February 14, 2014

By Tara O’Shea | Originally published by Sustainable Brands

What is REDD+?

Accounting for 15 percent of global annual greenhouse gas emissions, deforestation has turned what should be our largest terrestrial carbon sink into our second largest source of climate-changing emissions. Although deforestation is estimated to cost the global economy $2-5 trillion each year, we continue to place higher value on cut forests than standing.

Why are we perpetuating such perverse economic incentives, and what can we do to create a more sustainable paradigm for economic development?

These are the questions the United Nations sought to answer with the creation of REDD+ (“Reducing Emissions from Deforestation and Forest Degradation”). A global mechanism to quantify and value the carbon-storage services that forests provide, REDD+ provides developing countries with an economic alternative to deforestation. It creates a low-carbon pathway to economic growth that will be critical to sustainable human progress and climate-change mitigation.

Like any other global mechanism, REDD+ requires institutional support with public, private and civic participation. And like any other global mechanism, it won’t be easy. But current environmental, economic, and population growth trends provide us with no choice but to be proactive; the world simply cannot afford to wait to create more sustainable economic incentives for land-use decisions.

Is it working?

Global REDD+ efforts are already working on the ground and preparing to scale.

REDD+ projects — which are independently validated and verified to robust environmental and social standards — are already protecting 14 million hectares of threatened tropical forest and reducing emissions by 22 million tonnes of CO2 annually.

National REDD+ programs are creating the institutional and transparent financial infrastructure necessary to integrate REDD+ into global climate-change mitigation and sustainable growth strategies.

Subnational programs (often called “jurisdictional”) are linking these project and national program activities. Many jurisdictions, states, and countries — including California, Brazil, and Mexico — are already exploring “jurisdictional partnerships” to achieve shared emission reduction and forest conservation goals.

So what’s missing?

What is really needed to make REDD+ work is not just institutional development, but return on investment. The ROI — the cash flow that provides sustainable economic alternatives for these forest communities and developing countries — is the sale of the emission reductions generated from REDD+. There must be a market for these emission reductions; there must be demand that values supply.

The original vision for REDD+ was that an international climate agreement would put a price on carbon and thereby create demand through regulated markets. This vision, however, has yet to come to fruition. It is unlikely that global climate policy will come into existence before 2020 and, more importantly, it is unlikely that it will be driven strictly by government mandates.

If we are to truly address the unsustainable incentives in our economic system — if we are to reconcile our economic and environmental systems, particularly with regards to land use — we must engage and change private sector practices.

Private sector engagement

The REDD+ mechanism must be incorporated into private sector practices, corporate business models, andregulatory frameworks to create sustainable alternatives to deforestation and low-carbon opportunities for economic development.

The private sector must be part of the solution. Financial institutions, multinational corporations, and commodities producers must incorporate the value of forests to create a return on investment for global REDD+ activities. Only then will demand for REDD+ emission reductions incentivize developing countries to provide a supply of forest conservation.

The United Nations Environment Programme Finance Initiative (UNEP FI), in its recent Interim Forest Finance Project Report, emphasizes the importance of stimulating demand for REDD+ emission reductions through private sector engagement between now and 2020. The report calls for “using public sector funding to leverage considerably more private sector investment,” acknowledging that clear and long-term financial incentives need to be developed in partnership with private sector practices.

Stimulating the private sector to purchase emission reductions from REDD+ activities, the report concludes, is critical to accelerating the financial flows that will keep forests standing, keep carbon sequestered, and create sustainable economic opportunity for developing countries.

Making it work

Several companies and sectors are already involved and investing in REDD+. Insurance giant Allianz describes its REDD+ investments as “leveraging our capital base to build up the low-carbon infrastructure of tomorrow,” while financial magnate Barclays regards its REDD+ investments as “a shift toward a realistic understanding of what we need to do to adapt to climate change and sustain local economies.”

The private sector has an unparalleled role in creating sustainable economic incentives around land use to achieve both climate and economic development goals. As institutional infrastructure for REDD+ continues to advance, the return on that investment must materialize in the form of private sector models and practices that stimulate demand for REDD+.

To learn more about public-private synergies for REDD+, check out Code REDD’s REDD+ Talks series and hear from Kering, PUMA, Microsoft, Natura, UNEP, UNDP, Wildlife Conservation Society, BSR, and more.