Accounting for the value of the world’s rainforests
Perspective 01

Accounting for the value of the world’s rainforests

The impetus around nature-based climate solutions has never been greater as countries, companies, corporations, manufacturers and institutions commit to reaching Net Zero emissions by 2050 (or before). This transition is mirrored across the financial sector where pension funds, asset managers and major financial institutions have begun to exercise their influence to ensure firms minimise their contribution to climate change.

Clustered around the world’s equator, the planet’s three major rainforest basins are a major part of the solution. Eight per cent of global emissions already come from the loss of tree cover in these tropical forests. However, their role is even more significant when we consider that tropical forests also provide up to a fifth of the cost-effective climate mitigation needed before 2030. Reducing carbon emissions from deforestation should have been one of the first major actions to reduce global carbon emissions - and yet it hasn’t happened.

Reducing carbon emissions from deforestation should have been one of the first major actions to reduce global carbon emissions - and yet it hasn’t happened.

It is the unpredictable nature of political economies in most forested regions that makes it hard. Donors to Indonesia and Brazil have long tried to stop deforestation but negotiating the political landscape has proved to be exceptionally difficult, often due to vested interests but also due to distorted incentives where the forest is valued merely in terms of its agricultural land potential, ignoring its value to climate and biodiversity health. These societal, political and governance failures have stalled progress on reducing emissions from forestry which should have been right at the top of the world’s to-do list.

Well-governed forest nations such as Gabon offer the opportunity to be laboratories of good practice because they suffer from fewer tensions in their political economy, meaning they can ensure a stable process for forest preservation that work. This is a lure for corporations looking to head towards Net Zero, who may need to complement their own emission reduction efforts with Gold Standard carbon offsets with high levels of environmental integrity.

The diplomatic difficulty of reaching global consensus over effective mechanisms and measurement is likely to result in a system that is grown from the bottom up, pilot scheme by pilot scheme, country by country and learning by learning.

However, carbon storage is only one of many ecosystem services that forests provide. By deriving value from as many of them as possible, selling not just carbon credits but also increasing revenues from eco-tourism and sustainable agriculture, preserving nature becomes attractive financially. Utilising the land in this way maintains its natural capital stock, but also generates enough revenue to make it worthwhile to the nations that have stewardship over them.

One of the expected areas of focus for this year’s COP26 is Article 6 of the Paris Agreement, which sets out a mechanism for establishing a new international carbon market to replace the existing market established under the 1997 Kyoto Protocol. The reality however is that a co-ordinated global system for reducing carbon emissions and accounting for natural capital is far from imminent.

Politically stable nations in the world’s rainforest regions are well positioned to take the lead.

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