Following the money: Global recovery rooted in forests, says U.N. report

Measuring the circumference of a Funtunia Africana in a forest reserve near Masako. Kisangani, Democratic Republic of Congo. CIFOR/Ollivier Girard

A new study adds up the latest troubling statistics on forests, making a mathematical argument for their central role in realizing an inclusive, resilient, and sustainable global economy.

Not only do forests combat challenges posed by climate change and human susceptibility to disease, but they harbor biodiversity and generate revenue, while enhancing “green” food systems and value chains.

Estimates indicate that more than half of world gross domestic product – $84.4 trillion in 2020 – is dependent upon ecosystem services, including those provided by forests, according to the “State of the World’s Forests 2022,” launched on Monday by the U.N. Food and Agriculture Organization (FAO) to coincide with the World Forestry Congress in Seoul.

“Although this latest report isn’t startling with regard to research, it details a course of action long promoted by CIFOR-ICRAF, providing a financial roadmap for policymakers and the private sector to follow,” said Robert Nasi, managing director of the Center for International Forestry Research and World Agroforestry (CIFOR-ICRAF).

“The important thing now is implementation. Despite a lot of talk, the goal seems ever beyond our grasp. We need to see these ephemeral commitments become reality with specific guidance for governments and companies.”

Forests make up 31 percent of land surface, covering more than 4 billion hectares, but this is an area that becomes ever smaller as at least 420 million hectares have been deforested since 1990.

And while deforestation – at least 90 percent of which is driven by agricultural expansion — rates have dropped, 10 million hectares are cleared each year, states the report, which is released every two years by FAO based on the agency’s latest figures and research on global forest trends.

Halting deforestation is potentially one of the most cost-effective actions for mitigating climate change and keeping average global temperatures from rising more than 1.5 degrees Celsius above pre-industrial times.

Ending deforestation, a commitment made in various non-binding U.N. agreements over the years, most recently at the COP26 climate talks in Glasgow, would be a cost-effective means of avoiding planet-warming greenhouse gas emissions, including, as the report details, 14 percent of the amount required up to 2030 to stay below 1.5 degrees C.

“Watching the sand trickling through the hourglass as time ticks down is frightening,” Nasi said. “Climate change is here, and we’ve got front row seats as it unfolds. We’ve argued elsewhere that the 1987 Montreal Protocol – the most successful environmental treaty, which banned the production of chlorofluorocarbons – should be used as a design template.”

That agreement set out a mandatory timetable to phase out major ozone-depleting substances, and included financial support for countries in the Global South, he added. “Although initial reactions were largely dismissive, companies soon developed alternatives to the harmful chemicals.”

To stay within the 1.5 degrees C range, as recommended by the U.N. Intergovernmental Panel on Climate Change and detailed in the 2015 Paris Agreement, human activities must become carbon neutral by 2050, an achievable target if direct emissions from lost biomass are avoided and the carbon-absorbing capacity of forests is maintained, the report says.

Financing Flows

Total financing to halt deforestation, restore degraded land and build sustainable value chains must triple by 2030 and increase fourfold by 2050 to meet climate, biodiversity and land degradation neutrality targets, with the estimated required finance for forest establishment and management alone equaling $203 billion a year by 2050, it adds.

If agricultural subsidies, which currently equal almost $540 billion year, are restructured to include agroforestry and forestry, harmful impacts embodied in 86 percent of them could be avoided, the report says.

“We must not only focus on preserving primary forests, but restore secondary forests and degraded land to plantations for agroforestry and bioenergy use wherever it makes environmental and financial sense,” Nasi said. “It’s recognized that restoration and other natural options could contribute more than a third of the solution to the climate crisis.”

Smallholder farmers produce 80 percent of the world’s food, with 35 percent produced by landholders with less than 2 hectares of land. Smallholders, local communities and Indigenous Peoples own or manage at least 4.35 billion hectares of forest and farmlands and are estimated to produce farm and forest products worth up to $869 billion to $1.29 trillion a year.

Studies show that 91 percent of all Indigenous and community lands are in good or moderate ecological condition, indicating great potential to cost-effectively reduce deforestation and improve forests, according to the report. More than 8.5 million producer organizations currently exist, which can help to support a green recovery.

Yet less than 2 percent of global climate finance is actually reaching smallholder farmers, Indigenous Peoples and local communities in developing countries. As a result, mobilizing investment for smallholders, including to reduce perceived risks for investors, is a growing strategic approach.

“Despite the general squeeze placed on forest-dependent Indigenous Peoples, local and low-income communities, we have no shortage of money,” Nasi said. “Governments are estimated to spend $1.8 trillion a year in military expenditures and more than $5 trillion in fossil fuel subsidies, but only about $50 billion on landscape restoration. It’s time for society to rethink its priorities to enable a better future.”

Circular Bioeconomy

Companies in forest-based value chains will need to become essential partners in the development of circular economies, the report states, adding that many are already increasing the range of forest products as substitutes for materials with higher greenhouse gas emissions and increasing processing efficiency. Local forest growers and processors can gain more benefit by strengthening links with buyers and developing capacity through producer organizations.

The report estimates that non-food bio-based industries will grow by 3.3 percent a year to 2030, with the projected output valued at $5 trillion. Forest-based bioproducts, including biochemicals, bioplastics and textiles, are likely to benefit from this growth with potential environmental benefits. For example, each 1 kg of carbon of manufactured wood-based textiles replacing a non-wood textile could avoid carbon emissions by up to 2.8 kg of carbon, the report states.

This topic was discussed at XV World Forestry Congress 02-06 May 2022, Coex, Seoul, Republic of Korea See event details here

It recommends greening public domestic finance, making climate finance work for forest-based approaches, developing pipelines of investment-grade projects and supporting investment in value-added wood processing in countries of origin. Greening financial markets with regulatory and supervisory tools are also key recommendations.

Blended public-private finance models could help de-risk private-sector investments that have significant public value but insufficiently attractive risk–return profiles. Green bonds are developing but, to date, only 3 percent are oriented towards nature-based approaches, the report states.

“The most urgent task for a sustainable future and climate change mitigation is to reduce consumption and emissions, but it is also crucial to begin using wood more efficiently for purposes in which wood has a comparative advantage from sustainability and circular economy perspectives,” Nasi said.

Annual global consumption of all natural resources combined is projected to more than double from 92 billion tons in 2017 to 190 billion tons in 2060, due to increasing population growth and growing affluence, the report says.

Companies involved in forest-based value chains must become partners in developing circular bio-economies, which substitute forest products for materials with a higher carbon footprint, such as cement and plastic, and increase processing efficiency, it adds.

Local forest growers and processors can obtain more benefit by strengthening links with buyers and developing capacity through producer organizations.

“We must not tarry – we have no time to waste,” Nasi said. “Our task is clear, we must switch from a fossil-fuel based economy to a nature-based circular bioeconomy, and all else can follow.”