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Executive Perspectives

EXECUTIVE PERSPECTIVE: Mitigate Climate Change and Ensure Sustainable Green Growth

Two for the Price of One: Investment in Forests Can Mitigate Climate Change and Ensure Sustainable Green Growth

The planet is facing unprecedented pressure from issues such as climate change, pollution, and habitat destruction, yet addressing these challenges need not come at the expense of economic growth. In fact, a growing body of evidence shows that conserving the environment actually supports long-term sustainable growth and human wellbeing, and nations such as Indonesia are well on the way to demonstrating this in practical terms.

Take the case of forests. Building Natural Capital: How REDD+ Can Support a Green Economy, a recent report by the International Resource Panel (IRP), said 33 of the world’s 150 largest cities draw their fresh water from protected forest areas, and cited a specific case study in northern Tanzania, where the restoration of two million hectares of forest doubled household income. An earlier study by The Economics of Ecosystems and Biodiversity (TEEB) quantified the number more specifically: ecosystem services from tropical forests are worth an estimated $6,120 per hectare each year to local and national economies.

These are just a few examples of how natural capital—as the value of nature’s services to humanity are known—drives economic growth and human prosperity in many nations. However, despite an ever-strengthening macroeconomic case for conservation, total forest loss still averages about 13 million hectares annually.

One smart and efficient way to address this market and policy failure is by building a Green Economy approach into the Reducing Emissions from Deforestation and Forest Degradation in Developing Countries (REDD) initiative. REDD is the tool adopted by the United Nations Framework Convention on Climate Change to cut greenhouse gas emissions by paying for actions that reduce forest loss. REDD+ is an expanded approach that includes the care for the related biodiversity, sustainable management of forests and the enhancement of forest carbon stocks.

The IRP report, supported by the UN-REDD Programme, outlines how an investment of $30 billion per year into REDD+ can deliver the bargain of two for the price of one: not only fulfilling the initiative’s core function of cutting emissions and mitigating climate change, but hastening a global transition to sustainable economic growth.

Developing nations are already demonstrating how this integrated approach can work. Indonesia, which has shown firm commitment to green growth and REDD+, has set a target of reducing emissions through national efforts by 26 per cent, and 41 per cent with international support, by 2020. Unlike in many other emerging economies, the majority of greenhouse gas emissions in Indonesia are caused by deforestation, the burning and degradation of peat lands, and other land-use changes, so REDD+ programmes can account for a significant slice of the needed cuts. On the other hand, Indonesia needs to move aggressively on improving living standards: some 32 million people live below the poverty line, according to World Bank figures.

Investments in REDD+ can tackle both challenges at once, as tens of millions of Indonesia’s poor are dependent on forest ecosystem services. For example, a UNEP study found that REDD+ payments in Indonesia amounting to 2.5 per cent of GDP from 2011 to 2030 would bring higher GDP growth than business-as-usual, a reduction in rural poverty, a 25 per cent increase in income from non-timber products, and a doubling in the value of ecotourism. Indonesia has already begun to act: as part of its Green Growth strategy, the government has placed a temporary moratorium on new forest licences in primary natural forests and peat lands to reduce pressures on forests, directly contributing to REDD+.

A 2012 study by UNEP and the Kenya Forest Service showed that deforestation in the East African nation’s water towers deprived the economy of $68 million in 2010 through damage to sectors such as agriculture, far outstripping the income from forestry. The report sparked efforts to create national forest-resource accounting that will dovetail with REDD+ activities in Kenya and help protect forest-related livelihoods.

These country examples and the wider research show how integrating REDD+ into economic planning can bring Green Economy benefits, such as increasing the resource efficiency of other sectors, prompting investments in a Green Economy, and boosting income by developing green industries, agricultural production, and ecotourism.

Despite the growing momentum and the support for REDD+ displayed by governments and donors in 2013, funding for the initiative stands at only $6.27 billion. The $30 billion needed per year sounds like big commitment by comparison, but to put it into perspective, the fossil fuel industry received direct pre-tax subsidies of $480 billion in 2011.

Governments, international agencies, and the private sector need to seize this opportunity to back REDD+ investments that maintain and enhance natural capital and make this green heart of growth and human wellbeing beat ever stronger.

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