Understanding regenerative business models

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Identifying the most effective area for intervention is only the first step. Creating the mechanisms and incentives to keep forest standing, and to encourage forest restoration, is what can transform today’s largely degenerating forest frontier into a productive, resilient and globally valuable forest economy. Creating such an economy requires a combination of well-enforced regulatory and fiscal policies and socio-economic incentives that reward sustainable management and protection of forest more highly than single-use extraction.

In the tropical forest context, regenerative models generate value from the protection and restoration of forests. In doing so, they provide tangible incentives to keep forests standing,
or even to regrow them over time. Accoring to a research commissioned by the Food and Land Use Coalition, the varied models which exist can be grouped into three key categories:

• Models which create value from standing forest

• Models that incorporate forest protection into agricultural production

• Models which create value from re-growing degraded forest

Therefore, for each of the land categories described in our “Sealing the forest edge where it is currently exposed” article, – standing forest, the agricultural zone and the degraded zone – a corresponding category of regenerative business model exists.

Category 1: Creating value from standing forest

WHAT ARE “VALUE FROM STANDING FOREST” MODELS?

These models depend upon harnessing the high variety, value and productivity of naturally growing forest products and environmental services in standing primary forest. They do not include timber plantations or other forms of man-made, plantation forests. When implemented, high-value, low-intensity value chains are created. They are high-value because the products and services which are produced by intact forests generate high market value per unit, and low-intensity because the impact on forest is minimal or almost non-existent.

WHY ARE THEY SO IMPORTANT?

The ecosystem value of primary forest is higher than any man-made attempt at recreating or mimicking it. Preserving standing forest has a twofold, additive impact: not only does it maintain the extraordinary array of products and services provided by forests, it also prevents the negative impacts of their disappearance (which produce some of the most harmful environmental impacts on the planet). Furthermore, standing tropical forest provides the home, livelihoods and cultural heritage of millions of indigenous community members.

Category 2: Agricultural intensification with a mandate to protect and preserve

WHAT ARE “AGRICULTURAL PRODUCTIONPROTECTION” MODELS?

These models involve improving production efficiency, and therefore reducing the environmental impact, of agricultural activities in proximity to forest landscapes. To do so, improved agricultural practices (particularly sustainable intensification) are combined with effective land use planning, robust local governance and incentive and reward mechanisms for forest protection. The result is increased productivity per hectare, the protection of forest with highest conservation value and in some cases the restoration of previously degraded land. As sustainable intensification is implemented, a gradual shift towards regenerative agriculture is required. This has the potential to maintain yields, while at the same time promoting soil health, reducing use of chemical inputs, and increasing the diversity of healthy, planetfriendly foods produced and consumed. Productive regenerative practices combine traditional techniques, such as crop rotation, controlled livestock grazing systems, low-till agriculture and cover crops, with advanced precision farming technologies and new bio-based fertilisers and pesticides. New technologies that drive productive regenerative agriculture are continually emerging.

WHY ARE THEY IMPORTANT?

Agricultural expansion, both by smallholders and larger organisations, is the dominant driver behind more than half of all tropical forest loss. Finding business models that can both deliver enhanced agricultural output and mitigate forest loss can deliver “triple wins”: rural development; domestic economic growth; and protection and restoration of forests on a large scale (and all their associated benefits, including those directly necessary for agricultural production such as water cycles, pollination, etc.)

Category 3: Creating value from forest regrowth on degraded land

WHAT ARE “VALUE FROM FOREST REGROWTH” MODELS?

These models centre on restoring previously degraded land and returning that land to a state that is as close as possible to natural forest. They use a diverse mixture of regrowth vegetation that increases both above- and below-ground biodiversity and biomass. They do not include monocultural plantations. By mimicking natural ecosystems, and by working with species that are particularly well suited to specific environmental conditions, forest regrowth models can restore increased environmental and economic productivity.

WHY ARE THEY SO IMPORTANT?

There is an estimated 100 million hectares of degraded land within the forest frontier alone. The natural productivity and value of this land has been severely impacted, reducing its economic, social and environmental value. Restoring degraded land can support livelihoods and increase economic productivity by restoring soils and water, deliver climate change mitigation by sequestering carbon and enhance biodiversity and other key ecosystem services outcomes (clean water, reduced erosion, enhanced soil fertility, etc.).

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Carbon offsets – avoidance and removals

‘Stop the tap before mopping up’ Vertree is focused on nature-based solutions (NBS) as a key part of the fight…

‘Stop the tap before mopping up’

Vertree is focused on nature-based solutions (NBS) as a key part of the fight against catastrophic climate change. Carbon offsetting schemes provide critical finance to NBS projects. Among these, carbon offset projects that reduce emissions from deforestation and forest degradation in developing countries (REDD) provide the most immediate, tangible and sustainable climate impact available. Emission reductions from offset projects must be measurable, additional, and be as permanent as human intervention can guarantee. The focus of this note is to explore the increasing bias of carbon offset buyers for carbon removals over avoidance credits.

Avoidance credits are defined as certified emissions reductions from projects that reduce emissions compared with the most likely course of action – the baseline scenario. REDD+ projects reduce forestry loss and preserve the existing biomass and embedded carbon beyond historical trends. Other avoidance projects include renewable energy and carbon-capture from flue gases. In each, current emissions are reduced by improved alternatives, but existing CO2 is left untouched.

Removal credits are defined as emissions offset projects that adsorb additional CO2 back from the atmosphere in order to remove the greenhouse gas potential. This includes photosynthesis of all kinds, into timber, peat, seagrasses as well as engineered methods such as direct air capture and accelerated mineral weathering.

Global deforestation, at around 13 million hectares per year, makes up 8-12% of net emissions. As such it ranks 3rd after the USA in the country league tables. Preventing mature forestry loss, along with wider ecosystem destruction is therefore a priority for any climate strategy.

A tree stores very little carbon in the first 10 years of its life (figure 1). In any afforestation project, the bulk of the carbon captured is during the middle phase, from 15-40 years after planting to maturity, with early growth rates at a third of peak potential.

Cutting down a hectare of mature tropical forest releases an average of 629 tonnes of CO2 which will take more than a lifetime to regrow. Over the first 10 years of new planting the recapture is less than 80 tonnes CO2 per hectare.

The carbon budget (figure 2) shows that emissions must halve by 2026 to stay within 1.5 degrees of warming. This means that we do not have the time to continue emitting whilst we wait for new trees to grow and store carbon later. The atmospheric ‘pot’ will boil over in the interim.

The Oxford Principles for Net Zero Aligned Offsetting illustrate this point well (figure 3). Removals will be required, but avoidance is urgent today.

Trees grown for carbon capture – often fast growing, densely packed Sitka (spruce) or Eucalyptus (gum) trees are less favourable for wider forest benefits (apart from timber production). The recently released IPBES report argues strongly for tackling climate change and biodiversity loss together, and to this end REDD+ projects are increasingly focused on species conservation and habitat improvement. The CCB Gold framework provides certification of biodiversity co-benefits in voluntary offsets.

Vertree works with high-quality REDD+ projects with verified baselines and genuine emissions reductions. Our work helps preserve tropical rainforests alongside the wildlife and communities that live within them. These actions are critical to combat climate change today and over the next 10 years.

A premature focus just on removals, whilst well intentioned, means that immediate action to reduce forest emissions could be neglected at huge risk to the overall climate change pathway.

Sources: 

European Commission, REDD+ initiative 
2018 World Resources Institute, By the Numbers: The Value of Tropical Forests in the Climate Change Equation
Vertree, based on Journal of Environmental Management, Carbon in the Vegetation and Soils of Great Britain 1995 
2020 figures, World Resources Institute Global Forest Watch. Fored Pulse: The Latest on the World's Forests
IPCC quoted Brown et al. How Much Carbon Can Be Sequestered by Global Afforestation and Reforestation?
The Oxford Principles for Net Zero Aligned Carbon Offsetting
2021 The IPBES IPCC Co-Sponsored Workshop on Biodiversity and Climate Change
The Climate, Community and Biodiversity Alliance

How to protect and restore natural capital assets through nature based solutions

Despite our dependence on healthy land, and on coastal and marine ecosystems, we are depleting them at an alarming rate,…

Despite our dependence on healthy land, and on coastal and marine ecosystems, we are depleting them at an alarming rate, which undermines the resilience of our economies and exposes humanity to natural liabilities, including the increased risk of zoonotic disease spillover or simultaneous breadbasket failure. Protection and restoration of natural assets is therefore an essential foundation for a resilient economic system, in both urban and rural areas. The World Economic Forum, in collaboration to SYSTEMIQ, reports below.

Nature-positive policy opportunities:

Invest in Green urban infrastructure: use public and private investments to transform cities into engines of innovation, resilience and prosperity by integrating nature into their design.

Cities today face huge challenges: ambient air pollution claims more than 4 million lives annually, and there is overcrowding, congestion and enormous resource pressure with reliance on extracting “surplus” natural capital from the countryside. By 2050, 68% of the world’s population is expected to live in cities, but 60% of urban areas are yet to be built, which presents a huge opportunity for directing investments into nature-positive infrastructure, such as:

– Expanding public green spaces through large-scale planting, conversion of brown sites into ecological conservation areas and the creation of green corridors alongside existing infrastructure. Increased green space has a host of benefits, from creating jobs, to reducing urban temperatures and crime, to improving citizen health and well-being, to driving productivity and innovation. There are many micro-examples of cities investing in nature to enhance resilience, improve liveability and create jobs that could be replicated many times over. For example, in Medellín, Colombia, the local government has planted 30 green corridors around the city, helping to reduce average city temperatures by 2°C. Similarly, the local government in Durban, South Africa, developed a landfill site into an ecological conservation area and employment programme. Each of these opportunities will create localized jobs, strengthening the interest of local constituencies in supporting ecological outcomes. To seize this opportunity, governments need to invest in smart urban planning and central government should work with municipalities to help them put the right financing structures and public-private models in place, with local value-capture mechanisms (from rates to property development equity models) used to share the economics equitably.

– Using nature-positive infrastructure design to enhance the resilience of urban environments. Constructed ecosystems, including green roofs, bioretention systems and constructed wetlands are artificial, custom-built components of green infrastructure that are becoming more common in cities. The government of the city of Salford, UK, invested more than $12 billion in a constructed flood storage wetland (of more than 5 hectares) to protect almost 2,000 homes from flood risk, boost access to green space and increase biodiversity.

On a smaller scale, green roofs can reduce energy costs, capture storm water to reduce flood risk, create habitats for urban wildlife, reduce air pollution and urban heat, and even produce food. The market for green roofs is currently worth $9 billion and is set to grow by 12% annually through to 2030. Costs are falling, due to a combination of innovation and
government support; in Singapore, for example, costs fell from around $105 to $70 per square metre between 2016 and 2018, and the city’s 72 hectares of rooftop gardens and green walls are expected to triple by 2030.

Other opportunities include installing permeable pavements and cycle lanes that allow rainwater to pass into the underlying soil to reduce flood risk, support urban tree health (reducing air pollution) and provide natural water treatment.

Local governments can send a clear market signal for such green urban infrastructure by including requirements in planning permission for new buildings, and by rolling out installations across publicly owned assets.

Mobilize for large-scale Ecosystems Protection and Restoration, to mitigate growing risks from nature loss and climate breakdown, create jobs and boost rural livelihoods.

There is no pathway to achieving the goals of the Paris Agreement, nor to the Sustainable Development Goals (SDGs), without immediate protection and restoration of important ecosystems, particularly forests and wetlands mangroves, peatlands and marshes).

– Natural forests store 40 times more carbon than plantation equivalents and are hotspots of biodiversity, yet the rate of tropical forest loss (one football pitch every six seconds in 2019) has remained high for the past two decades. Mangrove forests provide more than $80 billion per year in avoided losses from coastal flooding and directly protect 18 million people in coastal areas. They also contribute $40–50 billion annually through fisheries, forestry and recreation benefits. Every $1 invested in mangrove conservation and restoration generates a benefit of $3, with conservation of existing mangroves yielding significantly higher benefits (88:1) than restoring degraded ones (2:1). Peatlands cover just 3% of the world’s land but store up to 25% of all soil carbon. Currently between 1 and 2 billion tonnes of carbon dioxide are lost from peat soils a year, despite limited benefits from the economic activities that disturb them.

Restoring degraded forests generates between $7 and $30 in economic benefits for every $1 invested. It is also a relatively low-skilled and labour-intensive exercise – an attractive proposition today with global employment forecast to decrease by up to 240 million jobs as a result of COVID-19, with Asia potentially worst hit.35 Similarly, there is a 10:1 return from mangrove conservation and restoration. Overall, new research suggests that expanding protected and conserved areas to at least 30% of our planet will result in financial and economic benefits exceeding the costs by a factor of at least 5:1 – 30% protection of our planet leads to increased economic output averaging $250 billion annually and generates additional non-monetized economic benefits from ecosystem services averaging $350 billion annually by 2050.

Some countries are already seizing these opportunities as part of their stimulus measures: Germany allocated $700 million for forest conservation and management; New Zealand aims to create 11,000 jobs in restoring wetlands and riverbanks, removing invasive species and improving tourism and recreation services on public lands; and the World Bank is providing $188 million and technical assistance to promote ecosystem restoration and disaster resilience in Pakistan, with the potential to mobilize 65,000 youths and labourers to
establish 12 new national parks. For conservation and restoration schemes to reach speed and scale – moving from individual, often subsidized, projects to systemic change that can mobilize private-sector ingenuity – both sticks (taxing pollution, closing off free access to natural resources and eliminating perverse incentives for land conversion, regulation and enforcement) and carrots (spatial planning, payments for ecosystem services designed to optimize environmental benefits, reforming agricultural subsidies, access to relevant public goods such as satellite monitoring data) are needed.

Protect and scale Ecotourism infrastructure to preserve the sector’s jobs and economic value and pave the way for further growth.

Prior to the COVID-19 pandemic, ecotourism was one of the fastest-growing subsectors of the travel and tourism industry, which was growing at a rate 40% faster than the overall global economy in 2019. Most ecotourism occurs in or around protected areas, which are estimated to receive 8 billion visits a year, generating revenue and supporting local livelihoods. The economic prize from supporting and scaling the nature-based tourism economy is evidenced by the case of Costa Rica, where the sector was growing by
more than 6% per year pre-COVID-19, contributing more than 13% of GDP and generating around 28% of direct and indirect employment. This has been supported by a raft of progressive policies – including the elimination of cattle subsidies (reducing pressure on forests) and the introduction of payments for ecosystem services.

But this source of economic value is now at risk. The global tourism industry is forecast to contract by up to 25% in 2020, with annual costs to the (largely wildlife-based) African tourism sector projected at $50 billion and 2 million job losses. Urgent action is required to support this sector in the short term. Governments should provide emergency funding and grants to private-sector enterprises, community-based organizations and conservation NGOs to maintain the integrity and functioning of the assets (aesthetic landscapes, iconic megafauna and biodiversity-rich ecosystems) upon which the industry relies. But for the sector to flourish in the longer term, it will require diversification of income streams for natural assets, most importantly through payments for ecosystem services as well as enforced protected areas. In the absence of a concerted effort to rescue this sector, an increase in land-grabbing, deforestation, illegal mining and wildlife poaching can be expected, further fuelling the vicious cycle of nature loss and economic risks.

Sealing the forest edge where it is currently exposed

Forest loss is exceptionally complex, multifaceted and dynamic. Historical patterns can be drastically altered by a change in political regime,…

Forest loss is exceptionally complex, multifaceted and dynamic. Historical patterns can be drastically altered by a change in political regime, almost overnight. New drivers of deforestation (such as more sophisticated and targeted illegal activity made possible by technology) mean interventions must constantly evolve. However, underlying almost all forms of forest loss is humanity’s accelerating demand for resources – food, commodities and land – which carve vast chunks out of tropical forest each year. Understanding patterns of loss, and underlying drivers, is critical to forming effective intervention strategies.

A research report commissioned by the Food and Land Use Coalition used a recognised “hotspot” methodology as the basis to define, both quantitatively and spatially, the current “frontier” between human development and remaining tropical forest, and the drivers of forest loss in these places. What emerges is an extremely complex and intricate pattern of human development penetrating primary forest – including roads, railways, agricultural production and human settlement. This belt of land – 600 million hectares across the tropics – is defined in this report as the “forest frontier” of the coming decade. It is within this frontier that regenerative business models must be urgently and widely scaled.

Effective intervention in just 20% of remaining tropical forest would be transformational

Together, tropical forests and their soils contain more than 900 billion tonnes of carbon dioxide equivalent – more than twice the world’s carbon budget to restrict warming to less than 1.5-degrees Celsius. But all tropical forest is not equal. Currently, 380 million hectares of primary forest – equivalent to around 20 percent of all remaining tropical forest – lies in the forest frontier. Forest at the frontier has high potential for impact, due to its strategic position. Already exposed and vulnerable through recent human activity, this forest must be immediately and decisively protected, and it is here that huge progress can be made towards protecting the around 1.5 billion hectares of forest that lies behind the frontier. Despite the potential of this strategy, it should be noted that restoration and protection efforts should not be exclusively limited to this area. Interventions must also make provision for those areas where human threat is not yet high.

Three major categories of land in the forest frontier are where alternative models must urgently be applied Geospatial analysis reveals how historical and current drivers of land use change have resulted in three land categories which dominate the almost 600 million-hectare forest frontier. These are:

• The standing forest zone. Around 380 million hectares of primary forest.g The result of undisturbed ecological and evolutionary processes over millennia. Forest that has not been disturbed by industrial scale land uses (e.g. major logging, mining, roads) but which may have some exposure to lowlevel and low-impact human use (e.g. used by indigenous communities for foraging). Highly complex habitat with extremely rich biodiversity and ecosystem services.

• The agricultural zone. Around 70 million hectares of active agricultural land. Here a combination of subsistence and commercial agriculture has converted forest into production land. Some of the most significant commodities dominating this land category are beef, soya, palm oil, coffee and cocoa – the demand for which is often driven from outside tropical forest countries. Over time, unsustainable practices often reduce agricultural productivity to such an extent that it is abandoned and left as uninhabited, degraded land – the degraded zone.

• The degraded zone. Around 120 million hectares of currently degraded land. Here unsustainable use and extraction of natural resources is occurring or has recently occurred. Land is either in transition (e.g. there has been a recent harvest or forest clearance), is under (shifting) smallscale agriculture or, such is the degree of environmental degradation (deforestation, disappearance of species, air and water pollution), the land has been abandoned altogether.

Each of these three land categories is currently underperforming across economic, social and environmental dimensions. Degraded land in particular has spread widely, causing catastrophic environmental declines over time. This in turn reduces social and economic value of the land to such an extent that it drives human re-settlement to new areas, pushing back the frontier. Current agricultural practice often has devastating environmental consequences (e.g. by degrading soils and generating pollution) whilst low productivity practices force continual expansion into standing forest – and the destruction of the environmental services it provides: water cycles, soil health and pollination. Contrastingly, the benefits currently delivered by standing forest are not sufficiently valued, or appropriately distributed by society. Forest benefits are enjoyed by the entire planet, whilst the benefits of felling the forest are accrued privately and concentrated in the hands of a few, leading to inevitable overexploitation.