Amazon damage could cost Brazil $184 billion, World Bank says

The Amazon rainforest is moving closer to an inflection point past when parts of its ecosystem won’t receive enough rain to support themselves, a development that could cost Brazil’s economy $184 billion by 2050, a new World Bank report says.

Climate change, illegal deforestation and the expansion of cattle pastures within the world’s largest rainforest could soon jeopardize the country’s agriculture production, water supply and even its ability to generate of hydroelectric energy, the bank said in a country climate and development report released Thursday.

“Brazil can, shortly, reach an inflection point,” the report warned. The projected cost of surpassing that threshold is equivalent to nearly 10% of the country’s gross domestic product from 2022.

Extreme weather events are already taking a toll on Latin America’s largest economy, costing it $2.6 billion on average each year, according to the bank. Anywhere from 800,000 to 3 million Brazilians will be at risk of extreme poverty as a result of such weather events from 2030 onward, the report said.

President Luiz Inácio Lula da Silva has vowed to reverse a trend of rising deforestation as the Amazon nears the point past which some scientists warn it may not recover. He has attracted international assistance to his cause, winning a pledge from the White House to commit $500 million to the Amazon Fund, a Brazil-led global initiative to protect the forest. Brazil is in talks with the U.K., France, Japan and European Union to join the fund started alongside Germany and Norway in 2008.

“Delivering the government’s pledge to curtail illegal deforestation and reach net zero emissions by 2050 could result in a significant reduction of carbon dioxide, which would help preserve vital ecosystems for the agriculture, energy and urban sectors,” the report said.

Lula’s economic team is currently mulling a tax reform proposal, and the World Bank suggests that Brazil consider a carbon levy for economic activities linked to mining and the extraction of fossil fuels. It estimates a carbon tax could pour an additional $30 billion a year into public coffers until 2030.

The country could also boost its production of green hydrogen, increase its renewable energy, extend protected areas to include indigenous communities and improve infrastructure related to irrigation, among other proposals.

But it will need to continue to tap into private and international funds, as the need for investment adds up to 3.7% of its GDP each year through 2030 just to deliver on pledges of sustainable infrastructure, according to the bank’s projections.