How climate change complicates Brazil's efforts to address deforestation

Climate change poses a growing risk to nature and agriculture in Brazil, as increasingly frequent and powerful wildfires cause forest loss and other climate hazards lead to lower crop yields.

As the most biologically diverse country in the world¹ and a major producer of several key agricultural products, Brazil has tried to reduce the impact of domestic farming on forests. The country’s Forest Code, first passed in 1965 and updated in 2012, requires the preservation of natural forest and shrubland on agricultural properties. But implementing and enforcing the Forest Code has proved challenging.²

The stakes are high when it comes to  protecting Brazil’s ecosystems. The Amazon rainforest functions as a crucial carbon sink and provides rainfall that much of the South American continent relies on and is home to 10% of all known wildlife species.³

Looming over efforts to address deforestation is climate change, which is having a complex mix of effects on Brazil’s agriculture sector and forests. Human-caused climate change is increasing the frequency and severity of wildfires in forest ecosystems, and wildfires have become a large driver of forest loss in the last 10 years. The S&P Global Sustainable1 Country Physical Risk dataset projects that wildfire conditions will grow more common across the Brazilian Amazon. In addition, other climate physical risks such as extreme heat and drought are expected to lower crop yields, which could encourage more agriculture-driven deforestation as farmers seek to clear more land for planting. 

Forests are home to most of the earth's terrestrial biodiversity.⁴ Brazil still contains the most total tropical primary forest of all countries, but it has also become the biggest contributor to forest loss globally.⁵

Historically, agriculture has been by far the dominant driver of forest loss in Brazil. But that has changed over the past decade. Data from Global Forest Watch, a collaboration between the World Resources Institute and Google DeepMind, shows that the annual rate of forest loss due to agriculture in Brazil has declined since peaking in 2004 — data that suggests some measure of success for Brazil’s nature preservation policies. But as agriculture-related forest loss has slowed, the damage from wildfires has increased dramatically since 2015. In 2024, wildfire caused more forest loss than permanent agriculture.

This trend appears likely to continue, based on projections from the S&P Global Sustainable1 Country Physical Risk dataset. The frequency of high wildfire conditions days in Brazil is projected to rise further, including in the nine states encompassed by or overlapping with the Amazon rainforest. In this dataset, the wildfire hazard is based on the Fire Weather Index (FWI), which provides an indicator of wildfire danger based on factors such as temperature, humidity, wind speed and precipitation. 

For this analysis, wildfire exposure is expressed as the number of days per year that an area might experience high to extreme wildfire conditions. While this metric does not directly represent the frequency of wildfire events, it does indicate increasing frequency of conditions conducive to wildfire in areas containing burnable vegetation.  We consider this exposure under two climate change scenarios: SSP2-4.5 (medium), in which there is strong global effort to curb emissions, and SSP3-7.0 (medium-high), in which there is less action to mitigate emissions. 

Three of the Brazilian Amazon states — Tocantins, Mato Grosso and Maranhão — are projected to face particularly high wildfire hazard exposure, even under the SSP2-4.5 climate change scenario. These three states are projected to spend at least three months per year in high to extreme wildfire conditions by the 2050s in this scenario. Mato Grosso is Brazil’s top soybean producing state, making wildfires an increasingly important risk to consider for that commodity.

For its part, Brazil has taken steps to assess and address wildfire-related forest loss due to climate change, and in 2024 it established a National Integrated Fire Management Policy. Under the policy, the Ministry of the Environment is tasked with coordinating among the federal government, states, municipalities, the private sector and civil society to strengthen and expand measures for the prevention, preparation and control of fires.⁶ Among other things, the policy created a national database to monitor forest fires and controlled burns.

Wildfire exposure is growing as a direct threat to forests. But climate change is also creating indirect risk to forests, as more severe and volatile temperatures and precipitation levels lead to lower crop yields. As yields fall, land-use changes increase, often in the form of clearing forests. In other words, farmers seeking to produce the same volume of crops would need to use more land to do so. S&P Global Energy projects that this increase in land use will occur even when accounting for future improvements in technology and farming practices that make land more productive.

S&P Global Energy projects that by 2050, sugarcane and second-season corn — which is grown after the first corn crop and soybean harvest — will lose at least 11% and 20% of yield per hectare, respectively, due to climate change. First-season corn yields are also projected to decline. This projection is based on the SSP2-4.5 scenario and on expected changes in extreme degree days and precipitation during the crop-growing season. An extreme degree day is defined as a day with temperatures above the optimal threshold for the crop growing season.

At the same time, Brazil has set policy goals of using more ethanol to reduce reliance on fossil fuels in its transport sector, which will raise demand for key ethanol inputs including sugarcane and corn. Brazil’s E30 mandate targets an ethanol blend of 30% in gasoline, up from 27.5%. S&P Global Energy projects that the demand for corn for biofuel use will rise 80% by 2050. 

This combination of projected lower crop yields and consistent policy-supported demand is projected to encourage farmers to use more land to maintain output. In S&P Global Energy’s base case projection,⁷ the land area for corn, soybean and sugarcane is set to expand by 12% by 2050 to meet higher demand. This projection accounts for technological advances that improve output per hectare, such as improvements in fertilization and seeds. When we account for yield deceleration caused by climate change, land use is projected to increase a further 6% to meet the same level of demand. Without incentives to protect forest land, biofuel policies could lead to more risk to nature and biodiversity.

Nature loss and climate change are increasingly viewed as dual crises that must be addressed in tandem. Each can worsen the other in negative feedback loops: Intact ecosystems that are normally carbon sinks, absorbing more carbon dioxide than they emit, can become net carbon emitters as they are degraded. Consequently, these places become contributors to the higher concentration of greenhouse gases in the atmosphere that trap heat and accelerate global warming. In 2021, scientists found that this switch has occurred in much of the Amazon rainforest, particularly in deforested and burned areas in the forest’s southeast.⁸

In addition, declining biodiversity and ecosystem services — just like rising climate physical hazards — pose direct risks to communities and companies. In the case of the Amazon rainforest, the increase in wildfire-driven forest loss represents how a climate physical risk can cause nature loss. The potential for wildfires to continue driving forest loss makes addressing agriculture-driven deforestation all the more important. 

Looking beyond Brazil, the world’s largest companies carry significant nature dependency risks. This is true across sectors and not just for companies with supply chains that rely on agricultural production. In other words, the economic stakes are high for protecting the ecosystem services and natural capital that businesses rely on. 

As a next step for forest preservation, a new global model for climate finance called the Tropical Forests Forever Fund, or Facility (TFFF) was launched at COP30. Under the TFFF, countries that preserve their tropical forests will be financially rewarded through a global investment fund. This creates economic incentives for conservation. More than 50 countries have expressed support for the initiative and the World Bank will serve as the trustee and interim host of the TFFF.

The S&P Global Sustainable1 Physical Risk: Country and Subnational dataset covers nine climate physical hazards: extreme heat, extreme cold, drought, wildfire, water stress, tropical cyclone, coastal flood, fluvial flood and pluvial flood.  

The frequency of each hazard is characterized for four climate scenarios (SSP1-2.6, SSP2-4.5, SSP3-7.0 and SSP5-8.5) on a decadal basis from the 2020s to 2090s. Dataset metrics include absolute frequencies of climate-related extreme events and conditions; their rank order relative to other geographies in the dataset; and measures of the percentage of GDP and population exposed for each country or subnational region. The materiality of a climate hazard for a country or subnational region can be expressed by how much GDP or population is exposed to a significant hazard threshold value, which varies for the different hazards.

In this analysis of wildfire risk in Brazil, we focus on the underlying hazard metric, the Fire Weather Index (FWI), which provides an indicator of wildfire danger based on factors such as temperature, humidity, wind speed and precipitation. 

These absolute and relative exposure metrics do not assume any impact from physical risk adaptation or resilience measures and therefore provide a starting point for exposure that could be reduced by adaptation investments.

S&P Global Energy Sustainable Agriculture datasets provide data-driven analyses using advanced machine-learning techniques to assess the impacts of climate change on crop yields. The service provides yield variations and impacts driven by temperature and precipitation fluctuations that ultimately impact agricultural productivity and the supply chain.

¹ Explore Brazil. International Union for Conservation of Nature (IUCN). 2025. https://iucngreenlist.org/country/brazil/

^{2 “}Where Does Brazil Stand with the Implementation of the Forest Code? – 2025 Edition.” Climate Policy Initiative. Oct. 22, 2025. https://www.climatepolicyinitiative.org/publication/where-does-brazil-stand-with-the-implementation-of-the-forest-code-2025-edition/

³ “The Amazon.” World Wildlife Fund. Oct. 8, 2024. https://www.wwf.org.uk/where-we-work/amazon

⁴ "The State of the World’s Forests 2020: Forests, biodiversity and people". 2020. UN Food and Agriculture Organization. https://reliefweb.int/report/world/state-world-s-forests-2020-forests-biodiversity-and-people-enarru

⁵ "2024 Forest Pulse". World Resources Institute. May 2025. https://gfr.wri.org/latest-analysis-deforestation-trends?utm_campaign=tcl2024&utm_medium=bitly&utm_source=GFWHomepage

⁶  “The Integrated Fire Management Law completes one year with advances in forest conservation.” Brazil's Ministry of Environment and Climate Change. July 2025. https://www.gov.br/mma/pt-br/noticias/lei-do-manejo-integrado-do-fogo-completa-um-ano-com-avancos-na-conservacao-de-florestas

⁷  Base case refers to S&P Global Energy’s crop long-term outlook that does not account for climate change scenarios.

⁸  “Amazonia as a carbon source linked to deforestation and climate change.” Nature. July 14, 2021. https://www.nature.com/articles/s41586-021-03629-6