Many people have made and are making small-scale decisions to farm, ranch or cut timber on rainforest land. These apparently inconsequential local actions have combined into a conflagration of rainforest destruction, with global consequences. These decisions are economic ones; therefore one of the most important means of preserving rainforests involves providing economic incentives to make conservation more attractive than exploitation. It is essential to make it financially appealing to preserve forest rather than to disturb or convert it, to make regeneration more attractive than rapid harvesting, and to make careful limited extraction more advantageous than clear-cutting. There has so far been little success in promoting sustainable use of resources, primarily since there are so many more financial incentives for rapid resource depletion. There are at present no legal mechanisms to compel those involved in deforestation to make compensation for the losses of rainforest which they engender and which, both immediately and ultimately, cost the public huge financial and amenity losses. Imaginative new measures are sorely needed.

a. International trade in “pollution credits” and the sale of ecosystem services:

i) Sale of pollution credits: There is today a healthy industry involved in selling “emissions” or “pollution” credits on the international market. This business is based on pollution reduction plans established by the Kyoto Climate Accord “Clean Development Mechanism.” The Kyoto protocol is an international agreement, signed in 1997 by 174 countries, including the United States, to regulate CO2 and other emissions to the atmosphere. Each signator country is committed to reducing emission levels of certain pollutants to specified levels by designated dates. However, a country which produces too much of a certain pollutant can purchase “pollution credits” from another country which produces less than its allowed amount of that pollutant. Since trees are thought by some (Schulze, Wirth and Heimann, [2000], for instance) to be net absorbers of carbon (i.e., act as carbon “sinks”), forests might also be used as credits. Under such an accord, countries with large forests could sell “pollution credits” (in reality, “sequestration services”; for more on this topic, see Part I, K1), and thus profit from maintaining their forests. This would compensate for the loss of revenue which is incurred by not logging or otherwise utilizing rainforests. The Conference of the Parties on the Climate Convention has allowed some use of forests in this way, but has not allowed the United States, for example, to obtain as many emission credits as it wished to claim for its forests to compensate for its huge amounts of excess carbon emissions. (The United States, in particular, has been reluctant to reduce its carbon emissions substantially. President Bush has, in fact, rescinded U.S. involvement in the Kyoto accord, citing “lack of scientific proof” for the reality of global warming, although virtually all scientists have agreed that anthropogenic global warming is occurring.) Whether or not forests actually are net carbon absorbers is not clear (see Part I, K1). This is a controversial topic which is being bitterly debated at the Kyoto meetings. The failure of the climate conference at The Hague in November 2000, to reach agreement on CO2 emissions was largely due to disagreements over land-use change and forestry. Some countries view carbon sequestration by forests as a useful mechanism to mitigate carbon dioxide emissions, while others wish to minimize its importance (a not-unreasonable view, given the uncertainty of whether or not net carbon sequestration by forests occurs). There is also the danger that allowing forests to substitute for a reduction in emissions might endanger or replace forest conservation and careful management of forests. Since young, growing forests are thought to consume more carbon dioxide than older forests, the use of sequestration credits might encourage countries to cut down old-growth forests and replant. This risk could be eliminated by only allowing credits for reforestation on lands which had not been under forest for at least some specified period of time.

Some energy and other companies are investing in forest conservation projects in an effort to reduce carbon levels; by doing so they can earn emission credits. American Electric Power, PacifiCorp and BP-America, in conjunction with The Nature Conservancy, have invested in the Noel Kempff Mercado Climate Action Project in Bolivia. These companies have paid logging companies to retire the logging rights to 1.6 million acres near the Noel Kempff Mercado National Park, an action which doubled the size of the park (Gullison, Rice & Blundell, 2000). Such forest “carbon markets” could provide important incentives for forest protection. In Madagascar, the preservation of 33,000 hectares of forest (Masoala National Park) is preferred by local inhabitants and international interests, which benefit financially from the intact forest, while the government would obtain more revenue by issuing logging concessions. However, the government would benefit more from an intact forest if it were compensated for the emissions reductions provided by the forest (Bonnie, et al., 2000; Kremen, et al., 2000). Kremen and his co-workers calculated that the loss of the forests of the Masoala area would cost the international community between US$68 million and US$645 million from carbon emissions alone (not including such items as the loss for ecotourism companies or the loss of value of biodiversity after deforestation). They estimate that the conservation of carbon (i.e., compensating Madagascar for not deforesting by issuing emission credits) would cost less than US$1 per ton, and that this would represent only one-twentieth of the loss which would be accrued by deforestation. Payment for emissions credits could give Madagascar as much as US$23 million per year, rather than the much lower amount now invested there. Such funds, they estimate, would be sufficient to preserve the park over the long term.

Another proposed mechanism is to pay countries for preserving their forests in order to prevent the release of carbon dioxide which occurs during deforestation. Since the removal of one hectare of tropical forest releases approximately 200 metric tons of carbon, reduction in deforestation levels could represent a significant benefit to the atmospheric carbon load. Such funds are known as “carbon-offset funds” and will probably be important in the future in slowing rainforest destruction. Brazil, the largest deforester, however, opposes allowing carbon-offset funds to be used to combat deforestation. As is generally the case in that country, the Ministry of the Environment has not been consulted in the matter. Laurance (2001a) estimates that Brazil could accrue between US $600 million and $1.96 billion per year from such funds, which would disembowel the economic rationale for rainforest destruction in that country.

In order for forest conservation to be financially beneficial for governments, forest conservation (that is, the retention of forests for carbon sinks) must be incorporated into international agreements as carbon credits.

ii) Sale of ecosystem and other forest services: These services might include watersheds, tourist attractions, genetic resources, and intellectual property. An imaginative way to use market forces to preserve forests is to invest corporations with the right to sell the ecosystem services of the forests. A company might obtain the rights to a watershed, for example, and it would be allowed to provide water which is derived from the preservation of rainforest as a watershed. Since today many vital watersheds are threatened by development, in a world in which trillions of dollars will be needed to provide water in the next 20 years, watershed conservation could greatly reduce the amount of money needed for this purpose. In Costa Rica, conservation areas are credited by the government for services as carbon sinks and as watersheds (at a rate of $10 and $50 per hectare, respectively). And other ecosystem services might also be sold.

In another vein, intellectual property rights can be given to companies in return for funds for forest preservation. Costa Rica and the pharmaceutical company Merck have made an agreement in which Costa Rica conserves forest areas with the financial support of Merck, while Merck in turn receives access to information obtained from forest plants. Costa Rica will also receive a percentage of any profits Merck might obtain from compounds developed from forest organisms (Chichilnisky and Heal, 1998). In order for such schemes to work, it is essential for the resource to provide services which can be commercially valued. As we have seen, rainforests amply fulfill this requirement. In addition, some of the value of this resource must be available for use by private agencies (producers). In these ways private corporations could benefit from the conservation of rainforests.

b.“Debt-for-nature” swaps: Tropical countries are liquidating their forests to provide short-term capital and for income to pay debts to developed countries. These debts to other countries and to international agencies such as the IMF and the World Bank are enormous and overwhelm the economies of poorer countries. There appears to be a distinct relationship between the rate of deforestation and the debt level of tropical countries. With “debt-for-nature” swaps, a conservation organization acquires a debt at a discount, and the debtor country redeems the debt by protecting land in reserves, by paying staff at reserves, and so forth. Otherwise, so long as tropical countries have massive debts, they will attempt to resolve them by liquidating their natural resources. For instance, a Bolivian debt of $650,000 was bought by a conservation group for $39,000 and the debt returned to that country with the understanding that Bolivia would set up a forest reserve in return for the debt forgiveness (Katzman and Cale, 1990). Debt-for-nature swaps have some serious disadvantages, however. As in many of these transactions, there is no guarantee that the debtor country will actually carry through with the promise, and if population or political pressures build up, the agreement may be abrogated.

c. “Public-private” partnerships: Non-governmental organizations might avert deforestation by establishing this type of partnership with a government. Dan Jantzen of the University of Pennsylvania has attempted this type of arrangement at Guanacaste National Park in Costa Rica. Private donations bought public grazing land which was adjacent to the park, and reforestation is being carried out on this land (Katzman and Cale, 1990). In the Atlantic forest in Brazil’s Paraná State, a reforestation project is being carried out by the Sociedade de Pesquisa em Vida Selvagem e Educaçao Ambiental (an NGO) and The Nature Conservancy on former pastureland. Funding is being provided by General Motors and American Electric Power. The companies may or may not receive carbon sequestration credits for their efforts (Bright and Mattoon, 2001). This type of arrangement is useful if there is a constituency in the country for conservation; in other places like Amazonia, this is less the case.

d. Private purchases and arrangements by non-governmental organizations: By utilizing their funds to purchase land or logging rights, non-governmental organizations (NGOs) can provide a “safety net” of protected forest. Among such agreements is The Nature Conservancy’s acquisition in Bolivia of logging concessions on 630,000 hectares of land adjoining Noel Kempff Mercado National Park, and Conservation International’s purchase of logging rights to 45,000 hectares of land which was added to Madidi National Park, also in Bolivia (Gullison, Rice & Blundell, 2000; Hardner and Rice, 2002). In these cases, the owners of the land were given financial incentives for preservation (that is, they were paid for logging rights, which were not exercised, but retired, by the conservation organization). Resources may also be provided to communities for conservation activities. In Mexico environmental organizations are paying the town of Cebadillas over a period of years to preserve the habitat of the thick-billed parrot (Gullison, Rice & Blundell 2000). This provides a direct incentive to local land owners for preservation. These types of actions compensate those who own and are willing to conserve important natural resources.

e. Extractive reserves: Certain tropical forest regions can be designated as extractive reserves which cannot be logged, but which can be used for traditional extractive purposes like rubber tapping. Brazilian rubber tappers have proposed such a mechanism in the Amazon (Burley, 1988; Katzman and Cale, 1990). This method, like the others, is subject to abrogation if economic or political pressures escalate, and is dependent upon the beneficence of the national government.

f. Tropical Forestry Action Plans: The World Resources Institute has proposed a TFAP by which agencies from a tropical country would meet with a variety of nongovernmental organizations and representatives of potential donor countries to set up tropical forest projects. Such projects could involve reforestation, conservation, fuelwood production and so on. All such methods run into difficulties, partly because of the desire of countries for national sovereignty and their suspicion of agreements which they interpret as interference with internal affairs, partly because of the political instability and corruption of many tropical countries, and partly because of the conflicting and often ill-defined property rights over forest land in these countries.

g. Conservation easements: This involves establishing an international consortium of developed countries which would compensate tropical countries for conservation. For tropical forests, easements might permit some extractive use by indigenous people, but would prohibit logging on any large scale, for example. They differ from extractive reserves in that the easement is held by a foundation rather than a government, and therefore is (presumably) less subject to political and other pressures. Priorities for different habitats would be established, with the government receiving compensation for granting the easement. In order to succeed, easement proposals must avoid political problems and permit the establishment of organizations to administer the finances, to develop processes for evaluation of habitats, and so on. Funds would have to be expended for research and enforcement. It has been estimated that it would cost approximately $600 million per year, only 2% of global foreign aid to developing nations, to protect 10% of the Amazon basin with such easements (Katzman & Cale, 1990).

h. Rewarding conservation efforts; credits and direct payments: Another mechanism is to provide rewards for conservation. In Bolivia, for example, there is a flat tax on all logging concessions, but up to 30% of the land in a concession can be designated as “reserve” and is then exempt from taxation. Another mechanism is to pay countries or communities to protect their forests. As Ferraro and Kiss (2002) comment, “The basic principle is that the cheapest way to get something you want is to pay for what you want (e.g., protected rain forest) rather than pay for something indirectly related to it (e.g., capital for improving eco-tourism), or more simply ‘you get what you pay for.’”

i. Integrated conservation and development projects (ICDPs): This approach involves the linking of biodiversity conservation in protected areas to the social and economic development of communities in the vicinity. Ideally, local communities are provided with incentives to conservation through employment opportunities, revenue sharing, shared decision-making, and/or the provision of needed development projects, such as schools and clinics. Unfortunately, these projects have not been too successful for a variety of reasons, such as overly-high expectations, lack of ecological monitoring, overharvesting of resources to provide a constant source of benefits (income), external market forces (such as urbanization and its increasing demands) and the inherently unreliable sources of potential revenue (tourism, for example). Furthermore, should a project be successful, it may attract more people to the area. These ICDPs must be carefully constructed so as to function well in and adapt to the social and ecological environment of the area for which they are devised. (For a discussion of these issues, see Newmark and Hough, 2000.)

It is becoming evident that such indirect methods of conservation have not proved very effective, as it is extremely difficult to maintain sustainable use of resources. (See Ferraro and Kiss, 2002; Terborgh, 1999.)

j. Purchasing of conservation concessions: Rather than undertake the extremely expensive means of buying forested land outright, conservation organizations can take out leases on land, in a manner similar to logging companies purchasing logging concessions for a certain period of time. This is not only less expensive than purchase, it also evades the problem of sensitivity about foreign ownership of land. According to Hardner and Rice (2002), much land in the tropics is being leased for as little as $1 per hectare! This mechanism could work if local people benefitted from the arrangement, just as logging companies provide jobs. In 2001, the Peruvian government established the Los Amigos conservation concession, a 40-year lease for 130,000 hectares of rainforest near Manu National Park (Hardner and Rice, 2002).

“Conservation must be the direct objective of policy…[and] policies must provide a positive inducement to drive the widespread adoption of conservation” (Gullison, Rice & Blundell, 2000). Or, as E.O. Wilson (1992, p. 283) put it, we have “the need to draw more income from the wildlands without killing them, and so to give the invisible hand of free market economics a green thumb.”