Forestry-Based Carbon Financing Mechanisms and Their Role in Advancing Sustainable Forest Management: A Systematic Review

• Scaling forestry-based carbon financing mechanisms is crucial for sustainable forest management. • A PRISMA-guided systematic review of peer-reviewed literature on carbon financing mechanisms in forestry. • REDD+, voluntary carbon markets, and PES have varying outcomes in different regions. • Insecure land tenure and governance issues limit the effectiveness of carbon finance. • Need stronger governance and equitable benefit distribution for long-term success in forest carbon financing. Forestry-based carbon financing mechanisms are significantly reshaping forest governance by converting emissions reductions and carbon removals into revenue streams that incentivize sustainable forest management, especially in the Global South. This systematic review synthesized peer-reviewed evidence on the types of forestry-based carbon financing mechanisms documented in the literature, how these mechanisms are designed and implemented, the environmental, social, and governance outcomes they produce, and the challenges and opportunities shaping their scalability. A PRISMA-guided systematic search retrieved 709 records across multiple academic databases, of which 73 studies met the eligibility criteria for final synthesis. The evidence base expanded sharply after 2022, with Asia and Africa representing the most studied regions. Reducing Emissions from Deforestation and Forest Degradation (REDD+) was the most commonly documented mechanism, featured in 41 studies, followed by voluntary carbon markets (18 studies) and Payments for Ecosystem Services (9 studies). Across mechanisms, results-based finance, robust measurement, reporting and verification systems, and community-based governance arrangements were the most commonly reported design features. Environmental outcomes were most consistently reported, particularly reduced deforestation, enhanced carbon sequestration, and biodiversity conservation, while social and governance outcomes were more variable and strongly shaped by tenure security, benefit-sharing equity, and institutional capacity. The most recurrent constraints were insecure land tenure, high transaction costs, weak governance and policy fragmentation, and market integrity risks including leakage and non-permanence. Nevertheless, opportunities were identified in the growing demand for high-integrity credits, integration with national climate policy frameworks, and advances in monitoring technologies. The review concludes that forestry-based carbon finance can contribute to sustainable forest management in the Global South, but its long-term success hinges on credible governance, transparent safeguards, and equitable benefit distribution, not just finance.