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‘Non-market’ solutions to deforestation need more support, advocates say

South Kalimantan's Walhi measures the trees on Mount Hauk, the sacred territory of the Dayak Pitap.

South Kalimantan's Walhi measures the trees on Mount Hauk, the sacred territory of the Dayak Pitap. Image by Riyad Dafhi Rizki/Mongabay Indonesia.

  • In a report released May 29, three environmental groups called for a shift away from carbon markets and toward “non-market” solutions to deforestation.
  • The Paris Agreement has a clause calling for such solutions, which the groups said could include financing for Indigenous groups, payment for ecosystem services, and debt relief.
  • The report criticized carbon markets, saying incentives for brokers and project developers are misaligned with global environmental priorities.
A report from the environmental groups RFUK, FERN and FPP calls for a shift away from market-based climate policies like carbon trading.

If funders want to protect the planet’s forests, they should stop focusing on market-based solutions like carbon trading, according to a report released May 29 by the Rainforest Foundation UK, FERN and the Forest Peoples Programme. The report, titled “Beyond Offsets,” said policies that are less transactional and designed with Indigenous communities in mind will have a greater impact on the world’s forests.

“The protection of forests requires both significant sources of funding and effective channels to ensure this support reaches forest defenders — the Indigenous peoples and local communities who call them home,” said Hannah Mowat, campaigns coordinator for FERN.

The report called for a shift in emphasis away from relying on carbon markets for forest protection, and toward a lesser-known provision of the Paris Agreement that calls for “integrated, holistic and balanced non-market approaches.”

Proponents of carbon markets have long said they can make use of market efficiencies to direct funds toward the most effective initiatives, whether for forest protection or other forms of carbon sequestration.

Rainforest in Gabon, which recently signed a debt-for-nature swap. Photo credit: ZB / Mongabay.

But despite being highly touted in recent U.N. climate summits, those markets have taken a reputational hit, after a series of scandals over accounting practices and human rights violations. According to the report, the price of some nature-based carbon credits has cratered, falling from $18 at the beginning of 2022 to less than $2 this year.

“Markets, by definition, seek to buy low and sell high and by nature fluctuate and are not predictable,” Mowat said. “This is leading to a rush of carbon deals, to grab carbon rights in as much forest land as quickly and cheaply as possible in anticipation of prices rising.”

The groups said policymakers should accept that carbon markets are unlikely to deliver significant climate benefits, and instead move their attention toward development aid, debt cancellation, and payments for ecosystem services.

Under a “non-market” approach to climate and biodiversity policy, funding could be directed toward the most effective actions, even if they prove politically costly or challenging to implement. Raising taxes on windfall profits and eliminating fossil fuel subsidies, for example, could help raise funds for climate aid projects.

In addition to greater emphasis on non-market solutions, the groups said global climate and biodiversity initiatives need to do a better job of building partnerships with Indigenous groups. The report cited studies showing that giving those groups ownership titles to their land is one of the best ways to prevent deforestation.

Indigenous rights have been a buzzy phrase at global climate and biodiversity summits, but the numbers tell a different story. According to the report, only a small portion of funding from philanthropic and government pledges makes its way to Indigenous communities, despite their track record as effective environmental stewards.

indigenous community in Idabato sub-divison of the Bakassi peninsula in the South West region of Cameroon. Despite a track record as effective environmental stewardship, Indigenous-run local organizations receive minimal support. Image by Roland Ndifor

The Forest Tenure Funders Group (FTFG), which includes the governments of the U.S., U.K. and Norway, and the Ford Foundation, made headlines at COP26 in 2021 when they pledged $1.7 billion to support forest-dwelling Indigenous communities. So far, $815 million of that money has been disbursed, but just $8.1 million — less than 1% — wound up in the hands of Indigenous-run or local organizations. In contrast, nearly half was given to large international NGOs.

“While building the organizational capacity of many grassroots organisations to absorb and distribute increased funding is a challenge, we think the much bigger risk is maintaining the status quo and a deeply inefficient system that privileges distant intermediaries,” said Joe Eisen of the Rainforest Foundation UK.

The report called for more funding to go toward payments for ecosystem services, where communities receive financial support over a long time period in exchange for hitting conservation and deforestation benchmarks.

Private sector financing, it said, could also shift away from flawed carbon trading schemes, and toward a practice called “insetting”. As opposed to “offsetting,” insetting emphasizes reducing emissions that are close to or part of a company’s supply chain, rather than those in a distant forest or factory.

A shift toward non-market approaches to addressing deforestation and climate change would require wealthy country governments to adopt politically risky policies, such as the imposition of new taxes. But the report’s authors told Mongabay the alternatives simply aren’t working.

“Our report shows there is government funding available for more non-market approaches to environmental protection, if the political will exists on things such as redirecting harmful subsidies or installing more progressive tax regimes,” Eisen said.

Markets and forests: 7 takeaways from our series on the forest carbon trade

Banner Image: South Kalimantan’s Walhi measures the trees on Mount Hauk, the sacred territory of the Dayak Pitap. Image by Riyad Dafhi Rizki/Mongabay Indonesia.

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