Blog Joining Forces to Protect the Amazon: Is it possible to combine financial instruments with forest conservation and restoration incentives?

The Amazon basin has the world's highest deforestation rates, which results in a significant increase in greenhouse gas emissions. This article highlights the importance of the Payments for Environmental Services Program in Colombia, and promotes its implementation together with other existing instruments such as the 'Obras por Impuestos' taxation incentive, to increase forest conservation in PDET municipalities.

The Amazon rainforest - known as the lungs of planet Earth - faces the threat of increasing deforestation. Year after year, this ecosystem - shared by Brazil, Peru, Colombia and Ecuador - ranks first in forest loss, with a devastating impact on biodiversity and greenhouse gas emissions. Faced with this urgent environmental crisis, a crucial question arises: Is there a way to combine existing financial instruments in the Amazon region with incentives to promote forest conservation and restoration?

According to the United Nations Environment Programme (UNEP), deforestation is responsible for 10-15% of carbon dioxide (CO2) emissions worldwide. Therefore, combating deforestation has become a priority in the fight against climate change, especially in the most forested areas of Earth.

Conservation of the Amazon cannot rely solely on governments and environmental organizations: it requires the involvement of the financial and business sectors to drive sustainable and cost-effective solutions. Fortunately, the last few years have seen significant advances in the search for innovative financial mechanisms that promote forest conservation and restoration.

In Colombia, for example, the 'Obras por Impuestos' tax payment mechanism was implemented as part of the tax reform in 2016. This mechanism allows companies to pay up to half of their tax obligations through the execution of public investment projects with social impact. Projects include infrastructure development, public education initiatives, aqueduct and sewerage systems, digital connectivity improvements, climate change adaptation measures, and payments for environmental services. The key is that projects must be carried out directly by participating companies in the 'Zones Most Affected by the Armed Conflict' (ZOMACs) and regions characterized by high rates of poverty, illicit economies and institutional fragility, where the Territorially Focused Development Program (PDET) operates.

The projects must be executed directly by participating companies in the ZOMAC and regions characterized by high rates of poverty, illicit economies and institutional fragility where the Territorially Focused Development Program (PDET) operates.

The 170 PDET municipalities cover 40% of the country's forests, covering an area of approximately 24 million hectares - an area similar to the size of Ecuador. These municipalities represent about 74% of the deforested area in Colombia, concentrated mainly in the departments of Meta, Caquetá, Putumayo, Guaviare and Nariño: regions that face various socio-environmental problems such as deforestation, the presence of illicit crops and armed conflict.

Although the causes of forest loss in Colombia differ by area, livestock, agriculture and illicit crops are the most frequently cited factors in the studies conducted so far. For this reason, the agricultural sector and supply chains - which include the entire process from production to consumption - play a central role in the discussions.

In response to these needs, the Colombian government has launched the 'Integral Strategy for Deforestation Control and Forest Management' (EICDGB). This strategy's objective is the sustainable management of forests and rural development, reducing deforestation in different supply chains, whilst focusing on the regions with the highest production products that drive deforestation.

One example of this is Caquetá and Cesar, which, are among the departments with the highest number of cattle in the country. It is there - at the gateway to the Colombian Amazon and in the tropical dry forests of the north - that the Alliance of Bioversity International and CIAT is supporting the strengthening of departmental cacao committees - organizations that represent local producers in the National Federation of Cacao Growers. The Alliance also provides the technical secretariat for the Zero Deforestation agreement for dairy cattle, and plays a key role in the Zero Deforestation agreement for cacao.

Achieving zero deforestation in supply chains requires the existence of business models that promote the adoption of sustainable practices in line with the National Green Business Plan of the Ministry of Environment and Sustainable Development. The purpose of this plan is to provide tools that allow development, whilst encouraging and promoting green business and sustainable businesses that promote environmentally responsible production and consumption practices.

The Payments for Environmental Services Program (PES) is another prominent example of economic incentives that recognize efforts in conservation, ecosystem restoration and sustainable production. This program aims to address deforestation and promote green business, thereby strengthening the agricultural sector and contributing to peace building in regions that have been affected by conflict.

Under the PES, practices such as agroforestry and silvopastoral systems are encouraged, which are essential for environmental protection and the promotion of sustainable practices. In doing so, a balance is sought between the conservation of natural resources and the country's economic development.

However, it is important to recognize that PES - although promising - has limitations to guarantee the long-term sustainability of conservation actions. Therefore, it must be complemented with other strategies and financial tools. In this sense, strengthening green business promotion instruments, particularly with producer associations, is a new approach with potential to incentivize the maintenance or restoration of ecosystem resources.

The combination of these financial instruments and incentives for forest conservation and restoration has the potential both to reduce deforestation and to improve the productivity and profitability of green businesses. It can provide effective and sustainable solutions for the country's development, leading to a more fair and equitable future. This approach will strengthen the agricultural sector and contribute to peace building in areas affected by the armed conflict, thus improving the quality of life of local communities and enhancing the resilience of ecosystems to climate change and other environmental impacts.

The protection of the Amazon is not only the responsibility of governments, but also of private companies and local communities. The challenge of combining financial instruments with environmental incentives in the Amazon region is not an easy task, but it is an objective that must be pursued. Only through joint and decisive action will it be possible to preserve the priceless biodiversity and resources that the Amazon offers.

This article was produced with support from CGIAR initiatives, AgriLAC Resilient, National Policy and Strategies and Mitigate+: Research for Low Emissions Food Systems, and project 18_III_106_COL_A_Sustainable Production Strategies, 'Implementation of sustainable agricultural and livestock systems for the simultaneous targeting of forest conservation for climate change mitigation (REDD+) and peace building in Colombia', which is part of the International Climate Initiative (IKI). The German Federal Ministry for the Environment and Nature Conservation and Nuclear Safety (BMU) support this initiative on the basis of a decision adopted by the German Bundestag.