This inversion is weird and I haven't seen or used it before.
It is a little weird, even for me. I was perfectly content to let your dismissal of (C) stand and to talk about other things instead; but then Novice forced the issue, and I cannot in good grammatical conscience say that (C) is incorrect. Weird though it is, I do find it grammatical.
I find both points confirmed in the literature on this highly idiomatic but extremely complicated construction, which is totally unfit for novices. It is generally acknowledged among linguists who have examined this construction that subject-auxiliary inversion is marginally acceptable in the second clause. See example (50) of this:
You may never have heard of them, but, among syntacticians and semanticists, Culicover and Jackendoff are two of the greats. Note that their point only applies to subject-auxiliary inversion in the second clause of the correlative comparative construction. This is part of the evidence for that clause's being the main clause.
"Be" has the status of an auxiliary verb, even when it is the main verb of a sentence or clause (i.e., even when it is a pure copula), as evidenced by the fact that we use it in question formation ("Natural disasters are frequent" <--> "Are natural disasters frequent?"). If we change from "are" to "occur," inversion won't work at all:
*The more forest destruction there is, the more occur natural disasters.
However, if we keep "occur" as the main verb but add one or more auxiliaries, subject-auxiliary inversion will once again be acceptable, at least marginally.
The more forest destruction there is, the more do natural disasters occur.
The more forest destruction there is, the more will natural disasters occur.
The exam maker knows that 'D' is totally grammatical and acceptable, so why would a student think of 'C' although they have never been taught to use such inversion with this structure?
My advice to the exam makers would not be that they start teaching nonnative speakers to use marginally acceptable inversion in this construction, but rather that they correct the choices by using a verb other than "be," like "occur" or "happen." Their test question is currently flawed anyway; the first part is totally ungrammatical. ♣