New ETC report highlights financial challenges and need to address root drivers of deforestation
LONDON, April 20, 2023 /PRNewswire/ -- The global Energy Transitions Commission (ETC) has released a new report, Financing the transition: The costs of avoiding deforestation, which presents a new analysis of how much it might cost to overcome the incentive cheap to cut down trees. The report explores the role that concessional payments/subsidies can play in avoiding tropical deforestation by 2030.
This is a companion report to Financing the Transition: Getting the Money Flowing for a Net-Zero Economy, released in March 2023. That report highlights the scale of financing required to build a net-zero global economy and limit global warming to 1.5°C. He makes a distinction between two conceptually different categories of financial flow:
The costs of avoiding deforestation
Human-induced deforestation is responsible for almost 15% of total CO2 emissions, but despite many promises to stop it, it shows little sign of slowing down. Many reports have estimated the cost per tonne of CO2 saved by avoiding deforestation, but few have attempted to estimate how much it would cost to end deforestation altogether. ETC's new report, Financing the Transition: The Costs of Avoiding Deforestation, estimates the order of magnitude of grant/grant payments needed to compensate landowners for not clearing tropical forests for profit ( for example, to raise livestock or grow staple crops).
The report concludes that the cost of protecting all forests at high risk of deforestation by 2030 would be so high (over $130 billion per year) that it is not credible to assume that concessional payments/grants of this scale (paid by companies through voluntary carbon markets, philanthropy and high-income countries). Currently, national and international funding to protect forests is only US$2-3 billion per year.[1]
Non-financial actions will also be required to halt deforestation, through some combination of:
But the implementation of these actions will take time and their effect is likely to be inadequate for many years. Therefore, some level of concession/grant payments to offset the deforestation incentive will be essential over the next decade to limit deforestation, buying time before more fundamental policy changes can be implemented.
The ETC concludes this new analysis by therefore recommending that at least $130 billion a year of funding could make a significant contribution to avoiding deforestation if directed to some of the highest-risk areas of tropical forests: an increase than 50 times in current forestry funding.
"Without a significant flow of concessional payments/subsidies, any reduction in deforestation will come too late to make it possible to limit global warming to less than 2°C, let alone 1.5°C. But finance for alone cannot end deforestation. Actions to reduce the fundamental consumer demands that are driving deforestation are also essential, and must be a priority for governments, businesses and consumers," said Adair Turner, President of the Energy Transitions Commission.
The question of who could pay for this required funding stream is addressed in the main financial report (Chapter 5, pages 65-72), where we present an ambitious but feasible funding strategy from high-income country governments, private companies through voluntary carbon markets and philanthropy. The issue of how to ensure that avoided deforestation projects and related carbon credits actually deliver reduced emissions is addressed in our Mind the Gap report (Chapter 5, pages 70-83), where we discuss the basic principles necessary for integrity in carbon markets.
To read the supplementary report, visit: https://www.energy-transitions.org/publications/financing-the-transition-etc-avoiding-deforestation/ [Supplementary report will be released at 00:01BST, April 19]
Para leer Financing the Transition: How to make the money flow for a net-zero economy, visite: https://www.energy-transitions.org/publications/financing-the-transition-etc/
Notes to editors
Financing the transition: the costs of avoiding deforestation is a companion study produced by the ETC team. ETC members were not asked to endorse this specific report.
For more information on ETC visit: https://www.energy-transitions.org To view the main report and infographics, visit: https://www.energy-transitions.org/publications/financing-the-transition/
Financing the Transition: How to make the money flow for a net-zero economy was published by ETC in March 2023 and highlights that clean energy investments must quadruple in the next two decades according to the Energy Transitions Commission (ETC). About $3.5 billion a year of capital investment will be needed on average between now and 2050 to build a net-zero global economy, up from $1 billion a year today. Of this, 70% is required for low-carbon power generation, transmission and distribution, which underpins decarbonisation in almost all sectors of the economy. Part of the required investment will be offset by reduced investment in fossil fuels, reducing the requirement from $3.5 billion per year to $3 billion net. This equates to 1.3% of probable average annual global GDP over the next 30 years.
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[1] Forest Declaration Assessment (2022), Are we on track for 2030?
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