Putting an end to the destruction of tropical forests has been the aim of several multilateral mechanisms, both past and present. What they all share, however, is that they have largely failed to measure up to the scale of the challenge. In some cases, they even cause more harm than good, particularly to indigenous and local populations. Brazilian President Lula da Silva is currently promoting a new billion-dollar initiative to be presented at the UN Climate Change Conference COP30 in Belém, which is expected to finally bring about the long-awaited progress: for the climate, for nature, and for the people who inhabit it. However, this initiative also has its pitfalls.
Uwe Witt is Senior Advisor for social-ecological transformation at the Rosa-Luxemburg-Stiftung.
The Core Concept
TFFF is the new acronym (referred to as “T-Triple-F” in NGO circles). It stands for “Tropical Forest Forever Facility”. In essence, participating Tropical Forest Countries (TFCs) will receive annual payments from a fund (the “Facility”) for preserving their forests largely intact. If deforestation occurs, the disbursements will be sharply reduced. Overall, this approach aims to provide three times as much non-repayable funding for forest conservation as previous efforts.
Controversially, the payout fund is financed through returns from capital markets. To generate these, high-income countries or private investors are expected to contribute first a capital base targeted at 25 billion USD, either interest-free or at very low interest rates. With this “sponsor capital”, TFFF plans to issue bonds on international capital markets at four times that amount. In this way, TFFF aims to mobilize a total of 125 billion USD.
This pooled debt-based capital forms the “Tropical Forest Investment Fund” (TFIF), which invests in a portfolio of fixed-income securities to generate profits exceeding the fund’s interest costs. The net proceeds then fund payments to tropical forest countries. According to calculations based on recent market data in the third TFFF draft proposal from August this year, a net return of 3.4 billion USD could be achieved. This sum would enable payments of 4 USD per hectare of forest cover. If the TFIF yields lower returns, the per-hectare payments would decrease accordingly.
The sanctions mechanism could be a powerful lever: if a country’s forest loss over the past three years averages 0.3 percent per year or less, it loses 100 shares of the proceeds for every hectare of forest loss. At 4 USD per hectare, this deduction acts as a deforestation penalty of 400 USD per hectare of destroyed tropical forest. For deforestation rates between 0.3 and 0.5 percent, the number of shares deducted in penalty doubles to — according to this example — 800 USD per hectare. A deforestation rate exceeding 0.5 percent results in exclusion from the mechanism. Comparable rules apply to degraded forests.
For example, if a participating country has 200 million hectares of tropical rainforest that it has successfully protected over the past three years, it could expect annual payments of 800 million USD. However, if it records an average annual deforestation rate of 0.4 percent during this period, only half as much funding would flow to the state under this scheme.
Example calculation:
If a participating country has 200 million hectares of tropical rainforest that it has successfully protected over the past three years, it could expect annual payments of 800 million USD (at 4 USD per hectare). However, if it records an average annual deforestation rate of 0.4 percent (800,000 hectares), it would only be entitled to payments for 100 million hectares [200 million – (100 * 600,000) for the first 0.3 percent of destroyed forest area, minus (200 * 200,000) for an additional 0.1 percent of destroyed forest area]. Hence, only USD 400 million per year would flow to the country.
According to the proposal draft, a forest consists of trees taller than 5 metres with canopies covering at least 20 to 30 percent of the land surface (“canopy cover”). Areas with tree monocultures or reforestation in regions historically without forest cover are not eligible for payments. The proposal envisages monitoring of the condition of forests by means of satellite technology.
Preventing Deforestation Displacement
Developed by representatives of the Brazilian government, the World Bank, Lion’s Head Global Partners, and others, this master plan differs from earlier mechanisms such as REDD+ (Reducing Emissions from Deforestation and Forest Degradation). The funds are not used for specific projects but are instead disbursed based on the success of preserving a country’s entire forest cover. Payments thus go to the state rather than directly to project operators or specific conservation efforts, allowing governments considerable freedom to decide how to use the funds and which instruments to employ for forest conservation.
However, this raises the question of whether the respective government will prioritize the state’s long-term revenue interests (linked to forest conservation) over deals with financially powerful constituencies that are often relevant during elections, such as those from agribusiness or oil and other commodity companies.
Moreover, the targeted penalties of 400 or 800 USD per hectare of destroyed forest initially have no direct impact on the responsible (potential) deforesters. While the first TFFF proposal noted that the estimated annual net profit of a soya plantation in Brazil is around 400 USD per hectare (making TFFF penalties higher), these penalties do not render such “alternative uses” uneconomical. This is because they do not directly threaten the specific owners or users of the land but rather the government budget of the country concerned. Thus, strong government enforcement would still be needed to prevent conversion under the TFFF, which is designed to complement rather than replace REDD+ and other mechanisms.
Support with Reservations
In a briefing note dated 5 June 2025, several international environmental and development organizations welcomed the new proposal in principle but criticized, among other things, the 20 percent canopy cover threshold as a uniform standard for defining a forest. While it expands the range of included countries, in regions where primary forest canopy cover exceeds 80 percent it could lead to significant forest loss before any reduction in payments is triggered. Felix Finkbeiner of Plant-for-the-Planet points out, however, that an additional penalty rule for forest degradation exists, though it currently applies only to fire damage. Its effectiveness depends on implementation rules that remain unclear.
Additionally, the organizations expressed concern about the payout fund being managed like a multilateral development bank under the World Bank, which could entrench US and European dominance.
TFFF's country-level, area-based approach to measuring success could at least help counter the problem of leakage seen in project-based schemes — where deforestation is merely shifted from funded areas to unfunded ones. Owners or project operators may collect funding but simply shift deforestation from funded to unfunded areas. TFFF also does not generate carbon credits, unlike those envisioned in the third phase of REDD+, which are fraught with methodological issues and whose contribution to climate and forest protection is highly questionable. In the so-called voluntary CO2 market, such credits are often associated with corporate greenwashing.
Under the TFFF draft, Tropical Forest Countries (up to 74 countries currently hosting over one billion hectares of tropical and subtropical rainforests) are required to allocate at least 20 percent of payments to “local communities, indigenous peoples, and protected area managers” — a point welcomed by environmental and development organizations.
Greenpeace, in a background paper dated 16 June 2025, also advocates granting a special status to intact forests and highly valuable forest ecosystems to provide “a clear incentive to truly protect these forests rather than merely reducing deforestation rates on paper”. It also calls for excluding “environmentally destructive sectors such as industrial agriculture, forestry, and biomass production” from eligibility.
Criticism of Capital Market Dependence
One of the biggest criticisms of the TFFF proposal at present centres on its funding strategy based on the capital market: the 125 billion USD of the Tropical Forest Investment Fund (TFIF) will flow into an investment portfolio on the capital market. While the focus is primarily on “climate-related and sustainable investments” in countries of the Global South, conventional government and corporate bonds are also permitted. However, the TFIF intends to exclude investments that are on a blacklist (still to be finalized). So far, this list includes “activities related to coal, peat, oil, and gas.”
These investments will be financed through debt, specifically through the “issuance of liquid, highly rated long-term bonds for purchase by institutional and private investors (‘market investors’)”. But who would ultimately be liable in the event of default? “Whom will investors sue if they don’t receive their interest and capital back — the TFFF or the recipient countries?” asks a critical TFFF report by the Global Forest Coalition (GFC). After all, it remains uncertain whether the massive investment portfolio will achieve the targeted returns of over eight percent (especially if genuinely sustainable investments are made) while keeping borrowing costs at a manageable level.
The GFC further criticizes the notion that governments should be rewarded merely for maintaining forest area without being required to take decisive measures to “limit and reverse the irrational expansion of monoculture plantations (soya, oil palm, sugarcane, etc.)” (the GFC only mentions the TFFF penalty mechanism for forest loss in passing). According to the GFC, the same applies to “unsustainable livestock farming, mining, and fossil fuel extraction”. Instead, the coalition argues that an international legal framework is needed that sanctions companies and countries that purchase products linked to tropical deforestation.
These demands need not be mutually exclusive. However, beyond all these criticisms, a fundamental question remains: to what extent is it responsible to make global forest conservation dependent on financial market transactions?
This article first appeared in German in Lateinamerika Nachrichten. Translated by Diego Otero and Marc Hiatt for Gegensatz Translation Collective
