Acre State Law Regarding Payment for Environmental Services Benefits Financial Market
By Amyra El Khalili and Arthur Soffiati  for Pravda.ru
Translation of the original article into English by Leandro Moura.
Acre State Law nº 2,308 of 22 October, 2010, which creates the State System of Incentives for Environmental Services (SISA), the Programme of Incentives for Environmental Services (ISA Carbono) and other Environmental Services and Eco-systemic Product Programmes  seems to be a manifestation of the green economy, even before this concept was presented at the Rio+20 conference. If the work of bees as pollinators can be valued and priced, who will receive the money in their name? Nature works without the notion of work and remuneration. Someone will receive it for them. Who will it be? The vulture works daily, whether it is Saturday, Sunday or a holiday. It does so because it is in its nature, not because it needs money. Schemes like SISA and ISA Carbono will make it a lot easier for big business to receive money for what Nature does for free, by valuing and pricing it. Someone will want to receive the money from these services Nature provides for free.
Price formation in the capital markets, specifically on stock and financial exchanges, is determined by three factors: an analysis of fundamentals, which is a study of the current economic setting; a mathematical analysis, which includes calculations of interest rates, time frames and costs; and a graphical analysis, which records the movement of the supply and demand for the object (asset or commodity). Therefore, the complexity involved in price formation demands in-depth knowledge of the object being traded.
In the neoliberal school, in order to shorten the price formation path, “indexes” have been created by elite universities and research institutes. Financial players pay top dollar to these institutions so that with these indicators to hand, they can make decisions (sales and purchases) and turn over contracts on the futures markets at an ever faster pace.
The futures industry, dealing in so-called derivatives, has become the most profitable in recent years, mainly for brokerages and banks, since intermediaries make money on the volume traded, irrespective of the result. In other words, they earn brokerage fees when the customer is making money and also when the customer is losing money.
Over time, it was no longer interesting to earn brokerage fees on sales and purchases for each contract closed. The appetite for speculation and the greed over the advantages of buying and selling quickly, often in seconds, created opportunities for intermediaries (brokers and traders) to profit from the financial game as well; and in general, gambling with other people’s productive work and money, rarely their own.
The financial industry has grown out of proportion with the production of real goods and services; deregulation has advanced, allowing for profits to be made without a system of guarantees in case of losses being incurred; power has become concentrated in the hands of half a dozen banks – also guarantors of deals they themselves offer their customers.
In December 2007, the Bank for International Settlements estimated that the derivatives business was worth US$ 681 trillion – ten times the GDP of all the countries in the world. It is a case of the fox  looking after the chicken coop.
We do not know whether those who authored the SISA law know how the financial markets work. What we do know is that the conceptual apparatus used by them is well-known and can lead to mistaken conclusions – like the ones suggested in relation to new laws on so-called ecosystem services.
The article “Duas filosofias de proteção à natureza” [Two nature protection philosophies], by Catherine Larrière, included in the book Filosofia e Natureza: Debates, Embates e Conexões [Philosophy and Nature: Debates, Conflicts and Connections], edited by Antônio Carlos dos Santos (Aracaju: Editora da Universidade Federal de Sergipe, 2008) highlights the importance of differentiating between the concepts of conservation and preservation. They are well-established and of fundamental importance to understanding the relations between human societies (anthropo-societies) and non-human nature.
Preservation means maintaining non-human nature free from human use. Conservation indicates using non-human nature while respecting its limits. In what sense does the law use the concept of preservation? Apparently, as a synonym for protection, a concept that involves preservation and conservation.
Among one group of defenders of non-human nature and the critics of the ecological and environmental movements, the concepts of conservation and of preservation are understood as mutually excluding opposites. A false opposition, for preservation and conservation complement each other. One cannot be a preservationist in a city, nor can one be a conservationist in an extractive reserve.
Proponents of the law also attribute to the Summit of the Peoples , a movement in parallel with Rio+20, the inadequate use of ideological analysis, drawing attention to its uninformed ideology. Here, they enter a minefield, a dangerous terrain, since according to one current of thought (Mannheim and Althusser, for example), every human being thinks in an ideological fashion, while classical Marxism understands ideology as the dominant thought that shapes the structure – and hence, the dominant ideology is the ideology of the ruling class. To which of the two meanings of ideology are those questioning the critique of the law referring? From the way the expression is used, it seems like they are outside the realm of ideologies, while the Summit of the Peoples is a prisoner of it.
The authors of the Law maintain that SISA seeks “to make economic and social development compatible with the best environmental preservation practices”. [..] “Making compatible” as in trying to reconcile predatory development, i.e., conventional economic growth, with environmental protection? Historically, since the 1970s, it has been suggested that such reconciliation is provisionally possible. However, when the rope that joins environmental protection and development breaks, development is always prioritised. But different conceptions of development exist. To which development model do the law’s authors refer? The answer to this question soon appears in the text of the Law: sustainable development.
The concept of sustainable development established itself in the 1980s, mainly through the book Our Common Future, which resulted from the Brundtland Commission. It gradually replaced the much clearer concept of eco-development, and became central to the Rio 92 Conference. Over time, its use has become so widespread that it has lost its meaning. Nowadays you hear things like sustainable interest rates, sustainable profits, sustainable income, sustainable growth, sustainable practices and even sustainable body without even a minimum of conceptual rigour. In responding to opinions critical of the SISA Law, its authors do the same. The consequence of such ambiguous use is that, in the case of Sustainable Development, indicators like income and GDP growth are employed. But the production of armaments and related services generate income and contribute to GDP growth. Where is these authors’ pioneering spirit if they use such indicators so uncritically?
Discussing carbon credits is tantamount to returning to the past – or a symptom that we never left it. The carbon market does not tackle the environmental crisis head-on, but seeks to transform it into a source of profits. But the past is also embedded in the present and, likewise, in the future. It suffices to examine the concept of green economy, trumpeted before, during and after Rio+20. What is its content? Nobody knows for sure. What is known is that it is being used by wheeler-dealers to make money from Nature. Just read the book A Economia Verde: Descubra as Oportunidades e os Desafios de uma Nova Era dos Negócios [Strategies for the Green Economy: Opportunities and Challenges in the New World of Business], by Joel Makower (São Paulo: Editora Gente, 2009). The concept of green economy opens the way to the valuing of the air and of photosynthesis, for instance. Producer and product, service provider and service are all lumped together.
It seems we are heading towards a new and more subtle form of slavery. In the slave system, slaves and the goods and services generated by them could be valued. A slave, even with arms crossed, had a price. He or she could be bought and sold, regardless of the goods and services produced by him or her. The new slavery is more akin to what French philosopher Étienne de La Boétie called voluntary servitude. Plants carry out photosynthesis voluntarily to exist, and not because we compel them to. But someone may ascribe to him or herself the right to charge for it, or be granted some government concession to exploit it. Let us leave it there, for the list of modes of undue exploitation is long.
Therefore, the SISA Law opens a dangerous precedent for the fox to look after the chicken coop and to get paid masses of money for doing so , as it allows resources to be gathered and then administered by the financial system through the carbon market. It is under the media spotlight, being trumpeted  as a model law for the world. While the European carbon market is in the doldrums , exacerbated by the 2008 financial crisis, over here preachers sell the carbon market as the path out of the convergence of crises.
It is strange that the authors of Acre’s law regarding payment for environmental services seem to have ignored the lessons that can be drawn from analysing the impact of the pricing of agricultural products on international commodity markets, such as cacao, sugar, coffee, soy beans, maize and beef, among others. One has the feeling that the most basic rules of pricing were not studied, those being the analysis of fundamentals (economic setting), mathematical analysis (interest rates, time frames and costs) and graphical analysis (supply and demand).
One cannot create a viable market artificially, with laws and environmental marketing. The experiences with commodity and derivative markets have taught us that the State’s direct participation in regulation to foment sales creates distortions and stimulates speculation.
When the Central Bank regulated exchange rates on the gold market, there was liquidity because the monetary authority would feed the market by buying and selling gold. When the Central Bank left the gold market, it evaporated. There was no future currency market simply because there were no future currency traders. When the Bank established currency control via the exchange rate band, the future currency market at the old BM&F (now BM&FBovespa) emerged from scratch, and is today the market that sustains, in conjunction with the interest rate market, the impressive financial turnover of BM&FBovespa.
Let the State play its role as a regulatory and enforcement agent of the financial system, let it even be a fomenter, but it should not dabble in “market-making”. If the State struggles to manage to prevent environmental degradation and devastation through enforcement, how can it become a financial agent or, with the best intentions, pass on this role to third parties (the fox)?
Ask BM&FBovespa: why do agricultural commodity markets not advance? Or: why do family farmers of this continent not operate on the Futures Exchange to protect themselves from sudden fluctuations in agricultural commodity prices? Ask the players: why is the national soy bean price set by the Chicago Exchange and not formed considering Brazilian costs?
Ask more questions before making laws “to ascribe value to” and/or “to value” environmental goods. Ask Arabs and Africans: why has water (a scarce good in the Middle East and Africa) never been quoted on stock exchanges? Or: why have Arabs and Northeast Brazilians not yet invented the future water market?
Also, ask members of the RECOs Alliance (Networks of Community Cooperation Without Borders), who are building a new economic model for Latin America and the Caribbean by creating “environmental commodities”, whose reports and public consultations have been signed by 5,000+ professionals from varied disciplines and hundreds of communities over more than a decade: why did we not propose (or, better still, not think up) this SISA Law before?
Maybe because we are not as intelligent as the authors of the SISA Law, to the point of mobilizing the vulture. Concluding, it is worth recalling the poem “O urubu mobilizado” [The mobilized vulture], by João Cabral de Melo Neto:
Durante as secas do sertão, o urubu
de urubu livre, passa a funcionário.
Ele nunca retira, pois prevendo cedo
que lhe mobilizarão a técnica e o tacto,
cala os serviços prestados e diplomas,
que o enquadrariam num melhor salário,
e vai acolitar os empreiteiros da seca,
veterano, mas ainda com zelos de novato:
aviando com eutanásia o morto incerto,
ele, que no civil que o morto claro.
Embora mobilizado, nesse urubu em ação
reponta logo o perfeito profissional.
No ar compenetrado, curvo e secretário,
no todo de guarda-chuva, na unção clerical,
Com que age, embora em posto subalterno:
ele, um convicto profissional liberal.
(1) Acre’s SISA law: http://www.observatorioeco.com.br/wp-content/uploads/up/2010/10/lei-do-acre-para-serviaos-ambientais.pdf
(2) Pagamento por “Serviços Ambientais” e a flexibilização do Código Florestal para um capitalismo “Verde” [Payment for “Environmental Services” and the loosening of the Forest Code towards a “Green” capitalism]. Terra de Direitos, August 2011:http://terradedireitos.org.br/wp-content/uploads/2011/08/Analise-PSA-CODIGO-Florestal-e-TEEB-Terra-de-direitos.pdf
(4) Uma análise crítica da economia verde e da natureza jurídica dos créditos ambientais [A critical analysis of the green economy and of the legal nature of environmental credits]
(5) Acre participa da Conferência de Mudanças Climáticas em Cancún, no México [Acre takes part in the Cancún Conference on Climate Change, in Mexico], 10 December 2010
(6) O Comércio de Carbono: Como funciona e por que é controvertido [Trading carbon: How it works and why it is controversial]. 3 July 2012.
Translation of the original article into English by Leandro Moura.
 For further context to this article see also Amyra El Khalili: Lei de pagamento por serviços ambientais do Acre beneficia Mercado Financeiro and response to the article by Virgilio Gibbon: Mira do fogo amigo erra ao criticar Lei de Pagamentos por Serviços Ambientais do Acre and Arthur Soffiati’s article Lei de Pagamento por Serviços Ambientais do Acre joga produtor e produto no mesmo saco
 Amyra El Khalili is an economist from São Paulo, author of the e-book Commodities Ambientais em Missão de Paz: Novo Modelo Econômico para a América Latina e o Caribe [Environmental Commodities on a Peace Mission: A New Economic Model for Latin America and the Caribbean]. São Paulo: Nova Consciência, 2009. 271 pages. Access freely on www.amyra.lachatre.org.br.
 Arthur Soffiati holds a PhD in Social History with an emphasis on Environmental History from the Federal University of Rio de Janeiro. He is a retired professor from the Fluminense Federal University, and member of its Socio-environmental Studies Centre. He has published ten books, as well as various book chapters, articles in specialized journals and in the weekly press.