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financing SFM

Private Financing for Sustainable Forest Management and Forest Products in Developing Countries – Trends and Drivers

CHALLENGE: A Global Imbalance in Forest Investments

The forest community recognizes that the private sector has a role to play in financing sustainable forest management (SFM). There is a considerable gap between the US$70-160 billion that SFM needs each year, and official development assistance to forestry, which only covers about 1 percent of the estimated total financing need.

Despite the private sector’s importance to forests, information on private forest financing remains scarce and inadequate. Data on private forest financing is not systematically reported in either global or regional databases and the quality remains inconsistent. The information that is available, however, points to an uneven distribution of forest investment across regions and countries.

Total private sector plantation investments in developing countries are estimated at US$1,763 million in 2011 (excluding REDD). Latin America accounts for a vast majority of annual investments, with US$1,464 million or 83% of the global total amount. Investments in Asia and Oceania are estimated at US$279 million or 16% of the global total, while private investments in plantation forests in Africa are estimated at US$20 million, or just 1% of total value.  Although Latin America draws the most private forest investment, it is unevenly allocated—Brazil accounts for more than 80% of the regional total.

There is a similar trend of regional imbalance in the estimated 66 million hectares of commercial, production-oriented forest plantations in developing countries, about one third of which are privately owned. Privately-owned plantations are spread over 18.7 million hectares in Latin America and comprise 78% of total commercial-production plantations. In contrast, there are only 5.1 million hectares of commercial plantations in Asia and Oceania and 0.3 million hectares in Africa.


Some countries are struggling to access private forest financing. What factors cause private forest investment to flow to certain countries, and not others? What can countries do to unlock more opportunities?

When assessing potential investments, forest investors compare expected returns and risks. Tree growing conditions, access to markets, growth potential, physical and institutional infrastructure, and the business environment -- including political and economic stability and security of land tenure -- are major determinants of investment flows. The main barriers to financing private investments in SFM in developing countries include high, real and perceived risks such as those related to land tenure; weak availability of both domestic and foreign equity and loan financing; unfavorable terms for financing; and finally, high up-front costs of preparing investment projects in the forestry sector.

To attract more forest investment, the government can take steps to make the investment environment better -- by improving policy and legislation, governance, transparency and infrastructure.  There are also many ways for the public sector to facilitate long-term investments in sustainable wood production. These include strengthening the information base on forest resources and finance, recording and publishing information on domestic investments and improving access to private financing.


This report makes a number of recommendations to unlock private financing opportunities. These actions include:

Strengthening land tenure systems.

  • Policy and legal reforms clarifying the role of the private sector, creating a policy framework for private sector investment in forestry and processing, and active investment promotion with targeted incentive schemes.
  • Reducing investment risks, both real and perceived, through guarantees, public-private partnerships, and innovative financing (fund) schemes as well as through provision of information.
  • Improving access to financing, for example, by developing new financial instruments favoring long-term investments.
  • Collecting and improving access to information around the availability of suitable land for investments, growth and yield, growing conditions in general, risks, and others.
  • Improving forest sector governance and transparency.
  • Improving transport and other infrastructure.
  • Supporting research and development to increase productivity.
  • Helping to organize smallholders and communities so that they can enjoy economies of scale, become more eligible for accessing finance, and gain negotiating power.

The publication of this report is forthcoming. Please visit our website or visit our Twitter and Facebook accounts for updates.

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Author : Collaborative Partnership on Forests [1] [1]
Last Updated : 01-31-2019

Analysis of Alternative REDD+ Financing Mechanisms in Indonesia

Since the Bali UNFCCC Conference of Parties (COP13), Indonesia has made climate change action a priority. In May 2010, Indonesia agreed with Norway on a path-breaking, performance-based initiative for action on REDD+. In January 2011, the Government of Indonesia identified two provinces that will pilot the REDD+ partnership agreement with Norway. However, much remains to be done to prepare sub-national financing instruments that transmit incentives from international REDD+ funding sources to regional and local levels. Financing mechanisms will need to be in place for programmatic activities as well as for project type approaches, and appropriate methodologies for disbursement of benefits and carbon accounting will need to be developed. Importantly, the design of financing mechanisms needs to fulfill requirements for efficiency, equity and effectiveness, and needs to fit into the national and sub-national institutional and legal framework.

This activity drew on the existing international body of knowledge regarding Payments for Ecosystem Services, REDD+ financing, transfers, and benefit sharing both internationally and in Indonesia. Combined with an analysis of current fiscal mechanisms in Indonesia and lessons from REDD+ demonstration activities, the synthesis provided lessons that are relevant for developing an Indonesian REDD+ financing architecture -- and for developing REDD+ financing mechanisms in other countries.

Policy briefs were developed in presentation format on issues related to financing mechanisms and shared with key REDD+ stakeholders and policy makers in Indonesia (some of the presentations are available on this page). Background papers were developed on PES as a Mechanism for REDD+ Benefit Sharing in Indonesia; Green PNPM as a REDD+ Benefit Sharing Mechanism in Indonesia; and The Role of Small Grants Programs in REDD+ Readiness and Implementation. These were consolidated into a single report that underwent World Bank peer and virtual review in September 2012 and is available as a working paper on this page: Integrating Communities into REDD+ in Indonesia.

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Author : World Bank Indonesia
Last Updated : 02-24-2017


Related Links

Doing Business website





Business Climate for Forest Investments: A Survey

The World Bank Group has been successful in reporting on the business and investment climate in developing countries through its Doing Business rankings which look at regulatory systems at the country and sub-national level. PROFOR and other partners have also devoted time and energy in trying to mobilize greater participation of businesses in meeting forest sector economic, social and environmental goals. A conducive investment and business climate would seem to be an essential element in this effort and would help increase the forest sector's contribution to "green growth".

However the regulatory requirements faced by large multinational and small local businesses vary widely; implementation of regulation is often inadequate; and investments in the forest sector may be driven by other factors such as adequate information on the resource base (inventories, land use maps, etc) and whether that resource is accessible (infrastructure, land rights, etc).

PROFOR created and tested a practical tool (methodology) for systematically assessing how administrative and regulatory requirements impact the business climate for investment in wood products and the forest sector more broadly. To develop the tool, PROFOR established a forest investor typology that reflects the needs of both domestic and international strategic investors and small and medium forest enterprises, and reviewed existing investment climate studies and tools and their applicability for forest sector investors.The applicable tools were then tested in Lao PDR and Tanzania to assess demand for such tool tailored to the forest sector, identify gaps in measuring forest investment climate, and understand the value add of a new instrument.

The publication Business Climate for Forest Investments: A Survey provides an overview of a diversity of tools to assess investment climate, their applicability in the forest sector and main gaps, and offers a menu of options for further development to improve methodologies and investment climate for sustainable forest management and wood processing.

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Author : PROFOR
Last Updated : 02-24-2017


External Related Links

United Nations Convention to Combat Desertification


World Bank Latin America and Caribbean Region, Corporación Nacional Forestal (CONAF)

Chile: Forests, Trees and Conservation in Degraded Lands

Chile is one of the most developed countries in the southern hemisphere and relies heavily on its natural resource base for employment and exports. Yet, despite its natural assets and economic prowess, the country is plagued by serious land degradation problems including desertification, accelerated soil erosion, and forest degradation. In addition, climate change is exacerbating land degradation through changes in rainfall quantity and regimen, and the melting of glaciers, which are critical for the country’s water supply.

An astounding two-thirds of the national territory (48 million ha) are affected or threatened by desertification and drought (CONAF 2006). Of the 1.3 million people inhabiting these areas, about 60 percent live in poverty. The main causes of desertification and land degradation in Chile are due to overgrazing, farming on marginal lands without conservation practices, and over-exploitation or poor management of forests. In fact, about half of Chile’s 15.4 million ha of forests are already degraded. Forest degradation is advancing at about 77,000 ha annually, and occurs mainly in the southern forests, where fuelwood extraction is a major contributor to the problem. Despite this alarming situation, there is only an emerging awareness regarding the degradation issues, and the country has yet to make significant advances to counter land and forest degradation. Urgent steps are needed to align country policies and programs to tackle the problem, provide technical guidance to field workers and heighten awareness nationwide.

The main objective of this activity is to provide state-of-the-art knowledge to the Chilean Government and other stakeholders on best practices and guidance for restoration of degraded lands through forestry applications suitable in the Chilean context.

This knowledge activity supported by PROFOR would include:

  • a review of the many pilots and ad hoc experiences in Chile to restore degraded lands through forestry (including economic, social and environmental benefits);
  • an analysis of the investment returns of select experiences, to demonstrate that the reversal of land degradation, climate change mitigation and the generation of income can be achieved simultaneously under specific conditions;
  • a projection of the carbon sequestration potential for afforestation and reforestation of degraded lands in appropriate areas throughout Chile;
  • a proposal for a monitoring system that would track desertification and progress in remedial efforts to address land degradation;
  • outreach and awareness building activities on the scope and impact of land degradation and remedial measures needed to slow its advance, especially those related to forests and trees. 

This activity, approved in June 2011, is ongoing. Findings will be shared on this page when they become available. Follow us on twitter or join our mailing list for regular updates.

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Author : World Bank Latin America and Caribbean Region, CorporaciĂłn Nacional Forestal (CONAF [1]) [1]
Last Updated : 02-24-2017

Improving the Forests Database to Support Sustainable Forest Management

At the heart of whether growth in a country is green and sustainable is the issue of accumulation of wealth. It is wealth — broadly defined to include manufactured capital, natural capital (including forests), human and social capital— that underlies the generation of national income. Gross domestic product (GDP) has conventionally been used to assess economic performance, measuring economic growth from one year to the next. But GDP does not take into account depreciation and depletion of wealth, and therefore does not provide an indication of whether growth is sustainable: an economy could appear to be growing in the near term by running down its assets such as its forests. Assessments of economic performance should therefore be based on both measures of annual growth (such as GDP) and measures of the comprehensive wealth of a country, which indicate whether that growth is sustainable in the long term.

For the past 15 years, the World Bank has provided indicators to measure the sustainability of a country’s growth path, such as Adjusted Net Saving (ANS), adjusted Net National Income (aNNI), and comprehensive wealth estimates.  Underpinning these indicators are data on natural resource rents (from forests, minerals, and energy) which provide policy makers with information on potential revenues from natural capital.

The comprehensive wealth accounts, which have been published for 1995, 2000, and 2005, include estimates for forest wealth which is calculated as the sum of the net present value of rents from timber extraction and annual benefits from non-timber resources, including minor forest products, hunting, recreation, and watershed protection. ANS, which is published annually and covers the period 1970-present, is defined as net national saving adjusted for investments in human capital, depletion of natural resources (including forests), and damages to human health caused by pollution, and provides an estimate of the annual change in wealth.

Recent findings suggest that while wealth data and ANS data are used by researchers and policy analysts, the greatest demand is for data on natural resource rents.  However, while minerals and energy rent data have gained a lot of traction, rent data for forests are not used as frequently. Interviews have revealed concerns with the credibility of the underlying data, such as the FAO data on forest area and growing stock. The authors of the indicators have also concluded that a number of methodological changes could improve estimates for forest wealth, potential forest rents, and net forest depletion.  

This activity hopes to increase the use of improved World Bank forest data (forest rents, net forest depletion, and forest wealth), so that countries and data users are better equipped with credible and more accurate information on the physical area and value of forest resources. Countries should consider not just the flow of revenues from forest resources, but also the sustainable management of the asset (stock of forest resources).

  • Data on the value of forest wealth, its share in total wealth, and how the value is changing over time can help governments assess the contribution of forests to current development outcomes and whether forests are being managed sustainably.
  • Data on potential forest rents when combined with information on actual rent recovery and use of these revenues will allow governments to assess whether contribution of forest resources to sustainable development is being realized and who is benefitting from the revenue.  Such data and assessments can equip policymakers to better manage forest resources, improve forest governance, increase transparency in the rent captured, and ultimately lead to increased reinvestment of forest rents in other forms of capital to grow the total wealth of the country.
  • These policy changes could, in turn, promote the sustainable management of forest resources for poverty reduction and economic growth.


The activity has been successfully completed.

A report is being finalized and will be released soon. The report reviews the latest literature, explores improved data sources, evaluates key parameters and assumptions in the methodology, and outlines the steps and resources required to improve the data and methods.

An implementation plan for updating the forest database that includes a plan for country surveys if the report finds insufficient global data will be finalized in the coming months.

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For stories and updates on related activities, follow us on twitter and facebook, or to our mailing list for regular updates.

Author : PROFOR [1], WAVES [2], RFF [3] [1] [2] [3]
Last Updated : 02-24-2017

Biodiversity Offsets Toolkit and Sourcebook


In many African countries, native forests are under pressure from rapidly-spreading roads, dams and other infrastructure, as well as the allocation of large forest areas to mining, commercial agriculture, and other non-forest uses. Biodiversity offsets are one of the tools available to address such pressures. Offsets can be used to strengthen protected areas of similar or greater conservation value than the area lost to specific projects. The driving impetus for such offset schemes is usually biodiversity protection, although the associated conservation areas provide additional ecosystem services such as soil and water conservation, flood mitigation, and habitat for sustainably exploitable fisheries. In an era of often flat -- and sometimes declining -- governmental support for forest conservation in general and protected areas in particular, biodiversity offsets provide an underutilized opportunity to mobilize substantial new funding from public infrastructure accounts as well as the private sector.

Biodiversity offsets are not a panacea, nor are they always the best tool available for achieving forest conservation. As part of the “mitigation hierarchy” underpinning the World Bank’s Safeguard Policies and the IFC’s Performance Standards, offsets are considered a last resort, after efforts to avoid, minimize, and restore any significant damage to forests or other natural habitats. Nonetheless, given that many infrastructure, extractive, and other large-scale projects have an inherently large footprint, a biodiversity offset scheme may be warranted (and required by some funding entities).

A key challenge is systematizing and scaling-up biodiversity offsets through a national or other aggregated offset approach in order to overcome limitation like: (i) the high transaction costs often borne by each separate project; (ii) sub-optimal selection of conservation offset areas due to uncoordinated, ad-hoc approaches; and (iii) insufficient participation and ownership by governmental authorities in arrangements negotiated primarily between large private firms and conservation NGOs. The cumulative impacts of multiple (including smaller-scale) projects could also be more effectively addressed through an aggregate offset approach.


Under this activity, the team produced a Biodiversity Offsets User Guide containing key information about biodiversity offsets that practitioners should know about, with references provided where readers could obtain further information. Three case studies of reasonably successful biodiversity offsets were added to the User Guide as annexes. The case studies involved two private sector mining projects (in Liberia and Madagascar) and one World Bank-supported hydropower project (in Cameroon). These case studies are intended to show readers how the concepts explained in the User Guide can realistically be applied to achieve positive results on the ground. 

In addition, in response to a strong expression of interest from the Government of Mozambique, this activity also provided legal technical assistance for incorporating biodiversity offsets into the Government’s official Environmental Impact Assessment (EIA) process. Two reports were produced: (i) An analysis of Mozambican environmental legislation with respect to the use of biodiversity offsets; and (ii) a draft revision of the actual EIA regulations.

Finally, two pilot Country Roadmaps were completed to assess the potential for large-scale biodiversity offset systems in Liberia and Mozambique. The Roadmaps are intended as preliminary country examinations of legal and regulatory frameworks, national policies, land use plans, financial structures, and other relevant information.


The research team found that multiple detailed publications already exist about the details and controversies of biodiversity offsets, but that a concise reference with practical advice on how actually to do them was still lacking. This is the void that the Biodiversity Offsets User Guide seeks to fill.

The Liberia Biodiversity Offsets Roadmap emphasizes industrial-scale mining. Since adequate funding for Liberia’s protected areas remains a challenge, biodiversity offsets offer the potential for improved financial sustainability. The Liberia Roadmap outlines a series of steps for scaling-up biodiversity offsets in Liberia; among the most important is the establishment of a national Conservation Trust Fund to enable the reliable and transparent transfer of funds from extractive firms to priority Protected Areas. The new Liberia Forest Sector (REDD+) Project, approved in April 2016 with support from the World Bank and Government of Norway, provides a vehicle for moving forward the Roadmap’s key recommendations.

In Mozambique, existing Conservation Areas (CAs) cover about 26% of the country’s land area, and encompass most types of terrestrial and aquatic ecosystems. However, most are seriously underfunded. The Mozambique Biodiversity Offsets Roadmap (also available in Portuguese) proposes using Mozambique’s BioFund to transfer biodiversity offsets funding from infrastructure and extractive industry projects to selected CAs that are ecologically similar to the project-affected areas. Implementation has begun of the Roadmap’s recommendations, through the Government’s recently revised Environmental Impact Assessment Regulations.

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For stories and updates on related activities, follow us on twitter and facebook, or to our mailing list for regular updates.

Author : World Bank Africa Region
Last Updated : 02-28-2017

Advancing Ecosystem Market Intelligence

Markets require reliable and transparent information in order to function; this applies equally to new and emerging markets for ecosystems services for carbon, water and biodiversity, as it does to traditional financial markets. Investors need to fully understand the risks and opportunities associated with their ecological dependencies, assets and investments. Only then will substantial private investment move toward supporting sustainable resource outcomes.

The “Ecosystem Marketplace” is a Forest Trends initiative that seeks to consolidate and report free and independent information on ecosystem markets and payments for environmental services through regular market reports. Historically, various businesses and foundations have supported the Ecosystem Marketplace (e.g., Bloomberg, JP Morgan Chase, Moore, Packard, MacArthur).

PROFOR's partnership with Forest Trends aims to secure a sustainable institutional platform for ecosystems market intelligence in order to scale up operations and reduce risks in investment in natural capital. This support is expected to help Forest Trends ramp up its analytical and targeted outreach work. It builds on previous work, including “Mobilization of Ecosystem Services Payments in China” though Forest Trends in 2006, and “Matrix: Mapping Payments for Ecosystem Services”, also through Forest Trends, in 2008.


This partnership helped Forest Trends to successfully organize multiple roundtable meetings (see below). The meetings attracted a wide audience of policymakers, practitioners, foundations, multi-lateral and bilateral institutions. Through wide media coverage, the materials reached international readers and academia.

  • Roundtable on “Beyond Carbon: Emerging Market Tools for Business Social Responsibility” (Panel event and media summary/outcomes brief, Carbon Expo – June 2013)
  • Roundtable on “Public Investments and Incentives: How to Achieve Effective and Sustainable Demand for Ecosystem Services and Land Use Outcomes” (December 2013)
  • Roundtable on “Need to Know Basis: Self-reporting, Self-regulation, and User-driven Environmental Intelligence in the Age of Corporate Disclosure” (February 2014)
  • Roundtable on “Supply Change: Corporations, Commodities, and Commitments that Count (March 2015)

The partnership also financed the production of reports that provide strategic and targeted delivery of ecosystem market intelligence:

For stories and updates on related activities, follow us on Twitter and Facebook, or subscribe to our mailing list for regular updates.


For stories and updates on related activities, follow us on twitter and facebook, or to our mailing list for regular updates.

Author : Forest Trends
Last Updated : 02-24-2017



Community Forestry Management & REDD+_0.pdf


World Bank

Community Forestry and REDD+


The inclusion of communities in the management of state-owned forest resources has become increasingly common in the last 30 years. Surveys suggest that the forest area under community tenure or management is now approaching 25% of the global forest estate. Community forestry approaches vary a lot, both between countries and sites, and the differences often evolve around institutional dimensions such as benefit- and power-sharing arrangements. Understanding has increased regarding the multiple benefits of community empowerment in the forest sector, as well as regarding the limitations and constraints associated with it.

More recently, the emergence of REDD+ has permeated the participatory forestry discourse, and the integration of local communities is seen as a critical ingredient of an equitable REDD+ architecture. This has been supported by some first-evidence from applied research, which cautions against blueprint solutions and advocates for a robust analysis of site-specific, socioeconomic and governance variables and of national enabling environments.

We still have, however, a very limited evidence base regarding whether some of the conditions that underpin successful community forestry regimes will also apply to REDD+ schemes. While many elements, such as the role of collective action through user groups, will transfer to carbon forestry, others entail significant differences, such as price volatility or separate carbon rights.


PROFOR supported a study that will contribute to the debate about the potential and constraints of community forestry approaches in order to strike a balance between forest management, livelihood enhancement and carbon sequestration in the context of emerging REDD+ architectures (national accounting/implementation, project-level accounting/implementation, national accounting/project implementation). The study focuses on the following policy questions:

  • What are the cost factors and non-economic barriers to the adoption of REDD+ schemes at the community level?
  • How are synergies and trade-offs between carbon sequestration and livelihood goals identified and managed?
  • What role do different benefit- and power-sharing approaches play, and how are they differentiated in the respective REDD architectures?
  • How can communities effectively and efficiently engage with globalized carbon markets?
  • What responsibilities can communities assume in terms of measurement, reporting and verification (MRV)?

Addressing these questions will help to develop guidance for policymakers and project proponents to design and implement REDD+ interventions that involve and benefit communities.

This activity includes: a synthesis report detailing good practices and lessons learned in community forestry; case studies in three countries (Nepal, Tanzania and Bolivia) that focus on specific criteria and barriers, such as tenure, social capital and access to credit (included in the synthesis report); and a Guidance Note, intended for an audience of REDD+ policy and operations practitioners, on mainstreaming community forestry in REDD+ strategies and projects.


The synthesis report has been printed and was disseminated at two key REDD+ events in Jamaica and Peru. In addition, the report has been made available on the PROFOR website, and a blog post introduces the key findings and messages.

The synthesis report uses a thorough literature review and analysis of primary data collected by the International Forestry Resources and Institutions research network from 57 community forest management (CFM) sites to achieve three objectives. First, a framework for examining interactions and relationships between CFM and REDD+ was established. Second, these relationships were empirically investigated in three countries: Nepal, Tanzania, and Bolivia. All three countries have a strong history of CFM, and each is engaged in the development of REDD+ or related institutional architectures. Finally, based on analysis of the data, key recommendations are provided for communities, project developers, policymakers and researchers.

Lessons on the factors that contribute to the success of CFM may be useful in the design of REDD+ programs. In a similar manner, REDD+ may also benefit from harnessing the capital developed by CFM. A partnership between CFM and REDD+ could represent a win-win scenario, with REDD+ providing resources to strengthen CFM sites and institutions, and CFM providing its experience, lessons and capital to achieve REDD+ goals.

Three ways were identified in which the two mechanisms may develop synergies, including by: (1) applying the lessons from community participation in forest management to the development of REDD+ strategies everywhere; (2) modifying existing CFM forests and institutions to achieve REDD+ goals (e.g., developing community MRV mechanisms to establish verifiable emissions reductions); and (3) extending the area of forests managed by communities globally.

In Nepal and Tanzania, most REDD+ readiness activities and pilot projects are being implemented in CFM landscapes. These on-the-ground actions demonstrate that it is possible to leverage CFM interventions and experiences to support the achievement of REDD+ objectives, and that such an approach can be central to national REDD+ strategies in countries where CFM sites constitute a substantial proportion of the forest estate. These REDD+ pilot projects harness and build on the substantial human, institutional, natural and physical capital in CFM sites. In particular, the institutional capacity of community groups involved in community forestry, and their experience of working with NGOs and government agencies to bridge the local and national levels to achieve sustainable forestry, have been catalytic in the implementation of REDD+ pilot projects.

In Bolivia, few formal REDD+ activities took place before the government rejected REDD+ as a market-based mechanism for achieving climate change mitigation. Bolivia has, instead, developed a joint mitigation and adaptation mechanism, which focuses on communities, indigenous peoples and equitable forest resource management.

The study finds a strong and statistically significant association between livelihood benefits from CFM and forest dependence among households in Nepal and Bolivia, and between community forest size and forest condition/carbon outcomes in Tanzania. REDD+ brings financial support to improve community forestry activities that have historically been constrained by limited resources. Non-financial benefits include improvements in institutional capacity and human capital. Better monitoring of resource extraction and greater enforcement of rules may result in improved forest carbon and livelihood outcomes. At the same time, REDD+ poses challenges to CFM if it reduces access to forest resources by local communities, or if it creates financial incentives for management recentralization or for benefit capture by elites.

In the case study countries, REDD+ has sought to take advantage of the prior experiences and capital developed by CFM. Ultimately, the success of REDD+ as a forest-based climate change mitigation strategy will depend on improved funding, but readiness activities and pilot projects that engage with and learn from CFM are a critical element of long-term, effective, efficient and equitable REDD+.

For stories and updates on related activities, follow us on twitter and facebook, or to our mailing list for regular updates.

Author : World Bank
Last Updated : 05-23-2017

Adaptation-Based Mitigation in Degraded Landscapes Vulnerable to High Climatic Variation

Central America is one of the world regions most vulnerable to climate change impacts. Most countries in the region have high population densities in areas vulnerable to extreme climatic variation, and experience some of the highest rates of deforestation and landscape degradation in Latin America. These conditions directly contribute to exacerbating the negative impacts of destructive climatic events, which affect a significant growing percent of the population, the landscape, and the economy.

Governments of the region are trying to respond to this new reality by designing and implementing effective policies and programs, and uniting international efforts to help communities living in the most vulnerable landscapes to recover their resilience and adapt to increasingly frequent and damaging meteorological phenomena. El Salvador, for example, has launched the National Program for the Restoration of Ecosystems and Rural Landscapes (PREP) and is preparibng REDD+ readiness plans with an emphasis on Adaptation-based Mitigation.

However the institutional efforts, social capital and financial resources that are needed to address these challenges are enormous. For such policies to be successful, coordination and synergies among the different relevant central (e.g. ministries of agriculture, rural development and environment) and local (e.g. municipalities and community organizations) stakeholders is critical. At local levels, steps to induce collective action and governance and improve access to innovative technologies and extension services also need to be taken.


Through analysis of three case studies—one in Honduras and two in El Salvador—PROFOR helped to identify policies and institutional arrangements that can make a difference. The key factors looked at were the heterogeneity of interests and rights of the actors who influence the landscape, social capital in the territory, knowledge and innovation management systems, and the use of direct incentives and other forms of compensation.

In Honduras, the most successful case, stakeholders were able to rally around an urgent social and environmental situation of degraded land: without national government involvement, farmers agreed to stop traditional burning for cropland so that lands could be restored. This change in practice was enabled by local knowledge that documented and offered new options for landscape restoration. The no-burn restoration practice had transaction costs for farmers and required the use of incentives accompanied by regulations, with the territory’s different municipalities applying fines to eradicate the use of burning in agriculture. In the two other cases, different interests among stakeholders impeded collective action.

A set of recommendations regarding the policy and institutional arrangements required for successful landscape-level actions are now informing local, national, and regional dialogues on sustainable landscape planning and management regarding climate change adaptation and mitigation. Additionally, the activity developed guidelines for the contribution of REDD+ to the revitalization of the depressed rural economy, which provided a bridge for working with other government priorities such as education, public security, and productivity.


This activity and its final strategic report will serve as a valuable input for the World Bank’s Forest Carbon Partnership Facility’s REDD+ Readiness Preparation activity in El Salvador. More specifically, the strategic report will aid that country’s REDD+ Readiness in terms of organization among government ministries, consultation with relevant actors, and overall national REDD+ strategy. This activity is ongoing. Findings will be shared on this page when they become available. Follow us on twitter or join our mailing list for regular updates.

For stories and updates on related activities, follow us on twitter and facebook, or to our mailing list for regular updates.

Author : World Bank
Last Updated : 02-24-2017

Innovative Financing for Sustainable Forest Management in the Southwest Balkans


In many countries—particularly in the Balkans—most of the environmental services provided by the sustainable management of forests and uplands are seldom quantified, often not valued, and even more rarely captured by the owners/managers of these resources. Capturing these benefits has the potential to enhance the environmental management of forest resources, protect landscapes from erosion and downstream water systems from siltation and flooding, increase carbon sequestration (with a possible decrease in consumption of fossil fuels), while at the same time helping to address rural poverty.

To increase the likelihood of payment for these environmental services, the value and scale of the benefits generated need to better understood.


With support from multiple partners including PROFOR, the World Bank’s Europe and Central Asia staff is undertaking two case studies to assess:

  • the benefits of sustainable upland forest and land management for downstream water users, and
  • the effectiveness of increasing the use and efficiency of firewood in reducing the use of fossil fuels and hence greenhouse gas emissions.

The first case study focuses primarily on the Ulza hydro-power dam and watershed in Albania. The second case study looks mainly at wood supply, stoves, and heating systems in Kosovo.
This research aims to define scientifically sound methodologies; establish key baseline data in some case studies; provide quantitative estimates of the value of specific targeted environmental services; propose mechanisms to start or increase payment for these services in the two countries; and then disseminate the results and experience both regionally and more broadly. The results will be particularly helpful for countries in the process of European Union accession, as they develop agro-environmental payments within the common agriculture policy.

All field work and data collection activities for the two case studies have concluded. Thirty-two project publications have been translated into Albanian and disseminated through the project website, the project blog, and the project Facebook page. The main publication Study and Analysis of Innovative Financing for Sustainable Forest Management in the Southwest Balkan: Innovative Financing for Sustainable Forest Management (September 2013) is also available on PROFOR website. A series of stakeholder workshops was held in Albania and Kosovo. The final results workshop for Albania took place in September 2013 in Tirana, and the final results workshop for Kosovo occurred on in Prishtina the same month.

The project generated numerous findings that are detailed in the project publications. Highlights include the following:

-At least 31.5% of the Ulza reservoir storage is filled with sediment.
-Erosion and sediment are correlated to land uses in a measurable way, with forested areas producing the lowest sediment load.
-Around 12% of stakeholders in the watershed are willing to pay for environmental services such as reduced erosion and reduced sedimentation.

-Total wood biomass production is about 1.25 million cubic meters, of which 0.17 million cubic meters is legally harvested forest.
-95% of wood harvested from forests is used for firewood.
-Improving existing agroforestry sites and introducing fast-growing species are good opportunities to increase wood biomass production.
-Wood biomass is an economically attractive energy option for individual household heating and public buildings.
-Carbon markets could support energy production from wood biomass.

This activity is ongoing. A website dedicated to sharing the results of this activity has been set up at the following address: findings and reports will also be shared on this page. You can also follow us on twitter ( or subscribe to our mailing list for regular updates.



For stories and updates on related activities, follow us on twitter and facebook, or to our mailing list for regular updates.

Author : World Bank [1], SNV Netherlands Development Organization [2], Natural Resources Solutions consultancy - Kosovo [3], REGEA Croatia [4], Diava Consulting - Albania [5], Faculty of Forestry - Macedonia [6], Wageningen University - The Netherlands [7] [1] [2] [3] [4] [5] [6] [7]
Last Updated : 03-10-2020