At the Paris climate conference last December, 196 governments unanimously agreed to work toward the near-elimination of greenhouse gas emissions by the second half of this century. The agreement sent a powerful signal that governments want a low-carbon future: energy without fossil fuels and agriculture without deforestation. Although this historic diplomatic achievement is cause for celebration, significant challenges remain. Even if all countries fulfill their current climate pledges, the world would still warm far above governments’ 2 °C (3.6 °F) temperature target, causing rising seas to inundate low-lying island nations and hundreds of American coastal cities. To narrow the substantial gap between individual national pledges and the collective goal established at the Paris conference, governments should look to tropical forests. Tropical forests are an attractive climate solution for scientific, economic, and political reasons. The missing piece, however, is funding.
About 10 percent of annual greenhouse gas emissions result from the burning of tropical forests, making this activity more damaging to the atmosphere than the sum of the European Union’s pollution on an annual basis. Unlike efforts to reduce emissions via other sources like power plants and cars, halting deforestation both curtails a source of greenhouse gas emissions and actually removes carbon dioxide from the atmosphere. Stopping tropical deforestation, while letting damaged and cleared forests grow back, could reduce annual global emissions by as much as 24 to 30 percent.
Reducing tropical deforestation is a relatively low-cost climate solution. In the next 35 years, the world is on track to lose an area of tropical forest equivalent to the size of India. Much of that deforestation, however, can be avoided cheaply. Reducing emissions by conserving tropical forests would cost less than one-quarter of what it would cost to achieve an equivalent reduction of emissions by limiting fossil fuel use in the United States or Europe. Tropical forests provide many other benefits too: cleaner water, cleaner air, and habitats for two-thirds of the world’s plants and land animals.
Dozens of tropical nations have already committed to halving deforestation by 2020, with the aim of ending it completely by 2030. By comparison, widespread efforts to phase out fossil fuels face greater resistance and may take at least two decades longer.
Tropical forests, therefore, figure prominently in the Paris climate agreement. Article 5 of the agreement encourages tropical countries to reduce deforestation and wealthy countries to pay them for doing so, if satellite images show that tropical countries have indeed kept their forests standing. Results-based payments transform forest conservation from an economic burden into an economic opportunity for many of these tropical nations. So far, the concept has been tested in Brazil, Guyana, and Indonesia, with some encouraging results.
For decades, the Brazilian Amazon was ground zero for deforestation. Since 2004, however, deforestation has fallen by nearly 80 percent, even while soy and beef production have grown. By reducing deforestation, Brazil has cut its greenhouse gas emissions by more than any other country in the world. The South American nation achieved this remarkable turnaround through aggressive forest law enforcement and bi-weekly satellite monitoring of deforestation, protected areas and indigenous reserves, and self-imposed deforestation moratoria by the soy and cattle industries. These domestic deforestation protection efforts have been bolstered by $1 billion in results-based funding, paid by Norway into Brazil’s Amazon Fund starting in 2008.
In 2010, Indonesia signed a similar $1 billion agreement with Norway. Among other efforts to reduce deforestation, the government in Jakarta stopped granting licenses to oil palm and paper companies to clear rainforests. Yet, deforestation in Indonesia has shown no signs of abating. In late 2015, deliberate land-clearing forest fires raged across the archipelago. The smoke and haze created a public health catastrophe and, on some days, released more greenhouse gas emissions than the entire United States economy. Indonesia’s agreement with Norway has not yet been successful in reducing emissions, but the results-based funding aspect of the accord has functioned as it was designed: because Indonesia’s deforestation rates have not fallen, Norway has not paid.
Guyana is the third early test case for results-based funding. In the face of mounting pressure from gold mining and logging companies, this small South American rainforest nation has kept deforestation extremely low, relative to other tropical countries. For its success, Guyana has received close to $200 million from Norway. However, multilateral development banks have held the funding in escrow, as they seek to ensure Guyana’s compliance with fiduciary safeguards designed with traditional development projects in mind. The slow pace of disbursement has dampened enthusiasm within the country for low-carbon development.
Experiences with results-based funding for forest conservation in these three countries have been positive enough that more countries are looking to enter, or fund, agreements of this sort. At the Paris conference, Germany, Norway, and the United Kingdom pledged $5 billion in funding for tropical forests, mostly through results-based frameworks. Furthermore, Liberia, Peru, Colombia, and Ecuador all signed agreements to reduce deforestation in exchange for results-based funding. More than 50 other tropical countries signaled their intention to participate in similar deals, if results-based funding becomes available.
While there is enormous potential for results-based payments to incentivize tropical nations to halt deforestation, funds are lacking. To make good on the promises made in Paris, three things should happen. First, wealthier nations should fund tropical deforestation efforts through their public budgets, either through bilateral agreements or international institutions, like the new Green Climate Fund. The contributions of Germany, Norway, and the United Kingdom are only enough to maintain international funding for tropical forests at roughly current levels for the next five years. More public funders are needed to reinforce these pledges.
Second, more tropical countries should devote domestic financial resources to combating deforestation. India, for example, reformed its tax system last year so states that maintain more forest cover, receive more tax revenue. The roughly $6 billion per year in tax revenue that India distributes domestically is a greater amount of results-based financing for forest conservation than has been allocated by any other country in the world.
Third, and most importantly, carbon markets should open up to tropical forests. International carbon trading — which involves one country transferring its right to release a ton of carbon dioxide into the atmosphere to another country — reduces the cost of fighting climate change by encouraging greater climate efforts from those countries that can afford to cut their emissions most cheaply. The state of California is exploring just this tactic. In July, California’s Air Resources Board will vote on whether it will allow companies participating in California’s carbon market to meet a portion of their legal emission-reduction obligations by buying credits from tropical states that reduce deforestation. A “yes” vote would lower costs for California companies and consumers, while providing a critical new source of results-based funding for forest conservation by tropical countries. Purchases would initially be limited to the state of Acre in Brazil, but could broaden if other states and provinces follow California’s lead. The decision to allow international offsets into California’s carbon market could galvanize forest conservation efforts in tropical countries, many of whom currently wonder if market demand for reduced emissions from deforestation will ever materialize.
And all of this comes not a moment too soon. Without results-based funding, tropical forests, our cheapest and fastest hope of stopping climate change, will continue to disappear.