Page 105 - Research on Financial Development Mechanism and Path of Forestry Carbon Sequestration in Developing Countries under Double Carbon Targets

Chapter 2 Forestry Carbon Sequestration and Carbon Finance

(5) Build a diversified forestry carbon sink financing mechanism
International experience shows that financial, tax, financial and other supporting
policies play an important role in the financing of forestry carbon sequestration proj-
ects. First, the fiscal and taxation policies are strongly supported. For example, in Ja-
pan’s forestry subsidy policy, subsidies are given on the basis of the cost of forestation,
40% of the standard subsidy is given to land of general nature, and 68% of the standard
subsidy is given to poorer land and water sources. The central government and the lo-
cal government shall compensate the public welfare forest for ecological benefits in a
ratio of 2:1. In addition, Japan also takes care of other aspects, such as tax relief, tax
base composition, tax extension, etc. The United States not only established afforesta-
tion subsidy fund and afforestation trust fund for public forests, but also implemented
tax relief policy; Subsidies to private insurance institutions handling forestry insurance
business. Mexico’s consumption transfer payments and government budget are largely
used for forestry carbon sequestration projects. South Korea Subsidies Reporting Fees
for Forestry Carbon Sequestration Projects. Second, strong financial market support.
Forestry carbon sequestration futures can improve the problem of market information
asymmetry, guide the spot price of forestry carbon sequestration, and thus effectively
avoid transaction risks. In 2005, the EU carbon market carried out futures, forward,
option and swap transactions of EUA, CER and ERU. In 2021, the unit price of carbon
sink futures in Europe exceeded 50 euros/ton, and more than 90% of the trading volume
was contributed by futures. Some financial institutions have successively introduced
financial derivatives, such as carbon emission options, futures and swaps, and some are
also specialized in intermediary business such as carbon purchase agency, consultancy
and financing guarantee. At the beginning of forestry carbon sequestration trading, the
World Bank designed three carbon funds: Prototype Carbon Fund (PCF), Community
Development Carbon Fund (CDCF) and Biological Carbon Fund (BIOCF). Support the
transaction of forestry carbon sequestration projects and promote the development of
forestry carbon sequestration. In 2008, the Forest Carbon Partnership Facility (FCPF)
was established to help developing countries reduce carbon emissions from deforesta-
tion and forest degradation, to strengthen forest management and increase forest carbon
sinks.
2) Technology transfer and training
The purpose of forestry carbon sequestration technology transfer and training is to
share forestry carbon sequestration technology knowledge and experience with individ-
uals, enterprises or institutions in need, and to provide relevant training to enhance their

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