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No single forest-conservation program can replace every subsidy linked to deforestation. The most credible approach is a package: redesign harmful agricultural support so farmers can shift to forest-compatible production, then direct part of public revenue toward measurable forest protection and ecosystem services. The right mix depends on the commodity driving land clearing, farmers’ transition needs, land tenure, government capacity and the ability to verify results.
Evidence from the World Bank, FAO, UNDP, UNEP, UN-REDD and country pilots points to five practical families of measures: repurposed agricultural support, payments for ecosystem services (PES), ecological fiscal transfers (EFTs), REDD+ results-based finance, and reforms to agricultural credit or sector-specific subsidies. These instruments are complements, not interchangeable products, and most pilot descriptions do not yet prove a specific reduction in forest loss.
Why replacing a subsidy is harder than removing it
Subsidies that lower the cost of fertilizer, credit, irrigation, land conversion or a particular commodity can increase production while shifting environmental costs onto forests, soils, water and nearby communities. Removing them abruptly can also reduce farm income, food production and access to inputs. A joint FAO–UNDP–UNEP report therefore recommends phasing out the most distortive and environmentally or socially harmful measures while redirecting resources to public goods and services, research and development, infrastructure and decoupled fiscal support.
The same report estimates that 87% of the USD 540 billion provided each year in support to agricultural producers is associated with measures that can be inefficient, inequitable, price-distorting, harmful to health or damaging to the environment. It projects agricultural support could reach USD 1.8 trillion by 2030 if current trends continue. The landing page for that report does not state a publication year, so these figures should not be assigned one without consulting the report itself.
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In practice, replacement means changing what public money rewards and giving producers a workable route to comply. That can involve digital eligibility systems, extension, soil-health advice, crop diversification, climate-smart technology and payments for verified ecosystem outcomes. The World Bank’s FoodSystems2030 grants illustrate this transition approach: USD 83 million in implementation grants to seven countries are testing ways to repurpose agricultural support. The grants demonstrate program design, not a cross-country impact ranking.
“These subsidies often unintentionally incentivize practices that exhaust soils, expand the agricultural frontier or increase chemical runoff while imposing steep hidden costs,” said Lina Barrera, Senior Vice President of Conservation International’s Center for Policy and Incentives, in a May 7, 2026, press release.
Five program families that can replace deforestation-inducing incentives
1. Repurposed agricultural support
Instead of paying for maximum use of a damaging input or expansion into new land, governments can attach support to practices that maintain yields without opening forests. The FAO–UNDP–UNEP recommendation is to redirect money toward public goods and less-distorting delivery while protecting a transition pathway for farmers.
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2. Payments for ecosystem services (PES)
PES pays people or land managers who maintain or improve services such as carbon storage, biodiversity, watershed regulation or non-timber forest products. The World Bank’s forest-options report presents PES as a possible domestic forest-finance mechanism and notes that payments can potentially be stacked across carbon, biodiversity, hydrological services and non-timber forest uses.
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A credible PES scheme needs a defined service, eligible land or custodians, a payment formula, monitoring rules and a durable funding source. It should establish what would likely happen without the payment so that public money rewards additional protection rather than paying for forest that was never at risk. PES cannot substitute for land-tenure recognition or enforcement where illegal clearing remains profitable.
3. Ecological fiscal transfers (EFTs)
EFTs change the formula for transfers from a national government to states, provinces or municipalities so that maintaining forests or other environmental assets affects the amount received. They can make conservation a local budget priority instead of leaving forested jurisdictions with the tax base of cleared land.
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The World Bank report uses the Republic of Congo as an illustrative option: internal transfers of oil revenue could be linked to maintaining stable forests. This is a policy example, not evidence that such a scheme is already operating there. An EFT formula must specify the forest data used, the time period, safeguards against manipulation and how communities share the resulting funds.
4. REDD+ and other results-based finance
UN-REDD describes grants and concessional loans as useful for upfront implementation and calls for more public and private results-based finance for actions that reduce emissions or increase forest-carbon capture. Results-based payments can finance enforcement, tenure work, monitoring and community programs after independently defined outcomes are achieved.
UN-REDD reports USD 1 billion in REDD+ financing mobilized since the program’s inception, including USD 350 million in results-based payments. Those totals describe finance mobilized, not a measured amount of forest loss avoided. REDD+ funding works best alongside agricultural and governance reforms that address why forests are being cleared.
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5. Credit and commodity-subsidy reform
Deforestation pressure can enter through the terms of farm credit or a sector subsidy rather than a general input program. Conservation International reports pilots that add sustainability and environmental criteria to agricultural credit in Colombia and Brazil. A separate Philippines pilot aims to build mangrove-friendly practices into subsidies for salt production. These approaches change the conditions for receiving finance or sector support, potentially reaching producers who do not participate in a stand-alone forest program.
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| Instrument | What changes | Best fit | Main design test |
|---|---|---|---|
| Repurposed agricultural support | Input, advisory or fiscal support is tied to efficient, diversified and forest-compatible production. | Where a subsidy or input program is a direct driver of expansion or soil depletion. | Can farmers maintain viable income while adopting the required practices? |
| PES | Land managers receive payments for maintaining or improving ecosystem services. | Where forest stewardship and service benefits can be defined and monitored. | Are outcomes additional, measurable and funded for the full contract period? |
| EFT | Intergovernmental transfers recognize forest or environmental performance. | Countries that already use formula-based transfers to subnational governments. | Does the formula reward real maintenance and distribute benefits fairly? |
| REDD+ results-based finance | Funding is linked to verified emissions reductions or increased forest carbon capture. | National or jurisdictional programs with accounting, safeguards and monitoring capacity. | Are results credible, not double-counted and supported by durable institutions? |
| Credit or sector-subsidy criteria | Loans or commodity support require sustainability and social safeguards. | Industries where credit terms or a narrow subsidy drives land-use decisions. | Can lenders or agencies verify compliance without excluding smallholders? |
No source cited here establishes a single cost-effectiveness ranking across these instruments. Compare them against the local driver, transition needs, forest additionality, governance, finance durability and transparency rather than assuming one mechanism is universally superior.
What country examples show about implementation
Philippines
A World Bank project combines input-support reform with crop diversification. Separately, Conservation International reports a pilot that would make salt-production subsidies more mangrove-friendly. The two examples illustrate why a national input program and a sector-specific subsidy may require different replacement tools.
Zambia
The World Bank describes reform of the farm input subsidy program through more diverse targeting, a digital farm registry, soil information, extension and soil-health practices. The design shifts support toward farmers and practices identified through better data instead of relying on a uniform distribution model.
Bangladesh
A fertilizer-support pilot uses e-vouchers with complementary extension, digital services and climate-smart practices. The voucher is only one component; advisory and production changes are intended to make the transition workable.
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Ghana
The World Bank describes a move from government-supplied inputs toward private-sector delivery supported by digital platforms. Such a change can improve supply-chain responsiveness, but it requires competition, retailer reach and safeguards against excluding remote or smaller farms.
Tanzania
The described approach combines extension, soil maps, fertilizer options and farmer registries. Matching recommendations to soil conditions can reduce blanket input use, although the forest effect depends on whether higher productivity reduces pressure to clear additional land.
Malawi
The project combines fertilizer-support e-vouchers, digital registration, crop-diversification incentives and payments for ecosystem services. This is a direct example of pairing an agricultural transition with a forest or ecosystem outcome rather than treating them as separate budgets.
Brazil
The World Bank reports support for aligning agricultural policy, while Conservation International reports a parallel pilot that strengthens environmental and social criteria in national agricultural credit. The examples address both public policy and lending conditions; neither source establishes a measured national reduction in forest loss from the pilot.
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Colombia and Fiji
Conservation International reports sustainability criteria for agricultural credit in Colombia and organic-fertilizer alternatives in Fiji’s subsidy for non-sugar crops. They show that replacement can target finance terms or input composition instead of creating a new protected-area payment.
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How to design a replacement program step by step
- Identify the actual forest-loss driver. Map the commodity, input, credit condition, road or land-use rule associated with clearing. A general fertilizer reform will not solve a mangrove loss problem caused by a salt subsidy.
- Define the farmer transition. Specify the replacement input, advisory service, technology, crop or income source, and the period during which support is available. Test whether smallholders can meet documentation and co-financing requirements.
- Choose the payment channel. Use targeted vouchers or decoupled fiscal support for farm transitions; PES for defined ecosystem services; EFTs for subnational budget incentives; and results-based finance for verified jurisdictional outcomes.
- Set tenure and participation safeguards. Identify who has legal or customary rights, obtain meaningful participation from affected communities and publish benefit-allocation rules. Financial incentives cannot resolve unresolved tenure conflicts by themselves.
- Build monitoring before disbursement. Establish a baseline, forest and farm indicators, data frequency, independent checks and a grievance process. Distinguish additional results from business as usual.
- Protect integrity in finance and claims. Track the origin and use of funds, prevent double counting of carbon or forest outcomes, and disclose assumptions. Results-based payments should not be presented as guaranteed outcomes before verification.
- Review and adapt. Compare uptake, farm income, production, forest condition, leakage and distributional effects. Replace a failing delivery channel rather than simply increasing its budget.
Malaysia’s framework as an example of integrity rules
Malaysia’s REDD Plus Finance Framework illustrates two possible instruments: a market-based Forest Carbon Offset (FCO) and a non-market Forest Conservation Certificate (FCC) focused on non-carbon benefits. The framework describes a registry intended to prevent double counting or double financing and sets equity, transparency and performance-relatedness as benefit-distribution principles.
These are features of Malaysia’s national framework, not a universal standard. A government adopting a similar approach would still need to check its own carbon-accounting rules, legal authority, community rights and relationship to international transfers.
How to judge whether a program is credible
- Driver fit: The incentive reaches the commodity, credit condition, input or land-use decision causing forest pressure.
- Livelihood viability: Farmers retain access to finance, inputs, technical advice and a realistic income during the transition.
- Forest additionality: The program can measure forest outcomes and distinguish them from what would have happened without it.
- Governance and tenure: Authorities can enforce rules, communities can participate and benefits reach legitimate rights-holders.
- Financial durability: The funding source—redirected domestic budgets, grants, concessional loans or private results-based finance—is predictable enough for the contract or transition period.
- Transparency: Eligibility, payments, results and assumptions are public, with safeguards against double counting and double financing.
Common failure modes and fixes
Removing support without a replacement income path
A sudden withdrawal can push farmers toward informal credit, lower yields or new clearing. Phase out the harmful component while providing targeted transition support, extension and viable alternatives.
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Paying for activity instead of outcomes
Counting vouchers distributed or hectares enrolled does not prove forests were maintained. Add outcome indicators and independent verification, and state clearly when evidence is limited to a pilot description.
Using one national template everywhere
Forest drivers, tenure systems, markets and administrative capacity differ. Adapt the instrument to local circumstances, as the World Bank’s forest-options report advises, rather than copying a mechanism because it worked on paper elsewhere.
Ignoring governance weaknesses
Where illegal clearing or insecure tenure is dominant, PES or REDD+ payments alone may be captured or undermined. Pair fiscal reform with enforcement, transparent registries, grievance channels and tenure work.
Overlooking distribution and integrity
Benefits can bypass communities, or the same forest outcome can be claimed by multiple financiers. Publish allocation rules, audit transfers and use registries or equivalent accounting controls.
What the evidence can—and cannot—say
The country cases show governments and partners testing ways to redirect support, improve targeting and connect finance to ecosystem outcomes. They do not establish that every listed pilot has already reduced forest loss, nor do they provide a comparable cost per hectare or per tonne of emissions avoided. Current eligibility, safeguards, project status and funding terms must be checked with the responsible national agency before advising an applicant or designing a program.
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