The Economic Case For Forestation
The benefits forests offer humanity can be accounted for through an interdisciplinary economic framework known as the triple bottom line. This theory contrasts from the neoliberal model in that it transcends a purely economic definition of value, opting instead to incorporate social and environmental concerns as well. The three pillars — social, environmental, and financial — don’t stand as isolated columns. Nature-based climate solutions like forest restoration build value in the form of ecosystem services, adding increasing value to communities, economies, and ecosystems as a forest matures. For this reason, the international community has designated 2020 the “UN Decade of Ecosystem Restoration,” emphasizing the low-cost climate sequestration potential as well as the long-term, systems-wide sustainability of the practice.
Forest protection and restoration aligns the three pillars of sustainability, and this fact has not been lost on the world’s financial institutions. Planting trees improves human well-being by mitigating pollution and natural disasters, cleaning the air and water, and making life generally worth living. Trees have been offering these perks to humanity since time immemorial, but today the resources forests provide are also highly valued for their timber, pharmaceutical, and agriculture resources. Beyond these more tangible services, the economy built around trading carbon itself, a $272 billion industry, is inextricably linked to the health and number of forests planted at a given time. Forestry-related ecosystem services represent an opportunity for investors hoping to cash in on saving the planet.
Ecosystem services, in the context of reforestation, are the collection of benefits to air, water, and ecosystem health that improve human well-being. Today, much of the global interest in trees is due to their capacity to sequester atmospheric carbon and prevent a runaway greenhouse effect. But humans have understood that forests improve soil health, protect biodiversity, and ensure air and water quality since the turn of the last century. This knowledge has developed over a century of trial and error, to the point that we can now put a price on the ecosystem services offered by a forest. These ecologically focused estimates are known as non-timber services, since they can be enjoyed without consumptive use of the forests. The Georgia Forestry Foundation estimates that the most productive stands of forest are worth as much as $13,442 per acre. Neoliberal economic thinking, with its emphasis on value in the form of hard cash, has contributed to a catastrophic loss in ecosystem value since the industrial revolution. The Economics of Land Degradation Initiative estimates that habitat degradation as a whole costs the global economy roughly 10.6 trillion dollars per year in ecosystem services.
This value is not lost on governments around the world, who have invested record sums into reforestation in the last decade. The Bonn Challenge is an international agreement well on its way to meeting its 350 million hectare reforestation goal by 2030. The EU Biodiversity Strategy hopes to plant 3 billion trees by 2030 by setting aside €20 billion per year for restoration. Africa’s Great Green Wall initiative has already secured over $14 billion in funding through 2025, in an attempt to prevent desertification. It is important to note that this money is not lost; we don’t trade money for trees. Instead, this money acts as a kind of econo-socio-environmental stimulus into communities most affected by land degradation. The returns on this investment will come in the form of ecosystem services, green jobs, and a slew of carbon credits that can be traded on an open market.
A sustainably managed forest also offers a number of raw materials that humans rely on for energy production, building material, and food. The global forestry economy is expected to grow well beyond $700 billion by 2025.
The biggest boon for the forest industry is the emerging carbon economy. In the nature-based version of this economy, one carbon credit represents one tonne of sequestered carbon. Once these emissions are created, they are traded among stakeholders to ensure that emissions do not exceed a predetermined cap. The following graphic explains the logic behind cap-and-trade carbon finance schemes.
A recent report from ETH Zürich has shown that forest restoration will be the driver of future carbon market development. The researchers found that reforestation is “overwhelmingly more powerful than all of the other climate change solutions proposed.” This fact is reflected in the carbon credit numbers; over the past five years, 42% of credits came from forestry. According to Justin Adam, managing director for global lands at The Nature Conservancy, “The business of planting trees is going to be one of the biggest climate stories of the next 20 years.”
The financial landscape of forest protection has never been brighter. In the words of Ibrahim Thiaw, Deputy Executive Director of the United Nations Environment Programme at the level of Assistant Secretary-General “Restoration is an idea whose time has come; investing in land restoration is generally economically profitable, socially acceptable and environmentally desirable.”
OFP: Much Needed Innovation for the Forest Industry
Open Forest Protocol (OFP) is an open-source ecosystem that connects investors, project operators, entrepreneurs, and technology integrators in an effort to standardize and build efficiencies into the global forestation economy. OFP will facilitate the transfer of more green capital into restoration by removing barriers that have hindered or siloed restoration investment in the past. These barriers include a lack of collaborative funding mechanisms, shoddy international MRV standardization, and a piecemeal approach to carbon trading.
OFP’s standardized MRV mechanism builds trust between investors and on-the-ground forest managers. The data stored on OFP is verified by a community of validators and remains on the protocol into perpetuity, which allows for the creation of data-backed carbon credits that can be traded on an open market. Whether you are a satellite data provider, an investor looking to enter the carbon economy, a forestation project hoping to verify your data, or an entrepreneur hoping to expand your business, OFP’s open-source community will support your goals. To learn more, visit our website at openforestprotocol.org.