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How planting trees turned into big business – Miguel Calmon and Alan Batista

How planting trees turned into big business

Photo: Nattapol Sritongcom/123RF.com

We live in a time when records of the planet’s high temperatures have been broken year after year, almost uninterrupted since 2001. The hottest of all was 2016: 0.99 degrees C above the 20th-century average, as announced in January by NOAA, the American institute for study of meteorology, oceans, atmosphere and climate. Facing this scenario, many pathways are being created in order to comply with the Climate Agreement, signed in Paris in 2015, and to contain the rise of the planet’s temperature to less than 1.5 °C by 2100.

It so happens that reducing deforestation and reforestation – in other words, keeping forests standing and increasing their areas – is currently the most cost-effective way to mitigate global warming, according to 2007 Mckinsey Study . That is, planting trees brings enormous benefits to the climate and the planet, and moreover: depending on the plantation model, it can also be an excellent business from a financial point of view.

So, this is the moment that forest restoration and reforestation should take off, gain scale and enter into any portfolio of investments. Attracting public and private capital to new business models in this area will also be instrumental in meeting one of Brazil’s NDC targets (the country’s commitments in the Paris Agreement) to restore and reforest 12 million hectares by 2030.

Investing in trees while considering financial profitability is not new in Brazil. This is the case with the so-called planted forests (pine and eucalyptus). In the case of eucalyptus, productivity has tripled over a period of 40 years. Most of the success obtained here can be attributed to the tropicalization of forestry, that is, through our own way of cultivating these trees. Something that was only possible thanks to resources contributed through research and development (R&D).

The same can be done with tree species native to the country. The development and application of technologies will create the basis for a new tropical forest economy, which in turn will open the way for large-scale reforestation. Among the many possible planting models, there are those with economic purposes, which will allow reforestation with native species, but at the same time make commercial use of them.

So what is the impediment to more investment in forests? One of the main barriers noted in international discussions – as well as in a series of workshops promoted in the country by the VERENA Project (Economic Valorization of Reforestation with Native Species) —is the lack of R&D incentive for native species. VERENA has identified that it is necessary to implement a pre-competitive program in this sense – a wish to invest.

For example: why are native species not yet used on a commercial scale? Which species have already been domesticated (are they within a production system, with some degree of improvement)? How can we stimulate/adopt plantations with biodiverse models (several species cultivated within the same system)? Where and in what state of conservation are the research banks and genetic material of these species (germplasm)? Why has eucalyptus become a success story? From there, it will be possible to identify which native species can achieve swiftly increased productivity, which will yield financial returns more quickly, which ones will be more valuable in the market, and so on. This will make forests part of the future vision of investors.

R & D programs take decades to show strong results, which entails major investments over a longer period of time. But the good news comes again from the Paris Agreement. Article 10 of the climate treaty establishes a long-term vision of the importance of developing and transferring technologies to reduce greenhouse gas emissions. This means that developing countries will be able to raise funds through bilateral and multilateral funds for the purpose of funding technologies such as development of arboreal species.

There is no doubt that the implementation of a pre-competitive and robust program will, in the short term, improve the business environment for reforestation with native trees (less risk to the investor, with prospects of increased productivity and, consequently, higher returns economic). In short, the accelerator for the implementation of what was agreed upon in Paris will go affect development of native species. How about investing in this area?

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