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Voluntary carbon markets can fund extensive forest restoration while generating substantial socioeconomic benefits

How carbon markets can save Brazil’s forests

A carbon-neutral economy: That’s the goal of companies around the world as they set ambitious commitments to reduce their greenhouse gas (GHG) emissions. However, despite efforts to decarbonize their activities, many organizations still struggle to achieve consistent progress in eliminating their emissions. In this scenario, the voluntary carbon market can help companies offset emissions in their journey to net zero.


According to the Taskforce on Scaling Voluntary Carbon Markets (TSVCM), the demand for carbon credits could increase by a factor of 15 or more by 2030 and by a factor of up to 100 by 2050. TSVCM also estimates that most of the carbon credit generation potential (65-85%) would be sourced by Natural Climate Solutions (NCS)¹.

Natural climate solutions and carbon credit potential in Brazil

Though conservation, restoration and land management, NCS aims to avoid greenhouse gas emissions or increase carbon storage in natural environments. These solutions can address both climate change and “nature loss” crises. With more than a quarter of the global reforestation and forest conservation opportunity, Brazil stands out as the country with the greatest carbon credit generation potential by 2030. Accounting for 15% of the sequestration opportunity through NCS, it is also the country with the greatest potential to adopt sustainable agricultural practices.


Research suggests Brazil has the potential to generate 1.2 to 1.9 gigatons of carbon dioxide equivalents (GtCO2eq) per year in carbon credits by 2030, of which 90-95% would be NCS-based projects such as forest restoration (reforestation and afforestation), forest conservation (i.e., REDD+)² and agroforestry (see Exhibit 1)³.

Exhibit 1

Brazil’s potential of carbon credit development in 2030, by project type – considering USD 25-35/tCO2eq

1.2 - 1.9
0.6 - 0.9
0.2 - 0.5
0.1 - 0.2
Carbon credit potential

Waste to Energy, Blue Carbon and Others

Agriculture and Land Use

Jurisdictional REDD+



Beyond the economic advantages, NCS carbon credits also generate numerous co-benefits, including biodiversity protection, water security, erosion prevention, and socioeconomic development for local communities. Estimates suggest that for every dollar from climate change benefits⁴, the local community receives a net socioenvironmental return of USD 1-4 in terms of job creation, community development, and ecosystem services.⁵

Understanding the potential socioeconomic impact of the voluntary carbon market (VCM) on local communities can help scale up the market

The exponential growth of the VCM, with estimated price increases of up to USD 100/tCO2eq by 2030⁶ could bring substantial socioeconomic benefits to Brazil, given the potential of NCS.


To assess these benefits, data from IBGE, World Bank and Nature Conservancy were used to investigate the impact of NCS projects on Gross Value Added (GVA) and employment (see Box I for details on methodology). Three different NCS projects were considered: reforestation and afforestation; REDD+; and Agroforestry. The net socioeconomic effects of these projects were estimated by comparing their results against cattle production results, which is a common baseline economic activity for Brazilian rural areas.

Box 1

Methodology to estimate the impact of the Voluntary Carbon Market (MVC) on gross value added (GVA) and jobs

The assessment was performed by using Brazil’s national input-output tables from IBGE (Instituto Brasileiro de Geografia e Estatística). The net impact of replacing cattle production activities in degraded pastures with forest restoration projects was estimated by using capital expenditure (capex) and operating expenditure (opex) data from The Nature Conservancy and The World Bank. REDD+ and agroforestry estimated costs were considered as incremental, with no opportunity cost. Cost data and restoration practices used in the model assume difficult environmental conditions associated with degraded pastureland. For this reason, job and added economic value results should be interpreted as the maximum potential, rather than a precise projection.

bgs andrey-04.png

Exhibit 2

The framework for estimating the economic impacts of Natural Climate Solutions (NCS) projects



Boundary Location

Initial land management plan

Site preparation


Hand planting - labor


Boundary maintenance

Update management plan

Burning management


Data from The Nature Conservancy and the World Bank





Salt and feed

Vaccines, insemination and de-wormers

Limestone and pasture cleaning


Fencing and improvements





Data from IHS Markit

*Only OPEX costs were used to estimate cattle jobs as cattle farms are already present in the target restoration areas



Feasibility study

Project implementation


Wages for experts




Data from The Nature Conservancy and the World Bank



Transitioning of pastureland into silvopastoral system

Educational program + in kind assistance + admin costs



Animal upkeep


Data from The Nature Conservancy and the World Bank

Considering Brazil’s four biggest biomes⁷, which account for 96.1% of its total territory⁸, the voluntary carbon market in Brazil could unlock up to 83.9 million hectares of land for NCS projects, including restoration and agroforestry activities in degraded areas. Agroforestry projects alone could involve over 20 million hectares of severely degraded pasture. These results were obtained considering a carbon credit price range of USD 25-35 per ton of CO2eq, which is in line with conservative estimates for 2030 and beyond⁹. Analyzing the potential economic benefits of these projects, the GVA ranges anywhere between USD 16 and 26 billion per year, mostly fostered by restoration projects.

bgs andrey-03.png

Aside from the climate change mitigation impact, NCS-based carbon credits also have other positive environmental and socioeconomic impacts

Exhibit 3




Restoration projects (Reforestation + Afforestation), REDD+ and Agroforestry correspond to ~90-95% of the national potential of carbon credits


16-26 bi


GVA impact with a carbon price of 25-35 USD/tCO2e, considering reforestation activities in degraded pasture areas, REDD+ and agroforestry


550 - 880k


Net positive impact in jobs, of which ~60% are located where the project takes place (e.g., seedling growth, forest management, etc.)


Beyond that, Nature Climate Solutions are also associated with numerous co-benefits, including biodiversity protection, ensuring water security, climate resilience, etc.

VCM could foster job creation in rural areas and substantially reduce deforestation incentives

We also investigated job creation through NCS projects. Restoration, agroforestry, and REDD+ can generate 550-880k net jobs per year, of which approximately 57% are direct jobs and concentrated where the projects take place. Most jobs are in agriculture, maintenance, and repair. Another 18% are indirect jobs likely to be in the same mesoregion or state, including sectors like agriculture, retail trade, and transport. The remaining 25% of jobs are also indirect, and would likely be located nationally, including sectors such as financial activities, petroleum, and wholesale trade.


Restoration, agroforestry, and REDD+ can generate up to 880 thousand jobs/year, with ~57% being located where the projects take place

Exhibit 4


Distribution of
total jobs


Job distribution by sector
In %

Analyzing the 15 municipalities with the most deforestation in Brazil¹⁰, the development of NCS projects in degraded pastures could sequester nearly 180 million tons of CO2eq, with a net annual impact of nearly 27 thousand jobs and USD 650 million in GVA.

When analyzed individually, 13 out of the 15 municipalities would experience positive socioeconomic impacts by replacing cattle production with forest restoration projects. In fact, regions with low levels of cattle density and productivity concentrate most of the net economic impact for restoration projects as cattle density and productivity emerged as the main driver for the opportunity cost of restoration projects. 

Beyond opportunity cost, the intensification of agriculture activities such as cattle production has the potential of reducing the pressure on new agricultural areas. It should help promote the balance between agricultural development and forest protection in emerging economies such as Brazil¹¹.

Therefore, the carbon economy has the potential to change the economic outlook of these areas, providing strong socioeconomic incentives to maintain the forests standing instead of cutting them down for the development of other agricultural activities, without affecting agriculture productivity in Brazil. 

Coordination among key players is required to develop the VCM in Brazil

Brazil is currently benefiting from less than 2% of its full annual potential¹². Considering the VCM’s potential development in Brazil, it is clear that coordination among different market stakeholders is fundamental to unlocking and giving traction to this market.

For this reason, the Brazilian Initiative for the Voluntary Carbon Market (BR VCM) was created to organize and channel efforts to identify market bottlenecks and create mechanisms to leverage Brazil’s VCM to its full potential.


1. NCS seeks to catalyze global enthusiasm for drawing down carbon by restoring ecosystems, the single most undervalued and underfunded tool for climate mitigation

2. Reducing Emissions from Deforestation and forest Degradation in developing countries (REDD+)

3. Analysis based on data from McKinsey Nature Analytics, IBGE, Mapbiomas, Network for Greening the Financial System and The Nature Conservancy, considering a carbon credit price range of USD 25-35 per ton of CO2eq, which is in line with conservative estimates for 2030 and beyond


4. Climate change benefits from high-integrity carbon credits of conservation, afforestation/reforestation and sustainable forest management projects

5. Valuing Impact and Natura Integrated Profit & Loss 2021 report

6. The Network for Greening the Financial System (NGFS)

7. The Amazon Forest, Cerrado, The Atlantic Forest and Caatinga


9. The Network for Greening the Financial System (NGFS) estimates carbon prices of between $100 and $200 per tCO2eq in 2030, sharply increasing these values until 2050

10. Municipalities with most deforestation according to PRODES (INPE) from 2000 to 2018

11. Cohn, AS et al. 2014. Cattle ranching intensification in Brazil can reduce global greenhouse gas emissions by sparing land from deforestation. Proceedings of the National Academy of Sciences, 111 (20), 7236-7241

12. According to Verra and Gold Standard registries, 21 MtCO2eq of carbon credits were issued in Brazil on average per year between 2019 and 2021

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