ROOTS of PROSPERITY the Economics and Finance of Restoring Land

Embargoed for December 19th, 2017 9 AM CET / 3 AM EST. Embargoed for December 19th, 2017 9 AM CET / 3 AM EST. Embargoed for December 19th, 2017 9 AM CET / 3 AM EST. ROOTS OF PROSPERITY The Economics and Finance of Restoring Land HELEN DING, SOFIA FARUQI, ANDREW WU, JUAN CARLOS ALTAMIRANO, ANDRÉS ANCHONDO ORTEGA, MICHAEL VERDONE, RENÉ ZAMORA CRISTALES, ROBIN CHAZDON, AND WALTER VERGARA WRI.ORG Roots of Prosperity: The Economics and Finance of Restoring Land i Embargoed for December 19th, 2017 9 AM CET / 3 AM EST. Design and layout by: Julie Moretti [email protected] ii WRI.org Embargoed for December 19th, 2017 9 AM CET / 3 AM EST. Embargoed for December 19th, 2017 9 AM CET / 3 AM EST. TABLE OF CONTENTS 1 Foreword 3 Executive Summary 9 Introduction 10 Purpose of This Report 11 Why Is Land Degradation a Problem? 11 How Can Degraded Land Be Restored? 15 Overcoming Barriers to the Financing of Forest and Landscape Restoration 16 State of Play: Current Financing for Landscape Restoration 17 Financing Institutions and Instruments 18 What Stymies Investment in Restoration? 34 Recommendations 37 Estimating the Full Set of Benefits and Costs of Forest and Landscape Restoration 40 Distinguishing between Private and Public Benefits 41 Using Economic Analysis to Inform Decision-Making on Restoration 58 Recommendations 61 Conclusions 65 References 72 Endnotes 73 Abbreviations 74 Acknowledgments Roots of Prosperity: The Economics and Finance of Restoring Land iii Embargoed for December 19th, 2017 9 AM CET / 3 AM EST. iv WRI.org Embargoed for December 19th, 2017 9 AM CET / 3 AM EST. Embargoed for December 19th, 2017 9 AM CET / 3 AM EST. FOREWORD There has never been a more pressing moment The authors show how these barriers are to restore the world’s degraded landscapes. surmountable. For example, ministries of finance, Around 2 billion hectares of land—twice the size agriculture, environment, and energy should work of China—was once forested but is now degraded, collaboratively to integrate restoration activities with little economic or ecological value. Rarely, and offer tax credits to support the initial cost if ever, have humans wasted a valuable resource of restoration projects. Development banks can with such abandon. It has been estimated that land provide guarantees to mitigate risk, attracting new degradation costs countries more than $6 trillion investors to the sector. Investors can aggregate per year. restoration projects, diversifying their portfolios and improving financial returns. But a revolution is brewing. Governments from around the world have committed to restore 160 Policymakers can use this report to better million hectares. This is because smart politicians understand the economic implications of restoring are now recognizing that they can gain up to 30 land. The authors outline the main steps involved times their initial economic investment by restoring in carrying out economic analyses, bringing to land. It’s good for the economy, for jobs, food light the full value of ecosystem services and security, and the planet—and it provides resilience social benefits as well as the costs of degradation. in the face of a changing climate. However, despite These insights can help governments to develop these extraordinary benefits, restoration remains policy instruments and financing mechanisms markedly underfunded, and the sector faces a that promote restoration on the ground. They can funding gap of around US$300 billion per year. also help financial institutions incorporate non- monetized public benefits into financing decisions. This report provides a comprehensive analysis of Clean air, freshwater, and fertile soil may seem the benefits and costs of restoring land in countries priceless, but government economists must put around the world, from Costa Rica to Norway, and an accurate dollar value on their supply if their from Ethiopia to the United States, demonstrating countries are to meet their restoration targets and how smart policies and innovative financing can support the hundreds of millions of people whose turn the tide. livelihoods depend on forests and land. The opportunity for restoration is clear. More than Land health is national wealth. I hope that, in 20 percent of the world’s forests, agricultural land, reading this report, policymakers will recognize and pastures have suffered degradation since the restoration as an amazing opportunity for growth, mid-twentieth century, impoverishing those who and design policy to inspire change. live off the land and contributing to greenhouse gas emissions. The report finds that finance, both public and private, for restoration is inadequate for several reasons. Environmental and social benefits are difficult to monetize, and the short-term incentives to degrade land often outweigh those to restore it. A poorly designed livestock subsidy, for example, may promote overgrazing and lead to devastating Andrew Steer erosion. In addition, restoration projects are often President small and perceived as risky investments that take World Resources Institute too long to deliver a payout. Climate finance is inadequate and hard to access. Roots of Prosperity: The Economics and Finance of Restoring Land 1 Embargoed for December 19th, 2017 9 AM CET / 3 AM EST. 2 WRI.org Embargoed for December 19th, 2017 9 AM CET / 3 AM EST. Embargoed for December 19th, 2017 9 AM CET / 3 AM EST. EXECUTIVE SUMMARY Almost one-quarter of the world’s land area has been degraded over the past 50 years because of soil erosion, salinization, peatland and wetland drainage, and forest degradation. The resulting damage, in terms of lost ecosystem goods and services, costs the world an estimated US$6.3 trillion a year. Roots of Prosperity: The Economics and Finance of Restoring Land 3 Embargoed for December 19th, 2017 9 AM CET / 3 AM EST. HIGHLIGHTS Degradation of agricultural lands and forests is reducing their ability to provide fiber and fuel, agricultural products, clean air, fresh water, Forest and land degradation is estimated climate regulation, recreational opportunities, and ▪ to cost the world more than US$6.3 trillion fertile soils. The total value of these lost goods and a year—equivalent to 8.3 percent of services has been estimated at $6.3 trillion per year, or 8.3 percent of global GDP in 2016 (Sutton global GDP in 2016—and jeopardizes the et al. 2016). Land degradation also jeopardizes the livelihoods of half a billion people who livelihoods of half a billion mostly poor people depend on forests and land resources. who depend on forests and agricultural lands. Declining land productivity undermines sustainable Restoring degraded forests generates an ▪ development, threatens food and water security, estimated $7–30 in economic benefits and can lead to involuntary human migration and for every dollar invested. Despite this even civil conflict. favorable benefit-cost ratio, funding for Almost a quarter of the world’s land area has landscape restoration falls short by about been degraded over the past 50 years. This is $300 billion a year. the result of soil erosion, salinization, peatland and wetland drainage, and forest degradation. The scale Investment is inadequate for several ▪ of the resulting damage is staggering: It costs the key reasons. For example, many of the world an estimated $6.3 trillion a year (8.3 percent benefits are public goods, which are of global GDP in 2016) in lost ecosystem service difficult to monetize; the long-term nature value, which includes agricultural products, clean of investments does not match investors’ air, fresh water, climate regulation, recreational desire for liquidity; and projects are opportunities, and fertile soils (Sutton et al. 2016). Land degradation also jeopardizes the livelihoods perceived to be risky. of half a billion mostly poor people who depend Policy solutions and financial mechanisms on forests and agricultural lands. Declining land ▪ productivity undermines sustainable development, exist to address these factors. threatens food and water security, and leads to Governments can shift incentives from involuntary human migration and even civil conflict. land degradation toward restoration, implement carbon taxes and direct At the global scale, land degradation revenues to restoration, adopt an compromises the integrity of the biosphere. Biodiversity loss represents a reduction of the integrated approach across ministries, and world’s genetic resources as well as an incalculable support risk-mitigation mechanisms that diminution in the richness of life on earth. Forests attract private investment. help to regulate the global hydrological cycle, and plant vegetation and soils are a major carbon sink Adopting a standardized economic ▪ helping to offset human-caused emissions of carbon valuation framework would enable dioxide. Restoring forests and other landscapes comparison among site- or country-level should be an urgent global priority. studies. Collecting analyses in a central In 2011, the Bonn Challenge was launched repository would help prevent duplication in recognition of the importance of land of effort and provide policymakers and restoration. The goal is to restore 150 million practitioners with access to knowledge hectares of the world’s deforested and degraded that could lead to better decision-making. land by 2020 and 350 million hectares by 2030. As of November 2017, 39 countries had made commitments. These governments now need to turn the pledges they made into action on the ground by implementing feasible, affordable solutions

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