Non-profits and indigenous peoples’ organisations have raised concerns over the proposed Tropical Forest Finance Facility (TFFF), a new financial mechanism to enable developing countries conserve their tropical forests.
The initiative offers large-scale financial incentives to countries by paying a fixed amount per hectare of forest that is preserved or restored annually.
However, Global Forest Coalition (GFC) — a group of non-profits and indigenous peoples’ organisations working to protect rights of forest peoples in forest policies and striving for social justice — has raised serious concerns over TFFF’s implementation.
The proposed system has two versions that are expected to be launched later this year, around the 30th Conference of Parties (COP30) to the United Nations Framework Convention on Climate Change (UNFCCC) in Belem, Brazil.
Brazil, Indonesia, and the Democratic Republic of the Congo reached an agreement and announced it on the sidelines of the G20 summit in Indonesia in 2022. The three countries collectively are home to about 52 per cent of the world’s rainforests.
“Tropical forests are essential ecosystems, and gravely threatened by the same logic of extractivism and endless pursuit of profit that now is being applied to their “protection” at an international level, whereby investors would seek monetary returns on these ecosystems based on a commercial valuation of the “services” they provide,” GFC stated.
The coalition added that it is unclear as to how the TFFF would work and who the investors and entities that support the initiative would be. It also raised questions about the role of forest peoples in the initiative, the backup system if it fails and how the valuation of forests would be done.
GFC has argued over a proposal in the initiative that talks about paying $4 per hectare of standing forest annually, depending on the target profitability of $125 billion in loans.
To earn $4 billion per year, the TFFF would be required to raise and invest about $125 billion which, considering 7.5 per cent interest, would amount to $9.375 billion.
“Of this amount, approximately $5.375 billion would be paid to public and private investors, and $4 billion would be distributed among countries based on the area of their standing tropical forests and discounting certain penalties for deforestation that may have occurred,” the coalition explained.
The move aims to place monetary value on ecosystem services, GFC has contended.
According to this view, what is free is unlikely to be cared for. If an ecosystem service is thus assigned a price, it can attract capital that wants to maintain and profit from that service. Trees have already been commodified for their material aspects such as wood, fruits, roots, or fronds, the coalition said.
“In contrast, ecosystem services are about the intangible part of the tree; its ability to produce oxygen, store carbon, release water vapour into the atmosphere, serve as a habitat for animals and insects, control erosion, provide shade, and other environmental functions,” it added.
Assigning a monetary value to environmental services was a ‘failure of the capitalist market’, the coalition said. It added that the concept gives a false solution for tropical forests.
GFC also said these payments per hectare would be delivered to national governments, thereby giving them a freehand on how to utilise the money and less control to indigenous peoples and the local community which would be paid 20 per cent of the $4 per hectare.
The payment per hectare is not assured as it would reduce in case investment profits decline. The coalition has also raised concerns over the repayment timeframe as loans/investments for repayment would only start post the 10th year of TFFF’s operations.
Yet another concern is that the fund could be liquidated under exceptional finance or other crises situations.
Apart from the TFFF to complement other market-based approaches to forests, such as REDD+, the concept would not create carbon credits, but enable investors to buy TFFF credits for greenwashing.
The GFC suggested that rather than reducing tropical forests to providers of ecosystem services for capitalising via banking tools, rights should be recognised.
As an alternative, the coalition recommended raising six times additional annual resources than the TFFF ($26.4 billion) by bringing in one per cent of all national defence budgets to fund forests.
“It is unacceptable to use public funds for military spending while the survival of forests depends on stock markets. Applying a tax of just $1 per barrel of oil could raise almost ten times more per year ($38 billion) than the $4 billion the TFFF hopes to raise annually through unsecured investments amid the crisis of change and biodiversity loss and the chronic crisis of capitalism,” it stated.