Why Forests? Why Now?: The Science, Economics, and Politics of Tropical Forests and Climate Change

CHAPTER 1

Introduction

For six long days at the end of October 1998, Hurricane Mitch lashed Central America with gusts of wind over three hundred kilometers per hour. Waves as high as thirteen meters crashed onto the shore.¹ Dubbed a Category 5 Monster, the worst Atlantic storm in more than two hundred years spread death and destruction across the region. Millions of people were displaced, and eleven thousand died. In countries where two-thirds of the population lived on less than four U.S. dollars a day,² the economic damage was estimated to be at least $5 billion.³

While El Salvador, Guatemala, and Nicaragua suffered significant loss of life and decimation of bridges, roads, and crops, Honduras bore the brunt of the hurricane’s impact. Although a storm of Mitch’s magnitude would have caused destruction under any circumstances, Honduran life and property were especially vulnerable to its wrath because of deforestation.⁴ As the country’s hillsides were drenched by up to 1.9 meters of rain,⁵ too little vegetation was left to hold the soil. Floods and mudslides washed away villages, destroyed 80 percent of the country’s infrastructure, and damaged one-third of all buildings in the capital city of Tegucigalpa.⁶

Honduras’s remaining forests were not spared. The pine, hardwood, and mangrove forests of the Bay Island of Guanaja were utterly flattened,⁷ with mangrove trees suffering 97 percent mortality.⁸ Mangroves throughout the region, which otherwise provided protection from coastal storms, were severely damaged by high winds and waves and buried in sediments that washed down from the hillsides.⁹

In the year following Hurricane Mitch, the economy of Honduras contracted by 4 percent.¹⁰ More generally, natural disasters can knock rich and poor countries alike off paths toward greater prosperity. Research on the impacts of thousands of cyclones over almost sixty years found such storms have a dramatic, long-term effect on economic development. Following the most extreme disasters (that is, those in the worst 10 percent), national income declines from its pre-disaster trend and does not recover within twenty years.¹¹

The U.S. National Oceanic and Atmospheric Administration (NOAA) predicted Mitch’s rank as the Western Hemisphere’s second deadliest hurricane (after the Great Hurricane of 1780) would likely stand for a long, long time.¹² It might not stand for as long as we’d like, though. With climate change, such tropical cyclones are expected to become more severe, and the most severe storms are predicted to become more frequent.¹³

In the meantime, tropical deforestation—which continues in most developing countries, including Honduras—is a key source of the greenhouse gas emissions that cause climate change. When forests are cleared and trees are burned or decay, the carbon stored in trunks, branches, leaves, and roots is released into the atmosphere. When disturbed, the carbon-rich soils beneath peatland and mangrove forests are among the world’s most potent land-based sources of greenhouse gas emissions. Removal of tree cover affects the climate through other pathways, as well, such as increases in surface temperature and disruptions to rainfall patterns.

Direct human action—such as the cultivation of hillsides in Honduras, the conversion of Amazon forests to cattle pastures and soybean fields, and the draining of Indonesia’s peatlands for oil palm and timber plantations—is the primary cause of emissions from deforestation. Those emissions are augmented by damage to forests from acute events linked to climate change—such as when Hurricane Mitch stripped mangrove trees from the island of Guanaja—as well as from the increased vulnerability of trees to drought, fire, and other sources of climate-induced stress.

Thus, deforestation contributes to climate change and erodes resilience to it, while climate change undermines development and damages forests. Figure 1.1 illustrates some of the ways deforestation and climate change are intertwined in a vicious cycle that exacerbates poverty. The good news is that this cycle can be arrested, and possibly even reversed.

The purpose of this book is to make the case that rewarding developing countries for protecting their forests is an urgently needed, affordable, and feasible strategy for rich countries to support reducing the emissions that cause climate change, while at the same time providing significant direct contributions to development.

Figure 1.1: Deforestation and climate change drive a vicious cycle that exacerbates poverty.

In this introductory chapter, we summarize why forests are so important to meeting goals related to both climate change and the reduction of poverty and why the current moment is ripe for action. We then explain why we believe the book will be useful to readers interested in climate change or development and provide a road map to its contents.

Climate Change Threatens Development and Poverty Reduction

The lives and livelihoods of poor people are especially dependent on a stable climate. In Latin American cities such as Rio de Janeiro and Bogota, the houses of poor families perch on steep, often unstable, hillsides. Across dryland Africa, the crops cultivated by poor farmers fail if the rain is too little or arrives too late. Along the coastlines of Asian countries from India to the Philippines, the safety of poor households depends on calm seas, and their livelihoods depend on productive fisheries.

Everywhere, the lives and livelihoods of poor people are threatened by a changing climate. Climate change amplifies extreme weather events, such as periods of intense rainfall that cause landslides, months without rain that lead to droughts, and high winds whipping up waves that destroy coastal communities and coral reef ecosystems. The places where poor people live and the sources of their income often place them on the front lines when societies face the impacts of floods, droughts, and storms. Because they are less likely to have savings, insurance, access to modern health care and other services, or the ability to migrate to safer or more resilient communities, poor people are often the least able to recover when disaster strikes.

On a broader scale, the development prospects of poor countries are threatened by climate change. It’s not just that a tropical cyclone like Hurricane Mitch can deal a long-term setback to growth; even in the absence of such a disaster, a less predictable climate raises the costs of achieving food, energy, and water security. Infrastructure for transportation and irrigation can be overwhelmed by too much rain; infrastructure for hydropower and drinking water can be rendered useless by too little.

Indeed, climate change is regressive. In other words, its effects will make poor households and countries not just worse off, but disproportionately worse off than better-off families and nations. While climate change will be disruptive and expensive for rich households and rich countries, for the poor it will be catastrophic.

In its Fifth Assessment Report in 2014, the International Panel on Climate Change (IPCC) detailed the many ways climate change will adversely affect the well-being of poor people and developing countries, including increasing risks to their incomes, health, safety, and food security. The IPCC concluded, Climate-change impacts are projected to slow down economic growth [and] make poverty reduction more difficult.¹⁴ Figure 1.2 provides a summary of those impacts.

Hunger caused by crop failure and drought, destruction of housing and infrastructure by storms and floods, disease spread by insects and water scarcity—all of these development challenges are exacerbated by climate change. For poor households and poor countries alike, an increasingly warm and unstable climate steepens the climb out of poverty. Achievement of development objectives will be much easier in a stable climate.

Why Forests?

Reducing emissions from the burning of fossil fuels such as coal, oil, and gas is, of course, central to any global climate mitigation strategy. Emissions from fossil fuels make up the largest and fastest growing share of carbon being released into the atmosphere. Furthermore, industrialized countries and richer households are disproportionately responsible for such emissions, and they are in a better position than poor countries and households to limit their emissions.

Figure 1.2: Poor people are most at risk from climate change.

Source: C. B. Field et al., eds., Climate Change 2014: Impacts, Adaptation, and Vulnerability. Part A: Global and Sectoral Aspects. Contribution of Working Group II to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (Cambridge, UK, and New York: Cambridge University Press, 2014).

But alongside reductions in emissions from fossil fuels through shifts to clean energy and transportation systems is a poorly recognized opportunity to reduce emissions from tropical deforestation. Reducing emissions from tropical deforestation is essential to any strategy to achieve climate stability, and maintaining forests contributes to the achievement of many sustainable development goals. Lowering deforestation rates offers many developing countries the single most attractive option for contributing to reduced global emissions in a way that is compatible with their own development objectives and one that is particularly aligned with the interests of their poorest citizens.

Tropical forests are undervalued assets in addressing two of the most significant challenges of our time: climate change and development.

Tropical forests are, thus, undervalued assets in addressing two of the most significant challenges of our time: climate change and development. The chapters in this book present evidence that a major international initiative to reduce deforestation is urgently needed, affordable, and feasible.

Action to Protect Forests Is Urgently Needed

Preventing the warming of global temperatures by more than two degrees Celsius—the upper limit agreed on at the 2015 climate talks in Paris—is not possible without protecting forests. If tropical deforestation were a country, its annual contributions to the emissions that cause climate change would be greater than those of the European Union. Efforts to avert catastrophic climate change are unlikely to succeed without reducing both forest and nonforest emissions.

According to the IPCC, global net emissions from forests and land-use change—mostly tropical deforestation—accounted for 11 percent of total human-caused emissions as of 2010. That percentage is misleadingly small for two reasons. First, while emissions from deforestation have continued apace in recent years, emissions from all other sources have increased dramatically, reducing forests’ share of the total. Second, growing tropical forests compensate for a large proportion of current emissions, pulling carbon out of the atmosphere and into vegetation, a safe and natural carbon capture and storage technology. Thus, forest destruction not only generates carbon emissions; it diminishes nature’s capacity to absorb them.

IPCC numbers suggest that if deforestation ended today and degraded forests were allowed to recover, tropical forests alone could reduce current annual global emissions by 24 to 30 percent.¹⁵ In other words, tropical forests hold the potential to constitute somewhere between one-quarter and one-third of the near-term solution to climate change.

According to the IPCC, all scenarios for staying below the two-degree limit include assumptions that deforestation is halted and reversed. And yet satellite imagery analysis makes clear that tropical forest loss is occurring today at an accelerating annual rate, with an area the size of Austria cleared each year.¹⁶ Modeling past deforestation trends into the future suggests that, without countervailing action, in thirty-five years the world will lose 289 million hectares of tropical forests—an area about the size of India. Furthermore, deforestation will release 169 billion tons of carbon dioxide, thus using up fully one-sixth of the remaining emissions budget allowable under a scenario that keeps global warming under two degrees.¹⁷

The longer the world waits before reversing current deforestation trends, the more the capacity of the remaining forests to serve as a natural carbon capture and storage system is eroded. And as climate change progresses, even intact forests will be damaged by such effects as more frequent and severe droughts and fires. Such damage could tip forests from being a large part of the solution to being a larger part of the problem. The window of opportunity is closing.

Action to Protect Forests Is Affordable

Among the many strategies available to reduce the emissions that cause climate change, protecting tropical forests is among the most affordable. Modeling suggests cutting emissions from tropical deforestation in half would make it 28 percent cheaper to keep global warming below two degrees Celsius. Alternatively, cutting emissions from tropical deforestation by between one-third and one-half could lessen global warming by 0.15°C to 0.82°C and hasten by two to five years the time when global greenhouse gas emissions start decreasing, without raising the overall cost of fighting climate change.¹⁸

Furthermore, modeling that simulates response to a price on carbon suggests that forest conservation represents more than half of the lowest-cost opportunities for emission reduction in developing countries other than China. In a scenario in which developing countries use payments for forest conservation to influence land-use decision making, the same analysis estimates a $20 per ton price on carbon dioxide could generate 41 billion tons of avoided emissions from 2015 to 2050.¹⁹ That price is significantly less than the U.S. Environmental Protection Agency’s estimates of the economic benefits of emission reductions over the same period at a 3 percent discount rate.²⁰ The cost of an equivalent quantity of emission reductions in Europe or the United States would be far higher.²¹

Yet the actual cost to developing-country governments of reducing deforestation could be far lower than those generated by the simulation for a number of reasons. The governments, for example, need not compensate land users for the large portion of forest clearance that is illegal. In recent years, forest-rich developing countries have offered emission reductions as part of bilateral and multilateral payment-for-performance agreements for as little as $5 per ton—a bargain compared to many other emission abatement options.

Developing-country governments are also increasingly recognizing the economic justification for protecting forests based on the domestic value of the many goods and services forests provide beyond carbon capture and storage. Wild products gathered from natural forests contribute, on average, more than one-fifth of household incomes in nearby communities—second to the proportion contributed by agricultural crops.²² Serving as green infrastructure, forested watersheds save tens of millions of dollars by preventing sedimentation, which extends the lives of hydroelectric dams and irrigation systems.

Farmers and researchers have long known forests provide services to nearby agricultural fields by regulating stream flows, providing shelter from wind, and supporting pollination from birds, bats, and bees. Evidence is now accumulating that they also support agriculture at continental scales by bringing rainfall to inland farmers. A study published in 2014 shows forest loss leads to warmer, drier conditions, both locally and at great distances.²³

Recent studies are also illuminating the linkages between forests and health, beyond the provision of pharmaceutical compounds from medicinal plants. Forests provide clean water by filtering out pollutants, and intact forests have been associated with decreased incidence of malaria; conversely, air pollution from forest fires is estimated to result in hundreds of thousands of premature deaths each year. New research is also substantiating the role of forests in making communities more resilient to costly natural disasters, such as fires, floods, droughts, and the landslides and waves generated by storms like Hurricane Mitch.

Most of these goods and services from forests are disproportionately important to people who live in the poorer communities in and around them, with the abovementioned result that deforestation is often regressive. Yet because the benefits generated by forests have not been systematically integrated into national accounts, they are invisible to economic development planners.

Action to Protect Forests Is Feasible

Tropical deforestation was long considered an intractable problem, and international cooperation to address it was particularly fraught. But over the past decade, innovations in policy and technology have converged to demonstrate that slowing deforestation is feasible, and to show how international support can help.

Utilizing a combination of land-use planning and recognition of property rights (including designation of protected areas and indigenous territories), law enforcement efforts, and market incentives, Brazil has dramatically lowered the deforestation rate in the Amazon, even as agricultural production has continued to rise. Brazil pioneered the use of remote sensing technology to track and respond to illegal forest clearing in remote forest areas. By slowing deforestation in the Amazon by some 80 percent in the decade starting in 2004, Brazil has made the single largest contribution to reducing the emissions that cause climate change of any country in the world.²⁴ And the out-of-pocket costs to federal, state, and municipal budgets are estimated to have been only a few dollars per ton of avoided emissions.²⁵

While Brazil’s achievement was driven primarily by leadership from within Brazilian society, key elements of that success illustrate the potential contribution of international cooperation to complement domestic political will. First, researchers and activists, empowered by new norms of transparency and widespread Internet access, raised international awareness of Brazil’s high rate of deforestation and effectively mobilized pressure on government and corporate actors to take action. Civil society groups took advantage of Brazil’s participation in international environmental forums to advance the domestic policy agenda.

Second, Brazil’s experience—which included a voluntary moratorium on forest clearing by the soy industry—illuminated the changing drivers of tropical deforestation. In the past, forest loss was blamed on the clearing of land by poor farmers for subsistence. Now, a large and increasing portion of deforestation across tropical countries is driven by forest clearing—much of it illegal—to cultivate globally traded commodities, such as soy, beef, palm oil, and fast-growing timber to make pulp and paper.

Expansion of the area dedicated to production of those commodities has occurred at the expense of carbon-dense forests. An analysis of 2000–2009 data reveals that forest clearing to produce four commodities in only eight countries was responsible for one-third of all emissions from tropical deforestation.²⁶ Furthermore, fully one-third of those emissions were embodied in international trade, a proportion that is certainly larger today, as exports of those commodities have increased since 2009. Market signals from international traders and buyers, as well as policy signals from consumer countries, can provide incentives for legal and deforestation-free production of food, fuel, and fiber.

Third, just as the more timely availability of satellite imagery helped Brazil crack down on illegal forest clearing, advances in the spatial resolution of remote sensing data now also enable more precise measurement of the amount of climate emissions avoided by reducing deforestation. Brazil has been a pioneer in an internationally agreed-on approach to international cooperation on forests, described further below, in which rich countries finance forest emission reductions in developing countries on a payment-for-performance basis. As of 2016, more than $1 billion in results-based payments from the governments of Norway and Germany had contributed to consolidating domestic support for forest conservation.

Why Now?

International concern about tropical deforestation dates back at least 165 years, when a denudation crisis in India raised alarm in the United Kingdom about looming shortages of timber and fuelwood. A century ago, French colonial officials noted the urgency of addressing the disappearance of dryland forests in West Africa, a concern that reemerged in the 1970s following droughts in the Sahel.²⁷

In the mid-1980s, rapid loss of tropical rainforests, deemed the lungs of the Earth, fueled an outpouring of activism, international initiatives, and donor funding, with a special focus on protecting the biological and cultural wealth of the Brazilian Amazon. A United Nations–sponsored Tropical Forestry Action Plan (TFAP) called for some $8 billion in pledges from donor countries to save the rainforest. In 1988, U.S. ice cream maker Ben and Jerry’s introduced a popular new flavor with cashew and Brazil nuts: Rainforest Crunch.

But fashions change in both ice cream flavors and favored development topics. Ben and Jerry’s dropped Rainforest Crunch from the menu less than a year after introducing it, and donor-funded forest initiatives proved more difficult to carry out than originally thought. At the 1992 Earth Summit in Rio de Janeiro, negotiators failed to conclude a convention on forests, largely because developing countries perceived the proposed agreement as an attempt to limit their sovereignty over domestic natural resources needed for development. The TFAP ended in acrimony, without reducing deforestation or reaching agreement on the best way to do so.

Funding and political attention focused on forests gradually dissipated. Development finance institutions, such as the World Bank, began disengaging from the forestry sector after being burned by allegations that their lending for business-as-usual timber extraction damaged ecological systems and harmed indigenous peoples. Other imperatives arose on the international agenda, and the individuals and organizations devoted to conserving tropical forests struggled to maintain support for their work into the 2000s.

Now, however, developments in the science, economics, and politics of tropical forests and climate change over the past decade have created a new opportunity for action. Culminating in the 2015 Paris Agreement, the world has recognized that deforestation and climate change are two problems with a common solution.

A New Framework for International Cooperation Has Been Agreed On

Ten years ago, tropical forests catapulted back to the top of the international agenda, this time due to the discovery of their importance to climate change. The surge of energy and enthusiasm unleashed by this linkage is difficult to exaggerate. Between the climate negotiations in Bali in 2007, when forests were formally incorporated into tracks for negotiation, and the 2009 summit in Copenhagen, when a global climate deal was expected to be struck, mobilization around the agenda to stop deforestation reached fever pitch.

Negotiations toward a framework eventually known as REDD+ (described in box 1.1) to support mitigation of forest-based emissions through results-based payments emerged as the most constructive area of annual discussions under the United Nations Framework Convention on Climate Change (UNFCCC), as negotiators worked through how to manage various risks to the interests of rich-country financiers and stakeholders in recipient countries. Donor agencies returned to the forestry sector with replenished checking accounts. And the thinned ranks of forest-related government officials, practitioners, researchers, and advocates, thrilled by the prospect of rapid policy development and significant financial support for their work, launched a new generation of initiatives ranging from village pilot projects to national strategic planning efforts.

Box 1.1: What is REDD+?

REDD+ stands for

Reducing

Emissions from

Deforestation and forest

Degradation

plus conservation, sustainable management of forests, and enhancement of forest carbon stocks.

REDD+ is the international framework agreed on for including forests in strategies to reduce the emissions that cause climate change. It was negotiated under the UN Framework Convention on Climate Change (UNFCCC) over the past decade, and was endorsed in the 2015 Paris Agreement. Through REDD+, industrialized countries can provide financial incentives to developing countries for reducing forest-based emissions and enhancing the carbon capture and storage functions of forests.

The key distinction between REDD+ finance and previous international flows of funding to address deforestation is the explicit intention to progress toward results-based finance. In other words, developing countries can receive ex-post payments for verified emission reductions, which can be financed either from public funds or carbon markets.

According to the Warsaw Framework for REDD+, which was agreed on under the UNFCCC in 2013, a developing country must have in place the following to qualify for results-based finance:

A national strategy or action plan for reducing forest-based emissions

A system for monitoring and reporting forest cover change and associated emission reductions

A baseline (reference level) against which progress in reducing emissions will be measured

A safeguards information system (SIS) for reporting on how measures to protect against environmental and social harm are being implementeda

Developing countries can get access to readiness funding to help them meet these requirements (phase 1) and investment funds to address the drivers of deforestation (phase 2) to qualify for payments based on performance in reducing emissions (phase 3).

Many early activities initiated under the banner of REDD+ took place at the level of individual projects managed by nongovernmental organizations (NGOs) or private sector entrepreneurs hoping to sell forest carbon credits to buyers in the voluntary carbon market. But consistent with the outcome of international negotiations, the current focus of results-based finance for REDD+ (and of this book) is on the jurisdictional scale. The few large-scale, results-based financing agreements to date have been concluded between rich-country governments, on the one hand, and developing-country governments and/or subnational state or provincial governments, on the other.

While the Paris Agreement allows for the international transfer of mitigation outcomes—which would allow rich countries to purchase REDD+ credits to offset their own emissions—none of the few REDD+ agreements concluded to date have included such transfers, nor have any compliance-driven carbon markets yet allowed REDD+ offsets (although as of mid-2016 the state of California was considering doing so). As a result, international REDD+ finance at the jurisdictional scale has been limited to commitments from donor-country aid budgets.

The term REDD+ is often used broadly as shorthand for the objective of reducing emissions from deforestation and forest degradation, rather than more narrowly as the framework negotiated under the UNFCCC and associated activities. It is also commonly used as a label for the many projects, national strategies, bilateral agreements, and multilateral initiatives spawned while negotiations were still going on. In this book, we attempt to use the term in its narrower sense as far as possible.

a. United Nations Framework Convention on Climate Change (UNFCCC), Decision 9/CP.19: Work Programme on Results-Based Finance to Progress the Full Implementation of the Activities Referred to in Decision 1/CP.16, Paragraph 70, from Report of the Conference of the Parties on its Nineteenth Session, Held in Warsaw from 11 to 23 November 2013 Addendum Part Two: Action Taken by the Conference of the Parties at Its Nineteenth Session, Warsaw, Poland, January 31, 2014.

The rebirth of tropical forest protection as a climate mitigation strategy in the first decade of the 2000s, in parallel with shifts in forest governance norms toward transparency and recognition of indigenous rights, has led to a realignment of interests and constituencies that is more supportive of international cooperation. Within the UNFCCC, countries from both North (industrialized countries) and South (developing countries) recognized reducing emissions from deforestation as a rare win-win. At the climate conference in Warsaw in 2013, negotiators agreed on REDD+ as the framework for rewarding developing countries for reducing forest-based emissions, and it was later incorporated into the 2015 Paris Agreement.

Recent Advances in Remote Sensing Technology Enable Measurement of Forest Emissions

A previous constraint on the incorporation of forests into climate change mitigation strategies was the difficulty of measuring changes in forest cover and associated emissions. Rapid technological change has now enabled satellites orbiting the Earth to generate pictures of sufficiently high resolution to pinpoint changes in areas the size of baseball diamonds. In 2008, the U.S. government made its archive of such images available for free.²⁸ This wealth of data, combined with increased computing power and lower cost, has made it possible to map and analyze deforestation around the world with a degree of precision that was unthinkable only ten years ago.

Increasingly refined satellite imagery to measure forest cover change has been accompanied by the deployment of new laser technologies to assess carbon density. In combination, these technologies make possible the estimation of carbon emissions from deforestation with a high degree of accuracy. Such measurements can, in turn, serve as the basis for financial rewards to developing countries, based on their performance in reducing emissions by protecting forests.

Payment for Performance Promises Better Outcomes

In parallel to the development of REDD+ as a climate mitigation strategy over the last decade, a new approach to foreign aid has been percolating in development policy circles. The 2005 Paris Declaration on Aid Effectiveness and the subsequent Accra Agenda for Action placed new emphasis on developing-country leadership of development policies and strategies and managing such policies and strategies for results.²⁹ Our colleagues at the Center for Global Development have translated these principles into a practical proposal for a cash-on-delivery approach to development cooperation.³⁰

The cash-on-delivery approach focuses on payment for performance in generating results rather than specifying the necessary inputs or strategies to achieve development objectives. Donors agree, for example, to pay a fixed amount for each child reaching an agreed-upon level of educational attainment, rather than financing the building of schools or the training of teachers. A number of benefits are expected from such a hands-off role for donors:

Greater leadership and coordination of development strategies on the part of developing-country governments

Greater accountability of governments to their citizens, as a result of the transparent reporting of progress

Greater flexibility, for learning by doing and adjusting strategies rather than being tied to a project blueprint

Less risk of corruption, as diversion of funds to the point of jeopardizing outcomes would result in nonpayment

Results-based finance is, arguably, particularly appropriate for reducing emissions from deforestation for a number of reasons. The recent developments in remote sensing technology described above make it possible to measure outcomes and independently verify results in ways not available to other sectors, such as health and education.

Furthermore, the complexity and political sensitivity of the forestry sector indicate the limitations of donor-designed approaches to addressing deforestation, which have not succeeded in turning the tide of deforestation at scale. While compliance with internationally agreed-on safeguards is essential, due deference to developing-country stakeholders as to how results can be achieved is otherwise in order. Paying only for results is attractive to rich-country politicians and the taxpayers they represent. Perhaps most important, payment-for-performance agreements reframe financial transactions as equal partnerships rather than charitable gifts, a more politically acceptable mode of cooperation for developing countries.

REDD+ agreements constitute a significant portion of the few genuine experiments with results-based finance between governments now underway, and they are already generating experience of broader relevance to improving aid effectiveness.³¹

Developing Countries Are Lined Up but Losing Hope

In developing countries, domestic constituencies for forest conservation were once small and often politically constrained, and agencies charged with forest management focused most of their attention on exploiting rather than conserving forest resources. In international negotiations related to forests, developing-country governments jealously guarded national sovereignty and resisted taking on international obligations.

In recent years, domestic and international factors have intertwined to pique a new appetite for international cooperation on forests. Domestically, democratic transitions in countries such as Brazil and Indonesia have empowered environmental advocates and social movements, while new technologies (see above) have increased the transparency of forest-related information and decision making. Advocates’ numbers have been augmented by those whose rights or livelihoods are threatened by forest loss, such as rubber tappers and indigenous peoples. Natural disasters such as droughts, floods, and fires have called national political attention to the linkage between forest protection and national well-being.

In addition, risks to their international reputations have helped motivate political leaders to address high rates of deforestation, starting with initiatives begun under President Luiz Inácio Lula da Silva in Brazil. When President Susilo Bambang Yudhoyono of Indonesia announced the first voluntary emission reduction targets from a developing country in 2009, he demonstrated the potential of forests as a vehicle for developing countries to show leadership in the climate protection arena. Both presidents were among the first to enter into bilateral payment-for-performance REDD+ agreements with the government of Norway.

Since then, dozens of other developing-country governments have initiated REDD+ programs with international support. But the large-scale, results-based finance from rich countries initially envisioned for REDD+ never materialized. The failure to conclude a binding agreement to reduce climate emissions at the UNFCCC summit in Copenhagen in 2009 had nothing to do with forests. In fact, negotiators had continued their steady progress in resolving contention concerning how to integrate forests into such an agreement. But just as the linkage to climate change had helped put tropical forests back on the international agenda, it also punctured the inflating expectations for large-scale forest finance based on demand for emission reductions. The sudden dimming of the possibility that such demand would emerge in the absence of a global climate agreement marked a stunning reversal for all those who had pinned their hopes on an international cap-and-trade system to generate the finance necessary to stop deforestation.

The Copenhagen disappointment was soon followed by others. In 2010, U.S. climate legislation, known as the Waxman-Markey Bill when it had passed the House of Representatives in June 2009, died without a vote in the Senate. The legislation would have generated demand for up to 1.5 billion tons of reductions in forest-based emissions annually, as well as separate funding for forests at a level of $3 billion per year. With no prospects for crediting in compliance markets, demand for forest carbon offsets from avoided deforestation on the voluntary market softened and fell by 8 percent in 2011 alone.³²

Many worthwhile initiatives launched between 2007 and 2009, when expectations were peaking, continued to muddle along. Although some early REDD+ projects folded, proponents of others soldiered on in the face of challenges, such as insecure land tenure and insufficient finance, that extended beyond project boundaries.³³ The $2.5 billion pledged by the government of Norway at the 2007 negotiations in Bali buoyed progress in addressing deforestation by offering performance-based finance to a handful of countries and making grants to numerous civil society groups.

But even Norway’s rainforest billions were insufficient to meet the expectations of the dozens of developing countries that signaled their intent to reduce emissions from deforestation in return for finance. Without compliance markets for forest carbon offsets, allocations of public funds for performance-based payments fell far short of what was required if the efforts of those countries to reverse current deforestation trends were to be successful.

Many political leaders and project entrepreneurs in developing countries who had taken political and financial risks with the expectation of a robust global willingness to pay for reduced emissions from deforestation found themselves tethered to a gradually deflating balloon, and a narrative of disappointment in the promise of REDD+ began to take hold.³⁴ In August 2014, twenty-three governors from forest-rich states and provinces signed on to a commitment to reduce deforestation in their jurisdictions up to 80 percent by 2020 in return for guarantees of adequate, performance-based financing, while expressing their frustration at having seen so little finance so far.³⁵

We Are at a Watershed Moment

Despite all this, 2014 also brought a palpable regaining of momentum in efforts to stop tropical deforestation. At the UN secretary-general’s Climate Summit 2014 in September, a critical mass of governments, private companies, nongovernmental organizations, and indigenous groups came together to endorse the New York Declaration on Forests, committing to contribute to a goal of halving deforestation by 2020 and ending it by 2030.³⁶ Later that year, at the UNFCCC negotiations in Peru, a group of forest-rich developing countries endorsed the Lima Challenge, offering to increase their ambition to reduce deforestation in return for greater incentives from rich countries.³⁷

In the meantime, private sector support for ending forest loss was growing. An initial trickle of private businesses making commitments to get deforestation out of their supply chains turned into a gush, with companies ranging from Mondelez to McDonald’s signing on to pledges. As recently as mid-2013, activists had seen global commodity traders as opaque corporate behemoths with no interest in or incentive to reduce the tropical deforestation powering their businesses. By early 2015, following commitments by Wilmar International, Golden Agri Resources, Bunge, Cargill, and other traders, some 90 percent of the global trade in palm oil was covered by corporate pledges to remove deforestation from supply chains.³⁸

Momentum continued to build in the run-up to the 2015 climate summit in Paris. In June, Pope Francis delivered his encyclical calling for action on climate change, giving particular attention to the importance of conserving forests.³⁹ In September, 193 countries adopted a new set of global sustainable development goals (SDGs), one of which includes halting deforestation by 2020.⁴⁰ And in Paris in December, heads of state from Brazil, Colombia, the Democratic Republic of Congo, Ethiopia, Gabon, Indonesia, Liberia, Mexico, and Peru joined a pledge to intensify their efforts to protect forests, while many countries included forests in the national plans for emission reductions they lodged at the conference.

Still, despite a prominent role for forests in the Paris Agreement itself and a new pledge of $5 billion in funding from the governments of Germany, Norway, and the United Kingdom, the need remains for large-scale, results-based finance to realize the promise of REDD+.

We are now at a watershed moment. Most of the pieces are in place: international consensus on a framework for REDD+; forest-rich countries and subnational jurisdictions making commitments contingent on additional finance; private corporations pledging to do their part; technology that enables accountability; and support from a broad base of civil society groups, including representatives of indigenous peoples. The one vital piece missing from the puzzle is a significant response from rich countries to meet this opportunity with tangible incentives, including increased finance, market demand for averted forest emissions, and demand-side trade and public procurement policies to complement corporate commitments.

Without such a response from rich countries, the fragile progress achieved in developing countries could slide backward, as the narrative of disappointment takes hold among early proponents of forest protection linked to performance-based finance for emission reductions, and the proponents of business as usual reassert themselves. Tropical forests could again slip from the international agenda, and lost momentum would be difficult to regain. Deforestation would continue, accelerating the rate of climate change through continued emissions and diminished carbon capture and storage capacity. Climate change in turn would undermine the ecological viability of the world’s dwindling tropical forests, with devastating consequences for both the climate and the world’s poorest communities.

The science, the economics, and the politics are now aligned for a major international effort to conserve tropical forests, with finance the missing piece.

A brighter scenario is possible. With political and financial support from rich countries, decision makers in developing countries who plan to clear their remaining forests could be encouraged to reconsider. Rich countries could help support decisions to protect forests by providing more, more certain, and more performance-based funding than is available today to reward successful efforts to reduce emissions from deforestation. International cooperation on protecting tropical forests could prove the key to maintaining momentum on efforts to protect the climate by providing a politically attractive and economically feasible bridge to broader and more aggressive efforts to implement the Paris Agreement to reduce emissions, while at the same time improving the lives of billions of people in developing countries.

In short, the science, the economics, and the politics are now aligned for a major international effort to conserve tropical forests, with finance the missing piece.

Why a Book, and Who Should Read It?

Although some world leaders noted the linkage between tropical deforestation and climate change as early as the late 1980s, concerted international effort to reduce forest loss as a climate change mitigation strategy has ramped up only within the past decade. In late 2006 and early 2007, three analyses propelled forest-based emissions onto the global climate change agenda:

The IPCC Fourth Assessment Report identified deforestation as a major source of the emissions that cause climate change, estimating that forest-based emissions comprised more than 17 percent of total annual emissions from all sources. This share was more than that of all the cars, planes, trains, and ships that constitute the global transportation fleet, which together were responsible for just over 13 percent.⁴¹

Lord Nicholas Stern’s economic analysis of climate change mitigation options, in a study commissioned by the British government, identified reducing deforestation as one of the most cost-effective strategies for reducing emissions. The study concluded that reducing emissions from deforestation had to be one of four pillars of any international framework to address climate change, along with emissions trading, cooperation on technology, and adaptation.⁴²

A World Bank report on the relationship between deforestation and poverty identified North–South finance to reduce deforestation as an international arbitrage opportunity between the value of avoided emissions to the global climate protection effort and the relatively lower value of alternative land uses to local forest stewards. North–South transfers to slow deforestation could both protect the climate and promote development.⁴³

Over the ten years since these reports were published, understanding of the science, economics, and politics of reducing deforestation as a win-win opportunity to address both climate change and development has advanced dramatically. New data on the extent of deforestation, new analysis of the economic drivers and consequences of forest loss, and early experience with new modes of international cooperation are among the resources now available. As the chapters that follow elaborate, recent research across disciplines further strengthens the case for a major international effort to maintain the world’s remaining tropical forests.

Alongside the frenzy of activity in policy circles and among practitioners catalyzed by renewed attention to tropical forests late in the first decade of the new century, research, writing, and publication related to forests and climate change also flourished. In academia, a cohort of graduate students across disciplines selected this topic as the focus of their dissertations. Think tanks and advocacy groups churned out materials targeting negotiators and policy makers as well as forest management practitioners. As of mid-2016, a search on Google Scholar on the key words reducing emissions deforestation unearthed more than seventy-eight thousand articles.

So why does the world need a book on forests and climate change? First, we see a need to articulate the role of rich countries in reducing tropical deforestation as a strategy to promote global prosperity and climate stability, and in ways that go beyond traditional development aid. In particular, we present analysis designed to illuminate the gap between the potential of international results-based finance as an incentive for forest conservation and its actual deployment to date. While we provide evidence of the effectiveness of various domestic policy tools for slowing deforestation, we do so to instill confidence among rich-country audiences that success is possible, rather than to instruct developing countries on what to do. Indeed, a tenet of the payment-for-performance approach is that actors within countries are best positioned to figure out what works and ask for help when they need it.

A second reason for the book is that the recent outpouring of information and analysis on tropical forests has been consumed almost entirely by audiences within Forestry World—the policy makers, practitioners, researchers, and activists whose professional concentration is on forests. Key messages have not yet reached similar professionals in Climate World or Development World. Forest-related panel discussions held on the sidelines of annual climate negotiations are attended almost exclusively by those already focused on forests. Climate-related negotiators, advocates, and practitioners who specialize in climate finance, clean energy, or sustainable transport often have only vague and sometimes incorrect impressions about the potential of maintaining forests as a climate change mitigation strategy.

Similarly, many experts in Development World remain largely unaware of the evidence that conserving tropical forests serves many of their objectives. To the contrary, the myth that zero-sum trade-offs exist between forest conservation on the one hand and economic development, agricultural production, and/or poverty reduction on the other is remarkably persistent. We have been dismayed to discover how many experts working on global health issues are unfamiliar with the concept of ecosystem services and how such services might relate to their agendas. Although forest conservation would serve many of the U.N. Sustainable Development Goals formulated in 2015, the text describing them and their associated targets is mostly silent on the potential contributions of forests.⁴⁴

In short, despite the near-total domination of Forestry World by the focus on reducing climate emissions from deforestation in recent years, there is abundant evidence that the denizens of both Climate World and Development World do not yet fully appreciate the relevance of tropical forests to their objectives.

Misconceptions about the implications for action abound. For example, when alerted to the benefits of forests for climate and development, many people assume the best way to reap them is to plant trees. Planting trees is often a good thing to do, but it is not a substitute for reducing emissions from deforestation: when forests are cleared, emissions are released in a large pulse to the atmosphere right away, while newly planted trees accrue carbon in small increments over many years. In addition, planting trees cannot compete with maintaining existing natural forests as a way of conserving biodiversity and producing ecosystem services.

The knowledge gap has been exacerbated by the rate of change in relevant technology, analysis, and experience. Because the science, the economics, and the politics of conserving tropical forests are evolving so quickly, debates that took place less than ten years ago on issues such as the potential for measuring forest degradation, the feasibility of slowing commodity-driven conversion, and the risks to indigenous peoples from forest protection initiatives must now all be revisited in the light of new facts.

Even the professionals in Forestry World have lots of new information to assimilate. The rapid accumulation of new research, early experiences with REDD+, and broader changes in global economics and politics that have occurred since tropical forests recaptured the imagination a generation ago—and especially since the issue reemerged within the last decade—have rendered much conventional wisdom obsolete. Some changes—for example, the boom in profitability and production of commodities, such as palm oil, that destroy or degrade forests—have made the objective of protecting tropical forests harder to attain. But many goals that seemed hopelessly expensive, difficult, or risky not long ago now appear affordable, feasible, and prudent in the light of new information and experience.

Accordingly, this book synthesizes the latest evidence on the importance of tropical forests and the potential of international cooperation to conserve them, in a way that is accessible to people in both Climate World and Development World. Below we summarize some of the perceptions common in each of these worlds that we aspire to challenge.

Why Climate World Undervalues Forests

Since international discussions on climate change began in the run-up to the 1992 Rio Earth Summit, negotiators, advocates, and academics have focused most of their attention on reducing emissions from fossil fuel use. The problem of emissions from land-use change has been recognized from the beginning of those discussions, but it has seldom taken center stage as the focus of mitigation strategies. More recently, developing countries have insisted on increasing attention to adaptation to climate change, but the role of forests in helping maintain the resilience of households and countries has been similarly underplayed.

Forest protection formally entered climate negotiations in 2007, and, by 2013, the parameters of a framework to finance protection—in the form of REDD+ (see box 1.1)—were largely agreed on. But the allocation of climate finance does not yet reflect the scientific and economic analysis of the importance of forests nor the political consensus on how to promote their protection. For example, while tropical forests constitute somewhere between a quarter and a third of the solution to climate change in terms of potential mitigation of current total emissions, decision makers in Climate World allocated to REDD+ only about 10 percent of the $35 billion in fast-start finance pledged for 2010–12.⁴⁵

Some reasons for this mismatch stem from persistent misunderstandings and myths. International climate negotiators, for example, first considered avoided deforestation as an emission mitigation strategy during discussions that led to the Kyoto Protocol in 1998 and with respect to determining the kinds of projects eligible for the Clean Development Mechanism in 2001. At that time, protecting forests was relegated to the too-hard basket, in part because of the limited ability to measure and monitor changes in forests and thus to make sufficiently accurate estimates of avoided carbon emissions. Many people still believe REDD+ cannot advance until elaborate national-level monitoring systems are in place, even though the aforementioned improvements in remote-sensing technologies are already making available sufficient data to get performance-based payments for reducing deforestation underway.

A second misunderstanding is apparent in the confusion regarding the significance of deforestation to climate change, which has been generated by statistics that combine the dual roles of forests as both sources and sinks for carbon emissions. Because periodic reports by the IPCC present the share of emissions from forests as a net number (that is, the difference between emissions from deforestation and emissions sequestered by forest regrowth), the number presented is smaller than forests’ mitigation potential (which is the sum of emissions and sequestration). In other words, the IPCC number takes emissions from deforesting countries such as Indonesia and reduces them by the amount of reforestation and regrowth taking place in countries such as China. And yet reducing deforestation in Indonesia and continuing to plant trees in China are both part of the solution.

Third, myths persist among climate policymakers that emissions avoided by leaving forests standing are somehow less valuable than those avoided by leaving fossil fuels in the ground, even though their impact on the atmosphere is the same. In fact, forests left standing are arguably more valuable for the climate than fuels left underground, as they continue to serve as a natural carbon capture and storage system in a way shale oil and coal deposits do not.

Finally, another myth holds that REDD+ has been tried and it didn’t work. But if a key component of REDD+ is the certainty of large-scale, performance-based finance to reward reductions in deforestation, it has hardly been tried: only about $4 billion in results-based finance has been made available to developing countries over the past decade, mostly through bilateral agreements, and only 11 percent of the total funds pledged for multilateral REDD+ finance had been disbursed as of 2014.⁴⁶ The certainty of large-scale, performance-based finance has so far been offered to only a handful of countries.

Why Development World Underinvests in Forests

Decision making in Development World suggests similar blinders are in place to the significance of forests for development objectives. Chronic and acute setbacks to poverty eradication and growth objectives caused by forest mismanagement have seldom penetrated the boundaries between forestry and other sectors. For example, although thick smoke from periodic forest fires in Indonesia routinely closes airports and sends people to hospitals due to respiratory distress, transportation and health sector planners rarely speak up for improved forest management.

Experts in Development World can be forgiven for not seeing these linkages, because they are largely invisible. Neither subsistence income from the harvest of wild forest products nor the value of forest-based ecosystem services is captured in national statistical accounts (although World Bank initiatives are striving to remedy these omissions).⁴⁷ Standing forests are thus effectively given a value of zero in country-level economic analysis and decision making.

In addition, many elements of the conventional wisdom about the role of forests in development are incorrect. A fundamental misconception is that standing forests do not make significant contributions to development objectives. In fact, research shows that wild products collected from forests constitute an average of 21 percent of household income in communities that live in and around forests, ranging as high as 63 percent in parts of Bolivia where households gather valuable Brazil nuts.⁴⁸ Significant headroom remains to act on the evidence that forest-based ecosystem services are important to agriculture and health and support the resilience of transportation, irrigation, and hydropower infrastructure.

Thirty years ago, poor people were widely believed to be the primary agents of deforestation. Since then, the drivers of deforestation—and our understanding of how they interact—have changed. Commercial-scale clearing for agriculture is now the primary driver, and studies show higher poverty levels are more often than not associated with less rather than more deforestation.⁴⁹ But the myth about poor people as the main cause of deforestation has been stubbornly persistent.

Many development professionals believe clearing forests for agriculture is necessary to achieve food security and reduce poverty, and as of around 2005, no large, forest-rich country had yet successfully slowed deforestation before most of the forest was already gone. Brazil’s success in reducing its deforestation rate in the Amazon by some 80 percent over the ensuing decade proved deforestation could be decoupled from agricultural production, with greater gains from intensifying cultivation in an area than from increasing the area under cultivation. New science is revealing the significant role of forests in maintaining the cooler, wetter climates that support agricultural productivity at continental scales, in addition to providing local hydrological, pollination, and other services.

Another challenge is the reputation the forestry sector has gained among donor agencies for being difficult. Indeed, donors have tended to avoid engaging in forest-related activities precisely because of perceived risks of association with the corruption and land rights conflicts endemic to the sector. While forests do, indeed, present challenging and complex issues, such perceptions may overestimate the risks to investing in the sector compared to those of undertaking other strategies to address climate or development goals. Of more than one hundred claims brought to the World Bank’s Inspection Panel over its twenty-two-year history, only five concerned forestry projects, while another eight involved the impacts on forests of lending in other sectors, such as mining and hydropower.⁵⁰

Early in the development of REDD+, some were deeply concerned about the risks of unintended negative consequences of assigning monetary value to forest carbon, especially for indigenous communities. The slogan of indigenous activists at the 2007 climate negotiations in Bali was No Rights, No REDD. While some indigenous groups remain opposed to REDD+, and in particular to private markets for forest carbon offsets, many have cautiously embraced the potential of valuing their forests for global climate protection as a way of strengthening their rights and generating revenue.

Furthermore, early experience with REDD+ initiatives suggests engagement on a payment-for-performance basis can promote improved governance, because it requires transparency and the clarification of responsibility for forest management outcomes. Indigenous peoples in several countries, for example, are using the political processes and funding flows opened by REDD+ to assert their customary rights over forests.

Indeed, many of the actions needed to reduce deforestation are the same as those needed to promote improved governance. Increased transparency and accountability in land-use decision making, for instance, reduces opportunities for corruption, and clarification of land tenure can help strengthen the rights of indigenous peoples and reduce rural conflict.

In sum, the purpose of this book is to provide an understanding of the science, the economics, and the politics of mobilizing tropical forests in the service of climate change mitigation and development. In both climate and development policy arenas, large gaps remain between the implications of recent research and current actions to incorporate those findings into decision making. By raising awareness of the importance of tropical forests to both climate and development goals, we aim to help close those gaps. Our hope is that greater understanding will stimulate action on the most promising ways forward—especially scaled-up payment-for-performance finance—with a focus on what rich countries can do.

Road Map to the Rest of the Book

The rest of this book comprises three sections summarizing the science, economics, and politics of international cooperation to protect forests for climate and development, plus a chapter on REDD+ finance and a final chapter on the way forward.

The Science

Chapter 2 explains the biophysical relationships between tropical deforestation and the greenhouse gas emissions that cause climate change. The chapter emphasizes how forest loss is a significant source of global emissions, while standing forests offer a safe and natural carbon capture and storage system.

Chapter 3 presents the rapidly evolving science linking tropical forests to the achievement of goals related to development and poverty reduction through the provision of ecosystem services. The chapter synthesizes studies describing how forests provide benefits to water, energy, agriculture, health, safety, and climate adaptation.

Chapter 4 describes how forest monitoring has undergone a data revolution in less than a decade. Technological advances in remote sensing are enabling increasingly precise and timely measurement of changes in forest cover and associated carbon emissions.

The Economics

Chapter 5 analyzes the costs of forest emission reductions relative