India welcomed Brazil’s initiative to establish a Tropical Forests Forever Facility (TFFF) during the leaders’ summit at COP30 in Belem. Recognising it as a significant step towards collective and sustained global action for the preservation of tropical forests, the country joined the fund as an observer. However, its benefit may be marginal because India has a smaller area of tropical rainforest.
The context of the fund stemmed from the assumption that traditional climate finance mechanisms have failed to effectively stop or reduce tropical and rainforest deforestation and their conservation. It is based on the idea that environmental degradation and deforestation are the result of market failure, so the way to protect forests is to make their preservation economically competitive with activities that are bent on destroying them.
However, the idea of the fund is under fire from the global civil society. They came out against the TFFF, terming it anti-forest conservation.
Understanding TFFF
The TFFF is proposed as a blended-finance mechanism to incentivise countries to prevent the deforestation and degradation of moist broadleaf tropical forests. The fund aims to utilise profits from capital market investments to provide results-based payments to rainforest countries. The TFFF is presented as a hybrid investment fund that combines public and private finance. It will have two arms: a fund (the Tropical Forest Investment Fund – TFIF) and a facility (the TFFF), which will raise resources and channel them into investment projects. Its objective is to generate attractive returns for private investors while achieving forest and rainforest conservation, emissions reduction, and benefits for local communities and Indigenous Peoples.
Experts say the fund will operate like a commercial bank, where it will obtain loans of $125 billion at lower interest rates and lend them at higher rates to generate a profit of around $4 billion annually. From this profit, $4 per hectare of standing forest will be distributed to the governments of the countries where 1 billion hectares of tropical forests are located. The TFFF prioritises investment profitability by establishing a clear payment path that ‘first ensures returns to private investors’, then to ‘public’ ones, and only then to designated Tropical forest countries (TFCs) that demonstrate forest preservation.
How is it different from REDD+
The ‘Coalition for Rainforest Nations’ during COP13 in 2005 proposed Reducing Emissions from Deforestation and the Degradation of Forests (REDD), a financial mechanism to reduce deforestation and provide a cheap way of reducing CO2 emissions through offsetting carbon emissions. It used the mechanism to incentivise developing countries to protect forests and mitigate climate change with activities such as forest conservation and sustainable forest management.
But critics say even after 20 years, REDD+ could neither stop deforestation nor address the root cause, as it focused on carbon credits rather than tackling the systemic economic and political drivers of deforestation and increased the risk of greenwashing. However, TFFF’s proponents argue that the fund adopts a long-term approach, including continuous payments for the conservation of standing tropical and subtropical forests, with a focus on measurable outcomes for forest preservation. Some argue that it complements REDD+ and other carbon markets in creating a forest finance ecosystem.
What’s in it for India
India accounts for a small portion of the total global tropical rainforest area. It has tropical rainforests, particularly in the Western Ghats and northeastern states. Globally, the Amazon and Congo rainforests are the largest, with the Amazon alone covering over 2.3 million square miles.
Critics argue that the fund does not adequately prioritise indigenous peoples and local communities, nor does it establish gender and intergenerational equity in the allocation of resources. It is like any other failed financial mechanism for conserving forests, they contend. The TFIF profit calculations are based on uncertain annual payments of $4 per hectare.
A statement by 159 global civil society organisations stated that the mechanism for privatising forest finance does not recognise forests as living systems. It argued that the fund considers deforestation to be a market failure and puts a price on the ecosystem services of tropical forests to attract private investment.