The Amazon rainforest plays a crucial role in the global climate agenda and the Brazilian economy. It has a large carbon storage capacity and provides essential ecosystem services, including the regulation of rainfall patterns on a continental scale. The loss of forest vegetation negatively affects local biodiversity, the country’s economic development, and global climate stability.

Researchers from Climate Policy Initiative/Pontifical Catholic University of Rio de Janeiro (CPI/PUC-RIO) analyzed the impact of changes in rainfall patterns caused by deforestation on the country’s electricity generation. This study shows that deforestation in the Amazon negatively affects the country’s electricity generation capacity and revenue, even affecting hydropower plants (HPPs) located thousands of kilometers away from the Amazon biome.

By analyzing four of the most significant HPPs in the country, this publication explores the effects of deforestation on electricity generation both inside and outside of the Amazon region. The first case study, focusing on the Teles Pires HPP, located in the Amazon region, identifies that deforestation has reduced monthly generation by 2.5% to 10%, resulting in an annual revenue loss of USD 21 million for the hydroelectric plant. The second case study investigates the impact of deforestation beyond the Amazon region. When analyzing the three HPPs in the Paraná Basin (located thousands of kilometers from the Amazon), researchers identified a generation loss of around 3%. For HPP Salto, for example, the electricity generation loss corresponds to a potential 10% loss of annual profit for the controlling company.

Hydroelectricity has historically been Brazil’s main source of electricity generation, accounting for 48.6% of installed capacity and 60.2% of total generation in 2023. Hydroelectric power is a renewable source of energy that is economically competitive and brings operational flexibility to the electricity system. However, it is vulnerable to changes in rainfall patterns and hydrological regimes.

The Teles Pires HPP case study was developed at CPI/PUC-RIO in 2020 by Rafael Araújo, then a senior analyst. The results of this research were published in January 2024 in the journal Energy Economics. In the current publication, CPI/PUC-RIO presents the full results of the research project “Deforestation and Energy Generation.”

This study aims to highlight the connection between the Amazon rainforest and energy generation, demonstrating that the impacts of deforestation reach beyond the deforested area and affect national hydroelectric generation. This analysis hones in on the resilience of Brazil’s electricity mix, which is already facing water scarcity and increasingly frequent extreme weather events. Although this study focuses on two case studies, it raises the hypothesis that the reliability and availability of hydroelectric generation can be impacted by deforestation. In addition, the study identifies regions in the Amazon that contribute to the hydroelectric generation of the analyzed HPPs, as well as the land categories present in the areas of influence for each plant. By identifying the most relevant areas to hydroelectric generation, this analysis shows the priority areas for implementing conservation and restoration policies, which can guide the design of effective financial mechanisms and the targeting of public and private resources.

The results highlight the need to define strategies that reconcile conservation and restoration policies with those for energy generation, ensuring greater institutional integration between energy and environmental issues. Especially since a large part of Brazil’s power generation system is exposed to this mechanism—17 of the 20 hydroelectric plants with the highest capacity are in the path of the flying rivers.