VZCZCXRO5862
RR RUEHAST RUEHDH RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD RUEHSL RUEHTM
RUEHTRO
DE RUEHBR #0872/01 1941403
ZNR UUUUU ZZH
R 131403Z JUL 09
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 4676
INFO RUEHSO/AMCONSUL SAO PAULO 4305
RUEHRI/AMCONSUL RIO DE JANEIRO 7987
RUEHRG/AMCONSUL RECIFE 9736
RUEHNY/AMEMBASSY OSLO 0049
RUEHOT/AMEMBASSY OTTAWA 1065
RUEHME/AMEMBASSY MEXICO 2172
RUEHKL/AMEMBASSY KUALA LUMPUR 0079
RUEHLO/AMEMBASSY LONDON 1272
RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE

UNCLAS SECTION 01 OF 03 BRASILIA 000872 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: SENV KGHG ECON KSCA EAID ENRG BR
SUBJECT:  BRAZIL: CALIFORNIA'S AND OTHERS' INITIATIVES TO REDUCE 
TROPICAL FOREST CLEARING TO MITIGATE CLIMATE CHANGE 
 
REF: A) BRASILIA 618, B) 2008 BRASILIA 1159, 
C) BRASILIA 809, D) PARTO 006 
 
BRASILIA 00000872  001.2 OF 003 
 
 
(U) THIS CABLE IS SENSITIVE BUT UNCLASSIFIED AND NOT FOR INTERNET 
DISTRIBUTION. 
 
¶1.  (SBU) SUMMARY.  California is leading a group of states in the 
United States, Brazil and Indonesia, which are parties to a November 
2008 Memorandum of Understanding (MOU), in developing the 
specifications for credit grade international offsets for avoiding 
deforestation under California's cap-and-trade system.  A June 18-19 
meeting in Belem, Brazil, advanced these efforts by establishing the 
Governors' Climate and Forests Task Force (GCF) as the executive 
body for implementation of the MOU's forest sector provisions and 
also by creating key working groups.  After that meeting, William 
Boyd, a legal advisor for the MOU participants, briefed and won the 
support of Brazil's national government for the MOU group's work. 
At the same time, there are signs of substantial flows of 
international financing and technical assistance coming to Brazil to 
help it address its serious deforestation problem.  These include 
Norway's pledge to the Amazon Fund, a major loan from the World 
Bank, and possible funding from Prince Charles' Rainforest Project. 
END SUMMARY. 
 
CALIFORNIA-LED SUB-NATIONAL FOREST INITIATIVE ADVANCES 
 
¶2.  (SBU) The tropical forest conservation initiative launched in 
November 2008 by California, Illinois and Wisconsin and four Amazon 
forest states in Brazil plus two provinces of Indonesia is moving 
into a new phase.  (REFTEL A)  This initiative embodied in a 
Memorandum of Understanding (MOU) crossed into new territory at a 
meeting of the participants June 18-19 in Belem, Brazil.  While the 
prospects of a national cap-and-trade greenhouse gas (GHG) emissions 
regime have improved with the passage on June 26 in the House of 
Representatives of the Waxman-Markey legislation, California has 
already enacted Assembly Bill 32, which creates a state-wide 
cap-and-trade system that is scheduled to enter into force in 2012. 
Californian officials are seeking to establish the protocol, rules 
and reliable measures for including international forest offsets 
into that system.  The MOU has a focus on Reducing Emission from 
Deforestation and Degradation (REDD) activities.  The MOU provides a 
process to develop rules for credit grade offsets.  Initially these 
rules might just apply to California, however, over time they could 
be subsumed into a national regime should Congress adopt a 
cap-and-trade GHG emissions regime. 
 
¶3.  (SBU) At the Belem meeting, the MOU parties formally established 
the Governors' Climate and Forests Task Force (GCF) as the key 
executive body for implementation of the MOU's forest sector 
provisions.  California is chairing the GCF for 2009 and one of the 
Brazilian states will likely serve as chair in 2010.  The group 
divided the task of developing the rules for credit grade forest 
offsets into three parts and established a key working group for 
each part: (1) development of standards and criteria for acceptable 
projects, which will led by the Brazilian State of Amapa; (2) 
development of forest carbon coordination mechanisms and accounting 
frameworks, which will be led by the Brazilian State of Mato Grosso; 
and (3) conduct a needs assessment (technical, legal, institutional 
and financial) for designing compliance grade REDD projects, which 
will be led by the Brazilian State of Acre.  This work should feed 
into the ongoing work of California officials in developing rules 
and protocols to implement Assembly Bill 32.  California seeks to 
have rules out for comment in 2010.  A critical product of the MOU 
will be the development of a reliable compliance credit from avoided 
deforestation.  This type of credit has been discussed for years, 
but never brought to life.  It differs greatly from the credit under 
the Clean Development Mechanism, which deals with actual reductions 
in GHG emissions.  The REDD credit entails giving a value to 
theoretically avoided GHG emissions from not clearing the forests. 
 
¶4.  (SBU) The next steps for the parties include meeting in 
September in California and developing a Joint Action Plan through 
the end of 2010.  The Moore Foundation and the Packard Foundation 
have supported the work under the MOU to date, though additional 
support will be needed after 2009.  The MOU parties are - beyond the 
U.S. and Brazilian states mentioned above - the Brazilian State of 
Para and the Indonesian Provinces of Aceh and Papua.  Further, the 
group expects to expand soon to include one or more states from 
Mexico (such as Chiapas) and one or more Canadian province (such as 
British Columbia).  Other U.S. states (such as Florida) are 
interested in joining too. 
 
BRASILIA 00000872  002.2 OF 003 
 
 
 
¶5.  (SBU) William Boyd, a legal advisor for the MOU parties, briefed 
officials from Brazil's Ministry of Exterior Relations (MRE), 
Ministry of the Environment (MMA), and the Presidency about the MOU 
and the ongoing work by the parties.  Boyd emphasized that the 
sub-national level work on forest credits is "not intended to be 
disruptive" of national level activities.  In fact, the MOU group is 
trying to be sure these different levels are coordinated.  At the 
MRE, Andre Odenbreit Carvalho, the Director of the Environment 
Policy Division, and Fernando Coimbra, the Director of the 
Environment Division, expressed their appreciation for the briefing 
on the MOU group's work and then, as discussed below, shifted the 
conversation to the ongoing climate change negotiations under the UN 
Framework Convention on Climate Change (UNFCCC).  The MMA's 
representative from the International Affairs Office, Gustavo Costa, 
and a representative from the MMA's Climate Change Secretariat, 
Mariana Egler, stated that the MMA welcomes this type of initiative 
because it helps their efforts to reduce deforestation, even though 
they couldn't give an official stamp of approval to the initiative. 
In addition, there was agreement to establish a follow up 
coordinating meeting between the MMA and the MOU group.  The MMA 
officials pointed out that the preferred tool at the national level 
is the Amazon Fund (REFTEL B) is premised on the concept of 
voluntary contributions to avoid deforestation without creating any 
offsets or credits.  Carlos Alfredo Teixeira, a senior international 
advisor at the Presidency, welcomed the briefing, but like the MRE 
he preferred to discuss the UNFCCC negotiations. 
 
¶6.  (SBU) A senior representative of the Brazilian State of Mato 
Grosso, Jefferson Castro, participated at the Belem meeting and 
accompanied Boyd on his meetings in Brasilia..  Castro underscored 
in these meetings the importance that Governor Blairo Maggi of the 
State of Mato Grosso placed on the MOU initiative and eventually 
launching REDD projects.  Governor Maggi is an influential voice for 
the agriculture sector and has excellent connections to President 
Luis Inacio "Lula" da Silva and his head of the Presidency, Minister 
Dilma Rousseff.  Castro said that Maggi in several weeks would be 
meeting at the highest levels of the MRE, the MMA, and with Min. 
Rousseff to provide additional support for the MOU's work. 
 
INTERESTING BRAZILIAN COMMENTS ON UNFCCC NEGOTIATIONS 
 
¶7. (SBU) At the Presidency, Carlos Alfredo Teixeira underscored Min. 
Rousseff's message of June 18 to Deputy National Security Advisor 
for International Economic Affairs Michael Froman, namely, that 
Brazil would give positive signs in the international negotiations. 
(REFTEL C)  When asked about the lack of movement at the MRE (REFTEL 
C), Teixeira stepped back and rephrased their position.  He said 
that Brazil "will not make dramatic moves," but it also "will not 
block positive efforts." 
 
¶8.  (SBU) Over at the MRE, Odenbreit (who is a senior advisor on the 
climate change negotiations team) stated that the USG was key to the 
UNFCCC negotiations.  In particular, he saw a question of 
comparability of efforts between the United States and the other 
Annex I countries.  Boyd, a former U.S. Senate staff assistant, 
explained how the Waxman-Markey legislation's worked.  Odenbreit 
expressed concern over the supplemental credits reductions, which he 
feared might be "shabbier," i.e., not of the same high quality as 
domestic or international offsets.  He said that the world would be 
focused on the quality of the credits the U.S. legislation required. 
 Odenbreit was surprised to learn that for many in the U.S. Congress 
the Clean Development Mechanism (CDM) had a bad image. 
 
¶9.  (SBU) The governors of the nine states containing the Amazon 
Forest sent a letter to President Lula dated June 26 urging the 
national government to change its international policy and support 
including forests in international carbon trading and offset 
regimes.  They wrote, "it is surprising to everyone, within the 
country and abroad, that the Government of Brazil is opposing the 
inclusion of forests in this promising market!  This position should 
be revised with urgency!"  The governors called on President Lula to 
create a national-state Task Force with the goal of developing 
recommendation to the President for positions that Brazil should 
pursue in Copenhagen.  To date, the national government has not 
responded to this remarkable letter. 
 
OTHER TROPICAL FOREST INITIATIVES 
 
¶10.  (SBU) While in Brasilia, Boyd met on June 24 with 
representatives of other countries and organizations that had 
 
BRASILIA 00000872  003.2 OF 003 
 
 
initiatives to reduce deforestation in Brazil.  The Economic 
Counselor from the Norwegian Embassy, Inge Nordang, deflated some of 
the hype about the Amazon Fund (REFTEL D).  He said that despite 
reports saying that Norway had transferred the first US$ 100 million 
installment of a US$ 1 billion pledge, no money had actually been 
sent.  Norway was waiting for the Amazon Fund's administrator, BNDES 
(the Brazilian national development bank) to submit REDD projects to 
be financed.  Nordang said that Norway wants the Amazon Fund to 
support a broad range of entities, not just a few large 
non-governmental organizations (NGOs) skilled at drafting proposals. 
 He added that they were concerned about double counting, where 
donors were paying twice for the same credits or activities, such as 
once on a sub-national level with California and a second time at 
the national level through the Amazon Fund.  Further, Nordang said 
that the projects needed to have a development aspect to them, since 
Norway wanted its contributions to count as Official Development 
Assistance (ODA).  He expected that the first projects would likely 
include a large project - possibly 50% of the first year's 
contribution - to Brazil's National Institute for Space Research 
(INPE), which handles satellites and remote sensing.  Norway was 
supportive of Brazil using a radar they had developed that sees 
through clouds and had been used to track Russian fishing trawlers 
fishing in Norwegian waters.  Norway is separately providing 
technical assistance to Amazon Forest states preparing their own 
anti-deforestation plans.  The Norwegians join the Brazilians in 
encouraging others to contribute to the Amazon Fund, but so far 
nobody has, though Germany has offered some grants for capacity 
building to help the Amazon Fund take off. 
 
¶11.  (SBU) Other highlights from the meeting with representatives 
from the World Bank and developed countries include: 
 
-The World Bank has a US$ 2 billion loan for rural development and 
sustainable development at the state level.  Underlying this loan is 
the concept that improved agriculture productivity on existing farm 
land will reduce pressure to clear forests for new arable land. 
 
-The United Kingdom is supporting capacity building at BNDES with 
environmental loans, as well as addressing the complex land title 
issue.  The UK is thinking beyond Copenhagen.  The UK expects to 
release in the next few months a cost-benefit analysis, a "Stern" 
report for Brazil, on acting now on climate change. 
 
-Japan is providing Brazil access to two of its remote sensing 
satellites, including one that can see through the clouds. 
 
-Tasso Azevedo, the MMA's representative working with Prince 
Charles' Rainforest Project (REFTEL D), said that Brazil is working 
on interim financing for the 5-10 year horizon with a goal of about 
US$ 10 billion per year.  He added that Brazil may be working on a 
cap-and-trade system for its forest sector. 
 
¶12. (SBU) COMMENT.  Significant new financing for efforts to reduce 
deforestation in Brazil are coming.  The Amazon Fund should soon 
have its first batch of projects approved and funded.  REDD 
activities that are California (or maybe even U.S.) offset quality 
are much closer to a reality, possibly as soon as 2012.  In 
addition, the World Bank, Prince Charles' Rainforest Project and 
other donors are or may soon bring serious amounts of funding or 
technical assistance to Brazil to help address the ongoing 
deforestation problem.  The work the California-led MOU group is 
performing will be useful in establishing tools for measuring and 
evaluating - and avoiding double counting - of REDD activities. 
Brazil may be soon faced with an absorption problem, i.e., a lack of 
enough good, vetted proposals.  END COMMENT. 
 
SOBEL