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Performance-based financing for forest conservation: Insights from REDD+

As the voluntary carbon market gained momentum, REDD+ projects began issuing forest carbon credits – tradable units sold to businesses and individuals aiming to offset their greenhouse gas (GHG) emissions. While these credits now dominate the market, experience suggests that translating forest conservation into a reliable climate change mitigation option is far from straightforward.
Published: 13 Aug, 2025
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⏲ 5 minutes Read

Halting deforestation and forest degradation is one of the key options for reducing global greenhouse gas emissions, but delivering results on the ground remains a challenge. Reducing Emissions from Deforestation and Forest Degradation (REDD, where ‘+’ refers to enhancing forest carbon stocks) originally emerged under the United Nations Framework Convention on Climate Change (UNFCCC) negotiations to incentivise low- and middle-income countries (LMICs) for conserving forests to sequester carbon. As the voluntary carbon market gained momentum, REDD+ projects began issuing forest carbon credits – tradable units sold to businesses and individuals aiming to offset their greenhouse gas (GHG) emissions. While these credits now dominate the market, experience suggests that translating forest conservation into a reliable climate change mitigation option is far from straightforward.

The South Asian Network for Development and Environmental Economics (SANDEE) and the International Centre for Integrated Mountain Development (ICIMOD) organise the Karl-Göran Mäler (KGM) Memorial Lecture biannually in memory of Professor Karl-Göran Mäler, who was one of the founders of SANDEE along with Sir Partha Dasgupta of Cambridge University.

Professor Erin Sills of North Carolina State University delivered the KGM Memorial Lecture this summer, in July 2025, as part of SANDEE’s 49th Research and Training Workshop in Sri Lanka. The Memorial Lecture was focused on the assessment of one of the world’s most ambitious performance-based climate mitigation initiatives, ‘Reducing emissions from deforestation and forest degradation in developing countries (REDD+).’

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Professor Erin Sills of North Carolina State University delivering the KGM Memorial Lecture at the 49th biannual Research and Training Workshop organised by SANDEE-ICIMOD. | Photo: Maxie Tissera, Freelance Photographer for the Institute of Policy Studies of Sri Lanka

The lecture intended to share learnings from empirical research assessing how well REDD+ has worked as a performance-based climate change mitigation tool. It revisited REDD+’s original promise, paying to reduce deforestation and forest degradation, and examined whether projects delivered measurable impacts.

Drawing on studies of REDD+ initiatives in the Brazilian Amazon and household-level information from sites across Africa, Asia, and Latin America, the lecture highlighted both methodological challenges and practical realities. It explored difficulties in constructing credible baselines (comparison or reference group) and presented synthetic control methods as a plausible way out.

The REDD+ framework’s concept is elegantly simple, as forests naturally store carbon, and protecting them should help fight climate change while preserving biodiversity and supporting local communities. Yet, it is operationally complex, as the REDD+ programme provides financial incentives to LMICs to reduce deforestation and forest degradation while enhancing forest carbon stocks.

Over time, REDD+ projects became increasingly linked to the voluntary carbon market, where individuals and companies are trading in carbon credits to offset their private emissions. Professor Sills’ lecture discussed whether these forest projects were creating impacts (additionality). Using satellite data and advanced research methods, she studied forest projects in Brazil and selected other countries, with a group of collaborators, to examine whether protected areas experienced reduced deforestation than what they would have without the REDD+ projects.

Results from Prof. Sills and co-authors’ work show that, in Brazil, only one among 12 forest projects showed a statistically significant effect on reducing deforestation. Globally, just seven out of 18 projects showed real (statistically significant and economically meaningful) impacts. Projects claimed they would offset 90 million tonnes of carbon dioxide but delivered only six million tonnes, a 90% failure rate.

The few successful projects, though, had some aspects in common; for example, projects led by government agencies and Indigenous communities were more likely to demonstrate increased conservation results. In another study, a survey of 2,000 households across 17 REDD+ project sites in countries such as Peru, Brazil, Cameroon, Tanzania, Vietnam, and Indonesia reveals a more nuanced picture of impact. As many as 30% of these project participants reported having never heard of the project or feeling that it had no relevance to their lives. Another 30% acknowledged awareness of such projects but said those had not influenced their land use practices, while around 40% said the projects had indeed led them to change their land use practices. These findings suggest that while REDD+ is having a positive effect in many countries, its reach and impact are more limited than were initially anticipated.

In wrapping up, the lecture called for moving beyond offset-based models toward approaches that provide steady, outcome-driven investment in forest conservation—linking finance to verified results over time rather than one-off projections. The takeaway was clear: cutting emissions at the source remains one of the more effective ways to slow down the effects of global climate change. Forest conservation is still vital, not only for storing carbon but also for safeguarding biodiversity and supporting ecosystem services that people depend on. To play this role effectively, it needs financing systems grounded in accountability, realism, and lessons learned from the ground. REDD+ can still be part of the solution, but only if future efforts are designed to deliver tangible, lasting results rather than promises.

Please click the video link to watch the full lecture

Author(s)

Digital Communications and Outreach Officer, ICIMOD

Environmental Specialist (Economist), ICIMOD

Programme Coordinator - SANDEE, ICIMOD

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