Global | Carbon Markets to Leverage Forests for Sustainability

Forest-based carbon markets offer significant opportunities for developing countries but require robust institutional frameworks, effective governance, and comprehensive policies to maximize benefits and mitigate risks.

Key points

• Key points:
• Although fossil fuel combustion accounts for 90% of global carbon emissions, deforestation significantly impacts total emissions in some regions.
• The highest land-use emissions occur in tropical regions due to large-scale deforestation for agricultural expansion. In contrast, regions like Europe experience carbon uptake due to forest regrowth (including re-/afforestation).
• Forests capture carbon, regulate water cycles, preserve soil, support biodiversity, and provide recreation. However, ecosystem services that do not generate monetary flows, particularly carbon capture and storage, are not accounted for.
• The establishment of carbon markets would allow this positive externality to be internalized to mitigate climate change, contributing to their conservation by generating monetary flows that can facilitate social development and, at the very least, make transparent the cost of activities that depreciate natural capital and hinder sustainable growth.
• Developing forest-based carbon markets presents challenges, including high transaction costs and the need for effective governance. Robust institutional frameworks, and comprehensive policies are needed to foster the demand for a supply of carbon credits with high-quality standards.

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