Commentary
No More Price Takers: Five Disruptive Ideas for Fair Value for Forests

[Feature image: Yaeda-Eyasi Landscape REDD+ Project. Credit: Roshni Lodhia for Carbon Tanzania]

Add up all of the greenhouse gas emissions released every year from airplanes and the shipping sector and multiply it by four. That roughly equals the total emissions released, every year, by tropical forests being cut down.

We cannot meet climate goals without forests, which absorb nearly one-third of the fossil fuel emissions that humans emit each year. They’re among the most cost effective climate solutions in the toolkit. Yet financial support for forests is a constant challenge: REDD+ carbon credits continue to trade at less than $10 per ton, far below the $30-50/ton that UNEP estimates is the actual cost of large-scale, high-integrity forest protection.

Ten dollars a ton may be enough to dissuade tree clearance in some places. In many other landscapes, it is still far more lucrative to continue clearing forests for agricultural commodities.

High financing costs eat further into the actual revenues flowing to projects. And market intermediaries, though they provide important functions like liquidity and buyer-seller matching, also take a cut. As a result, the forest communities that REDD+ is supposed to support in finding economic alternatives to deforestation receive little, relative to the tremendous climate benefit they’re producing.

How do we close the gap between market price and real value, and make REDD+ a better deal for forest countries and communities? A recent webinar hosted by Forest Trends, Nature4Climate, and UNEP offered some ideas for innovating. Here are five unconventional ideas proposed by speakers to reshape the market.

Idea#1: Move to Prepayment Structures

The high cost of capital – up to 25% according to market participants – significantly erodes the value reaching communities and project activities.

Prepayment, wherein projects receive part of the money from buyers before final delivery of credits, can increase the share going directly to communities. “A huge portion of money going to the developer is to cover the cost of their capital,” noted moderator Nathan Truitt, Executive Vice President of Climate Funding at the American Forest Foundation.

“They’ve had to go and borrow this money. So whenever buyers raise the concern [of community benefits], I always say that’s something that you can control by making prepayments. You will see a lot more of the credit price flow through to communities if we don’t have to pay that cost of that capital.”

Prepayment structures also result in better outcomes, says Roselyn Fosuah Adjei, Director of Climate Change at Ghana’s Forestry Commission.

“When you’re able to do a prepayment, you show commitment…It can ward off illegalities, because the time lag between signing an APA and going through validation, verification, and delivery could take about a year to two years,” said Adjei. During that time, illegal forest loss could very well continue in the absence of livelihoods alternatives.

In this way, prepayment structures enable project delivery with immediate gains for communities alongside more structured implementation to secure longer term outcomes on the basis of a theory of change. “When there’s an upfront payment it’s some form of insurance or security. And so local communities and indigenous peoples know that you are serious,” said Adjei. “[They’ll think:] ‘Yes, let’s commit to this program. Let’s ensure that it works.’”

Idea #2: Double Down on Communication 

Bad press on REDD+ has hurt demand and depressed prices. REDD+ credits lost 62 percent of their value between 2022 and 2023, with the average price of credits falling 23 percent. More than one billion dollars in market value, virtually all of which was going to project developers in Asia, Latin America, and the Caribbean, evaporated during that period.

Setting the record straight on REDD+’s performance, and impact, came up repeatedly.

“There was a lot of negative media coverage that specifically targeted REDD+,” noted Alex Procton, Manager of Data Solutions at Ecosystem Marketplace, “A number of articles that seemed to cherry pick individual REDD+ projects and then hold up issues with those projects as issues with the entire sector.”

“The string of almost non-ending articles had a real impact, not only on the market, but on people on the ground,” says Gabriel Labbate, Head of the Climate Mitigation Unit at UNEP. “I mean, those projects were depending on funding.”

Dr Theresia Ott, Chief Adviser for Nature Solutions at Rio Tinto, pointed to fundamental misunderstandings about what REDD+ actually involves.

“I think there’s a bit of a misinterpretation of what we’re actually talking about. A REDD+ project is not a conservation project where we’re just drawing a protective line on a map, and voila, the forest is protected. It’s actually all about people,” said Dr Ott. “We’re talking about  land use change. It doesn’t happen overnight. You need decades worth of investment and guaranteed cash coming through to these communities so that stick with it long enough to see that this is actually a better way of using the landscape through demonstrated benefits.”

Dr Ott provides a powerful example from Madagascar, where communities face stark choices: “It’s not easy to hike halfway up the mountain five kilometers away from your home, cut down a tree, bury it and set it alight to convert it to charcoal, but you do it because your family is dependent on that charcoal to cook with, or the livelihood from selling it at the market.”

The old adage “You get what you pay for” comes to mind. When buyers, or journalists, lack a full understanding of how high-integrity REDD+ works and why it matters, credit prices will inevitably fail to reflect actual value and cost of getting these projects right. More education, story-telling, and data are all needed here.

Idea #3: Adopt Portfolio Approaches to Integrity 

Rather than letting individual project controversies damage the whole sector, Labbate suggests viewing REDD+ more like an insurance portfolio: “In a sense, we are a bit like an insurance company. I may not be that concerned about your particular claim. What I want to make sure is that at the portfolio level, things are okay. We do not dismiss concerns, but we believe that these risks can be managed, and that we can improve integrity as we take the market with us.”

While negative press has impacted the market, Labbate argues, “We will be able to turn the tide… we should see a change in the mood.”

Whilst criticism of the market is vital to ensure that projects represent real carbon emissions or avoidance, criticism of individual projects should not result in a loss of investment to all REDD+ projects that are so critical in protecting what is left of the planet’s forests in regions where such finance is lacking.

Idea #4: More Direct Jurisdiction-Buyer Relationships 

In Ghana’s experience, eliminating intermediaries has allowed 69% of carbon revenues to flow directly to communities while building national capacity and ownership. Direct relationships not only improve economics but create stronger partnerships and sustained engagement.

“Why do we always need middlemen?” asks Adjei. “If buyers can engage directly with countries, all the better. We have built national capacity – we are not there [all the way there] yet, but we can do our negotiations, understand our legal positions, work on safeguards and MRV.”

While buyers often prefer intermediaries for accountability and reporting, countries can build this capacity over time, leading to more sustainable and equitable outcomes.

Idea #5: Forest Country Coordination 

Forest nations have historically been price takers, accepting what buyers in the Global North offer. And while we’ve seen buy-side coordination to raise the floor for REDD+ prices (notably through the LEAF Coalition), Adjei made a powerful case for coordination on the supply side as well. “What happens [presently] is if others start accepting $5-10/ton, then your country will practically just be left behind.”

“If it’s $30 a ton that we need, and we can justify thirty, let’s wait to get thirty,” she said. “Let’s have a stronger alliance.”