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Economies grow on trees

Maryanne Grieg-Gran
Principal Economist, International Institute for Environment and Development

Steve Bass
Head, Sustainable Markets Group, International Institute for Environment and Development

Many countries are beginning completely to rethink their economic strategies, as they struggle with tackling recession and reducing high levels of public debt. The Green Economy offers them a means to grow out of recession in ways that are resource-efficient, ecologically-sound and equitable - and so produce genuine wellbeing. Forests can play an important part in the Green Economy, providing attention shifts beyond wood and fibre production alone to the full range of the ecosystem services they provide.

Economic statistics for forests tend only to track wood and fibre-based products. These account for 1 per cent of global GDP and 0.4 per cent of formal employment, but make a bigger contribution in some African countries - up to 13 per cent of GDP. Important as this is, forests contribute much more. Over 2 billion people depend on wood for cooking, heating and preserving food. Hundreds of millions (estimates vary from 119 million to 1.4 billion) depend on forests for employment and livelihoods. More hidden still are the public goods derived from forest ecosystems: forests sustain over 50% of the world's terrestrial species; they regulate global climate through carbon storage and protecting watersheds; and they have great cultural significance.

Forests are a renewable resource - their products are also recyclable and biodegradable - and there have been notable advances in processing efficiency, including through using wood residues and recycling wood and paper products. As a result, an expected doubling of global demand for wood and fibre by 2030 can be met with only a 40 per cent growth in timber harvesting. And much of this increase in demand will be met from planted forests, which have also shown marked increases in productivity.

With such advances in resource efficiency, the forest sector could seem a perfect example of the Green Economy in action. However, shaping a Green Economy also entails stopping bad practice. Much timber harvesting is conducted on a non-renewable basis, often because of pressure from cash crops and cattle ranching, which offer higher returns. Deforestation, mostly in the tropics, is currently 13 million hectares per year, which the Food and Agriculture Organisation considers alarmingly high. Large areas of forest are being degraded through poor harvesting practices and illegal logging is widespread. So valuable ecosystem services and economic opportunities are being lost. These services are currently unpriced, and thus largely ignored, in management decisions - except in the islands of innovation represented by payments for environmental services (PES) schemes .

Yet the last decade has also brought good news. It is increasingly recognized that investing in reducing deforestation as a climate change mitigation option makes economic sense: the climate regulation benefits of halving deforestation have been estimated to be worth three times the costs. This is helping to push a forest-based approach to mitigation up the agenda in international climate negotiations, first as REDD (reducing emissions from deforestation and degradation) and more recently as REDD+ (which adds conservation, sustainable management of forests and enhancement of carbon stocks to the list of eligible activities).

This is all leading to greater recognition that investments in forests are more attractive if they capture the full range of forest ecosystem services, not just wood and fibre. This means more investment in: protecting forests, principally by ensuring a greater share of the benefits for local communities; improving management of production forests to minimise damage to ecosystem services; and increasing the area of the kinds of planted

forests that support many ecosystem services. From certified timber production and markets for ecosystem services, to partnerships that reward local poor people for conserving forests, we already have enough examples that work of Green Economy forestry to warrant more serious policy attention. Such 'glimpses of the future' need to be assessed for the ecosystem services they offer and their distribution of costs, benefits and risks, and promoted more widely in the REDD+ negotiations.

Economic modelling for UNEP's Green Economy report indicates that green investments in forests can boost national economies, while protecting ecosystem services. Providing just 0.035 per cent of global GDP each year between 2010 and 2050 in public investment to pay forest landholders to conserve forests, plus private investment in reforestation, could raise value added in the forest sector by 20% and increase the amount of carbon stored by 28%.

A global deal on REDD+ may be the best opportunity to conserve forests and invest in their contribution to a Green Economy. Existing PES schemes have been limited by a lack of funds to scale up from pilot projects. But if a deal can be struck, there could be a step change in the funds available. A global REDD+ agreement could tip the finance and governance balance in favour of long-term sustainable forest management. It would also open up the prospect of new types of forest-related jobs, livelihoods and revenues where local people can be rewarded as guardians of forests and ecosystem services. Safeguards will be needed to protect the rights of forest-dependent people - particularly when these derive from traditional systems rather than formal legal ones - and to ensure that those who bear the opportunity costs of REDD+ schemes receive an appropriate share of the benefits.

A vision for a forest sector in a Green Economy is now in sight. Decisionmakers and the wider public would better appreciate the many roles of forests - as 'factories' (producing goods from wood to food), as ecological 'infrastructure' (regulating climate and water regimes), and as providers of innovation and insurance services (through the resilience provided by forest biodiversity). The economic reach of forests would extend to sectors beyond wood and paper industries alone, lightening their ecological footprints by substituting renewable forest fibre for non-renewable metals, concrete and plastics, and carbon-neutral woodfuels for fossil fuels. Effective local control and management of forests would be encouraged by greater financial incentives, sustained by a robust and fair international regime to pay for forest global public goods. Such payments would also support and reward partnerships with local and community stakeholders who depend closely on forest health. With such incentives to produce multiple benefits, forest stakeholders will routinely value the range of forest goods and services, and account for them better.

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