Reaching Brazil’s NDC target depends on improving the ABC Recuperação credit line

A new study by Climate Policy Initiative/PUC-RIO (CPI/PUC-RIO) reveals that credit for recovering degraded pastures in the Cerrado biome has been ineffective. Nearly three-quarters of the areas analyzed remains unchanged four years after receiving credit. Obtaining credit is associated with an average reduction of 3 percentage points in the pasture area, and no significant effects are observed in severely degraded areas.  

“The analysis of land use transitions in the financed areas for pasture recovery indicates that the credit issued is not generating a significant increase in the quality of the pastures and has not led to significant changes in land use. The subsidized resources are not generating effective returns for society”, says Wagner Oliveira, senior analyst at CPI/PUC-RIO.  

Around two-thirds of Brazil’s pastures, equivalent to 100 million hectares, are degraded. ABC Recuperação is the main public policy instrument for recovering degraded pastures in Brazil implemented in recent years.  However, the ABC Recuperação credit line has contributed to at most 2.5% of the ABC Plan’s target of recovering 15 million hectares of degraded pasture by 2020. Even if 100% of the pasture areas declared in ABC Recuperação credit operations were recovered, the contribution of this credit line to the ABC Plan’s target would have been 18%.  

The study also shows evidence of deforestation in the areas declared for pasture recovery, with a 5 percentage points decrease in the average proportion of native vegetation in the six years prior to receiving credit. After the credit was issued, this trend changed. 

“The evidence of deforestation shows a contradiction with the primary goal of pasture recovery, which is to avoid new deforestation and greenhouse gas emissions. We need to better evaluate the areas declared before funds are released and focus credit on producers who adopt good practices. In addition, we need to improve post-funding monitoring of the areas and ensure compliance with the technical project submitted to obtain funds”, says Oliveira. 

For the authors of the study, combining credit with other public policy instruments, such as technical assistance, can increase its effectiveness. “Borrowers who hired technical assistance had a reduction of 6 percentage points in the area of degraded pasture. The quality of the pastures was practically unchanged for producers who did not hire the service,” explains Priscila Souza, head of policy evaluation at CPI/PUC-RIO.  

Souza also suggests combining credit with risk management instruments. “Increasing the availability of longer-term rural insurance policies can amplify the impacts and minimize the negative influence of risks that are beyond the producer’s control”, says Sousa.

Brazil has committed to recovering 30 million hectares of pasture by 2030 in its Nationally Determined Contribution (NDC). In 2023, the Ministry of Agriculture and Livestock launched the National Program for the Conversion of Degraded Pastures into Sustainable Agricultural and Forestry Production Systems (PNCPD), with the aim of recovering 40 million hectares of pasture.  

“Increasing resources for pasture recovery must go hand-in-hand with improving the effectiveness of investments, allowing Brazil to meet its national targets and strengthen its commitment to the global pact to tackle climate change. Brazil needs to align the growth of agricultural production with the preservation of native vegetation. As Brazil gears up to submit its new NDC, this presents an opportunity to improve the subsidized credit policy,” says Juliano Assunção, executive director of CPI/PUC-RIO.  

Researchers matched the georeferenced polygons of the Central Bank of Brazil’s rural credit operations between 2016 and 2018 with data on land use and pasture quality from the MAPBIOMAS Platform and the Image Processing and Geoprocessing Laboratory (LAPIG) of the Federal University of Goiás (UFG), analyzing the effects on pasture recovery by 2022. 

Full report: bit.ly/Pasture-Recovery.

About Climate Policy Initiative/PUC-RIO
Climate Policy Initiative (CPI) is an organization with international expertise in finance and policy analysis. CPI has seven offices around the world. In Brazil, CPI has a partnership with the Pontifical Catholic University of Rio de Janeiro (PUC-RIO). CPI/PUC-RIO works to improve the effectiveness of public policies and sustainable finance in Brazil through evidence-based analysis and strategic partnerships with members of the government, civil society, the private sector and financial institutions.

For more information, please contact
Camila Calado Lima 
camila.lima@cpiglobal.org 
+55 86 99966-0560