5 promising financing options for urban forestry in India

Unlike urban farming or agro-forestry, urban forestry provides products and services that are largely intangible. How can you charge someone for breathing fresh air? Therefore, a viable revenue model cannot be developed easily.

Authorities usually rely on grants from government, bilateral/multilateral organisation, foundations to meet operational costs. Many NGOs support urban forests through local initiatives. This has proven successful in many places. For instance, London was declared as the world’s first “National Park City” in July 2019, with at least 50% of the city covered by either green or blue spaces, largely built on support from the city authorities, public mobilization and NGOs.

However, for local governments stressed for funds, additional revenue may be needed to ensure that urban forests are developed, monitored and enhanced. Maximizing the value of urban forests ecosystems in disaster risk reduction, groundwater recharge or thermal regulation requires planning of the forest space. Further, implementing novel techniques for monitoring, like using LiDAR for measuring carbon stock in urban forests, require technology and human resources. To achieve these results, high-value revenue options around urban forests need to be explored. Let us discuss 5 of these:

1. CAMPA Fund for urban forests
2. Promoting local livelihoods around nature
3. Privatizing green spaces and PPP models
4. Payment for Ecosystem Services (PES)
5. Trading carbon credits from urban forests

CAMPA Fund for urban forests

According to the Compensatory Afforestation Fund Management and Planning Authority (CAMPA) Act, 2016, a company diverting forest land must provide alternative land to take up compensatory afforestation and pay to plant new trees in this alternative land provided to the state. The loss of forest ecosystem must also be compensated for by paying its net present value (NPV).

In July 2019, the Supreme Court of India authorized the transfer of unused compensatory afforestation funds amounting to INR 54,000 crores (~USD 7.5 billion) to the new National Authority, which will be disbursed to states for afforestation activities. According to the law, preference should be given to land in continuity with forests. If such land is unavailable, degraded land can be afforested. Urban forest establishment, maintenance and research could be added to the list of applicable areas to disburse this fund. This could even enhance the green spaces promoted under existing government initiatives like Smart Cities Mission and Atal Mission for Rejuvenation and Urban Transformation (AMRUT), if the different departments are willing to work together.

Promoting local livelihoods around nature

Eco-tourism around urban forests ecosystems is one option that will promote conservation and provide livelihood options. This will enlist the community’s willingness to safeguard these resources and promote sustainable growth.

The entrance fee amount for tourists can be calculated through valuation tools like the Travel Cost Method or the Contingent Valuation Method. The Travel Cost Method assesses the cost of the service in question (tourism and recreation) by considering the amount visitors spend to reach the location. The Contingent Valuation Method simply surveys people’s willingness to pay to enter such a tourist location. This method was employed to value the urban forests of Washington, D.C.

Fruit orchards are another viable option in cities like Bengaluru or Dehradun, that have native fruit-bearing tree species. Fruit orchards can be maintained by the local authorities, who can provide contracts to local fruit-sellers. I have observed this in the Forest Research Institute (FRI) campus of Dehradun, where fruit vendors collect litchis (Litchi chinensis) during summers.

Privatizing green spaces and PPP models

I ran a poll on Instagram (32 people responded) to see if people would be open to such an option. Surprisingly, they are! Private owners conserving nature is a viable option, preventing the “Tragedy of the Commons“.
There have been instances where developers create green and blue spaces, charging a premium (up to 5-15%) for this exclusive real estate that lies close to nature. While this has drawn criticism (because nature is viewed as a public good and should not be privately sold and bought), one cannot deny that this protects urban natural spaces. There is, however, no safeguard against the private party converting the urban forest to other use, if a tempting opportunity arises. Many refrained from answering that poll for this reason.

A more palatable option (according to my second poll) is to keep the urban forest as a public good, but (fully or partially) financed by a private party/parties. This is called a Public-Private Partnership (PPP) model and has been successful for urban development in India. For example, a PPP model for urban nature tourism collectively financed by corporate houses under their CSR initiatives would be a viable option.

Payment for Ecosystem Services (PES)

PES has already been used to good effect to safeguard ecosystem services from forests to cities. Economic valuation of the ecosystem services from urban forests will give us an estimate of the monetary value of urban forests. This amount could then be charged from the users based on the use of urban forests and practicality.

The classical option would be to charge a cess or tax on the users of these services. However, this option would be unlikely to succeed in Indian cities where such taxes are difficult to enforce and recover.

One example PES for urban forests could be employed by communities living close to urban forests and deriving its benefits directly. A payment for this urban forest could be charged as part of the maintenance fee that residents pay to their Residents Welfare Associations (RWAs). RWAs can manage this community-owned Urban Forest Fund for long-term nourishment of the urban forest. Local NGOs can support such initiatives in communities, at least in the beginning.

Another example of PES, which is well established in the world, is carbon trading in voluntary markets.

Trading carbon credits from urban forests

Finally, let us review an option that is viable but unlikely to materialize in the near future. Carbon trading is a popular mechanism of reducing Greenhouse Gas (GHG) emissions, and implementing the “polluter-pays” principle. Many municipalities of the United States are piloting a voluntary carbon market, where the municipality can sell credits to private players.

After the Clean Development Mechanism (CDM) stalled, India has been working with the World Bank to establish its own voluntary carbon market. A component of this carbon market could be around urban forests, enabling private capital to flow into urban green spaces. Developing a carbon market for the unique conditions of an urban forest would require a separate reference level, and customized protocols for its maintenance and carbon stock measurement. If developed and adopted, India would be one of the first operationalize carbon credits around urban forests. India has the capacity for this, considering the successfully implemented PAT scheme, a form of market-based carbon trading.

The ethical question: Is it right to want revenue from nature?

Urban forests are “commons property”, as all nature is. That is why, the Tragedy of the Commons comes into play. It seems wrong to want to look for a business model or revenue stream to build and maintain nature. However, in a world where land is increasingly stressed for a variety of economic activities, “common property” is first to suffer for private economic gains. Conservation of natural spaces will only work if you allow it to also support livelihoods. This means that we acknowledge and derive the economic value from these spaces. Otherwise, it will be exploited. So why not make this formal and create a win-win situation?