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Forest Carbon Partnership Facility Takes Aim at Deforestation

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  • World loses forest the size of Nicaragua annually.
  • Deforestation responsible for up to 20% of emissions.
  • Initiative hopes to create model for maintaining forests.

December 11, 2007—Two years ago, developing countries posed this question at climate-change talks: Why can’t we earn money for keeping our forests standing instead of cutting them down?

Today, they’re a step closer to an answer with the launch of the World Bank’s Forest Carbon Partnership Facility (FCPF).

Some 30 developing nations from Africa, Latin America and the Asia-Pacific region want to benefit from the first financial mechanism to pay countries for saving their tropical forests.

And nine industrialized countries have already pledged US$155 million to kick-start the 10-year initiative, including Germany (US$59 million), the United Kingdom ($30 million), the Netherlands ($22 million), Australia and Japan ($10 million each), France and Switzerland ($7 million each), and Denmark and Finland ($5 million each). US-based Nature Conservancy also pledged $5 million.

“The Forest Carbon Partnership Facility signals that the world cares about the global value of forests and is ready to pay for it,” says World Bank President Robert B. Zoellick, who launched the facility during UN climate change talks in Bali, Indonesia.

The facility consists of two components: A US$100 million Readiness Fund will provide grants to help countries set up systems and processes to monitor and credibly govern their forests. Several countries will also be able to sell emission reductions to a special US$200 million Carbon Fund supported by wealthy countries, as well as the private sector and organizations.

The facility’s ultimate goal is to jump-start a forest carbon market that tips the economic balance in favor of conserving forests, says Benoit Bosquet, a World Bank senior natural resources management specialist who has led the development of the facility.

Currently, developing countries can’t offer carbon credits from deforestation and forest degradation on the booming $30 billion carbon market that has evolved under the Kyoto Protocol agreement, in which industrialized countries can offset some of their carbon emissions by buying credits from developing nations hosting eco-friendly projects. Many hope such forest carbon will be included in a new agreement when the first commitment period for the Kyoto Protocol ends in 2012.

“We must not lose another day when it comes to climate and forest protection,” says German Development Minister Heidemarie Wieczorek-Zeul. “….Forest protection must be a central element in a future agreement on climate change.”

Considering the world currently loses some 13 million hectares of forest a year (the area of Nicaragua or Greece), the potential for compensated conservation based on forest carbon is “huge,” adds Bosquet.

Indonesia, for instance, could earn US$400 million to $2 billion a year in a forest carbon market, estimates the Bank.

Deforestation Major Factor in Global Warming

Support for a global forest payment scheme has grown along with mounting evidence deforestation is second only to energy usage as a cause of global warming, accounting for about 20 percent of all greenhouse gas emissions.

Heavily forested Indonesia, host of this year’s United Nations Framework Convention on Climate change, is surprisingly the third largest emitter of greenhouse gases after the United States and China. The main reason: deforestation is occurring at the rate of about two million hectares a year, as old-growth rainforest is logged, burned, or converted to agricultural concerns and palm oil plantations.

Urgent action is needed to reverse this trend and conserve remaining areas of natural forest, according to the influential Stern report on the economics of climate change released last year. The report adds that the international community should compensate developing countries for conserving their forests, taking into account lost economic opportunities and the costs of administering and enforcing protection.

Stern estimates the cost could amount to about US$5 billion annually for the eight countries responsible for 70 percent of emissions from land use (mainly deforestation).

Setting the Stage

The Forest Carbon Partnership Facility can help set the stage for the kind of large-scale effort needed to confront the problem by demonstrating how things can be done, says Bosquet.” For example, with a combination of remote sensing and on–the-ground monitoring we can work out the amount of emission reductions” from conserving forests.

But there are still many issues to be ironed out, Bosquet says, including the structuring and the scheduling of incentive payments so that the emission reductions are sustained in the long term.

Another issue to sort out is land ownership and rights, identified as a key issue in the World Bank report, “At Loggerheads: Agricultural Expansion, Poverty Reduction and Environment in the Tropical Forests,” published in November 2006.

“In the diagnosis of the book it really comes down to governance,” says lead author Ken Chomitz. “Forests have historically been a problem because we have conflicts over who has the rights to the land and trees, and these are very deep-seated issues. The forest carbon agenda could use financial incentives, transparency and monitoring to catalyze improved forest governance.” 

The facility will test various ways of reducing deforestation and degradation based on national circumstances. Various types of interventions may also be piloted, from policy reforms to on-the-ground investments. Different incentive models might be used.

The process is expected to involve a high degree of consultation with civil society and indigenous
peoples organizations, says Bosquet, with governments ensuring forest-dependent indigenous peoples and other forest dwellers are “meaningfully consulted” during the drafting of their country’s plan to reduce emissions from deforestation and degradation.

A major goal is to channel payments to where they’re needed most, such as to poor people whose livelihoods are linked to the forest.

“This can change the economic options for many people who depend on the forests for their livelihoods. There is now a value to conserving, not just harvesting the forest,” says Zoellick.



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