Pay Now or Pay More Later: Forest Bonds May Provide a Way to Support Fire Prevention

Clearing overgrowth and invasive species today can save money later and increase the economic value of a forest. A new private instrument, “forest resilience bonds,” may offer a way for forest owners to use future costs savings and income to pay for restoration efforts over time.

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Managing public forests in ways that prevent wildfires could save millions of dollars in future fire-emergency costs. But restoring forests is expensive, and limited public budgets emphasize short-term disaster spending rather than long-term management.

A private firm is testing a new model that they say could fill the short-term budgetary needs to get forest restoration practices up and running.

“The value of forest restoration oftentimes exceeds the cost,” said Leigh Madeira, one of Blue Forest Conservation’s founders. “But that doesn’t mean that the beneficiaries have the capital to pay for needed restoration projects.”

Blue Forest says they’ve come up with a way for communities to use that future increased value or cost savings of forests to pay for restoration activities today.

Blue Forest’s funding model is to collect private capital through a “forest resilience bond,” based on the money the forest owner is likely to make later, either through the reduced chance of forest fires or through additional earnings from forest products like lumber. Blue Forest then helps to coordinate forest restoration activities with business partners on the ground, often small, local enterprises who do the actual restoration work. The beneficiary of the restoration, whether a federal agency like the Forest Service or a publicly-owned water utility company, then pays for the services on a long-term contracted rate.

The money to pay back the bonds might come from a future forest yielding more income from better timber, or it can come from the money an agency won’t have to spend fighting catastrophic fires in that forest.

Blue Forest is moving forward with the first of four California-based pilot projects in the Yuba River Watershed of California’s Tahoe National Forest next year. In this region of the Sierra Nevadas northeast of Sacramento, one of the “beneficiaries” is the U. S. Forest Service. Blue Forest, having recently signed a Memorandum-of-Understanding with the federal agency, is currently pursuing forest restoration activities that comply with the Forest Service’s existing approved forest management plan. This is work that would already be occurring if the Forest Service had sufficient funds to pay for it from their regular cabudget.

Madeira said restoration activities vary from site to site and are wholly “specific to the landscape.” Depending on the ecological situation, “that could mean removing invasive species, thinning small-diameter trees, removing brush and following that with prescribed fire,” he said.

In the case of the Yuba pilot, “there is over a century of overgrowth that, left untreated, contributes to a perfect storm for severe wildfire” said Madeira. The implemented project would yield lower fuel load by removing some of that growth, making the forest more resilient to fires that break out in the future.

Blue Forest describes their forest resilience bonds as “public-private partnerships that enables private capital to finance much-needed forest restoration across the western U.S.”

“It all started in 2015,” said Blue Forest’s Madeira. The group created their business concept around a contest for sustainable investing sponsored by Morgan Stanley while they were MBA students at the University of California-Berkeley. “We were fortunate, and won the contest. Things really picked up from there. It’s how we first connected with potential investors who were very interested in the project,” said Madeira.

The record-breaking wildfire season of 2017 is focusing attention on numerous issues related to how federal government spending and policy can help to decrease future wildfire risks. Rural communities are clamoring for additional funding to pay for forest management activities on public land that reduce wildfire risk.

Money that pays for the firefighters and their equipment largely comes from the U.S. Forest Service and U. S. Department of Interior budgets. It’s based on a formula that has seen an increasing share of the agencies’ funding shift to firefighting, making it harder to pay for preventative measures like forest restoration.

So far in 2017, there have been 52,277 fires covering 8.82 million acres across all jurisdictions, according to the U. S. Forest Service. 2017 wildfires have tallied up $2.41 billion in federal costs so far.

Blue Forest is seeking additional project partners in California and in Colorado. In addition to the Forest Service, the company has active partnerships with the USDA’s Natural Resource Conservation Service as well as the American Forest Foundation and World Resources Institute.

A report on forest resilience bonding written by Blue Forest Conservation and Encourage Capital is available at https://www.forestresiliencebond.com/.

 

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