“ROOTS OF PROSPERITY: THE ECONOMICS AND FINANCE OF RESTORING LAND”

“ROOTS OF PROSPERITY: THE ECONOMICS AND FINANCE OF RESTORING LAND”

December 19TH, 2017

Thank you, Andrew for this kind introduction. It is a pleasure being here in the launch of a reportthat will undoubtedly contribute to galvanize action around land use, a crucial driver in the transition towards a low-carbon economy.

As we have known thanks to the research conducted by WRI and the New Climate Economy, land use is, along with energy and cities, the key to transforming our economies and achieve better growth and a better climate.

But finance and policy action in Land Use is perhaps even more urgent. Restoration and reforestation are the only way to capture all the carbon emissions concentrated in the atmosphere. This is particularly urgent: in 2016, carbon dioxide annual concentration in the atmosphere reached a record level of 400 parts per million.

Moreover, the trends in population growth and income will require us to provide more and higher-quality food for everyone around the world. We need to be able to feed a growing population and provide them with a better quality of life, ensuring their well-being.

Global population is set to increase 33%, by 2050 reaching 9.7 billion people. An equivalent to a country like France every year. GDP per capita is expected to increase 80%, with new consumers added to global markets, especially in the developing world.

Therefore, we will have to close a gap of 60 percent between the amount of food available today and that which will be required by 2050, according to figures by WRI. Yes, accelerating the transition on land use can help us achieve a better future. I am talking here about two crucial goals that will define whether we want to live in a more prosperous, equitable and environmentally stable future or an uncertain fate plagued by scarcity, inequality and acute natural disasters.

First, we must find ways to increase the productivity of natural resources, particularly land use and agriculture, or we deal with the consequences of neglect. Second, we must contain global warming under 2 degrees C and strive to achieve the 1.5-degree goal so as to avoid the worst consequences of climate change. Land restoration will be key in reversing the current unsustainable path we are in and will determine our march towards a better future. We should be investing heavily in restoration projects. However, we are now far from achieving success.

Annual financing needs for restoration projects are around 350 billion, while only 51 billion are invested each year: the financial gap is around 300 billion per year. Private investment is scarce and most of the burden lies on governments. 80% of the 51 billion invested nowadays comes from public sources, and private investment is around 10 billion a year.

This is why the new report by WRI is extremely valuable: it helps us identify precisely which are the barriers that are hampering investments to flow towards restoration and provides concrete recommendations on how to address each barrier.

The first and most harmful barrier to investments in restoration is that most environmental and social benefits of natural landscapes usually have no market value. This has resulted in enormous social and economic losses: healthy landscapes allow us to have more agricultural products from the resources available, they allow us to live with cleaner air, they filter rain water into underground aquifers for human use, they help us regulate climate.

Luckily for us, this report points to the solution: policy schemes that allow societies to capture this valuable ecosystem services and internalize them, like Payment for Ecosystem Services andcarbon pricing schemes. Second, we must address the fact that, under current conditions, incentives to degrade land outweigh incentives to restore it: subsidies to agricultural inputs and the lack of law enforcement in illegal logging lower the costs of degrading land. We must shift incentives towards restoration by eliminating agricultural subsidies and introduce financial incentives to restore.

This is exactly what Costa Rica did when, in the 1990s, the government eliminated subsidies to the beef industry alongside a whole agriculture sector reform: it introduced a Payment for Ecosystem Services scheme, funded by a fossil fuel tax. As a result, forest cover increased from 29% in 1991 to 54% in 2015.

 

Third, funding for restoration often comes only from environmental budgets, which tend to be smaller than those for economic development and fiscal policies. Governments should involve the ministries in charge of agriculture, finance, economy and social development so that they can also contribute with more funds. Brazil, Ethiopia and the US are already doing this. Furthermore, restoration policies or projects should be framed in terms that are relevant to governments, such as poverty alleviation, job creation, migration, and food and water security.

These are some concrete, fact-based examples of the various policy solutions governments can use to engage in full-scale restoration efforts. I believe the role governments must play in this is particularly fundamental. Even if the private sector is becoming more and more involved in sustainable development and responsible business, ultimately, governments have a major responsibility to care for the interests of present and future generations. They should be the ones leading the charge against the hurdles that hamper effective action.

Policy-making is definitely a wicked task and we know that there are many challenges along the process of formulating and implementing policies. However, an insightful diagnosis along with accurate recommendations can make this challenging path a lot easier. Congratulations to WRI for their great contribution in this regard by elaborating the report we are presenting today.

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