Saving What Remains
FUNDING RAINFOREST CONSERVATIONApril 1, 2007
Now that we have prioritized what forest areas should be set aside for reserves, we must focus on implementation and management of these protected areas. Clearly all three steps will require a broad spectrum of participants, from local farmers to CEOs of multinational corporations to high-ranking government officials. Without cooperation, any protected-areas system is destined to fail.
Reserves are expensive to establish and maintain, as is forest management. In the 1990s, the U.N. FAO estimated that the forestry sector was funded only 27 percent of what it requires, while the United Nations Conference on the Environment and Development (1992) estimated the cost of protecting tropical forests through sustainable development at $30 billion per year (a number that has roughly doubled today). The countries in which reserves and forest management are most needed often have neither the money nor the interest in funding these projects. Other priorities — ranging from growing the economy to improving health care access to providing education — win out over forests. Yet innovative models are showing that forest conservation need not be separate from other initiatives. In fact protecting forests can go hand-in-hand with economic growth and poverty alleviation.
One method of financing conservation projects in developing countries is debt-for-nature programs where conservation and other international organizations purchase a portion of a developing country's commercial debt at a discount, or else persuade creditor banks to donate some of debt. Foreign debt can be purchased at 50 to 90 percent of its actual value and sometimes far less. For example the non-profit organization Conservation International purchased $650,000 worth of Bolivian debt for only $100,000 when it initiated the first debt-exchange program in 1987. In exchange for being relieved of the obligation to repay a portion of international debt, the country agrees to set aside funds to promote conservation by encouraging sustainable development, expanding environmental education programs, purchasing land, and improving land management. Within a decade of the first agreement, debt-for-nature agreements totaling nearly US$1 billion had been arranged in sixteen countries including the tropically forested countries of Argentina, Bolivia, Costa Rica, Dominican Republic, Ecuador, Guatemala, Honduras, Jamaica, Mexico, Madagascar, Philippines, Venezuela, and Zambia.
In 1998, Congress approved a bill that authorized more funding for debt-for-nature swaps. Under the Tropical Forest Conservation Act, the U.S. reduces or forgives debt owed the U.S. by developing countries in exchange for establishing forestry funds to be used for conservation and promoting economic reform. The act mandates that projects be carried out at the local level by NGOs, community organizations, and Indigenous organizations. By 2011, debt-for-nature swaps under the TFCA had generated more than $250 million for forest conservation.
According to an analysis by the World Bank, while debt-for-nature agreements will never substantially reduce external debts of poor countries—which are far too large for such schemes— they can dramatically increase the amount of funds spent by the debtor country on environmental protection.
Possible Funding Strategies for the Future
There are other means that may prove useful in financing reserves, although they have not been developed to their fullest potential. Most of these are based on the concept that all nations should contribute to rainforest preservation since the effects of deforestation will impact everyone. Wealthy countries are expected to provide most of the funding. Some have suggested that money could come by reducing subsidies currently given to certain polluting and environmentally damaging industries, such as the fossil fuels and mining sectors.
Presently the most advanced program for funding rainforest conservation is called Reducing Emissions from Deforestation and Degradation or REDD+. As a concept, REDD+ aims to cut greenhouse gas emissions by paying tropical countries to protect their forests. While many of the details — including sources of finance, safeguards, and implementation protocols — are still being hammered out, a number of REDD+ projects are underway in countries ranging from Brazil to Cambodia. REDD+ has the potential to generate tens of billions of dollars annually for forest protection efforts.
Another approach that has been discussed is a "rainforest bond", which would be issued by a forest country and sold to investors. The bond would generate money upfront for conservation activities and would be paid back using revenue generated from environmental taxes, reduced impact logging, and payments for ecosystem services — including carbon sequestration and watershed services. Rainforest bonds have been advanced by Prince Charles' Rainforest Project as a mechanism for funding the early stages of the REDD+ program.
- How can pollution by wealthy countries be used to protect rainforests in poor countries?
- What is a debt-for-nature swap?
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