It’s expensive to develop carbon offset projects that reduce emissions by capturing carbon in trees, and one reason is that every project has to develop its own methodologies for measuring results. The UNFCCC is asking for help in streamlining that process.
30 July 2009 | The United Nations Framework Convention on Climate Change (UNFCCC) has released a technical paper on the cost of implementing methodologies and monitoring systems related to estimates on greenhouse gas emissions from deforestation and forest degradation – as well as the assessment of carbon stocks and greenhouse gas emissions from changes in forest cover and the enhancement of forest-carbon stocks.
The UNFCCC REDD Web Platform requests comments and information sharing from Parties at the country level, organizations and other stakeholders to share relevant information regarding their experiences, lessons learned, cost estimates, case studies and other resources such as step-by-step guides to establishing national monitoring systems in different developing country contexts.
The UNFCCC REDD Web Platform has created a space where this information will be posted. Please submit information to the following e-mail address: [email protected].
• An overview of the possible steps and requirements needed to develop and implement a monitoring system for estimating emissions from deforestation and forest degradation, assessing carbon stocks and greenhouse gas (GHG) emissions from changes in forest cover, and assessing the enhancement of forest carbon stocks.
• Information on the indicative costs associated with the possible steps and requirements of a national monitoring system.
• Elements that developing countries may need to take into account when developing a national monitoring system.
• A means of facilitating the better understanding of the associated costs of the implementation of methodologies and monitoring systems related to estimates of emissions from deforestation and forest degradation, the assessment of carbon stocks and GHG emissions from changes in forest cover, and the enhancement of forest carbon stocks.
Buyers of voluntary carbon offsets have no shortage of projects to choose from, but where is the line between choice and information overload? The Environmental Defense Fund says we crossed it long ago, and aims to simplify the whole process with an online list of eleven projects whose offsets it believes will stand the test of time. The Ecosystem Marketplace gives it a click.
More than 70 projects have been submitted to date, but the site debuted with just eleven projects and is designed to evolve as new projects meet the criteria.
Not a New Standard
EDF says the approach does not represent a new standard because it is results-oriented and not procedure-oriented.
“Our approach focused on the environmental integrity of the projects that were submitted for review and the ability to demonstrate measurable and verifiable proof of greenhouse gas reductions – rather than specific project types or technologies,” says Ron Luhur, EDF Carbon Markets Specialist.
“Being technology and standard neutral was important to us because we believe that we can’t afford to overlook any credible emission reductions given the urgency of the climate crisis.”
As a result, the list could include projects from controversial technologies that many standards eschew – such as geological sequestration.
“We basically say that projects employing technologies like that have to demonstrate that they have taken steps to account for reversal,” says Luhur. “Rather than disregard the technology, we say you can deploy it under an extremely watchful eye.”
The Living List
Of the eleven debut projects, eight achieve reductions through landfill gas destruction – largely because such projects are easy to verify.
“We’re looking for anything that generates a real and measurable reduction,” says Luhur. “The proposals we received are everything from methane to geological sequestration and forestry. Some won’t make the list, but some projects are just too early in the development phase to get listed, while others are almost there but still need some documentation.”
As more projects meet the nine criteria – which were established through a best practices review process involving a committee of external experts in the fields of science and policy – they will also be posted on the site.
“If all goes according to plan, these offsets will sell out, and we’ll have to come up with a new list again very soon,” says Luhur.
In fact, this is not the first time EDF created such a list. Several years ago, the non-profit, with assistance from Environmental Resources Trust created a “short list” of carbon offset providers that met their decision criteria. The list, while still heavy on methane destruction, included a more diverse set of projects, including credits from geological sequestration. This year the team focused on screening projects rather than offset providers, since most providers have a portfolio of credits from varying sources.
Voluntary vs. Pre-Compliance
Luhur adds that the criteria were developed to create trustworthy voluntary credits, and not to conform to any existing or evolving compliance regimes.
“If the criteria resemble those of state regimes, it’s only because the goals are similar and not because we are trying to build a pre-compliance portal,” he says. “We want to make sure that an offset really does represent an emission reduction, and compliance regimes have the same goal – although we have taken a lot of the best thinking from some of the compliance regimes and from the voluntary standards.”
Steve Zwick is managing editor of the Ecosystem Marketplace. He can be reached at [email protected].
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27 August 2008 | If anyone knows the value of the Eastern Arc Mountain ecosystem, it’s George Jambiya and Neil Burgess.
Together, they’ve spent more than three decades helping WWF and the Tanzanian government document thousands of rare plant and animal species that populate the Arc, not to mention the ecosystems they support and the animals and economies that depend on them.
Neither of them, however, can tell you with scientific certainty the value of the ecosystem services that flow from those plants and animals.
“On the one hand, you can say, ‘Look, we all depend on these services, so the value is inherent,'” says Burgess. “But we can’t go to Coca Cola and say, ‘This catchment delivers this amount of clean water, and has this value to you.'”
The ability to make that statement with confidence, however, would help save life-supporting ecosystem services that support – and, in our economic system, compete with – tangible hard commodities like timber and food.
“Right now, a lot of the values that are being applied to forestry management and water management are only taking into account things like timber prices and logging prices,” says Jambiya. “Things such as carbon sequestration and hydrological services don’t come into play, and the value of water is not determined by the market or even by supply and demand – but by an arbitrarily-set figure, which is probably very much on the low side. The values of biodiversity are even worse.”
The two are among a handful of experts spearheading a five-year research and policy project called
“Valuing the Arc”, which began in January, 2007, and runs until December, 2011. Its mission is to quantify the economic value of specific ecosystem services in the Eastern Arc Mountains, and it harvests expertise from five UK-based universities (Cambridge, East Anglia, York, Leeds, and Cranfield), two Tanzanian universities (University of Dar es Salaam and Sokoine University of Agriculture), the WWF Tanzania Programme Office, and the Natural Capital Project.
Along the way, they’ve begun to identify and educate potential buyers and sellers of ecosystem services and provide fodder for a CARE-WWF partnership called “Equitable Payments for Watershed Services (EPWS)”, which is the subject of a later installment in this series).
Katoomba in Uganda
Burgess got the idea for Valuing the Arc after attending a 2005 Katoomba Meeting in Kampala, Uganda (Katoomba VIII) on behalf of Tanzania’s Department of Natural Resources, for whom he was working at the time.
“We knew the forest was storing a lot of carbon, and the whole payments for ecosystem services thing was beginning to emerge,” he says. “The Katoomba Meeting catalyzed a lot of things, and brought a lot of people together.”
Among those people were PES project developers from Mexico, South America, and South Africa.
“I saw what they were doing and thought, ‘Well, that all looks similar to the beginnings of what has happened in Tanzania,'” Burgess recalls. “I figured maybe we could start to go more in the ecosystem service direction here.”
First the Price, then the Payment
“Neil basically realized that he needed to get beyond general statements about the value of nature and show decision-makers where the value lies within their actual landscapes,” says Taylor Ricketts, co-founder of the Natural Capital Project, which is itself a joint project of Stanford University’s Woods Institute for the Environment, The Nature Conservancy, and WWF.
Over the years, Burgess and scores of other researchers had taken a shot at mapping the ecosystems of the Eastern Arc Mountains, and several facts were clear:
First, they knew that foliage in the fog-enshrouded, moss-laden “cloud forests” that capture and store moisture high in the mountains was declining. Second, they knew that farmers were both tapping the mountain streams for agriculture and letting their fertilizer run into the waters.
They also knew that downstream rivers were running faster in the wet season and slower in the dry season – and muddier all year long.
But they didn’t know the extent to which each problem could be attributed to specific practices, and they couldn’t determine how much maintaining the upper catchments was worth to end-users such as breweries and water filtration plants.
Building the Team
Once back home in the UK, Burgess mentioned his dilemma to Cambridge Professor Andrew Balmford, who told him about a grant available from the Leverhulme Trust. Balmford applied for and won that grant, while Burgess lined up the University of Dar es Salaam and the Sokoine University of Agriculture, each of which unleashed scores of staff and PhD students to ramp up the mapping process.
“That’s where we come in,” says Ricketts, whose Natural Capital Project (NatCap) supplied a tool called InVEST (Integrated Valuation of Ecosystem Services and Trade-offs) – a software package that that maps ecosystem services and their economic values.
As NatCap was joining the project, Ricketts applied for and won a grant from the Packard Foundation that complemented the Leverhulme grant – and set to work delivering their piece of the puzzle.
“We’ve basically built a program that plugs into the industry-standard GIS tool,” he explains. “You can map how much carbon is being stored in forests and woodlands, for example, or where people harvest products like medicinal plants directly from ecosystems.”
InVEST also offers modules that map important areas for water supply, flood control, timber harvest, crop pollination, and other ecosystem services.
“You can use only the modules you care about, and customize those to your situation,” he says.
Laying the Groundwork and Priming the Pump
The tedious task of lining up the partners and identifying their responsibilities consumed much of the first phase of Valuing the Arc. After that came identifying the gaps.
“We spent quite a lot of the end of the first year putting together all available data on water flows, timber, carbon etc,” says Burgess. “A lot of the data was from previous work, including the previous project that I’d worked on. We basically compiled all available data that we knew of from the past 20 years.”
Keeping It Real
The project has grabbed plenty of attention within the ecosystem payments community, but Burgess says it has a long way to go before it begins to yield tangible fruit.
“We’re still heavily collecting data and building models,” he says. “So, we can’t say these are really definitive results. We can only say, these are preliminary results, but they’re quite nice aren’t they?”
As the measurements become more concrete and targeted, however, he believes their numbers will persuade potential buyers of ecosystem services to lay down their money – and for economic reasons, and not just for philanthropy.
“We’ve got a lot of information coming together on habitat quality and on the amount of timber and non-timber resources coming out of the forest, as well as how much forest there is,” he says. “This will all be pretty fundamental stuff for the carbon baseline work in the near term, and should be valuable to the whole payments for ecosystem services arena that’s going to be there in five or 10 years time.”
Jambiya agrees, but says the near-term damage control can best be handled by government.
“The whole intention of Valuing the Arc is to try to establish the true values of these resources and the services that they offer, and through that make arguments for greater investment on the government side for conservation efforts,” he says, adding that private sector investors will still be needed to make the system viable over the long haul.
Steve Zwick is Managing Editor of the Ecosystem Marketplace. He can be reached at [email protected].
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27 July 2009 | French carbon dealer ecosur today received approval under the Kyoto Protocol’s Clean Development Mechanism for a waste-to-energy carbon offset project in Cí´te d’Ivoire that it had submitted to the United Nations Framework Convention on Climate Change (UNFCCC) on July 9. A subsidiary of US agro-industrial giant Cargill has already signed forward agreements to purchase Certified Emission Reduction certificates (CERs) from the Abidjan Municipal Waste-to-Energy Project, which is the first CDM project located in a member state of the West African Economic and Monetary Union (UEMOA), and one of the few in sub-Saharan Africa outside of South Africa. Two projects have been registered in Nigeria, which is part of the Economic Community of West African States (ECOWAS), and scores have been registered in South Africa, as well as in Egypt and other north African states, but the continent still accounts for less than 2% of all CDM projects worldwide (See “Voluntary Solutions for Climate Change”, right). Fabrice Le Saché, an ecosur managing partner, says his company is in the process of registering projects in Senegal, Guinea, Mali, Cameroon and elsewhere. “The Abidjan CDM project is new evidence of West Africa’s commitment to sustainable development,” says Thierno Bocar Tall, head of the African Biofuel and Renewable Energy Fund (ABREF), which arranged funding for the project. “Since 2006, ABREF has been at the forefront of this effort. We will continue and accelerate our investment in CDM projects together with ecosur.”
The Project and its Reductions
The Abidjan Municipal Waste-to-Energy Project is located in Bingerville, North of Abidjan, and is expected to reduce greenhouse gas emissions by the equivalent of more than 71,000 tons of CO2 per year. Project owner Soci Ivoirienne de Traitement des Déchets (SITRADE) will collect and treat 200,000 tons of urban waste per year using anaerobic digesters, and the resulting biogas will be used to produce electricity, while residual waste will be transformed into compost. Italian manufacturer Promeco is the technology provider, and ABREF arranged funding, with the Economic Community of West African States Bank for Investment and Development (EBID) acting as the major sponsor and the government of Ivorian President Laurent Gbagbo offering support as well. “We are implementing a comprehensive strategy to tackle climate change, and CDM is only a part of the solution,” said presidential advisors Cédric Lombardo and Bernard Houdin in a written statement. “A new tax-free zone dedicated to clean technologies is under establishment close to Abidjan in Grand Bassam, to support CDM development, environmental research, climate change mitigation and adaptation.” Steve Zwick is Managing Editor of Ecosystem Marketplace. He can be reached at [email protected]. Please see our Reprint Guidelines for details on republishing our articles.
If you want to sell carbon offsets in exchange for action that reduces greenhouse gas emissions, you first have to prove that the money you’re earning is what makes the action you’re taking possible. That, in a nutshell, is “additionality” – a simple concept, but one that’s proving difficult to put into practice.
13 July 2009 | Additionality is a cornerstone of environmental finance – and one of the sector’s most contentious issues.
Without it, carbon offset projects have no credibility, and thus no value. Billions of dollars in carbon revenue thus hinge on the definition of additionality and the debate over how to establish methodologies for determining whether additionality has been achieved.
To date, the most common methodology for measuring additionality has been the project-by-project or “bottom up” approach, but a growing number of practitioners complain this approach is inconsistent and ultimately unworkable. They advocate a “top-down” approach using industry-wide benchmarks.
Project-by-Project Approach
Whether or not a carbon offset project is additional can be measured in a few different ways using a project-by-project approach:
Financial/Investment:Would the carbon offset project have been possible without the use of carbon finance? In other words, is the return-on-investment from the project too low, or would the project owner have been unable to provide upfront financing for the project without carbon financing? If yes, then the project can be considered additional.
Legal and Regulatory:Does the carbon offset project go beyond compliance requirements? If yes, is it also occurring in addition to other practices that might have occurred anyway? For instance, if the project is beyond ordinary compliance but is part of a cost-cutting exercise, then it cannot be considered additional. If the project is occurring outside of obligatory compliance and would not have been considered for other strategic reasons, then the project is additional.
Barriers:Does the project overcome non-financial barriers (technical, skill-based, institutional) that would not have been an issue under a business as usual scenario? If yes, then the project can be considered additional.
Common Practice:Are the technologies that are being employed through the project commonly used? If not, then the project could be considered additional.
Benchmark Approach
Recently, however, in response to concerns over the integrity of many carbon offsets approved under the UN Clean Development Mechanism (CDM), experts such as Ken Newcombe, the founding head of the World Bank’s Carbon Finance Unit, have promoted the use of a “top down” approach based on industry-wide benchmarks.
Under this approach, an emissions benchmark is established for a sector, and emissions reductions are then evaluated on the basis of their deviation from that benchmark in order to determine whether or not an additional reduction in emissions has occurred.
Because the top-down approach has pre-established parameters for determining what is additional, many believe it is much more objective and therefore less likely to be manipulated than the project approach. The US Regional Greenhouse Gas Initiative (RGGI) currently uses the benchmark approach in the administration of its program and the California Climate Action Registry (CCAR) also plans on adopting sector-based protocols.
Concerns with Measuring Additionality
Measuring and proving the additionality of a carbon offset project can be a difficult feat, at times resulting in harsh criticism of the carbon offset market, its incentive structures, and its regulation. For instance, under the current system, auditors are tasked with providing objective analysis of project additionality for the CDM executive board, but at the same time are being paid by project developers. Some might find parallels between carbon offset auditors and the financial ratings agencies tasked with objectively evaluating the investment potential of various debt instruments.
The Road to Copenhagen: New Approaches for Additionality
It is uncertain exactly how the rules around offset additionality will shape up in the next Climate Treaty and in country level rule-making, though it is clear that the mistakes made under the Kyoto Protocol must be addressed in order to truly begin to mitigate the climate change problem.
Avril David conducts research on the terrestrial carbon sector for Ecosystem Marketplace’s Forest Carbon Portal. She may be reached at [email protected].
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The above articles were consolidated, along with other material from Ecosystem Marketplace, in two brochures that were distributed at Katoomba XV.
Leading up to the meeting, Ecosystem Marketplace commissioned this series of articles to shed light on issues relevant to these meetings and that part of the world.
The Katoomba Group gratefully acknowledges the sponsorship and support of the following organizations for the Katoomba XV Meeting:
USAID; the Global Environment Facility (GEF); Gordon and Betty Moore Foundation; NORAD; Rockefeller Foundation; Rainforest Alliance; and Price Waterhouse Coopers.
The 15th Katoomba Meeting generated nearly 20 hours of dialogue and debate on how to incorporate the value of nature’s services into West Africa’s economy – which is poised to receive an influx of oil wealth that could have devastating consequences if poorly managed. Now these discussions, featuring more than 50 of West Africa’s leading practitioners, policy-makers, and theorists in the field, are available for free on the Ecosystem Marketplace.
9 October 2009 | Katoomba XV took place in Accra, Ghana at the end of the first week of October. It was Africa’s fourth Katoomba Meeting and West Africa’s first – and it came as more and more local conservationists were beginning to identify payments for ecosystem services (PES) as a valuable mechanism in promoting sustainable development where conventional approaches to natural resource management and conservation had failed.
More than 200 people attended the “Public Meeting” that comprised the first two days of the event, and 78 were invited to the Private Meeting, which comprised the third and fourth day.
Learning about PES in West Africa
Leading up to Katoomba XV, Ecosystem Marketplace produced a series of feature articles designed to shed light on issues being discussed at the event. You will find links to these articles to the right.
These articles were incorporated into brochures that were distributed at the meeting, along with more technical literature generated through focus groups convened in the weeks leading up to Katoomba XV. These are all available for download to the right.
Streaming Content and Presentations
In order to make the content of Katoomba XV available to as wide an audience as possible, we tried to record every panel discussion and asked presenters to provide us with PDFs of their presentations. These are available for public use below.
The panel discussions are posted in their entirety, including questions from the audience, in mp3 format. You can either listen to them online or download them to your own device.
The PDFs of individual presentations within the panel discussions are posted individually below the mp3s. We have also provided summaries of key presentations to help you navigate this page.
Members of the media are free to quote from the presentations below, but we ask that you please accredit the Fifteenth Kattomba Meeting in Accra, Ghana as the venue where the statements were made.
Due to intermittent power outages, the quality is sketchy in parts, and some presentations contain small gaps. We apologize for these disturbances and trust that you find this a valuable resource nonetheless. We also welcome feedback on how to make future Katoomba meetings more accessible to a wider audience. Feel free to contact EM Editor Steve Zwick at [email protected] with feedback.
Moderator: Mohammad Rafiq, Senior Vice President, Rainforest Alliance
“A Private Sector Perspective on Emerging Environmental Markets”, delivered by Sachin Kapila, Group Biodiversity Advisor, Shell International Limited
This presentation begins with a business case for biodiversity, water, and carbon PES, as well as the need for private-sector finance to supplement public funding. Then it moves into an emphasis on the need to scale up as quickly as possible (especially as regards climate change mitigation), which will require both increased partnerships with the private sector and regulation (as a major driver of PES markets, as in the ‘cap-and-trade’ approach). The presenter also notes that the value of markets for ‘sustainable commodities’ is projected to reach $60 billion by 2010.
This presentation provides an overview of forests and carbon finance, focusing particularly on the potential of REDD to mitigate climate change while pointing out that some deforestation for development is inevitable. The presenter highlights South-South cooperation to surmount this tricky relationship, as well as the need to change from an exchange of technology for deforestation (as in the case of bulldozer-linked deforestation chains developed in the Amazon and currently in use in Northern Ghana) to technology (and policies) for conservation. He also emphasizes that forests should not only be valued for their carbon.
This presentation explores the ‘win-win’ potential of higher-shade cocoa systems – which can ensure the sustainability of cocoa production more than unshaded cocoa, which is higher-yielding but also shorter-lived, and leaves the soil mined of its nutrients. Shade cocoa might also mitigate climate change by capturing carbon in trees and can generate significant co-benefits, because cocoa is a small/poor farmer’s crop in Ghana.
REDD: Evolving Architecture and First Steps in West and Central Africa
Moderator: Victor Agyeman, Director, Forestry Research Institute, Ghana
“The Status of REDD Readiness in Africa“, delivered by Andre Aquino, BioCarbon Fund and Forest Carbon Partnership Facility, World Bank, and Josep Gari, Technical Adviser for Natural Resources and Ecosystems, UNDP Africa
This presentation examines the current status of REDD Readiness initiatives in the region, especially the development of Readiness Preparation Plans (R-PPs) for the World Bank Forest Carbon Partnership Facility. Key points include the need for an integrated and cross-sectoral land-use planning approach; that the key challenges are governance, trust, and technical capacity; and the need for broader participation in REDD Readiness, including a prominent role for civil society. DRC was presented as a success story in terms of its institutional framework for REDD: the DRC REDD Coordination body is supported by an Inter-Institutional Committee, a REDD Working Group of Civil Society, and a Scientific Council. A key distinction was also made between what should happen at the national level for deforestation to be reduced, e.g., tenure and governance reforms, and the challenge of attracting sufficient carbon finance (implying the need for private sector participation and ‘sub-national’ activities which generate carbon credits).
“National REDD Architecture Options”, delivered by Lucio Pedroni, Chief Executive Officer, Carbon Decisions
This presentation examines the main REDD ‘architectural’ options (a ‘national’, ‘sub-national’ and ‘hybrid’ approach). Much of this presentation focuses on whether/how ‘sub-national’ REDD activities (or projects) can be included in national REDD-plus programs. The case is made for the hybrid or ‘nested approach’ (sub-national activities within a national accounting system), and a step-by-step approach for developing it is presented, including inter alia the clarification of carbon rights, development of clear approval procedures, a national carbon registry, development of a national monitoring system, etc.
“REDD and PES Perspectives in Central Africa“, delivered by Alain Karsenty, Economist, Centre de Cooperation Internationale en Recherche Agronomique por le Developpement (CIRAD), France
One of the most-discussed presentations of the event, it examines the challenges of REDD in Central Africa and broader REDD issues. The presenter questions the likely effectiveness of REDD in terms of the additionality of many REDD actions, difficulties in establishing baselines, transaction costs, geographical and ‘economic’ leakage, and the danger of perverse incentives in a ‘baseline and credit’ REDD system. He raises the concern that the opportunity cost approach of REDD will not be sustainable without viable livelihood alternatives, and that it could perpetuate poverty, as well as paying people for the opportunity costs of legal compliance. He examines food demand as the key driver of forest degradation, and says that the priority for environmental and social objectives should be investment in agricultural efficiency, land reform, land use planning, and governance – all supported by a ‘PES plus’ approach that goes beyond compensation of opportunity costs, e.g., helping community forestry become more competitive with alternative land uses. He called this a ‘double green revolution.’
Beyond REDD: Capturing the Full Range of Terrestrial Carbon Options
The presenter argues there is little evidence of reduced emissions from land-use options and questions some of the assumptions behind McKinsey’s cost-abatement curve. But he also says we are underestimating the effect of terrestrial carbon stocks and expresses high hopes for secondary forest regrowth. He believes we need to focus more on carbon effectiveness and less on co-benefits – leaving better-funded policies and initiatives to tackle rural poverty.
This presentation focuses on the win-win potential of an Agricultural Carbon Facility for Africa, but also points out key problems – such as the high risks that small farmers face when changing farming practices. The presenter describes how ‘carbon-friendly agriculture’ needs to be based on building ecosystem resilienceand that carbon finance can be layered onto sustainable land management. He also predicts that soil carbon is likely to be part of the Clean Development Mechanism (CDM) and will be included under Nationally-Appropriate Mitigation Actions (NAMAs), so that support can be both market- and fund-based; it may also be merged with REDD plus in the future – but not at Copenhagen.
“Biochar – Prospects for Africa“, delivered by Edward Yeboah, Soil Research Institute, Ghana, and Phil Covell, Business Analyst, Forest Trends
This presentation examines the potential of biochar for reducing emissions (especially of methane and nitrous oxide) as well as its impact on soil fertility, including the capacity to retain nitrates from inorganic fertilizers. The key constraint appears to be a sustainable foodstock with low or zero opportunity costs. There is also a need to develop carbon methodologies for biochar.
“The Africa BioCarbon Initiative”, delivered by Peter Minang, Global Coordinator for the Alternatives to Slash and Burn Partnership (ASB), World Agroforestry Centre
This presentation describes the key principles developed by Forest Trends’ Business and Biodiversity Offsets Program (BBOP) and its partners, discusses its achievements, and sets out some priority work areas, including in West Africa. It then addresses the specific mechanism of conservation banking and markets for biodiversity credits, drawing particularly on examples from the US and Australia.
This presentation examines a case study of a biodiversity offset project in Sierra Leone. The Bumbuna Hydroelectric project is undertaking compensatory conservation to offset the construction of a major dam. The presentation focused on financing, institutional, and social issues. In addition to support from the World Bank and African Development Bank, a key financing mechanism will be a 3%-electricity tariff to be used for community development and environmental management.
This presentation describes the Makira Forest Protected Area Project in Madagascar, highlighting linkages between biodiversity and REDD, as well as the roles of local communities and government. The Makira Project has negotiated apparently equitable benefit-sharing arrangements with the government of Madagascar.
Moderator: Professor Chris Gordon, Africa Wetlands Centre, University of Ghana
“Water, Weather and West Africa’s Forests“, delivered by Yadvinder Malhi, Professor of Ecosystem Science, University of Oxford School of Geography and the Environment
This presentation reveals the critical importance of the region’s forests for rainfall and temperature (the cooling effect); for example, it shows how forests help cloud formation and provides data showing that Kumasi (in the heart of Ghana’s high forest zone) has experienced a 20-30% decline in rainfall since the 1950s. The presenter makes the case for payments for forest’s rainfall services.
The presentation is followed by a rather chilling discussion of what life could be like in Ghana with a possible rise of 6-7 degrees Celsius by 2060, assuming continuation of ‘business as usual’.
“PES for Mangroves and Wetlands”, delivered by Gordon Ajonina, Mangrove & Wetlands Management Expert, National Program Coordinator, Cameroon Wildlife Conservation Society (CWCS)
This presentation examines issues around PES in mangroves and wetlands, pointing out the major co-benefits at stake. It also mentions that they have been generally neglected in carbon finance discussions. Also, few African countries have wetland policies. The speaker specifically examines the Douala-Edea Mangrove and Marine Park in Cameroon as a case study – mangrove loss is being reduced via collaborative work with wood cutters and fish smokers.
This presentation points out the historical tendency for natural resource planners to undervalue coastal and marine ecosystems, which support a disproportionately large portion of the world’s population, especially the poor, and are increasingly under threat. Marine PES face unique challenges compared to terrestrial PES, such as the open access nature of marine resources and their vulnerability to land-based sources of pollution and other upstream degradation drivers. Key needs include creating synergies between communities and government – this will require institution building in particular.
The ensuing discussion includes the disturbing prediction that coral reefs will die out in 30 years assuming atmospheric carbon dioxide hits 450 parts per million – it is currently about 390 parts per million (some 500 million people also depend on coral reefs for their livelihoods). This is not just due to climate change: a range of stressors, including over-fishing, pollution and habitat destruction need tackling. A recurring theme of the Meeting was that PES actions are only partial solutions – a holistic and multi-pronged approach combining policy and project level actions is essential.
Facilitator: Phil Franks, Coordinator, CARE Poverty, Environment, and Climate Change Network, CARE International
The report-back of the pro-poor REDD group emphasized the importance of improving our understanding of how the poor will be affected; that the main pro-poor benefits are likely to be from changes in the natural resources’policy and governance framework, including tenure, rather than direct carbon payments; and that the challenges include better organization, information, and platforms for policy advocacy.
The MRV breakout group reported that, in general, good guidance is available on carbon measurement, for example, from the Intergovernmental Panel for Climate Change (IPCC). There is still some way to go in terms of cost-effective measurement of forest degradation (the second D of REDD) – a key challenge is to more precisely define ‘degradation’. The Brazilian Juma project presentation revealed that sub-national projects need national baselines.
Facilitator: Joerg Seifert-Granzin, Senior Advisor Climate Change and Environmental Services, Fundacií³n Amigos de la Naturaleza (FAN), Bolivia
“Developing a Carbon Map for Ghana”, delivered by Yadvinder Malhi, Professor of Ecosystem Science, University of Oxford School of Geography and the Environment
“The Challenge of Accounting for Forest Degradation”, delivered by Johannes Eberling, Independent Consultant, Madagascar
“Lessons from the Juma Project, Brazil”, delivered by Mariano Cenamo, Executive Director, IDESAM
The cocoa carbon group reported on the need for more field research, but that a survey of 800 cocoa-growing households by the Sustainable Tree Crops Program (STCP) should help. It reported that Kuapa Kokoo, the largest cocoa cooperative in the world with 68,000 farmers, is emphasizing farmer education and has a well-established benefit-sharing scheme. The importance of profitability from carbon finance options was underlined – at present, declining profitability of cocoa means that few children of cocoa farmers want to continue in cocoa farming.
Facilitator: Frank Hicks,Vice President Investment Opportunities, BioLogical Capital
“Cocoa Carbon – Potential and Challenges in West Africa”, Speaker, Sustainable Tree Crops Program, International Institute of Tropical Agriculture (name to be announced)
“Cocoa Farmer Perspectives“, delivered by Paul C.K. Buah, President, Kuapa Kokoo Farmers Union and Nicholas Adjei-Gyan, Research and Development Officer, Kuapa Kokoo Ltd.
This presentation examines the charcoal experience from East Africa with a concentration on projects in Tanzania and Kenya. The main REDD potential is in a potential tripling in the charcoal recovery rate via improved kilns and secondly by switching from unsustainable to sustainable ‘feedstock’ mainly through woodlots. The presenter emphasizes the need for a holistic approach to charcoal, including working towards a more enabling policy framework (e.g., development of regulations in Kenya in 2008), forming charcoal associations, promoting certified charcoal production (although there is no price premium at present), and looking at alternative ways of meeting the mainly urban demand for charcoal.
This presentation highlights progress in identifying a potential charcoal project to be supported by the Katoomba Incubator. NCRC has been establishing agreements with local authorities to regulate the charcoal trade in one of the main production areas in Ghana’s transition zone. A REDD strategy would aim to establish sustainable charcoal production practices, including local regulation of production, use of woodlots and/or sustainable woodland management, and improved kilns. The ensuing discussion revealed some challenges for REDD-based charcoal, including the need for a fuel-switching carbon methodology when the baseline is unsustainable charcoal production, and effective MRV.
“Renewable Energy Options in Liberia”, delivered by Joel Strickland, President, Buchanan Renewables
Toward an Integrated Landscape Approach to Land-Use-Based Emissions Reduction and Sequestration
This presentation examines integrated land use in the context of transboundary conservation projects in the region, including the multi-donor TerrAfrica sustainable land management (SLM) project in northern Ghana and Burkino Faso
“Monitoring and Measuring Carbon at the Landscape Scale”, delivered by Peter Minang, Global Coordinator for the Alternatives to Slash-and-Burn Partnership (ASB) of the World Forestry Centre, and Kieth Shepherd, Senior Scientist, World Agroforestry Centre
This presentation focuses on the policy and institutional issues for ‘landscape carbon’. The presenter emphasizes the need for economies of scale, focusing on carbon-rich landscapes and building on current institutions (e.g., micro-finance groups); the benefits of increasing productivity against the ‘compensating opportunity costs’ approach; the potential for bundling with agricultural certification; community training, etc.
The ensuing discussion included the great potential of such innovations as mobile (phone) finance and live Google maps which can be used by communities. Rainforest Alliance also mentioned the potential to build on their group-based agricultural certification work, and (again) the key role of the private sector in view of its interest in the sustainability of the supply chain, e.g.., for coffee, cocoa, etc.
This presentation emphasizes that the West Coast of Ghana contains some of the most important coastal and marine biodiversity in the country. But the newly discovered oil presents a high threat of habitat destruction/degradation due to the economic and political pressures to develop this resource quickly rather than sustainably. It was argued that market-based mechanisms, such as biodiversity offsets and other PES, can be tools for sustainable development, but need to be promoted and crafted in a way that avoids ‘greenwashing’ the oil extraction.
This presentation offers a cautionary tale from Nigeria. It begins with a detailed summary of the damage that was inflicted on the people and places of the Niger Delta by 50 years of poorly-managed oil exploration and progresses into an analysis of how something so apparently good went so bad. The presenter urges Ghanaians to avoid the same fate by recognizing the long- and short-term value of all of the country’s natural resources and argued that oil companies should be held accountable for damage inflicted on fisheries, farms, and tourist destinations. He proposes PES as one means of delivering this accountability – but only when mitigation is a weak option and only if local stakeholders have been involved and educated early.
This presentation picks up the thread by outlining efforts to make local stakeholders in Ghana’s Jomoro district aware of the options open to them. The presenter begins by explaining that the bulk of Ghana’s recently-discovered oil reserves lie in Jomoro, and the government there has been conducting public hearings to help local stakeholders understand the impact of oil on their livelihoods and the options open to them. He then outlines several government proposals to bring local stakeholders into the decision-making process and the challenges facing them. He criticizes a recent environmental impact assessment as being intentionally obtuse, overly technical, and clearly designed to bamboozle underpaid district assembly members. He closes with an appeal to local NGOs to spread awareness among disempowered stakeholders.
Steve Zwick is Managing Editor of Ecosystem Marketplace. He can be reached at [email protected].
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This project represents a logical progression of processes that began some nine years ago, when a group of people interested in the environment met under the auspices of a DC-based non-profit called Forest Trends to discuss a question that was pointedly on very few people’s minds: Should nature and the services it provides have an economic value?
That meeting took place in a town outside of Sydney, Australia called Katoomba (appropriately enough, we are told that the word in the local aboriginal dialect means “rushing water”), which is why the group began calling itself “The Katoomba Group“. The idea at the time was that one of the fundamental problems with the global economic system – one of the core reasons for our environmental problems – is that the value of nature isn’t properly being accounted for in anyone’s bottom line.
This concept wasn’t entirely new; there had already been much written in economic circles about the need for a new form of “environmental economics”, or for a “Green GDP”, and there were even estimates of the value of nature’s services that were being published by leaders in the field of environmental economics (I am, of course, thinking of the estimate by Robert Costanza that nature’s services were worth some $33 trillion on an annual basis).
What was different about this group, however, was that rather than rely on the estimates of economists, the group felt that markets were going to have to be created in order to “put a price” on nature. The sorts of markets that they had in mind were not only the “cap-and-trade” style markets like the one created to manage Sulfur dioxide (SO2) emissions in the US, but also other forms of “Payments for Ecosystem Services” such as the voluntary carbon markets that had already emerged, or government-mediated markets such as the ones that were emerging in Colombia, Costa Rica, and elsewhere.
In order to better understand how these systems might work, the group included scientists, NGOs, businesses, financiers, academics, and others. And the group was designed to be practical: to think not of what should be done to establish these payment schemes for ecosystem services, but rather what could be done and what was being done.
The Rise of Ecosystem Marketplace
As it turns out, all of the participants found the meeting to be hugely valuable (if nothing else because each of the participants felt a little less lonely after that meeting, knowing that there were others out there thinking about these issues) and so it became a regular event. Katoomba Meetings were held in London, Vancouver, Tokyo, Rio, Uganda, and many other cities and countries throughout the world.
At a key meeting in Switzerland, the participants realized that one of the links that was missing in the creation of these markets was information; it is no accident that markets generate information tools like the Wall Street Journal, the Financial Times, or Bloomberg.
Without information, markets cannot function. And so the group decided to create a “Bloomberg” for environmental markets in advance of the markets themselves. And that tool was called the Ecosystem Marketplace.
EM has now been operational for nearly six years, and in that time it has produced landmark studies such as the recently released “State of the Voluntary Carbon Markets” report, as well as similar reports and pieces of information on the wetland mitigation markets, species banking, and water quality trading.
But that is only the “ECO” part of this story.
The Alignment of Profit and Preservation
The “EKO” part reflects an explosion of private, for-profit companies created to serve and profit from these emerging markets: it’s the name of a company that some of us created two years ago because we felt there was a growing disconnect between these emerging environmental markets and large sources of capital – a disconnect that was often camouflaged by the success of the carbon markets, which are well-supplied with both capital and capitalists.
For instance, it is a little known fact that the US has had – for almost two decades – a thriving market in ecosystem restoration. The market is called “wetland mitigation banking” because it covers that particular ecosystem and arises out of language in the Clean Water Act, but it is essentially an environmental market – not unlike the EU market for carbon. This market currently transacts (according to the best estimates out there) some $3 billion a year and has led to the creation of other similar markets in species conservation, etc. But despite the fact that this is a real and (some might say) vibrant market, it is almost entirely underserved by large-scale capital providers.
That is why some of us created EKO Asset Management Partners, to serve as Green “Merchant Bankers” (or, if you prefer, a Boutique Investment Firm) created to help bring capital to bear in these new and exciting environmental markets. There are now dozens of other for-profit ventures designed to stimulate (and make money from) these markets, and that is only the beginning.
As we write this (in mid-2009), the US Congress has finished the first of what are likely to be lengthy discussions on the creation of a cap-and-trade market for carbon in the US. If and when a version of these laws finally comes to pass, it will create one of the world’s largest environmental markets. Already, the ripples are beginning to emerge: new businesses are being proposed almost daily to take advantage of these new markets.
Rapid Response
In other words, the pace of change is ramping up. When we created Ecosystem Marketplace (and, for that matter, EKO Asset Management Partners), it was enough to write articles every month or every couple of weeks and we were able to cover most of what was happening in this space. But today there is news daily (it sometimes seems like it comes hourly!) and our subjects are being discussed live, on air, via C-Span. For this reason, we believe it is time to create a faster, more vibrant form of discussion, news, reflection, and information on these markets; a truly interactive blog.
While we do not suggest that financial markets – heavily criticized in recent months for inflated profits, obtuse formulas, and outright fraud – are the only answer for conservation or climate stabilization, we do think that they have tremendous potential to achieve cost-efficient environmental aims, provided they are backed by sufficient government foresight and public oversight. They are a tool in our tool-belt, one we can ill afford to overlook.
Admittedly, not all conservation aims will be served by markets. As is the nature of virtually all human institutions, capital markets have proven themselves easily manipulated by human greed (in the guise of financial engineers and fancy derivatives, creating wild profits for a few at the expense of the many). However, the same forces that attracted early proponents to capitalism – namely, production cost-efficiencies and the better distribution of scarce resources – can also apply to environmental markets.
So we recognize that all is not well in the world of environmental markets. We know there are problems, we know there are issues. But we believe there can also be solutions and we hope you will join us (and our “guest columnists”) in discussing and debating these issues. Because only with such open intellectual discussion will we ever be able to solve the many environmental problems we face. We hope you’ll contribute often and let us know what you’re most curious about, what you think is most needed to make markets for ecosystem services succeed, and what you think is merely a green (or capitalist) pipe dream.
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The above articles were consolidated, along with other material from Ecosystem Marketplace, in two brochures that were distributed at Katoomba XV.
Leading up to the meeting, Ecosystem Marketplace commissioned this series of articles to shed light on issues relevant to these meetings and that part of the world.
The Katoomba Group gratefully acknowledges the sponsorship and support of the following organizations for the Katoomba XV Meeting:
USAID; the Global Environment Facility (GEF); Gordon and Betty Moore Foundation; NORAD; Rockefeller Foundation; Rainforest Alliance; and Price Waterhouse Coopers.
As mining and logging spread across Gabon’s watershed, they threaten the river that nourishes the capital city, Libreville, and also drives the city’s turbines. USAID and the Global Environment Facility are helping the government of Gabon and the Wildlife Conservation Society entice electricity users into paying to maintain the watershed – for their good and the good of others.
1 October 2009 | When Gabon’s late president Omar Bongo created 13 national parks covering 10% of the country’s territory in 2002, he turned Gabon into a conservation champion overnight. Gabon has since surprised critics who dismissed the move as a publicity stunt by following through with a comprehensive legal framework and an ongoing search for long-term, sustainable environmental protection.
The idea of taking into account the non-market value of ecosystem and to charge for the services they provide (anything from carbon sequestration to flood control to crop pollination) could provide new incentives for conservation – and the most recent frontier is water. The Ministry of Environment recently teamed up with the Wildlife Conservation Society (WCS) on a Payment for Watershed Services (PWS) scheme designed to preserve and revive the Mbé watershed in the Northeast of the country.
Now Is the Time
“The awareness and capacity for PES in Gabon is low,” says WCS Gabon technical advisor Christina Connolly, “but there is a keen interest in the project because it fits into the sustainable development concept.”
The timing is right. Gabon has enjoyed substantial – and sustained – oil revenues since the 1960s, but with production forecast to decrease in the medium term, the pressure is on to diversify the economy. Mining and logging have huge economic potential, but their impact on the environment could be disastrous.
Forests cover 85% of the country and are home to some of the highest levels of biodiversity in the world. The watershed is one of many gems in Gabon. A 2004 study by the Central African Regional Program for the Environment (a USAID initiative) concluded that “in terms of numbers of species per hectare, it is the richest site in Africa assessed to date.” Endemicity is high, and the local ape population hasn’t been affected by the Ebola virus.
The also plays a vital economic role: The watershed is the main source of electricity for Gabon’s capital, Libreville, which makes up 60% of the country’s population. Electricity is generated from a hydroelectric dam owned by the Soci d’Energie et d’Eau du Gabon (SEEG), a subsidiary of the French multinational Veolia. Forests in the watershed reduce siltation in the reservoirs and help regulate water flow.
Threats to the
Despite its environmental and economic importance, the is facing serious threats. In addition to illegal mining, logging, and hunting, there is no capacity to regulate activities of the numerous legitimate actors: logging and mining concessions, the Monts de Cristal National Park (which occupies a third of the watershed), and local communities.
The approach has been piecemeal, and existing laws are often not enforced. The Forestry Code, for instance, requires concessionaires to adopt sound environmental practices, but none of the logging companies in the watershed abide by it. They’re not FSC-certified and don’t use reduced impact-logging techniques either.
WCS, with support from the GEF and USAID Translinks, is trying to establish a PWS scheme in the for services rendered to the city of Libreville. The basic principle is that electricity users downstream would pay land users upstream to adopt land-use practices conducive to the protection of the ecosystem and the good functioning of the hydroelectric dam. It’s trailblazing work, but Connolly hopes it will serve a greater purpose.
Early Days and Institutional Challenges
“What we have done is accumulate knowledge that will help us design the next three years. We have to build the institutional and legal framework of the PES, and I am hoping that the principles and institutions we set up can accommodate other PES schemes and REDD activities,” she says.
Gabon’s complex institutional makeup is likely to be one of the biggest challenges in getting the scheme running.
To begin with, there are a dozen stakeholders involved – from several ministries to the Monts de Cristal National Park (which covers a third of the watershed area) to local authorities, mining and logging concessionaires, and local communities – and as many conflicting priorities to reconcile.
The scheme also lacks a strong business case for the time being. Because of a chronic lack of data, it is difficult to show the link between deforestation and sedimentation; since it is the premise the scheme is based on, Connolly says studies to establish a connection will be put in place. “At the moment, it is hard for SEEG to know the extent of the change they would have a stake in addressing.”
Defining the Services
The exact nature of the services rendered is equally difficult to define. Local populations currently have a relatively low impact on land degradation, making it difficult to determine what harmful activities they could be paid to stop doing.
Equally tricky is the notion that logging companies would somehow be paid to adopt environmentally friendly practices when that is already required by laws they have simply failed to comply with.
Connolly acknowledges these are difficult questions, but she believes the scheme is an opportunity to rethink the current situation. Since the stick didn’t work, perhaps the carrot will? The PWS could provide an incentive for logging companies to go above and beyond the current legal framework such as not cutting trees near rivers or on steep slopes which create acute sedimentation problems. As for local communities, there is a move towards more community involvement, so there is scope.
Then there is the issue of payment. SEEG would be the main buyer, but it is likely it could pass on some or all of the cost to its customers.
“People are very supportive of the project in principle,” says Connolly, “but when we start talking about passing the cost on to consumers, it may change.”
Ensuring that the funds are then collected and distributed appropriately is another consideration: Who would be in charge?
Etienne Massard Makaga, General Director for the Environment and Nature Protection at the Ministry of Environment, is more dogmatic.
“The PES is a new way of seeing things: we have to shift from thinking about the environment in an economic context to thinking about the economy in an environmental context. We’re changing the paradigm. And this pilot project is about bringing the entire Gabonese society to change paradigm,” he says.
He thinks that once people understand the mutual benefits of the system, they’ll adhere to it.
“If SEEG realizes that the new approach is generating savings in operational costs, it will definitely take part. And if consumers get a better, more reliable electricity supply, a 2-3% increase on the bill will be money well spent.”
The Road Ahead
It is too early to have all the nitty-gritty details ironed out, but the scoping study has raised some interesting issues. WCS is submitting its plan for the next four years to the GEF (the main funder) this autumn; if all goes well, feasibility studies will start in January 2010. The objective is to have a signed contract between buyer(s) and seller(s) by the end of the program.
The feasibility study will focus on cost-benefit analysis and valuation studies to establish a robust PWS. Connolly and her team will also have much awareness-raising and capacity-building to do amongst stakeholders.
If the PWS materializes, WCS has planned interesting follow-up measures to evaluate the impact of the scheme: two sample areas will be compared, one taking part (treatment group) and one not involved (control group).
“It’s not a new idea,” says Connolly, “but it hasn’t been implemented systematically in the past. With the benefit of hindsight from other projects, we thought it would be good to include at the design stage.”
Funding or not, Connolly says WCS will pursue its work on PES in Gabon. The government also has high hopes for PWS schemes. The country plans to continue developing hydroelectric energy; large-scale PWS schemes could be part of the development, such as in the Grand Poubara dam in northeast Gabon, part of a €3 billion deal to exploit the Belinga iron mine.
Emilie Filou is a free-lance writer specializing in African development issues and a regular contributor to Ecosystem Marketplace. She is based in London, and can be reached at [email protected].
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Deforestation accounts for 20% of all greenhouse gas emissions, and the UN bodies charged with mapping out the role of forestry offsets in a post-Kyoto climate-change regime are meeting in Bonn, Germany, this week and next to continue the process of hammering out their differences. The groups will meet at least three more times before gathering in Copenhagen at the end of the year.
2 June 2009 | Delegates from 182 nations are beginning to arrive in the former German capital of Bonn to hammer their preferences into a 53-page negotiating text that will be kicked around ad nauseum between now and December, when the final version is set to be presented to high-level negotiators UN Framework Convention on Climate Change’s (UNFCCC) Conference of the Parties in Copenhagen.
Over the next few days, the various contact groups will be taking shape, and we may soon have a decision on whether or not to break REDD into a separate negotiating stream. As the negotiations develop, Ecosystem Marketplace will be keeping tabs on them for you.
It is an axiom of life that money complicates everything, and so it is for REDD. Over the course of the last Bonn meetings, the debate continued regarding how to finance the reduction of deforestation in developing countries. Should REDD be financed in the model of traditional government-to-government development funding, or should it be linked to a market, and should it generate credits that can be used by industrialized countries to meet their emissions targets?
No consensus was reached on these questions in previous Bonn meetings, but there was a general trend in the discussions towards developing a hybrid approach combining the various funding options.
A proposal from Norway helped focus earlier discussions around the idea of a multi-phased process for REDD implementation that would be customizable, to fit the circumstances of each participating country. Correspondingly, each phase would be funded through a different finance mechanism, beginning with direct government assistance, and culminating in the generation of credits that developed countries could use to meet their emission targets. The Government of Norway released a report that elaborates this approach.
Land Use, Land-Use Change and Forestry (LULUCF)
Leaving REDD aside, carbon emissions and sequestration from changing land use are already a part of the Kyoto Protocol, where industrialized countries must account for their LULUCF emissions. During a meeting of another of the working groups referred to above, the AWG-KP, a carbon accounting option suggested by the European Union caused quite a stir. The accounting method, known as the “bar approach”, proposes that a country would have a reference level of LULUCF emissions (or reductions), based on some agreed-upon historical baseline. If the country went below that emission level, it would be credited; if it went above, it would be debited.
The influential Climate Action Network viewed this proposal with a healthy dose of skepticism, suggesting in its ECO newsletter that the method might be susceptible to ‘gaming’. Without a doubt, however, the issue will reappear at the next AG-KP meetings, set for early June in Bonn.
Indigenous Rights
The rights of Indigenous Peoples in the development and implementation of REDD also continued to be a contentious issue at previous Bonn meetings, with a number of organizations contending that little was being done to enable the participation of indigenous communities, or to protect the right to free, prior and informed consent (FPIC), as provided in the UN Declaration on the Rights of Indigenous Peoples.
UNFCCC 2009 Schedule
June 1-12, 2009 Bonn, Germany AWG-KP, AWG-LCA, SBSTA and SBI
August 10-14, 2009 Bonn, Germany AWG-KP and AWG-LCA
Sept. 28-Oct. 9, 2009 Bangkok, Thailand AWG-KP and AWG-LCA
November 2-6, 2009 Location TBD AWG-KP and AWG-LCA
December 7-18, 2009 Copenhagen, Denmark Conference of the Parties
Copenhagen: The End of the Beginning for REDD?
While the addition of two new working group meetings on the UNFCCC schedule indicates a true commitment on the part of the working groups to bring substantial and specific text to Copenhagen for negotiation, it is still too early to tell how much progress can honestly be made in the next six months. Referring to the REDD negotiations, AWG-LCA chair Zammit Cutajar urged prudence from the participants. He reminded them that the famously complicated Clean Development Mechanism (CDM) is only covered in one small article in the Kyoto Protocol, and suggested that participants focus on sending the right ‘signal’ in Copenhagen, with the details being hashed out later.
Perhaps REDD will be a mere sentence in the Copenhagen document, leaving the details for yet another day?
Reporting and Summaries
At each UNFCCC meeting, organizations and institutions offer their perspective on the events, either through reporting or analysis. Here we have highlighted a few we found particularly useful.
Earth Negotiations Bulletin
For those that want to follow the events of the Bonn meeting in detail, the International Institute for Sustainable Development (IISD) reporting service provides the most consistent and impartial reportage throughout the various climate negotiations. You can download the wrap-up from the Bonn meetings, or you can view the index of their daily Bonn reporting. A word of caution: These summaries are laden with acronyms and arcane terminology.
Carbon Finance
In an insightful piece, Andrei Marcu, a senior advisor on emissions trading at the Canadian law firm Bennett Jones and negotiator for Panama, reads the tea leaves on the REDD discussions at Bonn, to try to divine what might happen in Copenhagen. He also offers insights into what it all might mean for businesses and investors.
Global Canopy Program Blog
With two bookend postings from the Bonn meetings, Charlie Parker of the Global Canopy Program provides a quick summary of what could have happened and what did happen with regards to REDD in the various policy negotiating streams, and offers a another perspective the ultimate outcome Copenhagen.
ECO Newsletter
The Climate Action Network, which we alluded to above, represents 450 non-governmental organizations (NGOs) and provides daily coverage and (often witty) commentary from the NGO perspective through its ECO Newsletter.
Statements and Outputs
To coincide with the Bonn meetings, a number of organizations and institutions released reports to inform, and in some cases influence, the discussions. Here are a few of the relevant publications.
The International Institute for Environment and Development (IIED) released two briefings by Virgilio Viana, director general of the Amazonas Sustainable Foundation which helped to pioneer a system of REDD payments in Amazonas. In the briefings, Viana makes the argument for funding approach for REDD that combines market access (carbon credits) with funding from governments.
Greenpeace released a report proposing that including forest offset credits in carbon markets would cause a 75 percent collapse in the price of carbon, triggering a subsequent reduction in clean technology investments. The report, however, highlights findings of an unconstrained scenario as opposed to the more likely one with politically constrained supply.
Additionally, the recent draft US climate bill evidences a strong US demand projection for credits and thus the likelihood of international forestry credits causing global carbon prices to crash also decreases significantly. Moreover, revenue from the strategic reserve auctions and allowance set asides in the supplemental pollution reduction program to retire forestry credits should mitigate the deflationary price pressure as well.
As with any major UNFCCC meeting, there are a host of official documents to sort through. These are all available at the UNFCCC website for that particular meeting. There, one can find the documents that various stakeholders and observer organizations submitted in advance of the meeting, to see where they stand on the issues.
Of unique interest is the focus document for the working group on long-term cooperative action, written by the Chair of the working group. Released in two parts (one and Evan W. Johnson is a Forest Carbon Consultant based in the US State of California. He can be reached at [email protected].
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Cocoa is one of Ghana’s most important exports, but current farming techniques wreak havoc on both soil and surrounding forests. This is not only unsustainable for cocoa, but also contributes to global warming and biodiversity loss. EM examines efforts to promote sustainable cocoa farming by tapping into the global carbon markets.
Third in the Series: The Road to Accra, leading up to the October Katoomba Meeting in Accra, Ghana.
About this Series
The Fifteenth Katoomba Meeting begins on October 6 in Accra Ghana, and runs through October 9 in two phases: phase one runs for two days and is open to anyone who registers and is designed to bring the debate over the role that payments for ecosystem services can play in promoting sustainable development to a larger audience. Phase two also runs for two days (October 8 and 9), but is an intensive, invitation-only workshop for practitioners, policy-makers, and stakeholders.
This series is designed to shed light on issues relevant to these meetings and that part of the world.
Part One, Soil Carbon in Africa, brings you up to date on ways that African farmers can earn income by adopting agricultural techniques that capture carbon in the soil.
Part Two, CDM in Africa, examines the role that local financial systems play in attracting CDM investment.
Part Three, Carbon and Cocoa, examines the interrelationship between cocoa farming, deforestation, and carbon sequestration.
Part Four, Gabon’s Mbé Watershed, examines a pioneering watershed protection scheme being implemented in Gabon.
Part Five, Ghana Readies for REDD, introduces you to the various players working to forge Ghana’s payments for ecosystem services regime.
Other stories will be added over the course of the month.
23 September 2009 | Can carbon save cocoa? That, some say, is the million-dollar question – or, more accurately, the $2.2 billion question, since industry insiders estimate that’s the value of carbon stored in Ghana’s cocoa landscapes.
That value could play an important role in ensuring the long-term survival of the nation’s cocoa industry, which faces existential threats in the wake of depleted soil fertility, reduced water supplies, and various diseases worldwide. Already Brazil, once the second-leading cocoa producer in the world, has seen its cash cow fall victim to a massive fungal disease. Now, instead of making money from cocoa, Brazil pays to import it.
Meanwhile Ghana – which is second only to Cí´te d’Ivoire in world cocoa production – has experienced a decades-long decline in cocoa yield per acre farmed, spurring farmers to abandon the livelihood that supported their families for generations. That decline and the accompanying flight from farming have been in remission for three years – thanks largely to the current high price of cocoa – but current agricultural techniques are unsustainable over the long haul.
Two-thirds of Ghana’s stored carbon lies in its high-forest region – and the country has already lost most of this, seeing it shrink from 8.2 million hectares in 1900 to less than 1.2 million hectares today.
The Cocoa Conundrum and the Sun Curse
Cocoa has always been rough on land. Under the best of circumstances, the cacao trees from which cocoa is harvested suck nutrients out of the soil at rates that require massive infusions of chemical fertilizer – which only 3% of cocoa famers use – and also require heavy doses of insecticides – which are also not in wide use.
Traditional cocoa farming techniques recommend leaving much of the standing forest intact, because traditional strains of cacao tree grow best in filtered sunlight. Over time, hybrid varieties have improved yields – beginning with strains that can be harvested twice per year instead of once. Newer plantations, however, are shifting to even newer hybrid trees that tolerate more direct sunlight. This makes it possible for farmers to chop down larger shade trees and plant more cacao trees – an apparent improvement over traditional farming because it, like earlier hybrids, offers higher yields.
Unfortunately, sun-free or low-shade systems suck even more nutrients out of the soil than do the already ravenous multi-harvest varieties; they also encourage some pests and – more importantly for the world at large – rob the planet of both carbon-sequestering trees and of valuable habitat for various species of rare animal and plant by encouraging the destruction of natural shade trees that store carbon and provide shelter.
As a result, these newer plantations are often abandoned within a few decades and replaced with newly-deforested land, says Michael Richards, a natural resources economist with Forest Trends (publisher of Ecosystem Marketplace). Cocoa farmers often then extend their farms or move into other forested areas, bringing deforestation with them and releasing more carbon into the atmosphere.
Most Ghanaian farmers still use the shaded variety of cacao tree, but the hybrids are taking hold – especially in the Western part of the country – and the global atmosphere is paying the price.
Long-term, farmers are paying a price as well.
Soil fertility has shrunk noticeably; the newer hybrid-cocoa trees’ lifespan is growing shorter; and farmers are struggling to survive. Climate change and unsustainable farming techniques have decreased the amount of land supporting cocoa crops by 40% in the past four decades alone, reports the Ghanaian Nature Conservation Research Center, the leading conservation NGO in West Africa – although that amount has been increasing in recent years as cocoa prices rise.
Some experts believe that if nothing is done, Ghana’s cocoa sector could go the way of Brazil’s.
“The world is focusing on whether Kraft is going to buy Cadbury and how much it’ll pay for it, but it may not be a great long-term investment if we run out of cocoa in 30 years,” says John Mason, executive director of the Nature Conservation Research Centre (NCRC).
Preliminary research by the University of Reading in the UK suggests that traditional, shaded-cocoa farms store over twice as much carbon as shade-free farms. Farmers could be persuaded to increase their tree canopy and decrease their cocoa yield if carbon trading makes it worth their while.
Re-Thinking the Process
Scores of environmental non-governmental organizations (NGOs) have called for a moratorium on new sun cocoa plantations and a return to shade-cocoa. Many believe that carbon offsets for projects that reduce greenhouse gas emissions from deforestation and forest degradation (REDD) can make it worthwhile for farmers to return to shade-growing, but Michael Packer, managing director of ArborCarb Ltd, says simply reviving the shaded growth method will not be enough.
“Traditional cocoa is problematic, too, in the way it has been produced,” he says. “After all, that led to the deforestation that exhausted soil, which lead to the requirement for hybrids.”
The solution, he adds, is to manage cocoa plantations differently.
“We need to work with ecosystem to manage soil nutrient content, biodiversity and associated ecosystem services – including carbon sequestration and disease control,” he says.
Pioneering Cocoa Carbon
This sparked a push to create the world’s first-ever cocoa carbon initiative – and, not surprisingly, its Petri dish is Ghan.
Forest Trends, NCRC, and the Katoomba Group (an international network promoting ecosystem service markets and co-publisher of Ecosystem Marketplace) are spearheading a three-part carbon-offset pilot project under the Forest Trends Incubator program, which has already initiated community-based projects across Latin America.
If the program overcomes funding and logistical hurdles, it could start as early as mid-2010, insiders say.
Who Are the Farmers?
Most cocoa farmers are share croppers, but many also live on gifted land or land they have purchased. Regardless of the ownership structure, the project plans to measure whether farm owners who preserve or enhance the carbon-storing forest canopy of their farms can compensate for their decreased cocoa production with the sale of carbon-offset credits – and how this compensation can be spread among land-owners who lease their land to share-croppers and land-owners who farm their own land.
This could answer the $2.2 billion question – if policymakers can navigate several complex hurdles. Chief among them is land tenure.
The Tenure Quandary
The Katoomba Group recently invited key participants from a range of stakeholder groups – including various government departments – to an REDD Opportunities Scoping Exercise that identified tree tenure as a major constraint for REDD.
Tree tenure laws in Ghana, for example, discourage farmers from keeping timber trees because the state owns all naturally-occurring trees, while planted trees belong to the person who plants them. Farmers, therefore, are only permitted to fell timber trees for household use, but not for income. Only timber groups with government concessions can fell naturally-occurring trees for money – leaving cocoa farmers no economic or financial interest in preserving trees growing on the land they either own or work.
Adding to the complexity: many cocoa farms are located within the ‘off-reserve’ areas of timber concession zones. This means that a logger with a concession can harvest the farm’s trees – although the logger does have to let the farmer know he’s harvesting them, and technically he has to compensate the farmer for the felled timber trees and any damage to cacao trees from machinery. Unfortunately, there are no standards of compensation, and disputes are quite common.
To avoid the hassle – and the risk of damage – cocoa farmers often select smaller shade trees in preference to timber shade trees. They have also been known to destroy timber saplings and even ring-bark mature timber trees. Those who keep the trees often sell them clandestinely to chainsaw operators who cause minimum damage to cocoa.
The Katoomba Scoping Exercise concluded that the best chance for sustainable shade-tree cocoa farming, as well as other tree-based systems, would be the extension of what are known as Community Resource Management Areas (CREMAs), in which communities can hold greater rights to the natural resources on their land, including trees.
NCRC is working with a few pilot CREMAs, but there are currently only a handful in the country, and the government has not adopted a policy of promoting them. Local NGOs argue this must change as part of a national REDD program.
The Importance of Education
A public-private partnership named the Sustainable Tree Crops Program (STCP) kicked off in 2000 to introduce sustainable innovations such as integrated pest management and reduced chemical use to enhance cocoa productivity.
Farmers graduating from the program’s “farmer field school” have seen their incomes improve by 15-50 percent, says Bill Guyton, president of the World Cocoa Foundation that supports the partnership and represents nearly 70 chocolate companies worldwide.
So far, however, only a small percentage of cocoa farmers participate in field school, and Guyton says he’s anxious to explore the use of carbon credits to augment farmer income and industry sustainability.
Credits could be generated through four types of transactions activities under the REDD banner or as afforestation/reforestation projects under the Kyoto Protocol’s Clean Development Mechanism – or in the voluntary carbon market.
Compensation for Limitation
REDD-wise, cocoa growers could be compensated for not encroaching on forest reserves or deforesting to extend their plantations. On farms, they could get credits for maintaining shade cover and not promoting full-sun exposure.
As for reforestation, farmers would be rewarded for reverting from a full-sun system to shaded cocoa to planting trees and encouraging regeneration.
They could also get credits for rehabilitating abandoned plantations and not letting them turn into low-productivity agricultural land or bush, which have low carbon-storage capacity.
“It is a potential win-win situation for everyone,” says Richards. “It promotes biodiversity and environmental sustainability, would ensure supply sustainability for the big cocoa buyers, and it could improve the livelihoods of thousands of small farmers.”
Potential vs. Practice
Potential is one thing. Practice is another.
“We’re all convinced that this area has real potential,” says Ken Norris, a researcher from the University of Reading and lead scientist for the pilot projects. “The problem is there are a whole lot of practical issues to overcome to make it work.”
For instance, because verification of carbon offsets is expensive, CO2 contracts typically apply to land sizes ranging from 3,000-5,000 hectares. But the average cocoa farm in Ghana is only 2-3 hectares. Each contract, then, would require approximately 2,000 farmers to federate.
And carbon rights are not established in law yet – although many are going on the assumption that they will follow the timber rights outlined above: namely, that standing trees will fall under the jurisdiction of the Forestry Commission, while planted trees – and their largesse – will be owned by whoever plants them.
“This is a major organizational democracy initiative about benefit sharing,” says Mason. “We’re trying to work out the best way of doing it, perhaps through existing community groups or organizations.”
Money
And, of course, there is the issue of funding. Norris estimated the project cost at US $5.5 million, and believes potential funding organizations will wait until after funding issues are resolved at the year-end Copenhagen Climate Conference before they decide how much they will contribute.
Cocoa carbon credits are not expected to flow for at least another two or three years – yet Mason says he is optimistic; he already has potential buyers.
“The cocoa industry is prepared to buy our credits as soon as we’re able to bring them to market,” he says, adding that he’s been working with the cocoa industry over the last three years – and his message is sinking in.
“It’s gone from ignorance and skepticism to the realization that a major shortage of cocoa beans is looming.”
But he says he is concerned about what’s been done to mitigate the crisis so far.
“All the big manufacturers are competing against each other when this is a time for a major concerted effort.”
The Ghana Cocoa-Carbon Initiative and pilot projects under the Forest Trends/NCRC/Katoomba Incubator could answer these concerns. The initiative already raised $1.5 million from international donors such as the Rockefeller Foundation and NGOs such as the Rainforest Alliance.
Winning Industry Support
Mason also asked the cocoa industry to chip in. He recently presented the initiative at the launch of a new not-for-profit organization called Source Trust. Set up by Armajaro, a leading cocoa supplier whose clients include Cadbury, Nestlé, and Kraft’s amongst others, Source Trust certifies and promotes sustainable cocoa farming practices in local communities.
It already raised $1 million to pay for education and water projects that promote sustainable farming, as well as bed nets that reduce malaria. Chocolate manufacturers pay Armajaro a premium of $30 per ton in exchange for a traceable and sustainable cocoa supply.
“As an industry, our interest is to ensure that farmers have good yields over the long-term, not just in the next couple of years,” says Nicko Debenham, head of traceability and sustainability at Armajaro and a spokesperson for Source Trust.
Encouraging farmers to leave 40% shade cover on their farm would serve that purpose. Debenham says Source Trust will assess its stakeholders’ interest in providing the $4 million Mason requested for the cocoa carbon initiative. The carbon pilot project could also piggyback on Source Trust’s certification program as the administrative platform for carbon payments.
Cocoa Carbon Projects
Once funded, the project plans to learn more about carbon sequestration in varied landscapes, Norris says. Three pilot sites will be chosen, one in western, one in central and one in eastern Ghana. Two of the incubator’s projects will be dedicated to carbon and cocoa.
Their objective is threefold. They will undertake detailed scientific work to build a robust case for future contracts between farmers and carbon credit buyers. They will establish methodologies and structures to take the credits to market. And they will federate farmers into groups or cooperatives that will work under a single contract to spread the impact of transaction costs.
Outside the Box
It will take years before cocoa-industry stakeholders can answer the $2.2 billion question. But the final answer could transform not only the cocoa industry and carbon trading but farming as we know it.
“Instead of thinking about producing food to the detriment of the environment,” Norris says, “we could produce food to preserve the environment.”
Emilie Filou is a free-lance writer specializing in African development issues and a regular contributor to Ecosystem Marketplace. She is based in London, and can be reached at [email protected].
Alice Kenny is a prize-winning science writer and a regular contributor to Ecosystem Marketplace. She may be reached at [email protected]
Steve Zwick is Managing Editor of Ecosystem Marketplace. He can be reached at SZwick (at) ecosystemmarketplace.com.
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Ecotourism and sustainable trophy hunting have delivered verifiable conservation benefits in parts of Africa, but scaling up has proven difficult. Now, an innovative pilot scheme in Tanzania is trying an alternative approach: paying communities directly to protect wildlife habitats. The Ecosystem Marketplace examines this promising new model for wildlife conservation.
16 July 2008 | The stone patio at Tarangire Safari Lodge sits on a bluff overlooking the Tarangire River, where thousands of elephant, buffalo, zebra, and antelopes congregate during the long Tanzanian dry season.
During this time of year the lodge – easily the best vantage point for miles around – is packed with tourists from Europe and North America enjoying evening cocktails as they watch families of elephants drifting down to the river in the fading light. Such spectacles have made Tarangire National Park one of the jewels in northern Tanzania’s tourism circuit, and a key part of an industry which generates over $800 million in total annual revenues in one of the world’s poorest countries.
Cashing in
Such funds should, in theory, provide an incentive for the people of the plains to conserve wildlife, but there’s a catch: the money historically flows primarily to tourism companies and national park agencies, while the wildlife herds roam widely according to seasonal patterns of rainfall and forage availability, living for up to half of the year outside the park on community lands.
If the animals’ habitat is to be preserved, benefits will have to flow to people far away from park boundaries and tourism lodges – but how? Some other regional efforts to pay for habitat services have failed to provide a direct link between conservation and payment – and thus failed to make a difference.
Now the Tarangire Safari Lodge and a small group of other tourism companies which are invested in the park and surrounding area believe they’ve found an answer, and have entered into an agreement with Terrat village, which provides the community with annual payments for protecting important seasonal wildlife habitats.
Although Terrat lies about 40 kilometers from the park boundary, its lands contain critical breeding and calving grounds for thousands of wildebeest and zebra that spend the dry season along the Tarangire River.
“At the end of the day, our industry’s sustainability depends on these communities having a secure economic stake in the health of the wildlife populations that their lands help produce,” says David Peterson of Dorobo Tours, the company that took the lead in negotiating the deal with Terrat.
The Lay of the Land
East African savannahs are lands where change and variability are intrinsic ecological characteristics. In these semi-arid areas, rainfall largely determines annual plant growth, but rainfall is in turn rather unpredictable. For wildlife and human communities alike, these conditions place a premium on the ability to move across large areas to take advantage of the ephemeral presence of water and forage.
When the rains do fall across the Maasai Steppe, which usually occurs some time in October or November, the scene along the Tarangire River changes dramatically. Wild animals soon depart from the park’s confines, dispersing far and wide to areas which lack permanent water but which bloom with fresh new growth once the rains arrive.
“During the rainy season, the park has very few animals remaining within its boundaries,” notes Charles Foley, a zoologist with the Wildlife Conservation Society and researcher based in Tarangire since the early 1990’s.
Herds of zebra and wildebeest, the most abundant large mammals in Tarangire, travel to wet season habitats on open short-grass plains. These plains, formed by a hard underlying rocky substrate covered with a layer of volcanic soil, possess mineral-rich grasses which wildlife require during the calving season because of the value such nutrients provide to lactating female animals and their young.
The most important area for Tarangire’s herds is an expanse of open grasslands known as the Simanjiro plains, located between 25 and 40 kilometers to the east of Tarangire National Park. These plains hosted about 10,000 zebra and 6,000 wildebeest in the early 1980’s, in addition to smaller numbers of antelope such as eland, fringe-eared oryx, Grant’s gazelle, and hartebeest. Today, perhaps only 3,000 to 4,000 zebra and wildebeest in total are found on Simanjiro, and species such as oryx and hartebeest have become scarce. These declines are due to high levels of poaching for meat and zebra skins, combined with the loss of habitat to spreading agriculture.
The Maasai – People and Wildlife
The Simanjiro plains fall under the traditional authority of several Maasai communities, the pastoralist ethnic group that inhabits much of the Rift Valley from central Kenya to central Tanzania. The Maasai are renowned for living amidst some of the world’s greatest assemblages of wildlife, and their pastoralist management practices – burning and grazing rangelands and preventing cultivation across large areas – have shaped ecosystems such as the Serengeti over the course of the past two or three centuries.
Maasai pastoralist management systems mirror the basic ecology of wild herbivores in these savannahs in moving between dry season and wet season pastures. Maasai communities set side large areas of their land as customary grazing reserves, where livestock are only allowed to enter and graze during the later stages of the dry season. This ensures the availability of forage during this most difficult time of the year. It also effectively protects large stretches of land free from human use for much of the year, which helps conserve wildlife populations.
The Simanjiro plains fall within the boundaries of three villages: Emboreet, Terrat, and Sukuro. While these communities, like Maasai elsewhere in northern Tanzania, may co-exist reasonably well with most large mammals, save the occasional lion or hyena that attacks livestock, their relationship with conservationists has been far less amenable. In 1970, the creation of Tarangire National Park displaced local people and permanently closed off access to the important water sources – the Tarangire River and large swamps in the park’s southern portion – located in this new state protected area.
James Igoe, an anthropology professor at Dartmouth College who carried out his PhD research in Simanjiro, writes that local communities feel that the loss of pastures and water to the protected area “has significantly contributed to declining livestock health and reduced the reproductive capacity of their herds.”
Conservation vs. Agriculture
Twelve years after Tarangire National Park was gazetted, a proposal was put forth by a foreign conservationist to create a new ‘multiple-use’ conservation area on the Simanjiro plains in order to protect this key stretch of habitat. This proposal called for banning all agricultural cultivation and reducing livestock numbers in Simanjiro across a 6,000 square kilometer area. The reaction by local communities was, unsurprisingly, defensive and antagonistic.
Two decades later, the legacy of historic experiences, compounded by additional efforts to create new parks, reserves, and ‘buffer zones’ adjacent to Tarangire, has made local communities extremely suspicious of conservation interests. Recent research findings demonstrate how some Maasai communities are now promoting farming not only out of food security interests, but also because they feel that agriculture ‘brands’ the land and makes it harder to take away for conservation purposes.
“The fear of wildlife conservation interests plays a significant role in the spread of agriculture in Simanjiro’s pastoralist communities,” notes Hassan Sachedina, who recently completed a PhD dissertation at Oxford examining the interaction of livelihoods and conservation in Emboreet village.
This creates quite a challenge for landscape-scale conservation in the community lands outside Tarangire. Although wildlife populations depend on lands far outside national park boundaries which are managed by rural communities, those communities have generally grown hostile to formal conservation interests as a result of land and resource loss during the past thirty years. Furthermore, wildlife remains government property in Tanzania, generating large revenues from trophy hunting which is predominantly captured at the national or district level but rarely trickles down to villages. This lack of positive local incentives for conserving wildlife on community lands underlies the declining wildlife populations in Simanjiro, and, for that matter, across much of east Africa.
Making Conservation Pay
One promising model for generating such incentives emerged in the early 1990’s. Two relatively small-scale, high-end tour operators, Dorobo Tours and Oliver’s Camps, approached communities living adjacent to Tarangire National Park with the aim of exploring the possibility of establishing tourism concessions on community lands. The operators’ objective was explicitly geared towards linking conservation with tourism enterprises in order to provide local incentives to protect land for wildlife rather than allow it to be converted into farms.
“Our goal was to make wildlife and tourism a viable economic option for the communities and shift their incentives away from the growing threat of agricultural conversion,” recalls Peterson.
Communities and Ecotourism
These initial negotiations led to formal agreements between the operators and two villages, Emboreet and Loiborsoit, providing the communities with set annual concession payments augmented by daily fees paid for each client staying in the area. In exchange, the villages gave the operators exclusive tourism rights to the tourism concession areas and agreed to prohibit farming, permanent settlement, and tree-felling for charcoal production.
An important part of the agreement was that seasonal use of the concession areas for livestock grazing continued to be allowed according to customary practices. Since the early 1990’s, several other village-operator tourism concessions have emerged, and these areas now provide community protections of about 40,000 hectares of land along the eastern border of Tarangire National Park.
Indirect Values
Although these tourism ventures provided the incentive to for local communities to protect a large area of land adjacent to the park, the more important wildlife habitats on the Simanjiro plains, much farther away from the park, were not included in the concessions. In fact, the plains become difficult to access by vehicle during the wet season, when the large herds of wildlife are present, and are not as attractive for tourists during the dry season, when they are accessible.
The plains’ value to tourism is mostly indirect, by providing the wet season habitat for wildlife that congregates inside Tarangire National Park during the dry season, and which lend the park its high value for tourism during this time of year.
Market Failure
This situation represents a classic market failure: wildlife with an overall high economic value does not, through the existing operation of tourism markets, provide any remunerative value to the communities whose lands provide the habitat that these animals depend on. For example, Terrat and Sukuro villages’ lands contain about two-thirds of the Simanjiro plains, but they receive no income from wildlife tourism.
This market failure served to catalyze a new approach for rewarding local communities in Simanjiro for the ecological services they provide by maintaining critical wildlife habitat.
“After 25 years of watching wildlife populations decline and millions of dollars be spent on conservation projects that were, for the most part, ineffectual, it seemed like time to think and act outside the box,” says Peterson.
Beyond Ecotourism: Direct Payments
A consortium of five tourism companies, supported by conservation organizations including the Wildlife Conservation Society and Sand County Foundation and a local development organization called the Ujamaa-Community Resource Trust, experimentally decided to pay one of the Simanjiro villages, Terrat, to formally protect its portion of the short-grass plains.
Terrat receives a modest annual payment, the equivalent of about $4,500, in exchange for contractually agreeing to prevent farming or permanent settlement on about 9,300 hectares of land which encompasses its portion of the plains. The village is also contractually obliged to prevent activities such as charcoal burning, tree-felling, or illegal hunting of wildlife. Unlike nearby tourism concessions in other villages, in Terrat the tour operators do not carry out any tourism activities in this concession area; their payments are made solely out of conservation aims, and based on the reality that tourism businesses inside Tarangire National Park rely on the health of the wildlife populations using the Simanjiro plains.
Instead of buying access to community land for tourism, the operators are buying protection of the land and its value to wildlife directly.
This land easement or conservation concession is the first of its kind in Tanzania, with only one or two similar arrangements having been developed elsewhere in east and southern Africa’s wildlife-rich savannahs.
How the Deal Was Done
Both the operator consortium agreement and the easement contract with Terrat village were negotiated principally by Dorobo Tours. The company’s long-term experience with community tourism concessions provided critical background experience for the deal’s successful execution. A key challenge which needed to be overcome was the historic local suspicion of wildlife conservation interests.
“The key to making the easement acceptable was presenting the deal to the village as a business proposition linked to system-wide tourism interests, and not making the deal about ‘conservation’ per se,” notes Peterson.
The Results
This novel arrangement has only been in place for about three years, but it has given new hope for developing collaborative solutions to the long-term conservation challenges in the Simanjiro plains and broader ecosystem.
The most important impact has been providing a framework for creating local financial incentives for conserving wildlife that does not depend directly on the physical presence of tourism camps. This payments-for-conservation model could, for example, be more widely adopted by large conservation organizations and foreign donors, or by government park authorities.
Moreover, this model has been established in a locale that has long had a deserved reputation as a crucible of conflict between local communities and conservation interests. By making conservation a fair deal for communities and rewarding them for the value their lands provide, a step has been taken towards a more effective and equitable approach to wildlife conservation in northern Tanzania.
Fred Nelson has worked on community-based natural resource management in Tanzania since 1998 and is the director of Maliasili Initiatives, a consulting firm which promotes innovative conservation strategies based on local incentives and devolved resource tenure. He can be reached at [email protected].
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Payments for Ecosystem Services encourage entities that benefit from ecosystem services to pay for maintaining those ecosystems – but how? At the Biodiversity Conference (COP 9) in Bonn, Germany, Forest Trends, the Katoomba Group and the United Nations Environment Programme (UNEP) have jointly unveiled a nuts-and-bolts primer designed to answer that question.
21 May 2008 | Francis Ogwal has spent years trying to balance the opposing forces of economic development and environmental protection. Now, as focal point for the Convention on Biological Diversity (CDB) within Uganda’s National Environment Management Authority, he believes he’s found a tool that help him do just that.
“Payments for Ecosystem Services (PES) are still relatively new in Uganda, but there is growing interest in that approach, because we have been relying mainly on the old method of provision of money for conservation from government and donors,” he said at the ninth meeting of the Conference of the Parties (COP 9) to the CBD. “But there is a lot of competition for these resources, especially in developing countries – where you want to put money into education, health, and agriculture – and conservation always ends up way down on the list.”
The 70-page document was compiled by theKatoomba Group (parent of the Ecosystem Marketplace), Forest Trends, and the United Nations Environment Programme (UNEP), with contributions from the Division of Environmental Law and Conventions (DELC), and funded through UNEP by the Norwegian Government.
It is designed as a resource for people in developing countries looking to implement such schemes in a way that not only preserves and promotes ecosystem services, but does so in a way that empowers the rural poor of the developing world as stewards of an ecosystem service, for which they can be justly compensated.
Four-Step Process
The document covers the challenges of structuring programs that both deliver environmental benefits and benefit the rural poor, and its core is a four-step process for establishing PES projects. The steps include:
• Identifying Ecosystem Service Prospects and Potential Buyers • Assessing Institutional and Technical Capacity as well as Access • Structuring Agreements • Implementing PES Agreements
Each of these steps is broken down into smaller steps in an effort to introduce potential sellers of ecosystem services to the details of PES deals. Throughout the document, there are numerous case studies to illustrate components of the process.
Not a Panacea
The document makes it clear that PES is not a panacea. Among the obstacles highlighted: high transaction costs, a lack of regulatory drivers, and lack of understanding among those who can benefit the most from such schemes.
“People have to understand that PES schemes won’t lead to a windfall of money, and that you can’t just go out, plant trees, and hope to get rewarded,” said Rahweza. “This is a learning process, and we are simply trying to provide a resource that will help people along that process.”
Eva Haden agrees. Water and Ecosystems Program Officer for the World Business Council for Sustainable Development, she said that industry has a long to go before funding of PES schemes takes place on a level anywhere near that of the booming carbon markets.
“At this point, there is just too much uncertainty – even about basic definitions of what constitutes payment for an ecosystem service, or what constitutes an ecosystem service,” she said. “Documents like this go a long way towards moving beyond abstract theory and providing some sort of common definition, but we have a long way to go.”
Steve Zwick is managing editor of the Ecosystem Marketplace. He can be reached at [email protected].
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17 June 2008 | Over the past decade, more and more businesses have come to recognize that man’s economy depends on the earth’s ecology, and that ecosystem services – from waste treatment and pollination to genetic resources – generate tangible benefits to industry.
Furthermore, because these benefits have gone unquantified, they have also gone unpaid for – and the ecosystems that provide them are in decline.
This has sparked a diverse array of efforts around the globe to value and pay for ecosystem services.
Many of these Payments for Ecosystem Services (PES) efforts – like the booming carbon markets – already channel billions of dollars into projects designed to keep the planet’s ecosystem infrastructure alive.
Others, however, are less developed.
Even in carbon – by far the most successful ecosystem market to date – the concepts are emerging, changing rapidly, and dispersed across geography and institutions.
All of which makes it difficult to get a clear sense of the big picture of these markets: What are the major markets for ecosystem services? How big are they? Who’s involved? Where are they heading?
Mapping the Markets
To map this PES landscape, the Ecosystem Marketplace researched the main PES schemes and each of their sub-categories (mandatory or “compliance” offsets for carbon forestry, voluntary offsets for carbon forestry, government-mediated watershed protection, and mandatory or “compliance” offsets for biodiversity, among others) and their key characteristics (size, environmental impact, community impact, market participants and shapers, and emerging trends).
To collect the information on such a broad spectrum of topics, we pulled together a team of authorities on PES, each of whom performed interviews, literature searches, and web searches to collect information for a specific category of market.
The result of this effort is a large spreadsheet showing all of the markets and their defining characteristics side by side. This poster-sized chart is a powerful tool for viewing and thinking about PES markets. We’ve dubbed it “the Matrix”.
To create a more reader-friendly format for accessing this information online, we’ve split the Matrix into ‘market profiles’ that are essentially executive summaries or narratives for each market.
Commodity Types
There are different ways of categorizing markets for ecosystem services. If you’re viewing them as ecological commodities, they follow the popular grouping of: carbon, water, biodiversity, and bundled services.
Carbon markets generally reward the stewardship of an ecosystem’s atmospheric regulation services – specifically, the absorption of carbon dioxide from the atmosphere.
Water markets provide payments for nature’s hydrological services – primarily the filtering of water through wetlands.
Biodiversity markets create an incentive to pay for the management and preservation biological processes as well as habitat and species.
Bundled payments secure all or a combination of carbon, water, and biodiversity services. Bundled payments also include those in which the ecosystem service payment is built into the price of the product, such as certified timber or certified produce.
Payment Types
If, on the other hand, you are viewing them as payment types, they fall into three categories: voluntary, compliance, or government-meditated.
Compliance markets are driven by regulation and enforcement, similar to other pollutant trading markets.
Voluntary markets are driven by ethical and/or business-case motives. In many cases, the threat of future regulation also drives these markets.
And government-mediated markets are publicly-administered programs that use public funds to pay private landowners for the stewardship of ecosystem services on their property.
Lay of the Land
The Matrix shows that while most PES markets are growing at approximately 10 to 20 percent a year, the carbon markets are skyrocketing at 200 to 700 percent a year.
While this is no surprise to most followers of environmental markets, carbon’s surge is a dramatic entrance for an environmental commodity onto the world markets, and perhaps indicative of the power of markets for ecosystem services.
Promises and Pitfalls
The participants and experts we surveyed said they believe existing markets have the potential to serve the environment – but may not be living up to their potential. This underscores that these payment systems are instruments that by themselves aren’t a solution.
PES, in other words, is not a single tool, but an entire tool box with different instruments for different circumstances.
To achieve the sustainable management of ecosystem services, PES schemes must be designed and implemented carefully, intelligently, and adaptively.
Spreading (and Tailoring) the Wealth
A recurring theme is the potential benefit for PES schemes in developing countries, as well as the necessity to tailor them to the specific circumstances of the region.
Many of the national compliance markets in developed countries require sophisticated regulation and enforcement to drive effective markets, such as species mitigation credits and water quality trading.
Developing countries, however, host a good number of PES schemes that are structured differently. The largest of these are the government-mediated programs in South Africa, Brazil, and China. China’s watershed protection program alone is estimated to generate $4 billion a year in payments.
Social Equity
Perhaps the most important example of how these markets must be crafted and managed carefully is the issue of social equity.
The majority of ecosystem services are produced in rural and natural areas where local communities depend closely on ecosystem goods and services and are the environmental stewards. It is clear from our research that an important aspect across all of these markets will be to ensure that the communities and small scale producers are able to actively participate and benefit from ecosystem service markets.
This will mean developing instruments to provide support, such as aggregation services to communities, shaping regulation to engage local small-scale providers, and clarifying tenure and user rights associated with these new opportunities.
There may be a large wave of investment opportunity in rural areas that are providers of these services. To make sure it is distributed fairly, organizations and overseas development aid groups that care about the equity dimension will have to provide a focused effort.
This is an important section of the Matrix and is reflected in the work of Forest Trends and the Ecosystem Marketplace.
Staying Oriented
A quick glance over the Matrix and through the pages of the market profiles will show that, indeed, there are a good number of initiatives attempting to value and pay for the services our green infrastructure provides. And with a closer look, informative patterns emerge in how PES are being applied in different circumstances.
We developed the Matrix to help members of the Katoomba Group and others working in this field to visualize and track the shifting global trends and nuances in PES – basically, to get oriented in the PES landscape.
Building a Database
To further this aim, we are developing an online database of the Matrix. This will provide convenient and current access to basic PES information provided in the Matrix. It will also allow for collaboration and data contribution, enabling the PES Matrix to be a living document under broad and continual update.
The Matrix products – chart, narrative, and online database – will aid in the evaluation and comparison of the different shapes and sizes of PES systems around the globe, creating a better understanding of what is being done, as well as where, by whom, and with what effect. We hope this will help refine existing PES systems and spur new and creative solutions.
Nathaniel Carroll is Biodiversity Market Adviser to the Ecosystem Marketplace and Forest Trends. He can be reached at [email protected].
Michael Jenkins is Publisher of the Ecosystem Marketplace and founding President of Forest Trends.
Water markets can help provide a solution to Uganda’s looming water crisis – but only if buyers understand the stakes and the dynamics. Alice Ruhweza, East and Southern Africa Katoomba Group Coordinator, says Ugandan water users understand the crisis but haven’t yet explored market-based solutions. The Ecosystem Marketplace summarizes her findings.
18 April 2008 | Massive Lake Victoria spreads thinly over nearly 70,000 square kilometers in Africa’s Rift Valley, covering more surface area than any other tropical lake in the world. Millions of people and thousands of businesses in three nations depend on this vast but shallow body of water for survival – but huge parts of the lake are themselves “dead zones”, devoid of oxygen and barely capable of supporting what little life remains below the waves, let alone supporting humans on the shore.
Key among these humans on the shore are Ugandan brewers, bottlers, flower exporters, electric companies, and of course municipal water plants – all of which are not only dependent on clean water, but also have the economic and political clout to promote change.
But do they understand the importance of ecosystem services to their business, and are they willing to put their money where their menace is and support efforts to clean up the water? These were the key questions the East and Southern Africa Katoomba Group put to more than fifteen leaders of Ugandan industry in a survey conducted last year, the results of which have been published in Assessing the Market: Conversations with Private Sector Businesses About Payments for Ecosystem Services – A Letter from Uganda.
The answers are, in a nutshell: yes, they are aware of their dependence on this fragile resource, but no, they do not have concrete plans to invest in the lake’s future.
These findings were echoed in a survey of Fortune 1000 executives carried out by the Marsh Center for Risk Insights. Forty percent of the companies surveyed said the impact of a water shortage would be severe or even catastrophic, but less than one-in-five (17%) say they have prepared for such a crisis.
Identifying Key Ecosystem Services
All companies surveyed named water as the resource most critical to their business, and most of them draw their water from Lake Victoria. Those that aren’t directly dependent on the lake, such as some district or municipal water companies and flower exporters, draw their water from aquifers through the use of boreholes. Some companies also mentioned shallow wells and rainwater collection.
Energy or electricity came second on the list, but it is also directly tied to water and hydro-power.
Lake Victoria: an Overview
Despite its massive surface area, Lake Victoria has a mean depth of just 40 meters (131 feet), leaving it susceptible to both climate change and conventional pollution. Indeed, inflows of farm run-off and untreated effluent have led to fish die-offs, algal blooms and the spread of water hyacinth (a waterweed), which in turn depletes dissolved oxygen, blocks sunlight, and impedes water transport.
A recent survey by environmental engineering group Air Water Earth (AWE) concluded that Murchison Bay, where the Ugandan capital Kampala is located, has only about half the dissolved oxygen needed to support most species of fish; while all along the Lake Victoria shoreline, hyacinth provides habitat for malaria mosquitoes and snails which harbor bilharzia parasites.
The key drivers are easy to identify, but that doesn’t mean they will be easy to reverse. Kampala’s sewer system, for example, captures just ten percent of the city’s waste, and most of Lake Victoria’s pollution flows in from nonpoint sources that are almost completely unregulated – such as small-scale workshops, parking lots, and car repair garages. Furthermore, guesthouses, slum dwellings and industries discharge untreated wastewater directly into the Nakivubo Channel, an artificial stream that drains Kampala and its suburbs.
The channel flows directly into Murchison Bay, and is responsible for roughly 75% of the nitrogen and 85% of the phosphorus discharged daily into the bay daily, and these nutrients are largely responsible for the eutrophication and algal blooms that clog water treatment plants and extract oxygen from water.
The Consequences
Uganda’s National Water & Sewerage Corporation (NWSC) says that the worse the water gets, the more expensive it becomes to make it drinkable. Ironically, NWSC’s own sewage treatment plant at Bugolobi discharges 15,000 cubic meters of inadequately treated sewage per day into Murchison Bay, and has been named the lake’s single largest polluter.
The Nakivubo Wetland and other major catchment wetlands, which once played the vital role of filtering effluent and storm water discharging into the lake, have long ago been encroached and degraded by settlement and cultivation. Widespread lakeshore cultivation and soil erosion also contribute excessive sediment and nutrients into the lake. Storm water flowing through Nakivubo Channel now carries tons of soil and waste straight into the lake.
Climate Change and Low Levels of Water
All companies surveyed cited climate change as a serious threat, as lower levels of water not only leave more concentrated pollution, but also leave a loss of other services that water bodies provide. The flower exporters and the district water supplier, for example, said they fear canals drying up during ever more-frequent periods of prolonged drought.
The lake also acts as a reservoir for hydropower, and falling water levels have reduced water available for generation. This situation is becoming an issue for businesses, because diesel-generated power is expensive and electricity tariffs have increased recently. Already, some companies require water use permits from the Directorate of Water Development which now have even more strict approval conditions to use water.
Further compounding expenses, severe power outages in 2005 resulted in business disruptions. For example, exporters of cut flowers exporters failed to meet their customer orders, and Uganda’s overall revenue from flower exports dropped from US$ 24 million in 2005 to US$ 20 million in 2006.
Other Ecosystem Services
Good electricity poles are also in short supply in Uganda, due to deforestation. Therefore, at present, most poles are imported from South Africa at a cost of roughly 1,200,000 Ugandan shillings (approximately US$ 750) each. Recently, the Parliamentary Committee on Natural Resources raised concerns about these costs and asked Uganda Electricity Distribution Company (UEDCL) to find a solution.
Furthermore, due to land shortage from high population growth, no land will be allocated for growth of wood for poles and the shortage will continue. Eucalyptus poles have high nutrient and water demand, and are not a sustainable option. PES approaches that could rectify this situation need to be explored. For example, a group of land owners could be given an incentive to plant fast-growing native trees.
The Corporate Response
Most of the companies surveyed have made investments to respond to ecosystem changes, but these are focused on meeting their own, individual, needs – and do not address macroenvironmental issues.
Beverage manufacturers, for example, have built water reservoirs on their plants which store water for up to two days. They also recycle 80% of the water that they use, and maintain water treatment plants and waste treatment plants. In the future, many plan to minimize water usage by modifying technology.
Flower companies have supplemented the water shortages by drilling bore holes, constructing water collection reservoirs for rain water harvesting, and planting trees.
The district water system is advising communities to form water user committees to be proactive in address soil erosion threats by planting grass, and digging terraces in gardens.
Some of the companies also have a policy of training employees in safety and environmental management, but implementation is costly and policies are often not implemented.
Surprisingly, the electricity sector has not yet articulated a strategy to deal with various environmental service shortages, especially related to water, although the Ministry of Energy is promoting other sustainable alternative sources of energy such as mini-hydropower generation on small rivers, solar power, wind power, biomass energy, and biogas.
In addition, most companies are engaged in some form of public outreach, detailed in the full report.
Payments for Watershed Services
All companies said it was critical for natural resources management to be integrated into the company strategies. This would enable market-based mechanisms to be part of the company programs.
The easiest way to incentivize this is to begin charging for water, the delivery of which is currently supported through very low tariffs. This approach, however, would likely face stiff resistance from water users, many of whom assert that natural resources are free and should not be paid for.
The Payment for Watershed services (PWS) concept exists in Uganda, but has not been incorporated into the present models of water management. Based on the survey and roundtable discussions, payments for water to also cover the cost of maintaining and restoring watershed services would constitute a general shift in company policy.
Until now, the companies have emphasized on-site investments to cater for future water shortages and to ensure water quality. PWS would shift them towards the protection and maintenance of ecosystems that provide the water that they use and ideally an eventual recovery of costs.
For a payment scheme to succeed and endure, the actions and change brought about by upstream land and water managers should result in identifiable benefits for downstream water users. Therefore, clear cause-and-effect relationships between upstream land and water use practices and the provision of watershed services for downstream users needs to be identified. The degree to which this is possible varies considerably from case to case.
A key policy question of how competing users should pay for the services of one watershed may arise. A decision based only on willingness-to-pay may lead to the exclusion of those who have less ability to pay, or to free-loaders who enjoy the benefits of the watershed without paying for them
There is, therefore, a need for more site specific analysis in order to determine whether a particular site is feasible for PWS.
Why Take a Market-Based Approach?
Those who own or manage upper watershed land often have little incentive to provide watershed services because the benefits occur downstream, so upper watershed actors don’t receive compensation for providing them. Development of incentives for appropriate land use practices therefore require finding ways for upstream landholders to be compensated for their costs.
This is where a more broad-based Payments for Ecosystem Services (PES) scheme could help alleviate the problem. Paying land owners in the upper water catchment to maintain existing forest cover or vegetation, for example, could maintain stable stream flows and reduce sedimentation. Likewise, a small fee could be added to the monthly water bill, with the funds being set aside for conservation and watershed protection projects.
What Should Companies do Next?
Based on our conversations, we have mapped out a three-phase approach that would have to be carried out with the cooperation of private, public, and community stakeholders.
Phase 1: Exploring the potential for—and returns on investment related to—payments for watershed services in key areas of Uganda relevant to business, which would include identifying and locating specific areas within targeted watersheds that contribute the most to the water problem (such as water shortages or poor water quality). These studies would also indicate where and how land-use changes must be introduced in order to reduce and eventually eradicate the sources of such problem.
Phase 2: Designing a pilot PES project for private-sector investment. Based on Phase I findings, a pilot test of changed watershed management practices can be designed for private sector investment and collaborative implementation and study. Such a pilot would include a cooperation agreement (or memorandum of understanding) between upland watershed service providers and downstream service users (the companies/businesses), whereby the upland providers would agree to carry out certain activities to ensure water quantity and quality in return for an agreed amount of money or form of compensation. Monitoring and verification can be undertaken by a third party.
Phase 3: Implementing a pilot PWS project (or portfolio of projects) and assessing results, including return on investment (ROI). The last stage would be implementation of the agreement for an agreed period of time (with continuous monitoring) that would enable private sector partners to assess if payments for watershed services offers improved reliability of water quantity, quality and/or cost savings.
Alice Ruhweza is Coordinator of the East & Southern Africa Katoomba Group. She can be reached at [email protected].
Steve Zwick is Managing Editor of Ecosystem Marketplace. He can be reached at [email protected].
Please see our Reprint Guidelines for details on republishing our articles.
16 April 2008 | In the early 1980s, the de la Motte family realized that cow dung and fertilizers were finding their way into the aquifer that fed the family’s famous (and lucrative) mineral water plant in the town of Vittel, in northeastern France, after upstream farmers had replaced natural, filtering grasslands with corn.
By the end of the decade it had become clear the problem needed an innovative solution – one Vittel’s new owner, Nestle, spent the 1990s hammering out with local farmers. The company purchased 600 acres of sensitive habitat and signed long-term conservation contracts with farmers whose corn and cows had polluted downstream waters.
Nestle now pays these farmers to manage their animal waste, graze their dairy cows the old-fashioned way, and reforest sensitive filtration zones. Though costly, it’s a lot cheaper than the alternative. Competitor Perrier (now also owned by Nestle) once spent more than $260 million on a global recall after benzene made its way into millions of its distinctive green bottles, and its market share has never recovered.
Payments for Ecosystem Services
Vittel’s action, like New York City’s payment to upstate farmers, has become a textbook example of a successful “PES” deal – short for Payments for Ecosystem Services – or, in this case, “payments for watershed services” (PWS). Such schemes, as frequent visitors to this site know, are based on the premise that ecosystems deliver valuable services that most of us take for granted – like filtering water in the above example – but whose value our economy doesn’t normally take into account.
PES schemes try to quantify the economic value of services that an ecosystem provides, and then either entice or mandate those who benefit from the service to pay the people who maintain them.
Unfortunately, for every successful PES scheme, there are scores of failures and near misses, and much debate about what works and what doesn’t. These issues are high on the agenda at the upcoming June Global Katoomba Group Meeting, and over the next two months we’ll be focusing on water-based PES schemes: the history, the theory, the practice, the successes, and the challenges.
Trading Water: Quantity and Quality
The Kyoto Protocol has put the trading of greenhouse gas emissions and offsets on everyone’s radar, but emissions trading actually began decades before the Kyoto Protocol was signed. The US Environmental Protection Agency’s (EPA) Emission Trading Program started in 1974, and allows a limited exchange of emission reduction credits for five air pollutants: volatile organic compounds, carbon monoxide, sulfur dioxide, particulate matter, and nitrogen oxides.
It kicked in at the height of the environmental movement in the United States. The first Earth Day was fresh in everyone’s mind, and the federal Clean Water Act (CWA) and the Endangered Species Act were laying the groundwork for today’s markets in water and biodiversity.
A Wetlands Savings Account
So-called “mitigation banking” covers the quantity of biodiversity and wetlands – which are more than just standing bodies of water. A well-functioning wetland plays a key role in filtering water and thereby “delivering” the ecosystem service of reliable water quality, as well as providing habitat for many plants, insects and animals that are part of the biodiversity of an area. These “services” are difficult to quantify – one reason environmentalists are up in arms over schemes that replace true wetlands with ponds and other bodies of isolated water.
Mitigation banking involves building up reserves of water capital, and is a key response to the CWA’s section 404.
The Act mandates that anyone who plans to dredge a wetland that nurtures other waterbodies try to find a way to avoid its destruction. When this is not possible, the developer must first get a permit through a program administered by the U.S. Army Corps of Engineers and the US EPA. Then, if a permit is granted, the developer must “establish, enhance, restore or preserve” an amount of wetland equal to or greater than what is being dredged – usually in the same watershed.
Mitigation banks are essentially wetlands that have been pro-actively established, enhanced, restored, or preserved – in exceptional circumstances when the land was under significant threat – with the goal of generating credits that can be sold to developers later as offsets. The CWA requires mitigation banks to replace function as well as acreage of jeopardized wetlands, although many complain that the function requirement is often overlooked.
The Drive for Distribution
In addition, you have schemes that cover the distribution of water for drinking and agriculture, and no one has taken this further than the Australians, who’ve turned water into a commodity that is almost as easily-traded as electricity is in other parts of the developed world.
But it’s in the developing world that such schemes could have their greatest impact. Studies show that the poorest usually pay the most for clean drinking water, while many industries simply waste it for free. Trading could put a uniform price on clean, delivered water, thus both reducing industrial waste and enabling delivery to areas that currently have poor access for drinking.
Most watersheds contain two types of polluters – “point” sources and “nonpoint” sources.
Point sources are the ones we hear about the most: industrial enterprises or urban waste treatment plants that directly pollute a watershed from a single pipe or point. Most point sources are regulated by the National Pollutant Discharge Elimination System (NPDES), and have been the cornerstone of water pollution control in the US since the passage of the CWA.
Nonpoint sources, on the other hand, account for a whopping 80% of the nitrogen and phosphorous that ends up in US waters – and most of these are unregulated, for a variety of political, social, economic, and logistical reasons.
These sources include farms, such as those that leached into the de la Motte’s watershed, as well as septic systems and new development whose pollution washes into a watershed over a diffuse area, usually in the form of run-off.
When run-off comes from agriculture, it’s called a “nutrient” – but it’s not the kind of nutrient your mother encourages you to eat with your Wheaties. Instead, these nutrients feed organisms that gobble up oxygen and lead to “dead zones” like those found in Europe’s Black Sea. Such dead zones have been labeled a greater threat to humanity than global warming by the Millennium Ecosystem Assessment, a United Nations-sponsored project that engaged over 1,300 scientists and is easily the most extensive research program to date focusing on ecosystems.
The technology for alleviating the problem of agricultural run-off is readily available. Farms can reduce their run-off by changing the way they till, plant, or fertilize – at a cost of about 1/65 of what factories in the developed world would pay to reduce their levels of pollution emissions, according to one study.
That’s where “nutrient trading” schemes come in. They put the reduction burden on factories and other point sources, but give them a chance to pay nonpoint polluters to reduce their pollution outtakes instead – so-called “point-nonpoint” transactions. In theory, industrial polluters will opt to pay farmers to reduce their pollution emissions along a river when those factories can’t afford to invest in technology to further limit their own discharges.
This is the current holy grail of water quality trading, but most activity remains “point-point” – partly because nonpoint sources are difficult to monitor, but also because it’s difficult to measure results. Also, non-regulated entities such as farms may be afraid of getting involved in voluntary schemes, no matter how lucrative, because they fear it will bring them into what they see as a regulatory boondoggle. In the weeks ahead, we will be addressing solutions on the table for addressing these and other issues.
The Beat Goes On
And there is, indeed, plenty on the table – with water schemes being proposed and implemented across Latin America, Asia, and Africa – as well as the United States, which got started in the early 1980’s with point-point effluent trading on Wisconsin’s Fox River and point-nonpoint trading on Colorado’s Dillon Reservoir.
In 1996, the US EPA formally threw its support behind these trading programs, and several state initiatives have followed suit: Michigan with draft rules for nutrient trading in 1999, followed by the Chesapeake Bay Program in 2001.
The Chesapeake Bay Program, a multi-jurisdictional partnership that is working to restore and protect the Bay and its many resources, encompasses the three Bay states (Maryland, Pennsylvania, and Virginia), the District of Columbia, and the US EPA. But rather than being a unified trading program across the entire watershed, it is more of a hodgepodge of efforts with each state running its own trading scheme.
In early 2003, the US EPA released its Water Quality Trading Policy, identifying general provisions the agency considers necessary for creating credible watershed-based trading programs. Over a decade in the making, this policy identifies the purpose, objectives and limitations of these and other trading opportunities. The EPA has even gone so far as to publish a map of trading programs in the US and a trading toolkit.
The policy is flexible by design, letting states, interstate agencies, and tribes develop their own trading programs that meet CWA requirements and localized needs. Critics, however, say it’s too flexible, failing to identify tradable pollutants and other basic parameters. This leaves the system undefined and fails to generate the kinds of certainty a true market requires.
Drivers for Water Quality Trading in the US
Two major factors in the mid to late 1990’s prompted not only the rapid increase of water quality trading programs in the US, but also a fundamental change in the way that water quality trading programs are developed and implemented. The first factor is the highly-publicized success of the Acid Rain Program, which demonstrated the efficacy of market mechanisms when coupled with proper government enforcement mechanisms. This convinced many policy makers that emissions trading could be applied to water pollution control.
The second factor is the increasing number of so-called “ TMDLs” (Total Maximum Daily Loads) being developed by states and US EPA as mandated by the CWA.
A TMDL is the maximum amount of pollution that a water body can assimilate without violating state water quality standards, and individual states determine the specific TMDLs for specific pollutants in specific bodies of water. TMDLs don’t just cover chemicals, but also things like temperature. In theory, they can act as de-facto caps for emissions in cap-and-trade water schemes, and approaches based on TMDLs and a handful of other tools are already being tested across the United States.
The calculations themselves are complex and the subject of much debate, but the existence of TDMLs identifies the sources and estimates the quantity of pollutants targeted for possible trading. This debate, in part, helps create the driver for a market – for in a well-structured market, the price of a pollutant will be tied to the actual amount of reduction necessary to meet the TMDL, and not to an arbitrary cap.
Water-quality trading can also occur on a “non-TMDL” waterbody (one that is not impaired or one that the government has not gotten around to developing a TMDL for), and trading can occur much sooner because nonpoint sources do not have to meet the TMDL minimum before a trade can occur. This is generally referred to as “pre-TMDL” trading.
This allowance was made because the TMDL minimum threshold may, in many cases, be too high and too expensive for nonpoint sources to meet, and could discourage them from pursuing a trade.
For a trade to occur in a TMDL waterbody, nonpoint sources must first meet their load allocation, then any additional amount of reduction they can accomplish can be sold to offset point source loads.
The TMDL trading unit is the specific pollutant identified in the TMDL. For example, in nitrogen TMDL, the unit is one pound of nitrogen removed from the waterbody; for a temperature TMDL, the unit is one degree of temperature lowered in the waterbody.
Despite the availability of these promising mechanisms, however, demand has been slow to materialize. For these markets to reach their true, enormous potential, awareness must be spread across both the private and public sectors – and to the community at large.
Next Week: Guest authors Mark Kieser and “Andrew” Feng Fang of Kieser & Associates analyze the framework within which water quality trading is evolving in the United States, and offer a round-up of projects underway across the country.
This introductory was compiled from essays submitted to Ecosystem Marketplace over the past two years, and we would like to thank Mark S. Kieser and “Andrew” Feng Fang of Kieser & Associates, Ricardo Bayon of EKO Asset Management Group, Amanda Hawn of New Forests, and regular Ecosystem Marketplace contributors Alice Kenny and Erik Ness.
Steve Zwick is managing editor of Ecosystem Marketplace. He can be reached at [email protected].
Please see our Reprint Guidelines for details on republishing our articles.
Following its success with an innovative "Working for Water" program, South Africa has begun experimenting with a whole new approach to conservation and restoration; an approach that has scientists "mapping" ecosystem services and land-users "farming" them. The Ecosystem Marketplace takes a closer look at these recent developments and considers whether or not "trading" will be the next new verb for ecosystem services in the RSA. The photo looked like it came from Mars: a reddish, dry riverbed running beneath yellowed marshlands and brown hills. Even the sky, where white streaks striated a pale blue horizon, looked parched. The printer had run out of blue ink. The result was a photograph version of South Africa's Gariep River that looked decidedly thirsty. And yet, embedded as it was in a document entitled, "Working for Wetlands, South Africa," the unintended photograph seemed strikingly appropriate, even prescient. It read like a warning: take care of South Africa's wetlands or the Gariep Basin may, itself, run out of blue in the decades ahead. South Africa is a dry country and recent climate projections suggest that much of the nation will grow drier in the years to come. By 2025, according to a recent WWF document, "the country's water requirements will outstrip supply unless urgent steps are taken to manage the resource more sustainably." Fortunately, South Africans are taking steps to conserve their water resources and, notably, they are using an ecosystem service-based approach to fuel their progress. Protecting watershed services in South Africa has, in fact, become the catalyst for a whole new approach to conservation and restoration in the country, an approach that some in the business are calling 'ecosystem farming.' Ecosystem farming is interesting because it implies a very different approach to a long recognized environmental conundrum: biodiversity conservation and people's need to earn a living from their land don't always coincide. In the United States, the government generally has resolved this conflict by paying farmers to take their land out of production. In South Africa, both public and private interests are currently testing the feasibility of paying landowners and laborers to do the opposite, i.e. to put land into a new form of production – one geared towards ecosystem services. Against this backdrop, the recently published 'ecosystem services map' of the country's Gariep Basin is especially intriguing. Could the project – a product of the Millennium Ecosystem Assessment (MA), a four-year international effort to assess the state of Earth's ecosystems – represent a road-map, not just for the development of the Gariep Basin, but also for the whole of South Africa and, by extension, for the rest of the world?
A New Kind of Map
The Gariep is not only the longest river in South Africa, it is also among the most important and most heavily regulated. Large dams and complicated transfer schemes knit together over 665,000 square kilometers of catchment, as the river flows from the mountain nation of Lesotho through Gauteng Province and on into the arid western reaches of South Africa and Namibia. On its way, the Gariep system supplies water to Johannesburg, the economic hub of Southern Africa, fuels South Africa's "grain basket" (where food for approximately 70% of the nation is produced), and supports two international biodiversity hotspots. Given its ecological and economic importance, the Gariep Basin is, in many ways, just the sort of place in need of an ecosystem services map. And so it was that, in 2000, The Gariep Basin Millennium Ecosystem Assessment was born. Broadly speaking, the aim of the project was to provide a map that would be useful to policy-makers balancing the trade-offs associated with the protection and use of ecosystem services at the local, national and regional scales. Toward this end, the scientists used models and participatory methods to assess the location and "irreplaceability" of three types of ecosystem service in the basin: water services; food and fuel production; and services linked to biodiversity. Water reaches were assigned classifications ranging from A to F, according to their level of ecological integrity and industrial/agricultural function. 'A' regions of the river carried proposals for strict management practices that would support biodiversity in a near natural state. In descending order, Bs, Cs and Ds allowed for successively greater alterations of natural flow, water quality and temperature. Finally, recommendations were made that Es and Fs – stretches of the river so modified by human activity that their function potentially was impaired irreversibly – should be restored to D level when and where possible, but that some reaches of the river should be treated as sacrificial "workhorses" for industrial, agricultural and municipal water needs. Once the basin's present water resources had been mapped, the researchers next used models to forecast attainable classifications for each area in the future. This second map thus described the 'restoration capacity' of the catchment over the course of five years, charting a path toward an increased net flow of watershed services to a variety of sectors. A similar approach was taken in the mapping of biodiversity and food production services. The basin was gridded and each cell, representing a piece of land, was ranked according to the level of service it provided in three areas – the production of protein, cereal and biodiversity. "We used the notion of irreplaceability to assign comparable values to areas of land," explains the report. "Irreplaceability is a measure of how important the features that an area contains are to the achievement of a stated goal." In the case of the Basin, the scientists defined their goals as the provision of the nutritional needs (in terms of protein and calories) of 70% of South Africa's population and the preservation of a baseline measure of biodiversity. The resulting map, in which areas with high irreplaceability values look like bright spots on an electricity grid, indicates those regions that should be managed most carefully for each of the respective services. Importantly, the map also reveals regions of overlap, where the same geographic area provides irreplaceable services in terms of both biodiversity and food production. It is in these "ecosystem service hotspots," stress the scientists, that different management practices should be considered most carefully, with decision processes that weigh trade-offs explicitly and pricing policies that reflect the full cost of the land being used. While the project's managers are quick to point out that, "framing a question of ecosystem services only as an economic issue has several shortcomings," they also acknowledge that market forces can play an especially important role in assigning values to services in areas where the trade-offs between two or more management regimes must be considered. The basic notion of economics, of course, is that economic forces give price signals that, because they are continually revised, are an especially useful means of assigning and tracking value in dynamic systems. Thus, it is in the basin's most irreplaceable 'ecosystem service hotspots' that market-based conservation mechanisms may have a role to play: "We are currently exploring markets for ecosystem services," says Christo Fabricius, one of the lead investigators on the project, "but there are no examples in South Africa, that I know of, where this has been successfully implemented…yet."
Brick by Brick, Tree by Tree
While true market-based conservation programs per se aren't up and running in South Africa, a suite of public works programs is laying the foundations upon which they might soon be built. Throughout the 20th century, public works projects generally focused on regulating rivers – through dams, dikes or irrigation schemes – in ways that made them less natural. In the first decade of the 21st century, South Africa has been widely recognized for turning this paradigm on its ear through a program called 'Working for Water'. By restoring watersheds to their 'natural' state, South Africans are harvesting the benefits of ecosystem services while simultaneously providing jobs to their nation's poor. Invasive species suck up a great deal of water in South Africa – a single eucalyptus can use up to 400 liters of water in a day. Consequently, their removal immediately increases the amount of water available to recharge water tables. Recognizing that two of the country's wrongs – unemployment and water-scarcity – might make a right, the South African government began paying people to clear invasive species out of river catchments in 1996. They called the program Working for Water and, in the decade since its inception, they have watched it grow from strength to strength. Click here for more on WfW. Now, Working for Water's impact is rippling ever wider through a series of spin-off programs: Working for Wetlands opened up shop in 2000 to restore the water filtration services of native marsh habitat; likewise, Working on Fire began dispatching crews to sustain healthy forests/veld and prevent wildfires last year; and a new program near Port Elizabeth, called Working for Woodlands, is beginning to restore pastoral lands to sustain biodiversity and sequester carbon. Taken as a whole, the projects constitute not only the largest conservation program on the African continent, but also a sea-change in terms of the recognition of the value of the services provided by healthy ecosystems. "Programmes like Working for Wetlands, Working on Fire, and Working for Woodlands, not only provide 'value' and employment because of their pro-poor policies, but also engender a conservation ethic amongst their workforce," says Val Charlton, Advocacy Coordinator of the Working on Fire Programme. "We could use more programmes like this – with lots of synergy and potential income generation possibilities based on land-users acting responsibly, looking after their land." The idea that land-users might not only act as stewards of the ecosystem services flowing from their land but also benefit financially from doing so is the win-win goal of modern conservation – the environmentalist's version, so to speak, of having one's cake and eating it too. In the case of South Africa, however, the idea is that land-users are, at the same time, baking more cakes. This, in a nutshell, is the basic notion behind ecosystem farming. And so, importantly, the new programs in South Africa are not only mapping and harvesting ecosystem services like soil protection, water delivery and carbon sequestration, they are also investigating the long-term economic returns that might convince private stake-holders to invest in increasing them. Those at Working on Fire, for instance, are stating their case to private agricultural and silvicultural enterprises. "The commercial sectors of Forestry and Agriculture suffer extensive financial loss as uncontrolled fires destroy crops, plantations, buildings and equipment," reads the program's website. "As this project aims to provide direct benefits to private sector bodies, it is expected that this sector will in return, support the venture." Working for Woodlands, meanwhile, is investigating potential income streams to entice private and communal land-users to undertake restoration work on their land. "Ultimately the aim is to remunerate the land-user for delivering services such as biodiversity conservation and the protection and maintenance of ecosystem functions – i.e. erosion/soil regimes, water delivery and quality and –the most talked about one at the moment—carbon sequestration," says Christo Marais, the Executive Manager of Strategic Partnerships at South Africa's Working for Water Programme. Working for Water and its sister programs – because they are seeded and sustained by government money rather than by direct payments from the users of their services – are not true market-based mechanisms, but rather an excellent example of how innovative public programs can create positive synergies between poverty alleviation and ecosystem restoration. Nonetheless, as the programs explore new funding streams in the private sector and begin to cultivate the notion of ecosystem farming among landowners, they are inching South Africa ever closer to the widespread deployment of market-based conservation. Experts in the field, however, warn that, before the 'mapping' and 'farming' of ecosystem services can actually generate 'trading' in South Africa, uncharted and tricky waters have yet to be navigated.
Here be sea-monsters?
"South Africa is a mix of both first and third world economies, with all the challenges associated with such," says Charlton of Working on Fire. "At the third world level, poverty is dire, and it is extraordinarily difficult to preach ecosystem services approaches to an audience that is starving – they are not thinking about tomorrow, only the meal that needs to be put on the table today. Thus the first challenge is to make conservation meaningful to the poor." Charlton's point is an important one. In a country where 8 million people still lack access to safe drinking water, the notion of farming the resource for others is a foreign, even absurd, idea. "Although Payments for Environmental Services (PES) are understood as a market based mechanism, in most instances in this country and region poor communities are providing environmental services without compensation and these are typical cases of market failure and a lack of bargaining power in the transaction of services," says Paula Nimpuno of the Ford Foundation. "[Our] current work with Resource Africa has the intention of mapping but also of improving our understanding of how to make the ecosystem market approach benefit the poor." Bread and butter politics reign supreme among the poorest of the poor in South Africa. If they are to succeed, market-based conservation mechanisms like the users-pay approach to ecosystem farming described above (also known as a PES or ESP model) must justify their relevance in these starkest of terms. Equally important, they must make sure the poor can access buyers for the services they render and that they can negotiate with them on equitable grounds. Click here for more on PES programs and the rural poor.
It is not all Poverty
Although poverty is perhaps the most pressing issue relating to ecosystem services in South Africa, it is worth noting that 83% of the country is privately owned, much of it by white landholders who are not impoverished. What of market mechanisms in these areas? Mark Botha, of the Conservation Unit at the Botanical Society of SA, cautions that important conservation opportunities are likely to be missed if these parties are not welcomed to the table. "Tenure and ownership are well defined in the private areas, and there are opportunities to link specific payments to well defined management actions (biodiversity friendly land use, increased run-off, increased carbon storage). However, international NGOs and donors are not prepared to test PES with this politically marginal and not-poverty stricken group," says Botha, who has looked carefully at the PES approach in South Africa. "The focus on poverty and communities has taken us away from some more direct PES opportunities." Evidence exists to suggest that Botha is right in looking closely at private, as well as communal, land-users. Private landholders in the country have had the right to use and manage the wildlife on their land for the last several decades, and the result, according to the Millennium Assessment "has been a doubling of protected land as well as increased economic benefits." Clearly, private property owners are well positioned, and perhaps ready, to take up the challenge of ecosystem farming on a much wider scale than anyone else.
The Voyage Ahead
Finding the synergies between poverty alleviation and ecosystem service conservation, while at the same time ensuring market-access to both economically and politically marginalized populations, is the next challenge for South Africa as it moves from mapping and farming its ecosystem services, through to trading them. Tied up as this challenge is in the past as well as the future, striking the right balance will be neither simple nor easy. History has shown, however, that it would be a mistake to count out this particular nation's possibility of success simply because of political, social and economic complexities. When it comes to the successful navigation of troubled waters, there may be no better boat to follow than that flying the green, black and yellow flag of the New South Africa. Amanda Hawn is the Assistant Editor of The Ecosystem Marketplace, she may be reached at [email protected].
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