Status: 07.12.2023, 13:30 PM
By: Alexandra Endres
Intact rainforest in Brazil: A new fund aims to better protect rainforests. © Cavan Images/Imago
At COP28, Brazil is presenting a new idea for forest protection: In the future, there will be money for every hectare that is preserved – and high fines for every hectare of deforestation.
Four months ago, at the Amazon Summit in Belém, Brazil, 28 countries with tropical forests agreed to "develop innovative mechanisms" to reconcile rainforest protection, social and economic concerns. Among them were the important rainforest states of Brazil, the Democratic Republic of Congo and Indonesia. Now, at COP<>, Brazil has presented a first "innovative mechanism".
A "Tropical Forests Forever Fund" is to finance rainforest protection in the future. Brazil initially hopes to "mobilize" at least $250 billion. It is not yet clear where the money will come from. Various possibilities were brought into play at the conference. Among other things, sovereign wealth funds could be wooed to invest.
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Money for every hectare protected
So far, only limited resources are available for global forest protection. Deforestation is usually more worthwhile than preserving the ecosystem: land is cleared for cattle breeding and soy cultivation, for example, and nature is destroyed for oil drilling and gold prospecting. The new fund aims to change that by providing economic incentives for the preservation of the ecosystem.
The money is to go primarily to the people and communities who protect and preserve the forest. According to the Brazilian government, around 80 countries could benefit from the fund. In a mechanism that is as simple as possible and therefore quick to implement, they would receive a fixed amount year after year – for every hectare of forest that is preserved or restored. For every hectare of deforestation, forest owners would have to pay hundreds of times as much in fines.
In the economic calculation of a forest owner, the fines could be the decisive factor. Growing soy promises a significantly higher yield per hectare than forest conservation, even with the payments from the fund, calculates Tasso Azevedo, the inventor of the Brazilian Amazon Fund. But a penalty that would nullify payments of a hundred protected hectares would be a very strong incentive to preserve the forest. It is necessary to ensure that nature conservation yields tangible returns, Azevedo wrote in a recent article.
Develop details with "partners"
At COP28, the initiative was presented at a high-level ceremony in the presence of Environment Minister Marina Silva and Finance Minister Fernando Haddad. Now Brazil is inviting "partners" to develop the operational details of the fund, Silva said. The new fund is expected to be operational by COP30.
So far, however, it is unclear to what extent other tropical countries support the initiative. They are in dialogue with some of them, Garo Batmanian said in an interview with Table.Media. He is the Director of the Forestry Service in the Brazilian Ministry of the Environment. However, he did not name specific names. The delegation said that the first step was to get a conversation going about the new idea.
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A spokesman for the Coalition for Rainforest Nations, which claims to include more than 50 countries, did not comment specifically on Brazil's initiative when asked: "We support the Brazilian government under Lula in principle," he said only, "and believe in the REDD+ mechanism of the UNFCCC."
REDD+ is an established concept that focuses on paying money for emissions avoided by forest conservation. It sees the ecosystem primarily as a carbon sink. Brazil's initiative could be seen as competition. In fact, the Brazilian delegation says that their own idea is much easier to implement than REDD+ and could therefore generate significant funds more quickly.
25 dollars per hectare of forest – a hundredfold penalty for clearing
The idea is to no longer link payments to the amount of carbon a forest stores, but to the area obtained. This is to take into account the fact that a forest also fulfils ecological and social functions. For example, 25 or 30 US dollars could flow per hectare – per hectare felled, the sum for a hundred hectares would be deducted.
The aim is to make the fund as simple as possible, says Batmanian. The requirements should not be too detailed, also in order to enable as many countries as possible to participate: "We all have forests. But we are at different stages of development, and there are socio-economic and cultural differences between us. A one-size-fits-all approach wouldn't do it justice."
Requirements for Participating Countries
However, all participating countries should meet some basic criteria:
- Their deforestation rates are supposed to be low and decrease in the long term. How low the rate must be and over what period of time the downward trend must continue has yet to be determined.
- Countries must be able to control and prove this through a credible monitoring system, either their own or one provided by a third party. For example, they could use FAO data.
- Most of the money that comes from the forest fund is intended to benefit the people who protect and preserve the forest. In Brazil, for example, this could be indigenous communities. The mechanism by which the money is distributed is supposed to be "transparent and inclusive". It is also not yet clear how money will be distributed and how its use will be documented.
- Countries should make a long-term commitment to participate in the initiative.
Possible sources of funding
By courting sovereign wealth funds as investors, it is hoped to raise sufficient funds for the new mechanism. According to Batmanian, sovereign wealth funds manage a combined $12 trillion in assets worldwide. They have clear investment rules: a large part of the money must be invested in safe AAA-rated bonds. Batmanian's idea: A financial institution – the World Bank, for example – issues such AAA bonds to investors at a market interest rate. It invests the funds it earns in the financial market. This is how she makes a profit. This could be used to protect tropical forests.
It remains unclear how market fluctuations will be dealt with – and whether sovereign wealth funds will even be allowed to invest in any significant amount of the bonds that the fund initiated by Brazil wants to issue. As a rule, they have to comply with quite strict requirements.
Tasso Azevedo personally favors a different source of funding: oil producers could pay a dollar into the fund for every barrel extracted – and Brazil itself could be the first to do so. "What if we then asked the U.S. to give a dollar as well? Or Saudi Arabia?" Private oil companies should also make their contribution, "only four or five years until we have managed to implement it". The sums needed, he believes, would be quickly collected.