Abstract

Restoration of forests in low- and middle-income countries (LMICs) has the potential to contribute to international carbon mitigation targets. However, high upfront costs and variable cashflows are obstacles for many landholders. Carbon payments have been promoted as a mechanism to incentivize restoration and economists have suggested cost-sharing by third parties to reduce financial burdens of restoration. Yet empirical evidence to support this theory, based on robust, dynamic field sampling is lacking. Here we use large, long-term datasets from Panama to evaluate the financial prospects of three forest restoration methods under different cost-sharing and carbon payment designs where income is generated through timber harvests. We show some, but not all options are economically viable. Further work combining growth and survival data from field trials with more sophisticated financial analyses is essential to understanding barriers and realizing the potential of forest restoration in LMICs to help meet global carbon mitigation commitments.