Tropical forest tree roots help the soil hold water like a sponge and release it slowly to streams and rivers. Roots are able to extract soil water from up to 10 m deep. So tropical forests help to maintain the flow of water through river basins and prevent flooding.

The tree root mats beneath tropical forests play a crucial role in holding together the substrate, upon which they grow. Just a century ago 35% of Ethiopia was covered in forest. By 2000, this cover had declined to 4.2%, resulting in desertification which has directly contributed to its decades of famine.

"Insurance firms and major shipping companies are financing a 25-year project to restore forest ecosystems along the 80-kilometre length of the Panama Canal. The Canal is the preferred shipping route between the Atlantic and Pacific Oceans, with more than 14,000 ships passing through in 2007. But its operation is becoming  increasingly affected by floods, erratic water supply and heavy silting as a result of  deforestation of the surrounding land".

"The costs of maintaining the canal are rising, and there is growing risk that it will have to close. Shipping companies faced increasing insurance premiums until ForestRe – a specialist insurance entity focused on forest risks – convinced them to fund ecosystem restoration. The advantages are less erosion and a more controlled flow of freshwater to the canal, which reduces insurance risks so that the shippers enjoy lower premiums."
© European Communities, 2008