Ending Deforestation Likely to Cost at Least $130 Billion a Year

It would likely cost more than $130 billion a year to end deforestation by the end of this decade, according to a report from a group of financiers, energy industry executives and academics.

The Energy Transitions Commission, which counts senior BP Plc and BlackRock Inc. employees among its members, said the analysis is a first-of-its-kind estimate of how much funds would be needed “to overcome the economic incentive to cut down trees.” The forecast is based on an analysis of the volume of grants or other forms of so-called concessional finance that would be needed to pay landowners not to deforest.

Financing forest preservation requires a different approach to investing in the decarbonization of heavy industry or energy systems, according to Adair Turner, the former City of London finance regulator who now chairs the ETC. Instead of the regular debt and equity financings that are used to electrify the power grid or develop new green steel plants, avoiding deforestation requires “a different category of financial flow,” namely “paying somebody not to do something” without expecting a direct rate of return, he said in an interview.

The three most likely sources for these grant-based funds are governments that allocate money to protect forests, philanthropic support and carbon credits, Turner said. For companies that have set science-based net zero goals, buying carbon credits on the way to net zero can be an important method for supporting forest conservation, he said.

ETC said “without a significant flow” of grant payments this decade, any reduction in deforestation would come "too late to make it possible to limit global warming to well below 2C, let alone to 1.5C." Since 2018, 3.2 million hectares of primary forest have been lost each year from non-fire related causes, which is equivalent to a rate of 10 football pitches being lost every minute, ETC said.