A global rainforest deal is more complicated than you think

In November 2022, Brazil, Indonesia, and the Democratic Republic of Congo—three countries that are home to more than half of the globe’s tropical rainforests—signed a pact to establish a “funding mechanism” that could help preserve rainforests. Rainforests act as a carbon sink by absorbing carbon dioxide, a greenhouse gas that absorbs and radiates heat, and preserving them has become increasingly important as the consequences of anthropogenic climate change become increasingly apparent.

“The harsh reality is that farmers, landowners and other relevant stakeholders need to be meaningfully and adequately incentivised to prevent deforestation,” he says later, noting there are a slew of different factors that could hinder the pact’s success. A “complementary approach” that incorporates both private investment and public funds would need to be assessed. Along the way, Story speaks at length about the challenges of navigating the international carbon market, which has only continued to evolve as the Global South jockeys for position in the global conversation about climate finance that has historically been dominated by more developed countries that bear much of the responsibility for global emissions that have produced runaway climate change.

What factors have made the finalization of the rulebook for an international carbon market so difficult?

The genius of the Paris Agreement was that it provided a broad, overarching framework which was theoretically politically palatable to almost all countries. Exact specifics could be ironed out later. So it’s been—and to an even greater degree than other contentious elements of the agreement—with Article 6. A common theme underlying the key sticking points is a North-South divide which can crudely be described as revolving around emissions reduction ambition and responsibility.

How has the war in Ukraine impacted governments’ ability to commit “long-term changes to their territorial concessions” in regard to carbon pricing?

The war in Ukraine has obviously injected a level of volatility into global energy markets which has not been seen in decades. Although the correlation is not always so clear cut, demand for carbon credits and hence, pricing, tends to trend downwards when energy prices are high as has been the case for most of the last 12 months.

Western leaders have long criticized OPEC's power to raise oil prices and its continued influence over the global market even as nations have increased oil production and alternative forms of energy have been introduced. What issues could we see play out with the rise of a “rainforest OPEC”?

Firstly, I think the biggest question here is whether Brazil, Indonesia and the Congo can work together and operate effectively as a cartel. OPEC itself is obviously composed of a heterogenous, diverse array of states. Still, the core of OPEC is made up of Arab states (namely Saudi Arabia, the UAE, Iraq and Kuwait) who are relatively close politically. Aside from being biodiversity hotspots, large commodity exporters and members of the Global South, the members of the rainforest cartel really have precious little in common. The early signs aren’t great. At the COP15 Biodiversity Summit at the end of 2022, the DRC was a hold-out to the deal eventually agreed to by Brazil, Indonesia and the majority of participating nations.

Is relying on private investment in exchange for assurances against deforestation enough? Would public funds be necessary to sustain the long-term success of this agreement?

I definitely think that government intervention and public funding will be required. The harsh reality is that farmers, landowners and other relevant stakeholders need to be meaningfully and adequately incentivised to prevent deforestation. If carbon prices fall below a certain number, e.g., in a global recession, conservation efforts (which are already challenging enough in countries with limited governance capacity) will simply not succeed.

The private sector is a huge source of demand for carbon credits, which is already being tapped. However, relying on the market alone won't always be enough. At the same time, government initiatives so far have been wanting (discussed more below), so a complementary approach is needed.

Why have international agreements to protect rainforests failed to curb deforestation worldwide?

Generally speaking, I think it comes down to a lack of funding mechanisms. A lot of the smorgasbord of agreements to date have not been legally binding, but even if they were it is unclear whether this would have made a fundamental difference. For a myriad of political, historic and elemental economic reasons, it makes little sense to ask developing countries to forgo the economic benefits of natural resource exploitation that developed countries enjoyed. By the same token, developed countries need to have confidence that deforestation hotspot countries are willing and able to conserve forests. Because of the way that deforestation is tied up in the political economy of many of these countries, this is a tall order.

On the subject of similar, smaller-scale financial mechanisms to preserve the rainforest in place right now: How have intergovernmental efforts like the Rainforest Coalition succeeded or failed?

The Coalition of Rainforest nations has focused more on capacity building amongst rainforest states, and on that count I think you could say it has had some success.

A good example of the pitfalls of these smaller scale mechanisms is Norway’s offering of financial support to countries like Indonesia to reduce deforestation. These initiatives, worth in the order of a couple of hundred million dollars, have been bogged down for years in arguments over compliance, verification and payment deadlines, among other issues. The Amazon Fund, rendered irrelevant under the former Brazilian President Jair Bolsonaro, now has a new lease on life under current President Lula. Concerns remain over how the existing funding will be spent and its relatively paltry size, currently around US$1 billion. This is not to say that there haven't been individual success stories, but the overall picture remains chequered.

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Adapted from the original article by ForeignPress.org.

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