Unlocking Forests’ Potential in Latin America and the Caribbean  

˙ Voces

Tropical forests, which cover 6 percent of Earth, are our planet’s largest natural carbon sink and our first line of defense against climate change. Even with massive human effort at reducing emissions, reaching the 1.5-degree target is not possible without forest restoration.   

Latin America and the Caribbean (LAC), whose forests hold 34 percent of global carbon mitigation potential, offer unique environmental and economic opportunities presently undermined by weak policies. In the past fifty years, 17 to 20 percent of the Amazon has been destroyed, making the Agriculture, Forestry, and Other Land Use (AFOLU) sector the top sectoral emitter (40 percent) in LAC. However, reforesting 20 million hectares could result in significant carbon sequestration, balance ecosystem service and biodiversity conservation, and yield US$23 billions in net benefits over 50 years. LAC must thus act quickly to safeguard biodiversity and secure forests’ potential as buffers against the climate crisis. Otherwise, the region will miss a critical opportunity to leverage its unique natural potential to tackle climate change while promoting sustainable productive activities.  The analysis below presents the case of deforestation in Brazil and Colombia. It then proposes structural changes and policy recommendations to reverse deforestation, highlighting Costa Rica’s success as a regional example. It also touches on relevant discussions held during COP28 regarding legal improvements for halting deforestation.  

Deforestation trends in Brazil and Colombia 

Brazil and Colombia are among the five countries globally with both the largest tropical forests and the highest cost-effective mitigation potential from forest protection measures. As recognized by Lula and Petro during COP28, their ambitious goals under the Paris Agreement will require structural improvements beyond the initiatives for reducing carbon emissions from deforestation and forest degradation (REDD+).  

Brazil’s successful forest strategy from 2004 to 2014 revolved around forest conservation policies and stronger monitoring and enforcement mechanisms. However, since 2014, deforestation increased due to weakened environmental institutions, changes in the land law, and subsidies to cattle ranching. This trend jeopardizes the value of the Brazilian rainforest, which is estimated at a total value of US$317 billion per year by the World Bank.  

In Colombia, deforestation peaked after the 2016 peace agreement with FARC in response to the lack of governmental presence and economic opportunities. As a result, the US$18.1 billions per year in natural capital was lost in 2021 the Colombian Amazon Basin due to deforestation.    

Critical policy to promote forest restoration and management 

At the macro level, countries’ top priorities should be implementing more stringent forest protection policies, improving effective forest law enforcement, and monitoring at the national, regional, and local levels. Also urgent are efforts to strengthen land governance, such as by eradicating land grabbing through modernized land registration and livestock tracing systems.  

Brazil and Colombia are aware of this need. During COP28, Lula and Petro discussed their aggressive efforts to protect forests and slash deforestation rates, claiming their governments have cut deforestation rates by 50 percent and 69 percent, respectively, yet upcoming drought periods threaten to unravel these successful trends. Significantly, Lula proposed a fund called the “Tropical Forests Forever Fund” at COP to finance forest conservation in 80 countries via sovereign wealth funds and private investors. While a salient idea, Brazilian and Colombian forest protection policies remain key.  

Two specific policy tools to stymie deforestation are clear carbon market regulations and better Payments for Environmental Services (PES) schemes. First, a robust institutional and regulatory framework that monitors and verifies carbon credits to avoid double counting and guarantee additionality is vital. Second, effective carbon offset strategies must benefit locals through PES, as monetarily incentivizing farmers and ranchers to transition their land into forest area is critical.  

Some progress on carbon markets has been made in both Colombia and Brazil. In Colombia, a carbon tax with an offset component is in place, and an emissions trading system is still in the development phase. Law 1931 of 2018 created a national cap and trade system (Programa Nacional de Cupos Transables de Emisión de Gases de Efecto Invernadero, PNCTE). Although implementation studies have been conducted, regulations are still under design and political support is limited.  

In Brazil, a bill aiming to regulate the carbon market that was presented in October 2023 is now under review by Congress. The proposed legislation would establish a cap and trade system for operators emitting over 25,000 tons of CO2e per year (except for agricultural production) and a complementary voluntary market.    

Internationally, there were high hopes that COP28 would design a new mechanism under Article 6.4. of the Paris Agreement that would enable countries to sell offsets to other governments, companies, and individuals. However, disagreement between the European Union (EU) and the United States led to failure on setting the rules needed to trade offsets bilaterally. On the one hand, the United States was pushing for a less strict regulation, while the EU, supported by Latin American and African nations, advocated for stronger environmental and human rights guardrails. Negotiators expect to try for a deal again at COP29.   

Strategy two, PES, incentivizes forest conservation by offering an alternative income to those deforesting for grazing, agriculture, illegal mining, and other activities. Although Brazil and Colombia have implemented these schemes, in most cases they lack both social and environmental safeguards and lack verification, transparency, and monitoring (VTM). Poor financial benefits and broad spatial distribution of forest areas are also limitations to their successful implementation.  

Costa Rican policy strategies and potential replication across LAC  

Costa Rica provides a model that Brazil and Colombia can adopt to address PES challenges, despite not having a functioning carbon market at present. First, Costa Rica built an inclusive scheme. By consulting the public as a first step to understanding the drivers of deforestation, Costa Rica designed a national REDD+ strategy that included the first PES program in the region. The program’s broad coverage, inclusive funds distribution, and transparency mechanisms explain its success, as it also includes a benefit-sharing plan for local communities under which funds are distributed among target populations, including indigenous people, women, forest landowners, and even traditionally ineligible non-landowners. Second, to guarantee VTM, PES contracts are registered, publicly available, and fully monitored to prevent double counting of carbon stocks. The PES program currently enrolls over 680 thousand acres, paying landowners about US$60 per 2.5 acres annually and is expected to bring in U$60 million by the end of 2025.   

The strategies described above could be replicated across LAC by considering countries’ specific socioeconomic and environmental contexts. However, any potential blueprint hinges on stronger governmental action, community engagement, international cooperation, and collaboration with businesses, social movements, and the financial sector. To ensure success, efforts should be organized around the relevant stakeholders interacting with the land, and their active participation in the co-design and implementation of policy interventions and incentives. Finally, these strategies should highlight that hindering reforestation provides ecosystem services and functions beyond carbon sequestration that are also crucial to tackle climate change.  

Juanita Fonseca is a sustainability entrepreneur, gender advocate, and international lawyer with expertise in assisting clients in navigating complex energy, sustainability, and governance issues. Fonseca is also the co-founder and CEO of coMpower, the first nonprofit aimed at designing a just Colombian energy transition by empowering and training young women to become decision makers.


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