Forests cover 30-40 percent of the earth’s land area and provide several essential ecosystem services. For example, forests act as sinks for as much as 46 percent of the world's terrestrial carbon stores, absorbing the carbon dioxide that is contributing to climate change. Forests are the repository of as much as 80 percent of terrestrial biodiversity. Forests also regulate water cycles, maintain soil quality, and reduce the risks of natural disasters such as floods. 

While extremely difficult to quantify, the economic values of the ecosystem services of the world’s forests is vast. These values are not however considered in much of the decision making about land uses that drive forest change, either within or outside of the forest sector itself.

The challenge for policy makers is to bring these values into markets, into decisions that affect more than one sector, and into macroeconomic and development policy in general.

 

Finance for forest conservation and protection is essential to maintaining these essential ecosystem services. The World Bank is therefore engaged in the development of effective markets for the environmental services that forests provide, including biodiversity, carbon sequestration, and watershed management. The Bank's carbon finance initiatives are part of the larger global effort to combat climate change. These include a Biocarbon Fund that aims to deliver cost-effective emissions reductions, while promoting the conservation of biodiversity and alleviating poverty. In alliance with the WWF, the Bank played an active role in promoting the establishment of protected areas in the Brazilian Amazon. Dialogue on the development of payments for environmental services is further supported by the PROFOR partnership.