Brazil’s New Forest Fund: Big Rewards—and Massive Penalties

Brazil has unveiled an innovative financial mechanism that could transform how the world protects tropical forests. The Tropical Forests Forever Facility (TFFF), launched November 6th ahead of the COP30 climate summit in Belém, offers countries up to $4 per hectare annually for preserving their standing forests—but comes with steep financial consequences for those who fail to protect them.

The fund’s structure creates powerful incentives through a reward-and-penalty system. While countries can earn significant payments for forest conservation, deforestation triggers massive financial losses of up to $800 per hectare. Even small increases in forest clearing can cost nations hundreds of millions of dollars. Countries with deforestation rates below 0.3% face discounts of $400 per cleared hectare, while higher rates (0.3-0.5%) double that penalty. Forest fires also carry consequences, with each fire-degraded hectare counted as equivalent to 35 hectares lost.

“Forests are worth more standing than cut down,” declared Brazilian President Luiz Inácio Lula da Silva at the launch event. “The ecosystem services they provide to humanity must be compensated, as should the people who work to protect them.” The fund requires participating countries to allocate 20% of payments to Indigenous and local communities, though governments retain discretion over how these funds are distributed.

This market-based approach represents a significant shift in conservation financing, using economic pressure to discourage deforestation while rewarding forest stewardship. As Brazil prepares to host COP30, the TFFF could serve as a model for scaling up global forest protection efforts through financial incentives.