Measures related to Systemic Shift 4: Creating incentives to maintain forest integrity
Strengthening sustainable productive uses of forests
A possible contributing solution to increasing the value of forests is to strengthen their sustainable productive uses. The production of sustainable wood and non-wood forest products can provide a viable alternative to converting forests into farmland while contributing to overall rural development. To promote productive uses of forests in a sustainable manner, governments can, for example, create a conducive business environment through the development of practical, user-friendly and simplified administrative processes, as well as through strengthening certification, incentivizing the formalization of informal operators, promoting community forestry approaches and investing in improved infrastructure. Private actors and supporting organizations, on the other hand, can adopt sustainable forest management practices, raise awareness of the availability of sustainable wood and non-wood forest products and their wide uses and benefits, invest in value-added processing facilities and consolidate forest value chains through the development of attractive business models.
| Reports | · FAO report: Enhancing the sustainability and financing of forest-based value chains |
| Platforms | · FAO toolkit: Sustainable Forest Management (SFM) Toolbox |
| Case studies/ examples | · FAO case studies: Legal and Sustainable Forest Value Chains for Climate Action |
| Academic publications | · Assembe-Mvondo, S. 2009. Sustainable forest management practice in Central African States and customary law. INTERNATIONAL JOURNAL OF SUSTAINABLE DEVELOPMENT AND WORLD ECOLOGY, 16(4), 217–227. https://doi.org/10.1080/13504500903031709 · Boscolo, M., Snook, L., & Quevedo, L. 2009. Adoption of sustainable forest management practices in Bolivian timber concessions: A quantitative assessment. INTERNATIONAL FORESTRY REVIEW, 11(4), 514–523. https://doi.org/10.1505/ifor.11.4.514 · Nugroho, H., Indrajaya, Y., Astana, S., Suharti, S., Basuki, T., Yuwati, T., Putra, P., Narendra, B., Abdulah, L., Setyawati, T., Krisnawati, H., Saputra, M., Lisnawati, Y., Garsetiasih, R., Sawitri, R., Putri, I., Setiawan, O., Octavia, D., Tata, H., … Subarudi. 2023. A Chronicle of Indonesia’s Forest Management: A Long Step towards Environmental Sustainability and Community Welfare. LAND, 12(6). https://doi.org/10.3390/land12061238 |
| Guidance | · FAO learning guide: Developing bankable business plans: A learning guide for forest producers and their organizations |
| Reports | · FAO report: Forest Products in the Global Bioeconomy |
| E-learning modules | · FAO e-learning course: Developing bankable business plans for sustainable forest-based enterprises |
| Initiatives/ projects | · FAO initiative: Sustainable Wood for a Sustainable World · Collaborative Partnership on Forests campaign: Grow the Solution · Ministerial statement: Ministerial Call on Sustainable Wood |
| Case studies/ examples | · Horizon Europe project: Optimising the sustainable production of wood and non-wood products in small forest properties and development of new forest-based value chains |
| Academic publications | · Arnold, J., & Pérez, M. 2001. Can non-timber forest products match tropical forest conservation and development objectives? ECOLOGICAL ECONOMICS, 39(3), 437–447. https://doi.org/10.1016/S0921-8009(01)00236-1 · Sasaki, N., Asner, G., Pan, Y., Knorr, W., Durst, P., Ma, H., Abe, I., Lowe, A., Koh, L., & Putz, F. 2016. Sustainable Management of Tropical Forests Can Reduce Carbon Emissions and Stabilize Timber Production. FRONTIERS IN ENVIRONMENTAL SCIENCE, 4. https://doi.org/10.3389/fenvs.2016.00050 |
| Reports | · FAO policy brief: Community-based forestry: Extent, effectiveness and potential · FAO training manual: Community-based forestry assessment: A training manual · FAO manual: Community-based tree and forest product enterprises: Market Analysis and Development · RECOFTC training manual: Community Forestry Introductory Curriculum · RECOFTC infosheet: Community forestry models in Asia-Pacific · RECOFTC report: Tenure and social forestry in ASEAN Member States · RECOFTC report: Empowering smallholders to comply with regulations targeting forest risk commodities |
| Platforms | · FAO platform: Community-based forestry · UN-REDD Initiative: ASEAN Social Forestry Initiative |
| E-learning modules | · FAO e-learning course: Developing bankable business plans for sustainable forest-based enterprises · RECOFTC e-learning courses, including: o Agroforestry 101: Enhancing Livelihoods and Ecosystem Resilience o Community Forestry 101 o Inclusive Enterprises for Empowered Communities o Partnering for progress: Inclusive land investments for smallholder success |
| Case studies/ examples | · Cambodia case study: Community-Based Natural Resource Management in Cambodia · West Africa case studies: Community-based forestry in action: Stories from West Africa · East Asia and Pacific Region: Good Practices for Strengthening Land Rights Recognition in Forestlands of the East Asia and Pacific Region · Indonesia case study: Climate Action Game Changers: The Forest Story from Indonesia · Sub-Saharan Africa: Collective tenure rights and climate action in sub-Saharan Africa |
| Academic publications | · Diansyah, W., Abas, A., & Sakawi, Z. 2021. A systematic review on community forest management in Southeast Asia: Current practices and impacts on biodiversity conservation and livelihood quality of local communities. Human Ecology Review, 27(1), 3–21. doi.org/10.22459/HER.27.01.2021.01 informit.280141055303355 · Di Girolami, E., Kampen, J. and Arts, B. 2023. Two systematic literature reviews of scientific research on the environmental impacts of forest certifications and community forest management at a global scale. Forest Policy and Economics: 146, 102864. https://doi.org/10.1016/j.forpol.2022.102864 · Fischer, H.W., Chhatre, A., Duddu, A. et al. Community forest governance and synergies among carbon, biodiversity and livelihoods. Nature Climate Change 13, 1340–1347. https://doi.org/10.1038/s41558-023-01863-6 · Hajjar, R., Oldekop, J.A., Cronkleton, P., Newton, P., Russell, A.J.M., & Zhou, W. (2021). A global analysis of the social and environmental outcomes of community forests. Nature Sustainability, 4, 216–224. https://www.nature.com/articles/s41893-020-00633-y · Tovar, J., & Hajjar, R. 2024. Towards a more just approach to community forestry initiatives: Confronting contradictions, trade-offs, and threats to fairness. BIOLOGICAL CONSERVATION, 295. https://doi.org/10.1016/j.biocon.2024.110665 |
Developing payment for ecosystem service mechanisms
Payment for ecosystem services programmes, including REDD+ finance initiatives and carbon markets, have been among the earliest financial interventions to increase the value of standing forests while applying environmental and social safeguards. Their underlying premise is that governments and those protecting forests will be remunerated for reducing deforestation through public and private results-based finance. REDD+ finance and carbon markets can be game changers for channelling much-needed finance into forest protection and can reward efforts through results-based payments, if appropriate and science-based rules are put in place and implemented.
Yet, isolated carbon market opportunities may carry integrity risks. Their success depends on enabling policy conditions such as clear regulations, targeted incentives, fair taxation and predictable finance approaches. For example, the Green Climate Fund has integrated REDD+ results-based finance into its standard financing mechanisms, giving countries predictability and time to prepare for payments. Likewise, carbon tax systems can regulate private sector emissions, support Paris Agreement targets and create predictable finance streams for deforestation reduction. Governments can further strengthen their engagement in these mechanisms to reap potential benefits, in addition to developing natural capital accounting systems to value forests’ ecosystem services and mainstreaming true cost accounting to determine the hidden costs of forest destruction.
| Guidance | · UNFCCC Paris Agreement cooperative approach and crediting mechanism: Paris Agreement Article 6 |
| Platform/Tools | · World bank State and Trends of Carbon Pricing Dashboard |
| Initiatives/ projects | · Integrity initiative: Voluntary Carbon Markets Integrity Initiative · Integrity initiative: Integrity Initiative for Voluntary Carbon Markets |
| Academic publications | · Atmadja, S., Duchelle, A., De Sy, V., Selviana, V., Komalasari, M., Sills, E., & Angelsen, A. 2022. How do REDD plus projects contribute to the goals of the Paris Agreement? ENVIRONMENTAL RESEARCH LETTERS, 17(4). https://doi.org/10.1088/1748-9326/ac5669 · Blanton, A., Mohan, M., Galgamuwa, G., Watt, M., Montenegro, J., Mills, F., Carlsen, S., Valasquez-Camacho, L., Bomfim, B., Pons, J., Broadbent, E., Kaur, A., Direk, S., de-Miguel, S., Ortega, M., Abdullah, M., Rondon, M., Jaafar, W., Silva, C., … Ewane, E. 2024. The status of forest carbon markets in Latin America. JOURNAL OF ENVIRONMENTAL MANAGEMENT, 352. https://doi.org/10.1016/j.jenvman.2023.119921 · Martello, R., Dargusch, P., & Medrilizam. 2010. A Systems Analysis of Factors Affecting Leakage in Reduced Emissions From Deforestation and Degradation Projects in Tropical Forests in Developing Nations. SMALL-SCALE FORESTRY, 9(4), 501–516. https://doi.org/10.1007/s11842-010-9140-0 · Paladino, S. 2011. Tracking the Fault Lines of Pro-Poor Carbon Forestry. CULTURE AGRICULTURE FOOD AND ENVIRONMENT, 33(2), 117–132. https://doi.org/10.1111/j.2153-9561.2011.01059.x · Yanai, R., Wayson, C., Lee, D., Espejo, A., Campbell, J., Green, M., Zukswert, J., Yoffe, S., Aukema, J., Lister, A., Kirchner, J., & Gamarra, J. 2020. Improving uncertainty in forest carbon accounting for REDD plus mitigation efforts. ENVIRONMENTAL RESEARCH LETTERS, 15(12). |
| Reports | · UN-REDD info brief: National Funding Mechanisms for REDD+: Lessons Learned and Success Factors |
| Platforms | · Green Climate Fund funding mechanism: REDD+ Results-based Payments Pilot program · FAO platform: REDD+ Reducing Emissions from Deforestation and Forest Degradation · Multistakeholder partnership: Forest Carbon Partnership Facility |
| E-learning modules | · E-learning course: REDD+ Academy |
| Academic publications | · Barbier, E., & Tesfaw, A. 2012. Can REDD+ Save the Forest? The Role of Payments and Tenure. FORESTS, 3(4), 881–895. https://doi.org/10.3390/f3040881 · Boer, H. 2018. The role of government in operationalising markets for REDD plus in Indonesia. FOREST POLICY AND ECONOMICS, 86, 4–12. https://doi.org/10.1016/j.forpol.2017.10.004 · Dixon, R., & Challies, E. 2015. Making REDD plus pay: Shifting rationales and tactics of private finance and the governance of avoided deforestation in Indonesia. ASIA PACIFIC VIEWPOINT, 56(1), 6–20. https://doi.org/10.1111/apv.12085 · Morita, K., & Matsumoto, K. 2023. Challenges and lessons learned for REDD plus finance and its governance. CARBON BALANCE AND MANAGEMENT, 18(1). https://doi.org/10.1186/s13021-023-00228-y |
Developing financial incentives
Creating financial incentives to maintain forest integrity is an effective way to reduce deforestation while channelling much-needed finance to those protecting forests. Sustainable investments, saving and credit mechanisms and environmentally conditioned cash transfers can incentivize the protection of forests. Inversely, financial penalties or credit restrictions for those found to engage in deforestation can be effective disincentives to clearing forests.
| Platforms | · Global Alliance against Hunger and Poverty policy instrument: Environmentally conditioned cash transfer |
| Initiatives/ projects | · GCF and FAO project: Poverty, Reforestation, Energy and Climate Change Project (PROEZA) in Eastern Paraguay |
| Case studies/ examples | · Case study: Bolsa Verde - Conditional cash transfer programme |
| Academic publications | · Alix-Garcia, J. M., Sims, K. R. E., Orozco-Olvera, V. H., Costica, L., Fernandez Medina, J. D., Romo-Monroy, S., & Pagiola, S. 2019. Can Environmental Cash Transfers Reduce Deforestation and Improve Social Outcomes? A Regression Discontinuity Analysis of Mexico’s National Program (2011–2014). World Bank, Washington, DC. https://doi.org/10.1596/1813-9450-8707 · Ferraro, P. J., & Simorangkir, R. 2020. Conditional cash transfers to alleviate poverty also reduced deforestation in Indonesia. Science Advances, 6(24), eaaz1298. https://doi.org/10.1126/sciadv.aaz1298 |
Developing fiscal incentives
Governments have significant leverage over the private sector through their fiscal powers. Taxation and subsidies can be impactful tools to incentivize desirable business practices while disincentivizing unwelcome ones. In the context of addressing deforestation, governments can, for instance, repurpose agricultural subsidies to consider the value of natural capital and ecosystem services. They can also make use of “feebates” (a contraction of fee and rebate) or bonus-malus systems, which are instruments of ecological taxation that combine an increase (malus) in taxes on unsustainably produced commodities with a decrease (bonus) in taxes on products deemed sustainable. This provides incentives to agricultural producers to adopt a non-compulsory norm while achieving budget neutrality by balancing tax increases and decreases.
| Reports | · World Bank report: Detox Development: Repurposing Environmentally Harmful Subsidies · FAO report: A multi-billion-dollar opportunity – Repurposing agricultural support to transform food systems |
| Case studies/ examples | · FAO news item: Bridging commitments and reality: Forestry Public Expenditure Review for policy coherence |
| Academic publications | · Chibwana, C., Jumbe, C., & Shively, G. 2013. Agricultural subsidies and forest clearing in Malawi. ENVIRONMENTAL CONSERVATION, 40(1), 60–70. https://doi.org/10.1017/S0376892912000252 · Fisher, M., & Shively, G. 2007. Agricultural subsidies and forest pressure in Malawi’s Miombo woodlands. JOURNAL OF AGRICULTURAL AND RESOURCE ECONOMICS, 32(2), 349–362. https://www.jstor.org/stable/40987368 · Heilmayr, R., Echeverría, C., & Lambin, E. 2020. Impacts of Chilean forest subsidies on forest cover, carbon and biodiversity. NATURE SUSTAINABILITY, 3(9), 701–709. https://doi.org/10.1038/s41893-020-0547-0 · Moffette, F., & Alix-Garcia, J. 2024. Agricultural subsidies: Cutting into forest conservation? ENVIRONMENT AND DEVELOPMENT ECONOMICS, 29(3), 179–205. https://doi.org/10.1017/S1355770X23000189 |
| Reports | · World Bank report: Cameroon Economic Update, June 2024: Fiscal Instruments for Sustainable Forestry · World Bank report: Republic of Congo Economic Update, 11th Edition: Designing Fiscal Instruments for Sustainable Forestry and Economic Growth · World Bank report: Equatorial Guinea Economic Update, 2nd Edition: Designing Fiscal Instruments for Sustainable Forestry · World Bank report: Gabon Economic Update: Designing Fiscal Policies for Sustainable Forestry |
| Academic publications | · Dulal, H., Dulal, R., & Yadav, P. (2015). Delivering green economy in Asia: The role of fiscal instruments. FUTURES, 73, 61–77. https://doi.org/10.1016/j.futures.2015.08.002 · Jha, A., & Misra, A. (2024). A robust role of carbon taxes towards alleviating carbon dioxide: A modeling study. JOURNAL OF ENGINEERING MATHEMATICS, 144(1). https://doi.org/10.1007/s10665-023-10327-x · Talberth, J., & Carlson, E. (2024). Forest carbon tax and reward: Regulating greenhouse gas emissions from industrial logging and deforestation in the US. ENVIRONMENT DEVELOPMENT AND SUSTAINABILITY. https://doi.org/10.1007/s10668-024-04523-7 · Verma, N., & Agarwal, M. (2021). Control of Atmospheric Carbon Dioxide by Imposing Environmental Tax: A Mathematical Model. INTERNATIONAL JOURNAL OF ECOLOGICAL ECONOMICS & STATISTICS, 42(1), 51–77. |
| Case studies/ examples | Case study: Modulating taxes or revenues for sustainable cocoa in Côte d’Ivoire and Ghana Cocoa production is considered as a major direct driver of deforestation in Côte d’Ivoire and Ghana. Against this backdrop, the Ivorian and Ghanaian governments, supported by the World Bank, commissioned national studies between 2019-2022 to identify measures for reducing cocoa-related deforestation. Both studies identified the introduction of a bonus-malus system as a viable tool for creating financial incentives to encourage the production of certified and traceable cocoa grown within an agroforestry production system. Bonus-malus systems are instruments of ecological taxation that combine an increase (malus) in taxes on unsustainably produced commodities with a decrease (bonus) in taxes on products deemed sustainable. In Côte d’Ivoire, the study’s authors proposed the modulation of the export tax (at 14.60% of the FOB value for cocoa beans), gradually increasing it over several years for non-certified cocoa, to be able to lower the tax rate for certified cocoa volumes. Ghana, on the other hand, does not have an export tax and it was instead proposed to modulate the commercial margins of cocoa bean Licensed Buying Companies (LBCs) on behalf of the Ghana Cocoa Board (COCOBOD) which is governing Ghana’s cocoa sector and is setting the margin rate. In 2022, the margin rate was set at 6.9 per cent of the FOB price. The volumes of certified cocoa beans (certifications selected by the government) delivered to the COCOBOD would entitle to an increased margin on these volumes, while a progressively lower margin would sanction the delivery of non-certified volumes. The hypothesis proposed in the two studies is that incentives are transmitted from downstream to upstream actors. It is expected that exporters in Côte d’Ivoire or cocoa collecting companies in Ghana will turn to their suppliers to obtain certified beans in order to reduce their export tax or increase their margins respectively. In addition, since certified volumes are limited, exporters or companies will be willing to pay more for certified cocoa to secure their supply. In the end, producers who are able to provide certified and/or agroforestry cocoa (verified by halting deforestation labels and agroforestry standards) would benefit from a higher price, thereby encouraging other producers to follow suit. The bonus-malus system might thereby create financial incentives for more sustainable production and increase the demand for sustainably produced cocoa. Since such a scheme may also create winners and losers, complementary policy measures targeting small-scale producers are desirable. |
| Initiatives/ projects | · TNC’s Nature Bonds Program |
| Case studies/ examples | · News Article: Ecuador completes $1.5 billion debt swap for Amazon conservation |
| Academic publications | · Arévalo, J., & Ladle, R. 2016. Challenges of Forest Conservation (S. MolinaMurillo & C. Rojas, Eds.; WOS:000401174500009; p. 195). https://doi.org/10.1201/b19975 · Barbier, E. 2022. The Policy Implications of the Dasgupta Review: Land Use Change and Biodiversity Invited Paper for the Special Issue on “The Economics of Biodiversity: Building on the Dasgupta Review” in Environmental and Resource Economics. ENVIRONMENTAL & RESOURCE ECONOMICS, 83(4), 911–935. https://doi.org/10.1007/s10640-022-00658-1 · Didia, D. 2001. Debt-for-nature swaps, market imperfections, and policy failures as determinants of sustainable development and environmental quality. JOURNAL OF ECONOMIC ISSUES, 35(2), 477–486. https://doi.org/10.1080/00213624.2001.11506382 |
| Platforms | · IPBES policy support tool: Ecological Fiscal Transfers |
| Case studies/ examples | · Case study: Malaysia Advances Ecological Fiscal Transfer for biodiversity conservation · Case study: Fiscal transfer incentives in Indonesia |
| Academic publications | · Busch, J. 2018. Monitoring and evaluating the payment-for-performance premise of REDD plus: The case of India’s ecological fiscal transfers. ECOSYSTEM HEALTH AND SUSTAINABILITY, 4(7), 169–175. https://doi.org/10.1080/20964129.2018.1492335 · Busch, J., Ring, I., Akullo, M., Amarjargal, O., Borie, M., Cassola, R. S., Cruz-Trinidad, A., Droste, N., Haryanto, J. T., Kasymov, U., Kotenko, N. V., Lhkagvadorj, A., De Paulo, F. L. L., May, P. H., Mukherjee, A., Mumbunan, S., Santos, R., Tacconi, L., Verde Selva, G., … Zhou, K. (2021). A global review of ecological fiscal transfers. Nature Sustainability, 4(9), 756–765. https://doi.org/10.1038/s41893-021-00728-0 · Ring, I., & Barton, D. 2015. Economic instruments in policy mixes for biodiversity conservation and ecosystem governance (J. MartinezAlier & R. Muradian, Eds.; WOS:000374315900017; p. 449). https://doi.org/10.4337/9781783471416 · Ring, I., Drechsler, M., van Teeffelen, A., Irawan, S., & Venter, O. 2010. Biodiversity conservation and climate mitigation: What role can economic instruments play? CURRENT OPINION IN ENVIRONMENTAL SUSTAINABILITY, 2(1–2), 50–58. https://doi.org/10.1016/j.cosust.2010.02.004 |