by , 07 January 2011
This month’s Conservation Letters has a Policy Perspective on the risks of relying REDD+ funding for conservation projects. REDD+ (Reducing Emissions from Deforestation and Degradation, with the “+” standing for biodiversity and social benefits), is a mechanism for transferring funds to developing countries for forest preservation and restoration. REDD+ financing is eventually supposed to flow primarily from the private sector, and it is one of the few parts of an international climate agreement that has been uncontentious in negotiations.
REDD+ presents a potentially huge new pool of funds for biodiversity conservation, but the authors caution that it comes with a set of risks:
- Political risk: While some REDD+ financing is already beginning to flow, the bulk of the funds are reliant on a future compliance regime regime that will incentivize companies to finance REDD+ in lieu of reducing their greenhouse gas emissions. Given the slow progress of efforts to put such laws in place, in the near REDD+ funds are more akin to international aid, which the authors note is “notoriously volatile.”
- Competition risk: REDD+ is primarily a tool to reduce greenhouse gas emissions, and biodiversity conservation is a co-benefit. The authors describe this a problem of “mismatched time scales,” but its really a matter of substitutability and competition. As low-carbon technologies become cheaper, they may become cheaper substitutes for forest carbon sequestration, lowering demand for REDD+.
The authors point to a number of strategies to reduce these risks, including diversification of funding sources, including both traditional donor financing and other payments for ecosystem services, and the development of insurance mechanisms. They also promote the use of conservation trust funds to pool REDD+ capital and distribute the interest - a conservative but stabilizing strategy.
There are a number of other risks associated with tying conservation funding with a nascent commodity market, and the authors urge conservationists to look to the private sector, which has been hesitant to invest in REDD+, and exercise similar cautions.
I think it would be an interesting exercise for conservation organizations to look at this list of investment risks produced by forest investors in order to understand what drives this hesitancy. If a conservation project can address these comprehensively, it’s a lot more likely to be able to secure consistent funding.
Phelps, J., Webb, E., & Koh, L. (2010). Risky business: an uncertain future for biodiversity conservation finance through REDD+ Conservation Letters DOI: 10.1111/j.1755-263X.2010.00155.x