Case Name: IBAMA vs. Madeireira Madevi (Illegal logging in Santarém and climate damage)

Summary

This is a Public Civil Action, requesting urgent relief, filed by IBAMA against Madevi LTDA seeking compensation for environmental and climate damage caused by the dumping of timber in rounds without an environmental license. This Public Civil Action is part of a set of nine lawsuits filed by IBAMA with the same grounds, but against different defendants, to challenge illegal logging and climate damage. The plaintiff claims that the dumping of timber without a proven origin is associated with illegal deforestation and predatory logging in the Amazon biome. Therefore, the plaintiff seeks compensation for associated environmental damage, including (i) damage to flora and fauna, (ii) soil erosion, and (iii) contribution to global warming. Regarding climate damage, the plaintiff claims that the illicit conduct not only removed carbon sinks from the forest but also caused the release of carbon into the atmosphere. The author seeks to establish (i) an obligation to undertake vegetation restoration in an area equivalent to that estimated by IBAMA, based on the volume of seized logs, totaling 29.57 hectares, and (ii) an obligation to pay for climate damage based on the Social Cost of Carbon (SCC). Based on the polluter-pays principle, he asserts that the negative climate externality represents an external social cost that was not internalized by the illegal vegetation removal activity. He argues that climate damage can be identified on an individual scale by multiplying the estimated GHG emissions from the activity by the SSC. In this specific case, IBAMA uses the Amazon Fund methodology to estimate emissions based on the area of the Amazon biome considered deforested. He expressly mentions environmental justice and argues that accountability for climate damage consists of legally asserting the correction of the distortion of environmental burdens and benefits. The plaintiff requests, as a preliminary injunction: (i) suspension of financing, tax incentives, and access to credit lines for the offender; (ii) unavailability of assets worth the estimated value required to fulfill the obligation to undertake vegetation restoration and the obligation to pay for climate damage; and (iii) judicial embargo on the illicit polluting activity. He further asserts the need to reverse the burden of proof and definitively requests that the defendant be held liable for the obligation to undertake restoration of an area equivalent to the deforested area and to pay the amount corresponding to the social cost of carbon. There was a preliminary decision by the judge in which the injunction was partially granted regarding the unavailability of assets of the defendant company, suspension of the defendant's participation in financing lines and suspension or loss of tax incentives or benefits, given the strong evidence of damage and the duty to repair it (probability of the right) and the risk of jeopardizing the useful outcome of the process (ensuring reparation). However, it considered, at the moment, unfeasible to use the Social Cost of Carbon (SCC) for the purpose of declaring the unavailability of assets due to the lack of technical subsidies, since the amount requested was, at first glance, disproportionate. IBAMA filed an appeal (AI 1004508-40.2019.4.01.0000) requesting that the value of the CSC be included in the declaration of asset unavailability, considering the soundness of the methodology used as a reference for its quantification. The IBAMA argues that to fully compensate for the environmental damage caused, it is necessary to include the social cost of carbon, which is considered "residual damage" or "permanent damage." A first conciliation hearing was held in which the parties expressed an interest in formalizing an agreement, although they did not have a ready proposal. In its response, the defendant alleged a violation of the principle of due process in the administrative proceedings to investigate the environmental violation and the lack of a causal link for attribution of liability. Furthermore, it argued that the use of the social cost of carbon to quantify damages constitutes unjust enrichment, since the extraction of forest products is an unrelated activity. A new hearing was held, with the defendant presenting a settlement proposal. IBAMA disagreed with the settlement offer because it only contemplated the obligation to compensate for environmental damage, without mentioning the need to restore the degraded area. The IBAMA requested a supplement to the proposal. Therefore, the defendant submitted a new proposal, which is currently under review by IBAMA. Therefore, a new conciliation hearing was scheduled for a consensual resolution of the dispute. The defendant failed to appear at the hearing, and the court ruled that the attempt at self-compensation was unsuccessful. At the time, IBAMA argued that there was no possibility of an agreement since administrative proceedings had already taken place, and this option was rejected. A judgment of partial success was handed down, convicting the defendant of environmental damage resulting from the illegal dumping of timber without proper proof of legal origin. The conviction was based on strict liability, imposing on the polluter the obligation to repair the damage caused to the environment, regardless of fault. It was proven that the timber was acquired illegally, through the improper use of forest credits in the traceability system, without proof of the origin of the forest product, constituting an environmental violation. The order was made to convert the obligation to restore the degraded area into monetary compensation, in accordance with established technical parameters. The imposition of forfeiture and suspension of tax incentives was imposed, in addition to prohibiting participation in public financing lines until the environmental liabilities were regularized. The claim for compensation for climate damage was rejected due to the lack of technical reports or studies to substantiate the amount to be awarded. IBAMA filed a motion for clarification alleging the existence of an omission in the judgment regarding the application of the CNJ Protocol for the judgment of environmental actions, which were acknowledged and dismissed by the court. Subsequently, IBAMA filed an appeal, upholding, on the merits, the obligation to pay the CSC. Upon finding that the defendant had deposited forest products without proper certification of origin, the IBAMA argued that there had been illegal clearing of Amazon biome vegetation and carbon emissions, thus requiring the polluting enterprise to internalize the resulting social cost. The IBAMA argued that the methodology for calculating the social cost of carbon is referenced by the Environmental Protection Agency (EPA) and allows for pricing of climate damage, indicating the amount to be allocated for environmental reparations for each ton of greenhouse gas emitted illegally. Climate damage can be identified on an individual scale by multiplying the estimated GHG emissions at the emitting source by the CSC. For initial estimation purposes, the IBAMA adopted the OECD carbon price per ton as the midpoint (to be measured in the investigation). He indicated that the Amazon Fund's official regulations, supported by Brazilian legislation and international conventions, allow for the identification of how many tons of greenhouse gases are produced by the removal of 1 hectare of vegetation. This methodology requires, in this specific case, converting the volume of wood found to the area measured in hectares, allowing for the calculation of the area in hectares and the tons of carbon released, and ultimately, assigning values to the releases. He further argued that the CNJ Protocol for the Judgment of Environmental Actions (CNJ Recommendation No. 145/2023, established in collaboration with Resolution 433/2021) recommends applying the Social Cost of Carbon to the methodology for calculating climate damage and acknowledges that there is sufficient literature to support this application. He requested that urgent relief be granted to grant the preliminary requests made in the initial petition and the consequent decree of the unavailability of the defendant's assets and the civil judicial embargo of all illicit polluting activity.

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Main norms mobilized

• Article 225 of the Federal Constitution (CRFB/88)
• National Environment Policy Act - PNMA (Federal Law 6.938/1981)

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