Mato Grosso. 2019

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JEC Assessment: Mato Grosso. 2019

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JEC Assessment: Mato Grosso. 2019

October 1, 2019

TABLE OF CONTENTS

1. MACROECONOMIC OUTLOOK 1

2. POLITICAL DEVELOPMENTS IN 2018-2019 4

3. INSTITUTIONAL AND OTHER MAJOR DEVELOPMENTS IN 2018-2019 5 REM MT Program 5 Mato Grosso World Bank Policy Development Loan 6 PCI Institute 6 Land regularization program contract within Amazon Fund 7

4. CURRENT CHALLENGES 8 2019 forest fires 8 Slow implementation of the Rural Environmental Registry 10

5. ANALYSIS OF PROGRESS ON DEFORESTATION RATES VERSUS TARGETS 11

Checklist JEC 1: Scope Re-assessment 16

Checklist JEC 2: Ambition and Strategy Re-assessment 19

Checklist JEC 3: Progress Update 29

Checklist JEC 4: Monitoring, Reporting and Verification (MRV) Update 34

Checklist JEC 5: Social and environmental safeguards Update 36

ANNEX 1. FOREST FIRES IN THE AMAZON 38

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1. Macroeconomic Outlook

Mato Grosso is Brazil’s third largest State by area (903,357 km2 , about the same as France and Germany combined) but home to only 3.4 million people (1.6 percent of the Brazilian population). Its GDP-per-capita (as of 2016) is the fourth highest among Brazilian states at US$10,700. Over 50 percent of the State’s GDP is related to agriculture and it has become a global powerhouse for soy and beef production, with 32 million tons of soy beans - 27 percent and 9 percent of Brazilian and global soy production, respectively - and 5.4 million heads of cattle raised in 20181.

In 2017, Brazilian economy began to recover, growing 1.1 percent at the back of a strong agriculture sector. In 2018, GDP growth remained unchanged at 1.1 percent, supported by recovery in household consumption and investment. Job creation is slowly improving with unemployment declining from a peak of 13.6 percent in March 2017 to 12.3 percent in 2018 but still above pre-crisis levels. Also, most of the new jobs are created in the informal sector. Extreme poverty (at US$1.90/day in 2011 PPP) increased from 4.1 percent in 2014 to 7.4 percent in 2017 and is estimated to have barely changed in 2018. Inflation has declined rapidly since 2016, facilitating subsequent monetary policy easing. The recession exerted downward pressure on prices and wages and inflation fell rapidly to 2.9 percent at the end of 2017, which allowed the Central Bank to take a more accommodative stance, keeping the policy rate at 6.5 percent since March 2018. In 2018, inflation remained moderate at 3.7 percent2.

On September 10, 2019 Brazil’s government raised its 2019 economic growth forecast to 0.85% from 0.81% although the accompanying official document rounded the new projection down to 0.8%. That is largely in line with the market consensus view of 0.87% growth, according to the central bank’s latest weekly ‘FOCUS’ survey of economists and financial institutions but will still be the slowest pace of annual growth since Brazil emerged from recession three years ago. According to the Economy Ministry estimates, the economy should expand by 0.2% in the third quarter, the half the 0.4% pace of growth in the second quarter. According to Economy Ministry Secretary Adolfo Sachsida, the extremely difficult cycle of the Brazilian economy seems to have ended in August. From September onwards there should be a more consistent step-by-step recovery.

The government’s new estimates also included a reduction in the 2019 inflation forecast to 3.6% from 3.8%, even further away from the central bank’s official forecast of 4.25%. The new forecasts are the economic parameters that will be used as the basis for the government’s upcoming bi- monthly spending review. So far in 2019, the government has announced spending freezes totaling 34 billion reais to ensure it stays on track to meet its primary deficit target of 139 billion reais3.

1 Mato Grosso Financial Adjustment and Environmental Sustainability Development Policy Loan. Program document. World Bank, 2019. 2 Mato Grosso Financial Adjustment and Environmental Sustainability Development Policy Loan. Program document. World Bank, 2019. 3 UPDATE 2-Brazil ups 2019 GDP growth forecast, but keeps iron grip on spending, Reuters. Retrieved September 12, 2019.

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Figure 1. Expectation on Economic Recovery. Source: Banco Central do Brasil (retrieved September 12, 2019)

Figure 2. Inflation control and expectation anchorage. Source: Banco Central do Brasil (retrieved September 12, 2019)

Figure 3. Credit/GDP, annual growth and volume. Source: Banco Central do Brasil (retrieved September 12, 2019).

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In 2019, Mato Grosso's GDP decreased 0.3% in the first quarter of 2019 when compared to the same period of the previous year. Among the three major sectors that make up the state economy, two presented negative variations: Agriculture (-4.4%), Industry (-6.7%) and Services (3.7%) in the first quarter. According to the IBGE Quarterly National Accounts System, the GDP of Brazil in the same period grew 0.5%.

For the last four quarters ended in March 2019, compared to the four immediately preceding quarters, the Mato Grosso economy grew by 1.2%. The sector performance included: agriculture (-7.3%), industry (-3.1%) and services (3.8%). In the same period of time, Brazil's GDP grew by 0.9%.4

Figure 4. Cumulative growth rates of GDP of Mato between 2016 and 2019. Source: Government of Mato Grosso (retrieved September 12, 2019)..

Despite the relatively strong local economy, the State Government is in fiscal crisis. Mato Grosso has been relatively less affected by Brazil’s recent economic recession, given its strong agriculture exports, with growth averaging 2.6 percent between 2011 and 2016. The unemployment rate in Mato Grosso stood at 8.4 percent in 2018, below the national average (12.3 percent). Yet, revenues trail economic growth as production of agricultural commodities for export is exempt by federal legislation from the State’s value-added tax (ICMS) and States cannot tax rural properties. Expenditure growth in turn has been high, driven by increases in public employment, a growing pension deficit and generous wage policies. This imbalance has resulted in a growing financing gap, covered by accumulating arrears.

4 Quarterly GDP of Mato Grosso state. 1st Quarter of 2019. Retrieved September 12, 2019.

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2. Political developments in 2018-2019

In October 2018, Brazil had national and state elections. The current State Governor won the October 2018 state election in the first round with 58.7 percent of valid votes. Upon taking office in January 1st , 2019, the new administration urgently addressed the State Government’s fiscal crises, starting with the declaration of “financial calamity”.

Fiscal adjustment and sustainability are a key priority for the new Government, with a medium term plan currently being developed. In his opening speech to the legislature, the Governor emphasized the State’s broken public finances and the need to address the fiscal crisis swiftly, as a pre-condition to achieving other government priorities such as improved outcomes in health and education. These priorities are aligned with the governor’s program for the 2018 election, which focused on reducing the state bureaucracy and increasing the efficiency of public spending. The program also called for supporting the sustainable management of forests and progress in environmental regularization of rural properties and recovery of degraded areas, as key drivers to the agricultural sector growth.

By end of January 2019, it had approved a package of fiscal adjustment and reform measures termed Pacto por Mato Grosso (Pact for Mato Grosso). The package focuses on expenditure control, including the State Fiscal Responsibility law, changes to public sector pay adjustments, changes of the State’s public pension system and an administrative reform, reducing the number of State Secretariats and allowing for the closure of State companies. It also increases levies on the main agricultural commodities produced in the State. Moreover, the multi-stakeholder Produce, Conserve and Include (PCI) program has become a critical instrument to develop and implement a sustainable natural resources-based growth model. The package focuses on scaling-up efforts to reduce deforestation and forest fires, accelerating implementation of the environmental regularization in private properties, and institutionalizing the PCI strategy.

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3. Institutional and other major developments in 2018-2019

REM MT Program

The REDD+ for Early Movers (REM) program is an essential element of Germany's bilateral involvement in REDD + (Reducing Emissions from Deforestation and Forest Degradation), commissioned by the Federal Ministry for Economic Cooperation and Development of Germany (BMZ) and implemented jointly by the German Development Bank, Kreditanstalt für Wiederaufbau (KfW) and German International Development Cooperation, Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH. The REM program supports countries called Early Movers, rewarding “REDD pioneers” such as Colombia, Ecuador and Brazil for their success in reducing deforestation. KfW offers results-based financial cooperation for the REM program, while GIZ provides the technical cooperation necessary for the national counterparts to implement this financing scheme.

The REM Program in Brazil, launched in 2017, is co-financed by the Government of the United Kingdom and implemented with the State Governments of Mato Grosso and Acre via their Environment Secretariats and the Acre Climate Change Institute and with the Brazilian Federal Government via the Environment Ministry (MMA)5. GIZ provides technical assistance, particularly related to social environmental safeguards, participative governance and construction of indigenous territories program. The Brazilian Fund for Biodiversity (FUNBIO) acts as the Program's financial agent.

According to PRODES / INPE analysis, deforestation in the state of Mato Grosso was below the 1,788 kmퟸ agreed for 2016/2017 period. Hence, REM MT Program received, in December, the first disbursement from KfW: about BRL 22 million. An additional £ 8 million will be disbursed by the British Department for Energy and Industrial Strategy (BEIS).

The Program's benefit-sharing is designed to leverage structures and unlock key bottlenecks for the state's advance in this transition to a low-carbon economy. In the institutional strengthening strategy, support to the State REDD+ System and the PCI Strategy stands out as complementary mechanisms capable of leveraging new investments for the State. While advancing PCI targets also represents an increase in the state's carbon assets, SisREDD is the instrument that allows the state to account for these assets for use in attracting new investments. SisREDD is legally responsible for official record of carbon credits from conservation and deforestation reduction, as well as implementation of REDD+ and safeguard monitoring programs.

The second monitoring mission of the Mato Grosso REM Program, taking place in May 2019, highlighted the integration and cooperation between the organs of the State Executive Branch in the execution of actions aimed at complementing the actions already developed by Mato Grosso to combat illegal deforestation and enhance the standing forest. The mission pointed to the need to define priority geographic regions, preferably two in the Amazon and one in the Cerrado. The report also points out the importance of a strategic convergence among the actions in order to achieve expected results of combating illegal deforestation. The delegation of the second REM monitoring mission was led by KfW Bank represented by REM Program Coordinator Christiane Ehringhaus, Procurement Manager Klaus Kohnlein, Project Manager Florian Arneth and REDD + Technical Advisor Bojan Auhagen. Helen Humford of BEIS and Katerina Trosmann of the British Embassy represented the United Kingdom6.

5 Technical Cooperation for the REDD Early Movers (REM) Program -Mato Grosso and Acre -Brazil. Retrieved September 15, 2019. 6 REM Program Mission Praises Integration of MT Executive Organs. Retrieved September 15, 2019.

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Mato Grosso World Bank Policy Development Loan In the first semester of 2019, the World Bank Board of Executive Directors approved the US$ 250 million Mato Grosso fiscal adjustment and environmental sustainability development policy loan (PDL). The loan will support the Brazilian center-west state in two pillars: (i) to regain fiscal sustainability and (ii) increase institutional capacity for sustainable agriculture, forest conservation and climate change mitigation. It will help the state implement a heavily frontloaded fiscal reform package and critical environmental policies, including a new Deforestation and Forest Fire Prevention and Control Plan, and support to the implementation of a rural environmental cadaster and to the state Secretariat for the Environment.

A state Fiscal Responsibility Law is supported by this operation, enabling the state to regain and maintain sustainability of its finances. The operation will ensure that key expenditure drivers, such as wage growth, can be controlled going forward. Policies supported by the operation also strengthen Mato Grosso’s tax base by reducing tax expenditures and increasing fiscal contributions from the agrobusiness sector. To sustain the state’s agricultural export-led growth model, the operation supports policies to control deforestation and forest fires, and accelerates the implementation of the rural environmental cadaster. It also supports the institutional consolidation of the state’s efforts towards attracting investment in sustainable, inclusive, and climate-smart agriculture through “Produce, Conserve, Include” (PCI).

The outcomes supported by the program include:

• Increase in current savings to 5 percent of revenues • Reduction in the share of net current revenues spent on wages and pensions to 60 percent • Containment of the state pensions deficit and increases in state revenues. • 29 percent reduction of deforestation in the state’s part of the Amazon biome (relative to 2018 estimates) • Seven-fold increase in the area covered by validated rural land cadasters • Increase in resources mobilized for the state’s flagship green growth strategy

This loan from the International Bank for Reconstruction and Development (IBRD) to the state of Mato Grosso is guaranteed by the Federative Republic of Brazil and has a final maturity of 19.5 years, with a 3-month grace period7.

PCI Institute The PCI Institute was founded in early 2019 as a private, non-profit institution to coordinate the dialogue with donors and investors and raise resources for the transition to sustainable agriculture aiming at climate co-benefits. It is a financially self-sustained institution governed by a multi- stakeholder board, providing for transparent and independent decision making. Its mandate is to advise on public policies and measures, as well as on a balanced mix of innovative technical and financial incentives. Moreover, the Institute will provide technical assistance to create a robust monitoring, reporting and verification system to evaluate programs and projects implemented under the PCI strategy. By issuing the Decree No. 46 of February 27, 2019, the State Government appointed the PCI Institute to perform these functions on behalf of the State. Given that the Institute will operate at arm’s length with respect to the State, it will be able to ensure transparency and a governance structures appropriate to meet donors’ requirements.

Strengthening the PCI and giving it a permanent institutional structure is expected to raise national and international resources amounting to a cumulative total of US$90 million by 2021. Ultimately, a stronger PCI and additional funding are expected to contribute to the PCI Strategy’s overarching goal of decoupling the increase in agricultural and livestock production from deforestation.

7 Mato Grosso to Enhance Fiscal Sustainability while also Protecting the Environment. The World Bank, 2019. Retrieved September 12, 2019.

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Land regularization program8 contract within Amazon Fund

In 2018, a R$72.9 million, 60-month contract was approved within Amazon Fund for the Mato Grosso state. It aims to contribute to reduce land conflicts and illegal deforestation, and to strengthen family agriculture in the municipalities of the state of Mato Grosso located at the Amazon region, through the regularization of settlements and public lands (at state and federal levels) and the modernization of land management at state level, integrating it with that of the federal level.

The project is part of the Mato Grosso state Program of Sustainable Municipalities (PMS), which aims to promote the sustainable development of municipalities by strengthening the local economy; improving municipal public governance; promoting legal security; conservation of natural resources; environmental recovery; and reduction of social inequalities.

According to the president of Instituto de Terras de Mato Grosso (Intermat), Francisco Serafim de Barros estimates that circa 70,000 families will be affected by the Program9. It will will enable farmers to access loans for production and technical development, resulting in greater employability, income and strengthening of family agriculture.

8 Terra a Limpo program, Amazon Fund. Retrieved September 29, 2019. 9 Estado traça estratégias para aplicar mais de R$ 70 milhões em regularização fundiária. SEMA, June 2019. Retrieved September 29, 2019.

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4. Current Challenges

2019 forest fires

As of September 9, 2019, the governor of Mato Grosso, Mauro Mendes announced a state of emergency due to forest fires. It will last for 60 days and may be extended for an equal period. In addition, since August the state of Mato Grosso counts with the federal assistance by Brazilian Army and is already using the new satellite monitoring tool Planet, acquired in frames of REM project. During this fire season Mato Grosso expects to use 87 vehicles, two planes and a helicopter and 1,327 civilian-military fighters, taking turns between 350 and 400 men a day. The joint investment of all agencies, including state and federal agencies operating in Mato Grosso, is estimated at R$ 8.5 million. The joint efforts include the Secretariats of Environment, Public Safety, Civil House, Ibama, ICMBio, State Public Prosecutor, among others.

On September 12, The Secretary of State for the Environment of Mato Grosso, Ms Mauren Lazzaretti, presented to the state deputies of Mato Grosso the actions taken by the Government to combat forest fires and illegal deforestation. According to Ms Lazzaretti, among the states of the Legal Amazon, Mato Grosso has the best response to fire events, being one of the first to activate the Integrated Temporary Multiagency Operational Coordination Committee of the State of Mato Grosso (Ciman-MT). Established by Decree No. 174/2019, Ciman brings together the various agencies that work in the forest fire response season, such as the Fire Department of Mato Grosso, Prevfogo / Ibama and ICMBio, with the purpose of strengthening monitoring, prevention, readiness and rapid response to forest fires and burns in an integrated manner with the various levels of government.

In addition to the preparedness and preventive activities, Ms Lazzaretti presented the results of the "Integrated Action to Contain Deforestation and Burning in the Amazon Biome" which, over the past 30 days, has imposed R$ 146 million in fines for crimes against flora. According to Ms Lazzaretti, in the first half of 2019 alone, SEMA has already filed 561 notices, corresponding to 74% of all notices issued in 2018. The notices applied in the first six months of that year generated R$ 286 million in fines. In addition to the actions carried out by the task force in August and early September, there are more than 87,000 hectares assessed, 756 notices of infraction, and the total fines may reach R$ 430 million10.

The immediate effect of this task force action can be seen in practice in the graph below, which shows how Colniza, a municipality in northwestern Mato Grosso and one of the main focal points of deforestation in the state, moved from 2nd to 9th position after the start of Planet's use and enforcement activities:

Figure 5. Municipalities with the largest deforestation (July-August 2019 and August-September 2019). Source: Relevant Facts about Deforestation and Forest Fires in Mato Grosso. PCI 2019.

10 Sema applied R $ 146 million in fines for environmental crimes in the last 30 days. SEMA, September 2019. Retrieved September 29, 2019.

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• The average figures of forest fires in the Amazon basin are close to the average, but they include not only Brazil but also Peru, Colombia, and parts of other countries. The average annual figures of forest fires in Mato Grosso are the highest since 2012, but close to the average for the last 15-20 years. Some weekly fire counts have unusually high peaks in 2019, comparing to the same weeks of the previous years. • The fire alerts indicate a fire is happening but not how big it is - the accurate deforestation figures come from PRODES monitoring system (available later this year). • INPE uses active fire data from NASA’s MODIS sensors to monitor fire activity in the Brazilian Amazon, thus NASA and INPE have the same estimates of changes in recent fire activity. • As of September 9, Mato Grosso is under the decree of emergency situation due to forest fires. The Brazilian Army is authorized to support the State government in the fight with fires.

Figure 6. Seasonal comparation of forest fires dynamics in Mato Grosso State in the context of minimum, medium and maximum figures, between 1998 and Sept.27, 2019, highlighting the August and September situation, according to INPE. Source: INPE (accessed September 28, 2019).

Figure 7.Annual figures of forest fires active spots in Mato Grosso for the period between 1998 and September 27, 2019. Source: INPE (accessed September 28, 2019).

More information about the trends and analysis of forest fires can be found in Annex 1.

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Slow implementation of the Rural Environmental Registry

The Native Vegetation Protection Law (Law No. 12.651/2012), known as the Brazilian Forest Code, mandates minimum conservation standards for private landholdings. This represents a cornerstone of Brazil’s approach to promote climate change mitigation and adaptation through its agriculture, forest and land use sector.

Mato Grosso’s Rural Environmental Registry (SIMCAR), adopted in 2017, aims at verifying whether properties comply with the Brazilian Forest Code. Following validation of the information by the State Secretariat for the Environment (SEMA) and if an environmental liability is detected, properties can enter a process of environmental regularization which entails a Terms of Conduct Adjustment (TAC) with the State Public Prosecutor (Ministério Público do Estado). Implementation has been slow owing to limited financial and human resources and lack of clear and transparent implementation process. By the end of 2018, only 53 percent of the State’s private rural land (63,886 properties) had been registered with the SIMCAR, of which only 3 percent (1,420 properties) had already been validated. Further, merely 156 properties (out of 770 which are required to) had started the Environmental Regularization Program (PRA) process and were under evaluation by SEMA. Also, the lack of transparency on environmental permits and registry entries undermines effective monitoring and oversight.

During 2018 there have been concerns about the possibility of irregularities in the implementation of SIMCAR (e.g. by treating Amazon forest as Cerrado forest).

The recently approved World Bank’s Fiscal Adjustment and Environmental Sustainability Development aims to facilitate faster and more transparent SIMCAR implementation. It is expected that the total area of properties for which SIMCAR information has been validated by SEMA will increase from 2.9 million hectares in 2018 to 20 million hectares by 2021. This will have as an impact a reduction in the rate of deforestation with its related co-benefits in terms of climate change mitigation and adaptation.

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5. Analysis of Progress on deforestation rates versus targets

Mato Grosso has featured historically high levels of deforestation in the 1990s and early 2000s. While the state achieved substantial results in reducing deforestation in earlier years, since 2012 deforestation has been rising again.

Figure 8. Annual deforestation rates in the State of Mato Grosso (Legal Amazon) since INPE started monitoring the figures in 1998. Source: INPE (retrieved September 26, 2019).

Mato Grosso is on the second highest level of deforestation in Legal Amazon with 1,449.50 km2 deforested in 2018, accounting for 20% of the total deforestation in the region. Of that, 1,363.3 km2 was in Amazon Biome.

Figure 9. Deforestation rates in Legal Amazon states. Source: INPE (accessed on September 12, 2019).

BOX 1. Methodological approaches to measuring deforestation rates.

The National Institute for Space Research (INPE) through the Amazonian Gross Deforestation Monitoring Project (PRODES) annually assesses gross deforestation in “primary” (also referred to as natural) forests in Legal Amazonia using satellite data and a minimum mapping unit of 6.25 hectares.

PRODES forest definition includes all vegetation types of Evergreen Forest Formations in the Legal Amazonia and forest facies of other formations such as Savanna and Steppe, which are generally classified as “Other Wooded Land” according to the FAO classification system. The Brazilian deforestation time series from PRODES relate only to gross deforestation in primary forests, identified as patches with a clear cut pattern in the satellite imagery of Landsat class (approximately 30 meters resolution). The deforested areas are excluded from the “natural Forest mask” for the assessment of deforestation in the following year. Hence, the (natural) forest area under PRODES can never increase and is annually updated11.

All national submissions to UNFCCC as well as forest-related commitments and related baselines are follows this methodology which is in line with good practice as defined in GPG LULUCF (IPCC, 2003). In order to maintain the consistency of the calculations and baselines, the methodology can’t be changed. There is also no forecast for the adoption of a subnational FREL forest emission reference level12. The state of Mato Grosso has recently acquired a new satellite monitoring system Planet, the fact that generated some speculations about possibility of the methodology/baseline changes. The Secretary of Environment of Mato Grosso provided a public clarification13 stating that the annual deforestation rate will continue to be calculated based on INPE/PRODES figures while Planet will be used for a number of other applications including fire and deforestation alerts in real time.

Case: Comparison with Global Forest Watch data

The dashboard of Global Forest Watch provides data on deforestation rates, including for the state of Mato Grosso:

Figure 10. Deforestation rates in Mato Grosso state, according to Global Forest Watch. Source: GFW (retrieved September 12, 2019).

At first glance, these can seem to tell a different story than official national estimates. In the past, there have been speculations that this difference is due to the methodologies of the two monitoring systems. The University of Maryland (GFW) data captures loss from a larger forest area than PRODES including loss in secondary forest, forest degradation from fire, and loss as small as 0.1 hectares. It also uses January to December to capture loss, while PRODES uses August to July.

The team of GFW replicated the PRODES methodology using the University of Maryland data to see whether methodological differences could in fact explain the discrepancies14.

The closer examination of each dataset reveals the results are actually very much aligned, just measuring two different but important types of change in forests: while PRODES results demonstrate Brazil’s significant results in reducing the deforestation of primary forest since the early 2000s, the University of Maryland data shows an increase in other tree cover losses. Thus, the differences between the two monitoring products are likely due to definitional differences – the University of Maryland data includes degradation from fires and smaller loss areas, as well as captures loss in a larger forest area than PRODES does.

11 The methodological details of this process are publicly available in its national submission to UNFCCC, for example, Brazil’s submission of a Forest Reference Emission Level (FREL) for reducing emissions from deforestation in the Amazonia biome for REDD+ results-based payments under the UNFCCC from 2016 to 2020. UNFCCC, 2018. 12 Cooperação Técnica para o Programa REDD Early Movers (REM) - Mato Grosso e Acre – Brasil. GIZ, October 2018. Retrieved 29/09/2019. 13 Sema esclarece que dados para quantificação do desmatamento continuam sendo do INPE. SEMA, August 2019. Retrieved 12/09/2019. 14 The details are available at GFW site. Retrieved September 29, 2019.

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INPE/PRODES will publish the 2019 annual deforestation rate for Legal Amazon later this year. Still, the report by IMAZON based on the system of deforestation alerts shows a progress of Mato Grosso state in the first semester – while the deforestation rate in July of 2019 is 17% higher than in the same month of 2018 (although the lowest among other Amazon states), the cumulative deforestation between August and July is 17% lower in 2019 than in 2018. The official deforestation rates of 2019 will be made publicly available by INPE/PRODES at the end of 2019.

Figure 11. Deforestation rates and variation in Legal Amazon states in the first semester of 2019, according to Imazon. Source: IMAZON.

Progress on deforestation rate targets

The quantitative targets of deforestation reduction in Mato Grosso are outlined and monitored by Produce, Preserve and Include (PCI) Strategy, launched in 2015, which aims to bring a vision for the low-carbon agricultural development of Mato Grosso by 2030. It is based on a set of 21 goals, including the deforestation-related ones, and integrates the agendas of public, private actors and civil society, reconciling low-carbon farming with environmental conservation and socio-productive inclusion.

The dashboard of the Strategy is publicly available at PCI Monitor. The figure below depicts a rather stable deforestation rate during the last 4 reported years (2014-2018). The 2018 rate maintained the level of 2016, though revealing a 5% reduction comparing to 2017.

Figure 12. Baseline, historical rate and projections of deforestation in Mato Grosso. Dashboard of PCI Strategy. Source: PCI Monitor (Accessed on September 15, 2019)

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The PCI’s goals have a defined, publicly-available baseline and monitoring methodology. The deforestation indicators follow the same basis as national communications and commitments of Brazil, that is the INPE/PRODES annual deforestation rates figures, explained above.

INPE/DETER (monthly alerts): It is important to remember that monthly DETER alerts are not meant to be used as exacting measures of deforestation rates compared year-to-year, but rather the statistics aim to support surveillance and enforcement, as they provide information about areas undergoing deforestation that need to be prioritized for protection in real time. These statistics “should not be understood as a monthly deforestation rate,” INPE said in a news release, adding that official deforestation area data is compiled by PRODES, whose monitoring system has made year-to-year deforestation comparisons since 1988. Month- to-month deforestation rates are highly variable because monitoring systems cannot penetrate cloud cover, which makes estimate comparison with the same month a year earlier unreliable, especially during the rainy season between November and April.

Figure 13. Deforestation-related targets and progress indicators, monitored by PCI Monitor. Source: PCI Monitor. Retrieved September 12, 2019.

Country Date of Report Author Brazil 1st of October, 2019 Natalia Pasishnyk sub-national jurisdiction Date of AB Decision Approval Status Mato Grosso State 27th of October, 2019 Approved

Version History Date Version Author 16/09/2019 V1 Natalia Pasishnyk 01/10/2019 V2 Natalia Pasishnyk

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Checklist JEC 1: Scope Re-assessment Mato Grosso, Brazil

Analysis Check References (OK, not Item Criteria (in italics – interpretational support of the criteria in order for a jurisdiction to pass, can be (number referring to numbered reference OK, no deleted) list, where applicable incl. page number etc.) data/info) 1.1 Amount of forest/peatland in Summary conclusion: Primary forests, composed of Amazon and Cerrado OK [1] Deforestation mapping by the jurisdiction biomes, cover 48.94 million ha, or 54%, of the Mato Grosso state. The Amazon biome. SEMA, 2017. biome covers 30.5 million ha (63.11% of its initial area), with 138,841 ha lost since the initial assessment*. The Cerrado biome covers 18.4 million ha (51.40% [2] IBGE, 2019. of its initial area), having lost 101,273.94 ha in the same period [1]. * Initial assessment considers 2016 figures while current assessment considers 2017 data as the [3] MT World Bank Policy latest available. Development Loan (DPL), p14. • Jurisdiction size: 90.3 million ha World Bank, April 2019.

• Forest area: 48.94 million ha. Of these, 62% correspond to Amazon [4] PRODES/INPE. Retrieved biome and 38% to Cerrado biome. September 29, 2019. • Population: 3.5 million [2] Mato Grosso is Brazil’s third largest State by area (903,357 km2) about the same as France and Germany combined) but home to only 3.4 million people (1.6 percent of the Brazilian population). Its GDP-per-capita (as of 2016) is the fourth highest among Brazilian states at US$10,700. Over 50 percent of the State’s GDP is related to agriculture and it has become a global powerhouse for soy and beef production, with 32 million tons of soy beans - 27 percent and 9 percent of Brazilian and global soy production, respectively - and 5.4 million heads of cattle raised in 2018. This agricultural expansion has historically taken place through clearing of forests, including in the Amazon biome. While average deforestation post-2010 has been 75 percent below its 2001-10 average, deforestation continues to be considerable and its pace has increased again since 2015. [3] According to PRODES/INPE, in 2018, 1,490 km2 of primary forests were cleared in Mato Grosso (comparing to 1,489km2 in 2016 and 1,561km2 in 2017). [4]

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[7] Annex 2 of the Initial Proposed protection and restoration areas within the Mato Grosso state Assessment Report. are defined in PCI Strategy: [8] World Heritage List of - Protection: these areas correspond to 60% of the total area of Mato UNESCO. Retrieved September 29, Grosso, or 540 million ha. Such areas are covered by native vegetation 2019. of any of the three biomes located in the state. They include both the primary vegetation and secondary one on diverse stages of restoration. [9] Critical Regions of the World - Amazon. WWF. Retrieved - Restoration: these areas include degraded APP areas15 (1 million ha) September 12, 2019. and Legal Reserve areas subject to recomposition (1.9 million ha). Brazil still doesn’t have specific HCV criteria, the generic approach is applied [10] Deforestation effects on Amazon forest resilience. [5]. No private companies assessments yet made for Mato Grosso state [6]. D. C. Zemp C.‐F. Schleussner H. M. They can be considered of high conservation value, combining three categories J. Barbosa A. Rammig. American of High Conservation Values (HCV): Geophysical Union, 2017. HCV1. Mato Grosso is home to three highly valuable and internationally renowned biomes in terms of biodiversity concentration – Amazon (53% of the [11] Amazon deforestation has a state’s area), Cerrado (savannahs, 40%) and Pantanal (flooded plains, 7%) . significant impact on the local There are 11 Key Biodiversity Areas [7] and one UNESCO Heritage site within climate in Brazil. University of Leeds. ScienceDaily, August 2019. the State [8] .

HCV3: From the global perspective, all three biomes located in Mato Grosso [12] Brazil iNDC. UNFCCC, 2015. are threatened and endangered due to human activities, and are considered the

15 Environmentally sensitive areas near rivers and on hilltops and slopes that are designated as permanent protection areas.

17 JEC Assessment: Mato Grosso. 2019

Analysis Check References (OK, not Item Criteria (in italics – interpretational support of the criteria in order for a jurisdiction to pass, can be (number referring to numbered reference OK, no deleted) list, where applicable incl. page number etc.) data/info) most exceptional ecosystems and habitats by WWF [9]. Besides, the Amazon’s southwest including Mato Grosso state, is especially vulnerable and under great climatic influence from the rest of the Amazon forest, as a large proportion of its rainfall originates from transpiration of the trees located in the entire Amazon basin. As the region is already very vulnerable to drought due to its relatively long dry season, a small rainfall reduction due to deforestation has drastic ecological impacts [10]. HCV4: In terms of ecosystem services, a healthy intact Amazon forest helps regulate the local climate in Brazil and can act as a buffer to the warming effects of climate change, compared with disturbed forests. [11] Restored areas with secondary vegetation (i.e. APP16 areas, 1 million ha subject to restoration according to PCI) belong to HCV4 category due to the ecosystem services they provide. Considering planned restoration of both APP and Reserva Legal areas that sum up 2.9 million hectare, these represent one quarter of committed in Brazil’s NDC 12 million ha to be restored and reforested [12].

16 According to the Brazilian Law 12.651/2012, an APP (Permanent Preservation Area) is defined as a protected area, covered or not by native vegetation, with the environmental function of preserving water resources, landscape, geological stability and biodiversity, facilitating the genetic flow of fauna and flora, protecting the soil and ensuring the well-being of human populations. They are established in several situations such as hilltops, steep slopes, coastal shrublands, mangroves, wetlands, water springs etc.

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Checklist JEC 2: Ambition and Strategy Re-assessment Mato Grosso, Brazil References Analysis Item Criteria Check (number referring to numbered (in italics – interpretational support of the criteria in order for a jurisdiction to pass, can be deleted) reference list, where applicable incl. page number etc.) 2.1 Quantitative target Summary conclusion: The jurisdiction maintains the same quantitative targets, as well OK [13] PCI Monitor. Retrieved against historic rates of as baselines and reference periods since the commitment announcement in 2015. During September 29, 2019. gross deforestation the last three years, there was a slight increase of the deforestation rate in 2017 (1,561 km2), with the figure returning to its 2016 value (1,489 km2) in 2018 (1,490 km2). Projections are [14] “Nossos esforços são based on PRODES/INPE methodology and database which are the same used for national para, em dois anos, reduzir a communications and commitments of Brazil, with no forecast to change them. zero esse índice”. SEMA, August 2019.

[15] Análise de dados de PCI Strategy monitors the progress on 21 quantitative targets in the State of Mato Grosso, desmatamento do Estado de of them 3 directly related to deforestation [13]. Mato Grosso.Período 2016/2017, p.5. SEMA 2018. The headline goal – “Reduce deforestation in Amazon in 90%, reaching a yearly

deforestation rate of 571 km2 by 2030” is based on the national figures of deforestation [16] Sema esclarece que dados rates, provided at the end of each year by INPE, through its PRODES program. During the para quantificação do last four monitored years Mato Grosso maintained the approximately the same rate, with desmatamento continuam slight fluctuations, resulting in the same value for 2016 and 2018 years, 1,489 km2 and sendo do INPE. SEMA, August 1,490 km2 respectively. In 2017, the rate increased up to 1,561 km2, still being lower than in 2019. 2015 (1,601 km2).

Figure 14. Progress on the goal “Reduce deforestation in 90%, reaching a yearly deforestation rate of 571 km2 by 2030”. Source: PCI Monitor (Accessed on September 15, 2019).

19 JEC Assessment: Mato Grosso. 2019

Another goal, focused specifically on the Cerrado biome, hasn’t been updated since 2016. This goal, according to the methodology outlined in its Technical Note [13], relies not only on PRODES/INPE data but also on the state figures, provided by SEMA, analyzing the polygones of deforestation identified by SEMA on the areas not mapped by PRODES for the reference year. Figure 15. Progress on the goal “Reduce clearing of Cerrado woodland 95% below its historical levels by 2030”. Source: PCI Monitor (accessed on September 15, 2019).

20 JEC Assessment: Mato Grosso. 2019

References Analysis Item Criteria Check (number referring to numbered (in italics – interpretational support of the criteria in order for a jurisdiction to pass, can be deleted) reference list, where applicable incl. page number etc.) Still, using the PRODES data as a proxy, one can observe the decreasing rate of clear- cutting in this biome (Error! Reference source not found.). Figure 16. Deforestation dynamics of the Cerrado biome in Mato Grosso state. Source: PRODES/INPE (accessed on September 15, 2019).

Figure 17. Progress on the goal "Eradicate illegal deforestation by 2020". Source: PCI Monitor. (Acessed on September 15, 2019).

The third goal – “Eradicate illegal deforestation by 2020” – relies, besides the INPE and SEMA deforestation data, also on the numbers of authorizations of vegetation suppression and deforestation, supplied by SEMA.

21 JEC Assessment: Mato Grosso. 2019

References Analysis Item Criteria Check (number referring to numbered (in italics – interpretational support of the criteria in order for a jurisdiction to pass, can be deleted) reference list, where applicable incl. page number etc.) The 2017 results show a slight reduction comparing to 2016 figures (1.4 thousand km2 and 1.5 km2, respectively). The 2018 are not yet available, but recently the governor of Mato Grosso Mauro Mendes has recently publicly reconfirmed that the state government is working to reduce the illegal deforestation rate to zero over the next two years to reach its 2020 ambition [14].

It is important to mention that the main methodologic difference between PRODES and SEMA data is the statistical treatment used to estimate annual rates of PRODES (which is not the case of SEMA), i.e. for a better result, one should compare SEMA deforestation data with the PRODES raw data, not statistically treated, instead of comparation with annual deforestation rates of PRODES. Besides, SEMA conducts the analysis of illegal deforestation which is not applied by PRODES [15].

The new alert system, Planet Satellite Monitoring Platform, acquired recently by SEMA in frames of REM project, will not replace the monitoring carried out by INPE, and official deforestation data in Mato Grosso will remain the same PRODES data provided INPE. There is no forecast for the adoption of a subnational FREL forest emission reference level (see JEC 4.2 for details), neither the baseline of the PCI strategy which is PRODES-based [16].

22 JEC Assessment: Mato Grosso. 2019

2.2 Ambition Summary conclusion: The ambition announced in 2015, has been reinforced OK [3] MT World Bank Policy financially, institutionally and legally over the last year through the REM benefits sharing Development Loan (DPL), p14. contract (2018) and Fiscal Adjustment and Environmental Sustainability Development World Bank, April 2019. loan by World Bank (2019), both with quantitative and time-binding targets for reduction of deforestation rates, in line with Produce, Conserve, Include (PCI) Strategy. [13] PCI Monitor. Retrieved September 29, 2019.

[17] Programa REM Mato Dashboard of PCI Targets and progress publicly available at PCI Monitor [13]: Grosso. MMA, May 2019. Figure 18. The targets of PCI Strategy announced in 2015 remain public and unchanged.

Progress on each of 21 targets is yearly disclosed. Source: PCI Monitor (accessed on September 15, 2019).

These targets were reinforced with the target deforestation rates of World Bank’s Fiscal Adjustment and Environmental Sustainability Development Policy Loan [3] approved in 2019 and REM benefit sharing [17] (see JEC 2.4 for details).

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References Analysis Item Criteria Check (number referring to numbered (in italics – interpretational support of the criteria in order for a jurisdiction to pass, can be deleted) reference list, where applicable incl. page number etc.) 2.3 … equaling or exceeding Summary conclusion: The “Conserve” targets of Mato Grosso’s PCI Strategy align OK [18] Collaboration Toward national targets with all of the land-use components of Brazil’s NDC17. Mato Grosso aims at zero illegal Zero Deforestation, p.16. EDF, deforestation by 2020, which is much more advanced than the same target on the 2017. national-level committed to reach by 2030. Additionally, Mato Grosso’s target to restore [19] Conheça o Programa Rem 2.9 million ha of legal reserve and APPs by 2030 is just below one quarter of the national Mato Grosso. SEMA, August restoration target of 12 million ha [18]. 2019.

Figure 19. Mato Grosso’s PCI Strategy includes goals that align with all of the land-use components of Brazil’s NDC18. Source: EDF [18]

In terms of fulfillment of the goals (NDC's), the REM follows all principles and criteria of the United Nations Framework Convention on Climate Change (UNFCCC), where no carbon credit transfer occurs, so the State is awarded for reducing its emissions without affecting the country's forest carbon accounting [19].

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2.4 Feasible Strategy Summary conclusion: During the last two years, the strategy became more financially OK [17] Programa REM Mato sustainable and institutionally resilient in long-term thanks to the USD 250-million Grosso. MMA, p.37. May Development Policy loan from World Bank and result-driven funds from REM contract. 2019. Both contracts have quantitative and time-binding targets for deforestation reduction and are expected to accelerate the implementation of the PCI strategy through increased [3] MT World Bank Policy institutional capacity and accelerated implementation of related public policies. Development Loan (DPL), p26. World Bank, April 2019.

[19] REDD Early Movers The strategic framework of climate change management in Mato Grosso is articulated (REM) Annual Review - around the State Policy of Climate Change, the State REDD + System, and the Produce Conserving and Including Strategy (PCI). (Error! Reference source not found.) Summary Sheet, p12. Figure 20. Major policies and programs for deforestation reduction in Mato Grosso and current and potential resources. Source: MMA[17].

17 Mato Grosso PCI and Brazil’s NDC (Forest Strends, 2017). 18 The first theme, related to CAR, has an update since publication: The loan has a target of increasing the area of land for which CAR information has been validated by SEMA from 2.9 million hectares (2018) to 20 million hectares by 2021 (cumulative). Source: Mato Grosso Fiscal Adjustment DPL.

25 JEC Assessment: Mato Grosso. 2019

References Analysis Item Criteria Check (number referring to numbered (in italics – interpretational support of the criteria in order for a jurisdiction to pass, can be deleted) reference list, where applicable incl. page number etc.) During the last two years, this framework has proven feasible and got reinforced through the following developments: 1. First result-based payments received from REM Mato Grosso project (2018), enabling implementation of PCI & establishing potential for corporate investment in Mato Grosso as a sourcing region 2. World Bank Fiscal Adjustment and Environmental Sustainability Development Policy Loan approved (2019). One of the Prior Actions of this loan is strengthening the PCI Strategy through the launch of PCI Institute (2019).

REM Mato Grosso From 2016 to 2018, the Mato Grosso state was able to raise over US$50 million from international climate financing19. Most of this was raised through the REM (“REDD for Early Movers”) program: Euro 17 million from KfW and 24 million British Pounds from the UK Department for Business, Energy and Industrial Strategy (BEIS) in addition to a smaller IDH grant of about Euro 2.5 million. [3] In Mato Grosso, REM is implemented by the State Secretariat of Environment (SEMA), in coordination with the Ministry of Environment (MMA), with FUNBIO serving as financial manager. REM proposal development motivated integration of statewide SisREDD+ legal framework with PCI targets. In May 2018, the government of Mato Grosso agreed a General Coordinator and a Deputy Coordinator for its REM-IU ahead of payments who also serves as Director of the PCI Strategy to ensure integration between the REM initiative in Mato Grosso and the PCI Strategy [19]. In December 2018, Mato Grosso received the first payments from REM as a result of the reduction in deforestation for the reference year of July 2015/July 2016. The resources will be made available as the deforestation reduction results for the 2015-2019 reference years over the Program's 4-year term. The state will only receive the values if it maintains the

19 Resources will be distributed as follows, 60% to subprojects of (1) family farming, traditional peoples and communities in the Amazon, Cerrado and Pantanal, (2) indigenous territories and (3) sustainable production, innovation and markets. The remaining 40% will be allocated to the institutional strengthening of state government entities and the application and development of structuring public policies.

26 JEC Assessment: Mato Grosso. 2019

References Analysis Item Criteria Check (number referring to numbered (in italics – interpretational support of the criteria in order for a jurisdiction to pass, can be deleted) reference list, where applicable incl. page number etc.) deforestation rate below the 1,788 Km2 / year. In 2019, part of the funds has been already effectively invested in the acquisition of deforestation detection system Planet (see JEC 3.3 for details).

World Bank Fiscal Adjustment and Environmental Sustainability Development Policy Loan [3] In May 2019, the World Bank Board of Executive Directors approved the US$ 250 million Mato Grosso fiscal adjustment and environmental sustainability development policy loan. In addition to support the jurisdiction’s fiscal sustainability regain, it aims at increasing of the institutional capacity for sustainable agriculture, forest conservation and climate change mitigation. The loan will support the implementation of critical environmental policies (eg. Deforestation and Forest Fire Prevention and Control Plan, PPCDIF) and of a rural environmental cadaster (CAR).

As one of the prior action, in 2018 the Jurisdiction adopted the Action Plan for the Control and Prevention of Deforestation and Forest Fires (PPCDIF), established by Decree no. 1490/2018. This measure seeks to improve the State's institutional capacity to prevent and control illegal logging and forest fires and establishes specific mechanisms and priority actions that allow for quick alerts and responses. The linked quantitative target is to reduce annual deforestation reaching 1,241 km2 deforestation rate by 2021.

Another prior action consists in the acceleration of the Mato Grosso Rural Environmental Registry System (SIMCAR) implementation. The policy reforms associated with land management20 are expected to have significant positive effects progress on rural land registration, and will direct production to the areas found apt for agriculture reducing pressure on environmentally fragile areas, in part, by re-directing agricultural credit to those areas with valid registrations. It is expected that the total area of properties

20 Implementation of the policies under this prior action counts on the financial and technical assistance to temporarily increase the number of SIMCAR analysts at SEMA; increase their information technology equipment; establish a clear specialization in analytical tasks, hence accelerating execution.

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References Analysis Item Criteria Check (number referring to numbered (in italics – interpretational support of the criteria in order for a jurisdiction to pass, can be deleted) reference list, where applicable incl. page number etc.) for which SIMCAR information has been validated by SEMA will increase from 2.9 million hectares in 2018 to 20 million hectares by 2021. This will have as an impact a reduction in the rate of deforestation with its related co-benefits in terms of climate change mitigation and adaptation.

The third prior action implemented in 2019 strengthens the implementation of the PCI strategy and institutional capacity, appointing the PCI Institute as an independent agency to implement its PCI Strategy. The Institute will articulate and coordinating diverse stakeholders; suggest and encourage policies and public actions related to the strategy; lead efforts to identify and raise funds with donors and investors; and administer and monitor programs and projects funded with these resources. Strengthening the PCI and giving it a permanent institutional structure is expected to have a positive effect by reducing deforestation as it provides an economic and financial incentives to protect forest land as well as additional resources for conservation and sustainable forest management. The linked quantitative target is to reach a cumulative total of US$90 million of resources mobilized in coordination with the PCI Institute for the implementation of the PCI strategy, by 2021.

These actions put Mato Grosso in a leadership position on the environmental, climate and inclusive rural development agenda in Brazil, providing a key model for other States.

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Checklist JEC 3: Progress Update Mato Grosso, Brazil References Analysis Item Criteria Check (number referring to numbered (in italics – interpretational support of the criteria in order for a jurisdiction to pass, can be deleted) reference list, where applicable incl. page number etc.) 3.1 Timely progress Summary conclusion: Mato Grosso state has been demonstrating a clear process in OK [13] PCI Monitor. Retrieved towards milestones of implementation of the PCI Strategy. All the 21 time-bound goals are monitored according to September 29, 2019. the strategy… the publicly disclosed methodology and are being publicly report on the dedicated web- platform developed by Earth Observation Institute (PCI Monitor), using a dashboard for each indicator.

PCI Strategy runs an online monitoring platform, developed by Earth Innovation Institute, supported by IPAM and Instituto Centro de Vida (ICV) as well as by the Monitoring Group composed of 16 public, private and non-governmental institutions. The digital space aims to show the progress toward the goals and ensure the credibility and transparency of the Strategy for stakeholders. The database will be updated annually, allowing an assessment against the 2015 baseline [13].

In addition to the planned annual updates, there will also be a process of transferring this technology to the Government, enabling technicians to perform analysis and update data, thus ensuring the maintenance of the platform throughout the Strategy period.

Besides the dashboard, PCI Strategy publishes a bulleting of Goals’ Progress, available online on PCI Monitor.

Figure 21. PCI Monitor: Dashboard with "Conserve" indicators and goals. Source: PCI Monitor [13] (retrieved September 15, 2019).

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3.2 … measurably on a Summary conclusion: PCI Strategy measures the progress of the deforestation-related OK [4] PRODES/INPE. trajectory towards the targets and indicators based on PRODES/INPE and SEMA methodologies, detailed and Retrieved September 29, targets for reduced disclosed on the web-platform developed by Earth Innovation Institute – PCI Monitor. The 2019. deforestation datasets used in these methodologies are publicly available both at PCI Monitor (secondary [13] PCI Monitor. Retrieved data) and PRODES/INPE and SEMA websites (primary data). September 29, 2019.

[15] Análise de dados de PCI Strategy publicly discloses the Monitoring Criteria along with Technical note on desmatamento do Estado de monitoring on the same website that discloses the progress on the targets – PCI Monitor. Mato Grosso.Período Each “Conserve” target (i.e. related to deforestation/conservation) has a related indicator 2016/2017, SEMA 2018. along with specification of the dataset used and a measurement methodology [13].

The input data, used by some of the PCI indicators, is publicly available at the website of PRODES/INPE:

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References Analysis Item Criteria Check (number referring to numbered (in italics – interpretational support of the criteria in order for a jurisdiction to pass, can be deleted) reference list, where applicable incl. page number etc.) Figure 22. Deforestation rates data for Mato Grosso state, used by PCI indicators and goals, publicly available on the PRODES/INPE website. Source: INPE [14](retrieved on September 15, 2019).

The methodology used by the federal system, PRODES, is publicly available on the INPE’s website [4].

In addition to the federal instruments for monitoring deforestation in the Amazonian forest areas), the State of Mato Grosso through the State Environmental Secretariat (SEMA) has a monitoring system and quantification of deforestation in the entire territory of Mato Grosso including forest and non-forest areas. The methodology along with annual reports on deforestation rates used by SEMA, are publicly available on the website of SEMA [15].

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References Analysis Item Criteria Check (number referring to numbered (in italics – interpretational support of the criteria in order for a jurisdiction to pass, can be deleted) reference list, where applicable incl. page number etc.) 3.3 Verifiable Summary conclusion: Catalyzed by the Policy Development loan (PDL) of World Bank OK [3] MT World Bank Policy improvement of the and REM Program payments, Mato Grosso recently adopted the new Action Plan for the Development Loan (DPL), enabling environment Control and Prevention of Deforestation and Forest Fires in Mato Grosso state (PPCDIF), p42. World Bank, April appointed the PCI Institute as the independent agency to implement its PCI Strategy and 2019. acquired the satellite monitoring system Planet. These institutional and technical developments along with funds from the PDL and REM programs substantially improved the [16] Sema esclarece que enabling environment of the Strategy. dados para quantificação do desmatamento continuam sendo do INPE. The PDL, approved in 2019, enabled three main prior actions that have a high positive impact SEMA, August 2019. on the enabling environment of the PCI Strategy.

Figure 23.Prior Actions enabling the increase institutional capacity for sustainable [21] Primeira fiscalização agriculture, forest conservation and climate change mitigation, according to the Program da Plataforma Planet gera Document of World Banks’ Mato Grosso Fiscal Adjustment and Environmental Sustainability R$ 7,5 milhões em multas. Development Policy loan, approved in 201921. Source: WB 2019 [3] Portal MT, August 2019.

21 The baseline deforestation rate used in Prior Action #6, was based on preliminary PRODES results. The final deforestation of 1,490 km2 (2018) is discussed in items JEC 2.1 and JEC 3.2 of this report.

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References Analysis Item Criteria Check (number referring to numbered (in italics – interpretational support of the criteria in order for a jurisdiction to pass, can be deleted) reference list, where applicable incl. page number etc.) These policies are designed to improve environmental management and likely to have significant positive effects. The Plan to Fight Deforestation and Forest Fires, with its specific improvements in state capacity to detect and respond to illegal deforestation, is expected to have an important positive environmental impact on forest protection. The integrated environmental monitoring center included in the plan is expected to have a positive impact even beyond forest protection. The policy reforms associated with land management (SIMCAR) are expected to have significant positive effects progress on rural land registration, will direct production to the areas found apt for agriculture and reduce pressure on environmentally fragile areas in part by re- directing agricultural credit to those areas with valid registrations. The regularization program (PRA) will also provide a strong economic incentive for producers to regularize their land as it will allow customers to control the status of agricultural producers. The institutionalization of the PCI as a coordination and fundraising agency for the State’s climate change strategy and carbon finance is expected to have a positive effect by reducing deforestation as it provides an economic and financial incentives to protect forest land as well as additional resources for conservation and sustainable forest management [3].

33 JEC Assessment: Mato Grosso. 2019

Checklist JEC 4: Monitoring, Reporting and Verification (MRV) Update Mato Grosso State, Brazil Analysis References

Item Criteria (in italics – interpretational support of the criteria in order for a jurisdiction to pass, can be Check (number referring to numbered reference deleted) list, where applicable incl. page number etc.) 4.1 Transparent system Summary conclusion: the annual deforestation rates in Mato Grosso are OK operational monitored at the federal level with data publicly available at PRODES/INPE for Amazon and Cerrado biomes. Mato Grosso’s Secretary of Environment annually publishes summary reports on deforestation within the state. Besides, the online platform (PCImonitor.org) tracks progress toward PCI targets (deforestation indicators are built on the PRODES and SEMA data and methodologies).

On the national level, the official data is provided by PRODES/INPE, as mentioned in JEC 2.1 and JEC 3.2. It integrates near–real-time deforestation monitoring (DETER and DETER-B), annual deforestation rates (PRODES), forest degradation (DEGRAD), and post deforestation land-use (TerraClass) mapping within primary forests. The annual deforestation rates are informed by INPE annually. Both the methodology and data are publicly available. The same is true for SEMA methodology and reporting (see JEC 2.1 for details).

The National REDD + Strategy through the resolutions of CONAREDD + (National Commission for REDD +), regarding “Payment for REDD + Results”, established that the process of verification of emission reductions will take place on the federal level (Ministry of Environment). Therefore, REDD + programs based on Pay-for-Results logic will not require robust accounting systems.

34 JEC Assessment: Mato Grosso. 2019

Analysis References

Item Criteria (in italics – interpretational support of the criteria in order for a jurisdiction to pass, can be Check (number referring to numbered reference deleted) list, where applicable incl. page number etc.) Summary conclusion: Mato Grosso will implement the State REDD+ 4.2 Progress towards OK [17] Programa REM Mato Grosso. Accountability System, with the objective to avoid double carbon emission implementation of the MRV MMA, p.175. May 2019. counting as well as evaluate the performance of the Subprograms in their system respective areas of coverage, with the support to the REM MT Program.

In order to ensure the comprehensiveness and effectiveness of the State Climate Change Policy, in line with the State REDD + Policy and in frames of the REM- MT Program, Mato Grosso will implement the State REDD+ Accountability System, with the objective to avoid double carbon emission counting as well as evaluate the performance of the Subprograms in their respective areas of coverage.

Likewise, there is no forecast for the adoption of a subnational FREL forest emission reference level. In the context of the National Strategy for REDD + and CONAREDD +, there is no established limit for the Federal Government and Amazon states's fundraising as soon as REDD + results are obtained through the stock-and-flow methodology, i.e. that corelates forest areas and emissions reductions from deforestation [17].

The payments and reductions linked to the REM program will be uploaded to InfoHub Brasil (REDD+ public reports at the Ministry of Environment). However, payments for results can only be disbursed if annual deforestation is below the agreed performance trigger of 1,788 km². Thus, to avoid double counting of carbon emissions, SEMA should have state control of the amount of state reductions and reductions paid by existing programs [17].

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Checklist JEC 5: Social and environmental safeguards Update Mato Grosso, Brazil Analysis References

Item Criteria (in italics – interpretational support of the criteria in order for a jurisdiction to pass, can be Check (number referring to numbered reference deleted) list, where applicable incl. page number etc.) 5.1 Safeguards against social and Summary conclusion: The National REDD+ Strategy (ENREDD+) is OK environmental risks operational since 2015. One of its action lines includes development of a system [22] Second summary of associated with the strategy for providing information on how the safeguards are being addressed and information on how the Cancun in place respected (SISREDD+). The Safeguards are already designed, and the Thematic Safeguards were addressed and Advisory Board (CCT Safeguards) is now entirely dedicated in the SISREDD+ respected by Brazil throughout the improvement. implementation of actions to reduce emissions from deforestation in the Brazil started the development of its National Information System on REDD+ Amazon biome. MMA, 2018. Safeguards (SISREDD +) in 2015, and the Ministry of the Environment is responsible for its coordination. The Thematic Advisory Chamber on [17] Programa REM Mato Grosso. Safeguards (CCT Safeguards), created under CONAREDD+ (National MMA, p.177. May 2019. Commission for the Reduction of Greenhouse Gas Emissions), is composed of . experts and representatives of civil society and public and private entities, and has the attribution of contributing to the development of SISREDD+. It is the responsibility of CCT Safeguards to conceptualize the safeguards in the Brazilian context, to develop the SISREDD+ and the revision of the summary information on safeguards, among other activities. When SISREDD+ is in operation its information will be made available to society as a whole.

In 2018, Brazil submitted to the UNFCCC its 2nd Safeguards Summary [22]. This document presents information on the implementation of REDD+ safeguards in Brazil throughout the deployment of initiatives to reduce emissions from deforestation in the Amazon biome, aligned with REDD+ Technical Annex to the Second Brazilian Biennial Update Report (BUR), submitted to the UNFCCC in March 2017. It lays out information about the national circumstances, describes each safeguard in the Brazilian context, as well as the relevant systems and processes to implement the safeguards and the safeguards information system.

The dedicated portal aims at sharing the detailed information on the implementation of Cancun safeguards in Brazil and the full development of its

36 JEC Assessment: Mato Grosso. 2019

Analysis References

Item Criteria (in italics – interpretational support of the criteria in order for a jurisdiction to pass, can be Check (number referring to numbered reference deleted) list, where applicable incl. page number etc.) system. On the state level, Mato Grosso will design and implement a Monitoring System of Safeguards information in line with the National SisREDD+ in frames of REM MT program [17]. Summary conclusion: In 2018, Brazil submitted to the UNFCCC 5.2 Progress OK [17] Programa REM Mato Grosso. the 2nd Safeguards Summary containing the analysis of the relevant actions, MMA, p.177. May 2019. instruments and policies to the application of safeguards in the Brazilian context from 2011 on. On the state level, Mato Grosso is committed to design and implement a Monitoring System of Safeguards Information in line with the [22] Second summary of National SisREDD+ in frames of REM MT program. information on how the Cancun

Safeguards were addressed and

respected by Brazil throughout the The interpretation of the Cancun safeguards in the Brazilian context and the implementation of actions to reduce elaboration of this Second Summary brought additional inputs to those compiled emissions from deforestation in the by the Technical Panel for SISREDD+ full development. With the conclusion of Amazon biome, p73. MMA, 2018. the conceptualization of safeguards in the Brazilian context and the contributions to this summary, the CCT Safeguards is entirely dedicated in the SISREDD+ improvement [22].

On the state level, SEMA has agreed for the preparation, implementation and implementation of the REM MT Program in compliance with the Cancun Safeguards and KfW sustainability guidelines, as well as the measures and actions determined as a result of a comparative assessment of the Environmental and Social System - ESSA ( Environmental and Social System Assessment). The Program will also be aligned with the first REDD + Safeguards Summary, as per the Warsaw Framework for REDD + and other decisions under the UNFCCC. The ENREDD Safeguards Information Summary will be the main basis for the REM MT Program. An effective and operationally focused Risk and Safeguards Management system will be established within the scope of the REDD Safeguards Information System - SisREDD +, where safeguards will be integrated into the management and monitoring of the REM MT Program, based on a risk analysis (social and economic). actions) provided for in the Benefit Sharing Subprogram and will be supported by GIZ.

ANNEX 1. FOREST FIRES IN THE AMAZON

The fire season in the southern Amazon runs from June to November, with peak burning activity in September along the eastern and southern Amazon forest frontiers, a swath sometimes referred to as the "arc of deforestation". Year-to-year variability in fires is strongly linked to climate anomalies, and both the El Niño Southern Oscillation in the Pacific Ocean and Atlantic Multi-decadal Oscillation influence drought conditions and the risk of fires across the southern Amazon.

Figure 24. Strong El Niño events cause droughts in the region, creating ideal conditions for burning. El Niño years have high fire counts, even after intentional deforestation rates dropped. Source: National Geographic 2019.

With the fire season in the Amazon approaching its midpoint, scientists using NASA satellites to track fire activity have confirmed an increase in the number and intensity of fires in the Brazilian Amazon in 2019.

MODIS fire detections are analyzed by the Global Fire Emissions Database (GFED) project, which includes scientists from NASA Goddard, the University of California, Irvine, and Vrije Universiteit Amsterdam. According to GFED, fire counts to date in 2019 are a remarkable departure from recent years, but not a record for fire activity during the MODIS era. The figure below shows cumulative fire detections, cumulative fire radiative power (FRP), and mean FRP for Terra and Aqua MODIS fire detections from May 1st to August 28th for 2003-2019.

38 JEC Assessment: Mato Grosso. 2019

Figure 25. Cumulative fire counts in Legal Amazon since 2003. Source: GFED (accessed on September 12, 2019).

Cumulative active fire detections from May 1st through August 28th from MODIS (Aqua + Terra) and VIIRS (SNPP) confirm that the 2019 fire season has the highest fire count since 2012 (the start of the VIIRS record) across the Legal Amazon. In addition, fires in 2019 are more intense than previous years, measured in terms of fire radiative power, consistent with the observed increase in deforestation.

Figure 26. Cumulative fire counts in Legal Amazon during the last 7 years. Source: GFED (accessed on September 12, 2019).

→ It is important to remember that this data covers not only Brazilian Amazon but also parts of Peru and Bolivia and other countries too.

The unusual fire history in the seasonal context – end of August to September - can be seen on the Figure 27 which use MODIS fires data only for 2001 to present:

39 JEC Assessment: Mato Grosso. 2019

Figure 27. There were 30,878 MODIS fire alerts reported in the week of September 23, 2019. This was Unusually High compared to the same week in previous years.Source: Global Forest Watch (accessed on September 30, 2019).

It should be left clear that the INPE and NASA have the same estimates of changes in recent fire activity: According to Douglas Morton, INPE also uses active fire data from NASA’s MODIS sensors to monitor fire activity in the Brazilian Amazon,” Morton said. “As a result, NASA and INPE have the same estimates of changes in recent fire activity. MODIS detections are higher in 2019 than at this time last year in all seven states that comprise the Brazilian Amazon.

Situation in Mato Grosso

On August 16, 2019, an article published by EarthObservation @ Nasa, mentioned that an analysis of NASA satellite data indicated that total fire activity across the Amazon basin this year has been close to the average in comparison to the past 15 years. Though activity appears to be above average in the states of Amazonas and Rondônia, it had so far appeared below average in Mato Grosso and Pará, according to estimates from the Global Fire Emissions Database, a research project that compiles and analyzes NASA data. The first version of this article (updated as of August 22) contained some not updated information that was further adjusted but provoked a reaction of social media and news headlines.

It is important to consider that the fire alerts indicate a fire is happening but not how big it is. We have to wait for the tree cover loss data to get that information. The most accurate deforestation figures come from PRODES monitoring system, but these won’t be available until later this year. The historical annual series of fires spots dynamics updated until September 11, 2019, are shown on Figure 28.

40 JEC Assessment: Mato Grosso. 2019

Figure 28. Historical series of total fire spots detected by the reference satellite, from 1998 to 09/11/2019. Source: INPE (retrieved on September 12, 2019).

The Global Forest Watch pulls data from two NASA active fire sensors: MODIS and VIIRS. MODIS, launched in the year 2000, provides a longer historical fire record and detects fires at a 1- kilometer resolution. VIIRS, launched in the year 2012, detects fires at a 375-meter resolution. Compared to MODIS, VIIRS can better detect smaller fires, perimeter fires, and nighttime fires. The figures provided by this institution are compatible with the data quoted above, as shown on Figure 29 and Error! Reference source not found.

Figure 29. Annual forest fires dynamics in Mato Grosso sate. Source: Global Forest Watch (retrieved September 30, 2019).

Figure 30. Annual forest fires dynamics in Amazonas state. Source: GWF (retrieved September 30, 2019)