social context.
Various other visions of the future are possible (Bursztyn, 2008; Sachs, 2010;
Machado, 2010; Sanwal, 2011; Abramovay, 2009; Lesbaupin, 2010; Prins,
2010; Martins, 2010). Recently, new anti-capitalist proposals have emerged
in Latin America, such as the rights of nature and Pacha Mama, against the
mercantilization of nature (Bacarji, 2010; UNDP, 2010). Dialogue would be
desirable and, from a United Nations perspective, necessary.
Most important of all would be to see what could be done here and
now, without ambitious treaties, global governance agencies, new financial
resources and transfer of new technologies (Sawyer, 2011). There is room
for action on various levels: national, bilateral, regional and among emerging
countries. Otherwise, good intentions could generate innocuous or negative
results.
Nº 8 • June 2011
In the short run, Sustainable Development could be operationalized in
terms of already existing fundamental rights, such as human rights, which are
universal, or citizenship rights, which are national (ESCR-Net et al., 2010; IISD,
2010; Lusiani, 2010; Santilli, 2005; Sousa, 2010; Varella, Leuzinger, 2008).
Rights refer to ethical values (Grasso, 2010) and imply duties. One’s own
rights end where the rights of others begin. The rights of future generations to

41
GREEN ECONOMY
Challenges and
opportunities
Green economy and/or
sustainable development?
Donald Sawyer
meet their needs depend on the duties of present generations and limit their
freedom. This realist approach, within existing legal frameworks and institutions,
is possible.
In conclusion, both Green Economy and Sustainable Development can and
should be promoted. Green Economy can be more concrete, instrumental
and popular, and Sustainable Development more abstract, diplomatic and
governmental. The economic approach labeled as green can generate
awareness among decision-makers, appeal to business interests and placate
proponents of development, especially in developing countries. However, the
advances of 1992, which constitute an historical landmark for humanity, should
not be lost from sight, nor should the Earth Charter and the progress achieved
over the past 20 years. What really matters are the needs of the planet and
present and future generations, all of which depend on functioning ecosystems,
with or without additional financial resources, transfer of technologies and new
forms of global governance.
Nº 8 • June 2011
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GREEN ECONOMY
Challenges and
opportunities
Green economy and/or
sustainable development?
Donald Sawer
Nº 8 • June 2011
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World Bank (2010). Economics of adaptation to climate change: synthesis report.
Washington: World Bank. 136p.

43
GREEN ECONOMY
Challenges and
opportunities
International perspectives
of the transition to a
low-carbon green economy 1
Eduardo Viola 2
In it ia l c o n s id e r a t io n s
A fundamental dimension of an international green economy is the low
carbon intensity, which will be the focus of this article. A solid transition to a
green economy assumes the continuous reduction of carbon emissions in
developed countries, an accelerated decrease in the emissions growth curve
starting before 2020 and the establishment of a stabilizing year for emerging
mid-income countries, in addition to an accelerated decrease in the carbon
intensity of GDP globally. In the case of rich countries, there should be an
accelerated decrease in per capita emissions, and in the case of mid-income
countries, an accelerated reduction in the carbon intensity of GDP and a light
and continued fall in per capita emissions. Poor countries would still be allowed
space to increase their per capita emissions.
Emissions of GHG grew by 3% during the first decade of the 21st century,
according to information from the Netherlands Environmental Assessment
Agency 3 . Including figures from diverse sources on deforestation in Brazil and
Indonesia, the main emitters in 2009 were: China, responsible for 24% of the
global total (and a 5% annual growth over the last decade), the US with 19% of
total emissions (and 0.8% annual growth), the European Union (27 countries)
with 15% of the total (growing at 0.3% annually), India with 7% of the total
(growing at 6% per year), Russia with 5% of the total (and annual growth of
5%), Brazil with 4% of the total (4% annual growth until 2004, which drastically
reduced between 2005 and 2009), Indonesia with 4% (growing by 4% per year),
Japan with 3.5% (0.4% annual growth), Mexico with 2.5% of the total (growing
at 2% annually), Canada with 2% of the total (growing at 1.5% per year), South
Africa with 1.5% per year (growing at 2% per year), South Korea with 1.5% of
the total (growing by 0.7% annually) and Saudi Arabia with 1.5% of the total
(growing at 6% per year).
Nº 8 • June 2011
1. Article written to be published by Conservation International in a volume about green
economy.
2. Full Professor at the Institute of International Relations, University of Brasília, Coordinator of
the Climate Change and International Relations Research Network and Senior Researcher at
the Brazilian Council for Scientific and Technological Development.
3. The most important institute producing data on greenhouse gas emissions in the world.

44
GREEN ECONOMY
Challenges and
opportunities
International
perspectives of the
transition to a
low-carbon green
economy
Eduardo Viola
These 13 countries (considering the European Union as one unit) are
responsible for over 80% of global emissions and constitute the two crucial
groups of great and medium powers. The great powers share three highly
relevant characteristics: the first and essential, each one is responsible for
a high proportion of global carbon emissions (at least 15%) and of global
GDP; secondly, they possess important technological and human capital for
decarbonizing the economy; and thirdly, they have veto power over any global
international agreement that is effective. The medium powers are of limited
relevance in terms of their participation in emissions and the global economy and
none of them alone has veto capabilities over a global international agreement.
There are three great powers – the US, China and the European Union –
that stand for 54% of global GDP and 58% of global carbon emissions. The
European Union is isolated in the defense of an effective global architecture for
a rapid transition to a low-carbon economy. The US and China resist a global
agreement on a transition to low-carbon. There are ten medium powers: India,
Russia, Brazil, Indonesia, Japan, Mexico, Canada, South Africa, South Korea
and Saudi Arabia.
The severity of the 2008 economic crisis opened a limited window of
opportunity for a partial transformation of values in developed and emerging
countries in the direction of a diminished importance attributed to immediatism,
which favors the perception of the gravity of the climate issue. Since the
economic crisis is systemic, the recuperation process currently on course does
not imply the return to a situation similar to that existing prior to September 2008.
As opposed to what the majority of international economists and analysts had
imagined in mid-2008, a substantial part of the economic stimulus packages
initiated in November 2008 in various key countries propelled the transition to
a low-carbon economy: 65% of the increased spending in South Korea, 35%
in China, 20% in the United Kingdom, 20% in Germany and 15% in the United
States (Stern, 2009). Brazil, India, South Africa, Indonesia and Russia had very
poor progress in this case.
This article is organized in four parts. In the first, the current situation and
main policies of the great and medium powers in the transition to a low carbon
green economy will be analyzed. In the second part, the specific situation of
South America in this transition will be summarized. In the third part, the main
techno-economic vectors in the transition to a low carbon green economy will
be described. Finally, the fourth part contains a reflection on future perspectives
of the transition on a global level.
Nº 8 • June 2011

45
GREEN ECONOMY
Challenges and
opportunities
International
perspectives of the
transition to a
low-carbon green
economy
Eduardo Viola
Th e Gr e a t p o w e r s a n d t h e m e d iu m p o w e r s in t h e
t r a n s it io n t o a l o w c a r b o n e c o n o m y
The US continues to be the most important country in the international climate
negotiations, due to its status as second largest emitter and for continuing to
have the greatest potential for technological innovation of global impact in the
direction of low carbon (Giddens, 2009). The US emits 5.8 billion tons of carbon
dioxide equivalent per year, corresponding to 19% of total global emissions,
19 tons per capita and 0.4 tons of carbon for each US$ 1,000 of GDP. It is one
of the countries with the highest per capita emissions in the world. In global
terms, the US economy operates with a relatively high energy efficiency and
low carbon intensity, though presents one of the greatest intensities among
developed countries – exceeded only by Canada and Australia – due to the
combination of an energy matrix based on carbon and oil with high utilization
of air and personal car transport. Emissions in the US grow at 0.8% per year
in this century.
There is a marked difference between the first six months of the Obama
government and the previous period. At the beginning, there were signs that
the new administration would focus on the economic and climate crises as
interconnected processes that should be solved simultaneously, and thus giving
a decisive push to decarbonize the economy. The emergency economic program
for short term recuperation of the economy was compatible with the medium
and long term goals of the Obama platform: expansion of renewable energies,
upgrade of national electrical grid, promotion of public transport (especially high
speed trains) in metropolitan regions and incentives for all economic sectors
that created new green jobs in general. The emergency program differed from
a classic program of government spending expansion and was compatible with
the strategic objective of increasing energy security (Friedman, 2009).
Nº 8 • June 2011
The Waxman bill of energy and climate – that imposed a system of
ceilings and quotas for carbon emissions – was approved by the House of
Representatives in June 2009 and then paralyzed in the Senate during the
second term due to priorities given by the Obama administration to healthcare
reform, only to be officially abandoned by the democrats in July 2010. At the
beginning of 2011, the picture was very different from the first months of the
Obama government, with the failure of his first initiatives. Various factors explain
this failure: extreme bipartisan polarization in Congress with the subsequent
legislative paralysis and governance crises; high unemployment rates eroding
Obama's popularity; Democrat Party defeat in the 2010 legislative elections;
Republican Party offensive against the IPCC due to some errors in the 2007
report and dubious proceedings of consensus building; a wave of extreme
cold on the American east coast during the 2010 winter, that was used by
the Republican Party as a “demonstration” of the exaggerations in evaluating
the dangers of global warming; aggressive offensive of petroleum, carbon,

46
GREEN ECONOMY
Challenges and
opportunities
International
perspectives of the
transition to a
low-carbon green
economy
Eduardo Viola
cement, steel and electricity lobbies against approval of the climate bill, as it
supposedly would imply competitive losses for North American industry; limits
to the promotion of green investments due to severe fiscal deficits and growing
government debt; and various surveys showing strong growth in the proportion
of the North American population that believes the risks of global warming are
being exaggerated (Viola, 2010).
Important resistance is expressed in Congress with respect to emissions
reduction. The majority of these derives from the non-existence of reduction
commitments by large emerging countries, especially China. There is also a
more structural resistance, championed by strong economic sectors associated
with the fossil energy matrix: states that produce coal, oil, steel; and electric
energy businesses based on the production of coal fired power. On the other
hand, almost all the big businesses from the lower carbon intensity sectors have
favorable positions for significantly reducing emissions. In the communication
and information sectors, there are Google, Apple, Microsoft, Oracle and CNN; in
biotechnology, renewable energies and nuclear there is General Electric; among
the large retail chains is Wall Mart; producers of inputs for “green” building are
also among those that support emissions reductions, among others.
The United States has an important margin for reducing emissions through: a
technological change from coal fired power to clean coal (cleaner technologies)
and the use of carbon capture and storage; the expansion of wind, solar, biofuel
and nuclear power; decreased size and increased efficiency standards for
automobiles; modernization of the electrical grid and the establishment of new
green standards for construction (buildings and houses designed or renovated
to reduce emissions)
The European Union, composed of 27 countries, emits 4.5 billion tons of
carbon equivalent, corresponding to 15% of the world total, 10 tons per capita
and 0.3 tons of carbon for each US$ 1,000 of GDP. The European Union is
very heterogeneous, both in terms of per capita emissions – from 22 tons in
Luxemburg to 4 tons in France and Portugal – and in carbon intensity, which
is low in the Nordic countries, Germany, the United Kingdom and France;
average in Spain, Belgium and Italy; and high in Poland, Czech Republic,
Romania, Bulgaria and the Baltic countries. European Union emissions grew
by 0.5% per year, as a result of the almost stable emissions of Germany, the
United Kingdom and Sweden and the accelerated growth in emissions of Spain,
Portugal, Greece and the Eastern European countries (even though the latter
ones are below their 1990 base year).
Nº 8 • June 2011
The main political leaders of the European Union have over recent years
been in favor of an incisive action to mitigate global warming, in particular
the governments and public opinions in the United Kingdom, Germany,
Sweden, France and Denmark, joined by – although with less emphasis – the
Netherlands, Belgium and Finland. However, the 2008-9 economic crises and

47
GREEN ECONOMY
Challenges and
opportunities
International
perspectives of the
transition to a
low-carbon green
economy
Eduardo Viola
the subsequent eurozone instability greatly eroded the European capacity to
lead the transition to a green economy.
China emits 6.5 billion tons of carbon equivalent per year, which corresponds
to 24% of global emissions, 6 tons per capita and 1.5 tons of carbon for each
US$ 1,000 of GDP. This is a very carbon intensive economy due to its energy
matrix being based substantially on coal and petroleum, and notably, its low
energy efficiency. Even though the carbon intensity of the Chinese GDP has
been falling by 5% per year over the past decade, the country still maintains a
carbon intensity that is nine times greater than Japan’s and four times greater
than the US. Contrary to common sense, the per capita emissions in China are
average as opposed to low. The cost of reducing emissions in China is high
in the case of a continuation of the current industrialization model, but would
be viable in the case of a reoriented model based more on the internal market
and productivity growth, instead of the model based on export expansion. In
the year 2007, global emissions of GHG grew by 3.3% in relation to 2006 and
50% of this increase took place in China, since 2/3 of the growth in China was
based on burning coal. Even more important than reducing the consumption
of oil in the world is the reduction of coal burning and, consequently, a drastic
change in how the Chinese carbon (and also the Indian) is consumed is decisive.
Technologies of carbon capture and sequestration, of clean carbon and nuclear
power are very important for China.
Nº 8 • June 2011
The position of the Chinese government – in national energy and climate
policies, as well as in international negotiations – was negligent up to 2006,
when there were changes based on the evaluation of China's vulnerability to
climate change. The government strongly encouraged growth in wind and solar
energy and announced an objective to reduce the growth rate of emissions.
This objective was reflected by the National Climate Change Plan and the
anti-crises economic stimulus package approved in November 2008, with a
proportion of 35% of public spending aimed at transitioning to a low-carbon
economy. There is a cleavage in China between globalist and nationalist forces,
and the power of the prior is growing continuously and exhibits an intention
to change the Chinese position in the sense of global responsibility. However,
the Chinese position in international negotiations has remained delayed in
comparison with its new energy policy. China continues refusing to assume
commitments related to establishing an emissions peak and a stabilizing year
prior to 2020, as demanded by the international scientific community and by
the EU, the US and Japan – this being one of the factors that increases the
firepower of conservatives in the American Congress. In the technological area,
what stands out is the great technological advances, efficiency and productivity
of Taiwanese businesses in the field of solar photovoltaics and the formation
of joint ventures for massive investment in an extensive program in China
called “low carbon cities”. As of 2009, it is possible to say that two Chinas exist

48
GREEN ECONOMY
Challenges and
opportunities
in terms of carbon: on one hand, a traditional and highly predominant China
that is a production machine and exporter of carbon emissions; and on the
other hand, a new, low-carbon and of the minority China that is growing at an
extraordinary pace due to the country's high capacity to save and invest, and
that creates a new low carbon business community with interests that contradict
traditional China.
Next, the medium powers will be analyzed.
International
perspectives of the
transition to a
low-carbon green
economy
Eduardo Viola
India emits 2.2 billion tons of carbon equivalent per year, corresponding to
6% of total global emissions, 1.7 tons of carbon per capita and 1.4 tons for
each US$ 1,000 of GDP. However, per capita emissions rate is low and carbon
intensity is high due to low energy efficiency and the heavy weight of coal and
oil in the energy matrix. However, the country has developed photovoltaic
solar and wind power at much higher proportions than Brazil, although less
than China. India has partially developed ethanol production due to being the
largest producer of sugar in the world, although the majority of this production
is destined for food purposes. Emissions grow at 6% per year in India, which is
expected to substitute China as the country that emits most GHG in the world
during the 2010 decade. The Indian government position has been historically
negligent, like the Chinese, and has not changed until this day.
Nº 8 • June 2011
Some comparisons should be made between India and China, since the
behaviors of their societies are crucial for the present and the future, due to
the dramatic growth of their contributions to global warming. India is much
more vulnerable to climate change than China, considering that a fundamental
part of its population depends on water originating in the Himalayas, under
sovereignty of China, a country with growing temptations to divert the rivers
for consumption of its immense population, and furthermore, whose glaciers
are receding because of global warming. In addition, an important part of
India's population is living in lowlands subject to monsoons and devastating
clashes between the terrestrial and oceanic atmospheric circulation. India has
a democratic regime – even though of low quality due to cast inheritance – with
the presence of an important environmental movement that has contested,
though ambivalently, the official position to this day. The Indian population on
average has a less materialist lifestyle than the Chinese due to religious factors
and thus being more sensitive to the state of the planet. The Indian government
is very fragmented and inefficient, which makes it much more difficult for a
change in the direction of lower carbon intensity to occur there than in China.
India, with 1.7 tons of carbon per capita, cannot be pushed internationally to
the same degree of China (6 tons per capita) and Brazil (10 tons per capita)
and therefore has significant room for carbon to occupy to the detriment of
developed and mid-income countries.
Russia emits 2 billion tons of carbon equivalent per year, corresponding to
5% of global emissions, 14 tons per inhabitant and 1.3 tons of carbon for each

49
GREEN ECONOMY
Challenges and
opportunities
International
perspectives of the
transition to a
low-carbon green
economy
Eduardo Viola
US$ 1,000 of GDP. Russia has an economy with high per capita emissions
and high carbon intensity, constituting a unique profile among large economies
in the world. Russian society has enriched significantly over the past decade,
but through low energy efficiency and an energy matrix that is strongly based
on fossil fuels, given that the country is a large exporter of oil and gas. Russia
occupies an extremely unique position in the global arena. As an economy
whose main heritage is the superabundance of fossil fuels, it can be seen as
potential looser in the transition to a low carbon economy. However, an important
part of the elite and opinion-makers perceive – at least until the extremely
warm summer of 2010 – that global warming could favor Russia because of
an extraordinary increase in arable land.
Japan emits an annual 1.6 billion tons of carbon equivalent, corresponding
to 3.5% of the global total, 12 tons per inhabitant and 0.15 tons of carbon for
each US$ 1.000 of GDP. Japan is, along with European Union countries such
as France, Sweden and Denmark, among the economies with lesser carbonintensity
in the world, due to very high energy efficiency and a heavy weight of
nuclear energy in electricity generation. Public opinion and an important part of
the business community (Honda and Toyota being symbolic) are in favor of a
rapid transition to a low-carbon economy, but Japan's leadership position in the
international arena is below its potential due to its low-profile foreign policy and,
more recently, to the negative effects of the Fukushima nuclear accident.
Nº 8 • June 2011
Indonesia increased its emissions during the first decade of the century, due
to significant deforestation of peat forests with large carbon stocks. Canada has
made the least progress among developed countries. The large increase in oil
production in the Alberta province and the fact that natural resource extraction
is regulated at a provincial as opposed to federal level, are the main factors
that explain the Canadian delay. Mexico adopted a national climate change
plan in 2007 under the Presidency of Calderon, and assumed an international
vanguard position, but the new rhetoric does not correspond closely with the
behaviors of economic actors. In 2008, South Africa announced goals related
to emissions stabilization and peak, and thus taking the lead among emerging
countries belonging to G77. Over recent years, South Korea has maintained a
profile that puts it at the forefront of the transition to a low-carbon economy. Saudi
Arabia has maintained a very conservative historical position in international
negotiations and has exercised a decisive role in regulating the oil price thanks
to its superior capacity to extract and refine, which allows it to rapidly increase
production in response to demand or supply shocks. This is of fundamental
importance, because the international oil price level is essential to extensive
investment growth in clean energy. It could be argued that Saudi Arabia will
always act in defense of its strict national interest, by avoiding an excessive
increase in the oil price for a prolonged period, which would greatly accelerate
investments in renewable energy.

50
GREEN ECONOMY
Challenges and
opportunities
International
perspectives of the
transition to a
low-carbon green
economy
Eduardo Viola
In summary, from a May 2011 perspective, the formation of a victorious
decarbonization alliance in the world depends on, firstly, positive changes in the
United States, and secondly, an acceleration in the new Chinese energy policy
initiated in 2008. Changes in the US would positively affect China, relatively
fast. Once these changes in the US and China are achieved, a coalition of
the US, the EU, Japan, China, Brazil, South Korea, Mexico and South Africa
can put pressure on Russia, India, Saudi Arabia and Indonesia to accelerate
decarbonizing measures in their respective economies. The extensive
negotiations of this process would take place in multiple arenas – bilateral US-
China, China-EU and US-EU, trilateral (US, China, EU) and plurilateral (G20,
where South Korea and Brazil could play an active and crucial reformist role
against conservative medium-powers) – and finally, these negotiations would
be legitimized in a multilateral UN level.
So u t h Am e r ic a in t h e t r a n s it io n t o a l o w
c a r b o n e c o n o m y
South America emits approximately 3 billion tons of carbon dioxide equivalent
annually. Emissions of carbon dioxide (industry, energy, transport, deforestation
and changes in land use); methane (livestock farming, waste, hydroelectric
reservoirs) and nitrous oxide (agricultural fertilizers) summed together for the
region totaled approximately 7% of the global carbon emissions in 2009. A
unique aspect in South America is that carbon dioxide emissions derived from
deforestation and land use change were proportionally very high up to 2005. The
deforestation rate over the past five years has grown a lot in Bolivia, Ecuador
and Paraguay; increased moderately in Peru and Colombia; remained stable in
Venezuela and fell slightly in Argentina and dramatically in Brazil. Deforestation
rates (as a proportion of total forest cover) oscillated from 1% per year in Bolivia
to 0.1% per year in Argentina and has remained at 0.2% per year in Brazil
over recent years. Uruguay is the only country with a positive balance, with an
increasing forest cover due to reforestation and forestation.
Venezuela and Argentina each account for approximately 1% of global
emissions. Per capita emissions in Venezuela are 7 tons and in Argentina, 5
tons. Venezuela emits 1.3 tons of carbon per US$ 1,000 of GDP and Argentina
emits 1 ton. Colombia, Peru and Chile are each responsible for approximately
0.5% of global emissions.
Nº 8 • June 2011
Deforestation in South America has a triple negative effect on societies.
Firstly, deforestation implies a great destruction of natural resources and a
very inefficient conversion of forests. Secondly, it causes the proportion of the
informal economy to be high throughout the economy, with great systemic
inefficiencies due to the fact that the economy associated with deforestation
is, in general, small-scale and illegal or semi-legal. Thirdly, deforestation
undermines government authority and the rule of law, and thus generates an

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environment favorable to a growth in other illicit activities such as: corruption,
smuggling, drug trafficking, prostitution, trafficking of arms and wild animals
and even murder.
Although South America is highly vulnerable to climate change, as a whole
the region finds itself in a favorable position for transitioning to a low carbon
economy. The situation is very different in large emerging countries in other
regions of the world – China, India, Russia, South Africa, Mexico –, that produce
the majority of their electricity from fossil fuels. South American electricity is the
most hydro-intensive in the world: 85% of the total in the case of Brazil, 37%
in Argentina, 67% in Venezuela, 75% in Colombia, 53% in Chile, 80% in Peru,
62% in Ecuador, 64% in Bolivia, 99% in Uruguay and 100% in Paraguay. Even
Venezuela, which has a more carbon intensive economy – due to transport
inefficiencies and oil low prices – has a large hydro weight in its electricity
generation.
Brazil emitted approximately 1.8 billion tons of carbon equivalent in 2009,
corresponding to around 4% of global emissions, 10 tons per capita and 0.9
tons of carbon for each US$ 1,000 of GDP. Emissions in Brazil over the years
2005-2010 suffered a large reduction compared to the 2001-2004 period, due
to a dramatic fall in the Amazon deforestation rate from an annual average
of 20,000 km 2 to an annual average of 11.000 km2 between 2005 and 2010,
arriving at a low figure in 2010 (6,200 km 2 ).
Similar to Brazil, most of the countries in South America (Colombia,
Ecuador, Peru, Bolivia and Paraguay) could significantly decrease their carbon
emissions by reducing deforestation. Argentina and Uruguay have a lot to gain
in terms of energy conservation and as such, could grow economically with
stabilized emissions. The price structure of energy in Argentina is irrational
both from an economic point of view and from a carbon emissions perspective.
Chile, the richest country in South America, has a lot of margin to increase
energy efficiency and vehicle emissions standards. Chile already has greater
energy efficiency and above average economic productivity that allows a
more rapid incorporation of new climate technologies that are emerging in
developed countries. Venezuela also has a good margin for lowering carbonintensity
through three vectors: eliminating direct and indirect subsidies for
oil consumption, which make the vehicle fleet of this country one of the most
irrational in the world; increasing electric energy conservation where there is
a lot of room for gain; and reducing deforestation.
Nº 8 • June 2011
Up to now, regional integration structures in South America – Mercosur,
Andean Community, Union of South America and Organization of the Treaty for
Amazonian Cooperation – have not been dedicated to the issue of transitioning
to a low-carbon economy. The Amazonia Treaty, institutionalized in 2004,
existed on a solely formal level until 2009, especially due to the low interest
of the Brazilian government. This is yet another paradox of Brazil's South

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American policy, since the productivity of financial and institutional resources
allocated in this cooperative structure could be very high, by combining the
combat of illicit transnational activities and illegal deforestation and promoting
the rule of law. As of 2010, the governments of Brazil, Colombia and Ecuador
started giving more importance to the Treaty, which tends to strengthen the
organization. Brazil should assume the cost of leadership through policies
and Brazilian financial resources in several dimensions: promotion of public
safety in frontier zones and combat of illicit transnational activities; promotion
of transportation infrastructure of all types, but especially waterway, railway
and air transportation; promotion of integrated energy development, especially
in the hydroelectric sector, in which Brazil and the region have a competitive
advantage on a global scale; and promotion of a regional network of biodiversity/
biotechnology laboratories with contributions from American, European and
Japanese capital. A decisive task of international cooperation in the Amazon
is the establishment of an Amazon Panel of Climate Change and Biodiversity
molded after the IPCC. This institutionalism is fundamental to develop regional
governance in the Amazon.
Gl o b a l t e c h n o-e c o n o m ic v e c t o r s f o r t h e
t r a n s it io n t o a l o w-c a r b o n g r e e n e c o n o m y
For the solid and rapid transition to an international low-carbon economy, a
large international agreement would be necessary (on a much greater scale
than the Kyoto Protocol) that should be supported by a series of behavioral
changes, as well as simultaneous and complementary technological and
economic developments. The literature over the past few years calls for a series
of vectors for this transition. The below list of vectors has been synthesized
by the author:
1. Accelerate the growth pace of energy efficiency (this growth takes place
normally in the history of capitalism, but the pace needs to be increased) for
residential and industrial use, in transport and urban planning. Increase recycling
at all levels of the supply chain and in consumption;
Nº 8 • June 2011
2. Increase the proportion of non-fossil renewable energies (wind, solar,
biofuels and hydroelectric) in the global energy matrix. Hydroelectric energy has
been completely competitive during the past century and the competitiveness
of wind, solar and biofuel power developed extraordinarily in the past decade
due to advances in large and medium powers, only missing, in a majority of the
countries, appropriate regulatory frameworks that create incentives for more
vigorous growth. Recent experiences with biofuels show that only ethanol from
sugarcane is very effective in terms of reducing emissions; ethanol from corn
and beetroot and all biodiesel exhibit important limitations up to now. Second
generation ethanol – from cellulose – appears as a fundamental alternative

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(the issue in this case concerns the speed at which this technology will be
available on a large scale);
3. Increase the proportion of nuclear power in the global energy matrix, taking
advantage of significant improvements in reactor technologies from an operation
security perspective, despite the remaining problem of final disposal of nuclear
waste and the life-spans of old and unsafe reactors; in addition to this, there are
prospects for developing fourth generation nuclear reactors. The expansion of
nuclear energy is fundamental to accelerate decarbonization in various powers,
such as the US, China, India, Russia, Indonesia and Mexico;
4. Develop regulatory frameworks that promote the use of hybrid cars
(gasoline-electric and gasoline-ethanol) that have already reached full maturity
in terms of competing with conventional cars. Increase the use of public transport
and diminish car use. Utilize smaller and lighter cars;
5. Drastically reduce deforestation (currently responsible for 14% of global
emissions), reforest cleared areas and plant in areas that never had forests,
but that today are appropriate for homogeneous rapid-growing forests;
6. Increase the use of livestock farming techniques that are suited to the
carbon cycle, such as no till farming, precision irrigation and animal feed that
generates less methane. Reduce consumption of beef in high and medium
income countries, and thus enabling an increased consumption of this product
among global emerging middle class without imposing excessive pressures
on methane emissions;
7. Efficient use of water in domestic, agricultural and industrial consumption
and expanded basic sanitation across the planet. Appropriate disposal of waste
and sewer and a dramatic increase in methane power plants;
8. Promote rapid stabilization of the global population, between 2020
and 2025, and retirement schemes that correspond with life expectancies
(approximately 68 years for men and women in high and medium income
countries) and health systems that promote healthy life-styles, longevity with
quality of life and that minimize gigantic expenditures to prolong life with abysmal
quality in the final year, as is currently the case;
9. Accelerate the development of carbon capture and sequestration
technologies, separating the carbon dioxide both in coal and petroleum and
injecting it back into the already mined and empty coal fields that are highly
stable from a geologic perspective;
Nº 8 • June 2011
10. Reduce the proportion of face meetings (especially those that involve
air travel) and increase meetings via teleconferencing. Slow down the growth
of air transport. Develop airplanes with lighter materials, more aerodynamic
design and greater energy efficiency;

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11. Accelerate the development of the hydrogen cell, which will certainly be
the energy of the future. It will probably not play a significant role before 2050
but its development would give a clear signal that the transition to a low-carbon
economy is profound and irreversible;
12. Establish international accords that promote integrated inter-institutional
research to develop new advanced technologies to decarbonize the energy
matrix. Some of these are already at the initial stage, such as the utilization
of ocean and wave power; high altitude wind turbines; and solar nano cells.
Create a global cultural and institutional environment favorable to synergies
between new energy technologies and the revolutions in information technology,
communication and nanotechnology. Promote the development of climate
geoengineering research with the objective of having a plan B alternative in
the event of an exponential acceleration of global warming.
13. The transition to a low-carbon green economy assumes a profound
transformation of dominant values in international society (hyper materialism,
consumerism, immediatism, and disregard for long-term thinking) and, therefore,
transformation at all levels of formal education and media activities (classically
referred to as environmental education, but that nowadays should be called
education for a sustainable low-carbon society) will always play an important
role, to generate awareness among populations of these value changes and
the extraordinary gains in quality of life and happiness to be derived from them
– much more important than some short term losses in irrational consumption,
which would be a consequence of the transition to a decarbonized society,
feared by large segments of populations in the world.
Fu t u r e p r o s p e c t s
Nº 8 • June 2011
The year 2009 significantly changed the international political economy of
climate change. The legacy of Kyoto, that left the US and other large emerging
countries outside the carbon constraint, has disintegrated (Ladislaw, 2010;
Barret, 2010). The Copenhagen agreement is extremely weak from a judicial
standpoint, but almost universal from a carbon emissions constraint perspective.
It is practically impossible to advance in the sense of a new comprehensive and
legally binding treaty, until the US approves climate legislation that demands
quantified emissions reductions. Given current political dynamics, this is unlikely
to happen, even in best case scenario, before 2013-14: assuming the reelection
of president Obama in November 2012, a democrat victory in both chambers
of Congress and a decision by Obama to prioritize climate legislation at the
beginning of his second term. Another factor that influences the prospects for
this very important global agreement is the tension between the US and the
EU on the one hand and China on the other, due to China´s resistance to the
revaluation of the Yuan. The issue of reevaluation of the Yuan could generate
an anti-Chinese coalition among the countries that are invaded by Chinese

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merchandise due to its increased export capacity. Countries that are threatened
by the Chinese export machine include the majority of G20 members. Brazil, as
a significant exporter of commodities to China, is in an intermediary position:
its mining and food production sectors are favored by the Chinese dynamics,
and the manufacturing sector is threatened.
The economic and security dimensions of the international system have
a decisive impact on the climate dimension and it is necessary to take them
into priority consideration in any realistic analysis of the future of climate
negotiations. Tensions between countries with international trade surpluses and
deficits, especially in relation to China, can limit or even stop the G20 advances
in global economic governance that took place in 2009. The international system
could be reversing the dynamics of cooperative depolarization that occurred in
2008 and 2009. In the case of the predominance of a dynamics of moderate
increases of conflicts in the international system over the coming years, this
would be sufficient to block advances in a new international climate treaty, even if
a comprehensive climatic legislation were to be approved in the US in 2013.
In this context, the global transition to a low-carbon economy will be very slow
and one of its principal international instruments will be the establishment of
trade barriers for carbon-intensive products. In the case of Russia and India, a
majority of the sectors are threatened. In the case of China, the scenario would
be more complex considering that, due to the great advances in wind and solar
power, the proportion of products with low-carbon intensity (currently very low)
would increase rapidly on the agenda of Chinese exports.
In the case that a tendency towards cooperation and continued depolarization
of the international system prevails over the coming years and Obama becomes
reelected in 2012, it is probable that the American position will change from
being a great conservative power to a great reformist power in regard to a global
agreement to constrain carbon. Also probable is that an alliance between the
European Union, Japan, Canada, South Korea, Brazil, Mexico, South Africa
and the United States is able to persuade China, Russia and India to establish
emission peaks and different stabilizing years – prior to 2020 for China and
Russia and between 2025 and 2030 for India, considering that the per capita
emissions in Russia are almost double that of the Chinese and five times greater
than that of India; and Chinese emissions are three times greater than Indian
emissions (Viola and Machado Filho, 2010).
Nº 8 • June 2011
In an international system where forces of convergence predominate, China’s
globalization and decarbonization forces are favored.. From the perspective
of low-carbon technology, there are some small countries that will have
global impact due to their technological advances: Israel, Taiwan, Singapore,
Switzerland and Norway. The principal variable to increase cooperation and
produce a decarbonizing agreement in the international system is more flexible
intellectual property rights in the area of low-carbon technologies. The scenario

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is not simple, since some emerging countries are already at the forefront of
low-carbon technology in some areas. For example, China would need a more
flexible system in the areas of nuclear energy and second generation ethanol,
but not in wind and solar in which several mid and low income countries
would need Chinese-Taiwanese technology transfers. Brazil would need a
relaxation of intellectual property laws in the areas of wind and photovoltaic
solar energy, but would be at the forefront and should transfer technology in
the areas of hydroelectricity and first generation ethanol to medium and low
income countries.
A new and great question is how long Brazil will maintain the discrepancy
between a climate policy with emissions reduction targets and an international
negotiations position that follows China and India, which have more conservative
climate policies. Due to the relative power interests of various economic sectors
in Brazil and the dynamics of public opinion, it is probable that this inconsistency
will not be maintained for long and that the Brazilian negotiating position would
converge with that of the European Union, Japan and South Korea.
References
Barret, S. (2010). Contrasting future path for an evolving climate regime. Global
Policy, 1.
Friedman, T. (2009). Hot, flat and crowded. Why we need a green revolution and how
it can renew America. New York: Farrar, Strauss and Giroux.
Giddens, A. (2009). The politics of climate change. London: Polity Press.
La Viña, A. (2010). Ways forward after Copenhagen: reflections on the climate change
negotiations process by the REDD-plus facilitator. Manila: Foundation for International
Environmental Law and Development.
Ladislaw, S. (2010). A post-Copenhagen pathway. Washington: Center for Strategic
and International Studies.
Stern, N. (2009). The global deal. Climate change and the creation of a new era of
progress and prosperity. New York: Public Affairs.
Viola, E. (2010). A política climática global e o Brasil, 2005-2010. Tempo do Mundo,
vol. 1, n. 2. Brasília: IPEA.
Viola, E. and Machado Filho, H. (2010). Os BICs (Brasil, Índia e China) e as negociações
de mudança climática. Rio de Janeiro: Centro de Estudos de Integração e
Desenvolvimento, Breves 35.
Nº 8 • June 2011

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Green economy in Latin
America: the origins of
debate in ECLAC work
Márcia Tavares 1
The exact meaning of the term green economy is still being discussed, and
other articles in this volume certainly will contribute to this debate. It is likely
that the term will acquire different meanings in different countries and contexts.
In the context of the preparatory process for the United Nations Conference
on Sustainable Development (Rio+20), resolution 64/236 of the General
Assembly specifies that the term to be used is “green economy in the context
of sustainable development and the eradication of poverty” (italics added).
This qualification reflects four decades of dialogue between governments of
developed and developing countries about the environment, economics and
development, through the sequence of global conferences on the subject: the
1972 United Nations Conference on the Human Environment in Stockholm, the
1992 United Nations Conference on Environment and Development in Rio de
Janeiro and the 2002 World Summit on Sustainable Development, and now the
preparatory process for Rio+20. All these landmark conferences were marked
by resistance to the imposition of the manner in which these relations should
be handled by each country, how priorities should be defined in national policy
and the relative importance attributed to different challenges of development
and the protection of the environment. This tension, along with different
views on the role of international cooperation and the importance of historic
responsibilities, is visible in the definition of sustainable development by the
Brundtland Commission, in various of the principles of the Rio Declaration on
Environment and Development, in the difficulties in reaching an agreement on
climate change and currently in the debates between governments on green
economy.
Nº 8 • June 2011
Since the beginning of the 1970's, ECLAC has undertaken two functions
in regard to the relations between economics and environment – and as of
the end of the 1980's, “sustainable development”. Firstly, ECLAC supports
governments of the Latin American and Caribbean region in intergovernmental
processes. This role was reinforced by Agenda 21 in 1992, the Johannesburg
Plan of Implementation in 2002 and the reformulation of the modus operandi of
1. Márcia Tavares is Economic Affairs Officer of the Sustainable Development and Human
Settlements Division of the Economic Commission for Latin American and the Caribbean
(ECLAC). Opinions expressed in this article are the responsibility of the author and do not
necessarily coincide with those of ECLAC.

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the Commission on Sustainable Development (CSD) in 2003. Today, ECLAC
is the United Nations agency responsible for the regional preparatory process
for Rio+20 in Latin America and the Caribbean. Secondly, since its foundation
in 1948, ECLAC has been a think tank on Latin American (and as from 1984,
Caribbean) economies and their insertion in the international context. 2 In
exercising these two functions, a number of ECLAC´s institutional publications
and works by authors associated to the institution have addressed the relations
between environment and economics either directly or indirectly when dealing
with other aspects of development in the region.
This article extracts some of the main ideas from works undertaken within
ECLAC from the beginning of the 1970's to the beginning of the 1990's, at key
moments in the debate about relations between economics and environment or
about sustainable development. Some of the issues dealt with, the approaches
adopted, or even the language of these documents may now be outdated, but
the central arguments continue important to inform the debate about green
economy and the shape that this concept will take in Latin America. They
can be helpful in assessing the complexity of environmental problems in the
region and their direct link to economic and social structures and processes.
The references below do not do justice to the wealth of the original texts, but
will hopefully raise interest in them as historical references.
1. In p r e p a r a t io n f o r t h e St o c k h o l m
Co n f e r e n c e: “Hu m a n En v ir o n m e n t a n d Ec o n o m ic
De v e l o p m e n t in La t in Am e r ic a”, 1971
Nº 8 • June 2011
One of ECLACs first incursions in the environmental issue area was the
work related to the organization, in 1971, of a preparatory meeting for the
Stockholm Conference (1972). For this meeting, ECLAC published a study in
collaboration with the Latin American Institute of Economic and Social Planning
(ILPES) and the regional office of the Food and Agriculture Organization (FAO)
(ECLAC, 1971). The document identified low development and deficient income
distribution as the main sources of the “poor environmental conditions” of the
region. Industrialization, though necessary for development, had generated
new problems. Thus, it was argued, there coexisted in Latin America, to a
greater degree than in other regions, environmental problems associated
with underdevelopment and those associated with technological progress.
The document addressed the issue through the perspective of relations of
dependency, the region’s peripheral nature and structural heterogeneity,
elements that had dominated ECLAC thinking during the previous decade
(Bielschowsky, 1998).
3. “Founex Report on Development and the Environment”, presented by a group of specialists
summuned by the Secretary General of the United Nations Conference on the Human
Environment, 4 to 12 June, Founex, Switzerland.
2. For an overview of ECLAC thought up to the 1990’s, see Bielschowsky (1998) and (2009).

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Influenced by the Founex report written some months before 3 , the dominant
argument in this 1971 document was that development is a condition for
ensuring “desirable environmental conditions”. Implicitly, the document reacted
to theses that saw growth as detrimental to environmental quality, including
that of the limits to growth. On the other hand, it addressed the dilemma of
resource allocation between environmental and development objectives. This
dilemma applied both to public resource allocation and to private sector business
decisions. One example of the latter was the difficulty companies in the region
found to develop and adopt more modern and less polluting technology, due
to insufficient technological capacity and the need to maintain competitiveness
(low costs and prices) in the international market.
The 1971 document discussed the main environmental problems in urban
and rural areas; the difficulties in ensuring a sufficient expansion of urban public
services to meet the needs of a growing urban population; and the problems of
industrial pollution. It also showed the relation between the agricultural production
structure and the generation of large numbers of un- or underemployed, which
were forced to occupy marginal lands with little capacity to generate surplus
production or to integrate the increasing marginalized urban population. The
text goes on to discuss other problems that still today dominate regional and
international agendas, such as the challenges of securing energy for growing
populations and economies; the effects of mining on the environment and the
health of workers; the inefficient use of water; and the difficulty of developing
domestic technology compatible with the local context and its environmental
challenges. As would later be consolidated in both the 1992 instruments and
in the Seventh Millennium Development Goal (environmental sustainability),
the document supports the need to integrate environmental issues in public
policymaking. The life-cycle logic in production and consumption is mentioned
and used to show how natural materials such as cotton would be considered
more competitive than synthetic materials if the costs of adequate disposal
were considered. This was still a relevant subject on the agenda of the CSD
in 2011.
Nº 8 • June 2011
The conclusions lead to the debate about the means of implementation of
international environmental and sustainable development commitments, an
issue that is still significant in the preparations for Rio+20, including the debates
on green economy. These include the issue of trade restrictions; the capacity
of industry to adapt to a new paradigm; the need for technology transfer and
financial assistance; and the inseparability between economic development,
social development and the environment, which came to be the basis of the
concept of sustainable development.

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2. “De v e l o p m e n t s t y l e s a n d t h e e n v ir o n m e n t”,
1980
During most of the 1970's, the work of ECLAC was centered on what would
become known as “styles of development. 4 This line of work originated in the
perception that although the region had obtained good results in terms of growth
and industrialization, this had taken place with the exclusion of large sectors
of society, aggravating unemployment, underdevelopment and poverty, and
accumulating political tension. The aim of this approach was to understand and
respond to the development styles of countries in the region, seen in the context
of the internationally prevalent styles. It was understood that an “ascending”,
transnational, development was imposed over the “dominant” development
styles of each country. This confrontation of styles, together with existing social
forces, contributed to the structural heterogeneity 5 that characterizes peripheral
countries within the capitalist system, another key concept of ECLAC thought
in the 70's (Bielschowsky, 1998; Sunkel, 1980).
Mainstream work about development styles did not explicitly consider
the environmental dimension. Responding to this deficiency, between 1978
and 1980, ECLAC and the United Nations Environment Programme (UNEP)
developed a project entitled Development Styles and the Environment. This
formed the basis for work by ECLAC in the environmental issue area over
the 20 years that followed (Gligo, 2006). The results of the initial project were
joined into two volumes published in 1980 6 and summarized in an introductory
article by Osvaldo Sunkel (1980). This article relates environmental problems
in the region to the Latin American development process between the colonial
period and the end of the 1970's, and particularly to the emergence of the
“transnational” style after the post-war era.
According to Sunkel (1980), the development styles of the countries that are
developed today (including consumption choices, infrastructure, technological
pathways) have been generated over time based on a world vision where
natural resources were seen as unlimited. Colonial powers saw in the then
apparently infinite resources of the colonies, a source for that which lacked or
became scarce inside national boundaries. The United States´s ample territory
generated the same perception. The depletion of the best natural resources
Nº 8 • June 2011
4. There have been various definitions of “development styles” over time. Sunkel (1980) quotes
complementary definitions to those by Aníbal Pinto and Jorge Graciarena (free translation): “the
manner in which human resources and materials are organized and assigned within a certain
system with the purpose of resolving the questions of what, for whom and how to produce
goods and services” and the “concrete and dynamic modality adopted by a system in a defined
area and at a determined historical moment”.
5. The term structural heterogeneity refers to “the intra and inter sectoral asymmetries in terms of
productivity” (Pinto, 1970). These asymmetries are the hard core from which other inequalities
are transmitted to all of society ECLAC (2010).
6. Sunkel, Osvaldo and Gligo, Nicolo (compilers) (1980), “Estilos de Desarrollo y Medio
Ambiente en la América Latina”, Fondo de Cultura Económica, México. The two volumes of
this compilation contain 37 articles about development styles and the environment in general,
and the development of the agriculture, livestock and forestry industries, urbanization and
marginalization, energy and industrialization, and policies, strategies and planning sector. A
special edition of the CEPAL Review (No. 12, December 1980) gathered some of these articles.

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(high grade, best location for extraction) and the degradation of renewable
ones was not seen as a problem for these countries as technological progress
and expansion to new territories always made new resources available. Upon
gaining independence, ex-colonies reproduced development models based on
a perception of unlimited natural resources, not necessarily compatible with
their factor endowments and structural conditions, and without managing to
generate autonomous processes of technological progress.
Up to the 1940's, environmental problems in Latin America were, according
to the study, mainly related to agricultural practices associated with a structure
that combined large, under-utilized estates with overexploited smallholdings. In
parallel, the expansion of the agricultural frontier generated its own problems,
as did the exploitation of natural resources, a basic sector of the economies in
the region. Revenue generated from mineral extraction was not being reinvested
in local development. On the contrary, revenues were for the most part sent
abroad. Additionally, as early as the 1940's, environmental problems existed
in relation to the marginalization of segments of society both in rural and urban
areas, despite industrial pollution being dispersed and of limited significance.
By the end of the Second World War, the hegemony of the United States had
extended the North American development style – referred to as “transnational” -
to the rest of the world. The ascendance of this style in Latin America generated
new environmental problems. The transnational style was characterized by,
among others, the dominant role of transnational companies; the generation of
irreversible transformations in national economies and societies that reduced
the policy space of governments in the pursuit of autonomous development
processes; the homogenization of production, marketing and consumption
patterns; the internationalization of industrial production; and the intensification
of natural resource exploitation and growing dependence on oil. The expansion
of the use of the automobile influenced the dynamics of urban expansion and
generated a growing demand for land in residential areas and for transportation
infrastructure.
Against the background of this ascending style, in the post war period policies
of a breadth seldom seen since then were adopted in many countries to promote
the development of basic industries such as the petroleum and automobile
industries, as well as the infrastructure necessary to support these new sectors.
The financial surplus derived from the exploitation of natural resources – that
remained predominant in economic structures – was sent abroad or used to
finance imports of consumer goods.
Nº 8 • June 2011
One of the main characteristics of development in the region as understood
through the lens of the ascendance of the transnational style was high-energy
intensity and dependence on petroleum, the relevance of which much exceeds
the problems of atmospheric pollution. The contribution of Raul Prebisch to the
ECLAC/UNEP project collection (Prebisch, 1980) shows among other things, how

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America: the origins of
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Márcia Tavares
the era of cheap petroleum influenced the direction of technological research.
Investments allowed for the increase of productivity but not improvements in
energy efficiency. The expanded use of petroleum as a raw material led to the
substitution of natural fibers and wood by synthetic materials, to the detriment
of employment. In agriculture, mechanization generated unemployment and
migration to cities, which contributed to a massive and precarious urbanization
process. The use of fertilizers and pesticides from petrochemical origins
contributed to soil contamination.
Also inherent to the ascendance of the transnational style was the geographical
concentration of the industrial, political and bureaucratic administrative centers.
This partly explains the repeated failure of regional decentralization policies
between 1960 and 1980. Similarly, the dynamics of massive and precarious
migration always undermined policies aimed at addressing the housing deficit
or extending basic services to the poorest. While the most privileged groups
retreated to suburban neighborhoods, occupying land previously employed in
agriculture and requiring investments in the development of infrastructure for
the new areas, within the cities the poorest groups occupied increasing areas
of marginal land.
The oil crisis at the beginning of the 1970's led to a crisis of the transnational
style. However, by then its models of consumption, production, infrastructure
and urban development, as well as social structures, had already been firmly
established and still prevail to a great extent today. There were, by then, few
alternatives for substantial changes in development paths. The oil crisis at the
beginning of the 1970's, for instance, did not cause economies to shift to other
sources of fuels despite significant initiatives such as Pró-Álcool (Pro-Ethanol)
in Brazil. Rather, it generated even more pressure on export sectors to be able
to finance petroleum imports.
Nº 8 • June 2011
For an alternative development style compatible with the satisfaction of
the basic needs of the majority of the population and the preservation of the
natural resource base and the environment, the following recommendations
emerged from the research on styles of development and the environment: less
dependence on fossil fuels and a greater use of renewable and less polluting
energy sources; development of more labor intense technologies that are
adjusted to the local natural resource base; recycling and reuse of waste; natural
resource management with ecologically based knowledge and technology;
institution of decentralized administrative and political processes grounded in
local communities; and deterrence of the continued expansion of large cities
and excessive consumption. In addition, no development effort should leave
out consideration of the environmental dimension. It was recommended that
development planning and science and technology policies have as central
concerns the knowledge and assessment of natural resources and ecosystems,
the need for permanent monitoring, the development of alternative technologies

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and diversification of production based on ecologically adequate techniques.
Lastly, the document recommended, the establishment of mechanisms that
enable the participation of society in decision-making, which later became
consolidated as Principle 10 in the Rio Declaration.
The following citation draws attention to similarities with certain definitions
of the concept of green economy, or green growth as adopted by the OECD 7 .
In the words of Sunkel (1980) (free translation):
“Policies aimed at conserving, improving and expanding natural resources
and their productivity, and those that seek to conserve, improve and expand
the artificial environment and its productivity, are a part of development
policies, as they make development sustainable in the long term. But
they can also make positive contributions to solve problems characteristic
of the current development style (…) Conservation projects for soil and
forests, reforestation, dredging and conservation of irrigation channels,
maintenance and construction of roads that penetrate rural areas and the
self-construction of housing and community equipment in urban zones,
if adequately designed, can contribute to alleviate problems such as
unemployment and underemployment, at the same time as they promote
social organization at the base of society, increasing productivity and
improving living conditions.”
3. Th e d e b t c r is is a n d t h e Br u n d t l a n d
Co m m is s io n: r e f l e c t io n s b e t w e e n 1985 a n d 1990
The World Commission on Environment and Development, also known as
the Brundtland Commission, was created in 1983. In 1987, the Commission
published its report, which defines sustainable development as development
that meets the needs of the present without compromising the ability of future
generations to meet their own needs.
During this period and the years that followed, Latin America´s international
economic relations – and thereby the focus of ECLAC – were dominated by
“financial asphyxia due to indebtedness” (Bielschowsky, 1998). Two articles by
Osvaldo Sunkel – one before and one after the Brundtland report – refer to the
relation between the debt crisis and sustainable development. They make a
call for the global debate on the environment and sustainable development not
to disconsider the great challenges of the economic context in Latin American
countries and of the way in which they were inserted in the international
economic system. Sunkel suggested that the debt crisis was an opportunity to
Nº 8 • June 2011
1. “A way to pursue economic growth and development, while preventing environmental
degradation, viodiversity loss and unsustainable natural resource use”. This refers to
strategies that emerged in response to the global crisis and that sought sources of growth
that could contribute simultaneously to economic efficiency, environmental integrity and social
equality (OECD, 2010).

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improve the relation between economy and environment, which is reminiscent
of the concepts of green economy within the context of the United Nations,
and green growth within the context of the OECD, later emerged largely as a
reaction to the global crisis that reached its summit in 2008.
The 1985 article describes the effects of the crisis on the environment and
environmental institutions, an aspect that had allegedly not been adequately
addressed by the Brundtland Commission up to that point (Sunkel, 1985).
Environmental institutions were still weak and their role still the object of much
uncertainty when they were hit by the crisis. The budget constraints stemming
from the crisis and an economic and financial outlook that focused on the short
term further weakened the environmental institutions that had emerged since
the Stockholm Conference. Furthermore, the pressure to raise hard currency to
cover debt servicing and the political consequences of adjustments increased
poverty levels and contributed to aggravate problems of over-exploitation of
land and natural resources, as well as migration from rural areas to cities and
the consequent increase in urban poverty. Within cities, informal housing and
activities expanded. Running counter to sustainable development, the pressure
to raise hard currency led to the favoring of activities with visible short-term
results, to the detriment of long-term investments (such as those related to
environmental protection).
Similarly, in a compilation of Latin American perspectives on the Brundtland
report, Sunkel (1990) again demonstrates how the debt crisis, the deterioration
in the terms of trade and the conditions of international financing introduced
– or helped to perpetuate – despite what was promoted internationally, the
precedence of the short term. It shows how the crisis reduced the capacity of
the State to invest and attend to the basic necessities of the population (health,
education). Investments that resulted in high exports were favored, which in
turn generated resources that were channeled to pay off debts. Resources
allocated to environmental protection, whose results were not tangible or only
materialized in the long term, became scarce.
However, just like the oil crisis at the beginning of the 70's, the debt crisis
was also presented as an opportunity to change the style of economic growth
and to make development compatible with the environment. Again similar to the
first documents on green economy during the reactivation efforts of the global
economy in 2008, Sunkel proposed, in 1985, a vision of the new crisis as an
opportunity to change paths (free translation):
Nº 8 • June 2011
“It is possible to face the issue of environmental resources, the resources
given by nature and the constructed ones, as a way to establish a link
between short term economic policies and the need for medium and long term
development policies. In other words, what I am suggesting is that we face
the crisis as an opportunity. An opportunity to mobilize resources in a way that
enables change in the style of growth, taking into consideration the need to

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satisfy the essential necessities of the population and introduce a sustainable,
or “conscious”, development process.”
The article argues for an expansive, but selective, policy rather than
recessive adjustment; relates macroeconomic policies to the environment; and
includes specific policies for social issues, for small and medium businesses
and for industrial development. It also promotes the attachment of value to
environmental and natural resources in order to ensure that present and future
needs are met, This would influence the way in which the productive sectors,
instrumental in shaping development patterns, view the environment. The
1990's took a different direction.
Márcia Tavares
4. Pr o d u c t iv e t r a n s f o r m a t io n, e q u a l it y a n d t h e
e n v ir o n m e n t, 1991
The issue of productive transformation was a central them in ECLAC work
over most of the 1990's. Building on the theoretical base developed since
the end of the 1940's, in 1990 ECLAC proposed the concept of “productive
transformation with equality” as a regional priority over the coming decade
(ECLAC, 1990, 2008; Bielschowsky, 1998). A productive transformation
was proposed that would be sustained by the deliberate and systematic
incorporation of technical progress and increased productivity as factors
necessary for authentic international competitiveness 8 . The systemic character
of competitiveness was emphasized, as well as links between businesses,
the education system, technological, energy and transport infrastructures,
relations between employers and employees, the public and private institutional
apparatus and the financial system. It was argued that a suitable and stable
macroeconomic environment and a policy to correct prices, though necessary,
would not be sufficient to trigger productive transformation. Macroeconomic
management should be combined with sectoral policies, which could induce
productive transformation. It was necessary to secure links between different
sectors (exploitation of raw materials, industry, services) in order to generate
a progressive homogenization of levels of productivity. Equality, democracy
and environmental sustainability were seen as key factors in a productive
transformation process.
Nº 8 • June 2011
ECLAC´s document to support regional preparations for the Rio Summit
in 1992, “Sustainable development: productive transformation, equity and
environment” (ECLAC, 1991), was written in this context. The document
deals with various issues related to sustainable development in the region,
among them that of the relationship between productive transformation and
sustainability, based on the results of a study specifically dedicated to the topic
8. Concept construed in opposition to that of spurious competitiveness, based on the
degradation of natural resources and low valuation of human resources.

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(ECLAC/UNIDO, 1991).
The latter demonstrates that the traditional focus on productive development
on the one hand, and ecology on the other, emphasized different and
apparently irreconcilable objectives: growth and international competitiveness
as opposed to equity and environmental sustainability. The link that could
make these objectives converge would be the incorporation and diffusion of
technical progress (ECLAC/UNIDO, 1991). The dependence of Latin American
economies on natural resource extraction was seen as a concern; not only
because of the related environmental problems, but also because the way
in which these industries were organized was not conducive to overcoming
sectoral “encapsulation”, that is, the lack of productive links between different
sectors (primary, secondary, tertiary). The Latin American experience differed
from that of some OECD countries whose economies were also based on
natural resources, but whose industrial development had taken place mainly
as a result of the transformation of these resources, in a context that enabled
a wide range of technological innovation.
Overcoming sectoral “encapsulation” required strong and coordinated
policies; however, these were not sufficiently put into practice throughout the
1990's. A 2008 assessment demonstrated that, despite a greater diversification
of exports and economic benefits due to price increases in raw materials, the
region had not managed to reduce dependence on traditional exports, nor
incorporate more knowledge and aggregate value to activities and supply
chains. The increase in manufactured exports had not been translated into
an increase in activities of higher aggregate value, technology diffusion or
generating technological capabilities. Innovation efforts continue being rare,
especially if compared to Asian competitors (ECLAC, 2008).
In the green economy debates, the development of new “green” sectors is
mentioned as a way to stimulate economies, as a new technological paradigm. It
is important to consider, when defining the instruments to be adopted nationally
and internationally, that the challenge of productive transformation has persisted
in the region for decades. Managing to use the green economy as a motor of
economic expansion requires efforts of great magnitude in terms of policies
related to education, innovation and productive development, which cannot
be managed nor implemented solely by governmental agencies related to the
environment.
5. Po in t s f o r r e f l e c t i o n
Nº 8 • June 2011
Among the questions that this compilation of documents raises for the green
economy debate, the following are highlighted due to their importance and
link to the second theme of Rio+20, the institutional framework for sustainable
development.

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As a group, the documents mentioned are a reminder that the relation
between environmental, social and economic problems in Latin America is
profound and complex. The reflection on how to change these relations and
solve the great environmental problems in the region, that disproportionately
affect the poorest, must consider these roots. In this sense, green economy
strategies will tend to be insufficient if managed and implemented separately
by entities – governments, civil society, businesses and their representative
entities – that deal with the environment as a specialized area.
Secondly, seen with the benefit of hindsight, the documents show the
importance of identifying and removing barriers to change. Already in 1971,
solutions were suggested that continue to be debated internationally, but that are
only marginally implemented, such as the adoption of a life-cycle approach to
production. 9 Two ideas found at the origins of the international projection of the
green economy concept – that of transforming crisis into opportunity to redirect
development towards greater sustainability and that of making environmental
protection a source of economic opportunities – had already emerged in 1980
(Sunkel, 1980), if not before. Why did these ideas – of which ECLAC was only
a small exponent – not have significant practical consequences? It is known
that there are, among others, technological, entrepreneurial, legal, institutional
and information barriers, including the difficulties of valuation of natural capital.
There is an inertia derived from investments made under a paradigm that did not
attribute value to the environment: investments in technology, energy sources,
monitoring systems, industrial plants, business models, methods for calculating
the cost-benefit of projects, public institution mandates, etc. To ensure that
the green economy – under whichever precise concept comes to be adopted
internationally and by each country – goes beyond a set of well-intended
declarations, it will be necessary to overcome these barriers in a coordinated
manner among institutions and actors in different spheres.
On the other hand, as shown through the experience in the 1980's, if there
are not strong and permanent institutions that can ensure that between two
options the sustainable one is favored, the progress is nullified in times of crisis
when choices have to be made between objectives.
Nº 8 • June 2011
Finally, the green economy has been mentioned as an opportunity for a
new technological and innovation cycle. This could mean, for Latin American
countries, the entrance into new markets and a new opportunity to participate in
sectors with higher value added, that diffuse technology, in some cases linked to
the natural resource sectors that are so important in the economies of the region.
When considering this argument, it is important to keep in mind the experiences
in the region with productive transformation – mentioned previously in relation
9. In addition to debates on green economy, see the reports from the 18th and 19th sessions
of the Commission on Sustainable Development, particularly with regards to the topic of
consumption and sustainable production.

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to the documents from the beginning of the 1990's – and the lessons learned:
to take advantage of opportunities such as this active policies are needed, with
clear strategic objectives. This includes an articulated combination of policies
addressing education, and industry, science and technology, among others. A
necessary condition is a clear choice, by a relevant and articulated group of
public institutions, to prioritize a sustainable development path.
Green economy in Latin
America: the origins of
debate in ECLAC work
Márcia Tavares
Nº 8 • June 2011
References
Bielschowsky, R. (1998). Cincuenta años del pensamiento de La CEPAL: una reseña.
In CEPAL, Cincuenta Años de Pensamiento en la CEPAL: Texto Seleccionados.
Mexico: ECLAC/Fondo de Cultura Económica.
Bielschowsky, R. (2009). Sesenta años de la CEPAL: estructuralismo y neoestructuralismo.
In Revista de la CEPAL, n. 97. April, 173-194.
ECLAC (1971). El medio ambiente humano y el desarrollo económico en América
Latina. Seminário Regional Latinoamericano sobre los Problemas del Medio Ambiente
Humano y Desarrollo, ST/ECLA/Conf.40/L.2, August 25, Santiago de Chile.
ECLAC (1990). Transformación productiva com equidad: la tarea prioritaria del desarrollo
em América Latina y el Caribe em los años noventa (LC/G.1601-P). Santiago de
Chile: United Nations Publication.
ECLAC (1991). El desarrollo sustentable: transformación productiva, equidad y médio
ambiente (LC./G.1648(CONF.80/2)/Rev.1.). Santiago de Chile: United Nations
Publication.
ECLAC (2008). La transformación productiva 20 años después: viejos problemas,
nuevas oportunidades (LC/G.2367(SES.32/3). United Nations Publication.
ECLAC (2010). La hora de la igualdad: brechas por cerrar, caminos por abrir (LC/
G.2432(SES.33/3). Santiago de Chile: United Nations Publication.
ECLAC/UNIDO (1991). Tecnología, Competitividad y Sustentabilidad (LC.L/608).
Santiago de Chile: United Nations Publication.
Gligo, N. (2006). Estilos de desarrollo y medio ambiente en América Latina, un cuarto
de siglo después. Serie Medio Ambiente y Desarrollo, n. 126, May. ECLAC.
OECD (2010). Interim report of the green growth strategy: implementing our commitment
for a sustainable future. Paris: OECD.
Pinto, A. (1970[2000]). Natureza e Implicações da Heterogeneidade Estrutural da
América Latina. In Bielschowsky, R. (org.), Cinquenta anos de pensamento da CEPAL.
Rio de Janeir; São Paulo: ed. Record, ECLAC, Cofecon, vol.2.
Prebisch, R. (1980). Biósfera y desarrollo. In Sunkel, O. and Gligo, N. (comp.), Estilos
de Desarrollo y Medio Ambiente en la América Latina. Mexico: Fondo de Cultura
Económica.
Sunkel, O. (1980). Introducción: la interacción entre los estilos de desarrollo y el
medio ambiente en la América Latina. In Sunkel, O. and Gligo, N. (comp.), Estilos
de desarrollo y medio ambiente en la América Latina. Mexico: Fondo de Cultura
Económica.
Sunkel, O. (1985). Dívida, desenvolvimento e meio-ambiente. Espaços & Debates –
Revista de Estudos Regionais e Urbanos, ano V, no. 16.
Sunkel, O. (1990). El difícil contexto internacional para un desarrollo sustentable. In
Maihold, Günther and Victor L. Urquidi (comp.), Dialogo con nuestro futuro comun:
perspectivas latinoamericanas del Informe Brundtland. Mexico: Fundación Friedrich
Ebert- Editorial Nueva Sociedad.

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Challenges and
opportunities
The role of inclusive growth
for a green economy in
developing countries
Clóvis Zapata 1
In t r o d u c t io n
The proposition that anthropogenic emissions of greenhouse gases have
dangerously modified global climate is already consensually accepted. One
may ask, however, what the economic impacts are of necessary measures to
achieve reductions in emissions levels and environmental degradation capable
of minimizing such effects. Environmental economists agree that public policies
based on economic incentive instruments can alleviate the effects caused by
climate change at an acceptable cost.
According to the 2011 UNEP report “Towards a green economy: pathways
to sustainable development and eradication of poverty”, in a green economy
income and employment growth is fostered by public and private investment
that reduces carbon emissions and pollution, improves efficiency in the use
of energy and natural resources, and avoids the loss of biodiversity and
ecosystem services. These investments should be supported by directed public
expenditure, policy reform and regulatory changes. This development path
should maintain, improve and, where necessary, rebuild natural capital as a
critical economic asset and source of public benefits, especially for poor people
whose survival and security depend strongly on nature. The essential notion
advocated by the green economy concept is that public policy coupled with
changes in key sectors can conduce national economies to admissible levels of
environmental degradation, without drastic changes in consumption patterns.
Nº 8 • June 2011
Despite the theoretical possibility, the practical challenge is tremendous
for developing economies, since public policy makers must already associate
economic growth with other areas, such as increased consumption patterns to
the poorest segments of society. In this sense, Gunningham et al. (2003) point
to the importance of combining economic, social, environmental and political
dimensions in the design of both economic incentive instruments and commandand-control
measures for environmental policy , which is a fundamental issue
for developing economies willing to enter the green economy.
1. Senior researcher at the International Policy Centre for Inclusive Growth of the United
Nations Development Programme (IPC-IG/UNDP) and professor of Finance at the University
of Brasília.

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Th e g r e e n e c o n o m y
The green economy can be defined as a paradigm shift that proposes a
reduction of current environmental risks and ecological limitations, coupled
with an increased human well-being and social equity (UNEP, 2011). Thus, the
concept can be easily connected to the notion of inclusive growth, which proposes
improved quality of life for all those that live in an economy. In this sense, both
are of fundamental importance for policy makers in developing countries.
In order for an economy to move from the current model to the desirable green,
investments in strategic areas of natural capital that minimize environmental
risks are fundamental. Despite the issue having been presented extensively in
the academic literature, governments have only recently started to take more
proactive measures to translate the rather vague green economy concept into
practical actions.
It is worth emphasizing the role played by international organizations, such as
the United Nations, which provide a forum for permanent debate, disseminating
successful cases of developed and developing countries and presenting
innovative policy proposals. The Green Initiative, for instance, was launched
in 2009 by the UNEP, as part of the nine UN-Wide Joint Crisis Initiatives that
involve all 21 UN agencies, including the Bretton Woods institutions.
Contributions are also made in the area of public policy proposals. The most
prominent example has been the UNEP report that broadly defends that annual
investments equivalent to 2% of the global GDP (close to US$ 1.3 trillion) until
2050 would fuel the development and transition of 11 key sectors to a green
economy (UNEP, 2011). These are: 1- agriculture, 2- buildings, 3- renewable
energy, 4- forestry, 5- manufacturing industry, 6- fishery resources, 7- tourism,
8- transport, 9- water resources, 10- solid waste management and 11- cities.
Nº 8 • June 2011
According to the defended thesis, investments coupled with political reforms
should foster change in the selected industrial sectors, which would improve
the industries competitive position in the long term. As a consequences,
sustainability transformation could be driven by eco-efficient solutions, which
propose more efficient utilization of scarce natural resources and present
innumerable social benefits, such as employment in 'green jobs'. From a
social perspective, this process can conduct emerging countries to a situation
where a growing green economy unfolds into the desired inclusive growth.
The development of these key sectors can reduce poverty and minimize
income discrepancies. To achieve this, the policy menu is diverse, including
direct generation of green jobs, increased access to environmental products
and services in needy communities, design of conditional cash transfers,
direct subsidies to certain industrial sectors and restructure of national public
spending policies.

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Many developing countries have already incorporated sustainable
development concepts, at least in certain sectors, that link various key policy
areas such as pro-poor and pro-employment economic growth. In this sense,
a fundamental aspect for developing countries is that the inclusion of a
green economy can connect dimensions that were previously perceived as
antagonistic.
According to Gunningham et al., (2003), environmental, social, economic and
political dimensions should be taken into account when designing public policies
capable of modifying environmental progress in industrial sectors. An analysis of
the 'license to operate' model indicates the relevance of the interaction between
dimensions as the starting point for influencing the environmental progress of
industry. . As such, these diverse dimensions should be taken into account by
countries that are interested in developing certain sectors of the economy.
This holistic understanding goes beyond the interpretations offered by
authors of corporate strategy such as Porter and Van der Lind (1995) and Hart
(1997), who were pioneers in the idea that the private sector can benefit from
environmental regulation in competitive terms. Such concepts were thereafter
modified by Reinhardt (2000) and Orsato (2009), that indicate conditions where
gains could be realized. Despite the great relevance of such literature, few
industrial sectors have actually awoken to the new areas of green economy,
especially in developing countries. Many of the efforts have been solely
focused on the green discourse and green packaging of old unsustainable
practices. Thus, the role that governments and international organizations play
in promoting the agenda for developing a green economy is essential, since the
combination of fiscal incentives and regulations can accelerate the process of
change through technological innovation and the creation of green markets. If
left to the exclusive will of the private sector, as has been the case, economies
turn out to be incapable of actually entering into a green economy.
It is important to note that social, economic, political and environmental
dimensions follow different mecanisms that should be carefully understood
for developing countries. Despite the existence of potential synergies and
strong interactions between these dimensions, it cannot be assumed that the
dynamics and responses of each one can be identical. Each country faces
the challenge of finding solutions that drive economic growth in a way that is
environmentally sustainable, socially inclusive and politically feasible, within
their unique contexts.
Nº 8 • June 2011
Th e c o m p l e m e n t a r it y b e t w e e n s o c ia l a n d
e n v ir o n m e n t a l d im e n s io n s
In terms of public policy, the economic and social dimensions have been on
the centre of policy making in developing countries. Although the development

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of social policies should be coupled with the development of the green economy,
the evolution seen in the field of social program design was not accompanied
by environmental concerns. In the social field, Brazil and other developing
countries recently adopted a series of innovative social protection strategies
to improve the lifestyles of the poorest. Brazil, for example, implemented the
Family Grant program (Bolsa Familia), and Mexico the Oportunidades. Such
programs have generated significant benefits in combating poverty, raising the
living standards of the population in certain areas and guaranteeing benefits
in the fields of education and health.
However, the interaction between social and environmental policies still
requires more robust debate. One of the options presented by some countries is
the payment for environmental services, which utilizes conditional cash transfer
instruments to rural landowners that preserve part of their land, as was done
in Costa Rica. Such programs have generated positive effects, but still have
not been widely adopted in other countries. In Brazil, for example, despite the
success of the Family Grant program and the efforts by the Brazilian Ministry
of the Environment, the country has not been capable of introducing a payment
for environmental services program in an effective large scale manner.
It is noteworthy that the generation of green jobs through the sectors
highlighted by UNEP (2011) is essentially different, as it is based on the belief
that the market is capable of generating such positions, with support provided
by the public sector. Conditional cash transfer programs are designed to tackle
a different issue, since they are better equipped to eliminate distortions relative
to extreme poverty and to families in great need for financial resources. Green
jobs focus on substituting unsustainable processes with cleaner more advanced
alternatives.
The 'license to operate' framework presented by Gunningham et al. (2003)
notes that the interaction between social, environmental, economic and political
licenses is intricate and should be analysed case by case. In a very simplified
way, conditional cash transfer programs can be seen as inducers of a non-trivial
response. Such programs serve to solve poverty issues, but still have not been
able to fully incorporate exit strategies nor the environmental dimension..
However, policies of productive inclusion can be designed to attend to
environmental needs and promote key sectors in the green economy.
Nº 8 • June 2011
In d u s t r ia l d e v e l o p m e n t a n d p r o d u c t iv e in c l u s io n:
t h e c a s e o f t h e Br a z il ia n Bi o d i e s e l Pr o g r a m
Beyond social strategies, the development of a green economy requires
structured growth policies, which generate jobs and include marginal
populations in supply chains with high aggregate values. Social strategies can
serve as complements to deal with specific social aspects, but as sources of

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development and 'green' innovation. As such, the combination of expansionist
macroeconomic policies capable of generating employment and income,
coupled with national structures that encourage industrial development, is
fundamental. In this section, these issues will be briefly contextualized with
the use of the Brazilian Biodiesel Program case.
Biodiesel is an area of great debate in the development of renewable energy
for transport. Brazil is internationally recognized as one of the leaders in the
research and development of biofuels for the automotive industry. In this context,
the Brazilian Biodiesel Program brings important elements to the debate, as
it relates both to the areas of sustainable transport and renewable energy, as
well as presents a political structure to address the social dimension.
The Brazilian Biodiesel Program has been developed to structure the
productive supply chain and incorporate small family farmers in the production of
raw materials for the production of biodiesel. The program was designed so that
small farmers could contribute with a series of vegetable sources such as soy,
castor bean, sunflower, palm and cotton. Despite the extensive background the
country possess in this area, the inclusion of small family farmers in the biofuel
supply chain was an innovative policy effort that turned out to be disappointing,
due to innumerable problems related to the program design and implementation
(Zapata et al., 2010).
In 2010, the government, perceiving the need to redirect the program to
increase the participation of small farmers, remodeled the program structure and
placed Petrobras Biofuels as principal stakeholderr. After this change, positive
anecdotal evidence has have emerged. . It is expected that consolidated data
will be available this year.
The Brazilian Biodiesel Program has shown that the policies that t seek
to reduce poverty through the productive inclusion of small family farmers is
complex, but feasible. Lessons can be taken and applied in other countries that
wish to follow similar paths. Despite the effort of combining the environmental
and social dimensions, Brazil takes timid steps in the development of
technologies and radical innovation strategies, such as hydrogen and electric
or hybrid vehicles. The transport strategy is based on incremental modifications
of internal combustion engines with marginal environmental effect (Zapata and
Nieuwenhuis, 2010).
Th e So u t h-So u t h d e b a t e
Nº 8 • June 2011
Beyond the central importance of social and environmental dimensions for
the development of a green economy in developing countries, the political
dimension is also crucial. Interest groups can influence governments and society
to take measures that generate profound changes in determined areas of the
economy and can strengthen the elements necessary for the development of

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green economy in
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the green economy. As such, f international organizations can play a central role
that presents feasible opportunities to shape the political dimension in accord
with the interests of wider society and not just specific interest groups. The
United Nations system, for example, has achieved highly significant results in
the political sphere through the promotion of international discussion forums.
Experiences with rural and urban inclusive production that drive development
in sectors specific to the development of a green economy should be better
studied and shared between countries with similar characteristics. In the field
of productive inclusion policies or conditional cash transfers, the sharing of
experiences among southern countries is fundamental. In this context, it is
important to emphasize the efforts made in the IBSA (India, Brazil and South
Africa) and BRIC (Brazil, Russia, India and China) countries through IPC-IG,
which has acted as catalyst in the debate and experience sharing in specific
forums for these two groups.
Co n c l u s io n
The green economy is an ample concept that should be better translated into
measures that modify the current structure of national economies. The current
debate is lead by UNEP is based on the premise that incremental modifications
in selected industrial sectors would be sufficient to conduct humanity towards
sustainability. However, the demands from developing countries are pressing,
as aside from the critical environmental dimension, the social dimension is also
in desperate need. In this sense, the concept of inclusive growth should be
fundamentally incorporated in the green economy discussion.
In general terms, the discourse of international organizations and many
countries is substantially optimistic, and based on the dissemination of
successful cases in certain areas. However, it is important to note that the
international replicability of such experiences is very limited, since each strategic
sector exists within specific local and national conditions, with particular social,
environmental, economic and political dimensions.
Nº 8 • June 2011
The efforts made by the United Nations and other international organizations
are essential, but still incipient in the area of green economy. The private
sector should play a leading role in this context. However, It should be noted
that the consensus among environmental economists disappears regarding
the time necessary to achieve such transformations. A process of profound
change in production and consumption, based on radical innovation, is not on
the agenda, because much more substantial investments would be required.
Thus, we should ask if the current debate on the green economy encompasses
the sense of urgency necessary to solve the environmental problem within the
required time-frame.

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References
Gunningham, N., Kagan, R. and Thornton, D. (2003). Shades of green: business, regulation,
and environment. Palo Alto: Stanford University Press.
Hart, S. (1997). Beyond greening: strategies for a sustainable world. Harvard Business
Review, 75(1), 66–76.
Orsato, R. (2009). Sustainability strategies. New York: Palgrave MacMillan and INSEAD
Business Press.
Porter, M. and Van der Linde, C. (1995). Towards a new conception of the environmentcompetitiveness
relationship. Journal of Economic Perspectives, 9(4), 97-118.
Reinhardt, F. (2000). Down to earth, applying business principles to environmental
management. Cambridge: Harvard Business School Press.
UNEP (2011). Towards a green economy: pathways to sustainable development and
poverty eradication. Retrieved from: .
Zapata, C. and Nieuwenhuis, P. (2010). Exploring innovation in the automotive industry:
new technologies for cleaner cars. Journal of Cleaner Production, 18(1), 14-20.
Zapata, C., Vazquez-Brust, D. and Plaza-Úbeda, J. (2010). Productive inclusion of
smallholder farmers in Brazil’s biodiesel value chain: programme design, institutional
incentives and stakeholder constraints. International Policy Centre for Inclusive
Growth Working paper 73.
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GREEN ECONOMY
Challenges and
opportunities
Brazil and the green
economy: a panorama
Francisco Gaetani 1
Ernani Kuhn 2
Renato Rosenberg 3
1. In t r o d u c t io n
Upon seeking to understand the situation in Brazil as relates to the green
economy (GE) and its perspectives, some crucial questions arise. What are
the main advances already achieved in relation to GE? How is Brazil doing
in comparison to other countries? What are the main challenges that need to
be addressed? These questions are ample, current and narrowly related to
discussions about the impacts of climate change and new formulations in the
sphere of economic theory.
According to the document “Green Economy: synthesis for policy makers”,
elaborated by the UNEP in 2011, green economy can be defined as that
which results in improvements to human well-being and social equity, while
significantly reducing environmental risks and ecological scarcities. In other
words, GE can be thought of along the lines of low carbon, efficient resource
use and social inclusion.
Productive restructuring efforts towards a greener economy are part of
government programs both in developed and emerging countries. Development
of new markets guided by cleaner energy sources, sustainable arrangements
of economic activities and socio-economic inclusion, dominated the debate in
the second half of the 20th century, though the 2008 financial crisis and the
democratic revival in the Arab world have re-introduced the regressive scenario
of predatory growth on the agenda.
2. Br a z il a s p o t e n t ia l e n v ir o n m e n t a l e n e r g y
s u p e r p o w e r
Nº 8 • June 2011
To analyze the GE potential of Brazil, it is fundamental to also understand
the distinguished role of the country in relation to its privileged environmental
conditions of natural resources abundance. The national territory encompasses
the second largest forest area on the planet, which occupies around 4.8 million
square kilometers; representing 56% of national territory and 10% of global
1. Deputy Minister of the Brazilian Ministry of the Environment.
2. Program Director at the Brazilian Ministry of the Environment.
3. Technical Advisor to the Brazilian Ministry of the Environment.

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Francisco Gaetani
Ernani Kuhn
Renato Rosenberg
forests (Governo Federal, 2008). Beyond these great dimensions, the forests
are also rather diversified, ranging from the Amazon rainforest, the Araucarias
Forests (Brazilian pine forests), the seasonal forests, the tropical Atlantic
Forests, the Caatinga (Brazilian dry forests), the Campinaranas (Brazilian heath
forests), to the Cerrado (Brazilian savannahs), making this the most bio-diverse
country on the planet – the other two with similar characteristics are Indonesia
and the Democratic Republic of the Congo.
In terms of water resources, Brazil also exhibits indicators of global relevance:
the country has approximately 12% of the surface water available on the planet
according to the Brazilian National Water Agency, to which the Amazon region
contributes almost 75% (MMA, 2010). In addition to the genetic wealth derived
from the country’s biodiversity, an enviable natural resource endowment has
also been recorded – in the volume of deposits and heterogeneity of resources
– comparable only to Russia, the United States, Canada and Australia.
Brazil has been developing a series of institutional, economic and
technological instruments aimed at preserving and utilizing these resources in
a more rational and sustainable way. This is a recent effort, though it has been
gathering force over the past 25 years. The challenge today is to benefit from the
accumulated efforts in favor of environmental preservation and socio-economic
development, by taking advantage of the global window of opportunity that is
opening through and for Brazil.
One example of a distinguished initiative is the Brazilian experience with
using combustible alcohol, more commonly known as ethanol fuel. Research
to utilize ethanol derived from sugarcane in automotive engines began in the
1920’s (Magalhães and Schartzman, 1981). By the 1930’s, Decree n. 19.717 (20
February 1931) made the addition of ethanol to gasoline mandatory. The first oil
crisis in 1973 brought an energy shortage to the country. Through the National
Ethanol Program (Pró-Álcool), Brazil was mobilized to produce ethanol to be
mixed with gasoline as a first step, and subsequently to be utilized directly as
fuel on a large scale, which put Brazil in a unique position in relation to the rest
of the world. In recent years, cars called flex (bio-fueled) have already reached
a relevant share of the vehicle fleet sold in the country, and thus significantly
changing the fuel consumption profile, by consolidating the possibility of using
ethanol as a substitute to gasoline and by affecting the demand characteristics
in this market by suddenly offering consumers a choice.
Nº 8 • June 2011
Such initiatives did not have environmental protection as an objective. Today,
however, they are of significant importance in the Brazilian strategy to achieve
a transition to a green economy. In the case of ethanol, this fuel emits much
lower levels of greenhouse gases than its main competitor, gasoline.
According to the Brazilian Ministry of Mines and Energy, between 1970 and
2007 the consumption 854 million barrels of petroleum was avoided due to the

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Brazil and the green
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Francisco Gaetani
Ernani Kuhn
Renato Rosenberg
utilization of ethanol, and thereby withholding the emission of 800 million tons of
CO 2 into the atmosphere (MME, 2008). Aggregated to this is the public health
benefit due to reduced emissions of atmospheric pollutants. The increased
agricultural and industrial productivity in the ethanol sector, a result of intensive
research and development, to a certain extent contributed to reduce pressure
on forests being converted into agricultural land. Despite increased productivity,
the recent higher levels of demand made the adoption of mitigative measures
a necessity in order to preserve areas with important environmental capital.
In addition to technological progress, there were a series of measures of an
institutional character that enabled Brazil to capitalize on its enormous potential
to generate environmental benefits. Among these, the Forest Code (1965) and
the National Environmental Policy (1981) stand out historically. More recently,
a presidential decree was issued to approve the Agroecological Zoning of
sugarcane, which prohibited plantations in environmentally sensitive areas,
such as forest remnants, sand dunes, mangroves and strategic biomes and
hydrographic basins, more specifically in the Amazon, the Pantanal and the
Alto Paraguai basin. Also established were standards to encourage mechanical
harvesting as a way to curb the burning of straw from sugarcane.
These are some examples of GE in Brazil: develop economic, technological
and institutional instruments to benefit efficiently from the excellent natural
conditions of the country and ensure that the benefits gained through these
activities are inclusively incorporated into Brazilian society.
3. Br a z il o n t h e in t e r n a t io n a l s c e n e
However, in spite of favorable natural and geographic conditions, Brazil is a
large emitter of CO 2 . In 2005, total global emissions of GHG reached 44.130
billion metric tons of carbon equivalent (MtCO2eq) and increased at an annual
rate of 1.24% between 1990 and 2005 (ECLAC, 2010). In this context, Latin
America and the Caribbean contributed to 12% of total global emissions,
with an amount of 5.390 MtCO 2 eq, and exhibited a growth rate similar to the
global average of 1.19% between 1990 and 2005. It can also be noted that
the emissions per country in the region are very heterogeneous, with a strong
relative concentration in some countries. Furthermore, there are differentiated
behaviors based on emission sources, with growth in energy sources and
the relative dominance of emissions resulting from changes in land use
(deforestation) (ECLAC, 2010).
Nº 8 • June 2011
During the period 1990-2005, Brazil exhibited a percentage growth in
emissions below the average for the region. Nevertheless, Brazil is the largest
GHG emitter in the region, corresponding to more than 50% of emissions
during the mentioned period (ECLAC, 2010). Considering total equivalent CO 2
emissions during the same period, excluding emissions from land use (Barbier,

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2009), the country is in 7th place globally (2.6%), behind China (18.6%), the
United States (18%), the European Union (13%), Russia (5.1%), India (4.8%)
and Japan (3.5%). It is worth pointing out that in Brazil, the greatest part of GHG
emissions stems from change in land use that, if included in this calculation,
would certainly elevate the country to one of the greatest global emitters.
The main sources of emissions at a global level are concentrated in the
energy sector (65%), followed by the agricultural sector (14%) and emissions
caused by changes in land use (12%). Emission sources in Latin America
and the Caribbean have a unique structure in that emissions originating from
changes in land use represent almost half of the regional total, while the energy
sector makes up 28% and agriculture 20% (ECLAC, 2010). This demonstrates
that mitigation strategies in Latin America should consider both emissions
related to energy consumption and, primarily, the levels of deforestation and
land degradation.
When considering per capita emissions of GHG in 1990 and 2005, Brazil
occupied 4th place among the greatest regional emitters, behind only Bolivia,
Venezuela and Trinidad and Tobago. Considering CO2 emissions from energy
consumption and the production of cement (2005), Brazil is below the levels of
the countries in Latin America and the Caribbean (ECLAC, 2010).
When speaking about climate change in Brazil, as a large emitter of GHG,
the country has already adopted a pro-active stance by assuming voluntary
goals within the United Nations Framework Convention on Climate Change and
the Kyoto Protocol. The country committed to, through its National Policy on
Climate Change (Governo Federal, 2008), reduce between 36.1% and 38.9%
of its projected emissions for the year 2020. In concrete terms, this means
reducing close to 6% of its emissions relative to the base year 2005, by the
year 2020, which is equivalent to around 132 million tons of carbon equivalent.
This attitude should have a positive impact, if not fundamental, on future Kyoto
Protocol negotiations.
4. Pr in c ip a l Ac t io n s 4
4.1 Forests
Nº 8 • June 2011
With regards to the National Policy on Climate Change, important advances
were recorded for the year 2010, most noteworthy being the National Fund on
Climate Change regulation, in which it was established that part of the funds
would be derived from the petroleum supply chain. Among the objectives of
fund are combating desertification, education and training projects, with the
development and diffusion of technologies, support for sustainable supply
chains and payment for environmental services.
4. The source of the mentioned actions is Presidência da República do Brasil (2011).

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Ernani Kuhn
Renato Rosenberg
Another sensitive point is preventing and controlling deforestation and
burning. In the important Amazon biome, between 1st August 2009 and 31
July 2010, an area of 6,451 km² was deforested according to Brazilian National
Institute for Space Research. The rate represents a 13.6% reduction compared
to the previous period and close to 75% in relation to data from 2003.
The so-called Action Plan for Prevention and Control of Deforestation in
the Amazon centralized its efforts in 43 municipalities responsible for the
highest deforestation rates. Close to 90% succeeded in reducing this process.
Furthermore, in order to accelerate the process of environmental regularization
of rural properties in the Amazon, 94 municipalities initiated Rural Environmental
Registration activities. Just in the states of Mato Grosso and Para, this
registration has already been implemented on more than 40,000 properties.
Command and control mechanisms, especially enforcement instruments,
have also been utilized in the region. Over the analyzed period, the Brazilian
Institute of Environment and Renewable Natural Resource with help from the
National Public Security Force, the Federal Police and the Federal Highway
Police, issued close to 5,400 fines for a total value of R$ 1.8 billion. Close to 86
thousand m³ of timber were seized and 170 thousand hectares embargoed.
In the Cerrado biome, measures are also planned to reduce deforestation
rates, burning, and forest fires through the Action Plan for Prevention and
Controlling Deforestation and Burning in the Cerrado. Highlights include the
systematic monitoring system of the Cerrado forest cover, the training of 4.5
thousand firefighters, the drafting of the Ecologic and Economic ‘Macro-zoning’
for Cerrado regions, the creation of 2.5 million hectares of protected areas (or
conservation units, the term used in Brazil), the inclusion of more than seven
socio-biodiversity products in the Minimum Price Guarantee Policy, the provision
of credit lines for recovery of degraded pastures and increase of planted forests
in already open areas.
The Plan to Prevent and Control Deforestation in the Caatinga Biome,
which is in elaboration phase by the Federal Government, will be concluded in
2011. With the increased monitoring of national territories that stems from the
Monitoring Deforestation of Brazilian Biomes via Satellite Project, more recent
data will be provided for Caatinga, Pantanal and Atlantic forest biomes. The
challenges are great, but changes are taking place.
4.2 Macro-zoning
Nº 8 • June 2011
Ecological-economic macro-zoning in the Legal Amazon, which comprises
the territories of nine Brazilian states, was institutionalized by decree in
December 2010. The same year, physical, biotic and socio-economic diagnoses
were published for the hydrographic basin of the Sao Francisco River. Currently,
close to 50% of the territory has already received some directive on land use

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Brazil and the green
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Francisco Gaetani
Ernani Kuhn
Renato Rosenberg
and occupation, at the scale of 1:250.000. More than 2/3 of the national area is
covered by this zoning. Such zoning is important to make agricultural production
compatible with environmental issues, aiming to avoid disordered expansion
and the resulting environmental damage.
Macro-zoning is a fundamental instrument for implementing an environmental
policy that necessarily is linked to territories. The migration of portions of the
Brazilian economy towards a green economy has various dimensions with
implications for regional development that should be anticipated through the
incorporation of these concerns in the sustainability dimension beyond microentrepreneurial
viewpoints. The macro-regions that have guided environmental
policy – the six biomes: the Amazon, Caatinga, Cerrado, Atlantic Forest,
Pantanal and Pampa – require analyzes that overlap them with other vectors
of economic and social development, such as the Accelerated Growth Program
and its infrastructure investments, local productive arrangements, settlements
and others, in order to permit the planning of environmental, economic and
social responses to each specific context.
4.3 Solid waste treatment
Another thematic area acting as important catalyst in the development of a
green economy in Brazil is the treatment of urban solid waste. The National
Solid Waste Policy was endorsed on 2 August 2010 and its regulation enacted
on 23 December the same year. With the 2011 drafting of the National Solid
Waste Plan, the implementation of the National Waste Management Information
System and the realization of Sectorial Accords, which should consider the
reverse logistics implementation mechanisms of main products and the
packaging of each activity, there is a context of great expectations and a lot of
activity for the government and the diverse actors involved.
The development of these markets and the change in operational levels
indicate a new scale in the greening process of the economy, with implications
for business areas that are traditionally influenced by local and state
governments. Basic sanitation, solid waste and reverse logistics are important
pillars of the (new) green economy. These are markets whose growth rates will
be substantially greater than the average for the economy.
4.4 Water resources
Nº 8 • June 2011
The year 2010 was characterized by a strengthened National Water
Resources Policy and National Water Resources Management System.
Relevant events took place, such as the 1st National Water Conference and
the first revision of the National Water Resources Plan. Other actions stand
out, such as the development of a matrix of technical coefficients for water

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Brazil and the green
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Francisco Gaetani
Ernani Kuhn
Renato Rosenberg
consumption in production processes and a general equilibrium model; the
strategic planning of National Water Resources Management System and the
development of strategies for strengthening the National Water Resources
Council; and the development of the National Water Resource Plan Information
System, that will be integrated with the National System of Water Resources
Information.
Other initiatives deserve to be mentioned. The Hydrographic Basin
Revitalization Program seeks to contribute to minimizing environmental
degradation and recuperating the natural state of water resources. The
Program is decentralized and carried out through partnerships with states and
municipalities. In 2010, actions in the Sao Francisco river basin were prioritized,
which included the implementation of a water supply system in riverain
communities in 106 municipalities, sewage system works in 194 municipalities
and solid waste treatment system projects in 13 inter-municipal consortiums.
Charging for water use has been implemented in Brazil since 2001. For
rivers controlled by the Union, charges have already been established for the
Paraíba do Sul river basin (southeast region of Brazil) since 2003, the rivers
basins of Piracicaba, Capivari and Jundiaí (southeast region of Brazil) since
2006 and the Sao Francisco river basin since 2010. The raised resources fully
return to the water agencies or delegated entities.
4.5 Forest management
In the field of public forest management, the forest concession, among others,
has started to be adopted as a way to protect public property and structure
a sustainable economy with a forest basis. The Brazilian Forest Service has
already provided more than a million hectares for forest management, an activity
that can generate jobs and move the economy in places that need sustainable
development. This is the beginning of a process to capitalize on a business
area with great potential.
Nº 8 • June 2011
Forest management is simultaneously perceived as an alternative action
to economic exploitation, environmental preservation and socio-productive
inclusion. The dissemination of good practices in this sphere is conditioned
on factors such as a) the development of forest research that indicates viable
and economically feasible alternatives to exploitation; b) business modeling
so that the Brazilian Forest Service, the Brazilian Institute of Environment and
Renewable Natural Resource and the Chico Mendes Institute for Biodiversity
Conservation work in harmony to construct partnerships with the private sector;
and c) demonstrating the economic viability of this type of venture, however,
not at the expense of environmental protection and social concerns.

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Brazil and the green
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Francisco Gaetani
Ernani Kuhn
Renato Rosenberg
4.6 Conservation unit management
The Chico Mendes Institute for Biodiversity Conservation is responsible for
administering conservation units (CUs) in Brazil, which occupy 8.5% of national
territories. There are 12 unit categories – national parks, ecological stations,
biological reserves, wildlife refuges, natural monuments, integral protection
CUs, areas of relevant ecological interest, areas of environmental preservation,
areas of national forests, extractive reserves, areas of sustainable development
and sustainable use CUs – of which 32% already have management plans and
27% have draft plans in process.
In the context of disseminating practices associated with GE, there is current
discussion about the menu of institutional arrangements likely of being adopted
in these CUs in order to identify business models capable of reconciling the
premise of preservation, as well as the development of other activities such
as research (basic and applied), tourism, sustainable forest management,
extractivism, sustainable economic exploitation and others. Preservation largely
depends on society perceiving that it is conscious, planned and careful use of the
country’s natural patrimony that guarantees its conservation and expansion.
5. Ch a l l e n g e s
The challenges that Brazil faces in the environmental area are proportional
to their potentials. They involve rethinking the country’s economic development
strategies, taking into account growing imperatives of a socio-environmental
nature. Developing a strong and structured green economy with an increased
generation of green jobs is fundamental. This is a national issue that transcends
the jurisdiction of the Brazilian Ministry of the Environment and for which society
and various levels of government are responsible.
There are pressing issues, such as the reconciliation of the need to improve
the combat against deforestation with the strong pressure of agricultural
and cattle raising expansion. Even the management of the national energy
matrix brings important dilemmas, such as those associated with changing
the equilibrium between renewable and non-renewable sources, an issue
that cannot be addressed without an analysis of the costs and competitive
advantages associated with each alternative.
Nº 8 • June 2011
The coordination of environmental policies in the area of federal government
administration and the cooperative federalism pact related to the process of
implementation of these policies are permanent challenges. The Ministry of
the Environment interacts with almost all the other ministries in the federal
public administration and bilateral agendas are being formed with each one.
In the area of inter-governmental relations, it is worth registering that Brazilian
environmental issues are national, not federal. But the capital needed for
coordination is, without a doubt, a very scarce resource in any government.

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Brazil and the green
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Francisco Gaetani
Ernani Kuhn
Renato Rosenberg
Dialogues with the business sector, social movements and NGOs can be
found in the DNA of the environmental agenda and it is not surprising that all
are moving rapidly in the direction of a greener society and economy. The
history of the Ministry of the Environment is the result, to a large extent, of
these dialogues. The challenge is to deepen them so that they become more
and more qualified and produce developments in the sphere of environmental
public policies, especially the inclusive sort.
Finally, it is necessary to mention that today Brazil is known internationally
as a global environmental power that dialogues with rich, developing, emerging
and poor countries in relation to the global environmental agenda. In the area
of large global conferences, in the sphere of international technical cooperation
and South-South platforms (Ibas, Basic, Bric, Unasul, etc), a leadership position
is increasingly being expected from Brazil. But leadership requires example:
therein lies the importance of the whole nation engaging itself in addressing
these simultaneous challenges in an extensive and coordinated way.
6. Co n c l u s io n
From various geopolitical aspects, Brazil starts from a privileged situation in
the direction of a green economy. The natural characteristics and their past use
are already driving one of the cleanest energy matrices in the world. Recent
initiatives, herein focused on the scope of government activities, mainly compose
the beginning of a consolidated development effort in different areas.
In most cases, institutional structuring is only beginning, as well as the
creation of economic mechanisms that compose the agenda of a country
that is increasingly focused on evolving markets related to a green economy.
Some initiatives are already presenting good progress, such as the reduction
of deforestation in the Amazon biome, though that does not mean to say that
there is not a long road ahead, in particular for this one, but also for other
biomes. The best protection should be combined with proper biodiversity use
integrated with the process of national development.
GE is included in the context of a national development project that is
sustainable and inclusive and does not accept, from the point of view of
government policy proposals, artificial trade-offs that do not serve in the
national interest, such as growth versus sustainability or social inclusion versus
environmental preservation.
Nº 8 • June 2011
The Brazilian Ministry of the Environment, integrated with the federal
government administration, has become a strategic actor in the economic
agenda of the country, because the government understands that there is no
development that does not seek sustainability and biodiversity.

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Renato Rosenberg
References
Barbier, E. B. (2009). Rethinking the economic recovery: a global green new deal.
Report prepared for the Economics and Trade Branch of the Division of Technology,
Industry and Economics of UNEP. University of Wyoming: Department of Economics
and Finance.
Decreto Federal n. 19.717, 20 February 1931.
ECLAC (2010). La Economía del Cambio Climático en América Latina y el Caribe.
Síntesis 2010. Santiago de Chile: United Nations Publication.
Governo Federal (2008). Plano Nacional sobre Mudança Global do Clima – PNMC –
Brasil. Comitê Interministerial sobre Mudança do Clima.
Magalhães Castro, M. H and Schwartzman, S. (1981). Tecnologia para a Indústria: a
história do Instituto Nacional de Tecnologia. Retrieved from:
en el 19 de setiembre de 2007.
MMA (2010). Tabela de Indicadores do MMA. Retrieved from: en el 08 de abril de 2011.
MME (2008). Biocombustíveis: instrumento para inclusão social e fator de desenvolvimento
econômico com respeito ao meio ambiente. Retrieved from:
en el 08 de abril de 2011.
Presidência da República do Brasil (2011). Mensagem ao Congresso Nacional 2011:
1ª Sessão Legislativa Ordinária da 54ª legislatura. Brasília.
UNEP (2011). Towards a green economy. Pathways to sustainable development and poverty
eradication. A synthesis for policy makers. St-Martin-Belleveu, France: UNEP.
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Growth potential of the
green economy in Brazil 1
Carlos Eduardo Frickmann Young 2
1. Gr e e n e c o n o m y a s a n e w p a t t e r n o f
d e v e l o p m e n t
The concept of green economy suggests that the dynamism of the economy
must be set by the expansion of sectors with low environmental impact
by promoting actions such as clean technology, renewable energy, green
transportation, waste management, green buildings, sustainable agriculture,
forest management and payment for environmental services. The reason for
that is that this process of reconfiguration of economic activity provides better
return on investments in natural, human and economic capital, while reducing
the pressure on the environment and contributing to greater social equity 3 .
Therefore, the green economy offers the opportunity to reconcile the traditional
goals of economic policy, especially growth of income and employment with
the social and environmental objectives of sustainable development: a strategy
to enter into a development process based on the endogenous capacity of
generation and incorporation of technical progress while social issues (including
environmental protection) receive the same importance as economic goals.
The aim of this paper is to show that the “greening” of the Brazilian economy
through the expansion of economic activities with low environmental impact,
can bring better results to the generation of employment and income than
the current model of specialization of exports of natural resources exploited
predatorily or industrial goods with a high degree of pollution in their production
processes. That is to say that the adoption of an alternative model, based on
the expansion of “clean” sectors, can bring more social and economic benefits
than the current path of specialization in “dirty” activities.
To demonstrate this, the results of an input-output matrix model will be
presented so as to compare alternative options of economic growth (“green”
or “brown”) in terms of capacity to generate employment and income (Young,
2010). The growth scenarios based on spurious depletion or degradation of
natural resources bring worse results than the scenarios where the production
Nº 8 • June 2011
1. This article is the result of the research project “Transición de América Latina y el Caribe
hacia un modelo de crecimiento verde e inclusivo”, with the support of UNEP and ECLAC. I
would like to thank Mr. Leonardo Barcellos de Bakker and Mr.André Falkenbach Santoro for
their comments and help in the elaboration of this text.
2. Profesor of the Institute of Economics of the Federal University of Rio de Janeiro (IE/UFRJ).
Email: young@ie.ufrj.br
3. UNEP (2011).

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dynamism is concentrated in sectors that are less harmful to the environment:
the creation of employment and wages are higher in scenarios where the
dependence on natural resources and degradation are reduced, proving that the
dichotomy between environmental conservation and improvement of economic
conditions is false.
Growth potential of the
green economy in Brazil
Carlos Eduardo Young
2. Th e r e s p e c ia l iz a t io n o f La t in Am e r ic a o n
n a t u r a l r e s o u r c e e x p o r t s
The increasing dependence on exports based on natural resources or
pollution-intensive goods is a structural problem in Latin American countries,
whose exports are increasingly concentrated in natural resources or industrial
goods characterized by a relatively high degree of pollution in their production
processes (Young, 1988; Lustosa and Young, 2001, 2002, Malavasi et al., 2005).
This trend has been accentuated in recent years, both in terms of the relative
share of natural resources in the exports basket and specialization in pollutionintensive
industrial goods. The results obtained by Young (2010), using the
international trade database TradeCan and coefficients of potential emission of
industrial pollutants (ILITHA) of the Industrial Pollution Projection System - IPPS
(Hettige et al., 1994) show that there is a clear trend of increasing dependence
of the export basket on primary goods, which has rapidly accelerated in the
2000s. Figures 1 and 2 present the results for Brazil.
Figure 1
Participation of primary products in exports (%), Brazil and Latin America
Primary/total – Brazil
Primary/total – Latin America
Nº 8 • June 2011
Source: Young (2010), based on data from TradeCan.

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Figure 2
Average intensity of potential pollution of industrial exports
(ILITHA/IPPS), Brazil and Latin America
Growth potential of the
green economy in Brazil
ILITHA/Industrials – Brazil
Carlos Eduardo Young
ILITHA/Industrials – Latin America
Source: Young (2010), based on data from IPPS and TradeCan (Hettige et al., 1994)
These results are associated with the hypothesis of deindustrialization,
showing that the liberalization process initiated in the 1990s, along with the
boom in commodity prices in the 2000s, resulted in structural change in the
region, returning to a position where the dynamism of foreign markets is based
on direct sales of natural resources or of goods whose production is intensive
in pollutant emissions. Combining both results, in the 2000s exports from
Brazil and Latin America have become increasingly dependent on the spurious
competitiveness based on depletion of the natural resource base, instead of a
virtuous cycle in which the commercial gain would be obtained from technical
progress and innovation.
This issue is particularly problematic, because consumers in developed
countries are increasingly aware of environmental footprints of the products they
buy and the position of Latin America can be seen as fragile if this awareness
is reflected in trade restrictions against products harmful to the environment.
Nº 8 • June 2011
Despite these problems, it is common to find defenders of the current growth
trend supported by natural resources or emissions-intensive products arguing
that environmental losses are a necessary cost of economic development. This
hypothesis, usually called “environmental Kuznets curve”, would justify that, at
certain stages of development, the sacrifice of natural resources is an inevitable
price to improve the material conditions of life. The next section presents a
model to test the validity of this hypothesis in the Brazilian context.

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Carlos Eduardo Young
3. In d u s t r ia l p o l l u t i o n a n d s o c ia l in c l u s io n:
s c e n a r io s f o r t h e f u t u r e
In the previous session, it was shown that Brazil and the rest of Latin America
increased their structural dependence of primary goods and pollution-intensive
goods in their export basket. Obviously this brings negative consequences for
the environment. Even so, exports have been a major engine of economic growth
and, therefore, some argue that it is necessary to accept some environmental
damage in order to increase the pace of economic activity.
The implicit hypothesis in this argument is that economic activity and
environmental conservation are necessarily in opposition and that, consequently,
policymakers have to decide between (i) increase employment and income
levels, or (ii) weaken economic growth in pursuit of environmental preservation.
The purpose of this session is to show that an alternative path of economic
growth is possible, exemplifying how the priority to the green economy,
besides conserving the environment, will bring beneficial effects to the levels
of employment and income.
This session examines the problem, testing whether a growth based on
degradation of natural resources would bring better or worse results than
the economical alternative to concentrate the product in higher value added
activities, which bring less harm to the environment. To illustrate this point,
scenarios have been constructed using the input-output matrix of 2005 (the
most recent) of Brazil, comparing different possibilities of economic growth,
using the generation of jobs and wages as a measure of economic growth.
Among other reasons, employment and wages are good indicators of growth
with social inclusion, since they express better the evolution of welfare than
GDP growth. Furthermore, given the extreme concentration of income in Latin
America, it is more important to avoid growth measures that do not consider
the redistribution of income.
The exercises performed sought to answer the following questions:
• What generates higher growth: the expansion of activities intensive in natural
resources or those based on manufactured goods or services?
• Within the manufacturing sector, which generates higher growth: the
expansion of activities more or less pollution-intensive?
Nº 8 • June 2011
The advantage of using the input-output matrix is that it allows the perception
of the entire production chain. In order to make the scenarios comparable, all
of them must all be based on similar expansions of final demand, by means of
an exogenous increase in exports.
There are a number of limitations on the use of an input-output matrix.
Technical coefficients and relative prices are assumed to be constant, as if the
economy remained static during the period under analysis. In addition, there are

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Carlos Eduardo Young
no observed coefficients of emissions, only potential estimates based on older
models such as the Industrial Pollution Projection System (IPPS), elaborated
by the World Bank and on which this analysis is based.
Despite all the problems reported above, the exercise of input-output based
on a real economy provides important results, since it allows the consideration
of inter-sectoral chains and are a more effective way to simulate an alternative
growth of possibilities than ungrounded assumptions or tests on the consistency
of its results.
a. Methodology
The exercise simulated an expansion of final demand of R$ 40 billion (at
2005 prices), or approximately 12% of exports in 2005 - this figure was chosen
because it was the average annual growth of Brazilian exports between 2000
and 2005. Each scenario has distributed the expansion of that same amount
(R$ 40 billion) in different combinations of final demand in economic sectors.
The first question that arises is which sector generates more growth, as
measured by employment and wage growth. The economy was divided into
three major sectors (primary products, manufactured goods and services) and
the total expansion of final demand (R$ 40 billion) was distributed according
to the following criteria:
• In Scenario 1 the expansion of final demand took place only in primary
activities.
• In Scenario 2 the expansion of final demand occurred only in manufactured
products.
• In Scenario 3 the expansion of final demand was distributed among the
service, industrial utilities and civil construction sectors.
The second question is whether there are differences between the growth
led by the most “clean” or “dirty” industries in terms of employment and income
generation. To answer this, the Scenario 2 was divided into two sub-scenarios
in which the growth of industrial activity was distinguished by the intensity
of potential pollution in accordance with the IPPS coefficients: the 10 most
polluting industries, according to the IPPS were separated from the rest of the
industry.
Nº 8 • June 2011
• In Scenario 2.1, it has been assumed that most of the growth of final demand
(R$ 30 billion) was concentrated in the 10 most polluting activities, while growth
of exports from the least polluting activities has been of only R$10 billion.
• In Scenario 2.2, the opposite scenario has been simulated, assuming
that the 10 most polluting activities grew by only R$10 billion, while the least
polluting grew R$30 billion.

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Carlos Eduardo Young
The 10 most polluting industrial activities under the IPPS are:
• Wood products, excluding furniture
• Paper and pulp
• Oil refineries and coking
• Chemicals
• Resins
• Chemicals and its derivatives - various
• Cement
• Other non-metallic products
• Manufactures of metal
• Non-metallic metallurgy
The total production associated with each of these scenarios has been
obtained by multiplying the Leontief Matrix by expansion of the respective
increases in final demand. Hence, the increase in employment (personnel
employed) has been calculated by multiplying the job/income coefficient (the
coefficient between employment and value of production per activity) by the
coefficient of expansion of product by sector. The equation below summarizes
the procedure:
ΔEi = (E/VP). (I-A) -1 . ΔXi
Where:
ΔEi: Employment expansion in the scenario “i”
E/VP: Employment/value of production
(I-A) -1 : Leontief Matrix for Brazil (2005), calculated by the Brazilian
Institute of Geography and Statistics
ΔXi: Expansion of export in scenario “i”
The increase in wages (including social contributions) has been estimated
in a similar manner by multiplying the salary/income coefficient (the coefficient
between wages, including social security contributions, and value of production
per activity) by the coefficient of expansion of output by sector. The equation
below summarizes the procedure:
ΔWi= (W/VP).(I-A) -1 . ΔXi
Nº 8 • June 2011
Where:
ΔWi: Expansion of salary under scenario “i”
W/VP: Wages/Value of production

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b. Results
Table 2 presents the aggregated results for each scenario. Interestingly
enough, although the expansion of aggregate exports is the same in all
scenarios (R$ 40 billion), the results vary considerably, both in terms of
employment generation and generation of income.
Growth potential of the
green economy in Brazil
Carlos Eduardo Young
Table 1
Employment and wages created by scenario
Scenario Employment Wage creation
creation
(R$ Bi)
Scenario 1
Expansion in primary activities 2,476,906 11,182
Scenario 2
Expansion in the manufacturing industry
– linear increase in all sectors 1,351,194 13,186
Scenario 2.1 – Expansion in the
manufacturing industry – concentrated
increase in the most polluting sectors 1,050,523 11,747
Scenario 2.2 – Expansion in the
manufacturing industry – concentrated
increase in the least polluting sectors 1,409,478 13,464
Scenario 3 – Expansion in services,
industrial utilities and civil construction 2,008,166 15,220
Source: Author’s calculations based on data from the Brazilian Institute of Geography and Statistics
(Input-Output Matrix, Brazil 2005).
At a first glance, it seems that, under Scenario 1, the expansion of primary
activities have benefited more employment growth, since it presented the
highest number of jobs creation. However, two factors must be considered.
• The expansion in primary activities generates the lowest wage growth,
indicating that the quality of jobs created by these sectors is of the worst quality
among all scenarios. The results of Scenario 3, characterized by activities
identified with the “dematerialized growth”, shows that the total salary would
have been 36% greater than in Scenario 1, even though employment would
have increased 19% less.
• Dynamic effects: models based on input-output matrices design the patterns
for the future, keeping all the technical parameters constant over time. However,
Nº 8 • June 2011
the rapid mechanization in agricultural production and the increasing capital
intensity in the mining sector have had the effect of replacing more work,
reducing the demand for manpower. Therefore, these sectors are responsible
for liquid unemployment, rather than employment. This can be proven by

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green economy in Brazil
Carlos Eduardo Young
looking at the Brazilian National Accounts: the rapid expansion of primary
activities, increasing its share in GDP from 7.2% to 8.4% in 2000-2006, was
accompanied by a steady reduction in total work force, from 22.4% to 19.8%
during the same period (Table 2).
Table 2
Relative participation (%) of primary activities in GDP and Employment,
Brazil
% Primary activities on total GDP
2000 2001 2002 2003 2004 2005 2006
7.2 7.4 8.2 9.1 8.8 8.2 8.4
% Primary activities on total employment
2000 2001 2002 2003 2004 2005 2006
22.4 21.3 21.1 21.1 21.5 21.0 19.8
Source: Author’s calculations based on data from the Brazilian Institute of Geography and
Statistics (Input-Output Matrix, Brazil 2005).
On the other hand, the expansion in Scenario 3 shows a good performance
of the employment (the second largest volume of jobs created) and the
largest increase in total salary. Note that Scenario 3 is the most identified with
the “greening” of the economy as it expands the civil construction industry
(investment in the “cleaning” of economy require civil construction works, such
as sanitation) and services, the basis of “dematerialization” of growth (also
known as “decoupling”) based on knowledge, culture, technology and tacit
components.
A similar trend is also observed within the manufactory industry. Export
expansion is concentrated in the group of less-polluting industries (Scenario
2.2), which would generate 34% more jobs and pay 15% more than in Scenario
2.1, where the dynamic sectors are the most polluting ones. This is related to the
fact that most of the sectors with high pollution potential, such as intermediate
goods, are very intensive on capital and require relatively few jobs.
Nº 8 • June 2011
The message of the analysis of these results is clear: it is a fallacy to think that
developing countries like Brazil have to decide between economic growth and
environmental quality. The scenarios that showed the most consistent results
for improving economic activity, as measured by job and wage creation, are
precisely those where the dependence on natural resource consumption and
degradation are reduced. So there is no reason to believe that, as predicted
by the “environmental Kuznets curve”, the decline in environmental quality is
necessary to achieve a greater economic activity: scenarios with more pollution
and resource depletion would lead to reduced growth compared with scenarios
of “green growth”.

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Growth potential of the
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Carlos Eduardo Young
Co n c l u s io n
This study has shown that the “green economy” initiatives consist on an
opportunity to start a new pattern of development based on the endogenous
capacity of generation and incorporation of technical progress, while being
socially inclusive and environmentally responsible. In this sense, there are
many similarities with the original concept of industrialization proposed in the
Center-Periphery System (Prebisch, 1949): long-term development can only
be achieved when the economy becomes more intense in innovation and less
dependent on extensive exploitation of natural resources. This concept was
further deepened by Fajnzylber (1988) through the concept of authentic or
systemic competition.
Nevertheless, the empirical exercises have shown that there is a clear
trend, since the late 1990s, of increasing dependence of exports of primary
commodities and industrial goods that are intensive on pollution during their
production process. This result is of great concern because it shows that Brazil
and other Latin American economies are doing the opposite of what is required
by the principles of sustainable development. Moreover, there is an increasing
risk that the mechanisms of punishment may be established in the ‘dirty’
products in international trade, with obvious damage to the countries whose
exports are associated with degradation or depletion of natural resources.
The main argument for those who defend the status quo is that developing
countries must decide between economic growth and environmental quality. The
implicit assumption behind this view is that economic activity and environmental
conservation are necessarily in opposition and therefore decision makers
have to choose between one or the other, as if preserving natural resources
automatically blocks the growth of income and employment. This argument,
known as “environmental Kuznets curve” is commonly quoted in literature,
although no definite evidence that a pattern of “dirty” growth would bring better
results than the one of ‘’greening” of the economy.
In order to test the differences in terms of job creation and wage standards
in “dirty” and “clean” scenarios input-output techniques have been created to
simulate the consequences of using different patterns of natural resources
use. In each scenario, the same amount of final demand has been considered,
but with different sectoral distribution. Employment and wages have been
considered as a measure of growth because they are better indicators of social
inclusion than GDP.
Nº 8 • June 2011
The results are very consistent, showing that the spurious growth based
on consumption of natural resources or degradation can bring much worse
results than other economic options that focus on producing higher value added
products, which are less harmful to the environment. The scenarios of increased
employment and wage creation are exactly those where the dependence on

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Carlos Eduardo Young
natural resources consumption and degradation are reduced. More pollution
and depletion of natural resources would lead to unfavorable performances,
instead of more inclusive growth, leading to an opposite result to that expected
from the “environmental Kuznets curve”.
Finally, it should be noted that the results presented in this report have
important limitations related to the methodology and hypothesis used and
the quality of data is far from ideal. The improvement of production data and
generation of environmental indicators is an important need to improve our
understanding of the relationship between trade, competitiveness issues and
the environment. Thus, another policy recommendation is to implement an
effective system of environmental information related to the economic indicators
already available.
References
Fajnzylber, F. (1988). Competitividad internacional: evolución y lecciones. Revista de
la CEPAL, n. 36, December, 7-24.
Hettige, H., Martin, P., Singh, M. and Wheeler, D. (1994). IPPS - The industrial pollution
projection system. Washington, D.C.: World Bank.
Malavasi, L. O., Schuschny, A. R. and Gallopín, G. (2005). Evolución de las emisiones
industriales potenciales en América Latina, 1970-2000. Serie Medio Ambiente y
Desarrollo, 97. Santiago de Chile: ECLAC.
Prebisch, R. (1949). El desarrollo económico de la América Latina y algunos de sus
principales problemas. Santiago de Chile: ECLAC.
Young, C. E. F. (1998). Industrial pollution and export-oriented policies in Brazil. Revista
Brasileira de Economia, v.52, 543–561.
Young, C. E. F. (2010). Transition towards a green and inclusive economic model: a
Latin American perspective. Reserach report prepared for the Transición de América
Latina y el Caribe hacia un modelo de crecimiento verde y inclusivo Project (UNEP/
ECLAC). Rio de Janeiro: IE/UFRJ.
Young, C. E. F. and Lustosa, M. C. J. (2001). Meio ambiente e competitividade na
indústria brasileira. Revista de Economia Contemporânea, v. 5, 231-259.
Young, C. E. F. and Lustosa, M. C. J. (2002). Competitividade e meio ambiente. In
Braga, A. S. and Miranda, L. C. (ed.), Comércio e meio ambiente: uma agenda para
a América Latina e Caribe, 41-60. Brasília: MMA.
UNEP (2011). Towards a green economy: pathways to sustainable development and
poverty eradication – a synthesis for policy makers. Retrieved from: .
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opportunities
Brazil and the green
economy: foundations and
strategy for transition
Cláudio R. Frischtak 1
In t r o d u c t io n
The dominant view about environmental conservation continues to be that, in
the process of development, countries ultimately face a choice: more growth or
more conservation. To propose foundations for a new economy it is necessary
to revisit the basic assumptions underlying the predominant economy and how
its results are measured. This is not an easy task, because the fragility of the
dominant paradigm is not part of the concrete experience of most countries.
After all, the industrial revolution was a predator of natural resources, but at the
same time it accelerated growth and generated increasing levels of wellbeing.
So why rethink the economy and abandon the connection - apparently more
necessary the lower the income level - between growth and intensive (and
unsustainable) resource use?
First, because exhausting of the capacity of ecosystems to withstand the
pressure of economic activities could undermine economic growth itself. From
this perspective, economic growth can only be sustained by conserving that
capacity. Second, the need to develop new foundations for a transition to a green
economy will produce new opportunities. Products and services geared toward
this transition will assume an increasing proportion of economic activities.
The exhaustion of the old model and the transition to a green economy
require a reversal of the predominant assumption: increased growth becomes
dependent on and (necessarily) accompanied by greater conservation or
sustainable use of natural resources, so that the new trade-off would be
between growth and the predatory use of natural capital. The objective of this
study is to establish the foundations for a green economy in Brasil as well as
a transition strategy.
Nº 8 • June 2011
1. President of Inter.B International Business Consulting (Inter.B Consultoria Internacional de
Negócios).

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Brazil and the green
economy: foundations
and strategy for
transition
Cláudio R. Frischtak
Th e t r a n s it io n t o a g r e e n e c o n o m y in Br a z il
The green economy has no precedent or model. It proposes a transformation
in the mode of production and consumption, redefinition of government planning
and policy, and greater emphasis on innovative effort. To enable public policy
approaches of sectoral support for the transition to green economy, the study
develops the following analytical framework to facilitate the illustrations.
Supply is organized into two categories. "Market" supply is that which
responds autonomously to demand that is either pre-existing or arises in
response to supply; in both cases, production results from the normal course
of business by incumbent firms and by the entry of new firms. "Structured"
supply is that which encounters difficulties in meeting demand, either due to
inadequate returns or due to technological or institutional complexity, and as
a result requires some level of intervention or support, in the form of R&D,
planning, investment, organization of production or pricing. The structuring of
supply may involve direct investments by government, fiscal incentives, financial
subsidies or changes in the regulatory environment, among other actions.
Demand, in turn, can be characterized as “spontaneous” when it emerges
from the basic needs of individuals, being determined primarily by income
level and education, the volume and nature of the information that they have
access to, through the experience (of consumption) and its surroundings (via
demonstration effect). Alternatively, demand can be characterized as "induced",
which requires that it be managed or encouraged through the transfer of
information, including awareness campaigns and public education, to ensure the
creation of markets for goods and services that do not arise spontaneously.
These typologies of supply and demand produce a 2x2 matrix, summarized in
the form of an analytical framework (Figure 1). In a clockwise direction, starting at
the upper left, is Quadrant I, which covers activities that combine a spontaneous
demand and a market supply and that, together, constitute the dominant part
of GDP in a conventional economy and a small share of Green GDP. Quadrant
II is composed of activities that require supply to be "structured" for markets to
form and spontaneous demand (potential) be met. Quadrant III brings together
activities that depend on both structured supply and induced demand to be
economically viable. These activities would presumably take longer and absorb
more resources to function. Finally, Quadrant IV includes activities that can
be viable if demand is stimulated by a greater flow of information (including
information campaigns) to consumers that induce behavioral changes, and by
other measures to change the dominant pattern of consumption.
Nº 8 • June 2011

98
Figure 1
Matrix of Green GDP activities and the dynamics of public policies
GREEN ECONOMY
Challenges and
opportunities
Market
supply
structured
Brazil and the green
economy: foundations
and strategy for
transition
Cláudio R. Frischtak
DEMAND
INDUced spontaneous
The matrix also illustrates the dynamics of a typically "green" activity, where
initial size is limited, but, driven by the "hand of the State" in initially structuring
the supply and then inducing demand, expands over time (symbolically, larger
concentric circles), characterizing the transition to a green economy. Increasing
returns to scale, or accumulated experience reflected by learning curves and
the resulting productivity gains, could make some of these activities return back
to Quadrant I (or in its direction), having already reached a size that assures
economic viability.
Below we consider the application of this analytical framework to a set of
activities that would comprise part of a Green GDP - understood as the set of
economic activities that maintain and expand the stock of natural capital – and,
although not exhausting the Green GDP potential, they are possibly the most
emblematic 2 .
Conservation of ecosystems
This category consists of economic activities that contribute to the integrity
of ecosystems and their ability to provide material support and a wide range of
services essential to a decent life for current and future generations.
Nº 8 • June 2011
2. The area of the circles reflects the relative economic importance of the measured activities as
estimated by their contribution to the country’s GDP.

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Figure 2
Conservation of ecosystems
Market
supply
Native Species
Reforestation (6)
structured
Brazil and the green
economy: foundations
and strategy for
transition
Cláudio R. Frischtak
DEMAND
INDUced SPONTaneous
natural
pharmacos (1)
Organic
Products (2)
Natural
Cosmetics (4)
Native Species
Reforestation (3)
Sustainable
Agriculture
Ecological
Tourism (5)
Sustainable
Extractive
Activities
(Food)
REDD / REDD + (7)
Preparation: Inter.B. Sources:
1. “Valuation of the Real and the competiveness of exports,” 7 April 2010, .
2. “Changing habits”,” 27 May 2009, Valor Econômico.
3. “Invasive species cause US$1.4 billion in damages,” 28 April 2010, Valor Econômico.
4. “Jewels of the forest,” 28 April 2010, Valor Econômico.
5. “Economic and socio-cultural value of ecotourism and recreational activities provided by the
Serra de São José Area of Environmental Protection (Minas Gerais state)” PIBIC/CNPq,
.
6. “Harvests from trees,” 12 December 2005, Unicamp, .
7. “Discussion about REDD defines the future of the forest, 24/ August 2009, Valor Online.
Nº 8 • June 2011
Note that the activities in Figure 2 are still relatively small in magnitude, have
limited support and are concentrated in Quadrant I. There still is not a real forestbased
economy, with intelligent extraction at a scale that is not limited to only
biodiversity products (pharmaceuticals, cosmetics), but involving sustainable
extractivism and ecotourism, among others. The great exception is the planting
of eucalyptus on “cleared” land, or land used for low productivity livestock
farming, especially when combined with the restoration of native vegetation.
A recent example 3 suggests that this latter alternative of restoring native
vegetation is economically feasible and, as it gains in scale and experience,
will become an activity consolidated in Quadrant I.
3. For example, Vale Reflorestar, a fund with R$ 605 million to be used for reforestation. Jornal
do Comercio, 6 May 2010.

100
Figure 3
Conservation of ecosystems in the transition to a green economy
GREEN ECONOMY
Challenges and
opportunities
Market
Native Species
Reforestation (6)
supply
structured
Brazil and the green
economy: foundations
and strategy for
transition
Cláudio R. Frischtak
DEMAND
INDuced spontaneous
Natural
Cosmetics (4)
Organic
Products (2)
Ecological
Tourism (5)
Sustainable
Extractive
Activities (Food)
Sustainable
Agriculture
REDD / REDD + (7)
Overall, the expansion of these activities depends not only on government
policies to structure the supply and occasionally induce demand, but on basic
legislation that promotes the protection and sustainable use of ecosystems. In
the area of ecosystem protection, Brazil has a fairly comprehensive legislation,
focusing primarily on the National System of Conservation Units, the Forest
Code, the Water Code and regulations that guide the use of natural resources,
economic activities and interventions in the landscape.
The system of conservation units (Brazilian term for protected areas) needs
to be strengthened by establishing new conservation units in critical areas and,
fundamentally, by consolidating existing conservation units. Systems are needed
for management, monitoring and supervision to ensure the integrity of the
conservation units and inhibit predatory activities inside. Social networks must be
established for protection in and around the units, involving traditional communities
and providing them with decent living conditions, through for example payments
for environmental services and sustainable natural resource extraction.
The Forest Code is another basic text that guides conservation activities,
and for which an ongoing revision by the Brazilian Congress has generated
contentious debate. For many producers in remote frontier areas, obtaining land
registration and environmental licensing (in the context of a plan for restoring
Permanent Preservation Areas and Legal Reserves), regularizing land tenure
and legalizing the use of land for economic purposes, is highly advantageous.
Nº 8 • June 2011
A powerful but underutilized tool to promote land-use sustainability is rural
credit. The 2010-11 Harvest Plan is a step in that direction through the Low
Carbon Agriculture Program, even though the program does not absorb more
than 5% of the available resources 4 .
4. See Valor, 7 June 2010 p. B12.

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Brazil and the green
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and strategy for
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Cláudio R. Frischtak
There are other instruments to promote these sustainable land-use activities.
Some measures consist of governmental policies that need to be expanded,
such as the inclusion of environmental criteria to municipal value-added tax
revenues (such as the ecological tax on operations related to the circulation
of goods and the provision of inter-state and inter-municipal transport services
and communication). More broadly, companies and individuals should be
encouraged to develop and execute projects on sustainable and intelligent
use of natural resources, with conservation and restoration of ecosystems.
The key is that ecosystem protection is not only a government task, but should
actively involve society.
Transport and sanitation
This section analyzes activities that serve to build sustainable cities
through targeted investments for improvements in accessibility, mobility and
sanitation.
Figure 4
Networks of sustainable cities
Market
supply
STRUctured
Sanitation (5)
Single ticket (3)
DEMAND
INDUced SPONTaneous
Bicycle transport (7)
Electric car (6)
Subway transport (2)
Subway transport (3)
RAPID TRANSIT BUS
Preparation: Inter.B. Sources:
1,2,3,4 “Government blames cars and motorcyles for pollution,” 26 March 2010, Folha de São
Paulo. 2,3 “Chinese and Spaniards enter in dispute for the TAV Project,” 6 August 20/09, 4“Even without a budget, government
wants more waterways,” 12 January 2010, Valor Econômico.
Nº 8 • June 2011
5Baltar, Emerenciano and Pereira, “Subsidy for providing water sanitation,”
6“Without official support, electric car not viable,” 13 April 2010, Valor Econômico. 7
“Reinventing mobility,” 12 August 2009, Agenda Sustentável,
8“Paes says that single ticket will not be subsidized,” 24 April 2010, O Globo.

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Figure 4 reveals that, in general, to exist or gain scale, these activities require
a structured supply, because there is no "pure" market solution for efficient and
low impact mass transit such as rail, subway or trams. These systems facilitate
accessibility within networks of cities and are critical for intra-urban mobility.
Although innovations such as electric cars should be seen as a breakthrough,
cities will only be effectively sustainable if irrigated by efficient systems of mass
transport. In the case of basic sanitation, economic viability (beyond the cost
of investment) often depends on the income level of users.
The weaknesses in the transport and sanitation systems, combined with
a low degree of adaptation of the cities to their natural environment, require
the design of a specific strategy in order to make cities sustainable. One must
consider Brazil’s high degree of urbanization and how this impacts quality of
life and the fact that public sector interventions, involving both in investments
and the regulation of urban activities, seem essential (Figure 5).
Figure 5 suggests the importance of active policies for the sustainability
of transport and sanitation systems, with special emphasis on mass transit.
Metropolitan areas require integrated planning in terms of accessibility and
mobility as well as in the case of sanitation. This should be handled by
a metropolitan planning agency with powers to allocate resources, while
respecting civil society consultation processes. Investments aimed at improving
the quality of life of urban populations are high, and collective interests should
be the dominant criterion in investment decisions with regard to resource
allocation.
Figure 5
Networks of sustainable cities in the transition to a green economy
MARKET
supply
STRUCTURED
sanitation (5)
Nº 8 • June 2011
DEMAND
INDUCED SPONTANEOUS
Bicycle transport (7)
Electric car (6)
High speed train
Subway
transport (2)
Metropolitan railway (3)
RAPID TRANSIT BUS

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Brazil and the green
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and strategy for
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Cláudio R. Frischtak
Energy
This category consists of activities directed toward the production and efficient
use of renewable energy. Brazil is relatively unique in that the country already
has a structure relatively adapted to a low-carbon economy due to the significant
share of renewable energies in the country’s energy matrix. Figure 6 suggests,
however, that the new generation of energy solutions - solar, wind, nuclear and
frontier hydropower and biomass projects - have not yet gained scale (as in the
case of bio-fuels) and thus will require more structured forms of support.
The agenda for energy sustainability is dense, as illustrated in Figure 7.
It is necessary to move energy efficiency and innovation to the cutting edge
of the economy, and stimulating the use of new sources at increased scales,
by consolidating the significant advances that have been made domestically
while also cooperating with global efforts for new solutions. Two sets of actions
are essential: first, structured support for R&D, both in the public realms of
universities and research centers, and in private and corporate spheres. Second,
it is necessary to expand programs of energy efficiency, with emphasis on
production processes and products, and on rational and efficient use.
Figure 6
Energy
mARKET
supply
STRUCTURED
Biomass from sugarcane
Wind power (2)
DEMAND
INDUCED SPONTANEOUS
HYDRO power
SOLAR power (3)
White line of Major appliance (4)
Nuclear power
BIOFUELS (1)
Nº 8 • June 2011
Preparation: Inter.B. Sources:
1. “Government blames cars and motorcycles for pollution,” 26 March 2010, Folha de São
Paulo.
2. “Wind at the price of water,” 10 January 2010, Revista Brasil Energia Ed. 350.
3. “Solar energy in Brazil,” 24 March 2010, Valor Econômico.
4. “Smaller IPI tax for appliances will respect environmental criteria,” 29 October 2009, Valor
Econômico.

104
Figure 7
Energy in the transition to a green economy
GREEN ECONOMY
supply
Challenges and
opportunities
Brazil and the green
economy: foundations
and strategy for
transition
Cláudio R. Frischtak
DEMAND
INDUCED SPONTANEOUS
MARKET
HYDRO power
Biomass
from
sugarcane
SOLAR power (3)
White line of low consumption (4)
Wind power (2)
STRUCTURED
BIOFUELS (1)
Nuclear power
Wastes
Figure 8 displays activities related to waste generation and treatment:
product disposal, recycling of certain materials and reduction or elimination
of non-biodegradables over reasonable period time. The scope for expanding
market solutions will be determined by a combination of public policies and
increased awareness of society.
Figura 8
Life cycle
MARKET
supply
STRUCTURED
DEMAND
INDUCED SPONTANEOUS
Recycled paper (1)
RECYCLED METALS (2)
Innovative products
(recyclable,
biodegradable) (5)
Green plastic
Sustainable
demolition (4)
Selective WASTE
collection (3)
Nº 8 • June 2011
Preparation: Inter.B. Sources:
1. “Recycled paper fad opens a new niche for industries” 18 January 2007, Valor Econômico.
2. “Reduced costs moves recycling market,” 29 January 2010, Valor Econômico.
3,5. “Changing habits,” 27 May 2009, Valor Econômico.
4. “Sustainability for the demolition of the Help Discotheque” 12 April 1010, O Globo
6. “’The dissolving pen,” 24 April 2010, O Globo.

105
Figure 9
Product life cycle in the transition to a green economy
GREEN ECONOMY
Challenges and
opportunities
MERKET
SUPpLY
STRUCTURED
Brazil and the green
economy: foundations
and strategy for
transition
Cláudio R. Frischtak
DEMAND
INDUCED SPONTANEOUS
Reverse
logistics
RECYCLED
METALS (2)
“Innovative products”
(recyclable,
biodegradable) (5)
Green plastic
Sustainable
demolition (4)
Selective WASTE
collection (3)
As shown in Figure 9, a new policy focused on waste management is needed,
based on thoughtful examination of the need (or not) to control or regulate
production and use of goods whose footprints are sensitive, either due to
negative externalities throughout the life cycle, or low degradability following
disposal, and that do not present economically viable recycling. The role of
government policy would be to encourage alternatives based on the redesign
of products, new materials, and to promote recycling and waste reduction 5 .
It is important to emphasize that many of the measures designed to encourage
recycling at the individual level are relatively simple, because they depend on
standards to be followed by the producer / distributor without public spending.
At the same time, many government interventions may be transient, so that
after a period of returns to scale and cost reductions, activities to integrate the
life cycle of products become viable in the market. The combination of greater
scarcity and higher prices of raw materials, and with the returns to scale initially
encouraged by government policies and rugulations, the collection and recycling
of disposable items through operations of reverse logistics would be the result
of company-driven initiatives. Even selective collection, after an initial period,
can become self-sustainable and eventually profitable enough to dispense with
government subsidies.
Nº 8 • June 2011
In short, improvements of ecosystem protection, urban transport and
sanitation systems, energy and waste management can be integrated into a
green economy with limited and temporary government interventions. The above
5. A very significant advance took place in 2010 with the establishment of the National Policy
for Solid Wastes, which regulates recycling and waste management, and innovates with
reverse logistics, which states that everyone involved in the supply chain of products must
organize to collect used packaging and product waste.

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Cláudio R. Frischtak
analysis indicates that a substantial part of Green GDP is already prefigured in
Quadrant I. This implies that there are market solutions, but many are incipient
and others do not yet exist. The expansion of many of these activities will depend
on active policies, although such support can only be temporary.
Tr a n s it io n s t r a t e g y
Implementing a green economy transition strategy requires the establishment
of a governmental green economy agenda. This agenda could involve:
First, the constitution of a working group or equivalent involving not only
government, but universities and research institutions, companies and civil
society organizations, with the following objectives:
• Identify, in an objective way, general sustainability criteria that would guide
direct or indirect government support to projects and activities.
• Conversely, define what would constitute predatory uses of natural capital
that should be contained, taxed or discouraged.
• Introduce into the national accounting system sustainability dimensions in
the sense suggested by the Stiglitz report, focusing on variations in the
stocks of natural capital.
• Gradually construct indicators that serve to price the services provided by
major ecosystems, recognizing that this exercise is tentative and subject to
trial and error, and that certain critical services are possibly not measurable
in economic terms.
• Inventory government actions (including those by state-owned companies)
that directly or indirectly affect the conservation of natural capital in Brazil,
ranking them according to their impacts.
Second, and based on the results of the efforts undertaken above, define a
reference framework and a set of norms as a basis for reorienting government
actions. It is worth stressing that Brazil still has a wide range of public policies
and government initiatives that incentivize predatory activities or activities
without merit in the context of a green economy.
Nº 8 • June 2011
A detailed review should be carried out of government programs, as well as
tax financial and other incentives, both at sector and regional levels, in addition
to investment plans of state-owned enterprises, to exame their economic and
legal viability (from this new perspective), as a step toward eliminating over
the next few years all forms of support to projects and activities that are clearly
incompatible with the green economy, because they:
• Directly exploit natural capital without adequately compensating for their
economic impacts;

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• Contribute to "dirtying" the energy matrix (such as power generation based
on diesel oil, fuel oil or coal);
• Reduce access to and mobility within cities; and
• Ignore new architectural concepts and standards, construction methods
and use of materials designed to conserve energy, maximize recycling and
utilization of rain water, among others.
Third, a positive agenda focused on the protection and restoration of
natural capital in major ecosystems must be promoted. It is imperative that the
country protects its biodiversity. On the specific issue of rain forest protection,
Brazil should strengthen its leadership in monitoring capabilities, preventing
deforestation and seeking alternatives to generate decent employment and
income for forest peoples, traditional communities, as well as settlers attracted
by government programs, among others. In terms of water resources, the
country must intensify its efforts to properly manage watersheds and ensure
multiple, balanced and sustainable water use, for which high quality production
and conservation need to involve riverain communities and farmers, and where
appropriate pricing is essential to encourage rational use.
These are the directives for a green economy transition strategy.
Co n c l u s io n
Years ago the world economy began a transition process supported by the
predatory use of natural capital and the depletion of the ecosystem capacities,
with deleterious effects on sustainability. A new paradigm is emerging, where
growth and conservation are positively correlated and form the basis of a green
economy.
Nº 8 • June 2011
Brazil is a global environmental power due to its ample ecosystem resources,
and renewable energy. With the support of adequate government policies, it
can become one of the countries to most rapidly incorporate a green economy.
This process is based on four key vectors of the Brazilian Green GDP: (i)
the preservation and expansion of natural capital, through efficient forms of
agriculture and a new forest economy based on the intelligent use of biodiversity;
(ii) the transformation of cities through integrated planning at the metropolitan
level, with reference to the need for a transformative vision of accessibility
and urban mobility, and the expansion of sanitation and the establishment of
new standards for architecture and construction; (iii) increased stimulus for the
generation and use of renewable energy, necessarily linked to increased efforts
in energy efficiency; and (iv) the integration of product life cycles in the economic
calculations of producers and consumers, through appropriate regulation of new
legislation, and innovative effort in the design and use of new materials.

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Challenges and
opportunities
Innovation and technology
for a green economy: key
issues
Maria Cecília Junqueira Lustosa 1
In t r o d u c t io n
The discussion on the limits of growth due to the finiteness of environmental
resources has placed the challenge of combining economic growth and
environmental preservation. Within this debate, two approaches can be
identified: the first focuses on technology as the main vector of change, creating
more environmentally friendly production processes and thus stretching the
limits of economic growth. The other approach, contrary to the first, puts the
impossibility of combining environmental preservation and economic growth in
the capitalist system. The need for new markets, imposing a pattern of intensive
use of raw materials and energy, makes the dependence of environmental
resources grow increasingly beyond the limits of the availability of these
resources, even with cleaner technologies.
Regardless of this debate, technological evolution towards more efficient
production processes from the environmental point of view, using fewer
materials and releasing less waste into the environment, is desirable from a
social point of view, since if it does not solve the environmental problem, at least
it seeks to soothe it. In this sense, the development of cleaner technologies is
extremely necessary.
Nevertheless, the study of technological change involves many aspects and
is an evolutionary process that presents nonlinearity, cumulativity and temporal
interdependence (path dependence) characteristics. Moreover, technological
change towards environmental sustainability depends on other non-economic
factors such as development of specific capabilities of enterprises, infrastructure
and institutional changes.
Nº 8 • June 2011
This article discusses issues related to innovation in the transition to a green
economy from the evolutionary theory of technological change point of view
and is divided into four sections besides this introduction. The first deals with
the emergence of environmental issues as a result of the economic output.
1. Associate professor at the Faculty of Economics, Business Administration and Accounting
of the Federal University of Alagoas (FEAC/UFAL), researcher at the Research Group on
Agribusiness and Innovation (GAIN/UFAL) and the Research Network on Local Productive
and Innovative Systems and Arrangements (RedeSist/UFRJ) and Northeast region director of
the Brazilian Society for Ecological Economics (EcoEco).

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The second addresses issues of the relationship between innovation and
environment, focusing on factors that influence the capacity of enterprises
to become innovative. The third presents the results of researches on the
environmental performance of Brazilian companies, especially regarding
environmental investments.
Innovation and
technology for a green
economy: key issues
Maria Cecília Junqueira
Lustosa
1. En v ir o n m e n t a l i s s u e s a n d e c o n o m ic p r o d u c t io n
Since the Industrial Revolution of the late 18th century, the economic and
technological development based on intensive use of raw materials and energy
increased the pace of utilization of natural resources. Given the abundance of
these resources, the issue of sustainability of the economic system (namely
the maintenance of good conditions for its good development, not depleting
needed resources and making them available in good quality for future use)
was not at the center of economists’ concerns for many decades.
More than a century and a half after the onset of the industrialization process
and the emergence of agriculture and livestock farming systems the issue of the
finitude of natural resources, seen as a threat to the growth of modern economies,
has definitively become part of the economists’ research agenda.
Besides the intensive use of natural resources, waste of production processes
released into the environment resulted in the accumulation of pollutants
above its carrying capacity, causing pollution. Pollution goes beyond the local
dimension (degradation of water bodies, soil and air quality) reaching a regional
(acid rain) and global dimension (climate change and ozone layer depletion).
The depletion of natural resources and pollution are environmental problems
resulting from anthropic activities, which also lead to loss of biodiversity,
generating imbalances in ecosystems and making them to lose part of their
social and biological functions. This set of problems is called “environmental
issue”. Its negative effects on the environment are the result of past actions and
decisions, suggesting a temporal interdependence (path dependence), revealing
a process of continuous change and highlighting uncertainties regarding the
knowledge about environmental impacts derived from economic growth.
Nº 8 • June 2011
The hypothesis that the carrying capacity of the planet was reaching its
limits, either by the amount of pollutants released into the environment or
by the depletion of natural resources, dates from the late 1960s. Heated
debates in the political, academic and social spheres have taken place when
the environmental movement’s discourse was incorporated, which pointed to
the incompatibility between environmental preservation and economic growth
based on the intensive use of natural resources and non renewable energy
sources. After more than five decades of debate, it is clear that there it is not
growth that has reached its limit, but the technology and consumer standards
hitherto adopted by industrialized countries.

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Lustosa
Economic growth based on technological standards that make intesive use of
raw materials and energy, especially from hydrocarbons (the main consumers
of natural resources) can run into the limits of finitude of environmental
resources, either through exhaustion or loss of quality. The change of current
technology standards towards others that are less harmful to the environment
is a necessary condition for economic growth to be continuous. In this sense
economic growth may be possible for all countries, but with cleaner and natural
resources efficient technologies 2 .
It is evident, therefore, that there is a difference between the change of the
current technological standard based on the burning of fossil fuels and the
development of new cleaner technologies within the same standard in order
to minimize the environmental impacts of economic activities.
The change of technological patterns is extremely complex, since it occurs
in the long term, depends on many variables, and even when induced by any
kind of policy, it is not possible to know a priori all the consequences deriving
from it, because not all negative externalities of technology, designed and used
for specific purposes, can be envisaged. When it comes to issues concerning
the environment, externalities affect an additional dimension, as they may have
cumulative and depletion effects, which involve uncertainties. As accumulated
pollution increases (cumulative effect), the adverse effects on ecosystems and
human health can be observed, but no one knows exactly how far they may
be affected.
But technology alone, even when using intensively natural resources and
restoring the waste of productive activities to the environment, would not
generate significant environmental impacts if not for the scale effect - the
environmental limit is reached by the pattern of consumption.
The ever-increasing production requires greater amount of natural resources
and disposes more waste into the environment. This increase is associated
with the consumption pattern imposed by the capitalist mode of production,
intensive in material and energy use that is the standard of central countries,
which, through cultural, economic, technological and financial subordination, is
transferred to the countries of the periphery 3 , following the logic of the capitalist
system of accumulation. For its expansion, new markets and therefore new
Nº 8 • June 2011
2. Kemp and Soete (1992) properly note that the term “clean technology”, despite being widely
used, is not the most correct linguistically. Firstly, because no technology is totally clean,
and secondly, because the term clean technology and cleaning technology (technologies
that elliminate pollution in the environment) must be distinguished. The correct term would
be “cleaner technology” or “environment-saving”. There are also control technologies, which
monitor emission levels and degradation of natural resources.
3. The center-periphery scheme is a thesis of Raul Prebisch, in which Latin America was part
of a system of international economic relations that operated as a constellation whose center
was the industrialized countries and the periphery was the passive Latin America. In this
context, Brazil has undergone a process of “modernization”, by the adoption of sophisticated
consumption patterns of developed countries by a small portion of the population, which
concentrated mostly the income from coffee exports (Furtado, 1974). With the deepening
of globalization in recent decades, the consumption pattern of the central countries spread
through all capitalist economies, creating a huge market of material and energy intensive
products, which present great technological obsolescence.

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Innovation and
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Maria Cecília Junqueira
Lustosa
consumer needs are required, which in order to be met demand indefinitely
developing production 4 . Thus, the population grows and so does its needs,
increasing the scale of industrial production and agricultural and livestock
farming systems, resulting in increases in the demand for natural resources
and of waste in production processes.
As a consequence there is a trade-off between economic growth and
environmental preservation. On the one hand, economic growth has brought
improvements in the population’s living conditions, generating greater quantity
of goods and services available to meet the needs, though not equitably
distributed. On the other hand, that same growth has brought environmental
problems, which are not restricted to industrial and agricultural activities such as
uncontrolled urbanization, worsening of environmental conditions and causing
damage to human health and to the quality of the environment.
Given the complexity of the issue outlined above, this article addresses a
specific aspect to support this broader discussion: environmental innovation as
a way of changing the current standard technology toward a green economy. As
a consequence, a central question arises: how to induce technological change
in the direction of cleaner technologies in order to achieve environmental
sustainability? That is, in a direction where natural resources serve to present
and future generations and that pollution levels are reduced, even when there
is an increase in production?
2. In n o v a t io n a n d t h e e n v ir o n m e n t
The industrial sector is one that causes more damage to the environment,
either by their production processes or by manufacture of products that pollute
and/or generate disposal problems after use. If on the one hand adopted
technologies have led to environmental degradation, on the other, they enabled
more efficient use of natural resources and input substitution in the production
process. An outstanding example was improved energy use derived from
petroleum and its partial substitution by other energy sources after the first oil
shock in 1973. Therefore, the technological development towards a pattern of
production less aggressive to the environment is seen as a partial solution to
the problem.
Nº 8 • June 2011
Technological change in the direction of cleaner technologies entangles
innovation process. According to Hall (1994), the innovation process
corresponds to all the activities that generate technological change and
dynamic interaction between them, which need not be primary inventions.
When innovating, the company is seeking a solution to a given problem that is
4. The organization of the industrial society since the 19th century is based on “... mechanic
productivist model of positivism: scientific progress = technical progress = economic
development = sociocultural progress” (Labeyrie, 2004, p. 125). In this context, there is no
room for discussing social inequities and ecological imbalances caused by scientific and
technological progress, basis of economic growth.

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Lustosa
solved within a technological paradigm, i.e., within certain standard solutions
widely accepted based on principles of natural sciences. Thus, once the
technological paradigm is established, innovations become selective in the
ability to solve problems, while hindering other solutions that would be outside
the technological paradigm – characterizing a “blindness” of the prevailing
technological paradigm. Technologies are elected in the selection process
which, according to the predominant features of the selective environment,
chooses certain technologies and not others.
However, when the difficulties of finding solutions increase, inclusive
regarding environmental problems, there is a strong incentive for a shift on
the technological paradigm. However this is not a sufficient condition since
in order to establish a new paradigm it is necessary that advances in basic
knowledge occur, as well as other institutional and market factors. Thus, the
dominant technological paradigm and the selective environment set the pace
and direction of technical progress, which can even generate a paradigm shift,
in a slow and gradual process.
Within the current technological paradigm, a particular technology is selected.
According to B. Arthur (quoted by López, 1996), the technology is not elected
because it is the most efficient, but it becomes more efficient because it has
been elected. That is, technologies become more attractive as they are more
used. Hence, technology has temporal interdependence (path-dependent)
since it is the result of predefined trajectories. This engenders a lock-in effect,
leading companies to get caught in the more widespread technology and to
the prevailing technological paradigm. These events have major effects on the
company’s ability to find solutions to specific problems, that is, on its ability
to innovate, including in the direction of Environmentally Sound Technologies
(ESTs).
The ESTs can be defined as the set of knowledge, techniques, methods,
processes, experiences and equipment that use natural resources sustainably
and that enable the proper disposal of industrial wastes, so as not to degrade
the environment. They are obtained by means of environmental innovations.
Technological changes in the direction of environmental technologies can
occur in the technological trajectory (i.e. a more powerful combustion engine
that generatesless emissions) or in the technological paradigm (a change of
primary energy sources toward generating less environmental impact). With
regard to primary energy generation, it is possible to identify the “hydrocarbon
paradigm” based on oil and natural gas.
Nº 8 • June 2011
Therefore, for environmental improvements to occur, companies must adopt
innovations. However, innovation in the enterprise is not the result of a decision
based on internal factors but of complex interactions between the company and
its customers and suppliers, and a broader context, including the institutional

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environment, cultural and social infrastructure, macroeconomic aspects: the
innovation system. The focus of the analysis should therefore be go beyond
the company and seek a systemic approach.
These considerations lead to an important aspect for the green economy
(how to direct technological change toward environmental innovations) and
raise the following question: What enables companies to generate and adopt
environmental innovations? There are several factors - economic, social,
institutional and scientific - that influence the capacity of enterprises to become
innovative. In general, it is possible to group them into internal and external
factors to business. Among the internal factors, it is possible to highlight the
company’s specific skills for problem solving, its absorptive capacity and its
access to innovations developed by others.
The company’s specific competencies to solve problems are accumulated
over time. That is, they consist of skills and knowledge that the company has
acquired over time, which determine its ability to absorb and create knowledge.
These skills and specific knowledge depend on investments in research and
development (R&D), individual knowledge of employees, the size and nature of
the enterprise (public, private, transnational etc.), sector of activity and degree
of specialization.
The second internal factor is directly related to the first. The absorptive
capacity, according to Cohen and Levinthal (1990), is defined by the skills
of recognizing the value of new information, assimilate it and apply it for
commercial purposes, being crucial to enable the company to innovate. This
ability to evaluate and use external knowledge is the function of prior knowledge,
that is, when the external knowledge and the company have basic standards and
common languages, it becomes easier to use the information productively.
The access to innovations developed by third parties is not free and, in
general, has high costs. Whether by lack of information from the company that
wants to adopt the environmental innovation, by the innovator’s competitive
strategy of not diffuding their innovation, by patent protection and by trade
secrecy or the costs of maintaing absorptive capacity, innovations are not
available as “products on a supermarket shelf”. This means that there is a
charge for access and it can be high. Thus, for many companies it is difficult
to innovate, whether because of high cost of internal development or of the
acquisition of third party technologies.
Nº 8 • June 2011
Among the external factors are: the current technological paradigm, the
National Innovation System, the macroeconomic context, measures of
regulatory nature and degree of market competition in which the company
operates.
The current technological paradigm, as explained earlier, determines the
company’s ability to innovate, because it sets the standard in which scientific

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innovations must be circumscribed. In this sense, the shift in the technology
paradigm may make the company become more or less innovative, depending
on their specific expertise.
The National Innovation System (NIS), the second external factor, will
influence the ability of businesses to generate and adopt innovations, since it
is an organizational system that aims to develop science and technology within
the country. It is a complex institutional arrangement involving companies’
laboratories of R&D, research institutes and universities, financial, educational
and law institutions (patents, laws regulating competition). The NIS should be
considered in its three dimensions: institutions; the interaction between them,
forming a network; and the learning ability. Thus, an effective NIS induces
enterprises to be innovative.
The macroeconomic context is a factor that interferes with the process of
innovation in businesses, since it makes explicit the economic context in which
it is inserted. Companies have difficulty in making decisions in conditions of
great uncertainty, generated by a scenario of macroeconomic instability. In
this context, there is some paralysis to innovate. Reversely, macroeconomic
stability creates confidence in economic agents, which will tend to consume
and invest more.
Measures of regulatory nature are crucial to induce environmental
innovations. Some scetors require greater regulations due to the type of
activity they develop. For example, companies whose activities have negative
impacts on the environment are subject to compliance with regulations, which
may induce innovations, depending on the objectives and instruments of
environmental policy.
Finally, the degree of market competition in which the company operates
is one of the factors that most influence their decision to generate and adopt
innovations, including environmental. With market pressure, especially the
most competitive ones, innovation becomes the differentiating factor between
the company and its competitors, creating asymmetries between them and
may be the only way to survive in a market that values the non-aggression to
the environment.
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In the light of the above, new paths and bifurcations of technological
trajectories must be induced so as to incorporate environmental improvements,
even though this is not the primary purpose of developing a particular
technology. That is to say that when incorporating environmental issues in
innovations, environmental improvements and economic gains can be achieved
simultaneously. The adoption of cleaner technologies has not been driven
by environmental protection, but by the search for efficiency in resource use
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Despite the advances in the environmental technologies of the industrial
sector (cleanear technologies, increased use of materials less harmful to the
environment, improved processes and systems for the reuse of materials)
environmental problems persist. The condition to achieve gains in the direction
of a production pattern which is more environmentally friendly implies to move
towards a technological paradigm that is not grounded in intensive use of energy
and raw materials, and the consequent adaptation of production processes.
A new technological paradigm requires a long maturation period, with several
changes, including of conceptual order.
The definition of consumption, for example, needs to be revised. Consumption
is a term distinct of use. The first means the destruction of the original material,
or rather the transformation into other elements. That is, when we burn coal,
consumption has taken place, as it was transformed into carbon dioxide and
water. Use means no transformation of the materials, but other elements can
be added to them. This is the case of water and metals, which remain water
and metals even after use. Thus, they can be recycled and reused in other
circumstances. However, this distinction is not made by the majority of economic
activities that generate pollution since they do not recycle materials already
used, thus not transforming the production process’ waste into wealth.
3. In n o v a t io n a n d t h e e n v ir o n m e n t in Br a z il ia n
c o m p a n ie s
Brazilian industrialization has been marked by a relative neglect of
the environmental issue, a result of “... the delay in the establishment of
environmental rulings and specialized agencies in pollution control; growth
strategy associated with import substitution industrialization, focusing on
emission-intensive sectors, and the trend towards the specialization of the
export sector in potentially polluting activities” (Young and Lustosa , 2001).
For many years, the industrial sector did not pay attention to the environmental
costs of their production processes, neither to the related waste, including
pollution. There used to be a belief that producing in an environmentally
sound manner would be more costly and would harm the companies’ financial
performance. However, the search for alternatives that minimize the negative
impacts of productive activity on the environment has been reflected in economic
gains and improved competitiveness of enterprises.
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Environmental issues gained ground on businesses’ social concerns since
the 1990s. When companies realized the society’s growing interest and
concern with the environment, they sought to insert themselves in the context
as participating agents of change in response to the expectations of society,
having seen the decline in the State’s financial capacity and the disbelief on
the State as an actor capable of solving relevant social problems.

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As the preservation of the environment has become a differentiating factor for
companies, as a business opportunity, the possibility to include environmental
concerns arose in their strategies, by means of more environmentally
appropriate practices. Such practices have resulted in the adoption of ESTs,
implementation of environmental management systems, rational use of natural
resources, among others.
Taking the opportunity to improve their image and have society’s
acknowledgement as a key player in the transformation process, companies
are investing in environmental programs of social nature. Even with little tax
incentive, companies engaged in these projects pursuing a positive image,
acting as a powerful marketing tool, differentiating themselves from their
competitors and gaining attention in the media - spontaneously, inclusive. This is
a first indication that the environment can be a way to improve competitiveness.
Despite the social and environmental initiatives implemented by companies with
positive results for the environment and society, environmental problems “at
home” (resulting from negative environmental impacts of their core activities)
were well below the visibility of environmental projects targeted at society. The
exceptions are companies that have suffered some pressure to do so: the
requirement of countries which import Brazilian products and environmental
regulations that force companies to lower the environmental impacts of their
activities.
Cost reduction has also played an important role in minimizing the
environmental impacts of companies. However, the environment was not the
focus - programs for energy conservation, process optimization aiming at
reducing input costs, automated control processes that reduce waste, water
recirculation, among others, presented a positive effect in the direction of a
more rational use of natural resources.
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Empirical evidence shows that the innovations that generate positive impacts
both to the environment and to the companies’ economic performance are related
to their size. Whether by employed personnel or by range of net revenues, the
biggest companies are those that consider the environment a motivating factor
for the company to innovate (Lustosa, 2002; Podcameni, 2007). The company
size has a positive influence on the probability of implementation of environment
investment, that is, the larger the company, the greater that probability (Ferraz
and Seroa da Motta, 2001). Micro and small enterprises (MSEs) have worked
less on solutions for environmental issues as indicated by variables of adoption
of environmental management, improved image, increased sales, access to
new markets and investment environment (CNI et al. 2001).
Other studies confirm that the requirements imposed by law are still the main
determinant of environmental investment in enterprises. According to Almeida
et al. (2004), most companies still restricts its environmental responsibility to
comply with environmental legislation and in response to the fines and penalties.

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However, the increasing demands of the market and competitivity between
companies turn the adoption of environmental management principles into a
necessary condition for the businesses’ survival.
Ferraz and Seroa da Motta (2001), in a study that analyzes the determinants
of environmental investment in the industry in the State of São Paulo, found
some internal and external factors to enterprises, which are significant for
environmental investment. The internal factors indicate that plants with
more workers, older firms and those with foreign capital tend to make more
environmental investments, as well as those with a higher proportion of exports
over sales and those belonging to sectors considered pollutants. In relation
to factors external to companies, only the factors associated with formal
environmental regulation, as the number of warnings given by the environmental
agency, for example, were significant.
Tigre (1994), in a research carried out with producers of equipment and
environmental services, shows that 69% of companies have realized that the
government regulations are extremely influential in the growth of their market
and that 21% considered such regulations influential 5 .
Innovation in the MSEs is related to factors such as the organization and
the need for innovation in the sector in which they operate. Although in most
cases they do not have enough capital, they have other advantages that
favor investment in innovation such as the flexibility of their structures, their
diversified activities and their quick adaptation to market changes. However,
small enterprises have less access to technological information than the larger
ones; besides, the difficulty in obtaining credit makes innovation initiatives
quite risky.
Among other factors that inhibit innovation in MSEs are low managerial
capacity of the people who are ahead of the business and the short-term
planning. Because of their small size, owners and/or administrators cling to
solve daily problems and do not give the due importance to long-term strategies
and to innovation.
With regard specifically to the issue of environmental innovation, its
importance lies in the fact that eco-efficient production is an important instrument
of competitiveness, as it reduces costs and improves product quality, enabling
the opening of new markets..
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5. To the other answer options, “little influent” or “non influent”, the percentages of 7% and 3%
have been attributed, respectivelly.

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Co n c l u s io n s
The growth process of modern capitalist economies, which started with
the Industrial Revolution of the 19th century, generated an enormous output
of material goods. Concomitant with this dramatic increase in production
scale, the “environmental issues” arose - depletion of natural resources and
pollution. However, it was in the late 1960s that the degradation of the planet
started gradually to enter into the discussion agenda of the social, political and
academic spheres. The environmental movement began to take a social and
political conotation.
In this debate, innovation and technology become important variables to be
studied, since they are those that determine the set of knowledge, techniques,
methods, processes, equipment and experiences that will transform raw
materials into consumer goods.
Therefore, the technological standard presents a double face: it was and still
is largely one of the factors leading to the aggravation of environmental issues
in proportion to increases in the scale of production. Its other side emerges as
the solution to environmental problems through technological changes in the
direction of environmentally sound technologies - which use natural resources
sustainably and enable the proper disposal of waste in production, so as not
to degrade the environment. These changes occur through environmental
innovations.
Once the companies are the producing agents in the economy, their capacity
to generate and adopt environmental innovations is crucial for the obtainment
of production processes and products less harmful to the environment and,
therefore, environmental improvements - properly managing natural resources
and controlling pollution.
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Despite the benefits that environmental innovations can bring, there are
factors in the technological, political and market spheres that limit their
generation and diffusion. In cases where companies show no interest in
practices less harmful to the environment, the State must use legal means
(environmental policy and its regulations), through public environmental
management and encourage companies to change their behavior in relation
to the environmental impacts of their activities. Environmental regulation has
both normative and informative sides: it translates the needs of environmental
protection into specific requirements, signaling to polluters and suppliers of
environmental technologies what is being demanded. The generation and
particularly the diffusion of environmental innovation are crucial to harmonize
environmental preservation with the growth of economic output.

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References
Almeida, J. R., Mell, C. S. and Cavalcanti, Y. (2004). Gestão ambiental: planejamento,
avaliação, implantação, operação e verificação, 2ª ed. Rio de janeiro: THEX.
CNI, SEBRAE, BNDES (2001). Relatório da Competitividade da Indústria Brasileira.
Brasília: CNI/SEBRAE; Rio de Janeiro: BNDES.
Cohen, W. and Levinthal, D. (1990). Absorptive capacity: a new perspective on learning
and innovation. Administrative Science Quarterly, 35, 128-152.
Ferraz, C. and Seroa da Motta, R. (2001). Regulação, mercado ou pressão social?
Os determinantes do investimento ambiental na indústria. Anais do XIX Encontro
Nacional de Economia, Salvador - BA, ANPEC.
Fukasaku, Y. (2000). Stimuler l’innovation environnementale. In OCDE, Le developpement
durable. Número especial, Paris: OCDE.
Furtado, C. (1974). O mito do desenvolvimento econômico. Rio de Janeiro: Paz e
Terra.
Hall, P. (1994). Innovation, economics and evolution: theoretical perspectives on
changing technology in economic systems. New York: Harvester Wheatsheaf.
Kemp, R. and Soete, L. (1992). The greening of technological progress: an evolutionary
perspective. Futures, 24(5), 437-457.
Labeyre, V. (2004). As conseqüências ecológicas das atividades tecno-industriais. In
Morin, E., A religação dos saberes: o desafio do século XXI, 4a ed. Rio de Janeiro:
Bertrand Brasil.
López, A. (1996). Competitividad, innovacion y desarrollo sustentable: una discusión
conceptual. DT 22, Buenos Aires: CENIT.
Lustosa, M. C. J. (2002). Meio ambiente, inovação e competitividade na indústria
brasileira: a cadeia produtiva do petróleo. Doctorate thesis, Rio de Janeiro: IE/
UFRJ.
Podcameni, M. G. (2007). Meio ambiente, inovação e competitividade: uma análise da
indústria de transformação brasileira com ênfase no setor de combustível. Master’s
degree dissertation. Rio de Janeiro: IE/UFRJ.
Preston, J. T. (1997). Technology innovation and environmental progress. In Chertow,
M. R. and Esty, D. C., Thinking ecologically – the next generation of environmental
policy. London: Yale Univ. Press.
Tigre, P. B. (coord.) (1994). Tecnologia e meio ambiente: oportunidades para a indústria.
Rio de Janeiro: UFRJ.
Young, C. E. F.ande Lustosa, M. C. J. (2001). Meio ambiente e competitividade na
indústria brasileira. Revista de Economia Contemporânea, v. 5, Edição Especial,
231-259. Rio de Janeiro: IE/UFRJ.
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1. In it ia l c o n s id e r a t io n s
What is a “green economy”? The An understanding of the meaning of a green
economy depends on the underlying concept of ecological sustainability. In the
recent UNEP report on green economy, this conception is that implied by the
sustainable development concept: it is possible to reconcile economic growth
with environmental conservation by increasing ecological efficiency 2 , by using
greater caution in decisions that involve environmental impacts, by raising
consumer awareness in selecting goods and services with lower impacts, etc.
The report clarifies how much can be done to bring about “a greening” of the
economy. 3
However, over a very long term, within a human time scale (thousands of
years 4 ), the concept of ecological sustainability to be considered is one that
clearly establishes that economic growth, as expressed by increased material/
energy production per capita, cannot continue indefinitely due to the simple
fact that there are entropic limits to increases in ecological efficiency. According
to the Second Law of Thermodynamics, the Entropy Law, it is impossible to
reduce waste generated by human activities to zero. 5 It is essential to take
into account the finitude of planet Earth, which is a closed system in terms
of the exchange of matter with other systems in space (with the exception
of occasional meteorite collisions); from an energy perspective, the planet is
“calibrated” to simply absorb solar energy and radiate heat to outer space,
having no significant endogenous sources of energy (geothermal sources are
relatively unimportant). The unlimited increase in the production of materials/
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1. Full professor at the Institute of Economics at the University of Campinas (IE/UNICAMP),
coordinator of the Nucleus of Studies and Research on Environment (NEPAM/UNICAMP) and
director of the Brazilian Society of Ecological Economics.
2. Ecological efficiency is understood as the most efficient use of natural resources, producing
more with the same quantity of resources and/or maintaining the level of production with the
use of fewer resources, resulting in reduced emission of residues per unit of product or service.
3. The recommendations of this report largely echo the viewpoints expressed for decades by the
principal theoretician of sustainable development, professor Ignacy Sachs, of the University of
Paris. See, for example, Sachs (2006).
4. The minimum time period that should be considered as a long-term human scale is 10
thousand years, since the invention of agriculture during the Neolithic age. In average, it
should be considered the time period since humans controlled the use of fire, between 200 and
400 thousand years ago.
5. Some specialists believe that it is theoretically possible to increase current average ecological
efficiency by up to 10 times. For example, current carbon emissions produced by the
combustion of carbon for steel production could be reduced by up to 90% with the introduction
of new processes. For a detailed discussion see the works of the Factor Ten Institute: http://
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energy based on exogenous sources of energy and materials (which can be
found inert in the terrestrial crust) leads to increased thermodynamic imbalances
that would eventually produce adaptive ecological processes catastrophic to
mankind. 6 Thus, zero growth (of material/energy production) is inevitable (“for
good or for evil”), as predicted by the Club of Rome in 1972. 7
Zero growth, it must be said, does not necessarily imply the absence of
human development. Indeed, human development depends on increased
production of materials and energy to achieve a level of material comfort that
is deemed appropriate. However, after a certain level of material comfort,
human development is much more dependent on other factors, particularly
those related to the emotional balance of individuals. In this sense, an index
that best measures development in its various dimensions would not be the
GDP, as it is currently calculated. 8
In agriculture, the limits of expansion are more obvious: the agricultural area
available is visibly finite and, however spectacular the gains in agricultural
productivity have been, one can no longer count on further significant increases.
In short, it seems clear that agricultural productivity cannot grow indefinitely.
After all, Thomas Malthus was absolutely right in his fundamental intuition about
the environmental limits to growth. Who disagrees with the notion that the world
population cannot grow forever? Even the most obtuse economists admit this
fact, although they continue believing in the perpetual growth of material and
energy consumption.
However, it is not sufficient to acknowledge that the expansion of agricultural
production has limits. One must consider the conditions under which this
production takes place, which must allow continuity for millennia! In the early
20th century a debate took place among agronomists in Europe, and particularly
in France, about the enormous advantages of American agriculture, with its
high labor productivity but major environmental impacts, compared to European
agriculture, which preserved the agricultural ecosystem but was less productive
per unit of labor. Many experts argued in favor of American agriculture, saying
it would not be worth losing productivity gains to conserve the soil, since in the
future (around the end of the century!) agriculture would no longer be necessary
for the production of food!
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6. Exogenous energy sources include all energy sources, except solar directly received by the
planet on a daily basis, such as fossil fuels and nuclear energy; inert materials in the crust
(all types of mineral resources) as they are mined and processed in the ecosphere (the layer
of earth where life is concentrated – from a few meters below the subsoil to several hundred
meters above the ground) become active waste to the degree that they force the ecosystems
of the ecosphere to absorb them.
7. The fact that initial predictions have failed due to errors in modeling and in the parameters
used in no way changes the rationale on which they were based.
8. For an analysis of the debate on indicators that reflects these dimensions of economic
development, see Veiga (2010).

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The catastrophic effects of erosion in the U.S. eventually led to a great
movement for soil conservation and for the adoption of other conservation
practices that guaranteed a minimum level of sustainability for so-called modern
agricultural practices. 9 However, one can question this minimum sustainability
level of current practices, as has been done by movements in favor of alternative
farming practices that effectively ensure agricultural productive capacity over
the very long term.
2. Th e e c o l o g ic a l s p e c i f i c i t y o f t h e a g r ic u l t u r a l
p r o d u c t io n s e c t o r
Agricultural activities depend on space. It is the primary agent responsible
for the irreversible transformation of natural ecosystems. The impacts of
farming practices on the natural resource base also directly affect the quality
and quantity of agricultural products generated. So-called modern practices
guarantee the quantity but not the quality of food, which exhibits varying degrees
of contamination by agrochemicals, as well as declining nutritional quality:
unbalanced fertilization and the deteriorating physical structure of soils affect
the structure of amino acids and vitamin content in foods.
However, even quantity is not guaranteed if we consider the very long term.
Similar to the defenders of American agriculture in the early 20th century,
proponents of current practices argue that adoption of agro-ecological practices
would drastically reduce agricultural labor productivity, resulting in unacceptable
costs to the population. In fact, so-called organic or, more generally, agroecological
10 products are more expensive, because their marketing is currently
limited to niche markets composed of a more aware consumer that is willing to
pay higher prices for better quality products. 11
It can be argued, however, that these prices could already be lower if
governments devoted similar efforts to support agro-ecological practices that
they dedicate to conventional agriculture, in terms of agricultural research and
extension, credit, subsidies, etc. Furthermore, one must consider that proper
ecological accounting would show that the higher prices of agro-ecological
products incorporate a range of ecosystem services 12 that benefit society as
a whole.
The first, as already mentioned, is the quality of food. Healthier food in terms of
nutrients and the absence of chemical contamination. Another important service
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9. Erosion caused by wind, in particular in the semi-arid Great Plains, caused enormous dust
storms referred to as “dust bowl”, which reached as far as the East Coast!
10. Agro-ecological products are understood as those produced according to certain rules of
cultivation based on intelligent management of natural forces, minimizing the introduction of
exogenous agrochemical inputs.
11. For an analysis of the problems associated with the adoption of agro-ecological practices in
Brazil, see Assis and Romeiro (2004 and 2007).
12. For a classification of ecosystem services, see the 2005 Report of the Millennium
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involves the provision of high quality water. An agro-ecological agricultural
landscape results from soil management that enhances the infiltration of water,
which eliminates erosion and contributes to the regulation of water flows in
rivers. As a result, water quality is not compromised by massive inputs of
sedimentary material and agrochemicals, thus reducing which reduces the cost
of water treatment in urban centers (which do not eliminate the whole problem)
and contributing to the preservationing of aquatic fauna.
A third ecosystem service is that of maintaining a diverse flora and fauna in
the agricultural landscape that is increasingly valued in most countries. This
agro-ecological landscape is essential for ecotourism or rural tourism, and
citizens of several countries are increasingly willing to pay for these services.
The absorption and storage of carbon is a fourth service. There are others, but
not all can be monetized due to a lack of information. Those that are monetizable
should be calculated and taken into account in the formulation of agricultural
policies that support agro-ecological practices.
The necessity of accounting for the economic (monetary) dimension of
the value of agro-ecology may be sufficient to justify more supportive policies.
Nevertheless, we must not lose sight of the ecological and socio-cultural
dimensions, which cannot be measured in monetary terms. The socio-cultural
dimension is measured by the role that agricultural space may have in
preserving the cultural identity of many peoples. In the case of the ecological
dimension, which concerns everyone, the metric is sustainability in the very
long term as defined by (a) utility (necessity for human survival) and (b) ethics
(acceptance of the right to survival of species without known uses)
Agricultural science has already accumulated sufficient experience to define
parameters for the sustainability of farming practices in the very long term: an
agro-ecosystem where a certain proportion of the remnant native flora and
fauna contributes to the long-term ecological resilience of agricultural practices
based on the management of natural processes.
The ecological principles of agro-ecological practices
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It can be said that modern farming practices have evolved in response to
economic stimuli resulting from the advantages of monoculture in terms of the
organization and productivity of agricultural labor, and the prospect of gains
from the specialization in making more profitable products. 13 Technically this
was made possible by the introduction of chemical-mechanical procedures that
have, however, proven to be degrading to the productive base.
It is necessary to be clear that monoculture contradicts a basic rule in
nature, that diversity is synonymous with stability. The more simplified a given
13. See Romeiro (1991, 1998) for a historic analysis of this process.

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ecosystem, the greater the need for exogenous sources of energy and matter
to maintain balance. Monoculture causes a profound imbalance, both in terms
of vegetation cover (pest infestations) as well as the physical, chemical and
biological activities within the soil.
Destabilizing factors gain strength and force farmers to use energy-intensive
techniques to maintain conditions favorable for crop development. However,
these technical solutions do not seek to eliminate the causes of the imbalance,
but only circumvent its effects on revenues. The initial effectiveness of these
techniques and procedures made the vast majority of experts extremely
optimistic.
Experience has shown, however, that there was no reason for this optimism.
In France, for example, due to the generally low organic matter content, the
physical structure of soils has become increasingly susceptible to the action of
climatic factors, as well as to the passage of heavy machinery and equipment –
the use of which, in turn, was necessary to aerate soils increasingly susceptible
to compaction due to low organic matter content!
In other words, the degradation of physical soil structure causes a permanent
contradiction in the interventions designed to improve the supply of water
and nutrients to crops: the more the soil is degraded, the less natural factors
(ecosystem services) provide the necessary conditions for cultivation, which
must then be obtained through chemical and mechanical interventions that also
contribute to degradation. However, it must be clear that these interventions
do not resolve the contradiction, in that they are designed to overcome the
effects of environmental degradation on productivity, without addressing the
causes of the problems.
The causes should be addressed through the adoption of agricultural
practices designed to manage nature rather than fight against it! An agricultural
ecosystem necessarily involves simplification of the original ecosystem. For
this reason it is necessary that the farmer always intervenes to keep it stable.
However, such interventions should be made in accordance with the laws of
nature.
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Extreme simplification can be avoided by crop rotation. This practice provides
a remarkable means of maintaining stability of the agricultural ecosystem. In
addition to dramatically reducing the risk of pest infestation of the vegetation
cover, rotation effectively contributes to the maintenance of good physical
soil structure. Agro-ecology seeks precisely this: based on the successful
experience of ancient farming systems, to scientifically develop farming
practices that manage nature in order to obtain ecosystem services useful for
production.

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3. Ag r o-e n v ir o n m e n t a l p o l i c i e s
As a result of the presentation in previous section, scientific research
in sustainable agro-ecosystems should be a fundamental part of an agroenvironmental
policy for agriculture. In Brazil, research began over 20 years
on low-impact farming practices. 14 One of the most notable results of this
work is the expansion of no-tillage systems, 15 which has already expanded to
over 10 million hectares. This is a farming system in which farmers create the
conditions that guarantee the required organic matter content and that protect
the soil from sun and rain, measures that are necessary for the activities of
soil micro-fauna that result in a physical soil structure suitable for planting.
This approach recognizes how the intelligent management of natural forces
can provide ecosystem services that both conserve the soil and maintain high
productivity. Another notable example, older and hugely successful, is the
widespread fixation of atmospheric nitrogen by inoculants that strengthen this
naturally occurring process associated with legumes such as soybeans. In
addition, farmers are increasingly applying biological control of pests in crops,
for example through viruses that attack their main insect predator of soybeans.
These are techniques that use natural processes and ecosystem services, but
are still mainly applied in monocultures.
Currently, research organizations in Brazil are increasing efforts to research
sustainable agro-ecosystems. For example, a few years ago Brazilian
Agricultural Research Company (EMBRAPA) created an agro-biology research
center as well as sustaining another research center in agriculture and
environment. 16 These are centers of reference, but all the other EMBRAPA
research centers have also expressed concern about the sustainability of
agricultural practices. Recently a technological “package” was launched for
livestock-agriculture integration. These are two activities that have strong
ecological complementarities, so that integration increases output per hectare in
a sustainable manner. This is an important step to enable the effective adoption
of agro-ecological practices.
Along with scientific and technological policies, it is crucial that the negative
externalities of conventional practices be are measured and taxed in some
way. Simultaneously, the positive externalities – such as the ecosystem
services generated by farmers – should be considered. As such, the cost of
adopting certain sustainable practices (opportunity cost) represents the value
of the environmental conservation service offered by the farmer. Through this
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14. For a broader analysis of the prospects for agro-environmental policies, see Romeiro (2007).
15. No-tillage is a system of farming without plowing the soil. The seed is buried directly in soil
covered with a layer of chopped-up crop residues (straw), which protects and at the same time
provides needed organic matter to feed the chain of organisms living in the soil. The conditions
needed for plant development from seed are derived precisely from the activities of these
organisms; as a result, these activities translate into an ecosystem service of structuring the
soil for the planting and development of crops.
16. EMBRAPA Agro-biology (CNPAB) and EMBRAPA Environment (CNPMA).

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environmental conservation service, the farmer ensures that nature (agroecosystem)
produces ecosystem services such as those mentioned (healthy
food, water quantity and quality, biodiversity). The best known food products
certification, such as organic or biodynamic agriculture, began by emphasizing
the healthy character of the food produced, but today these certifications
tend to include other ecosystem services resulting from the preservation and
management of a particular agricultural landscape, such as biodiversity and
water in particular.
It’s important to bear in mind that many of the ecosystem services produced
by the adoption of agro-ecological practices also benefit the farmer. In this case
one can speak of win-win technologies, which produce positive environmental
externalities and at the same time are profitable for producers. This is the
case for healthy food when the market recognizes its value by offering a
price that makes production profitable. In the case of water, protected soil
with appropriate organic matter content, increases crop resistance to drought
stress, thereby saving expenses associated with supplemental irrigation and
crop failures. In more balanced ecosystems, expenditures on pest control are
also decreased. Greater biodiversity also improves productivity by ensuring
better crop pollination.
Hence, it is important to take stock of the real opportunity costs of adopting
agro-ecological practices, thereby obtaining a fair reference on which to base
payments for environmental services that society as a whole should make to
farmers.
Nº 8 • June 2011
References
Assis, R. L. and Romeiro, A. R. (2004). Análise do processo de conversão de sistemas
de produção de café convencional para orgânico: um estudo de caso. Cadernos de
Ciência e Tecnologia, 21(1), 143-168. Brasília: EMBRAPA.
Assis, R. L. and Romeiro, A.R. (2007). O processo de conversão de sistemas de
produção convencionais para orgânicos. Revista Brasileira de Administração Pública,
41, 863-885.
Romeiro, A. R. (1991). O modelo euro-americano de modernização agrícola. Nova
Economia, 2(21), 175-197. Belo Horizonte: UFMG.
Romeiro, A. R. (1998). Meio Ambiente e Dinâmica de Inovações na Agricultura. São
Paulo: FAPESP/ANNABLUME, 277 p.
Romeiro, A. R. (2007). Perspectivas para políticas agroambientais. In Ramos, P. (org.)
Dimensões do agronegócio brasileiro: políticas, instituições e perspectivas, 1 ed.,
v. 1, 283-317. Brasília: NEAD Estudos.
Sachs, I. (2006). Caminhos para o desenvolvimento sustentável. Rio de Janeiro: Editora
Garamond.
Veiga, J. E. (2010). Indicadores de sustentabilidade. Estudos Avançados, n. 68,
Jan-Apr.

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Green economy and a new
cycle of rural development 1
Arilson Favareto 2
In t r o d u c t io n
Can the “green economy” favor the poorest, especially in rural areas? The
response to this question is affirmative. The “Green Economy Initiative” (GEI) 3 ,
launched by the UNEP in 2008, and the subsequent “Green Economy Coalition”
(GEC) 4 , headed by thirteen international organizations of consumers, workers,
entrepreneurs, environmentalists and researchers, define “green economy”
as that which in addition to being just and resilient, manages to improve the
quality of life for everyone, within the ecological limits of this planet. Thus,
the fundamental issue is not to know if such intent can favor the poorest, but
especially to show how this can take place and through what initiatives.
In the case of rural regions, there are two starting points for analyzing such
issue. It is known that, on the one hand, there is a declining role of agriculture
in the income generation of families. That is, rural family incomes increasingly
originate from other non-agricultural activities, such as urban-type jobs on
premises located nearby, from other activities conducted in agricultural
establishments, such as the provision of services or manufacture of product
parts, or even from the transfers of income via social programs. On the other
hand, the impacts of the current model of agricultural production and livestock
farming on the emissions of greenhouse gases are well-known, as shown by
various reports available on this topic. Furthermore, this model based on the
expansion of intensive agriculture, despite generating a lot of wealth and high
production volumes, promotes the disposal of labor – due to the introduction of
mechanization and industrialized inputs – and thereby offers little contribution
to the income generation of the poorest. And, ultimately, this model severely
pressures the environment through its intensive use of natural resources.
However, this is only one side of the coin that reflects the extension, to recent
times, of a rural development paradigm that originated in the post-war era of
the previous century. That which the literature refers to as a new rurality is
gradually emerging, with contours that are significantly different and in which
Nº 8 • June 2011
1. This article was written by request from Conservação Internacional (CI-Brasil) and is based
on arguments and excerpts originally published in other works by the author.
2. Sociologist, professor at the Federal University of ABC and researcher at the Brazilian Center
for Analysis and Planning (Cebrap). Email: arilson.favareto@ufabc.edu.br.
3. http://www.unep.org/greeneconomy/
4. http://www.greeneconomycoalition.org/

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reside great opportunities to inaugurate a new cycle of development that is
compatible with the principles envisaged by a “green economy”.
The objective of this article is to shed light on the contours of this emerging
rurality, whose distinctive trace is the transition from an agrarian and agricultural
paradigm to a paradigm organized around the environmental rooting of rural
development. And also to highlight some important issues for Brazil to accelerate
the transition in the direction of this new model. Thus, there are three sections
that follow this brief introduction. In the first, the contours of the so-called new
rurality are presented. The second, presents a brief table about the current
heterogeneity of Brazilian rural regions and their different forms of economic
inclusion and natural resource use. In the third, some sensitive issues are
recommended for the transition towards a “green economy”.
1. Th e e n v ir o n m e n t a l r o o t s o f n e w r u r a l it y
According to social theory (Abramovay, 2003), there are three fundamental
defining dimensions of rurality: proximity to nature, link to cities, and
interpersonal relations resulting from low population density and the reduced
size of rural populations. What changes in the new stage of rural development,
which emerges through the so-called new rurality, is the social content and the
quality of articulations between these elements.
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With regards to proximity to nature, natural resources that were previously
focused towards the production of primary goods, are now increasingly subject
to new forms of social use, such as for biodiversity conservation, exploiting
the landscape potential of this medium, and the search for renewable energy
sources. Nature is increasingly viewed as fundamental due to its unsubstitutable
capacity to provide the environmental services necessary for human existence:
closing the loop of certain chemicals that would be harmful to health, regulating
the climate, and forming watersheds, among others. Concerning relation to
cities, rural spaces have stopped being mere exporters of primary goods and
now give space to greater inter-sectoral diversification and integration of their
economies, and consequently dampening and in some cases even inverting
the demographic flows that prevailed in the previous phase. Interpersonal
relations, ultimately, no longer rely on relative homogeneity and isolation,
characteristics traditionally associated with rural areas, but are now structured by
growing individualization and heterogenization. This is a movement compatible
with greater physical mobility, with the development of information technology
and communications, with the new population profile and with the growing
integration between markets that were previously more clearly dichotomized
into the rural and urban – markets for goods and services, but also the job
market and the market for symbolic goods (Favareto, 2007). This qualitative
change can be better understood through rapid exposure, based on examples
from international experiences.

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One of the main books about rural development in the contemporary world
is devoted to the analysis of the US context - “Rural Development in the
United States”, by Galston and Baehler (1995). The authors highlight how
the comparative advantages of rural areas have changed over the course of
North American history. During the first extended phase of shaping the North
American territory, the great comparative advantage was the availability of
primary products: timber, coal, minerals and agricultural products. The search
for these resources guided the occupation of land and represented the principal
source of work and wealth for a long time.
Obviously, with the passing of time the importance of this production
decreased relative to other economic activities, both in terms of people
employed and wealth generated. Technological innovation and the emergence
of cities triggered a diversification in the productive base, with the growing
development of transformation and service activities. In this phase, rural
spaces have cheap labor and land, coupled with aspects such as lower levels
of taxation and unionization, as factors attracting industries and investment.
The main advantage becomes location, since the exploitation of these less
onerous factors in rural areas was only feasible because of the distance from
the more dynamic centers, which compensated for the transportation costs.
However, similar to how technological advances allow for lowered production
costs and the introduction of techniques that save labor in agriculture, the
same thing happens in the manufacturing sector. Thus, dynamism becomes
concentrated in the tertiary sector. Over the last two decades of the previous
century, the counties that offered the most services related to the exploitation of
rural amenities – natural or cultivated landscapes, pure air, clean water, cultural
attractions – where those that presented greatest growth. Exceptions include
places with very unique forms of investment such as casinos, prisons, or post
distribution centers. However, for obvious reasons this type of investment cannot
form the basis for a strategy to be recommended for rural areas.
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In the case of Italy, as presented by Veiga (2006), there is an evident
contrast between rural areas that essentially depend on income obtained from
the export of primary goods, eventually industrialized, and others where the
economy is grounded in the movements of income generated and obtained in
the cities. This division encounters a certain relation to natural characteristics,
such as relief, with plains and plateaus being characteristic of the first case and
proximity to hills and mountains the second. This division seems to have been
directly influenced by a whole range of phenomena related to tourism, which
in turn is narrowly determined by increases in free time and income, and as a
consequence also by an increase in leisure activities by growing social tiers.
In addition to natural heritage conservation, which is at the root of this type of
phenomenon, and economic exploitation of amenities, whose main expression
is tourism activity, the same study also shows that there is a third valuation
vector of rurality: the exploitation of new energy sources.

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Of course agriculture of commodities continues to carry great weight in
shaping rural spaces, and tertiary activities will always exist in this ambit.
What Galston and Baehler (1995) and Veiga (2006) point out is the growing
emphasis on this second set, as much in terms of people employed as in
wealth generated, but mainly in bringing something new to institutions linked
to rural development: the growing importance of nature and values that are
not directly monetized.
In this context of changing comparative advantages, one inescapable
conclusion is that not all rural areas have the same conditions for attempting
a development process based on the exploitation of its amenities. Low
population density, which is characteristic of these areas, complicates economic
diversification. The demographic profile and the characteristics of the social
fabric, mainly of stagnant rural areas or those that loose population are different:
there is a vulnerability to external social ties, lack of local opportunities, low
expectations of social mobility or increased interactions. Distance from urban
centers can also turn into a disadvantage through increased information and
transportation costs.
Therefore, coupled with the emphasis on the specific attributes of these
territories, the available literature draws equal attention to the form of inclusion of
these locations in the extralocal space (Jacobs, 1984; Veltz, 2003), or as some
authors prefer, in the relation of rural regions with cities or other parts of the
world. From this perspective, it is the city economy that shapes the economy in
rural regions. This takes place through the exports of primary products, through
the attraction of transformation activities, or through the capture of income from
urban sectors, such as from retirees or professionals in search of a second
home or tourism activities. The fact is, that the closer these relations are, the
greater the chance for prosperity.
However, for areas located outside this proximity, there is no need to be
fatalistic. It is possible to create a link between rural regions and a network of
cities, or to constitute a network of cities in a rural region. This can be done
by investing in communication and transport, to diminish distances, through
a kind of territorial division of labor between small sites, in order to overcome
necessities that would have to be fulfilled in urban centers. Or even through
generating local centers for growth by forming cities that can meet these
necessities. In any of these possibilities, the key word is diversification. That
is what guarantees the supply of the local population, which creates the
conditions for introducing innovations and the adaptation of these territories to
the pressures and opportunities of general economic changes.
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Implications for development
These changes, which have already been on course since the last quarter
of the 20th century in countries of advanced capitalism, have been noticed

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by multilateral organizations and government agencies, and transformed into
reorientations for policy design. The wear on agricultural policy by exclusively
sectoral biases arose in the middle of the 1980s and made space for a series
of reforms and debates on “The future of the rural world”, the title of a European
Commission Declaration to Parliament in 1988. An indisputable mark on this
changing vision was the creation of the “Leader Program – Links between
Actions for the Development of the Rural Economy” in 1991, which to this day
is the primary reference for territorial rural development programs. However, the
best synopses of planning agency perceptions of these changes were expressed
on two occasions, in the middle of the 1990’s: the well-known Cork Declaration,
which resulted from the conference Rural Europe – future perspectives, and
the workshop “Post-industrial rural development: the role of natural resources
and the environment”. At these events, a basic consensus was reached about
advanced rurality, synthesized in Box 1 below.
These events gave rise to a progressive transition in the design and the
institutional location of rural development policies. Policies began shifting
from a basically sectoral vision to what is conventionally referred to as a
territorial approach to rural development. This is an approach that intends to
overcome the rigid separation between rural and urban and support itself on
the complementarities between these two spaces (Veiga, 2000; Abramovay,
2003; Favareto, 2007). As a result, the emphasis of agricultural policy began
to make space for a growing approximation to regional development policy.
Box 1
Basic consensus, in the middle of the 1990’s, on advanced rurality
1. Rural zones, that encompass the residencies of one quarter of the
European population and more than more than a fifth of North American
people, and more than 80% of both territories, are characterized by
singular cultural, economic and social fabrics, an extraordinary mosaic
of activities and a great variety of landscapes (forests and agricultural
land, unharmed natural sites, villages and small towns, regional centers,
small industries, etc.).
2. Rural zones, as well as their inhabitants, represent an authentic
wealth in their regions and countries, and can be highly competitive.
3. Most of European and North American rural spaces are constituted
by agricultural land and forests that strongly influence the landscape
character.
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4. Given that agriculture will certainly persist as an important interface
between society and the environment, farmers should increasingly
exercise management functions over various natural resources and rural
territories.

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5. However, agriculture and forests no longer play predominant roles in
national economies. With the declining relative weight of their economies,
rural development should more than ever before involve all socio-economic
sectors in rural zones.
6. As European and North American citizens increasingly value quality
of life in general, and in particular issues related to health, safety, personal
development and leisure, rural regions occupy privileged positions to
satisfy such interests and offer ample possibilities for authentically modern
and high-quality development.
7. Agricultural policies should adapt to the new realities and challenges
posed as much by the demands and preferences of consumers as by the
evolution in international trade; an adaptation that principally propels the
transition from a system of price support to a system of direct support.
8. The subsidies established by the respective agricultural policies are
increasingly criticized. And it is already widely accepted that government
financial support should be increasingly conditioned on adequate natural
resource management and on maintaining and strengthening biodiversity
and cultural landscapes.
9. The agricultural policy reforms during the first half of the 1990’s
maintained inconsistencies, duplications and legal complexities, despite
undeniable advances in terms of transparency and efficiency.
10. It has become absolutely necessary to promote local sustainable
development capabilities in rural zones, in particular private and community
initiatives that are integrated with global markets.
Reproduced from: Veiga (2004)
2. An d in Br a z il?
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The main medium and long term tendency that manifests itself today in
Brazilian rural regions can be summarized in two statements: here, as in all
countries with advanced capitalism, agriculture has a declining tendency both
in generating income for farming families and in providing employment; and
due to a series of reasons, rural regions no longer experience a general exodus
but rather a heterogenization in their demographic profiles, such as increased
schooling and social differentiation. The result of this tendency in Brazil as
well, has been a change in the comparative advantage of rural regions through
declines in the dynamic and inclusive potential of more traditional activities linked
to strengthening the agricultural and livestock farming sector, and increases in
the potential of new activities related to the exploitation of biodiversity and its

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landscape potential, resulting in a new structure of income generation in these
regions. However, this is a potential that has not been realized as expected
or suggested in the new rurality literature. In a different way, the tendencies
and potentials of the new phase of rural development experience multifaceted
manifestations.
Unfortunately, due to the inherent limitations in the organization of Brazilian
statistical data, there is no good reading available about these dynamics on a
micro-regional scale. Brazilian rural regions can be categorized schematically
into four types. Each one of these types experiences a unique development
path, with which the generation of innovations aimed at a more sustainable
model necessarily need to dialogue.
The first type covers rural regions where a certain model of urbanization
associated with morphological territorial characteristics such as the environment
and social stratification, favored the creation of a social form of natural resource
use in which the search for conservation meets correspondents in the forms
of dynamics of social life. There, the diversified local economy relies on a high
degree of economic integration and territorial cohesion. Landscape, culture and
the economy interlace in a way that associates economic dynamism with good
social indicators and positive progress in environmental indicators. Something
similar occurs in regions such as Vale do Itajaí, in the state of Santa Catarina
(Southern Brazil). These regions combine a rurality grounded in environmental
factors with a more diversified and decentralized social structure. In these
areas, investment in innovations should favor the dissemination of the currently
embryonic economic activities that utilize local natural resources for activities
such as tourism or the management of these resources.
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In the second type, however – beyond the morphological territorial
characteristics that, with respect to the environment, favor conservation –
the characteristics of social stratification do not contribute to the creation of
institutions capable of diminishing the fractures among social groups due to
social positions. Conservation finds itself in conflict with the possibilities of give
dynamism to local life. The urbanization model is still incipient or heading in a
direction where there is no valuation of the rural. This is the typical case of certain
areas of the Amazon (Northern Brazil), where the forest coexists with advances
in business agriculture. The local social structures do not exhibit vigor nor
sufficient patterns of interaction to confront the expansion of primary activities,
resulting in biodiversity loss and the depletion of natural resources such as
land and water. There is a high degree of conflict between institutions, which
greatly affects local populations. These regions combine a rurality grounded
in environmental factors with more specialized and concentrated social
structures. In these areas, investments in innovation should favor economic
activities with larger economies of scale that are already based on new patterns
of natural resource use, and the creation of local productive arrangements

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capable of increasing the participation of small and medium enterprises, for
example creating arrangements aimed at processing forest products through
sustainable methods.
In the third type, morphological territorial characteristics in environmental
and social terms engender a relation between exploitation and the rural,
under restricted conservation possibilities and greater risks of fraying social
fabrics, despite the possible economic dynamism in the primary sector and
of transformation. Regions that experience an accentuated and dependent
dynamism of agricultural activities fit into this type. The wealth generated in
these regions establishes a relation between the municipal territorial center
and the others, where all resources are concentrated and do not result in
wealth spreading across a set of social groups. Environmental conservation
possibilities are restricted to the minimum required by law, such as cases of
preserving remnants, riparian forests and hill top vegetation. Local biodiversity
is greatly compromised or threatened by a forceful expansion of commercial
agriculture. In the case of more dynamic regions, such as some rural areas
in the state of São Paulo (Southeastern Brazil), patterns of urbanization offer
reasonable but concentrated infrastructure and services. In other less dynamic
regions, sectoral specialization and rigid social structures lead to a pattern in
which insecurity prevails, as is the case in the cacao regions of Bahia or the
Pernambuco Zona da Mata (Northeastern Brazil). In these areas, there is a
combination of a sectoral rurality with more specialized and concentrated
social structures. In these regions, investment in innovation should favor
economic diversification and the creation of arrangements favorable to small and
medium enterprises, always with special incentives for adopting less intensive
and polluting practices of natural resource use.
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The fourth type is shaped by situations where, despite morphological territorial
characteristics not being as promising with regards to natural resources, social
structures can favor a process of change and the creation of new institutions.
However, forms of economic domination impede or block this innovation. There
are fissures between the sectoral and the environmental, and between social
groups. An example of this type of territory is the western part of the state of
Santa Catarina (Southern of Brazil). A concentration of large agroindustrial
businesses coexists with a social structure based on a significant group of
family farmers. The region exhibits reasonable economic dynamics, but not
very good social and inequality indicators. The reproductive possibilities of local
social groups depend greatly on extra-local links, which favor a loss of valuable
human resources. As such, the possibility of creating greater interactions
and new institutions capable of changing towards territorial development is
impeded. These regions combine sectoral rurality with more diversified and
deconcentrated social structures. Here, investment in innovations should
favor above all, the diversification of economic activities and a new model of
natural resource use.

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As you can see, for each type of ongoing development dynamic, a determined
contribution to activities to promote innovation should be constructed. However,
this contribution is not the only element that can be mobilized to influence these
dynamics, to invert them when negative and strengthen them when positive.
There are various ongoing projects and investments that could be made more
useful for countryside regions in Brazil. Despite low investments in research
and development - Brazil exhibits current levels similar to Spain and Italy, but
proportionally is more distant from countries such as South Korea, Germany,
Japan and the United States - there are various projects and programs currently
being executed by the federal government that could favor the urgency of the
suggested economic activities. Just as an example, the federal government
has made important investments in tourism through the Tourism Development
Program, which could reach into these rural regions thanks to their environmental
and cultural attractions. Similarly, the Ministry of Development, Industry and
International Commerce has supported industrial decentralization, incentives
from which countryside regions could benefit as long as environmental criteria
are also introduced. The same is true for investments in biotechnology.
Nevertheless, the existence of these opportunities does not guarantee
their realization. Nor is there the allocation of resources that could favor the
introduction of innovations or support for enterprises in rural regions aimed
at realizing these opportunities. It is worth highlighting again that these
opportunities form an environment that could be extremely favorable to starting
a new cycle of development in rural areas of Brazil. It is fundamental to adopt as
guiding principle the strengthening of a “new rurality economy” while recognizing
the heterogeneity of rural regions, be it through promoting the adoption of new
agricultural production practices such as organic production or less intensive
and more conservationist technologies, through tourism activities, or in attracting
new populations interested in maintaining environmental amenities, be it
utilizing the great productive potential of biodiversity and biomass, through
the production of for example biofuels or through the industrial exploitation of
chemical, pharmaceutical or cosmetic products.
3. Id e a s f o r a n a g e n d a
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Clearly, a variety of these new activities could be strengthened, and even
so, increase pressures on the environment. Brazilian production of ethanol is
one example: there is a utilization of biomass, but concomitantly, the production
techniques and the weight of monoculture negatively pressure biodiversity and
necessary natural resources such as land and water. As such, it is not only
about promoting new activities in rural regions, but especially how to administer
them. Similarly, this does not necessarily lead to inclusion of the poorest. Again,
we can use the example of biofuels, this time biodiesel: despite an innovative
design introducing a Social Seal for businesses that purchase raw materials

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from family farmers, at least during their first years of existence, the program
did not succeed in including producers from the poorest regions and saw the
incentives being captured by the most consolidated sectors of family agriculture,
which explains the predominance of soya – produced by farmers in the Midwest
and the South – as a primary raw material instead of castor or palm from the
Northeast, as was initially envisioned. As such, the topic of transition to a new
model or a new paradigm is not trivial.
It is fundamental to recognize that formal and informal institutions – incentives,
cultural patterns, programs and policies – present a bias where the inertia of
the old paradigm is always present. There can be various items comprising
an agenda compatible with the contours of a “new rurality economy”, which in
turn is consistent with the idea of a “green economy”. Here we mention only
three of them.
The first is the introduction of a vigorous innovation policy aimed at
exploiting biomass and biodiversity and the promotion of new production
systems that are less intensive in natural resource use and less polluting.
Brazil has enormous potential in this area and relies on research institutes
with decades of experience and international excellence. Though, in spite
of this potential, little has been done compared to the production of science,
technology and innovation aimed at the old rurality, or the productivist model
that is highly intensive in natural resource use. Without this, these new activities
continue being niche markets and not the base of a new cycle – as is the current
case of biodiversity products – or they ambiguously constitute themselves
by substituting non-renewable for renewable resources but at a significant
environmental cost – as in the case of biofuels.
The second is the adoption of a system of incentives aimed at expanding
economic activities based on new forms of social use of natural resources.
The economies of scale of old activities and the transition costs involved in
adopting new forms of natural resource use need to be compensated by a
policy of incentives that stimulates social agents in adopting new technologies
and exploiting new markets, where short term gains through intensive resource
use and the depletion of natural resources makes space for activities that favor
long term gains as in environmental conservation, maintaining biodiversity and
the provision of environmental services.
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The third item on the agenda, not any less important than the previous two, is
the formation of coalitions of actors and interests consistent with these new
activities and modalities of natural resource use. The actors of the old rurality
are known – businesses in the agricultural food sector and organizations of rich
and poor farmers. To these, it will be necessary to add more segments, detainers
of other interests and above all, the social skills necessary to strengthen the
paths towards a transition of paradigms. Thus, it is necessary to create new
spaces for interacting with and influencing the shaping of policy.

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As you can see, these are not simple tasks. However, these tasks are
challenges that must be addressed to enable the transition to a green economy
where environmental conservation can be added to the life-styles of much of
society.
Green economy
and a new cycle of
rural development
Arilson Favareto
References
Abramovay, R. (2003). O futuro das regiões rurais. Porto Alegre: Ed. da UFRGS.
Favareto, A. (2007). Paradigmas do desenvolvimento rural em questão. São Paulo:
Fapesp/Edusp.
Galston, W. A. and Baehler, K. J. (1995). Rural development in the United States:
connecting theory, practice and possibilities. Washington D.C.: Island Press.
Jacobs, J. (1984). Cities and the wealth of nations. London: Penguin Books.
Veiga, J. E. (2000). A face rural do desenvolvimento – natureza, território e agricultura.
Porto Alegre: Ed. UFRGS.
Veiga, J. E. (2004). Destinos da ruralidade no processo de globalização. Estudos
Avançados, 51, May-August, 51-67.
Veiga, J. E. (2006). Nascimento de outra ruralidade. Estudos Avançados, 20(57).
Veltz, P. (2003). Des lieux et des liens. Paris: Ed. de l´aube.
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Challenges and
opportunities
Deforestation of the
Brazilian Amazon rainforest:
causes and solutions
Bastiaan Philip Reydon 1
1. In t r o d u c t io n
The debate over the deforestation problem in the Amazon rainforest, which
has been expressed, for instance, in the debates over changes to the Forest
Code, has been characterized by its superficiality and ideological character.
Initially, there is a necessity to clearly identify the process, and then look for its
causes, and finally to think of solutions for the short, medium and long terms.
It is undeniable that the forceful command and control policies 2 and economic
incentives 3 implemented over recent years had a crucial role in reducing
deforestation. As they depend on the direct intervention of the State, these
policies are difficult to maintain in the long term, mainly because the principal
productive causes of deforestation – from livestock and grain production to
energy production – persist, and enduring solutions must be found.
The central objective of this work is to demonstrate that the definitive solution
to this problem necessarily passes through the solution to the country´s land
tenure problems, which consist mainly of the Brazilian state assuming in
conjunction with the nation the effective governance over land ownership.
First, this article presents a brief description of the main causes of
deforestation identified in the literature on this topic. Then it is shown how
two problems that appear only marginally in the literature are, combined, the
main determinants of deforestation of the rainforest: land speculation through
the very clearing of the land and the absence of land governance. The fourth
Nº 8 • June 2011
1. Full Professor at Agricultural and Environmental Economics Center of the Institute of
Economics at the State University of Campinas (NEAA/IE/UNICAMP), technical advisor in
sustainability at the Innovation Agency (Unicamp) and consultant at the International Bank for
Reconstruction and Development (World Bank) and at FAO. E-mail: basrey@eco.unicamp.br.
2. The main command and control policies, direct state interventions to modify deforestation
behaviors, were: a) operations Curupira (2005) and Arco de Fogo (2008) that combated
illegal logging; b) decree 6321/07, which restricts credit approval by banks and obligate
landowners in municipalities with high deforestation rates to re-register; c) the creation
of up to 20 million hectares of Conservation Units (Brazilian protected areas) in addition
to the already existing 80 million, totaling 273 CUs; d) approval of 87 Indigenous Lands
and approximately 18 million hectares; and e) restrictions on agricultural products from
municipalities with high deforestation rates.
3. The economic incentives policies that use economic mechanisms (price and others) to
encourage or discourage economic actors to diminish deforestation, were as follows: a)
Arco Verde operation (2008); and b) a special credit line related to the Constitutional Fund
for Financing of the North , the Constitutional Fund for Financing of the Northeast and the
Constitutional Fund for Financing of the Midwest for the recuperation of degraded areas,
reforestation, environmental management and compliance in the Legal Amazon.

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item historically analyzes the formation of the institutional framework that lead
to the absence of regulation in land markets. Ultimately, in the last section, in
addition to arguing for the necessity of effective governance of land ownership,
the main implantation mechanisms are demonstrated as well as the benefits
generated.
Deforestation of
the Brazilian Amazon
rainforest: causes
and solutions
Bastiaan Reydon
2. De f o r e s t a t i o n a n d i t s m a in c a u s e s
According to FAO (2010), “Brazil lost an average of 2.6 million hectares of
forest per year over the past 10 years, compared to an average annual loss
of 2.9 million during the 1990’s; in Indonesia the losses were 500 thousand
hectares over the period 2000-2010 and 1.9 million hectares over the period
1990-2000.”
Diagram 1 illustrates deforestation in the Amazon based on satellite images,
demonstrating that deforestation in recent years shifted around 6.4 and 7.4
million hectares, which represents a substantial improvement although still a
highly elevated level of deforestation for a biome with the characteristics of
the Amazon. With the forest still standing, this biome possesses great wealth
in its elevated biodiversity, its importance in regulating the planet’s climate, its
production of freshwater and poor soil for agro pastoral activities.
Diagram 1. Deforestation in the Legal Amazon
Annual deforestation rate in the Legal Amazon
Source: PRODES (2011)
Nº 8 • June 2011
Km 2 / year
Year

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Deforestation of
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rainforest: causes
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Bastiaan Reydon
The question remains: how to derail an increase in deforestation rates
and further, how to significantly reduce rates? Deforestation in the Amazon
rainforest is a complex process with multiple determinants, and the object of
many theoretical and empirical studies 4 . Margulis (2000:9) affirms that:
“We do not believe there is a principal force that alone propels or explains
deforestation in the Amazon. The causes are varied and result from a
sophisticated combination of diverse variables and factors”.
The principal groups of variables that induce deforestation, present in
Margulis (2000) and the greater part of the literature are:
a) gains associated with the use of Amazon land – determined by agricultural
prices, increases in land prices, variations in input prices, increases in timber
prices and a decrease in rural salaries;
b) public policies and credit – the availability of affordable credit resources
(Amazon Investment Fund, Constitutional Fund for Financing of the North)
and policies of fiscal incentives (Superintendence of Development for the
Amazon);
c) accessibility – the construction of roads and/or other works that facilitate
access to frontier areas;
d) macroeconomics – growth cycles of GDP, population growth.
Insofar as these four groupings of variables have interfered directly with
deforestation in the Amazon, it can be said that after the recent interventions and
the 2008/9 crisis, all were having positive impacts on deforestation, but even so
deforestation increased. On the other hand, even during periods in which these
variables did not grow, deforestation grew. This implies that there are other more
profound factors whose relative importance has not been highlighted.
3. De f o r e s t a t i o n a n d l a n d s p e c u l a t io n
Nº 8 • June 2011
In our understanding, deforestation in the Amazon results from the continued
traditional practice of expanding the Brazilian agricultural frontier, that generally
occurs in the following stages: occupation of virgin lands (private or public),
extraction of its hardwood, installation of livestock farming 5 , and ultimately, the
development of more modern farming practices. These economic activities
play the role of generating income and legitimizing occupation of new lands
in the short term, almost without a necessity for resources 6 . In the long term,
the lands either remain under more intensive livestock farming, or if there is
demand, are converted to grain farming or other economic activities.
4. For an exhaustive revision, see Soares Filho et al. (2005).
5. Reydon and Romeiro (2000) demonstrate that the primary engine of the spread of livestock
farming is, on the one hand, the existence of much vacant land to be appropriated, coupled
with the possibility of, at low costs, installing farming, turning deforestation into an unbeatable
strategy of capital appreciation.
6. These same occupants are the ones that frequently are used as slave labor.

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Deforestation of
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rainforest: causes
and solutions
Bastiaan Reydon
However, what matters is the expectation that there will be demand for the
land 7 , to be used at some time in the future, which ensures that prices rise
significantly. And the closer the physical location of the land is to regions that
permit productive use, the greater the price. The appreciation of these lands
occurs as expectations rise.
In the various studies by Margulis (2000 and 2003) and the already cited
literature, the issue of land speculation appears, but is normally associated with
increases in the price of land. However, increases in the price of land do not
necessarily imply that a speculation process is taking place. As a matter of fact,
the price of land in the Northern region grossly follows the price movements
of land in the rest of the country, and thereby not generating great speculative
gains.
Land speculation is, as this article proposes, the main engine of deforestation
in the Amazon rainforest, though it takes on a much more microeconomic
appearance and is associated with the actual occupation of the land, and
could be perceived much more clearly through field research. What happens
in reality, is that any person that acquires or occupies forested land has a clear
perception that his or her land, or investment, appreciates in value through the
process of deforestation. In table 1 8 it can be observed that the price of forested
land in the different states varies between R$108 in Acre and R$546 in Mato
Grosso. It can also be observed that the land prices in the less deforested
states are lower, while the states of Mato Grosso, Pará and Rondônia have
more elevated prices.
The most important conclusion though drawn from the table is that in all
states deforestation always significantly appreciates the value of the property,
that is, on an average across the states deforestation more than quadruples
the land value. This occurs because the land price is fundamentally the result
of the expected productive gains through the associated livestock farming,
since on deforested land this use can take place immediately and without the
costs of deforestation.
In the most extreme case, as in Acre, deforestation multiplies this value by
a factor of 14, while in the Amazon state land value multiplies by a factor of 10.
Few investments have returns as elevated as these.
One must take into account that these properties, beyond the capital gains
from deforestation, also gain from selling the timber (in Cotriguaçú, a city in
Nº 8 • June 2011
7. This is due to the increase in price of fed cattle, soya, or even the announcement that the
country will be the largest ethanol producer in the world. In the recent period these factors
converged, resulting in an even greater increase in the demand for land and consequently
also the price, which puts even more pressure on deforestation.
8. The methodology of agribusiness firm Agra FNP collects average prices in homogeneous
regions in the mentioned states, using non-homogeneous terminology. For the forest land, we
aggregate the types of forest, that of easy access and difficult access. For the pasture land
we utilize the already established pastures (easy and difficult access), already established
pastures of high support and established pastures of low support.

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the Mato Grosso state, the estimated liquid return is R$2,400/ha) and from the
subsequent economic use (which in the case of livestock farming generates
an additional liquid revenue of over R$120 per hectare/year 9 ). Therefore, the
greatest catalyst of deforestation is a combination of gains from appreciated
land values, in the conversion from forest to productive land, coupled with gains
from timber sales and from the subsequently established livestock farming.
Deforestation of
the Brazilian Amazon
rainforest: causes
and solutions
Bastiaan Reydon
Table 1
Average prices of forest and pasture land
States of the Brazilian Amazon - in R$/ha in 2008 prices
STATES Forest R$/ha Pasture R$/ha Variation %
Acre 108.00 1,571.80 1,455.4
Amapá 141.00 800.00 567.4
Amazonas 132.43 1,243.91 939.3
Pará 457.73 1,509.40 329.8
Rondônia 358.50 1,762.50 491.6
Mato Grosso 546.13 2,083.69 381.5
Average NORTH 416.53 1,832.39 439.9
Source: AgraFND (2009)
This process of acquisition and deforestation that is already very profitable
in private areas, becomes even more lucrative for vacant land that according
to estimates 10 , represent 42% of the total Amazon land area, where most of
the deforestation takes place. That is, in the occupation of vacant land, gains
from timber, livestock and land value appreciation are multiplied because the
land itself did not have to be acquired, but rather simply usurped from public
property 11 .
4. Th e o c c u p a t io n o f l a n d in t h e Am a z o n a n d
in s e c u r e p r o p e r t y r i gh t s
The practice of occupation can be attributed to the absence of cadastre
and effective regulation of land properties in Brazil, particularly in the Amazon.
Existing cadastre details, based on declarations from landowners that registered
Nº 8 • June 2011
9. See Margulis (2003).
10. Estimate by Shiki (2007) indicates that 42 % of Amazon lands are vacant.
11. Perhaps some expenditures on henchmen, arms, lawyers and licit and illicit costs of
regularization in the area.

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Deforestation of
the Brazilian Amazon
rainforest: causes
and solutions
Bastiaan Reydon
through the National Institute of Colonization and Agrarian Reform (INCRA in
Portuguese acronym), demonstrate that in 2003 35% of 509 million hectares of
land in the Legal Amazon were occupied under private tenure rights, whether
as registered properties or occupied land. On the other hand, the recent
process of creating various types of reserves, whether at federal or state level,
has resulted in 42% of the Legal Amazon currently being under some type of
protection; approximately half of these areas are Indigenous Lands and the
other half are Conservation Units of various types. The remaining 24% are not
in either of these categories and consequently are technically considered public
land without allocation (Figure 1).
However, the situation is more complex and uncertain than the numbers imply.
Many of the protected areas are physically occupied by private users, whose
occupation claims may or may not be valid in accordance with the complex
legislation previously presented. The large area classified as private by the
cadastre system is also questionable. Out of the 178 million hectares declared
as private property, 100 million of hectares could be based on fraudulent
documentation. Another 42 million hectares in this area are classified based
on cadastre declarations as occupied, and may or may not be subject to land
regularization, yet again, depending on circumstances such as size, history
and location 12 . Consequently, 30% of the area could be legally uncertain and/
or contested.
Figure 1
Land tenure situation in the Legal Amazon, according to data from the
National System of Rural Cadastre (2003) and protected areas (2006)
Hectares
178.169.518 35%
22.306.963 4%
188.008.904 120.381.458 37%
120.381.458 24%
508.866.843 100%
210.315.867
508.866.843
188.008.904
178.169.518
22.306.963
Posses and
properties proterties in in
Incra´s cadastre
cadaster
Area Environmental for
Environmental
Protection Area
(APA)
Protection (APA)
Protected areas
excludings areas APAs
APAs
Without formal
occupation and
and
non-protected
Nº 8 • June 2011
Source: Barreto (2008).
12. There are all types of sizes of possessions in the INCRA register: both small ones of less
than 200 ha and those of more than 1,000 ha.

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Deforestation of
the Brazilian Amazon
rainforest: causes
and solutions
Bastiaan Reydon
The Brazilian state is so aware of its incapacity to regulate the use of this land,
primarily by not having a cadastre, that it obligated itself to take the following
concrete actions to diminish deforestation in the Amazon and increase land
governance, but always as an emergency measure and without addressing
the root of the problem:
a) Established Law 11.952/09 regularizing occupied land of up to 400 ha at
zero cost and selling occupied land of between 401 and 1,500 ha (squatters
must prove that they have lived on the land since 2004).
b) The government implemented the Legal Land Program, which established
criteria for land regularization in rural areas located on federal lands, in the
Legal Amazon area.
c) Creation of innumerable environmental protection areas (APAs)in the
form of Conservation Units (based on Law 9.985 of July 2000) for protecting
the edges of main roads under construction in the Amazon region to avoid
occupation and deforestation.
The clearest evidence of the incapacity of the Brazilian state in effectively
governing the market for land, is the very formulation of Ordinance 558/99,
applicable to all Brazilian territories and not just the Legal Amazon. There,
INCRA imposed on all landowners with more than 10,000 ha the requirement
of presenting their supporting documentation. Out of the 3,065 landowners
summoned, only 1,438 (46.9%) appeared, resulting in 1,627 properties on 46
million hectares being cancelled 13 . Furthermore, 53% of the area of these lands
were located in the Northern states of Brazil, largely in the Amazon Rainforest.
In the Amazon state alone, according to Lima (2002), the equivalent of 48.5
million hectares of properties in 14 counties were cancelled by the respective
land registration offices (cartórios in Portuguese) at the beginning of 21st
century. There are also academic studies such as Araújo et al. (2008), providing
evidence based on municipal data that uncertain property rights, such as those
in the Amazon, have a positive impact on deforestation.
5. In s t it u t io n a l f r a m e w o r k o f l a n d r e g u l a t io n:
w h y d o l a n d c a d a s t r e a n d g o v e r n a n c e n o t e x i s t
Nº 8 • June 2011
This section analyzes the historical formation of the Brazilian institutional
framework, which lead to the absence of regulation in land markets. It will be
demonstrated that many of the characteristics that cause this absence are
legacies from a historical ineptitude of the Brazilian state in relation to land
governance.
Before the Brazilian Land Law (1850), rules for occupying rural and urban
soil were defined by the powers of the king, the church and the political and
13. See Sabato (2001) for more details.

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rainforest: causes
and solutions
Bastiaan Reydon
physical powers of occupants. The Land Law should be understood in the
broader context of laws established to restrict land access in the entire colonial
world. 14 To accommodate the interests of the country’s landowners, the Land
Law maintained the possibility of regularizing occupied lands, stemming from
the occupation of vacant lands, which complicated the creation of a cadastre.
That is, there was always the possibility of regularizing occupied lands due to
the occupations of vacant lands. In addition to usucaption (which establishes
that after some years of occupation, the property can be regularized), the very
states (mainly after the Republic) have conceded properties with or without title
at some moments in history. This is the basic mechanism that kept and keeps
an effective cadastre from being established, and that also permits the definition
of vacant lands likely to be utilized by other types of land policies.
Up until the Land Law, properties were basically registered together with
Parochial Land Registers under the responsibility of the local vicar. This register
was utilized for a long time after the Land Law was implemented. In 1864, a
new institutional obligation eventually established a new tradition that persists
to the present day and that has generated greater uncertainty and inability
to effectively regulate the land market: the necessity to register properties,
regardless of having legal ownership rights. To a certain extent, the registration
of land at a registry office gives a certain air of legality to the property, without
any mechanisms to guarantee this 15 .The Proclamation of the Republic in
1889, passed the rights related to vacant lands to states, which led to the
possibility that their representatives would pass them on through the granting
of unregistered titles. This occurred with greater intensity in some states as
compared to others, but irregardless created yet another ambiguity in the
issuance of titles that complicated state regulation of land markets 16 .
The establishment of the Public Land Registry in 1900 is perhaps the principal
step towards the current system of registering land in land register offices. Under
this rule, everyone needs to delimit and register their lands, whether rural or
urban, but without any sort of fee and without cadastre. The state also needs
to delimit and register its lands (vacant), which is impractical since these are
defined by exclusion. As such, the very state acts illegally. This obligation ends
up increasing the possibilities for fraud in land register offices.
Nº 8 • June 2011
14. As in Latin America, Australia and the United States.
15. The most common irregularities are the issuance of titles to non-existing or vacant
properties and the overlap of several areas, that is, various landowners have title to the same
land. When this happens, it is said that the land has ‘floors’: for each additional owner with an
irregular title to the area another floor is added. The federal government is taking a decisive
step in the regulation of the rural and urban land market by implementing, with difficulties,
Law 10.267/2001, where land register offices are obligated, when there is any change in
ownership, to forward the plan to INCRA with boundaries in cartographic form (latitude and
longitude).
16. Nevertheless, there is the failed attempt at property regulation by Registro Torrens (1891)
where settlers and landowners could obtain definitive titles through non-contested petitions.
And, furthermore, the possibility of legalizing occupied lands in 1895 and 1922 (referring to
the occupied land between 1895 and 1921) ultimately created the conditions for occupied
lands to endure and weakened the regulation of the land market as expressed in the 1850
Land Law.

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Deforestation of
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rainforest: causes
and solutions
Bastiaan Reydon
The promulgation of the 1916 Civil Code generated the capability to regulate
land markets in Brazil, both by reaffirming the land register office as the
registration institution, and enabling the possibility of public lands being objects
of usucaption. In the words of Osório Silva (1996:324), “this completed the
framework for the transformation of the State into a proprietor like the others.
And as such, the doctrine of designation of vacant lands. Or, in other words,
the possibility of usucaption of vacant land”.
Thus, the Civil Code, for reasons not necessarily tied to the interests of
landowners, turned out to establish the institutional corner stones for land
access in Brazil, by defining that registering land in land register offices was
necessary (and at times also sufficient) to prove ownership.
The great institutional innovation in the sphere of Brazilian land policy and
administration is the 1964 Land Statute, whose rules and concepts remain valid
to the present day. Hence, in order to guide the implementation of agrarian
and agricultural policies, the 1964 Statute created the Rural Land Cadastre . All
private and public lands should be registered, including occupied land. Owners
should furnish information on the documentation situation and land-use (to
estimate productivity) for the purpose of facilitating the agrarian reform. INCRA,
created in 1970, became responsible for managing the National System of Rural
Cadastre (CNCR), which maintained the Rural Land Cadastre 17 . Once the land
was registered, INCRA emitted a Rural Land Cadastre Certificate (CCIR) that
was required for any type of transaction of the land. Squatters that registered
with INCRA also received a CCIR and were obligated to pay the Rural Land
Tax, though the amounts of this tax were always kept at low levels. The Land
Statute also maintained the legitimation of occupied lands, thus allowing the
titling of informally occupied public lands.
Nº 8 • June 2011
17. Since the 1967 cadastre and the posterior re-registrations were implemented for tax
reasons, based on landowner declarations and that were not monitored, they are not very
reliable as the study by Sabato (2001) demonstrated, based on information from Decree
558/98. Other recent attempts to integrate the cadastre of different public agencies to improve
the quality of the information have failed due to the absence of political will and an agency to
assume the role of executing land governance in the country.

147
Scheme 1
Current situation of Land Tenure Administration in Brazil
GREEN ECONOMY
Challenges and
opportunities
Presidency of Republic with
approval from the Legislative
stablish: Conservation Areas and
Indigenous Lands
State governments with
approval from the
Legislative establish: State
Conservation Areas
Deforestation of
the Brazilian Amazon
rainforest: causes
and solutions
Bastiaan Reydon
Registry of Real State: registry offices and
provides legal titles based on sale and acquisition
contracts (consulting only their registrations)
LAW 10.267 – Real State with
notary alterations present
geo-referenced design for registry
AGU –
transfer of
unclaimed
state lands
JUDICIARY – ratifies or
creates titles in decisions of
any type of conflict
MUNICIPALITIES:
decisions about
rural and urban
lands, use, and IPTU
charges, etc.
State Land
Institutes:
responsible for
the state land
INCRA: grants single initial
registration, includes in the cadastre,
grants concession use titles to
settlers, discriminates between
unclaimed lands and colonization
Federal
Revenue
Agency:
charges rural
taxes (ITR)
Settlements of
landless people
Colonization – destination of public
lands to rural subdivisions
Source: Legislation in force and Reydon (2006).
Nº 8 • June 2011
Diagram 2 seeks to synthesize the interrelations between agencies of the
land administration system in Brazil. We see that there is no link between INCRA
and municipalities, leading to many land problems on the borders between
rural and urban lands. Furthermore, there is no institution that centralizes
cadastre and makes a link to the Judicial agencies that are responsible for
issuing land titles. Though not evident from the diagram, a large proportion of
land problems in Brazil, both rural and urban, which are not properly resolved
in the administrative sphere, end up in the judiciary. As the judiciary has many
processes throughout its tribunals, it ends up taking years to issue rulings, which
results in land-related cases, whether rural or urban, almost always being ruled
as historical fact. Therefore, the great problem of deforestation in the Amazon is
associated with the lack of land governance in the country, which results from
a historical process of formation of institutional and legal frameworks that are
unsuitable for this end. Only through the construction of an institution aimed at
land governance and adjusting the Brazilian legal framework to this end, will
there be adequate land-use and a decrease in deforestation in this country.

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6. Th e n e c e s s i t y o f l a n d g o v e r n a n c e 18 a s a
n e c e s s a r y c o n d it io n t o r e d u c e d e f o r e s t a t io n
Brazilian agriculture presents exemplary accomplishments, with growth
in food production, supply of energy and foreign exchange, and greater
international insertion, among others. However, security as relates to land
ownership remains a great problem, especially in the Amazon. The solution
requires adequate and participative land governance, according to among
others FAO (2007) and Doelinger et al. (2010).
The benefits to be gained from an adequate system of territorial management
depend on clearly identifying unregistered lands and a simple and effective
mechanism for obtaining and updating this information. This process needs
to start without being dependent on information related to land titles and other
types of formal documents, which can always be used in cases of ownership
conflicts. This should begin with a process of title issuance that conciliates
property information based on satellite images 19 and a survey of landowners and
legitimate squatters (posse mansa in Portuguese). The effective participation
of landowners and squatters, according to a study by Gessa (2008), requires
that landowners, in particular the smaller ones, receive actual knowledge and
“empowerment” 20 .
Only through effective land governance, in particular the creation of a modern
and self powered cadastre, will it be possible to:
a) Guarantee private property rights for different purposes: business,
leasing, guarantees for obtaining credit, for the concession of payments for
environmental services, among others;
b) Identify public land and guarantee its adequate use for: the creation of
reserves, settlements or colonization;
c) Establish the other land policies with more security: agrarian reform, land
credit, land taxes;
d) Regulate the process for purchasing land to: limit access to foreigners,
large landowners or other types of landowners;
e) Zone land uses – establish and regulate limits based on zoning for
agricultural production and livestock farming in certain regions. Establish
protected areas and areas prohibiting deforestation;
Nº 8 • June 2011
18. FAO (2008:9) works with an adequate definition of land governance: “Governance is the
system of values, policies, and institutions by which a society manages its economic, political
and social affairs through its interactions within and among the state, civil society and private
sector. Land governance concerns the rules, processes and organizations through which
decisions are made about access to land and its use, the manner in which the decisions are
implemented, and the way that competing interest in land are managed.”
19. The technical innovations of gathering information from satellite images, according to
Doelinger et. Al. (2010), allow advances that can revolutionize the cadastre system of existing
properties.
20. Based on a study by Gessa (2008), which proposes mapping as an important instrument to
secure property rights and create empowerment of less privileged populations in regions with
insecure property rights.

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f) Regulate conversion processes of agricultural to urban lands and to have
a cadastre for levying property taxes (Urban Building and Land Tax and Tax
on Rural Property);
Land governance does not resolve the issue of deforestation in the Amazon,
but is a necessary condition to confront this problem. In the case of vacant
lands, by permitting the identification and possession by the State of these
lands, the cadastre would greatly hinder inappropriate private occupation and
deforestation. The cadastre would also enable the utilization of these vacant
lands in the execution of Brazilian land policy, through organized colonization,
agrarian reform and others.
In the case of private lands, effective participative governance, based on
understanding the context, discussing priorities for land use and determining
adequate monitoring, permits planning and the regulation of land use, through
zoning and other coercive instruments. Effective governance also impedes
deforestation and certainly limits land speculation, which is the principal cause
of deforestation.
Nº 8 • June 2011
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Deininger, K. et al. (2010). The land governance framework: methodology and early
lessons from country pilots. In Innovations in land rights recognition, administration
and governance. Washington: World Bank, GLTN, FIG and FAO.
FAO (2007). Buena gobernanza en la tenencia y la administración de tierras. Estudios
sobre Tenencia de La Tierra, no. 9. Rome: FAO.
FAO (2008). Towards good land governance. FAO Land Tenure Policy Series, Draft
version 0.1. Rome/Nairobi.
FAO (2010). Global forest resources assessment report. Rome: FAO.
Gessa, S. D. (2008). Participatory mapping as a tool for empowerment. Rome:
International land coalition.
Lima (2002). Relatório das correições extraordinárias nos registros de terras rurais no
estado do Amazonas. Governo do Estado do Amazonas. Secretaria da Cultura do
Estado do Amazonas, 440 p.
Margulis, S. (2000). Quem são os agentes dos desmatamentos na Amazônia e por
que eles desmatam. Conceptual paper. Brasília: World Bank. Retrieved from: .
Margulis, S. (2003). Causas do desmatamento da Amazônia brasileira. Brasília: World
Bank,100 p.
PRODES (2011). Taxas de desmatamento da Amazônia Legal, Projeto PRODES.
Ministério da Ciência e Tecnologia. IBAMA. Ministério do Meio Ambiente. INPE.
Retrieved from: in

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rainforest: causes
and solutions
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18/05/11.
Reydon, B. P. (2007). A regulação institucional da propriedade da terra no Brasil: uma
necessidade urgente. In Ramos, P. (org.) Dimensões do agronegócio brasileiro:
políticas, instituições e perspectivas. Brasília: MDA.
Reydon, B. P. and Cornelio, F. N. M. (2006). Mercados de terras no Brasil: estrutura e
dinâmica. Nead Debate, n.7. Brasília: MDA/NEAD, 444 p.
Reydon, B. P. and Plata, L. O. (2000). Intervenção estatal no mercado de terras: a
experiência recente no Brasil. Estudos NEAD, n.3. Campinas: NEAD, 172p.
Reydon, B. P. and Romeiro, A. R. (2000). Desenvolvimento da agricultura familiar e
reabilitação das terras alteradas na Amazônia. In Reforma Agrária e Desenvolvimento
Sustentável. Brasília/DF, v. 1, p. 311-317.
Sabbato, A. (2001). Perfil dos proprietários/detentores de grandes imóveis rurais que
não atenderam à notificação da Portaria 558/99. Retrieved from: in 03.08.03.
Shiki, S. (2007, March 16). Payment for ecosystem services: from local to global.
[PowerPoint slides] Proambiente, Ministério do Meio Ambiente. Retrieved from:
in 29.09.08.
Silva, Lígia O. (1996). Terras devolutas e latifúndio: efeitos da lei de 1850. Campinas:
Editora da Unicamp, 373p.
Silva, Lígia O. (1997). As leis agrárias e o latifúndio improdutivo. São Paulo em
Perspectiva, 11(2), 15-25.
Soares-Filho, Silveira B. et al. (2005). Cenários de desmatamento para a Amazônia.
Estudos Avançados, 19(54), 137-152. Retrieved from: . ISSN
0103-4014. Doi: 10.1590/S0103-40142005000200008>.
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Challenges and
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The transition to a green
economy in Brazilian
law: perspectives and
challenges
Carlos Teodoro J. Hugueney Irigaray 1
Op e n in g r e m a r k s
In the context of climate change, the transition to a low-carbon economy
consists of an imperative that requires a shift in paradigms, with great cultural,
economic and legal repercussions, that reshapes the ideas of sustainability
and environmental justice.
In this transition, considering the consequences of globalization and the
trans-border characteristics of pollution, there are tasks that demand to be
addressed by the international community, notwithstanding local actions,
especially issues such as measures to contain greenhouse gas (GHG)
emissions and adaptation to the effects of global warming.
However, even with these actions that involve international cooperation, the
list of tasks aiming to internally propitiate the transition to a green economy
remains ample within the countries.
Internationally, Brazil boasts a privileged position in this context, with a
relatively clean energy matrix, as apart from a mega-diversity and a range
of other natural attributes that secure the country in a prominent position for
biodiversity conservation.
However, natural wealth is not sufficient to ensure development on
sustainable bases, nor to the greening of the economy. In the case of Brazil, the
expansion of the agricultural frontier and the lack of consistent public policies
to guide economic exploitation of natural resources, contributed to forge a
predatory exploitation model that has caused the country great economic and
environmental losses.
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In response to this picture, innumerable laws were enacted with significant
advances in terms of environmental protection, though great challenges persist
in terms of the transition towards an economy that can be defined as green.
1. Professor of Environmental Law at Federal University of Mato Grosso (UFMT) (PhD), state
attorney at Mato Grosso (a Brazilian state) and president of the Right for a Green Planet
Institute (IDPV).

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Law can certainly offer a relevant contribution in this process, as will be
analyzed in this essay. A first challenge consists of delimiting the instruments
and mechanisms that can contribute to the achievement of a development on
sustainable bases, which implies the revision of the implicit subsidies of polluting
activities, as will be discussed in the first chapter.
In the second chapter of this essay, the principal challenges to this process
will also be pointed out, concluding with a discussion on the contribution of
Brazilian law to the transition to a green economy.
The context is greatly favorable to the necessary changes, both in terms of
societal awareness and the imperatives seen in the current ecological crisis.
We can only tackle these challenges and construct a new paradigm in which
the right to an ecologically balanced environment is not a mere proclamation,
but a reality based on intra and inter-generational solidarity.
1. Gr e e n e c o n o m y a n d t h e p o s s i b l e s u s t a in a b il it y
Since the conceptualization of sustainable development 2 , derived from the
Brundtland Commission, a vast intellectual production was developed that aims
to objectify the concept and establish parameters to quantify it. The greatest
obstacle to of this task relates to the lack of indicators to measure sustainable
development, since in principle none of the three objectives of sustainable
development (economic, environmental and social) are currently measured in
compatible parameters (Dourojeanni, 2000).
It is not without purpose that Morin and Kern (1995) signals that the very
notion of development, turns out to be gravely and severely underdeveloped.
The same happens with sustainability: either it is translated into economic
decisions and political actions, setting real limits on the utilization of natural
resources and the emission of pollutants, or on the contrary, sustainable
development would have been but an unrealized myth that we transmit to future
generations, together with gigantic environmental liabilities that originate from
a predatory civilization.
Because of this, it is of utmost importance that we deepen the debates about
the economic models that we select and the local and global actions that can
contribute to secure growth in clean sectors, with sustainability.
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In this sense, Dourojeanni (2000) ponders that it is up to the actors and
participants in the management process in each country or region to define the
significance of sustainability, admitting that this is an ambiguous term that applies
to production, ecology, economics, the environment, society and development.
As it permeates distinct and separate areas, the concept of sustainability exerts
2. In accordance with Brundtland (1987), sustainable development is the one “that meets the
needs of the present without compromising the ability of future generations to meet their own
needs”.

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an integrative and revolutionary function, implicating a rupture of secularly
consolidated patterns, beliefs and techniques linked to a context of changing
patterns in the relations between man and the natural world.
In this sense, sustainability can exert a transformative force, both in the
economic sphere by encouraging investment in clean capital, and in the
political-administrative sphere through the decentralization and democratization
of decision-making centers.
In any case, despite the imprecision of the sustainable development concept,
it can still be considered viable and possible in the sense that it sets guidelines
capable of informing political policies in this moment of transition from an
industrial risk society 3 , offering guiding criteria for public intervention in the
environmental sphere and especially in the economy, to foster an increase in
natural capital.
As such, it is indispensable to carry out a profound revision, in the economic
and legal areas, of the implicitly conceded incentives of polluting activities 4 ,
since the external effects of these economic activities are not frequently
considered in the pricing system, generating what the economic science
identifies as externalities.
These externalities will only be reduced if the environmental costs were
incorporated by producers and consumers, with the state intervening through
economic or command and control instruments, which would imply overcoming
a tradition of economic studies that view the environment as inexhaustible.
Furthermore, we cannot ignore the research that alerts us to the volumes
of natural resources currently consumed, considered above the replacement
capacity of the planet 5 ; that is, humanity is consuming resources in an
unsustainable way. This aspect is not being adequately considered in the
formulation of public policy; no economic consideration has been given to the
depletion of these resources that are treated as if they were inexhaustible.
Consequently, economic policies are generally conceived and implemented with
an extremely limited temporal horizon – short term policies, and in this context,
if there is no growth in clean sectors, sustainability is compromised.
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3. In the sense of Ulrich Beck (1992), the configuration of contemporary society, as a risk society,
assumes a scenario of catastrophic risks, marked by invisibility (nuclear threat, global warming,
etc) and the incapacity of the State to efficiently address the problems and provide security to
citizens (organized irresponsibility, security state and explosive society).
4. World Watch Institute estimates that the equivalent to 3% of the global economy (or equivalent
to the GDP of Italy) is spent on subsidizing activities that destroy the environment (Januzzi,
G. M. A política energética e o meio ambiente apud Romeiro et al., 1999, p. 156). This index
refers to explicit subsidies; the socio-environmental cost of polluting activities that are borne by
the population (and not by polluters) is incalculable.
5. An investigation conducted by an international team of scientists, under the coordination
of Mathis Wackernagel, entitled “Tracking the ecological overshoot in consumption of the
human economy”, signals the incapacity of the planet to absorb the carbon launched into
its atmosphere. According to Wackernagel, economic expansion stimulates the demand for
resources above the capacity of the planet to restore its goods and services: “We are no longer
living off the dividends of nature, but nature’s capital. Sustainable economies are not possible if
we live above the means that nature provides” (Polakovic, 2002).

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Therefore, the transition to a green economy requires substantial changes
in terms of public policies that aim to redirect market mechanisms to make
economic growth compatible with sustainability. From the legal perspective,
the necessary measures involve restructuring a system to effectively guide
public policies by combining the use of economic instruments and command
and control mechanisms that should necessarily be informed by some ethical
principles among which we highlight environmental justice and intra and intergenerational
equity.
The following chapter will focus on the challenges to this transition, considering
the national context and the mega-problems that negatively reverberate in the
environment of our country.
2. Ch a l l e n g e s o f t h e t r a n s it io n t o a g r e e n
e c o n o m y in Br a z il
As mentioned, the transition to a green economy faces challenges of a
global order and a national order, due to the singular spatial characteristics
of Environmental Law (Martin Mateo, 1977) where environmental problems
do not obey boundaries, and the globalization process keeps economies
interdependent. Furthermore, there are situations where global problems
reverberate in the national sphere, aggravating internal deficiencies and acting
synergistically to amplify risk conditions and accentuate the multifactorial
character of pollution.
Three factors will be addressed in this essay that directly relate to the
development model implemented in our country, which pose challenges in the
transition to a green economy: poverty, deforestation, and the unsustainable
expansion of agriculture.
2.1 Confronting Poverty
Even in the 21st Century poverty continues to be one of the most relevant
socio-environmental problems affecting humanity, and it continues being
endemic in developing countries with close to 1.2 billion people living on less
than one dollar per day in 1999, according to a United Nations Conference on
Trade and Development Information Note. 6
Brazil finds itself in a privileged position among developing countries, but
poverty indexes remain elevated and there is a significant income inequality,
which needs to be overcome to reduce the pressure on natural resources, the
lack of sanitation and ensure an improved quality of life.
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According to research conducted by the Brazilian Institute of Applied
Economic Research 7 , the national situation presents expressive improvements
6. UNCTAD (2004).
7. Presidência da República (2007).

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in the reduction of social inequality, but the problem is still serious. The study
points out that from 1995 to 2008, 13 million people got out of misery in the
country, causing the number of people in this condition to be reduced by half,
which in this case includes families with a per person income of below ¼ of
a monthly minimum wage. However, the country still accounts for 7.5 million
Brazilians with a per capita household income of below 1 dollar PPC per day.
This percentage is much greater when the proportion of Brazilians in absolute
poverty is considered, which according to that same study is 28.8%. This figure
consists of family members with an average per person income of up to half a
monthly minimum wage (close to 5 dollars per day).
It is worth stressing that the UN report “Our Common Future” already
highlights that pollution does not result only from development, but also from
poverty and growing slums, lack of sanitation, occupation of risk areas and lack
of education, among other consequences.
The challenges to be addressed in order to reduce poverty in the country,
according to the research conducted by the Brazilian Institute of Applied
Economic Research 8 , include above all the lack of access to food, due to the
low purchasing power of millions of Brazilians, a problem that is aggravated
by a series of other factors such as inadequate conditions of basic sanitation,
low levels of education and lacking health services.
In the area of sanitation, the indicators for urban Brazil (80.5% of urban
inhabitants have adequate sanitation) are inferior to urban areas in countries
such as Jamaica (82%), according to data from the United Nations 9 . Despite
advances during the past decade, the report adds that “the lack of an
adequate solution for domestic sewage still affects around 31 million urban
inhabitants”.
In rural Brazil, not only is the situation worse but improvements have also
been slower. In 2008, 76.9% of the population did not have adequate access
to sewage; this means that the 23.1% of rural inhabitants with adequate
sanitation was below that in rural areas of Afghanistan (25%), also according
to UN data.
Nº 8 • June 2011
Another equally relevant aspect related to poverty and lack of sanitation, is
the fact that less than 50% of sanitary sewage produced in Brazil is collected
and only 1/3 of that amount is effectively treated. According to the Health
Ministry, 65% of hospital admissions result from the inadequacy of these
services, and close to 50 thousand children die every year in Brazil (Irigaray
and Rios, 2005).
8. Idem.
9. UNCTAD (2004).

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As a consequence, “the lack of adequate solutions for collection and low
treatment levels of domestic sewage are the primary culprits for the pollution of
water resources in Brazil, a problem that is felt most acutely in densely populated
municipalities of metropolitan regions and medium and large cities”, stresses
the Brazilian Institute of Applied Economic Research report.
Now, it is difficult to establish the relationship between poverty and
unsustainable development. It is notorious that the proportion of the population
without access to drinking water and sanitation, or in precarious living situations,
is directly related to the quality of life and health of the population and,
consequently, to environmental sustainability.
In that sense, the United Nations Human Settlements Programme stresses in
“The State of the World’s Cities 2006/2007” 10 document, that there is a positive
correlation between living conditions and human development indicators.
This report observes that the existence of one or more housing inadequacies
threatens the health, education and employment opportunities of inhabitants
in precarious settlements: they are hungrier, have less chances of finding wellpaid
employment in the formal sector, have lower educational levels, are more
vulnerable to diseases and die sooner than the rest of the urban populations.
The document emphasizes: “housing location matters”.
Because of this scenario, overcoming socio-environmental injustice
constitutes a priority in the transition towards a green economy where economic
growth occurs on a sustainable basis.
2.2 The advance of deforestation
In accordance with the IPCC report, the shrinking forest cover resulting from
deforestation and conversions to alternative land use, as well as the degradation
associated with the selected logging of species, burning and other practices
that cause losses in the remaining carbon stocks, is responsible for close to
18% of the total estimated greenhouse gasses in the world. 11
Thereby, containing deforestation and forest burning has become a global
necessity for moving towards a low-carbon economy.
This challenge is of particularly high priority in our country, mainly due to the
elevated rates of deforestation in the Amazon region especially, where more
than 70% of deforestation results from the creation of pastures.
Upon analyzing the risk of expansion of biofuels in the Amazon, we stress:
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“Of the existing forest area on Brazilian territory, 20% has already been
deforested, which corresponds to 67 million hectares. Despite government
10. UNCHS (2006).
11. IPCC (2007).

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actions aimed at reverting the advances of the agricultural frontier into the
forest, the deforestation rates remain elevated. According to the Brazilian
National Institute for Space Research, the deforested area during the period
2007/2008 was equivalent to 11,968 km², and though a gradual reduction
in the percentage could be found, this could have been associated with
market downturns, and there is no assurance that deforestation would be
contained in a heating economy, even because the absence of the Amazon
State apparatus is one of the factors that aggravate the current situation,
characterized by land grabbing, illegal deforestation, violence, and slave
labor” (Irigaray, 2010).
This situation of Amazon forest degradation is driven primarily by extensive
cattle raising and by logging activities. Studies conducted by the Amazon
Institute of Man and the Environment reveal that the variation in deforestation
rates in the Legal Amazon oscillate in accordance with price variations of cattle
and soy, that is, the greater the product value, the greater the deforestation rate.
Also in accord with this study, close to ¾ of the deforestation over recent years
made space for pastures that occupy around 75% to 81% of total deforested
land between 1990 and 2005 (Barreto et al., 2008).
The lack of an agricultural policy that dialogues with environmental
management is an evidence of the weakness of political policies for the region,
and sustains the latent risk that increasing deforestation rates could unleash,
as has also been observed by Paulo Moutinho (2009):
“Some recent studies demonstrate that the Amazon deforestation, despite
recent rate declines, could increase in the decades to come (Soares et al.,
2006). It is estimated that more than half of the Brazilian Amazon will be
deforested or degraded due to logging and burning, in case the occupation
patterns continue along the trajectory of the past two decades”.
It should be noted that the advances in Amazon deforestation imply significant
increases in the carbon emissions indexes for Brazil, aggravated by the fact that,
as a rule, deforestation occurs illegally and frequently is followed by burning.
As such, containing deforestation becomes a priority, which puts our country
in an evident position, as André Lima (2009) expresses:
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“The Brazilian Federal Constitution of 1988 concluded 20 years of existence
in 2008. During the period from 1988 to 2008, 348 thousand km 2 of tropical
forest vanished into space, only in the Amazon region. In only two decades,
less than one generation. This corresponds, using conservative data from
the federal Brazilian government, to somewhere around 12.3 billion tons of
carbon in the atmosphere. All the Amazon forestal carbon that Brazil emitted
in the 21 years of our citizens’ Constitution, corresponds to almost twice the
emissions reduction efforts pledged by the Annex 1 countries of the Kyoto
Protocol for the first commitment period (2008-2012).”

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It is worth nothing that despite federal government efforts to contain
deforestation in the Amazon, and the significant decreases of recent years,
7 thousand km 2 of forest were cut down in 2010. In the Brazilian savannah
(Cerrado), control turns out to be even weaker, with conversion indexes that
have increased significantly in recent decades, currently making it the most
threatened Brazilian biome.
It is estimated that the Cerrado has already lost 49% of its native vegetation
and close to 14.2 thousand km 2 are deforested per year, especially due to
the creation of pastures, according to data from the Brazilian Institute of
Environment and Renewable Natural Resource.
However, deforestation is only the tip of an iceberg that needs to be addressed
in the transition to a green economy, since associated with this problem are
persisting cultural practices such as burning that degrades the soil, or the
excessive use of pesticides that contaminate soil and water resources, as well
as other environmental impacts associated with agricultural expansion, as will
be discussed in the following section.
2.3 The expansion of agriculture and cattle raising
Brazil stands out internationally as the granary of the world, by occupying
a prominent position in the production of grains, meat, poultry and other
agricultural products. Both agriculture and cattle raising are responsible for the
primary surplus obtained by the country in its trade balance.
While recognizing the importance of agriculture in the country and the
possibilities to expand agribusiness with a sustainable basis, there is still a
great distance between sector practices and the objectives of an agricultural
and livestock sector that can be considered “green” in Brazil.
Overcoming this distance between the real and the ideal implies recognizing
that in this surplus so hailed by the government, the subsidies that these
activities receive (implicitly and explicitly) are not accounted for, and neither
are the shortfalls in compliance with environmental legislation that causes
significant environmental impacts.
Nº 8 • June 2011
As noted, the raising of livestock is responsible for over 70% of the
deforestation in the Amazon. According to the Brazilian Institute of Geography
and Statistics, from 1990 to 2008 the stock in this region went from 21.1 million
to 71.4 million livestock. This growth was driven by various factors: low prices
or free land use (generally public lands occupied illegally), subsidized credit
and cheap labor or labor in conditions analogous with slavery.
The deforested areas of the Amazon generally house extensive cattle farms
with large-scale livestock raising and low productivity that advance across
protected areas (Legal Reserves and Permanent Preservation Areas). These

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practices cause severe degradation especially when analyzed from a biological
perspective because according to a study conducted by the Amazon Institute
of Man and the Environment in partnership with the World Bank, the Amazon
possesses some peculiarities, such as: poor soils and excessive rainfall in
around 80% of the region. These attributes are sufficient to make, from a purely
economic point of view, any traditional farming undertaking unviable 12 .
In the case of agriculture, the problems are not any smaller. The expansion
of agribusiness has typically occurred without respect for forest legislation,
through the planting of intensive monocultures that are highly dependent on
pesticides and fertilizers.
It is worth observing that opting for monocultures has been constructed as
a strategy by agribusinesses to reduce costs and increase production, which
today corresponds to a third of GDP and 42% of exports in Brazil. However, as
journalists Safatle and Pardini stress: “The strength of agribusiness is only one
side of the story. Socio-environmental damage still needs to be accounted for” 13 .
According to the Brazilian Institute of Applied Economic Research economist
Guilherme Delgado, “Brazilian agribusiness mixes technological modernity
with a delay in social relations”. They alert that there are still 3.6 million rural
families living in extreme poverty, living on less than one dollar per capita a
day. This contingent is being alienated since large-scale agriculture generates
little employment and causes a rural exodus that the urban centers are not
capable of absorbing with dignity. That is, in addition to the environmental
liability, since monocultures do not generally respect the legal reserves, there
are other repercussions of a social kind that should be considered.
According to Feltran-Barbieri and Kassai (2008): “the tangible environmental
liability generated by the non-existence of legal reserves could exceed R$ 112
million in the sampled regions, and could reach R$ 16 billion if extrapolated
to the realm of the Cerrado, that is, almost 0.5% of the Brazilian GDP in
2006. This liability does not account for the intangible losses to biodiversity
and other environmental services, but only the externalities generated by
agribusiness”.
Furthermore, beyond the enormous environmental liability generated by the
activity, this is a business that is highly exposed to international competition
and open to the creation of non-tariff barriers, resulting in non-compliance with
environmental legislation and the employment of slave labor.
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3. Th e c o n t r ib u t io n o f Br a z il ia n l a w t o a g r e e n
12. Report: “Manejo Florestal Sustentável, Mudanças Econômicas no Uso do Solo e
Implicações para Políticas Públicas na Amazônia”, Folha de S. Paulo, 22 October, 2000.
13. Safatle and Pardini (2004).

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e c o n o m y: p e r s p e c t i v e s
Among the mega-diverse countries, Brazil holds a special position with
more than 13.2% of the total number of species on the planet, exceptional
water availability and the greatest forest reserve on the planet, among other
natural attributes.
The threats that hover above this diversity of biomes and ecosystems cannot
be ignored, and are mainly due to the expansion of the agricultural frontier that
conflicts with existing environmental legislation, and causes economic damage
through the loss of exploited natural resources through predatory practices,
and ecological damage through the erosion of biodiversity.
However, since the 1988 Federal Constitution a broader regulatory framework
has been developed, which is capable of making economic growth compatible
with sustainability, given that Brazil holds the conditions to exercise strong
leadership in this transition towards a green economy characterized by low
carbon emissions.
Some principles are assured by the Federal Constitution that should guide
not only the operations of the government, but also the business sector and
civil society, such as recognizing the fundamental right to an ecologically
balanced environment, associated with the duty of the government and
society in defending and preserving this right. This duty is complemented by
the recognition of environmental defense as a principle that should inform the
economic sphere, and with the definition of a government task list assigned
by the Constitution to secure the effectiveness of the right recognized in art.
225.
Among the principal norms that provide the basis for sustainable development
in our country, are the Forest Code (Law n. 4.771/65), the National Environmental
Policy Law (Law n. 6.938/81), the Public Civil Action Law (Law n. 7.347/85), the
National Water Resource Policy Law (Law nº 9.433/97), the Law that instituted
the National System of Conservation Units (Law n. 9.985/00), the National
Solid Waste Policy Law (12.305/10) and the National Climate Change Policy
Law (Law n. 12.187/09).
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In these laws, especially the last one, certain principles, objectives and
directives are defined for the transition towards a green economy, where
development can materialize on a sustainable basis and with socio-environmental
justice. Along these lines, that law stresses that: “the objectives of the National
Climate Change Policy should be in line with sustainable development in order
to seek economic growth, the eradication of poverty and the reduction of social
inequality” (art. 4th).
The great challenge of this task is to increase the level of implementation of
these norms, above all the Forest Code, to be able to contain the advancing
agricultural frontier in fragile ecosystems, but which has met great rural

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resistance. Along these lines, it is worrying to see the efforts of rural lobbyists
in the National Congress to adapt the Forest Code in favor of agricultural
expansion onto the last standing remnants of the Cerrado, eliminating judicial
protection for the existent forest assets, which runs counter to government
efforts to reduce emissions caused by deforestation.
Equally worrying is the dubious position of the Brazilian government that,
on the one hand, presents an ambitious plan to reduce carbon emissions and,
on the other, does not seem determined to exercise an efficient environmental
policy by maintaining insignificant budgets for environmental agencies while
investing in high impact ventures such as the Belo Monte hydroelectricity plant,
or paving the BR 163 (Cuiabá/Santarém) and BR 319 (Manaus/Porto Velho)
federal highways, among others.
This contradiction is externalized through the dismantling of environmental
agencies and the lacking political will to implement efficient environmental
management, in such a way that impunity remains the rule in cases of
environmental infractions: the fines issued by environmental agencies are
not paid and few polluters are held civilly or criminally accountable for the
damages caused, characteristic of the “organized irresponsibility” described
by Ulrich Beck.
Beyond overcoming these limiting factors, new mechanisms should join
the effort of containing deforestation and appreciating sustainable production.
To this end, the employment of instruments such as REDD, payments for
environmental services and charging for water use, constitute experiences
that confirm the necessity of legal structures supporting the environmental
management system that combines the employment of economic instruments
with the provision of sanctions and efficient procedures for reparation and
compensation for damages caused to the environment.
It is worth registering that, though the actions implemented to contain climate
change have focused on reducing emissions associated with the burning of
fossil fuels, deforestation and forest degradation are currently at the center of
the debate because they constitute significant causes of global warming since
they collectively compose 17.4% of global emissions of greenhouse gases (more
than a third of the emissions from developing countries), and also because the
reduction of these emissions can be obtained at a lower cost than other sources
of emissions (Irigaray, 2010).
Nº 8 • June 2011
Our country holds an unparalleled natural heritage and a legal foundation
capable of assisting the transition to a green economy. Nevertheless, these
values should materialize in terms of social awareness, supported by political
actions that enable the configuration of a Rule of Environmental Law.

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5. Fin a l r e m a r k s
The transition to a green economy presupposes environmental justice
and improved living conditions for the population. As such, policies should
be prioritized that confront poverty, promote inclusive growth and provide to
everyone a more active participation in the economic growth process and the
sharing of its benefits, through social inclusion and the reduction of inequality.
This is not a difficult task in Brazil, where hunger and malnutrition are not caused
by scarcity in food production, since the domestic agricultural sector produces
more than enough to provide for the needs of the Brazilian population.
Similarly, conditions have been set for adapting economic activities to new
patterns of sustainability, as outlined by Brazilian legislation, considering the
agricultural industry and the notable agro-industrial development in the country
over the past few years.
However, the legislative advances are echoed quietly in the countryside.
There is a significant deficit in the implementation of these laws that possess
a merely symbolic character, since they continue to be disregarded without
major consequences, and encounter resistance from sectors that bet on
increased productivity in an unsustainable manner, that is, without considering
the environmental costs.
This dispute between maintaining a rigorous legislation and its attenuation
has as its backdrop the global debate on the consequences of climate change
and the need for mitigative and adaptive measures.
In the context of Brazil, which assumed international commitments to reduce
emissions, especially those originating from illegal deforestation and forest
burning, there is the risk of seeing an upswing in deforestation if the country
responds to pressures to relax its forest law.
Reverting this picture presupposes not only measures of command and
control mechanisms and adjustments to environmental management in the
forestry sector, but also economic measures that provide realignment of
economic incentives in favor of the conservation of forest assets, and the
structuring of a forest-based economy with the promotion of alternative means
of subsistence that are attractive to the population that depends on these
resources (Irigaray, 2010).
Nº 8 • June 2011
Among the economic instruments, payments for the ecological services
performed by the forest play a relevant role in the construction of alternatives
that contain deforestation and degradation of these ecosystems. Therefore,
the implementation of a REDD policy in Brazil appears as a solid alternative,
and given the magnitude of the emissions from deforestation and the low cost
of reducing these emissions, it plays an important role in the global strategy to
reduce emissions of greenhouse gases (Myers, 2009).

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Unfortunately, the requirements for sustainable use of natural resources in
our country, although constitutionally backed, have still not managed to find solid
mechanisms in environmental policy that allow thorough implementation. This
is so, because a management approach that considers the support capacity of
ecosystems and does not compromise their availability to future generations is
needed and may be considered a goal that can only be materialized if articulated
with other public policies, especially economic ones, which are directed towards
the same goal.
Furthermore, no country can produce and improve its environmental quality
without a government that restrains unsustainable practices and encourages
proper environmental behavior and sustainable use of environmental resources.
Therefore, our country needs to overcome this picture of institutional vulnerability
and strengthen the implementation of the existing regulatory framework,
principally by integrating agricultural policies with environmental protection as
a condition to secure the transition to a green economy.
Nº 8 • June 2011
References
Barreto, P. et al. (2008). A pecuária e o desmatamento na Amazônia na era das
mudanças climáticas. Belém: Instituto do Homem e Meio Ambiente da Amazônia.
Beck, Ulrich. (1998). La sociedade del riesgo. Hacia una nueva modernidad. Barcelona:
Ediciones Piados Ibérica.
Brundtland, G. H. et al. (1988). Nosso futuro comum. Relatório de 1987 da Comissão
Mundial de Meio Ambiente e Desenvolvimento. Rio de Janeiro: Fundação Getúlio
Vargas.
Dourojeanni, A. (2000). Procedimientos de gestión para el desarrollo sustentable. Série
Manual - Vol. 10. CEPAL/ECLAC. Santiago: United Nations.
Feltran-Barbiberi, R. and Kassai, J. R. (2008). Passivo ambiental das reservas legais
inexistentes no cerrado. Paper presented at the IX Simpósio Nacional Cerrado -
Desafios e estratégias para o equilíbrio entre sociedade, agronegócio e recursos
naturais. Brasília: EMBRAPA.
IPCC (2007). Quarto relatório de avaliação do Painel Intergovernamental sobre Mudança
Climática.
Irigaray, C. T. J. H. (2004). O emprego de instrumentos econômicos na gestão
ambiental. In Figueiredo, G. P. Direito Ambiental em Debate, Vol. 2. Rio de Janeiro:
Esplanada.
Irigaray, C. T. J. H. (2010a). A expansão dos biocombustíveis na Amazônia: riscos
e desafios. In Heline Sivini Ferreira and José Rubens Morato Leite (org.).
Biocombustíveis - fonte de energia sustentável?: considerações jurídicas, técnicas
e éticas. São Paulo: Saraiva.
Irigaray, C. T. J. H. (2010b). Pagamento por serviços ecológicos e o emprego do REDD
na Amazônia. In Paula Lavratti, V. P. et al. (org.). Direito e Mudanças Climáticas: 3.
Serviços Ecológicos. São Paulo: Instituto O Direito por um Planeta Verde.
Irigaray, C. T. J. H. and Rios, Aurélio V. (org.) (2005). O Direito e o desenvolvimento
sustentável. Brasília: IEB.
Irigaray, C. T. J. H., Vieira, G. F and Silva, L. R. (2009). Regularização fundiária na
Amazônia: a lei e os limites. Revista de Estudos Socio-Jurídico-Ambientais Amazônia
Legal, 5. Cuiabá: EditUFMT.

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in Brazilian law:
perspectives and
challenges
Carlos Teodoro Irigaray
Lima, A. (2009). Desafios jurídicos para a governança sobre as emissões de CO2
por desmatamento e a titularidade do carbono florestal. Retrieved from: in
05.12.2009.
Martin Mateo, R. (1977). Derecho ambiental. Madrid: Instituto de Estúdios de
Administración Local.
Morin, E. and Kern, A. B. (1995). Terra-Pátria. Porto Alegre: Sulina.
Moutinho, P. (2009). Desmatamento na Amazônia: desafios para reduzir as emissões
de gases de efeito estufa do Brasil. p. 2-3. Retrieved from: in 05.12.2009.
Myers, E. (2009). Mudança climática e setor florestal: cartilha de REDD. In Florestas:
o setor florestal nos mercados voluntários de carbono, segunda edição. Revista
Ecosystem Marketplace. The Katoomba Group’s.
Polakovic, F. (2002, June 06). O homem consome e a Terra não consegue repor. O
Estado de São Paulo, Geral/Ambiente, p. A15.
Presidência da República (2007). Objetivos de desenvolvimento do milênio:
relatório nacional de acompanhamento / coordenação: Instituto de Pesquisa
Econômica Aplicada e Secretaria de Planejamento e Investimentos Estratégicos;
supervisão:Grupo Técnico para o acompanhamento dos ODM. Brasília: IPEA, MP,
SPI.
Romeiro, A. R. et al. (org.) (1999). Economia do meio ambiente: teoria, políticas e a
gestão de espaços regionais. Campinas: UNICAMP-IE.
Safatle, A. and Pardini, F. (2004, Setembro 01). Grãos na balança. Carta Capital, n°
306.
UNCTAD (2004). Assegurando ganhos de desenvolvimento a partir do sistema comercial
internacional e das negociações de comércio. Nota de Informação, TD/397. Retrieved
from: < http://www.unctad.org/pt/docs/td397_pt.pdf>
UNCHS (2006). The state of the world’s cities 2006/2007: the millennium development
goals and urban sustainability, 30 years of shaping the Habitat agenda. Sterling:
Earthscan. Overview; 1.1-1.2.
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Market mechanisms for
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Peter H. May 1
Ar g u m e n t s in f a v o r o f a g r e e n e c o n o m y
To reach a “green economy” it is necessary to ensure a reduction in materials
and energy use in the production process, to allow society to prosper without
necessitating economic growth (Daly, 1996, Jackson, 2009, Victor, 2008). On
the other hand, social actors deprived of the bounties of modern capitalism
– owing to the inequitable distribution of wealth – can attain higher levels of
consumption without necessarily furtherdepleting natural capital. From this
perspective, the apparently contradictory goals of durable stability or degrowth
in the North and “greening” of growth (with equity) in the South represent the
basis for a meaningful dialogue about a sustainable future and, furthermore,
configure the platform of debate for Rio+20.
This brief contribution discusses the following question: to what point can we
resort to so-called “market mechanisms” to ensure this necessary transformation
in natural resource utilization? More specifically, how can we most effectively
guide the transition toward resource renewal and convert wastes into inputs
rather than residuals?
This analysis may appear contradictory in that it seems diametrically opposed
to what has moved economic actors historically, i.e., their single-minded pursuit
of maximum profit. Added to this is the recognition that the market has pushed
economic actors toward a growth regime based on the rapid depletion of natural
resources and the generation of pollution combined with a growing abyss
between rich and poor, within and among countries. This work is aligned with
a contemporary perspective that recognizes the limits of market mechanisms,
and thus makes reference to a discourse grounded on the economics of the
environment.
In this chapter, some of the main arguments of the economics of the
environment are introduced, including both those aimed at regulating public
goods and those that propose solutions to adverse effects arising from the
Nº 8 • June 2011
1. Associate professor at the Pos-Graduate Program in Social Sciences for Development,
Agriculture and Society at the Federal Rural University of Rio de Janeiro (CPDA/UFRRJ),
vice-coordinator of the Master’s in Sustainable Development Practice (PPGDPS/UFRRJ),
coordinator of the research component on Biodiversity, Natural and Cultural Resources of the
National Institute of Science and Technology in Public Policies for Development Strategies
(INCT/PPED), past president of the International Society for Ecological Economics (ISEE),
advisor of the Brazilian Society for Ecological Economics and collaborator at Friends of the
Earth-Brazilian Amazonia.

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modern economy. Such arguments question the relative superiority of market
mechanisms, adopted in many countries as the most efficient mechanism to
ensure the provision of environmental services. Along these lines, we discuss
payments for environmental services (PES) and its application, as a means
to complement command and control mechanisms aimed at efforts to reduce
and revert carbon emissions, above all those stemming from deforestation in
tropical countries (REDD+).
In s t it u t io n s f o r e n v ir o n m e n t a l m a n a g e m e n t
What institutions does society possess to signal and support the transition
to a green economy? It should be recognized, before anything else, that the
market is only one of many institutions created by human societies to administer
relations of exchange and production (North, 1990). In many cases, the market
may not be the most adequate institution to signal change along technological
trajectories, even if such a trajectory is underpinned by high wastage and
exhaustible inputs, due to the fact that the market does not adequately reflect the
value of public goods (Vatn, 2010). Thus, under what conditions is it acceptable
to rely on the allocative efficiency of the market to produce “green” outcomes
for economic processes?
A first step is to suggest how more adequate policies can be selected, which
in turn requires that available instruments be differentiated along a continuum,
ranging from activity regulation – based on physical standards – to mechanisms
based on motivating the actions of individuals in their own self-interest and in
response to the laws of supply and demand. Along this continuum, there is a
range of options with greater or lesser degrees of dependence on market forces.
The relative convenience and efficacy of such options, for regulating economic
activities in the context of environmental restrictions, have been the object of
innumerable studies (see Seroa da Motta, Ruitenbeek et al., 1996).
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The criteria for selecting the appropriate mechanism differ when derived
from an ecological economic perspective. In this regard, we can classify the
instruments of environmental resource management in accordance with two
principal variables: (1) the relative importance (non-substitutable character) of
the resource in question, and (2) its resilience (capacity to recover from stress
or degradation). These two variables reveal, without resorting to devices of
market valuation, the biophysical constraints of human intervention. Situations
where the biota has little capacity to withstand disturbances and simultaneously
is constituted by endemic or endangered species, make perfect candidates for
the application of “sanctuary” measures, that is, the access and use of such
resources should be prohibited. As extinction is irreversible, there are no ways to
substitute species or populations, whose survival depends on the maintenance
of intact ecosystems.

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On the other side of the spectrum, resilient natural resources (whose losses
associated with exhaustion/modification are less relevant), offer the opportunity
to take advantage of the market’s allocative efficiency, insofar as it provides
resources through rewards and may even reinforce cleaner behaviors. This
enables the creation of markets that negotiate quotas for pollutant emission
permits, for example. In the middle of the spectrum, intermediate restrictions
can be found, such as fishing quotas or permitted fishing net size (King, 1994).
The specific locations of boundaries between different modes of intervention are
not measurable, and management adaptations are necessary in response to
the different evolutionary characteristics of the ecosystems being analyzed.
Unfortunately, there are difficulties in developing efficient policies due to
uncertainty or total ignorance about the resilience of ecosystems and their
“tipping points”: thresholds associated with radical changes in these systems.
In a first evaluation, it seems prudent to err on the side of caution, given that
the unintended or unforeseeable consequences of human actions can cause
irreversible losses, thereby leading to damage to human well-being (Ring and
Schroter-Schlak, 2011). Thus, the formulation of policies to combat biodiversity
losses should include instruments that can protect a “safe minimum standard”
(Ciriacy-Wantrup, 1952) of biodiversity conservation, independent of the
potential efficiency of available economic instruments, or their estimated
benefit/cost ratios. Direct regulation (command and control – C&C), establishing
protected areas, no-take fishing zones or prohibiting the use of certain products
or substances (e.g., GMOs) that can lead to impacts on biodiversity, is a key
regulatory component in these contexts.
At an intermediate stage, uncertainty or ignorance of limits can warrant the
creation of permit schemes based on the “cap and trade” approach (establishing
a ceiling for the production or utilization of a certain resource, or the emission of
pollutants generated by this production, and then commercializing all or part of
the excess or gap in relation to the ceiling). This imposes an aggregate limit on
the exploitation of species or habitats, and leaves the allocation within this limit
to the market, and thus combines efficient allocation with conservation efforts
ensured by the limit. The emergence of the carbon market stemmed from this
approach. If a limit is not established by regulation, there would be no incentive
to seek cost reduction through a market structured around emission permits.
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The emergence of markets for environmental services owes its theoretical
inspiration to the seminal work of Ronald Coase, in 1960, that established that
an “optimal” point of environmental degradation is identified under the rule of
law through the interaction of actors interested in negotiating permits for natural
resource use. In this hypothetically constructed world, the legal responsibility of
each actor in the negotiation is mandatorily defined and obeyed. Equilibrium is
reached through free negotiation among actors. Those that feel prejudiced in a
negotiation are compensated by an amount greater than the minimum that they

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would accept to give up their desired outcome. The solution will be symmetric
if the agent harmed by environmental degradation is held accountable, having
to pay compensation to the perpetrator of damage to desist.
However, for the economic optimum to be attained, the Coase theorem posits
that there be zero transaction costs 2 necessary to reach a negotiated solution.
That way, there would be negotiation if the benefits of reaching a negotiated
solution exceed the costs. In the opposite case, there would be no solution.
This, however, according to Coase would also imply an equilibrium solution,
since the lowest cost outcome is achieved. Therefore it is argued that if there
is no negotiation, it is because the status quo situation is better than incurring
the costs of searching for a solution. In analogous fashion, the perpetuation of
externalities would be considered optimal (because too costly to satisfy those
harmed), and consequently the government would not need to intervene.
One problem to this type of solution to market failures, lies with the premise
that information is symmetrical between the actors involved in a negotiation;
on the contrary, polluters are normally few, know the amount of emissions they
produce, and how much they are willing to invest in mitigation. The affected are
many, disorganized, without information about the source or characteristics of
the damage suffered and without easily mobilized resources to bring polluters
to justice or even to the bargaining table. Not only is the “the power to exercise
knowledge” (Lewontin, 1992) missing, but also the knowledge to exercise power
among the actors.
Pa y m e n t s f o r e n v ir o n m e n t a l s e r v i c e s
Though the majority of prior studies focused on market mechanisms
concentrate on problems related to pollution, there is now a major movement
in favor of the utilization of this type of instrument as a means to stimulate the
participation of rural landowners in a collective effort to conserve biodiversity,
water sources and carbon stocks in forests. In this sense, instead of being held
accountable for the emissions caused by deforestation and brought to justice,
they may be treated as potential providers of environmental services beneficial
to society. The negotiation between service providers and society stimulates
the participation of rural landowners, whether motivating them to refrain from
using forestlands for productive purposes, or stimulating them to incorporate
better land use practices, and consequently diminishing emissions. This great
Coasean bargain is called Payments for Environmental Services (PES).
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One of the main theorists on the subject (Wunder, 2005) classifies PES as any
transaction involving at least one buyer, one seller and one environmental service
2. Note that transaction costs, according to Williamson (1979, 1985), depend on the frequency
of transactions, degree of specificity of the transaction and the level of uncertainty that the
transaction involves.

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being provided contingent on payments between the parties. Consequently,
there are terms for a negotiation if the cost of providing the service added to the
transaction costs of carrying out the arrangement are less than the collective
socio-environmental benefit obtained by the buyers (whether local or global
or both). The problem in this situation is that the benefits of environmental
services are enjoyed by many –some can free-ride on the efforts of others, which
lowers the incentive to contribute. Therefore, when information is asymmetrical,
transaction costs yet again tend to be high. That is, there is an abundance of
market failures to surmount in negotiations of this sort.
Furthermore, there are problems of contractual insecurity: in the carbon
market, for example, the buyer is the only one responsible for fulfilling what
has been agreed with the seller of carbon credits with relation to emissions
reductions. In this case, it is advantageous for a seller of credits to deforest
and afterwards claim “what a shame, a fire on the neighboring farm got out of
control”. It becomes the buyer’s problem to seek alternative carbon sources,
or to securitize to fulfill reduction obligations. This is why, on the only regulated
carbon market that reaches developing countries – that motivated by the Clean
Development Mechanism (CDM) – primarily projects that imply emissions
reductions at the source can be found, typically in ventures that involve changing
energy sources or altering industrial processes and not projects involving forests
or land use change. This is the problem of moral hazard.
There are three solutions to the problem of moral hazard in PES contracts.
The first is that of internalization: the actual buyer of the environmental benefit
promotes the provision of environmental services as part of his or her own
business. Multinational businesses can reduce emissions in a region of low
efficiency and credit the gains internally in another subsidiary.
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In many cases a governmental solution is adopted to guarantee PES
programs. In this case the State assumes responsibility, whether by
guaranteeing or ultimately paying for the environmental benefits (Veiga and
May, 2010). The principal national PES programs in Latin America (Costa Rica
and Mexico, for example) adopt this procedure, since economic actors do not
possess the necessary institutional framework to mediate negotiations between
demanders and providers of services. In the case of Brazil, the remuneration
for environmental services by private landowners is prohibited, due to the
inexistence of such service provision in legislation. As a result, businesses,
cooperatives or associations are brought into the process as intermediaries,
with their respective transaction costs, that thereby dilute the revenue of the
provider.
The final case refers to voluntary action of private sector actors. In these
cases, a third party certifies fulfillment of the objective of the contract in terms
of emissions reduction and other aspects, such as the contribution of a project
to processes of local and regional development, conservation of biodiversity

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or water resource protection. Independent certification is a type of “non-state”
regulation, in which there is mediation of the relation between producers and
consumers, establishing rules that prove – through an adequate degree of
trust – that productive processes obey sustainability criteria (Kaechele, May
et al., 2011). The proliferation of independent certification models, such as
those being promoted by leading NGOs, creates a mechanism capable of
overcoming one of the main obstacles to attract resources for environmental
service markets. As of 2009, 96% of the volume of CO 2 credits commercialized
in forest projects was already subject to independent certification (Hamilton,
Chokkalingam et al., 2009).
“Be t t e r REDD t h a n d e a d?”
The topic of reducing deforestation as an aim of negotiations emerged in
the area of global regulation when constructing a post Kyoto agenda, due to
the lack of options capable of achieving the planned targets.
Brazil – that is not attracting a lot of investments intended for reducing
emissions in other sectors, since these are already considered relatively “green”
- is one of the largest greenhouse gas emitters due to persistent deforestation.
Despite having refused for years to enter into negotiations with Northern
countries to define issues related to what it considered matters of national
sovereignty, Brazil evidently decided not to enter the negotiations of the new
climate accord as a pariah. Brazil therefore committed at the Conference of the
Parties in Copenhagen in 2009 to make radical cuts in deforestation over the
period up to 2020, reducing the deforestation rate in the Amazon by 80% and
by 50% in the Cerrado (Brazilian savannah) as compared with a baseline of the
previous 10 years. This accord was facilitated by the fact that deforestation has
declined since a peak in 2005, with a level in 2010 of almost 70% below that
peak. However, there is still a need to combat the persistent deforestation of
large areas every year. A principal share of this new deforestation results from
the expansion of cattle pastures in municipalities having low environmental
governance capabilities.
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At the Conferences of the Parties (COP) of the United Nations Framework
Convention on Climate Change and especially since COP12 in Nairobi (2006),
the topic of “deforestation”, which was always postponed due to issues of
national sovereignty, has received increased attention. At COP15 in Copenhagen
(2009), considerable resources were committed to avoid deforestation through
voluntary transfers between North and South. Resources are specifically aimed
to support actions initiated by countries that seek to promote the Reduction
of Emissions from Deforestation and Forest Degradation (REDD). Other
complementary actions that seek to enrich and restore ecosystem functions
of tropical rainforests were also contemplated (REDD+).

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The deforestation reductions that have taken place since 2005 elevated
Brazil to a distinguished position at the climate negotiations. According to the
government, the reduction resulted from a great effort to punish offenders and
remove “pirate cattle” 3 from protected areas. In compensation, the Norwegian
government committed to donate a total of US$ 1 billion to Brazil over the
course of 10 years, deposited in the Amazon Fund created by the Brazilian
National Bank of Economic and Social Development (BNDES) specifically to
execute grant-financed actions that reinforce municipal monitoring and land
regularization, and thus stimulating more sustainable natural resource uses.
However, according to analyses by environmental entities, the observed
reduction in deforestation can also be attributed to the price declines of
agricultural commodities and a repercussion of the financial market crisis
beginning in 2008. As some of these analysts argue, it would be more
interesting to establish instruments that compensate those that would engage
in deforestation, such as through PES, instead of focusing all resources on
regulation. The question remains: should market mechanisms or C&C be
favored in attaining the goals to reduce deforestation? If primarily market
(PES), how much needs to be paid? What is the cost to society, to affected
economic actors, and to communities dependent on forest resources for their
sustenance? Who benefits?
In this challenging context, Brazil is aided by the existing land use legislation
that has a firm foothold in C&C. The Forest Code, with consecutive re-editions
of Provisional Measures since 1998, permits alteration of native vegetation with
productive purposes on only 20% of properties in the Amazon and 65% in the
Cerrado. The rest has to remain as Legal Reserves. The problem is that few
obey the Code, that even so is being targeted for dilution by the Congressional
ruralist lobby (PL 00740/2011 replacement of Law 4.771, reported by Deputy
Aldo Rebelo). On the other hand, state programs aimed at strengthening the
Forest Code requirements through environmental licensing of rural land-use,
have been deployed with some success in recent years. Licensing – that
establishes the boundaries of each property and the location of legal reserves
and permanent preservation areas -, when combined with the monitoring of
changes in land use via satellite and verification in the field, allows assessment
of compliance with the Code in practice. This set of legal instruments and
monitoring resources makes Brazil one of the few countries that possesses the
capacity to monitor and verify deforestation, and as such could gain access to
resources pledged by countries in the North under REDD.
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One advantage of the Forest Code not yet utilized in many states is to operate
as a ceiling (cap) on deforestation, because it establishes the maximum area
that each property can modify. This could conceivably allow market mechanisms
3. This refers to the presence of cattle on illegal properties (generally state-owned).

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to compensate those that observe the law. According to the stance of rural
producers, they need an incentive to restore unduly deforested areas and they
demand resources to cover the opportunity cost of retiring productive areas,
as well as some compensation for the benefits provided to other members of
society by restoring ecosystem functions. Others argue that rural producers
already have received substantial incentives to deforest and now they need to
observe the minimum safe standards of the Law, and that only those already
observing the Forest Code should be compensated by PES.
Despite discussions and various exercises to estimate the cost of reducing
deforestation, the issue persists of how to better structure institutions to regulate
the provision of public goods. A review of the experience with economic
instruments and C&C regulation applied to biodiversity conservation (Ring and
Schroter-Schlak, 2011) suggests that the best path in terms of cost effectiveness
is a mix of instruments grounded in regulation. In this sense, strengthening
the Forest Code (and not weakening it) should serve as the basis from which
institutional innovations can flourish in Brazil.
We conclude that market instruments, such as those associated with PES
and REDD+, should assume an important role in the transition to a green
economy. Such a role should be mediated by regulation that defines natural
resources access and control criteria, reflected by biophysical limits established
with reference to scientific knowledge and by extensive and prior consultation
with populations that depend on those resources for their sustenance. Based
on duly established parameters, it is possible in restricted circumstances to
utilize the market’s allocative efficiency as a complement to other institutions
to achieve society’s goals.
Nº 8 • June 2011
References
Ciriacy-Wantrup, S. V. (1952). Resource conservation: economics and policies. Berkeley,
California: University of California Press.
Coase, R. H. (1960). The problem of social cost. Journal of Law and Economics, 3
(Oktober, 1960), 1-44.
Daly, H. E. (1996). Beyond growth: the economics of sustainable development. Boston:
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Hamilton, K., U. Chokkalingam et al. (2009). State of the forest carbon markets; taking
root and branching out. Washington, D.C.: Forest Trends.
Jackson, T. (2009). Prosperity without growth: economics for a finite planet. London;
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Kaechele, K., May, P. H. et al. (2011). Forest certification: a voluntary instrument for
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Market mechanisms
for a green economy
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North, D. C. (1990). Institutions, institutional change, and economic performance.
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Leipzig: Helmholz Institute.
Serôa da Motta, R. and Ruitenbeek, J. et al. (1996). Uso de instrumentos econômicos
na gestão ambiental da América Latina e Caribe: lições e recomendações. Rio de
Janeiro: IPEA.
Vatn, A. (2010). An institutional analysis of payments for environmental services.
Ecological Economics, 69(6), 1245-1252.
Veiga, F. C. N. and May, P. H. (2010). Mercados para serviços ambientais. In May, P.
H., Economia do meio ambiente: teoria e prática. Rio de Janeiro: Elsevier.
Victor, P. A. (2008). Managing without growth: slower by design, not disaster. Cheltenham;
Northampton: Edward Elgar.
Williamson, O. (1985). The economic institutions of capitalism. New York: The
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Williamson, O. (1979). Transaction-cost economics: the governance of contractual
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Wunder, S. (2005). Payments for environmental services: some nuts and bolts. In CIFOR
Occasional Paper. CIFOR. 42.
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Challenges and
opportunities
Valuation and pricing of
environmental resources for
a green economy 1
Ronaldo Seroa da Motta 2
In t r o d u c t io n
The green economy concept means that economic growth can be based on
investments in natural capital, whereby the structure of the economy changes
in the direction of “green” or “clean” sectors/technologies to substitute “dirty”
or “brown” sectors/technologies. The United Nations Environment Programme
report “Towards a Green Economy: Pathways to Sustainable Development
and Poverty Eradication” (UNEP, 2011), seeks to demonstrate that this
transformation can be achieved without a loss of income and employment, and
yet, with reductions in poverty.
This task of natural capital appreciation imposes the necessity of responding
to at least two questions, namely:
(i)
(ii)
What is the value of an environmental resource? And
What policy instrument should we use to capture this value?
Another recent report “The Economics of Ecosystems and Biodiversity”
(TEEB, 2011), for example, offers some estimates of ecosystem and biodiversity
costs on a global scale and examples of how to capture these values using
economic instruments. As stated in the report, estimating the values associated
with environmental goods and services and the ways they are captured by the
market is a controversial and complex task, but even so, the resulting estimates
ultimately indicate opportunities to generate income and employment through
the recognition of the economic values of natural resources.
That is, in order to finance investments in natural capital, we must recognize
its economic and social contribution and price these according to their
contribution to the welfare of society.
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In the following section, concepts and techniques, as well as limitations,
of the valuation of environmental goods and services are discussed. In the
third section, the ways to price these goods and services to construct a green
economy are analyzed. The last section concludes with some final remarks.
1. Senior Researcher at the Research Institute for Applied Economics (IPEA) and member of
the IPCC 3rd and 5th Assessment Reports.
2. For a more detailed introduction see for example, Hanley, Shogren and White (2007), Seroa
da Motta (1988 e 2006), UNEP (2000a), Kolstad (2000), Freeman (1993) and Pearce and
Turner (1990).

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Va l u in g e n v ir o n m e n t a l g o o d s a n d s e r v i c e s 3
If we can identify the importance of environmental quality to guarantee
the maximization of well-being, how come economic growth policies do not
incorporate it from the beginning? Or better yet, why does the economic system
not naturally optimize the use of natural resources?
According to economic theory, the use of natural resources almost always
generates negative economic externalities in the economic system. These
externalities are not entirely captured by the pricing system, because enforcing
the property or use rights of these resources results in high transaction costs,
owed to the technical or cultural difficulties of fixing exclusive and rival rights.
So, it is not possible to establish exchange relationships between these rights
that ensure optimal resource use.
In summary, these technical and institutional difficulties in defining the property
rights between contemporary, and present and past generations, impede the
existence of a market that signals the value of the resources or, when it exists,
these imperfections result in prices and costs of use that do not reflect the
economic (or social) value of the resource, and as such, introduces inefficiencies
in the economic system. That is, the use of environmental resources generates
negative external costs that are intra and inter-temporal.
The economic value or the opportunity cost of environmental resources
normally is not observed in the market by means of the pricing system. However,
as with the other goods and services present in the market, its economic value
derives from its attributes, with the peculiarity that these attributes may or may
not be associated with use.
The economic value of environmental resources (EVER) can be broken
down into use value (UV) and non-use value (NUV) and is expressed in the
following way:
EVER = (DUV + IUV + OV) + EV
where:
Direct Use Value (DUV): value that individuals assign to an environmental
resource through its direct use, such as extraction, visitation or another activity
of direct production or consumption. For example, resource extraction, tourism,
recreation and scientific research activities 3 ;
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Indirect Use Value (IUV): value that individuals assign to an environmental
resource when the benefit of use derives from ecosystem functions, such as,
containing erosion, controlling climate and protecting water springs 4 ;
3. Benefits in-situ.
4. Benefits ex-situ.

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Option Value (OV): value that individuals assign to the conservation of
resources, that may be threatened, for direct and indirect use in the near future
but not fully known today. For example, the benefit from gene therapies based
on properties of genes not yet discovered from tropical forest plants.
Non-use value, Passive or Existence Value (EV): value that is disassociated
with use (though represents environmental consumption) and derives from
a moral, cultural, ethical or altruistic position in relation to the rights of other
species than the human to exist and other natural wealth, even if they do not
represent actual or future use for anybody. A clear example of this value is
the great mobilization of public opinion to save the panda bears or whales,
even in regions where people would never be able to make any use from their
existence.
There is also another way to classify the economic value of an environmental
resource by its capacity to generate flows of ecosystem services, as was
established in the “Millennium Ecosystem Assessment Report” (MEA, 2005),
that categorizes or typifies environmental services in provision, regulation,
support and cultural services in the following manner:
Provisioning services: those that generate direct material consumption, for
example, foods, water, medicines and energy.
Regulating services: services that regulate ecosystem functions, for example,
carbon sequestration, solid waste decomposition, water and air purification
and pest control.
Supporting services: those that support ecosystem functions, such as soil
formation, photosynthesis, and dispersion of nutrients and seeds.
Cultural services: services that generate non-material consumption in the
form of cultural, intellectual, recreational, spiritual and scientific activities.
The table below relates and exemplifies these taxonomies.
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5. Benefícios ex-situ.

177
General taxonomy of the value of environmental resources
GREEN ECONOMY
Economic value of environmental resources
Challenges and
opportunities
Direct
use value
Indirected
use value
Option
value
Existence
value
Valuation and pricing
of environmental
resources for a green
economy
Ronaldo Seroa da Motta
Value
Environmental
goods and
services directly
appropriated
through present
resource
exploitation and
consumption
Environmental
goods and
services that
are generated
through
ecosystem
functions and
appropriated
and consumed
indirectly in the
present
Environmental
goods and
services of
direct and
indirect
use to be
appropriated
and
consumed in
the future
Value not
associated
with present
or future use
and reflects
moral,
cultural,
ethical and
altruistic
attitudes
Related
services
Provisioning
and regulating
services
Regulating,
supporting
and cultural
services
Provisioning,
regulating,
supporting
and cultural
services not
yet discovered
Cultural
services
In the literature, there is still some controversy in relation to the existence
value as a representation of the value an individual assigns to maintain certain
environmental resources so that their offspring (future generations) can enjoy
their direct and indirect uses (bequest value). This is a conceptual issue that in
some ways is irrelevant, since the challenge of environmental valuation consists
of admitting that an individual attributes value to resources, even if he or she
does not make any use of them.
The use and non-use of environmental resources imply values, which need
to be measured in order to make informed decisions of the various uses and
non-uses, even when they are conflicting, that is, when one type of use or nonuse
excludes other types of use or non-use. For example, the use of a beach
for dumping sewage excludes (or at least limits) its use for recreation.
Once the uses and non-uses and the respective environmental services
have been identified, we can proceed to valuation, and its methodology will
be presented next.
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The methods of economic valuation of the environment are part of welfare
economics and are necessary in the evaluation of social costs and benefits when
public investments affect the consumption of the population and, consequently,
its level of welfare.
The reader can now evaluate with more clarity the degree of difficulty in
identifying market prices (adequate or not) that reflect the values attributed to

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environmental resources. This difficulty increases as we move from use values
to non-use values. Among use values, indirect use and option values present,
in turn, even greater difficulties than direct use values.
As we have sought to demonstrate up to now, the task of economically
valuing an environmental resource consists of determining how much better
or worse the welfare of individuals becomes based on changes in the quantity
of environmental goods and services, whether appropriated as use or not.
Consequently, the environmental valuation methods correspond to this
objective based on their capacity to capture these distinct bundles of economic
value of the environmental resource. Nevertheless, as will be discussed below,
each method presents limitations in covering these values that are almost always
associated with the degree of sophistication (methodological and database)
required, and with the assumptions on the individual consumer behavior and
the effects of environmental consumption on other sectors of the economy.
Bearing in mind that such a balance is almost always pragmatic and
determined in a restricted way, it is up to the analyst that evaluates to explain,
with precision, the limits of the estimated values and the degree of validity of
the measurements for the intended end. As will be discussed next, the adoption
of each method depends on the valuation objective, the assumed hypotheses,
the availability of data and knowledge of the ecological dynamics of the object
that is being valued.
The valuation methods analyzed here are classified as follows: production
function methods and demand function methods.
Production function methods: marginal productivity and substitute goods
market methods (replacement, defensive spending or avoided costs and
control costs)
If the environmental resource is an input or a substitute of a private good
or service, these methods utilize market prices for the private good or service
to estimate the economic value of the environmental resource. As such,
the environmental benefits and costs of the varying availability of these
environmental resources to society can be estimated.
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Based on the prices of these private resources, generally assuming that they
do not alter against these variations, economic values are indirectly estimated
(shadow prices) of the environmental resources whose varying availability
is being analyzed. The benefit (or cost) of the variation in availability of the
environmental resource is reached by the product of varied quantity of the
resource times its estimated economic value. For example, the soil nutrient
loss caused by deforestation may affect agricultural productivity. Or the reduced
sedimentation levels in a basin, due to a revegetation project, may increase
the life-span and productivity of a hydroelectric plant.

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Demand function methods: complementary goods market methods (hedonic
prices and travel cost) and the contingent valuation method.
These methods assume that the variation in availability of an environmental
resource alters the willingness of economic agents to pay or receive in relation
to the resource or its complementary private good. Thus, these methods directly
estimate the economic values (shadow prices) based on demand functions
for these resources derived from (i) markets of private goods and services
complementary to the environmental resource or (ii) hypothetical markets
constructed specifically for the environmental resource being analyzed.
Utilizing demand functions, these methods permit the capture measurements
of individual’s willingness to pay (or accept) relative to variations in the
environmental resource availability. Based on these measurements, variations
in the level of welfare are estimated through the excess satisfaction that the
consumer obtains by paying a price (or pays nothing) for the resource below
what he would be willing to pay. The consumer surplus is, thereby, measured
by the area below the demand curve and above the price curve. Thus, there
are variations in consumer surplus relative to variations in the availability of
the environmental resource. Therefore, the benefit (or cost) of the variation
in the availability of the environmental resource will be given by the variation
in consumer surplus measured by the demand function for this resource. For
example, the travel costs that individuals incur to visit a national park could
represent an approximation of the willingness to pay related to the recreational
benefits of the park.
These measurements of willingness to pay can also be identified through
research that asks a sample of the population about the size of a tax aimed
at environmental investments for biodiversity protection with the contingent
valuation method. Identifying these measurements of willingness to pay, we
can construct the respective demand functions.
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Note that these two general methods can, in accordance with their
hypotheses, estimate environmental values derived from production or demand
functions based on the current economic condition. So that these values
(costs and benefits) can occur within a time-period, it is necessary to identify
these values in time. That is, identifying values resulting not only from actual
conditions, but also from future conditions. Prospecting future conditions can
be done through alternative scenarios in order to minimize the high degree of
uncertainty. Anyhow, the future values will have to be discounted over time, that
is, calculated in terms of present values utilizing a social discount rate. This rate
differs from the one observed in the market due to capital market imperfections
and its determination is not trivial, even though it can significantly affect the
results of a cost-benefit analysis.

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In the environmental context, the complexity is even greater. For example,
due to the possibility of exhaustion, the value of environmental resources tend
to grow over time, if we assume that its use increases with economic growth.
Estimating this future scarcity and translating it into a monetary value is a
complex issue that requires a certain exercise of futurology. As such, some
specialists suggest the use of smaller discount rates for projects with significant
environmental benefits or costs or adding the necessary investments to
eliminate environmental risk. It is therefore considered that the environmental
costs and benefits would be adequately valued and that scenarios with distinct
discount rate values should be utilized to evaluate its indetermination.
This complexity will also be reflected when constructing a National System
of Environmental Accounts to measure the national income (GDP), deducing
the amounts that the economy “consumed” (depreciation) or “invested”
(appreciation) in natural capital 5 . In disaggregated levels, Environmental
Accounts approach a cost-benefit analysis, where GDP reflects a measure
of benefit and consumption of natural capital represents the cost. Thus, the
valuation concepts and techniques will be the same as herein discussed 6 .
To summarize, selecting an economic method for valuing the environment
depends on the objective of the valuation, the assumed hypotheses, the
availability of data, and scientific knowledge of the ecological dynamics of the
object in question.
Pr ic in g e n v ir o n m e n t a l g o o d s a n d s e r v i c e s 7
Although internalizing environmental externalities increases the efficiency of
the system, these gains are perceived differently by economic agents and are
dispersed over time. That is, they affect the intra and inter-temporal income
distribution. So how can we internalize this amount in the pricing system so
that consumers can perceive the value?
Economic theory proposes that in order to correct this market failure (“the
tragedy of the commons”), defined user rights would be exchanged in a market
and thereby set an equilibrium price that represents the social cost of these
resources.
This possibility could take the form of a fee for using the natural resource
or through the creation of markets. That is, economic instruments that signal
prices that reflect the social opportunity cost of the resources that, thereby,
internalizes the correct price of the resource in the economic system.
Nº 8 • June 2011
5. It would be a measure of the net domestic product (NDP) of an economy, represented by
GDP minus the consumption of capital.
6. See for example Seroa da Motta (1995 and 1998b) for a detailed discussion of how to apply
valuation techniques in Environmental Accounts and some estimates of capital consumption
in Brazil.
7. For a more extensive discussion see for example, Hanley, Shogren and White (2007), Seroa
da Motta (2006), UNEP (2000b), Kolstad (2000) and Pearce and Turner (1990).

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Note that the efficiency gain of an economic instrument is associated with
the heterogeneity of control or use costs among economic agents. This cost
differentiation makes individual decisions more flexible when comparing the
amount charged or the right to issue or use with the control or usage costs.
This leads to users with smaller control costs to control more at lower costs
than what is collected or earned by selling rights.
Nevertheless, these efficiency gains cannot be canceled by high transaction
costs (of information or implementation), whether through collection or the
creation of markets. When this occurs, introducing economic instruments
should be avoided.
Ch a r g in g
Theoretically a pigouvian tax is equivalent to the marginal environmental
damage that allows an economic optimal degradation to be reached. Such
nomenclature was formulated by the economist Arthur Cecil Pigou, who
formulated it for the first time during the 1920s of the past century.
This tax adopts the economically optimal level of resource use criteria where
negative externalities, such as environmental damage, are internalized in the
resource price both in the production process as well as consumption. Once this
new externality price is determined and imposed on each user, aggregated to
its market price, each level of individual use is altered as well as the aggregate
level of use.
In this way, the new levels reflect a socially optimized use, because now the
benefits of use are counterbalanced by all the associated costs, that is, each
user pays for exactly the damage caused by his or her use. The calculation of
this tax does not exist in practice, given the difficulties of precisely measuring
environmental damage, as discussed in the previous section.
The optimal level of use is determined in the political process by the affected
social agents, and from there payment levels for use of the natural resource
are derived. In these cases, the economic price can be of two types: induction
price and fianacing price; each one with its distinct criteria that generates also
distinct values, but both aiming to reduce negative externalities.
Nº 8 • June 2011
Induction price: the new price of the resource is determined to obtain
a certain aggregate level of technically adequate use (and not aggregate
revenue). It is determined so that the sum of the induced change in individual
use results in a new desired aggregate level. As such, the estimate should
be based on simulations to identify how individuals would alter their resource
use against different prices. The induction price is related to the “polluter/user
pays” principle 8 .
8. In the ex-ante conception, the user perceives the damage payment before the act of using.
The ex-post formulation is more associated with repairing the damage through judicial means
after the user has generated damage.

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For example, this would be the case of charging for water to induce an
aggregate reduction in use by X% or a fee that encourages an increase in
certification of Y%.
Determining the induction price is based on demand or cost functions of each
user, differentiating the prices in order to induce users in the aggregate to obtain
a level of desired use. The general rule for this price differentiation would be a
higher price for the most price-sensitive users (greater price elasticity). This is
because those are the users that will reduce their use the most for each unit
of price increase.
Fianancing price: adopts the criterion of optimal financing levels where the
price is determined to obtain a desired level of revenue. As such, the financing
price is associated with a predetermined budget and not with a desired level of
resource use. Its application is associated with the “protector-receiver principle”,
such as, charging for resource use to generate the revenue that is necessary for
a determined investment in a conservation unit or payments for environmental
services expenditures. 9
Contrary to the induction price, the general rule for price differentiation would
be a lower price for the most price-sensitive users (greater price elasticity). This
is because these users would be the ones to reduce most their use for each
additional unit increase in price and, consequently, reducing revenues.
To summarize, the financing price aims to attain an aggregate revenue target
and the induction price, instead of aiming for a certain total revenue, seeks to
alter the level of individual use. Whatever its form is, the economic instrument
always represents an economic price of the negative externalities.
Ma r k e t Cr e a t io n
Another pricing possibility is the creation of a market of transferable rights
of usage or to pollute.
In these markets, rights to use or pollute are distributed or sold in a way that
in the aggregate the desired levels of use or pollution are no exceeded. Once
the initial allocation is realized, levels of use or pollution above the individual
quotas would require the transaction of these rights between users/polluters.
For example, the user/polluter that has the highest control costs would have
incentives to buy quotas from those will lower costs.
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Note that it is the absence of (or difficulty in signaling) complete property
rights for environmental resources that makes their usage less efficient. In
the case that specifying complete rights were possible, a negotiation between
users could take place in order for uses with greater returns (more efficient)
9. In the economic literature this price would adopt the “Ramsey rule”, named after its first
proponent.

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to be prioritized, that is, the exchange of rights in the market would induce
users that most benefitted from its use (or with smaller costs) to pay more for
the rights. The terms of negotiation would be based on the costs and benefits
perceived by the parties.
However, for a market of rights to exist, the property rights would need to
be clearly defined and there would need to be a great number of participants
with different costs and benefits, buying and selling in the market. On the
other hand, an institutionalized, diversified and fragmented market requires
sophisticated institutional and legal support. Thus, we must look into these
three qualifying principles:
a) initial allocation: the rights could be initially allocated in a way that (i) is
neutral in the proportion to current levels of use or pollution 10 ; (ii) has distributive
criteria with greater allocations to some segments of society; and in both
cases the allocation could either be free or achieved through an auction that
generates revenue. In the case of an auction, each user/polluter would pay for
the quotas in accordance with their value for that specific activity. In the case
of free distribution, distributive issues would need to be addressed given that
holders would consider these rights a real source of costs and benefits.
b) imperfect information: government and users/polluters would not be
perfectly informed about the level of use or pollution of the resource and the
associated costs. Thus, the transaction costs of these rights would be greatly
elevated and the transaction levels lower, and consequently less efficient.
Though such imperfection could be mitigated in future markets, the management
of such a system is complex to implement comprehensively in extensive regions
with large varieties of users/polluters; and
c)market power: users or polluters with market power 11 tend to manipulate
the purchase of rights to create barriers of entry for competitors (or regional
competition) or engage in price arbitrage aimed at abnormal profit. Such
imperfections could be corrected through limits of use or emissions per user, or
transfer restrictions, though this would complicate management by demanding
an extensive range of information from principal users.
To summarize, the pricing of an environmental resource generates an
immediate dividend for society by increasing environmental efficiency. But
there is also an additional efficiency gain, a second dividend, in the possibility
of improving the economic efficiency of taxation through the substitution of the
distorted tax revenueon consumption and capital, for revenues resulting from
environmental taxation or revenues generated by user rights.
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10. “Grandfather system”.
11. Oligopolistic or oligopsonic.

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Thus, a tax reform where environmental taxation is introduced and the
revenue is used to finance reductions in other taxes generates a so-called
double dividend. In this case, the fiscal recycling permits an environmental
tax of neutral revenue that reduces environmental degradation and improves
economic efficiency by reducing the distorting tax load.
Valuation and pricing
of environmental
resources for a green
economy
Ronaldo Seroa da Motta
Fin a l Re m a r k s
An ecological evaluation should precede any initiative of applying economic
criteria, as it is critical for determining how the environmental services are
correlated with the stock levels of natural capital. Thus, the use of economic
criteria requires explicitly stated ecological impacts (physicochemical and
biological) to guide the application.
An additional limitation in the use of economic criteria is associated with
determining discounts over time of costs and benefits, since the type and value
of the discount rate depend on hypotheses about future growth in consumption
and future alterations in individual preferences. The exercise of capturing
values associated with future generations carries a degree of uncertainty and,
consequently, cannot be estimated deterministically. As such, we must consider
a sensitivity analysis of the results from different discount rates.
We must also identify the sensitivity of various distinct statistical models in
the estimation of ecological impacts as well as in economic measurements.
Lastly, it is worth noting that the magnitude of the environmental impact of a
specific sector could be significant enough to affect other sectors in its supply
chain. That is, if there is evidence of significant inter-sectoral effects, these
sectoral relations in the economy must be considered and captured through
general equilibrium models. 12 Impacts do not always have this extension 13
, but it is worthwhile to highlight that these general equilibrium models require
a high level of statistical and database sophistication.
The valuation and pricing of environmental resources do not only identify total
costs and benefits, but also, if not principally, how these are distributed within
society (i.e., who is bearing the costs and who receives the benefits).
This process of valuation and pricing, thus, is very important because it guides
decision-makers in finding ways to conciliate other alternatives that harmonize
this distribution of gains and losses and, from this point, construct consensus
and stimulate participation, support and commitment among various economic
regulators in the construction of the basis for a green economy.
Nº 8 • June 2011
12. A more simplified version of this model is an input-output matrix where the elasticities of
substitution are null. A general equilibrium model abandons this hypothesis with specific
estimates of elasticities for each activity, as well as adopting technical coefficients of a matrix
for production and consumption functions.
13. As generally occurs, for example, in climate change impacts where analysts almost always
use such models.

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Pearce, D. W. and Turner, K. R. (1990). Economics of natural resources and the environment.
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Seroa da Motta, R. (coord.) (1995). Contabilidade Ambiental: Teoria, Metodologia e
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Seroa da Motta, R. (1998b). Sustainability principles and depreciation estimates of
natural capital in Brazil. In Faucheux, S; O’Connor, M. and van Straaten, J (eds.),
Sustainable Development: Concepts, Rationalities and Strategies. Amsterdam:
Kluwer Academic Publishers.
Seroa da Motta, R. (2006). Economia ambiental. Rio de Janeiro: FGV Editora.
TEEB (2011). The economics of ecosystems and biodiversity: mainstreaming the economics
of nature: a synthesis of the approach, conclusions and recommendations
of TEEB.
UNEP (2011). Towards a green economy: pathways to sustainable development and
poverty eradication - a synthesis for policy makers. Retrieved from: .
UNEP (2000a). Environmental valuation - a worldwide compendium of case studies.
UNEP.
UNEP (2000b). Economic instruments for environmental management - A worldwide
compendium of case studies. UNEP.
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13. As generally occurs, for example, in climate change impacts where analysts almost always
use such models.

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The debate began to take shape in the 1970s and intensified at the turn of
the century: there must be a limit to growth, since the economy is part of a
system, planet Earth, whose equilibrium must be respected in the exploitation
of its resources. The disruption of this equilibrium does not interest anyone
in the long term. Therefore, the great forefront of sustainability is perhaps
addressing how companies ought to take this context into account in their
business models.
Furthermore: a company’s good results do not guarantee the continuity of
its business per se. More than just the bottom line of balance sheets, investors
and society increasingly want to know what actions were necessary in order
to achieve such results. In other words, sustainability is an integrated part of
management and not a mere addendum.
To financial institutions, the concern with sustainable development began
in the 1980s. However, it was in the 1990s that the subject gained greater
response, culminating in the launch of the Equator Principles, discussed
below. Since then, a series of voluntary commitments, self-regulations and
regulations have been encouraging banks to assume a sustainable role and
include sustainability concepts in their management.
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During the past decade, Brazilian financial institutions have adopted a series
of practices aimed at incorporating sustainable elements into their activities,
which transformed Brazil into a unique case among emerging countries, where
institutions manage projects of environmental improvements related to their
operations, promote community environmental education, and hire a growing
number of staff specialized in environmental risk and opportunities. Many
institutions consider socio-environmental aspects in credit approvals, promote
training on socio-environmental issues related to business management for
internal auditors and relationship managers of different divisions, such as
wholesale business, asset management and compliance. Training managers
and analysts to disseminate the socio-environmental risk policy and promoting
the evaluation of socio-environmental risk in the entire credit area, is another
1. Director of institutional relations at Brazilian Federation of Banks (FEBRABAN).

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common practice. Its objective is concerned with instructing teams to identify
risks in economic groups and sectors considered critical, such as those related
to the petroleum, chemicals, petrochemicals, pulp and steel.
Brazilian banks have been aware of socio-environmental responsibility
issues throughout the decade and massively adhered to international and
national pacts. This adhesion is connected to the institutional positioning of
the businesses, to the recognition of the importance of these pacts, to ethical
posture, reputation and image. Some examples of these commitments, assumed
gradually and to different extents by various Brazilian banks, are:
• Equator Principles: launched in 2002 by ten of the world’s largest banks in
project financing. They establish minimum criteria for credit extension to projects
that require investments above R$ 10 million, to ensure that financed projects
are developed in a socially and environmentally sustainable manner;
• Global Compact: officially launched by the United Nations in 2000.
Encourages businesses to adopt policies of corporate social responsibility
and sustainability, and guides organizations in redefining their strategies and
activities through ten principles in the areas of human rights, labor, environment
and anti-corruption;
• United Nations Environment Programme Finance Initiative (UNEP FI):
a partnership between UNEP and the global financial sector, enacted since
1991, whose mission is identifying and promoting practical improvements
related to sustainability. All members sign a declaration through which they
commit themselves to increasingly integrate sustainable development in their
operations;
• Millennium Development Goals (MDG): the Millennium Development
Goals (MDG) establish commitments approved by leaders from 191 United
Nations member-states in 2000. There are eight millennium goals: to eradicate
extreme poverty and hunger, achieve universal primary education, promote
gender equality and empower women, reduce child mortality, improve maternal
health, combat HIV/AIDS, malaria and other diseases, ensure environmental
sustainability and establish a Global Partnership for Development. Collective
efforts should guarantee the fulfillment of these objectives by 2015;
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• Principles for Responsible Investment (PRI): one of the achievements
of UNEP FI, in conjunction with the Global Compact, was the creation of
the Principles of Responsible Investment (PRI) in 2006. The objective of
this initiative is for investors all over the world to voluntarily incorporate
environmental, social and corporate governance aspects at the time that their
applications are executed. By April 2011, more than 850 investment institutions
have become signatories;
• Business Pact for Integrity and Against Corruption: launched in
2006 during the Ethos International Conference, the pact contains a set of

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suggestions, directives and proceedings to be adopted by businesses and
entities in their relations with government;
• National Pact to Eradicate Slave Labor in Brazil: created in May 2005,
the pact is coordinated and monitored by the Ethos Institute of Business and
Social Responsibility, the Social Observatory Institute, the Brazil Reporter NGO
and by the International Labor Organization. Its mission is to implement tools
that inhibit the business sector and Brazilian society to market products from
producers that utilize slave labor;
• Carbon Disclosure Project (CDP): is a collective petition formulated by
a group of 534 institutional investors responsible for the administration of an
estimated US$ 64 trillion worth of assets. The project was designed so that
businesses and investors all over the world would have access to information
about the impacts caused by greenhouse gas emissions and climate change
on company results. CDP is coordinated by a non-profit entity financed by
the British government’s Carbon Trust, and a group of foundations led by the
Rockefeller Foundation.
The Green Protocol
A more concrete step in the commitment of Brazilian private banks
to sustainable finances was taken in April 2009, with the adoption of a
protocol of intent by the Brazilian Bank Federation (FEBRABAN) and the
Ministry of the Environment, known as the Green Protocol. The protocol is
a fruit of the common effort to adopt socio-environmental policies that are
precursory, multiplicative, demonstrative or examples of banking practices,
and that are in harmony with the objective of promoting sustainable
development.
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To construct and implement a common sustainability agenda in the
sector that is aligned with the principles and directives of the Green
Protocol, FEBRABAN, with support from the Getulio Vargas Foundation
(FGV), began the construction of a matrix of sustainability indicators for
financial institutions in 2009. In addition to creating its own indicators,
the project draws inspiration from other existing and recognized
references in the market, such as the Global Reporting Initiative’s (GRI)
financial services sector supplement, the Ethos/FEBRABAN indicators
and the Securities, Commodities and Futures Exchange of Sao Paulo
(BM&FBovespa) Business Sustainability Index (ISE) evaluation
questionnaire. Besides the participation of associated banks, this process
of collective construction counts on collaboration with representatives of
civil society organizations.

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The objective is to offer a management tool that plots a diagnosis of
individual and sectoral performances, which evaluates the contribution
of banks to wealth generation that takes sustainability into account. The
matrix is also intended to serve as an instrument of communicating with
and accounting for society, including the development of new products
and services that contribute to the rapid transition to a green and more
inclusive economy. Banks should individually confirm their commitments to
the directives of the Green Protocol. In 2009, the State Bank of Rio Grande
do Sul, BIC Banco, Banco Sofisa, Banco Votorantim, Bancoob, BNP
Paribas Brasil, Banrisul, Bradesco, Cacique, Citi, HSBC, Itaú Unibanco,
Safra and Santander Brasil became signatories of the document.
Various banks have also offered products focused on financing schemes,
investment funds and loyalty cards with fees going to NGOs dedicated to
environmental issues. The equity funds of the businesses that compose the
Business Sustainability Index (ISE) are emblematic, as well as the financing
programs for environmental conservation and recuperation that aim to improve
and recuperate degraded legal reserves and permanent preservation areas.
The progress of these “green” funds reveals the effectiveness and
competence of businesses that adopt sustainable practices. In 2010, a weak
year on the stock exchanges, funds registered as sustainable and governed
by the Brazilian Association of Financial and Capital Market Entities (Anbima,
representing 340 institutions acting in the financial and capital markets)
presented an appreciation in quotations of 7.96%, compared to the 1.04%
appreciation of the Stock Exchange Index.
In the area of credit and financing, new environmental lines were created for
financing reforestation, development of agroforestry systems and investment in
renewable energy. Banks also offer credit lines for the acquisition of machinery
and equipment at reduced interest rates for businesses that seek to develop
cleaner production processes. To reduce environmental impacts, there are
also programs aimed at remediation of hydrographic basins, environmental
compensation, implementation and maintenance of Conservation Units,
biodiesel use and organic production.
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To evaluate and classify the socio-environmental risks of business lines, the
most common tool used by banks is the socio-environmental questionnaire,
which includes checking information related to compliance, environmental
licensing requirements and site visits. There are banks that expand these
evaluations by analyzing the potential socio-environmental risks of the client,
sector or project, through practice management by specialized teams that
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and, when necessary, through technical assistance for the financing of socioenvironmental
improvements.
To ensure that the client is in fact complying with the socio-environmental
requirements stated in the contract, banks carry out environmental audits,
technical visits, property evaluations, monitoring of credit portfolios and project
reevaluations. Despite all these practices, the auditing process of socioenvironmental
policies and risks is a challenge to the sector. Most banks do not
carry out verifications focused on sustainability, but intend to implement it over
the coming years. The objective is to prevent risks and promote the adoption
of best practices among clients.
Meanwhile, some banks have already developed this process for certain
project lines, based on the Equator Principles. The emphasis is on the
periodic application of the socio-environmental risk policy to the credit of a
legal entity, under the technical supervision of the internal audit committee
and the application of effectiveness tests. The results of these evaluations are
reported to main executives, such as members of the board of directors and
the sustainability committee.
Training and engaging professionals in socio-environmental policies is
another challenge to the incorporation and evaluation of sustainability criteria,
and thus has become a strategic goal of business areas within banks. Among
the main existing initiatives is conceptual and analytical socio-environmental risk
training for relationship managers, internal auditors and analysts. However, a
majority of banks have set objectives to expand training provisions to a greater
portion of the internal public.
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It should be highlighted that this movement is not based on a do-gooder
ethos, because risk and the management of risk, is at the core of the financial
business. And environmental risk has an effective and growing impact on the
four large risks faced by banking institutions – market risk, legal risk, operational,
and most importantly, reputation risk. Reputation is perhaps the greatest asset
of businesses that deal with an activity – financial intermediation – where trust
and credibility are the difference between life and death. Just remember that
the word credit comes from the Latin credere, believe, trust. During the last
crisis, images of clients camping outside the UK bank Northern Rock circled the
world, similar to the faded photos of the old bank runs so common in the 19th
century and the beginning of the 20th century. Moreover, it is not by accident
that research carried out by the consulting firm Accenture of senior executives
around the world, revealed that 72% of those interviewed highlighted the
importance of visible and authentic commitments to sustainability as an urgent
necessity, in order to reconquer the confidence and reconstruct the reputation
shattered by the international financial crisis.
One example, however, illustrates the size of the role played by financial
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finance: the media increasingly holds banks co-responsible for the projects
that they finance, such as the case of Belo Monte hydroelectric power plant.
The whole world is looking at Brazil and wondering: how are the local and
indigenous communities being treated? Are the environmental impacts being
considered? This leads to the following question: are the business members
of the consortium taking appropriate action? And finally: how are the banks
positioning themselves in relation to all this?
Just by this example we can assess the immense responsibility and why a
proactive posture is decisive. Especially as many markets are being put in check
nowadays. The energy model is one example, and we already observe how
universities, research institutes and businesses are working to discover new
technologies. The inclusion of the base of the pyramid is also challenging and
large and small organizations are already positioning themselves and offering
innovative solutions. Among the innumerable new companies that are surfacing,
there are certainly embryos of large businesses that will be very profitable in
ten years. The banks should be the propellants of these waves; they should
understand the trends, promote, invest and finance these types of businesses,
and thereby inducing the process of transitioning to a new economy.
Leaders of financial institutions must be ready to take this turn. Presently
Bloomberg and Reuters, for example, are creating mechanisms to help
analysts in considering environmental, social and governance variables. But it
is necessary to go farther. Each bank must recognize the impact of its portfolio
of clients and have a strategic plan to make this transition. Being close to
universities or incubators, for example, will help to identify the trends.
All this to say that it is no longer suitable for banks to play a passive and
purely monitoring role, but rather an active role of identifying entrepreneurs,
technologies and new business models. Only then will we have a positive
balance for all parts.
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Carolina Burle Schmidt Dubeux 2
In t r o d u c t io n
The report “Towards a green economy: pathways to sustainable development
and poverty eradication”, produced by the United Nations Environment
Programme (UNEP, 2011), seeks to demonstrate that sustainable development
can be reached without losses in income and employment, or increases in
poverty. Along these lines, the report models the macroeconomic effects
(income, employment and consumption) of a green economy.
The results of the growth models adopted in the report estimate that in the
medium term (in the spam time of six years) investments in natural capital, in
the magnitude of 2% of the global GDP between 2011 and 2050, will generate
growth in clean sectors that would more than compensate the income and job
losses in the constricting brown sectors. And that these investments also reduce
the poverty levels of those that depend directly on environmental services. The
green economy concept is not a substitute for sustainable development, but
rather, instrumental to it.
Financing these investments in a sustained manner requires regulations that
cut perverse subsidies and the pricing of environmental goods and services,
as well as a system of environmental indicators.
In the following section we will discuss how sustainability theory incorporates
the principles of a green economy. Lastly, we will outline briefly the basic
strategies for the construction of a green economy in Brazil.
Su s t a in a b il it y a n d g r e e n e c o n o m y 3
The sustainable development concept was formally adopted in the Brundtland
report (World Commission on Environment and Development, 1987) 4 . This
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1. Senior Researcher at the Research Institute for Applied Economics (IPEA) and member of
the IPCC 3rd and 5th Assessment Reports.
2. Researcher at the Center for Integrated Studies on Environment and Climate Change (Centro
Clima/COPPE/UFRJ) and member of the 5th Assessment Report..
3. This section was based on Seroa da Motta (2011).
4. The idea of making economic growth and nature compatible was already a recurrent theme
before the publication of the Brundtland report, but the report was most successful in
formalizing it.

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document definitively introduced the idea that economic development should
be undertaken without compromising the economic development of future
generations.
In a rather simplified way, the novelty of this approach of sustainable
development, resides in the inclusion of an environmental dimension to the
models of economic growth.
The sustainability of economic growth was always a central question in
development models. However, the development models adopted by countries
over the past fifty years, only exceptionally referred to environmental issues
as a restriction. The natural basis for the planning strategies was considered
infinite, that is, as a capital factor without scarcity restrictions.
Although the natural basis is intrinsically associated with the comparative
advantages of economies in their international insertion, and closely associated
with the subsistence activities of the poorest segments of the population, as in
the majority of developing countries, there are few references to environmental
issues in the economic development literature.
Despite the finitude of these resources posing as an obstacle to the adopted
development trajectory and generating significant social problems, the
perception of scarcity does not exist in the design of these models. 5
The sustainable development concept, though it may have several
descriptions and its utilization in the communications media generally occurs in
vague contexts, can be discussed objectively the same way that sustainability of
economic growth is discussed when considering the importance of maintaining
non-declining asset values in an economy. That is, sustainability in an economy
occurs when its capital stock, that defines the future flow of goods and services,
is maintained at least constant.
The current sustainability issue only introduces the necessity of treating
natural capital differently from material capital. A differentiation with a theoretic
and methodological basis similar to that which introduced the theory of human
and technological capital into these same models.
The economic growth models developed in the 70’s, that analyzed the
inter-temporal optimization of natural resources in production 6 , depended on
hypotheses about the essentiality of resources and their impacts on the levels
of growth in the economy.
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According to Perrings et al. (1995), the essentiality of environmental resources
can be analyzed by the degree of complementarity and substitution between
natural capital and material capital among the possibilities of production and
consumption in an economy. That is, the elasticity of substitution between these
5. See for example, Dasgupta and Maller (1996) for an analysis of this gap in the literature.
6. See Hartwick (1977), Solow (1978) and Dasgupta and Heal (1979).

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two types of capital is what defines the degree of essentiality. The greater the
elasticity of substitution, the less essential is the resource.
In traditional models, it is assumed that the elasticity of substitution is greater
than or equal to one. That is, the level of natural capital stock may decrease
as long as the economy can make the compensatory investments in material
capital.
This is the well-known Solow-Hartwick rule, in which the sustainability of
an economy, understood as the capacity of an economy to maintain a certain
level of consumption, is determined by the capacity to avoid that revenues
generated through the exploitation of non-renewable natural resources is
wholly transformed into present consumption. Thus, it would suffice to reinvest
part of the revenue generated from the exploitation of natural resources in the
formation of capital, whether material or natural, equivalent to the consumption
of natural capital 7 .
According to these models, maintaining the total stock of capital “constant”
over time is what matters in order to maximize welfare. 8
Thus, environmental issues are not considered as relevant or restrictive to
growth. What matters is the political capacity to immobilize part of the income
resulting from the exploitation of natural resources.
However, the capacity of ecosystems to generate services depends on
maintaining certain ecosystem components, such as the population and food
chain, within specific limits. Once these limits are surpassed, the ecosystem
could enter into a collapse and its productivity become null. The definition of
these limits identifies the limits to growth and, consequently, determines the
sustainable growth trajectory of an economy.
As such, it is prudent to identify the minimum secure levels or support capacities
of the natural resources that are being utilized for the generation of revenue.
Thereby we can define the critical natural capital as that where the level of
consumption already exceeds its support capacity, and therefore productivity
declines to zero. In these cases, the elasticity of substitution is less than one
and the possibilities to substitute between natural and material capital tend to
decline when the product grows.
In these critical cases, a declining level of natural stock represents a nonsustainable
trajectory and losses in welfare should be considered. Thus the
consumption of this capital has to be negative, that is, it should be appreciated
and not depreciated.
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7. That is, the environmental costs are inferior to the resultant benefits or income generation
could compensate or recuperate environmental losses and still add aggregate value to the
economy.
8. Beyond other restrictive hypotheses, such as: valuation of capital over time and a fixed
discount rate over time.

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The non-critical natural capital would be that where the stock level still has
not reached its support capacity. In the meanwhile, this does not imply that
the capital does not have a minimal level of security below which it becomes
critical.
However, the consumption of this capital can be compensated by investments
in material capital without losses to welfare. Whether it be investing in the
recuperation of rivers, contaminated areas or in controlling impacts, as in the
case of climate change through mitigation and adaptation efforts.
The hypothesis of very weak sustainability, “economic growth without
environmental restrictions”, assumes that substitution possibilities are infinite,
as long as the total capital stock in the economy does not decline. On the other
extreme, the hypothesis of strong sustainability, of “zero growth”, assumes that
there are no more substitution possibilities, since all forms of natural capital
are critical and no more natural capital should be consumed.
Intermediately is the hypothesis of weak sustainability, which distinguishes
between the critical and non-critical forms of natural capital and determines
differentiated treatments in accordance with the critical levels of identified stock.
In this approach, technological progress is considered an agent of sustainability
when it reduces the intensity of environmental consumption.
Ultimately, sustainability would be possible with greater environmental
efficiency resulting from (i) changes in production processes and product
designs; (ii) changes in the structure of production and consumption; and (iii)
reductions in the levels of production and consumption.
In this spectrum, the green economy is characterized by a continuous
increase in natural capital, that is, an appreciation and not a depreciation.
This would enable lower levels of material intensity and less pollution per unit
of revenue, which in turn would induce “detachment” / “decoupling”, or the
separation of economic activity from environmental impacts.
This proposition holds that economic policies aimed at natural capital
can accelerate this detachment without reducing levels of consumption and
production. To a certain extent, this possibility opposes that which claims that
decoupling occurs spontaneously within the economic growth process when
the economy reaches a threshold in income levels (Environmental Kuznets
Curve – EKC) 9 .
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Presently, the challenge to constructing a green economy is creating
institutional capacity to integrate environmental policies with economic policies,
and a system of environmental indicators capable of measuring and monitoring
the benefits of natural capital investments.
9. See a critical revision of the EKC in Galeotti, Manera and Lanza (2009).

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Go v e r n a n c e s t r a t e g i e s in a g r e e n e c o n o m y
In the previous sections we have seen that in accordance with the theoretical
economic assumptions, the appreciation of natural capital does not necessarily
reduce the efficiency of an economy. Or better yet, the environmental costs
generated by the inefficient exploitation of environmental resources reduce
growth possibilities.
Challenging conventional wisdom, environmental cost is not associated with
poverty, but rather on the contrary, poverty is part of the environmental cost. It is
common to observe constant references in the literature to population pressures
on the environment 10 and that poverty exacerbates the pressure on the natural
base of economies and thereby amplifies the environmental crisis. Evidence of
this positive relation between poverty and degradation have been contested in
the literature that measures the relationship between income and degradation in
light of the environmental Kuznets curve hypothesis (see for example Heerink,
Mulatu and Bulte, 2001) and Environmental Justice (see Acselrad, Herculano
and Pádua, 2004 and Shepard and Cobin-Mark, 2009).
For example, the lower consumption levels of the low-income population,
especially of energy, generate low levels of greenhouse gases. Reports by the
IPCC 11 , on the other hand, confirm that the lacking earnings capacity of this
population results in a low adaptation capacity and that they will suffer most
from the impacts of climate change.
Seroa da Motta (2004) measures the contributions by income-level to water
and air pollution in Brazil, and finds that the great concentration of degradation
pressure comes from the consumption patterns of the richest people, which adds
yet another negative aspect to the unequal distribution of income in Brazil.
That is, degradation pressure comes mainly from the consumption patterns
of the highest income classes, and relaxing environmental controls indirectly
creates a subsidy for the consumption of the rich at the expense of the poor.
Thus, the distribution of costs and benefits of environmental controls should
be equitable. And the environmental issue can stop being a problem and instead
turn into a solution. As such, it would be necessary to consolidate the real
life scenarios previously described and design policy options that harmonize
environmental and economic policies. Next, we will elaborate on some of these
options, namely: systematizing environmental indicators, amplifying economic
instruments and removing perverse incentives.
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10. This hypothesis stems from the seminal work of Ehrlich (1968), who introduces the concept
of environmental risk due to population pressure, which became known as the “neomalthusian”
thesis.
11. See for example IPCC (2007).

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Sy s t e m a t i z i n g e n v ir o n m e n t a l in d ic a t o r s
The economic and ecological magnitudes of environmental issues are distinct
and their relative importance must be outlined. Therefore, it is necessary to
prioritize the objectives of political actions to construct a green economy.
However, such efforts must come from inside the planning system with the
objective of generating physiochemical indicators that evaluate the patterns of
environmental resource use, associated with economic and social indicators
that evaluate their connections to the real economy. 12
A report by the Stiglitz-Sen-Fitoussi Commission that details an
extensive analysis of measurements of economic performance and social
progress, reveals that actions taken by decision-makers depend on what is
measured, of how good the measurements are and how well the measurements
are understood 13 .
Essentials conditions to realize these initiatives are: a) the creation of
an environmental statistics system that includes environmental indicators; and
b) the establishment of a relationship between these and traditional economic
and social indicators.
Environmental indicators can reflect the pressure of economic activities
(production and consumption) on the environment (such as, greenhouse gas
emissions, consumption of renewable energy and deforestation rates) or the
state of the environment (such as, concentration of pollutants in the atmosphere
and water resources and levels of species extinction) 14 . These indicators thus
permit specific evaluation of an environmental resource.
A more general evaluation of environmental progress in a region or biome
must rely on compounded environmental indexes that aggregate and synthesize
environmental indicators of pressure and state, such as the “Environmental
Sustainability Index” (ESI) or the “Environmental Performance Index” (EPI),
as well as compounded indexes that measure “environmental footprints” (for
example, the Ecological Footprint Index) 15 .
Ultimately, there are indicators that correlate environmental indicators with
economic indicators that measure production and consumption and are derived
from a system of national accounts. A system of environmental accounts (SEA)
has been proposed in order to include the environmental variable in the current
system of national accounts (SNA). The performance of economic activities is
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12. See Seroa da Motta (1996) for the evaluation of an effort to generate environmental
indicators in Brazil.
13. Stiglitz, Sen and Fitoussi (2009), p. 9.
14. See OECD (1993) where the proposal for indicators in this category was first presented.
15. See Stiglitz, Sen and Fitoussi (2009) for a detailed discussion of these indexes, especially
the footprints that to the authors do not consider trade between countries, nor do they
account for the substitution of natural capital for material capital, that is, environmental
productivity gains over time.

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reflected in the SNA by macroeconomic aggregates, such as the gross domestic
product (GDP), investments and capital depreciation.
The greater the stock of capital in an economy, the greater is its capacity
to generate revenue. The GDP is the revenue generated by the economy.
Investments represent how much capital the economy “created” in order
to generate the GDP and, consequently are part of the GDP. Depreciation
represents how much capital the economy “consumed” to generate the GDP
and, consequently is not included in the GDP. Thus, the net domestic product
(NDP) of an economy is the GDP minus the consumption of capital.
These measurements from SNA are estimated based on the information
collected by production units through survey research (for example, the census).
As has been discussed, the use of natural capital generates costs that economic
actors do not internalize in their activities. The SNA was not initially designed
to capture the environmental costs associated with the depreciation of natural
capital. Efforts have been made by the United Nations Statistics Division (see
SEEA, 2003) to standardize a methodology that permits the estimation of the
consumption of natural capital to be included in SNA in the form of a system
of environmental accounts.
Observe that the estimation of natural capital consumption generates an
indicator of how much society is relying on its natural assets to generate
revenue, i.e., swapping sustainability for present consumption. This indicator
could offer good guidance for the environmental investment efforts necessary
to maintain a sustainable level of natural capital. For example, the World Bank
(World Bank, 2006) estimated an indicator of net savings or net adjusted
savings to measure how much of national income is due to the consumption
of natural capital.
Determining the adequate level of sustainability has been one of the main
problems in the valuation of natural capital consumption. For example, Seroa da
Motta (1998) estimated that 2.40% of Brazil’s GDP in 2005 could be considered
consumption of natural capital by weak sustainability criteria, but that this
percentage could reach 29% in the case of a strong sustainability scenario.
Nº 8 • June 2011
A System of Environmental Accounts is not limited to, for example, the
measurement of a green GDP. The integration of all economic indicators
from the National Accounts offers innumerable options of measurements
of environmental performance. The most simple would be the intensity of
environmental consumption (pollution emissions, energy, etc) per unit of revenue
and consumption (national revenue, family incomes, government consumption,
imports and exports) to those that are related to the formation of capital that
measure the appreciations and depreciations of the natural capital stock 16 .
16. In the case of measuring the consumption of natural capital, there are more complex and
controversial conceptual and methodological issues related to the monetization of the value
of the natural resource and its services. See SEEA (2003) and the chapter about valuation in
this publication.

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Studies realized so far 17 also indicate that the contribution of the SNA
for environmental management is strongly associated with the degree of
disaggregation of the indicators in terms of sectors, locations and time.
As such, the planning of a green economy must define an Environmental
Indicators Plan to take immediate effect with a minimum and viable set of
environmental indicators that can be, for example, already consolidated with
administrative registers from environmental agencies (organized for monitoring
and supervision, such as inventories of emissions, flora and fauna) and from
existing continuous research that investigate environmental aspects (sanitation,
solid waste, deforestation, etc).
To summarize, without knowledge of the natural basis and how it transforms
in relation to economic activities, all and any efforts towards a green economy
cannot be conducted nor verified.
Am p l i f y i n g e c o n o m ic in s t r u m e n t s
The structural change in the economy in the direction of green sectors
will require the correct pricing of environmental goods and services to reflect
their true opportunity costs. This price correction can be done with economic
instruments for collections (tax or payments) through environmental resource
use or through creating markets for use rights.
Beyond the aspect of generating efficiency, these instruments can generate
additional fiscal or administrative revenue to: a) finance the institutional
capacity building of environmental agencies; b) realize environmental payments
or compensation; and c) when designed in a progressive way, implement
compensatory policies to alleviate environmental impacts on the poor 18 .
As such, the first condition is the consolidation and codification of environmental
legislation and the creation of the legal space to adopt instruments. The second
is the recognition of the fiscal space of these instruments in the tax system.
However, their amplified use should be cautious due to the associated
technical and administrative difficulties. Flexibility, institutional compatibilization,
gradualism and participation of stakeholders should be criteria to be respected
in their introduction.
Nº 8 • June 2011
Before any attempts to develop an economic instrument, regulators should
first analyze the political objectives and the current state of the natural resource
use. This is an obvious step, although frequently overlooked, especially
when regulators are anxious to transfer a “good” experience of a certain
instrument applied in another country. Regulators should first make explicit the
environmental policy and its objectives for which the economic instrument will
17. See a recent review in Stigliz, Sen and Fitoussi (2009).
18. See, for example, Seroa da Motta (2006).

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be used. Note that an instrument is a means and therefore cannot substitute
the objectives of the policies. In summary, an instrument is intended to serve
a policy, not the other way around.
Re m o v i n g p e r v e r s e in c e n t iv e s
The greatest challenge to the planning of a green economy will be in the
adjustments to be made to economic instruments that are currently used or
under development by economic, social and sectoral policies. The inclusion
of the environmental issue in these policies is crucial to eliminate perverse
incentives in the use of environmental resources, which contradict and/or annul
the efforts of pricing and preserving environmental resources. Among these
policies, we highlight:
a) those aimed at natural resources and infrastructure, such as energy, water
supply, roads and others;
b) typically sectoral ones, such as the expansion of farming, cattle raising
and industry;
c) those of a macroeconomic nature, aimed at stimulating exports, generating
employment and investments;
d) those with structural content, such as agrarian reform and privatizations;
and
e) those with a distributive objective, that stimulate small businesses, urban
settlements and others.
The removal of perverse incentives in the construction of a green economy
will only be viable through a joint effort between the system of environmental
regulation and sectoral regulations that enable commitments to diagnose,
evaluate and route the actions of redefining these sectoral policies.
The uncertainty of various environmental impacts vis-a-vis the desired
benefits can, in some cases, certainly lead to indeterminate decisions.
However, a common and participative effort contributes to pinpoint these
areas of uncertainty, evaluate the costs and eliminate distorted perceptions.
Only then will a less costly and more efficient adjustment to these policies be
possible. To summarize, in these cases of indetermination and uncertainty,
the recommended posture would be to identify losers and winners, and their
losses and gains resulting from the environmental impacts as well as possible
mitigative and compensatory actions.
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In conclusion, the options that were briefly outlined here confirm the
hypothesis that environmental regulation should not be understood as a problem
and, beyond being a solution, it can represent a source of economic and social
benefits for Brazil in the 21st century through a green economy that generates
growth with preservation and alleviates poverty.

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