Soy and cows destroy the Amazon? So do cars and washing machines …

The frontier of the deforestation on the southeastern end of Brazil’s Amazon is steadily moving north, but the usual suspects – ranchers and farmers – are nowhere to be found. The big drivers here pig iron producers – a crowd you might not think about much, but are a key part of the vehicles and electrical appliances in our lives. In a complex global economy, understanding the environmental impact of our decisions involves digging further and further back into the supply chain and asking a lot of questions that don’t come up in day-to-day conversation.

Like for starters: What the hell is pig iron? And what on God’s green earth does it have to do with trees?

This story starts decades ago when Brazil discovered some of the world’s largest iron ore deposits in the middle of the Amazon. The place now known as Carajas is a huge center of iron production mined by the world’s biggest iron ore miner, Vale (a privatized former state-run company once known as Companhia Vale do Rio Doce or CVRD). The place has for years generated tons of foreign exchange for Brazil’s coffers, and is now a major source of iron for China’s booming steel mills, but it never really made much in the way of jobs or anything else that would help the local population. In fact, the government installed a huge hydroelectric dam called Tucurui which, like most dams, was advertised as way to ensure there would be enough electricity for people’s TVs and washing machines or to keep grandma on life support, but in fact is almost entirely dedicated to powering a mine.

The government needed something to show for all the money that was being generated in the region, so it encouraged the construction of steel mills to create employment in the area. But this being the middle of the jungle with no river access, it wasn’t a terribly practical place to build steel mills, so the companies stuck to the most basic type of steel that uses the most basic technology that adds the least value: pig iron, an intermediary product used to make high-value specialized steels that go into the construction of household appliances or vehicles.

Like steel, pig iron requires smelting iron with some form of coal. But instead of dragging coal all the way to the state of Para, the pig iron mills built up their operations around the use of charcoal that was made out of the Amazon’s most abundant resource – trees. You can see where this is going.

It turns out making charcoal is not only a horrible process that often involves child labor, severed toes, burnt members, charred lungs and enormously high rates of cancer. It also turns out that growing eucalyptus trees and cultivating them for charcoal is about 10 times as expensive as just knocking down whatever trees happen to be nearby. Investigations by media and local NGOs around five years back exposed both the environmental side effects as well as the quasi slave labor conditions of the workers at these facilities.  Under heavy pressure, the pig iron producers agreed to create a certification mechanism to document where the charcoal was coming from, and to insist that charcoal makers demonstrate where they were getting their wood. The resulting organization known as the Citizen Charcoal Institute created a list of all the registered charcoal producers and documented their total production capacity. Vale, Brazil’s second-biggest company and a darling of Wall Street, said it would stop supplying iron ore to pig iron makers that did not demonstrate a convincing charcoal supply chain. Labor rights advocates say the agreement resulted in considerable improvement in the fate of workers at the registered charcoal producers. So far so good.

But a few weeks back, a group called Observatorio Social released a study revealing extensive cheating across the board by charcoal makers and steel mills to launder illegal timber for charcoal use. Backyard “artesanal” charcoal producers – clandestine facilities that are not very well hidden along a main highway in Brazil’s heavily deforested state of Para – continue to buy thousands of tonnes of illegally harvested wood, often from ransacked from indigenous communities or nature preserves. 

One of the most striking details of the study: it began in the municipality of Nova Ipixuna, a place now famous in Brazil because it was the site of the massacre in May of two conservationists who had denounced local timber mafias.

The report, available in Portuguese, documents an entire chain of irregularities, starting with a cadre of corrupt environment ministry officials who sell bogus certification papers, to the book-cooking by pig iron makers who buy the illegal charcoal and make it look legit. It's worth taking a look at the report at least for the pictures, which have a staggering sci-fi quality to them. 

Observatorio Social looked at the total number of furnaces that were registered, calculated their maximum possible production, and compared that to the total amount of charcoal being sold. In a number of cases many of these facilities were claiming to produce at twice their capacity – precisely because they were reselling charcoal made illegally in clandestine production centers using native vegetation and the work of women and children.

This in turn implicates the pig iron industry, which had agreed to certify where the charcoal was coming from, as well as Vale, which is supplying ore to these companies.

Official corruption is a key part of this. Illegal timber in the state of Para alone is believed to generate as much as $2 billion a year, providing an ample war chest to buy off the local authorities. Despite frequent arrests of environment ministry employees, an army of officials works together with timber mafias to create shadow companies that launder the illegally produced charcoal.

Charcoal can be made out of biomass other than trees, such as waste wood thrown out by saw mills or the shells of babassu coconuts. The latter are cultivated and hand-cracked by poor women of the Amazon who use the flesh for everything from cooking oil to soaps and tourist trinkets. The pig iron buyers buy up the shells and, since this is a waste product from a non-endangered tree, they do not have to document the source. It probably won’t come as a surprise that some of these pig-iron producers claim that as much as half their charcoal comes from these shells – even when there's nothing to suggest they could have legitimately gotten that much biomass from babassu shells.

Using charcoal rather than coal in steel making actually does have some advantages – when done correctly. Charcoal is less likely to have contaminants like mercury or sulphur, and burning it is considerably cleaner than the usual coking coal used to make steel. But that requires adequate environmental regulations and proper labor and health standards, otherwise pig iron producers are simply dumping the costs onto the environment. And of course it continues to fuel the existence of timber mafias that are implicated in assassinations of environmental activists and the destruction of the Amazon ecosystem.

On the face of it, this sort of brazen cheating of a publicly sanctioned agreement to protect the environment is both outrageous and depressing. But I think it’s also reason for optimism. The reason we know this sort of thing is going is precisely because the charcoal council requires that these charcoal makers show how much wood they’re buying and how much charcoal they’re selling – and for the pig iron producers to document the source of their supplies. Ten years ago there was no way to know, like an equation with two unknowns that has no concrete solution. With the agreement in place, all it took was for Observatorio Social to solve for X. We can only hope this sort of supply-chain transparency will help smoke out environmental predation around the globe.