Financing the Tropical Forest Conservation Act

The Tropical Forest Conservation Act is an incentive program that provides less developed countries with debt relief when they protect their forests. According to USAID, this act includes funding from both the United States federal government and private organizations. The Tropical Forest Conservation Act funds protect forests throughout all regions of the world, including Bangladesh, Belize, Jamaica, and Botswana, as well as others.

The Tropical Forest Conservation Act was originally authorized by President Bush in 2001. President Obama has continued funding this program and more nations and sources of funding are added periodically. The University of California, Santa Barbara reports that the debt structure of this program provides several beneficial effects. The program includes terms which allow a debtor to convert loans due in a foreign currency into loans due in its own currency. A debtor pays loans to a Tropical Forest Fund in its own country rather than a bank in another nation which loaned it the money. Additional leverage may be available, since in some cases the US government can purchase a developing country’s bonds for below their face value because foreign bond purchasers previously didn’t expect the developing country to be able to pay off its debt.

Conservation funds available through this program are still much lower than the amount of money necessary to completely protect the world’s tropical forests. The United States has spent $83 million since this program started, according to USAID, and Harvard claims that it will cost $15 to $30 billion a year to defend the tropical forests. A method of continual payment provides a stream of income greater than the income provided by cutting down the forest and setting up farms or industrial sites.

The United Nations has established a program called REDD which assigns a value to protecting these forests. This program is a carbon offset market. Private investors can purchase carbon credits, and sell them to other nations or industries at higher prices if the carbon offset laws become stronger in the future. The money gained from purchasing carbon credits goes to the nation where the tropical forests are located. Harvard claims that this has already provided an incentive for organizations such as banks and multinational corporations to stop development of several tropical forests, because of potential gains in a future carbon credit market.

REDD provides a method for the United States government to find private investors to finance the Tropical Forest Conservation Act. Most of the current partners who are helping the federal government pay for tropical forest protection are nonprofits. The United Nations reports that European countries, including Spain, Norway, and Denmark, are funding tropical forest protection. Norway provided $52 million in funding for 2009 to support the UN’s REDD program. This is still a long way from the $30 billion a year that Harvard claims is necessary to protect the rainforest.