Forest conservation policies: what works and what doesn’t

Policymakers looking to reduce deforestation in their countries have the right tools to do so today, but without a solid foundation in good governance and consistent policies, they will not be successful, said a prominent policy expert.

As the International Year of the Forests wrapped up at the end of 2011, the worldwide community continued to struggle to halt deforestation and the related loss of biodiversity. Despite billions of dollars in foreign aid to tackle the problem and tightening regulations, deforestation still pervades many developing tropical countries, which are home to some of the world’s most valuable remaining forests.

A notable exception to that trend is Costa Rica. Its tropical forested area is roughly twice the size it was 20 years ago, when its government first implemented national policies on conservation.

Speaking to Eco-Business in a recent interview, Conservation International (CI) conservation policy expert Carlos Manuel Rodriguez, who is also the former environment minister of Costa Rica, outlined some of the policy tools available today for reducing deforestation.

“Countries around the world are losing forest at a high rate because the economics do not support conservation,” he said.

Traditional policies such as strict regulation and law enforcement have not stopped deforestation, he added.

Mr Rodriguez, who started working on forest policies in his home country nearly 20 years ago, attributes Costa Rica’s success to a national programme that used economic incentives to ensure its people paid for the environmental services nature provided.

One of the policy tools implemented was a scheme called Payment for Environmental Services (see sidebar).

The first generation of PES projects, in which governments provided tax breaks and direct payments or subsidies to forest dwellers and managers for measures such as protecting forests and reducing soil erosion, was financially unsustainable, he noted.

A second version of PES was eventually introduced by the government to provide better long-term financing. In one example, water and hydro-electric companies charged customers through fees embedded in utility bills in order to generate income to pay forest managers. In this way, the communities that depend on forested areas to protect water sources, known as watersheds, pay for the environmental benefits they receive.

The country’s PES schemes are also funded through a tax on fossil fuels that was introduced in 1997.

“Costa Rica is in a very good situation compared to other countries because our mechanism does not depend on the will of a minister of finance to allocate resources,” said Mr Rodriguez.

Mr Rodriguez said there were several hundred small-scale watershed PES projects around the world, many of which are demonstrations or trials.

For one such project, CI has partnered with international hotel group Marriott to develop a self-sustaining PES project in China’s Sichuan Province. The project draws on another key source of financing – voluntary corporate funding (see box below).

The business role

Businesses have a key role to play in forest conservation policies, noted Mr Rodriguez. “We need the leadership of the private sector to help create schemes…In most developing nations, the bright, smart minds are in the private sector.”

Companies today typically reduce their environmental footprints by voluntarily paying to offset the carbon (CO2) emissions generated by their business. But Mr Rodriguez pointed out that this approach can lead to false or exaggerated sustainability claims - or ‘greenwashing’.

He observed that, while there were many good examples of corporate conservation efforts, businesses lack the motivation to protect natural resources. “It is not within the genes of the corporate sector; we need to embed these issues within the genes. In order to do that, we need to rework the economics (to include costs of pollution and benefits of natural resources),” he said.

Mr Rodriguez would like to see governments step up and create new financial mechanisms that remedy the economy’s failure to value natural resources. He noted a lack of political leadership to put such systems in place. “(Paying for pollution or resource depletion) should not be a voluntary decision for businesses. It should be binding for the corporate sector, but we are still many years from there,” he said.

Experts have cautioned that economic solutions to conservation should be used with care.

The authors of a study called “Paying for Ecosystem Services— Promise and Peril” that was published last year in Science magazine said that the effectiveness of projects are often diluted by alternative goals such as poverty alleviation. The authors argued that ecosystem services are not valued accurately when a project’s focus is on channelling income to particular groups of people. Such projects tended to be based on uncertain science and target a single ecosystem service, when they should be capturing all effects of ecosystem management, they wrote.

Indeed, many PES programmes target small farmers and indigenous peoples in poor communities for payments.

Of the 8,000 Costa Rican recipients of PES funds, 40 per cent are considered very poor, noted Mr Rodriguez. Payments for carbon fixation (through forest conservation) have become a primary source of revenue for them, and some indigenous communities have been able to invest in new facilities and infrastructure, he further noted.

“PES has proven to be a great opportunity to address climate mitigation, poverty alleviation, forest conservation and biodiversity,” he said.

But he agrees that depending on PES to fix all problems is a mistake.

“Of course, PES is not going to solve all of your problems. It is just a tool to implement national policies on sustainability. In that context, it can deliver a lot. But the policies are not in place,” he said.

Institutional failures

In Asia, Indonesia epitomizes how consistent policies are crucial for tackling deforestation. The country’s separate ministries in charge of energy, forestry, environment and industry do not work together and are all competing to undertake activities in the same geographical areas, he noted.

Indonesia has the third-largest forested area in the world, but an index on global deforestation - published in November by risk analysis and mapping company Maplecroft - placed it among the top three countries for deforestation rates. According to the index, the republic is losing about 1 million hectares of forest each year.

Indonesia has a target to reduce its greenhouse gas emissions, which are dominated by deforestation, by 26 per cent by 2020.

Countries such as Indonesia and Brazil cannot achieve their carbon targets if they do not address institutional failures, said Mr Rodriguez.

Those same institutional failures, he argued, will defeat international efforts to help developing countries protect their forests.

International efforts to curb deforestation are centred on a United Nations-backed scheme called Reducing Emissions from Deforestation and Forest Degradation (REDD). The latest version – REDD+, which emerged from the 2009 climate talks in Copenhagen, was developed to provide financial incentives to countries and landowners to protect and better manage forests.

The official framework for REDD+ financing has yet to be established, but countries and organisations have moved ahead with voluntary programmes. According to data on the Climate Funds Update website, over US$3 billion has been allocated thus far for specific REDD+ projects.

The most ambitious of these within the Asian region is Norway’s US$1 billion pledge to Indonesia, which has resulted in a contentious moratorium on clearing forests.

Within the past year, Indonesia’s forest preservation efforts have faced multiple setbacks, from delays in national policies to ban forest conversion to confusion due to conflicting policies from provincial and national agencies. Other issues include claims from forest dwelling communities that REDD+ programmes were destroying their livelihoods.

Mr Rodriguez said that the international community has been ‘missing the point’ in negotiations on implementing REDD+. Most of the discussion has been on how to measure impact, an important but secondary concern, he noted.

“Transparency, accountability, ease of doing business and non-corruption are basic elements for REDD+ and we’re not addressing them,” he said, adding that funding would not have impact if countries do not address the underlying issues of deforestation.

Figuring out how to successfully protect forests is a learning process, he admitted, and one that would benefit from what he calls ‘south-south’ cooperation.

“Tropical developing countries tend to go to the north for technical and financial aid, and this case, the north does not have much experience,” said Mr Rodriguez, who spends his time at CI helping countries develop positive, efficient policies for conservation.

His own experience has shown that PES and other economic tools, which include green accounting and addressing perverse incentives such as fossil fuel subsidies, can help governments balance some of the complex challenges of forest conservation.

For the purposes of reducing CO2 emissions in Indonesia, new research suggests that a nation-wide, mandatory approach would be most effective.

A recent article co-authored by the World Resources Institute and Indonesia’s Padjadjaran University described a joint study by CI and the non-profit Environmental Defense Fund on the use of economic incentives to reduce deforestation in Indonesia.

Of the three scenarios evaluated, the most effective was a mandatory carbon price, followed closely by a highly structured voluntary programme. PES schemes were found to be least effective.

• A mandatory carbon price would set legal limits for CO2 emissions and force emitters to pay for excessive emissions through the purchase of carbon offsets. The estimated benefits of this system were an avoidance of 211 million metric tonnes of CO2 – equal to a 26 per cent reduction - and annual revenue of US$1 billion after costs;

• A voluntary programme that carefully coordinated incentives for individual districts or provinces could achieve a 22 per cent reduction in emissions and generate US$331 million in revenue for Indonesia. This option has the benefit of avoiding the political difficulties of implementing a mandatory policy;

• Site-specific PES projects, such as those used to protect watersheds, showed only an 8 per cent reduction in emissions and would cost Indonesia US$6.2 billion per year.

Regarding PES schemes, Mr Rodriguez emphasised that one size does not fit all, and that each country had to learn how to use various tools for its individual needs.

“Governments need to learn how to use the market for forest conservation: what works and what doesn’t.  In the end, we are protecting not just ecosystems, but also livelihoods and humankind’s future prosperity,” he said.