What incentives will prevent deforestation?

Madagascar has 7 million hectares of rainforest under protection as of this month, but stopping the poor people who live near those areas from illegally cutting down rosewood trees remains a challenge.

“Most… say we are spending a lot of money to protect the environment instead of spending money to help them find something to eat,” said Ralava Beboarimisa, the southeast African island nation’s environment minister.

“One of the challenges in Madagascar is to protect the forests, and to change the habits of the people and to help them to fight against poverty.”

Madagascar has recently signed forest carbon deals with some large non-governmental groups, including Conservation International, and half of the revenues from the credits generated will go to helping local communities find new ways of making a living, Beboarimisa said.

Under such deals, a price is put on every tonne of carbon stored in protected trees, and those avoided emissions are sold to companies or other buyers in lieu of them reducing their own emissions.

Experts told a conference on carbon markets in Barcelona that putting the right economic incentives in place to stop people cutting down forests – and releasing the carbon stored in them – was key to keeping them standing.

Forests, food and emissions

Neeraj Prasad, manager of the World Bank Institute’s climate change team, said 20 percent of the world’s population – or 1.5 billion people – were largely dependent on forests to make a living.

As well, “we are going to have to face massive issues of food security…in the next two to three decades” that threaten to drive more deforestation, he said.

A large part of emissions from deforestation come from the clearing of forest land for agriculture.

Yet despite major challenges to forest protection, such as these, finding ways to address the 25 percent of global greenhouse gas emissions that come from changes in land use will be critical to limiting global warming to an internationally agreed target of 2 degrees Celsius, he said.

“This is an urgent problem,” Prasad said.

Justin Adams, managing director for global lands at The Nature Conservancy, an environmental charity, said efforts to curb emissions from land use should deliver about a third of the solution to climate change worldwide, but forests tend to be “forgotten”.

Kyung-Ah Park, head of environmental markets at investment bank Goldman Sachs, said a major problem is that there is still more value in felling forests for productive purposes such pulp and paper than preserving them.

The financial markets are awash with capital, but the amounts flowing to forest protection are limited compared to what is needed, she added.

It will be hard to attract more private capital without getting forest projects into formal government-backed markets for reducing emissions, and enabling larger scale and demand, as well as boosting the value of forest carbon credits, she said.

These credits are now traded on voluntary markets and bilaterally, as U.N. climate talks have yet to settle on a market mechanism to enable them to be traded internationally to contribute to government emissions cuts.

Getting Incentives right

Joost Oorthuizen, executive director of The Sustainable Trade Initiative (IDH), said there was a need to bring producers of commodities, such as soy, cotton and beef, and their buyers together with governments and financial institutions to come up with an investment case.

Different sources of finance, including carbon finance, should be blended to fill the gaps, he added.

But to ensure success, business incentives must be put in place for farmers not to cut down forests, he said.

“How do we create an economy in the landscape that actually raises their livelihoods substantially, so that they don’t have to deforest, so there are other opportunities?” he asked.

For example, in Brazil, there is potential to make cattle farming more intensive so as to free up land to grow the additional soy crops required to meet demand instead of clearing more forest.

“You can mobilise as much capital as you want, but if it doesn’t reach the people who really need it, and only (goes to) the big producers and to the large companies, you won’t get there,” Oorthuizen said.

This article is published in collaboration with The Thomson Reuters Foundation. Publication does not imply endorsement of views by the World Economic Forum.

To keep up with the Agenda subscribe to our weekly newsletter.

Author: Megan Rowling is a journalist for the Thomson Reuters Foundation.

Image: A view is seen of the Amazon forest. REUTERS/Bruno Kelly.