Brazil’s Environmental Leadership

Tropical forests are among the most valuable resources on the planet. Estimates by the UN Food and Agriculture
Organization are that deforestation sacrifices 25 million acres of tropical forest each year. This has a double whammy for climate change, emitting stored carbon from cut trees and reducing the acreage of forest sequestering carbon.

Despite efforts like carbon credits tied to curbing tree loss or grant schemes that reward forest protection, deforestation continues at a massive rate. In the first 10 months since Lula da Silva was reelected president of Brazil, however, deforestation in the Brazilian Amazon dropped 50 percent compared to the same period a year earlier. Even more significant is the Tropical Forest Finance Facility (TFFF) proposing to pay developing countries a fee for every acre of forest they maintain.

The TFFF would pay countries for services that tropical forests perform for free, such as water management,
biodiversity preservation, soil protection, nutrient cycling, and carbon storage. The UN is working with Brazil to
finalize the program, including how it would be governed, by the end of this year. Brazil’s promotion of the scheme
has already garnered significant support, but it hopes to capitalize on its role as host of the UN climate summit in
2025 to bring it to fruition.

The program envisions a $125 billion investment fund. There would be no donations from the governments of
wealthy nations, a contentious point with many previous schemes. Rich nations, big philanthropies, and private
investors would loan money to the fund long-term (20 years) for a fixed rate of return. The idea to create grants to
protect forests on such a scale is unique, but the financial mechanism behind it — getting deposits and reinvesting
them for profit — is common.

The TFFF would create a diversified portfolio with returns large enough to repay investors plus more to pay
roughly 70 developing countries to protect tropical forests. The fund’s goal is to pay countries with a low
deforestation rate $1.60 per acre per year for standing forests. Satellite images will monitor and verify compliance.
The forests can be old-growth or restored, but not tree plantations. Countries receiving these payments would be
penalized $160 per acre for lost forest, roughly what a soybean farm in the Amazon earns, one of the most profitable uses of deforested land. The impact of a reliable stream of funds for budget planning purposes would greatly motivate a country to forgo and even outlaw deforestation projects.

Developing countries have paid high rates for years to get economic development funds. The TFFF would give such countries something they have longed for: the kind of cheap money to which only wealthy nations have access.

Although there are challenges, the vision, scope, and early support from both wealthy and developing countries
encourages cautious optimism. This program fits with the growing interest in nature-based solutions for addressing
climate change and other environmental challenges.