FT Rethink

Putting an end to deforestation – starting local, going global

Putting an end to deforestation – starting local, going global

Since 1992, when the United Nations achieved the first international consensus on the conservation of forests, an area of forest the size of Libya has disappeared from the earth. As our understanding of the environmental importance of forests has increased – forests absorb 30% of our annual carbon emissions and give a home to 80% of terrestrial biodiversity – so, too, has the urgency of calls to end deforestation. With millions of hectares still being cleared every year, the need is growing for governments, policymakers and financial institutions to find solutions.

Deforestation represents multiple threats to the climate – the act of clearing trees both diminishes one of nature’s most important carbon sinks, and at the same time emits huge amounts of carbon

The climate imperative

Deforestation represents multiple threats to the climate – the act of clearing trees both diminishes one of nature’s most important carbon sinks, and at the same time emits huge amounts of carbon. Each year around 11% of anthropogenic carbon emissions come from deforestation1, as trees are burned or felled and ground is disturbed.

But while the climate imperative for putting an end to deforestation is clear, the casting of deforesters as bad actors is too simplistic. For most of human history, development has been accompanied by deforestation – over the past six millennia more than half of Europe’s forests are estimated to have disappeared2, as growing populations cleared trees to create farmland and to provide wood for use as building material and fuel. This trend has reversed in the industrialised world with increasing agricultural productivity, but continues in many developing countries.

For the often less wealthy communities living in heavily wooded tropical regions today, forests can still only generate financial value as a resource to be exploited or cleared for other uses of land. The tool of strengthening law enforcement to control illegal deforestation can play an important role but isn’t enough, particularly in often inaccessible and hard to police regions. Also, a more fundamental transformation of rural development patterns is needed given the need to fully halt and reverse global forest loss within the next decade in order to meet global climate and biodiversity goals. As with many climate challenges the key to success is likely to be found in positive incentives.

Strengthening the rights of indigenous groups in the Amazon and other regions and supporting their forest guardianship efforts are thus vitally important for the global effort to protect forests and so prevent climate change

Indigenous rights

In tropical regions, the battle against deforestation is closely linked to the legal rights of indigenous communities. In Amazonia, for instance, between 2000 and 2015 deforestation took place inside Protected Areas and legally recognised Indigenous Territories at just one-fifth the rate that it occurred outside. Indigenous territories cover about 30% of the land area in the Amazon, storing more carbon than all the forest area of the Democratic Republic of Congo or Indonesia, and these areas are under mounting threats3.

Strengthening the rights of indigenous groups in the Amazon and other regions and supporting their forest guardianship efforts are thus vitally important for the global effort to protect forests and so prevent climate change. A study carried out by researchers from the University of São Paulo found the land-management of indigenous groups to be “more effective and less expensive than conventional government-sponsored alternatives,” and concluded, “indigenous land stewardship is a global environmental service that merits both political protection and financial support4.”

Read also: Indigenous communities – on the frontline in the fight to protect tropical forests

 

Economic incentives

By 1995, Costa Rica had become one of the world’s most deforested countries, having lost around half of its forest cover to loggers and land use change in the space of just 50 years. In response, in addition to legislation that criminalised forest clearance, the Costa Rican government introduced an innovative Payments for Environmental Services Program5 (PES), which paid landowners to maintain existing forest and restore deforested land.

Funded by a tax on fuel, the PES program recognised the need to provide a financial alternative to deforestation – as Carlos Manuel Rodriguez, Costa Rica’s former minister for environment and energy, put it, “we have learned that the pocket is the quickest way to get to the heart.” PES proved spectacularly successful – today the majority of Costa Rica’s lost forests have been restored.

Read also: Sustainable investing

 

International consensus

The first ever international consensus on deforestation – known as ‘The Forest Principles’ – acknowledged that, “States have the sovereign right to exploit their own resources [according] to their own environmental policies.” This laid bare a challenge that has dogged anti-deforestation efforts for decades – that of creating sufficient economic value in forests so that governments and stakeholders will choose to preserve and restore rather than exploit them in ways that lead to degradation.

Only by recognising the rights and needs of those dependent on forested land, and by providing economic alternatives to land clearance, will effective solutions be found to conserving the world’s remaining forests

 

While this challenge is yet to be fully resolved, last year’s COP26 summit gave reason for optimism. In the Glasgow Leaders’ Declaration on Forests and Land Use, more than 140 world leaders, representing countries that are home to more than 85% of the world’s forests, committed to ending deforestation by 2030. Crucially this pledge was backed by funding – USD 12 billion from twelve nations – to help shift the economic balance in favour of forest preservation. COP26 also delivered on its billing as “the business summit,” with a further USD 7.2 billion funding from the private sector, and a commitment from thirty major financial institutions to end their exposure to deforestation by 2025, a move that will reduce the economic incentive for landowners to clear forest for agricultural production.

At the same summit a less-publicised, but perhaps as important, declaration recognised that indigenous communities are on the front-line in the war on deforestation. Endorsed by Germany, Norway, the Netherlands, the UK, the United States and numerous international foundations, the IPLC Forest Tenure Joint Donor Statement promised at least USD 1.7 billion in financing specifically to support the land rights of indigenous peoples, and to recognise their importance as “guardians of forests and nature.” And in a landmark move to create new avenues of economic value in forest preservation the Lowering Emissions by Accelerating Forest Finance (LEAF) Coalition last year mobilised USD 1 billion in emissions reduction financing – “the largest-ever public-private effort to protect tropical forests.”6

Over the last thirty years, the rate of deforestation has slowed, but with the majority of net-zero pathway projections from the Intergovernmental Panel on Climate Change requiring not only an end to deforestation but also the restoration of lost forests on a massive scale, there is much more work to do. With ever greater commitments from supra-national bodies, governments and global corporations the momentum in favour of preserving forests represents a historic opportunity. But lasting change will only be achieved if it is done right, with both public finance and private sustainable investment creating value in forest preservation and funding sustainable forest management at the ground level. Only by recognising the rights and needs of those dependent on forested land, and by providing economic alternatives to land clearance, will effective solutions be found to conserving the world’s remaining forests and restoring our lost and degraded forest environments.

 

REDD+ Reducing Emissions from Deforestation and Forest Degradation | Food and Agriculture Organization of the United Nations (fao.org)
Europe's lost forests – study shows coverage has halved over six millennia (phys.org)
Full article: Forest carbon in Amazonia: the unrecognized contribution of indigenous territories and protected natural areas (tandfonline.com)
The_role_of_forest_conversion_degradation_and_dist.pdf
Payments for Environmental Services Program | Costa Rica | UNFCCC
The LEAF Coalition

Important information

This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.

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