An Institutional Design for Sustainable Foreign Forest Carbon Projects in Developing Countries

Abstract

Under the international climate legal regime, many tree planting and forest management activities have been conducted in developing countries with the intention to generate carbon offsets (forest carbon projects). However, studies have shown that some foreign forest carbon projects lead to severely unsustainable results. The current international institutional framework cannot guarantee the long-term environmental and social benefits. This study set out to investigate how to design institutional reforms to promote sustainable results in foreign forest carbon projects in developing countries. The study provides one possible solution to this question that lies in the existing governing systems of multilateral funds. _Part I_ reviews the international institutional framework on forest carbon projects in developing countries using doctrinal and historical approaches. _Part II_ analyses the incentive schemes and the financial streams among major project actors from developed and developing countries. _Part III_ presents a case study of China, which examines the national institutional framework and practices based on interviews and project-site visits. Based on the analysis in the previous parts, Chapter 9 confirms that multilateral funds, which invest in foreign forest carbon projects in developing countries as financial intermediaries between the North and the South, have institutional and economic advantages in addressing the problems identified in the institutional framework and in the incentive schemes. Ten measures are discussed and tailored to address identified problems, based on evidence from practice, and embedded in a workable existing system.