Development of business models to address drivers of deforestation

As part of a project funded by the International Climate Initiative (ICI) of the German Government, Climate Focus is implementing a project with UNIQUE forestry and land use to develop business models in the land-use sector that address drivers of deforestation and promote the rehabilitation of degraded lands.

Approximately 5.2 million hectares of forests are cut down annually, contributing to greenhouse gas emissions and this is largely due to agricultural expansion and commodity production (e.g. cattle, palm oil, soybeans, timber and pulp).

Despite the positive momentum created by the international mechanism that defines incentives to reduce deforestation (REDD+), limited public financial, administrative and technical resources often hamper the promotion of conservation and sustainable land use on the ground. Most of the effort to curb deforestation has been focused on creating the institutional and legal frameworks for sustainable land use.

While institutions only fulfill their public mandates to a limited extent, the private sector bears much responsibility for the destruction of forests. A close cooperation between public and private sector is necessary to move towards a long-term sustainable land use. Private actors in forestry and agriculture are therefore crucial partners for the sustainable transformation of the land use sector.

The goal of the two-year project is to facilitate investments and private sector engagement in activities that address deforestation in developing countries. To achieve this objective, Climate Focus and UNIQUE are tasked to develop projects in at least two countries that promote financially viable land use alternatives. The project is divided into three key phases, with the pre-feasibility studies in Colombia and Ecuador (Climate Focus), and Ethiopia, Paraguay and Vietnam (UNIQUE) in the first phase having been completed.

The project is currently in its second phase with Climate Focus and UNIQUE working together developing business models in Colombia and Vietnam respectively. In-depth feasibility studies are being developed, assessing the economic, technical, managerial, institutional, legal, environmental and social aspects of identified business models. The studies will also identify potential risks and opportunities and outline an implementation plan to be presented to potential private and public investors.

The business model assessed in Colombia aims to reclaim inefficiently used pastureland with intensified, diversified and sustainable use. For this purpose, the project team is assessing, conceptualizing and implementing a model that blends:

(a) intensification of cattle production on a reduced area;
(b) introduction of forestry and/or agroforestry systems; and
(c) restoration of gallery forests and riparian buffers.

Through this approach, inefficient cattle ranching systems can be replaced with a more productive land use model that increases productivity of cattle on a reduced area, produces additional timber and non-timber products, improves soils, diversifies farm income, generates employment away from the forest frontier, enhances carbon stocks, reduces erosion and runoff into rivers, and enhances biodiversity, thereby contributing directly to mitigation and adaptation ambitions expressed in Colombia's NCD (Intended Nationally Determined Contribution) to the UNFCCC.

In Vietnam, the identified business model seeks to improve the economic and environmental performance of Acacia plantations. Two corresponding activities are currently assessed: to increase the rotation length and target dimensions, and to diversify plantations through the introduction of high-value indigenous tree species. By rehabilitating fast growing Acacia plantations and promoting forest certification as a means to meet sustainability standards for international markets, the business model offers important environmental, social and economic benefits. It offers the potential to promote the economic viability of the forestry sector, while improving livelihoods and income opportunities in rural areas. With more wood being produced, Vietnam’s dependency on imports would be reduced.

During the final phase, the project will implement the most effective and financially viable business models assessed during the second phase.

The website of our partner UNIQUE forestry and land use can be found here.