Federal Environmental Agency (IBAMA) vs. Alto Norte Indústria, Comércio e Exportação de Madeiras Ltda

On December 20, 2018, Brazil’s Federal Environment Agency (“IBAMA”), filed a public civil action (environmental class-action) against Alto Norte Indústria, Comércio e Exportação de Madeiras Ltda. seeking compensation for environmental and climate damages based on an infringement notice for illegal wood storage without an environmental license. This public civil action is part of a set of 9 lawsuits brought by IBAMA on the same grounds, but against different defendants, to question illegal wood deposits and climate damage. The plaintiff alleges that the storage of wood without proven origin is associated with illegal deforestation and predatory exploitation in the Amazon biome. Thus, it seeks reparation for environmental damages provoked by it, including (i) the damage caused to flora and fauna, (ii) soil erosion, and (iii) contribution to global warming. As for the climate damage, it claims that the unlawful conduct not only removed carbon sinks from the forest, but also caused the release of carbon into the atmosphere. The plaintiff seeks redress through the determination of (i) an obligation to restore the vegetation in an area equivalent to that estimated by IBAMA, based on the volume of logs seized, amounting to 20.63 hectares, ideally in an area of the same biome in Indigenous Land, Conservation Unit or Agrarian Reform Settlement Project and (ii) an obligation to pay the climate damage based on the Carbon Social Cost (CSC) in the amount of R$ 2,003,342.17. It claims, based on the polluter pays principle, that the climate damage represents an external social cost that is not internalized by the illegal deforestation, leaving it to society. It also argues that climate damage can be quantified on an individual scale by multiplying the estimated GHG emissions of the activity by the CSC. In this case, IBAMA uses the Amazon Fund methodology to estimate emissions based on the area of the Amazon biome considered deforested, summing up to 7,571.21 tons of carbon. The plaintiff requests, as an injunction: (i) suspension of financing and tax incentives and access to credit lines by the offender, (ii) unavailability of assets in the estimated amount for the obligation of the vegetation restorage and the obligation to compensate the climate damage, and (iii) judicial restraint order of the illicit polluting activity. On the merits, it requests the defendant's conviction in the obligation to do - to recover an area equivalent to that deforested - and the obligation to pay - in the amount related to the social cost of carbon. In a preliminary decision, the court partially granted the injunction, considering that the danger of delay was evident, especially in view of the fragility of the ecologically balanced environment. Thus, it granted and ordered (i) the suspension of the right to participate in financing lines offered by official credit establishments; (ii) the restriction of access to tax incentives and tax benefits offered by the Government in the three spheres of the Federation; and (iii) the unavailability of the assets of Alto Norte Indústria, Comércio e Exportação de Madeiras Ltda. in the amount of R$ 2,224,949.63.