Which forest conservation programs can replace subsidies that encourage deforestation? No single program works everywhere. The most credible replacement is a package: redirect the most harmful agricultural support toward public goods and a practical farmer transition, then use forest-focused finance—such as payments for ecosystem services (PES), ecological fiscal transfers (EFTs), and results-based REDD+ funding—to pay for verified forest outcomes.
The right mix depends on the commodity and land-use decisions driving forest loss, farmers’ need for income and inputs, land tenure, administrative capacity, and whether forest results can be measured. Removing a subsidy without replacing the service it provided can push costs onto farmers or shift production elsewhere. Reform should therefore change the incentive while preserving viable livelihoods.
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What should replace a deforestation-inducing subsidy?
Start by separating two functions that are often bundled together in a harmful subsidy. One function may provide legitimate support—credit, fertilizer access, roads, research, risk protection, or a predictable income. The other may reward expansion into forests, excessive input use, or production in unsuitable locations. Reform can retain the useful function while removing the land-use signal that causes damage.
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A joint FAO, UNDP, and UNEP report recommends phasing out the most distortive and environmentally or socially harmful measures, while redirecting resources to public goods and services. Its examples include agricultural research and development, infrastructure, and decoupled fiscal support that is not tied to producing more of a forest-risk commodity. This approach recognizes that a blanket cut can hurt smallholders without changing the underlying market incentive.
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In practice, a replacement package may combine targeted e-vouchers, extension, digital advice, soil-health information, crop diversification, climate-smart technologies, and more efficient fertilizer support. The World Bank’s FoodSystems2030 projects illustrate these designs. Bangladesh’s pilot uses e-vouchers with extension and digital services. Zambia’s program adds a digital farm registry, soil information, extension, and soil-health practices to a more diverse targeting model. Ghana is moving from government-supplied inputs toward private-sector delivery supported by digital platforms. Tanzania combines soil maps, fertilizer options, extension, and farmer registries. Malawi links fertilizer-support e-vouchers and digital registration with crop-diversification incentives and payments for ecosystem services.
These are program designs, not proof that one model is universally superior. A replacement should be tested against the actual reason farmers use the original subsidy: price, liquidity, risk, lack of advice, weak markets, or political allocation.
Pay for ecosystem services
Payments for ecosystem services compensate land managers or communities for maintaining or improving services such as carbon storage, biodiversity, water regulation, or non-timber forest products. The World Bank’s forest-options analysis presents PES as a possible domestic forest-protection mechanism and notes that payments can potentially be stacked across several services when rules permit.
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Use ecological fiscal transfers
Ecological fiscal transfers adjust money moving between national and subnational governments so that maintaining forests or other environmental assets affects the allocation. They can make conservation fiscally visible to municipalities or provinces that otherwise gain more from clearing land than protecting it.
The World Bank report gives the Republic of Congo as an illustrative policy option: internal transfers of oil revenue could be linked to maintaining stable forests. The example is not evidence that a scheme is already operating there. An EFT requires a transparent formula, reliable environmental data, a clear recipient government, and protections against penalizing jurisdictions for factors outside their control.
Use REDD+ and results-based finance as complementary funding
UN-REDD describes grants and concessional loans as useful for upfront implementation and calls for more public and private results-based finance for actions that reduce emissions or increase forest-carbon capture. REDD+ can therefore help fund enforcement, tenure work, monitoring, and community programs, but it does not replace agricultural or governance reforms that create the pressure to clear forests.
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Malaysia’s REDD Plus Finance Framework illustrates two possible instruments: a market-based Forest Carbon Offset (FCO) and a non-market Forest Conservation Certificate (FCC) focused on non-carbon benefits. The framework describes a registry intended to prevent double counting or double financing and lists equity, transparency, and performance-relatedness as benefit-distribution principles. Those features belong to Malaysia’s framework; another country would need its own legal, accounting, and social safeguards.
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Reform credit and commodity-linked incentives
Deforestation pressure can enter through loan conditions and sector subsidies rather than a direct payment for clearing. Conservation International reports pilots that add sustainability and environmental criteria to agricultural credit in Colombia and Brazil. It also reports a Philippines pilot intended to build mangrove-friendly practices into salt-production subsidies and a Fiji pilot involving organic fertilizer alternatives for non-sugar crops.
This lever can reach farmers who never receive a forest payment. A lender or government can make better terms conditional on a verified land-use standard, traceability, restoration, or compliance with social safeguards. The condition must be practical: if documentation is impossible for small producers, credit may simply move to informal lenders.
How the main alternatives differ
| Program | Primary target | Typical funding source | What must be measured | Main risk |
|---|---|---|---|---|
| Repurposed agricultural support | Input, income, infrastructure, and production incentives | Redirected domestic agricultural budgets | Farmer access, adoption, income, and land-use outcomes | New support still rewards expansion or intensive input use |
| Payments for ecosystem services | Land managers and forest communities | Public budgets, donors, or environmental finance | Service delivered, forest condition, additionality, and compliance | Exclusion of customary users or payment for results that would have occurred anyway |
| Ecological fiscal transfers | Subnational governments | Intergovernmental transfers, potentially linked to domestic revenue | Forest retention or other environmental performance | Weak data or a formula that rewards jurisdictions for circumstances they do not control |
| REDD+ results-based finance | Programs that reduce emissions or increase forest carbon | Public and private results-based finance, plus grants and concessional loans | Emissions, carbon stocks, safeguards, and leakage | Delayed payments, uncertain demand, or double counting |
| Credit and commodity criteria | Loans, value chains, and sector subsidies | Public credit programs, banks, buyers, or blended finance | Eligibility, traceability, environmental and social compliance | Smallholders lose access to finance if standards are costly or unclear |
Country examples and what they demonstrate
The examples below show the range of policy levers. They describe projects or pilots; the cited material does not establish a measured reduction in forest loss for every one.
| Country or group | Instrument described | Interpretation |
|---|---|---|
| Philippines | World Bank input-support reform with crop diversification; a separate pilot linking salt subsidies to mangrove-friendly practices | Input policy and a sector-specific subsidy can be addressed in parallel |
| Zambia | More diverse targeting, digital farm registry, soil information, extension, and soil-health practices | Better targeting and agronomic support can replace a broad input subsidy |
| Bangladesh | Fertilizer-support e-vouchers with extension, digital services, and climate-smart practices | Digital delivery can preserve access while changing how support is allocated |
| Ghana | Shift from government-supplied inputs toward private-sector delivery through digital platforms | Market delivery can be combined with public targeting and oversight |
| Tanzania | Extension, soil maps, fertilizer options, and farmer registries | Advice and site-specific recommendations can reduce inefficient input use |
| Malawi | Fertilizer e-vouchers, digital registration, crop-diversification incentives, and ecosystem-service payments | A transition package can join farm support with forest-related incentives |
| Brazil | World Bank support to align agricultural policy; a separate credit pilot adding environmental and social criteria | Budget reform and lending standards can reinforce each other |
| Colombia and Fiji | Sustainability criteria for agricultural credit in Colombia; organic fertilizer alternatives for non-sugar crops in Fiji | Credit conditions and input substitutes are options where a direct forest payment is unsuitable |
How to design a replacement program
- Identify the actual forest-loss driver. Map the commodity, road, credit condition, input, land-tenure problem, or local government incentive associated with clearing. A fertilizer subsidy and a cattle-credit program require different reforms.
- Separate beneficiaries and harms. Determine who receives the existing support, which part improves livelihoods, and which part encourages expansion, excessive inputs, or production in high-risk areas.
- Choose a transition service. Replace lost access with an e-voucher, extension, digital advisory, soil testing, crop-diversification support, insurance, market access, or another service farmers can actually use. Set eligibility rules that include women, tenants, customary users, and remote producers where relevant.
- Add a forest instrument when the outcome is measurable. Use PES for contracted land management, an EFT when subnational budgets drive the problem, or results-based finance when emissions and safeguards can be credibly measured. Do not promise a carbon payment before legal ownership and accounting rules are settled.
- Define tenure and benefit sharing. State who can enroll, who receives money, how communities consent, and how disputes are resolved. Payments should not transfer control of forests without recognizing existing rights.
- Build a monitoring baseline. Record forest cover, degradation, production, yields, incomes, input use, and participation before the reform. Use a consistent method to distinguish program results from weather, commodity prices, migration, or clearing shifted to another area.
- Publish the rules and transactions. Disclose eligibility, payment formulas, recipients, monitoring results, grievances, and any credits or certificates issued. A registry can help prevent double counting or double financing, as Malaysia’s framework proposes.
- Phase and adjust. Pilot in locations representing the main drivers, audit the results, and revise payment levels or delivery channels before scaling. A pilot demonstrates feasibility, not impact, until an evaluation shows what changed relative to a credible comparison.
Monitoring, integrity, and fairness
Forest additionality is the central test: did the intervention prevent loss or improve forest condition beyond what would have happened without it? Remote-sensing data can detect canopy change, but it cannot by itself establish who caused the change, whether a community consented, or whether clearing moved across a boundary. Combine spatial data with field checks, administrative records, and community reporting.
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Leakage must be checked at the landscape or jurisdiction level. If a farm stops clearing inside a project boundary but production expands nearby, a project-level success may not represent a regional reduction. Permanence also matters: a short contract cannot guarantee that stored carbon or restored habitat will remain for decades.
Benefit distribution should be transparent and performance-related without making vulnerable people absorb all the risk. Malaysia’s framework identifies equity, transparency, and performance-relatedness as principles, but those principles need operational rules: public payment schedules, accessible grievance channels, independent audits, and clear treatment of customary tenure.
How much money is available?
The scale of the agricultural-support problem explains why reform is attractive. A joint FAO, UNDP, and UNEP report says 87% of USD 540 billion per year in support to agricultural producers consists of measures that are often inefficient, inequitable, price-distorting, harmful to health, or damaging to the environment. It projects agricultural support reaching USD 1.8 trillion by 2030 if current trends continue. The host landing page does not state the report’s publication year, so these figures should be treated as undated until the report itself is checked.
The World Bank says FoodSystems2030 provided USD 83 million in implementation grants to seven countries to test approaches to repurposing agricultural support; that is program funding, not a global estimate of replacement costs. UN-REDD reports USD 1 billion in REDD+ financing mobilized since its inception, including USD 350 million in results-based payments. These pools can support transition and forest action, but they are not interchangeable: domestic budget reform, grants, concessional finance, and performance payments have different conditions and time horizons.
How to choose among options
Use a decision screen rather than a universal ranking. The available sources do not provide a cross-country cost-effectiveness league table or a single figure for forest loss avoided by these programs.
- Driver fit: Does the instrument reach the decision causing forest pressure—inputs, credit, commodity demand, land allocation, or local-government revenue?
- Livelihood fit: Can farmers retain finance, advice, inputs, and viable income during the transition?
- Forest additionality: Is there a measurable outcome beyond business as usual?
- Governance and tenure: Can authorities enforce rules, recognize rights, include communities, and resolve disputes?
- Finance durability: Is funding predictable, and can the program survive a change in commodity prices or government?
- Integrity: Are results, payments, credits, and certificates reported clearly without double counting or double financing?
What the evidence does—and does not—show
The country projects and pilots establish that governments and partners are testing these mechanisms. They do not establish that every pilot has already reduced deforestation, nor that a particular instrument is cheapest or most effective everywhere. Outcomes depend on implementation, enforcement, farmer response, tenure, market conditions, and the quality of monitoring.
The defensible conclusion is therefore conditional: repurpose harmful support, provide a workable transition, and add forest finance matched to measurable outcomes. Where governance is weak, enforcement and tenure reforms may be prerequisites rather than optional additions. Where forest performance can be verified, PES, EFTs, or REDD+ results-based finance can make conservation financially visible. A program should scale only after transparent monitoring shows that farmers are better supported and forests are better protected than under the original subsidy.
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