Forests are central to achieving net-zero targets in the private sector. As of now, forests are the most common sources of carbon offsets and have the greatest potential for carbon sequestration through forest restoration.

Securing forests to ensure sufficient negative emissions promises to turn the voluntary carbon market into a financial bubble. This will be bad for the planet, business, and the rural communities. Let me outline why an exclusive focus on carbon from forests is a bad idea and then outline an opportunity in forests that is good for the planet, good for the people, and good for profits simultaneously.

There are three good reasons why securing negative emissions from forests and discovering a price through the market is going to be a challenge. These were first identified and analysed in the early 1990s, what later became the Clean Development Mechanism under the Kyoto Protocol in 2005. These are additionality, permanence, and leakage.

Additionality refers to carbon sequestration that can happen even in the absence of targeted action. Majority of forests in western Europe and the north-eastern US grew back on agricultural land abandoned by households moving to industrial jobs. This is known as the Forest Transition. This transition has also been underway in India since the mid-90s, with steady net-positive growth.

Leakage is the opposite. Just because one forest is protected is no reason to believe that the activities that led to emissions from this forest have not been deflected to other neighbouring forests. Counting negative emissions from this forest is simply fraudulent. This is common and expected in rural contexts in India. The fuelwood has to come from somewhere, and all that changes is that the women have to walk farther, spend more time, and face more harassment. Total emissions remain the same.

Permanence is the most severe challenge. With climate change, we can expect more heat waves, dry spells, and more frequent and intense forest fires. This phenomenon is already underway in Australia, the western US, and Siberia. The Bootleg fire in Oregon burned through 90,000 acres of forest set aside as carbon offsets for Microsoft and BP. This forest, and the carbon it holds, were expected to live for at least 100 years.

Business opportunity

To protect and restore, our forests, we must create incentives and build equity for local communities to reap a fair share of benefits. Forests will be protected and restored when communities living near these forests expect to derive direct material benefits. India’s Forest Rights Act 2006 allows communities to own and manage their forests. Chhattisgarh, Odisha, and Jharkhand have already recognised this opportunity to create jobs and wealth. But this opportunity requires the private sector to step up and support the process.

By engaging directly with communities, the informal forest economy can be transformed into business transactions that are fair and transparent and incentivise sustainable protection, management, and restoration of India’s forests. If communities protect forests because they get better prices for Sal seeds, Mahua flowers, or Tendu leaves, they will protect them from fires as well as any other threats that come along. Carbon sequestration will be a side benefit.

The writer is Executive Director BIPP, Indian School of Business/Chair - IRB