Expert in financial incentives for sustainable agriculture - Brazil

Result of Service Operationalization of suitable incentives in high-priority areas in the Brazil Cerrado.

Work Location Brazil

Expected duration The consultant will work for 4 months from 1 September 2022 until 15 December 2022. The consultant must be based in Brazil and can either be home based or use the UNEP office in Brasilia.

Duties and Responsibilities UN Environment Programme (UNEP) is the leading global environmental authority that promotes the coherent implementation of the environmental dimension of sustainable development within the United Nations system and serves as an authoritative advocate for the global environment. UNEP's Ecosystem Division supports countries in conserving, restoring and sustainably managing their terrestrial, freshwater and marine ecosystems, the biodiversity they contain and the products and services they provide for human well-being and prosperity. Located within the Ecosystem Division, the Climate Finance Unit focuses on unlocking and scaling up private and catalytic public finance for sustainable land use.

The world urgently needs to move towards sustainable land use models that separate deforestation from agricultural production and rehabilitate degraded land. Therefore, UNEP has partnered with TNC and the Tropical Forest Alliance under the IFACC project (Innovative Finance for the Amazon, Cerrado and Chaco) to stimulate investments in deforestation and conversion free (DCF) business models in Brazil, Argentina and Paraguay. Currently, a lack of incentives and de-risking solutions for both agricultural producers and financial institutions are the main bottlenecks for transitioning to deforestation and conversion free (DCF) business models and scaling up investments in sustainable land use practices. In the Brazilian Cerrado, in particular, with current soy prices producers are highly incentivized to fully clear the area that can legally be deforested to expand soy production. Similarly, financial institutions are more willing to lend to producers with the largest possible area under production (as opposed to producers with high forested areas), as cultivated land, used as collateral, is worth several times more than forested land.

Different options exist to create market-based incentives and de-risking solutions for DCF business models. A potential path is provided by carbon markets, which create financial flows for producers that can compensate for the missed agricultural revenues coming from land conversion. Carbon credits may be even used as collateral for credit institutions, de-risking their loan portfolios and making them willing to invest in DCF agricultural projects. Nature markets are also starting to be explored. On the public side, repurposing agricultural subsidies can create additional revenue streams for producers, as well as other types of Payments for Environmental Services.

The right type of incentive or mix of incentives is context specific and its design and implementation require deep knowledge of the socio-economic reality and dynamics, as well as of the capacity and readiness of the private and public sector in focus jurisdictions. Many studies have been carried out to date to analyze ex-ante or evaluate ex-post incentive schemes for the Brazilian Cerrado and there’s now a need to review the knowledge generated thus far and move towards implementation of the most promising solutions.

The consultant will report to the Head, Climate Finance Unit.

Workplan

Overall objective of the consultancy

The consultancy aims at reviewing the available knowledge on suitable incentives (both level of financial compensation and type of mechanisms) for DCF commodity production in the Brazilian Cerrado and outlining a clear direction to move towards implementation.

Tasks

1. Review of TNC and other spatial data on magnitude of forests on farmland beyond legal requirements in the Cerrado, with breakdowns by commodity, farm size etc. 2. Literature review of relevant studies to identify a “fair price” that most producers would be willing to accept to refrain from legal agricultural expansion at the expenses of native vegetation on existing farms. Such a price should be expressed as a function of both soy price and the price of land (cultivated, cleared/degraded, forested), and any other relevant factors. The “fair price” is not supposed to fully compensate producers for lost income due to avoided expansion, but to create a significant incentive that, together with the mounting pressure from the international markets for sustainable sourcing, can help farmers embrace the transition to DCF models. 3. Analyze evidence from the literature on the supply curve to identify how different segments of producers are likely to react to financial incentives (some may have already embraced the transition without incentives, while others may never change regardless of the compensation). Consideration of different factors that influence how much financial incentive may be needed to change behavior, such as market trends towards DCF sourcing by traders and slaughterhouses, and also timeframe – farmer willingness to commit to longer-term or multi-year protection versus year-by-year with no commitment beyond that (and implications for enduring environmental impact) 4. Indicate if on-site validation of results from the literature review or an additional study are deemed necessary to arrive at solid and reliable estimates of the “fair price”. 5. Review of existing analyses and programs adopting financial mechanisms, including the Cerrado Conservation Mechanism, Responsible Commodities facility, Conserv program led by IPAM, and others. The consultant will review relevant documents and also interview programs to understand the experience with offering incentives to farmers. Financial mechanisms should include both market-based incentives (e.g., carbon markets, reduction in loans’ interest rates), public subsidies and incentives (e.g., payments for environmental services, repurposing agricultural subsidies), and structures such as reverse auctions. Pros/cons of different mechanisms for delivering value to farmers for protection beyond legal requirements and discussion of conditions, frameworks, policies, that would enable those mechanisms to work in practice. This component includes literature review and in-country consultations. 6. Initial scoping of regions / states where such mechanism could be piloted and evaluation of the best approach (e.g., for carbon-based incentives, jurisdictional approach vs voluntary carbon markets), with particular attention to high priority areas, such as Soft Commodity Forum priority municipalities This component includes mainly in-country consultations.

The consultant will meet with UNEP, TNC, TFA and other partners to refine the scope of work and to provide input and review of progress through the course of the engagement.

Qualifications/special skills Academic Qualifications: Advanced university degree (Master’s degree or equivalent) in agricultural or environmental economics, or related discipline is required.

Experience: Minimum five years of progressively responsible work experience as agricultural or environmental economist in Brazil, preferably with specific experience on incentives for sustainable commodity production is required.

Thorough understanding of farm-level economics and of the key factors influencing decision making by producers in Brazil; demonstrable knowledge of different types of financial incentives for sustainable production; knowledge of carbon markets an advantage.

Language: Fluency in written and oral English and Portuguese and excellent writing skills are required.

No Fee THE UNITED NATIONS DOES NOT CHARGE A FEE AT ANY STAGE OF THE RECRUITMENT PROCESS (APPLICATION, INTERVIEW MEETING, PROCESSING, OR TRAINING). THE UNITED NATIONS DOES NOT CONCERN ITSELF WITH INFORMATION ON APPLICANTS’ BANK ACCOUNTS.