Sustainable Industry

Ratifying the Mercosur-EU Agreement: a tangible and effective action for the climate

The agreement, in addition to reinforcing commitments to climate change and the environment in general, brings instruments for its effective implementation*

Robson Braga de Andrade

Entrepreneur and President of the National Confederation of Industry (CNI)

The debate on climate change has come of age. The risk of global warming and the urgent need for across-the-board adoption of tangible measures to mitigate it have become unquestionable. The challenge now is to set priorities in a concerted manner by engaging governments, businesses and the civil society in actions with an impact at the macro level. If the 26th Conference of the Parties on Climate Change (COP-26) being held in Glasgow, Scotland, is to deliver tangible results, we need to think pragmatically.

It is against this backdrop that the ratification of the Mercosur-European Union Agreement has become even more relevant and urgent. A comparative analysis of international agreements currently in force shows clearly and unequivocally that this is one of the most advanced instruments in the world to cover environmental, social and governance (ESG) aspects. A pact that establishes obligations on signatory countries in line with the best global ESG practices.

This is a concern that runs throughout the agreement. So much so that it reinforces all the major multilateral treaties on the environment – including the Paris Agreement –, sets forth commitments in biodiversity and sustainable forest management and outlines two governance instruments to ensure implementation: a bilateral cooperation framework – essential to address environmental issues at the international level – and the Subcommittee on Trade and Sustainable Development, which is dedicated to discussing and presenting solutions to improve trade and investment in areas such as research and innovation. Thus, in addition to reinforcing commitments to climate change and the environment in general, ratification of the agreement includes instruments for its effective implementation.

History has shown that the most effective way to counter environmentally harmful practices is to encourage practices that help to conserve the environment. This statement may seem obvious, but an analysis of the current state-of-affairs shows that this rationale has not been applied. Instead of encouraging the sustainable management of our forests and biodiversity resources as a means to curb their illegal and irrational exploitation, we have indiscriminately criminalized any use of natural resources.

The same rationale applies to the Mercosur-European Union Agreement. Instead of quickly ratifying this modern and important instrument for the evolution of trade, and as a way to expand cooperation and to speed up the adoption of ESG practices in these countries, we have been wasting time with accusations and misinformation. At the very least, it is contradictory to claim that some nations are not environmentally mature enough to take a stand against the ratification of an agreement that will precisely encourage them to align themselves with the best global practices.

According to a paper by the London School of Economics (LSE) commissioned by the European Commission, under a conservative scenario, the Mercosur-EU Agreement would not only provide gains of 11 billion euro for the European bloc and 7.5 billion euro for Mercosur economies in ten years, but it would also contribute to reducing CO2 emissions globally. Taking these numbers into account is essential to bring some sense into the debate and concretely move toward fast-tracking adoption of the agreement by both sides.

Brazil and the major European economies share environmental values ​​and are leaders in this global agenda.  Ratification of the Mercosur-EU agreement is yet another catalyst for this alignment with the ESG principles and, therefore, should appear on the priority list of the global sustainable development agenda. In the meantime, the Brazilian industrial sector has been doing its part and adjusting its production processes toward a low greenhouse gas emissions economy based on four pillars: energy transition, carbon market, circular economy, and forest conservation.

This expanded, in-depth and straightforward approach is the way to achieve effective results. All pillars are important and in all of them Brazil has great examples to be showcased! As far as energy transition goes, it should be noted that 84.8% of the electricity mix in Brazil is made up of renewable sources. By way of comparison, in the United States and member countries of the Organization for Economic Cooperation and Development (OECD) these percentages are 18% and 27%, respectively, according to the International Energy Agency (IEA). The world average is 25%.

Under the second pillar, the CNI advocates for the establishment of a regulated carbon market before the National Congress, in the form of an emissions trading system under the “cap and trade” rationale, which encourages companies to invest in clean technologies. Despite not having a regulated market, in some segments, such as cement, Brazil’s greenhouse gas emissions are less than half the global average.

In the circular economy, Brazil also adopts a series of good initiatives that can serve as an example. While 56% of aluminum is recycled in Brazil, the global average is 26%. This is just one example of the efforts being made by the Brazilian industrial sector to spearhead a sustainability agenda at the global level.

The forest conservation pillar puts forward a straightforward proposal to tackle a problem that affects Brazil’s environment and reputation internationally. Sustainable forest management and public forest concessions, in addition to surveillance and monitoring, make it possible to conserve and create opportunities for millions of people who live around forest areas in the country. Here, once again, we must apply the rationale of encouraging good practices as a means to combat and curb undesirable practices.

For the industrial sector, COP-26 is an opportunity to demonstrate its long-standing commitment to the environmental cause, attract investments to Brazil and make headway in international relations with strategic partners such as countries in the European Union.

There is still a long way to go when it comes to attracting investment. Latin America and the Caribbean were given only 4.5% of the total funding provided by climate funds. The funds allocated to Brazil were even lower. By contrast, Asia scooped 38% of these funds.

The time has come to translate the debate on the climate issue into straightforward actions with concrete results. The response involves a global approach, innovation, technology and Brazil, a continent-sized country that has more than 60% of its area covered by native vegetation and holds the greatest biodiversity on the planet.

COP26 is a unique opportunity for us to recognize that criticism without proposed actions can be a warning, but will not provide a solution. And, if we are to have concrete results, we need to adopt equally concrete measures, such as the ratification of the Mercosur-European Union Agreement.

*Article published in the newspaper El Pais on 27/10/2021