In Our World: Food, Water And Mining

The International Institute of Environment and Development (IIED) has collected key environmental news stories that include Brazil’s rejection of gold mining at an Amazon dam site while farmers in India are producing record amounts of rice without herbicide and GM seeds as well as reports on sea-level rise and pollution related disease increases, in their latest post.

In Our World is a blog series from IIED covering the environment and development-some from the real world and some from the online world. Click here to read this article in its original format.

19 March 2013 | Fred Pearce — writing for Yale Environment 360 — examines whether 2012 was the worst year yet for violence against those working to protect the environment

Mining Matters

Mongabay.com reports that Brazil has rejected a Canadian company’s bid to mine a controversial Amazon dam site for gold.

Global Witness has welcomed the move by EU finance ministers to maintain sanctions against Zimbabwe’s diamond sector.

From the Blogs

Kirsty Newman gets beyond the hyperbole about science and development.

Rosebell Kagumire profiles Congolese journalists and activists whose freedom of expression is never certain.

South-to-South

China has overtaken the EU as Brazil’s top trading partner, says the Climate News Network, which explores what this means for the Amazon and agriculture.

Forest Crime

INTERPOL’s has arrested close to 200 people and seized of millions of dollars’ worth of timber in Latin America, in its first international operation targeting large-scale illegal logging.

Climate Action (or Inaction)

Edward Cameron explains why he thinks climate justice will dominate the UN talks this year in this piece for Responding to Climate Change.

Brazil, South Africa, India and China are disappointed over low ambition from industrialised nations.

Do you know what the world is getting wrong about China and climate change? Chinadialogue’s Xu Nan and Zhang Chung explain.

Opening Up

Elementa: Science of the Anthropocene is a new, non-profit, open-access journal.

The UN Environment Programme has opened up its governance to all nations rather than the minority that usually sit on its governing council.

Better Harvest

The UN treated government ministers and officials to a meal of blemished African fruit and vegetables to highlight how European supermarkets reject edible food.

In a village in India’s poorest state, Bihar, farmers are growing world record amounts of rice – with no GM seeds, and no herbicide, reports John Vidal.

Something in the Water?

The new State of the Science of Endocrine Disrupting Chemicals report by the United Nations Environment Programme and the World Health Organization paints a complex picture of how pollution and factors such as age and nutrition could explain disease increases.

New Scientist’s Michael Marshall reports on a new study that says coastal areas in India, Bangladesh, Japan, South Africa, Argentina and Australia are likely to face more sea-level rise than other countries.

Land Grabs

Jonathan Glennie writes on the Guardian’s Poverty Matters blog about a report that makes the business case for companies investing in land to work with local communities.

Matt Collin responds on the Aid Thoughts blog to urge people to remember the roles of governments and governance in the great land story that is unfolding.

Mike Shanahan is IIED’s press officer.
Additional resources

Remote Sensing: A Primer

Nearly all types of environmental finance – whether mitigation banking, payments for watershed services, or REDD – involve some form of remote sensing. But this catch-all phrase encompasses scores of practices using radar, lidar, and infrared technology from satellites, airplanes, and blimps. Here’s how they all fit together.

11 February 2013 | The National Aeronautics and Space Administration (NASA) and the US Geological Survey (USGS) today are sending Landsat 8 into space – ensuring the continuation of the world’s longest-lasting satellite-based remote sensing operation.

Such activities are essential to most ecosystem management projects, and the term essentially means the act of collecting information or data without actually touching the object you’re observing. You can do this either actively – by, for example, shining a light on it – or passively – by, for example, looking at it with its own natural light.

In technical terms, active sensing means sending out energy that bounces off an object and comes back to you, while passive sensing means detecting the natural radiation that an object either emits or reflects.

How it Works

Different surfaces reflect light differently, and this means that remotely-sensed data can be categorized by wavelengths of reflected light. Some of these relationships – especially in the visible spectrum – are obvious. Blue wavelengths, for example, depict water-covered areas, while green wavelengths correspond to healthy vegetation.

Many remote-sensing applications combine visible wavelengths with infrared wavelengths, which are less susceptible to atmospheric distortion and are very useful in differentiating vegetation types. Since infrared wavelengths are sensitive to plant and soil moisture content, they can be used to distinguish clouds, snow, ice, and soil boundaries.

Lastly, microwaves are also used in remote sensing since their longer wavelengths can better penetrate cloud cover and low light conditions. Active RADAR remote sensing uses these longer microwaves signals to “see through” a forest canopy to the ground below.

Why We Need It to Measure Forest Emissions

Deforestation generates roughly 15% of all global greenhouse gas emissions, which is why environmental non-profits developed programs that use carbon finance to save endangered forest and reduce greenhouse gas emissions from deforestation and forest degradation (REDD). The programs face significant challenges in implementation and monitoring, largely because of disagreement over which tools are best for measuring forest emissions.

Most emphasis in remote sensing has been on improving data representation of forest area loss; but for project managers and investors to obtain full knowledge of a forest, they also need knowledge of the carbon stored. Remote sensing techniques for monitoring overall forest cover and forest loss are widely accepted, but the technologies and techniques for their use in estimating biomass have yet to be fully approved by regulatory agencies. The work in active sensors (LiDAR and RADAR) are still considered new, but are increasingly proving themselves.

Currently, the region of most uncertainty and of most importance to understanding carbon stocks lies within a forests’ biomass. Above-ground biomass (AGB) accounts for 70-90% of all forest biomass carbon; the specific amount varies based on the climate, geography and other local factors. As the name implies, below-ground biomass contains the remaining carbon; however, this biomass remains difficult to obtain and is usually estimated based on AGB data.

Unfortunately, many large-scale estimates about forest biomass are inaccurate. Country reports to the Food and Agriculture Organization (FAO) often show highly variable biomass estimates -which change over time based on improved information instead of actual, on-the-ground changes in forest carbon. Additionally, countries relying on the Intergovernmental Panel on Climate Change (IPCC) guidelines will almost certainly over- or under- estimate their stock. The IPCC Tier 1 guidelines (the simplest to use) employ broad assumptions, often estimating carbon stocks on continental-scale ecological zones. This misses more nuanced ecological zones and/or different levels of human disturbance. The resulting predictions have high uncertainties and generate low confidence from investors.

Potential investors and monitoring agencies thus face a major technical problem: they need access to high-resolution data, obtained in a cost-effective manner. To complicate things, there is currently no standardized methodology. As a result, researchers have proposed numerous methods using plot-based field studies combined with one or more remote sensing technologies.

All remote sensing studies start with plot-based field studies. Researchers use the results gathered on land to double-check remote sensing results and to formulate equations that can extrapolate on the remote sensing data, a process we explored in Ghana Measures Forests from Sky and Land.

Remote monitoring via satellites can provide high area coverage at a low cost, but the lower resolution data generated needs more field-based plot studies to retain accuracy. Conversely, airborne remote sensing gives resolutions higher than those from satellites and has the advantage of needing less field plots to accurately convert the data. However, planes also have higher operational costs, and this currently limits airborne remote sensing’s feasibility in large scale projects. Lastly, ground-based remote sensing may supplement field-based plots in obtaining below ground biomass data. As of now, this new field has potential use within smaller sample sites but will likely not be applied on a larger scale.

The Common Technologies

Passive remote sensing only uses visible and/or infrared wavelengths. The resulting images reflect what we might see looking out of an airplane; the data only shows the treetops of forests and cannot penetrate into the canopy below (like LiDAR or radar systems). Using this horizontal distribution data, scientists can estimate biomass through common algorithms such as the Normalized Difference Vegetation Index or Leaf Area Index.

While optical remote sensing does not collect as much data as LiDAR or radar remote sensing systems, it remains particularly useful in determining tropical forest biomass. This is because radar and LiDAR begin to lose their precision in more compact environments. Current instruments perform admirably in woody forests or savannahs; however, after crossing a certain density threshold, or saturation limit, they become less reliable. Though saturation limits may range, almost all may be found within dense tropical forests. Researchers can use optical data to estimate biomass through complex algorithms, including regression models and neural networks.

Thus, optical remote sensing remains very much in use for studying forest biomass, especially in tropical forests, even through other remote sensing technologies yield more data. Current optical sensing technologies may be separated by their resolutions.

In particular, very-high resolution imagery (VHRI) provides high resolutions of up to 1 meter in accuracy. Privately owned satellites, from well-known companies like Google and DigitalGlobe, provide this data. While most of these image snapshots may be freely obtained, the data underlying these images remains expensive. If this price drops in the future, VHRI might become more commonly processed in remote sensing studies; but for now, it is rarely used.

Optical data at medium resolutions range from 10-100 m resolutions. The most commonly used are from NASA’s Landsat program, the longest continuous Earth observation project. There have been several successions of Landsat satellites; the most recent was the Landsat 7, launched in 1999. The Landsat 7 remains operational today; however, it began experiencing glitches in its data starting in 2003. With up to 25% of the data unreadable, many researchers still refer to the Landsat 5, which was launched in 1984 and operated problem-free until late 2011. While there has not been continuous, quality Landsat data since late 2011, today’s launch of the new Landsat 8, Data Continuity Mission should help fill that gap.

Today almost all remote sensing projects utilize Landsat data, largely because the data can be easily matched with country vegetation indices to accurately predict biomass. Another reason for its frequent use could be because currently, image textures are more effective in determining biomass in tropical forests with high saturation than spectral data. Regardless of the cause, climate negotiators recognized the Landsat project’s continuity and high spatial and temporal resolution and suggested it as the primary remote sensing methodology for REDD projects at the COP15. Also around this time, the convenience of using Landsat data to evaluate highly dense tropical forest data was made easier by the release of CLASlite, or the Carnegie Landsat Analysis System. This software program allows users to enter Landsat satellite images and then analyzes the data using a combination of calibration, atmospheric correction and other algorithms to heighten any deforestation imagery. The CLASlite software has already been updated to accept the new Landsat 8 data.

Lastly, coarser resolutions of 100 m resolutions or greater include MODIS, MISR, AVHRR, and SPOT; these have been used to estimate biomass with varying accuracy. In general, studies have used optical data from these sources in regional or continental-scale estimates; but they lose accuracy in smaller plot sizes.

In medium and coarse resolutions, it becomes more complicated to verify the accuracy of the data against field plots, as the plots and pixel size usually do not match. Oftentimes, researchers employ additional statistical procedures to combine the data. In an unexpected twist, a drawback of VHRI may be too much detail; the shadows caused by the canopy and topography can complicate AGB estimations. In addition to all of these considerations, researchers must also take into account processing times for the data. Higher quality imaging requires large data storage capabilities and takes a longer time to process.

LiDAR

While LiDAR also uses many of the same wavelengths as optical imaging, it has the added benefit of producing vertical distribution data. This reveals information hidden below the canopy, including canopy height and canopy vertical profile, which can be used to calculate AGB. The data collected depends on the wavelengths emitted by the LiDAR; there are currently three major types in use.

First and Last Pulse systems record wavelengths of up to 100 cm, called small footprint systems. The first pulse reveals the initial contact upon a forest and reveals only height data. The last pulse penetrates through the canopy cover – but may or may not actually reach the ground. Despite this limited data, small footprints often have higher repetition rates and can thus collect high resolution data of the top canopy. Another practical advantage of these systems is that they are widely used and most often available.

As more pulses are recorded between the first and last, the LiDAR system needs more detecting instruments to detect multiple return pulses. This may result in collecting data about a second and third pulse; or in the case of large footprint systems (10-100m), the entire return pulse may be recorded. However, this data density is still not the best method for collecting vertical data.

Waveform instruments record the signals from the laser at fixed time intervals. Waveform LiDAR has been created primarily for measuring vegetation, and can record: canopy height, crown size, vertical distribution of the canopy, biomass and leaf area index; and provides more accurate data than other LiDAR applications. Only a few airborne instruments, such as LVIS, and the satellite GLAS use waveform sensing. Most airborne LiDAR instruments do not employ waveform data collection because the large amounts of resulting data and the difficulties with interpreting it. As researchers Ashar Vazirabad and Mahmut Karslioglu noted noted, “From the data acquisition point of view, it is obvious that models and methods need to exploit the whole potential of the full waveform data for biomass estimation in future.”

Instrument Types

Currently, almost all LiDAR research utilizes airborne remote sensing. Airborne LiDAR began in the 1990’s when researchers discovered that combining GPS positioning with a laser resulted in very accurate measurements of topography and other data. Since then, airborne LiDAR has grown tremendously, and companies all over the world offer airborne LiDAR at ever-decreasing costs. A recent study using the Carnegie Airborne Observatory to operate the LiDAR, process the data, and provide maps paid less than $.08/ha. Despite these low prices, airborne LiDAR in remains cost-effective only within smaller projects and not those found at a national scale.

So far, only one LiDAR satellite has been launched, NASA’s ICESat GLAS . NASA launched the ICESat, the Ice, Cloud, and land Elevation Satellite in 2003 and decommissioned it in 2010. A part of ICESat, the Geoscience Laser Altimeter System GLAS used three lasers to emit infrared and visible laser pulses. While GLAS collected topographic data, the lasers were not able to penetrate substantial cloud cover and thus did not provide uninterrupted data of the ground. Other complications include the 70 m wide resolutions, which make it impractical to use as primary data. However, this unequal spatial data from GLAS may be supplemented with optical imagery data to obtain accurate biomass values and the wide resolutions come in use for larger studies. One such study determined that GLAS data was more accurate at regional levels – making it ideal for larger studies and not small projects. Despite the nearly global coverage and low cost, not many studies employ GLAS.

Terrestrial LiDAR applications are also rare but gaining more use. However, they do not provide equivalent data to satellite or airborne data. Researchers primarily use them as a supplement in determining beneath canopy data. And like all other remote sensing applications, field plots are needed to convert any LiDAR metrics to AGB data.

RADAR

Unlike LiDAR and optical data, Synthetic Aperture Radar (SAR) emits radio waves and combines the resulting backscatter data into a single image. While there is a strong relationship between backscatter data and above ground biomass, this relationship crumbles after reaching the saturation limit.

Backscatter depends on the size and reflectivity of the object when returning to the emitting device; larger and more reflective objects show up more clearly. The wavelength and polarization are two important considerations for affecting the backscatter in SAR. The most commonly used wavelength for forest biomass studies is the L-band; which uses a longer wavelength between 15-30 cm. With smaller wavelengths (such as the 3 cm X-band), the backscatter picks up smaller components of a tree, including leaves and small branches, and does not penetrate as deeply into the foliage. Short wavelengths are more sensitive to seasonal and site changes. Longer wavelengths only reflect from larger branches, stems, and terrain; giving a more accurate vertical profile of a forest.

L-band wavelengths usually have maximum AGB values around 100-150 Mg ha-1; thus, they are accurate in mixed tree and grass systems such as savannahs and woodlands, but lose their predictive value in many densely forested regions. P-band data has not been used in satellites, but has been used in NASA’s airborne AIRSAR system. Research showed that these longer wavelengths only begin to become saturated at 200 Mg ha-1 ; and might retain predictive qualities up to 300 Mg ha-1.

There are four types of polarization wavelengths used in SAR: HH, HV, VV, and VH. Most remote sensing methodologies use HV and HH data. HH data stands for horizontal-send, horizontal-receive data. These wavelengths pick up a wide range of objects, including trees, buildings, and ground cover. Due to its high sensitivity to reflection, HH wavelengths are more sensitive to changes in moisture. When the ground is wet or flooded, HH wavelengths have a tendency to double bounce, reflecting off both a tree and the ground. This can lead to variation in HH data between dry and wet seasons. Conversely, HV data responds less to changes in moisture due to its nature as horizontal-send, vertical receive data. This means the data is cross-polarized; that is, HV pulses emit horizontally but are received vertically. Instead of reflecting straight off an object, HV wavelengths are only received if they reflect off an object at a 90 degree angle. Complex structures like trees can easily reflect HV wavelengths; whereas soil will result in a backscatter. This makes HV data more sensitive to biomass than HH data; and researchers increasingly favor it in current studies.

VV and VH data are rarely utilized; VV data is less responsive than HH data while VH data is virtually the same as HV data. However, some experimental studies have tried combining HH, HV, VH, and VV data (called “fully polarimetric data”) to recreate the distribution and size of the scattering. While this methodology has a lot of potential, it remains largely untested at this point.

Instrument Types

While airborne systems exist and can provide resolutions up to 10 cm, most researchers use satellite data, which can be obtained cheaply or freely:

ALOS PALSAR was launched in 2006 by JAXA, and remained operational until 2011. The satellite updated its data every 46 days, and obtained resolutions of 10 m to 100 m. This depended on whether the high resolution or SCANsar mode was used. The satellite used long-wavelength (L-band, 23 cm wavelength), which has the capacity to collect both HV and HH data. Overall, it provided higher performance than JER-1due to its dual high resolution and use of ScanSAR. The data is available at no cost to the scientific community through the Alaska Research Facility.

Japanese Earth Resource Satellite (JERS-1) was launched in 1992 by the Japanese Aerospace Exploration Agency (JAXA) and remained functional until 1998. The satellite had a 44 day repeat orbit that allowed image coverage of most of the Earth. The satellite used an L-band wavelength, operating with HH polarization and obtained resolutions of 18 m with a swath width of 75 m. Due to the different scan wavelengths, it is only possible to combine ALOS PALSAR and JERS-1 images with advanced calculations.

Future Projects:

An ideal large-scale AGB measurement system would be able to collect AGB data independently of cloud cover and contain no upper biomass limit. Currently, no such system exists; but future satellite platforms will come much closer to meeting these goals:

ICESat-2is slated to launch in 2016. The mission objectives are similar to the original ICESat: it is primarily concerned with measuring sea levels and changes in ice sheets; however, the ICESat will also measure vegetation canopy height to estimate biomass and biomass change. Unlike the ICESat, ICESat-2 will emit micro-pulses and multiple beams, which should improve elevation estimates for rough areas and steep slopes.

ALOS-2 is supposed to launch in 2013 by JAXA. It will provide more data than ALOS, with its faster repeat cycle of only 14 days.

Furthermore, while it will continue to provide ScanSAR data at 100 m resolutions and PALSAR data at 10 m resolutions, it will also have a spotlight mode (with 1-3 m resolution) and a high resolution mode (with 3-10 m resolutions).

BIOMASS’s primary objective is to measure the global distribution of forest biomass. It will employ a P-band SAR, which the ESA claims will allow for “biomass at a resolution and accuracy compatible with the needs of global reporting on carbon stocks and terrestrial carbon models.” BIOMASS will provide 100 m resolution.

DESDnyl is supposed to be launched by NASA in 2021. It will use a L-band SAR system capable of 10 m resolution, and have a 12-16 day repeat cycle. The radar will also use a new imaging technique, “SweepSAR,” that will use full polarization and image swaths of up to 240 km.

Additional resources

How Two Different Studies
Found Consensus On Emissions
From Tropical Deforestation

When researchers from two separate institutions measured carbon emissions from deforestation using different techniques, they came to the same number: 3.0 gigatons per year from 2000 through 2005. This could help end a long-standing debate and give policymakers the clear benchmark they need for establishing future targets.

22 January 2013 | In order for the United Nations to achieve its goal of reducing carbon emissions from tropical deforestation by 50% between now and 2020, they have to know the amount of emissions that is currently caused by destroying tropical forests. Now they do: it’s roughly three gigatons per year, or at least was from 2000-2005. And they know that with surprising certainty, according to a synthesis of separate findings from Winrock International and the Woods Hole Research Center. A policy brief, Progress Towards a Consensus on Carbon Emissions From Tropical Deforestation was first published at global climate talks last month and shows that, despite initial differences, the data on gross carbon dioxide emissions from tropical deforestation was consistent. Gross carbon emissions accounts for the amount of carbon emitted from a deforested area but doesn’t account for carbon stored in any new vegetation planted on that land.

By achieving this scientific consensus, researchers have given policymakers an unbiased, historic benchmark to use in discussing agreement on a target of reducing emissions from gross tropical deforestation to below 1.5 Gt of carbon per year, the joint analysis reads.

The two studies initially had very different results. After analyzing their findings together, they found the Woods Hole group was measuring emissions on a broad perspective that included forest degradation and was over a longer period of time. Woods Hole’s original amount of emissions from deforestation was much higher at 8.1 Gt. But after excluding degradation and aligning their timeframes, the separate studies came to the same conclusion despite differences in data sets, methodologies and models.

They were unable to come to a consensus on forest degradation as well as emissions from peat and mineral soils. Participants agreed that properly measuring degradation was much more difficult than measuring deforestation, although with the right data and tools, scientists involved in the study believe it very feasible.

“Both studies offer insights into different ways to measure tropical deforestation,” says lead author Alessandro Baccini, an Assistant Scientist at WHRC. “The fact that we were able to reconcile these different studies across very different sets of data and methodologies should provide reassurance to policymakers that they can act with science on their side.”

Analyses like these are part of a movement toward accurate measurements and away from reliance on countries’ self-reported data through forestry services assessments which is unreliable and varying. “We’re reducing the uncertainty with these new measurements,” says Daniel Zarin, Director of Programs at the Climate and Land Use Alliance, which helped initiate the joint analyses.

The study will also provide NGOs, scientists and national governments with the technology and infrastructure investments they will need to measure and evaluate deforestation. Both organizations are hoping the analysis will force policymakers to act, especially in the REDD+ negotiations.

In terms of REDD+, Heike Schroeder, a senior lecturer on climate change and international development at the University of East Anglia says there needs to be a focus on the root causes of deforestation. The threat agriculture poses to forests, for example, is secondary to the immediate need to secure a food supply to the globe’s growing population. For REDD+ to be successful, synergies between forests and sectors like agriculture and energy need to be created.

“We need to address both carbon and human livelihood objectives when addressing REDD+,” says Schroeder.

Schroeder sees a growing trend towards an overall landscape sector rather than purely a forestry sector. Greater engagement with these competing interests can help provide sustainable practices and alternative livelihoods that will avoid leakage from REDD projects. Initiatives like Climate Smart Agriculture appear to be successful approaches to climate-friendly farming.

And with this benchmark of 3 Gt, REDD and other deforestation strategies now have a concrete target they can aim for. Zarin of the Climate and Land Use Alliance believes cutting this number in half by 2020 is not only doable but can be done by 2015. The international community, he says, should be aiming to reduce emissions from deforestation by 75% by 2020.

Even with this new objective in the forestry sector, Zarin says the real target we should be striving for is to keep 80% of fossil fuels in the ground and thus preventing Earth’s temperature from rising 2 degrees.

REDD+ And The Future Of
Climate-Safe Agriculture

REDD+ emerged from the Doha climate talks well ahead of overall negotiations, despite disagreement over how to verify and validate emission-reductions. Indeed, REDD and LULUCF appear to be evolving into a larger mechanism that incorporates climate-safe agriculture as well, according to REDD-plus facilitator Tony La Vií±a, who co-authored this analysis on the eve of the Doha conference.

This article has been adapted from the working paper “The Road to Doha: The future of REDD-Plus, agriculture, and land-use change in the UNFCCC”, published by the Foundation for International Environmental Law and Development (FIELD) and available for download here. The full paper offers a comprehensive summary of REDD-plus and LULUCF negotiations in the lead-up to Doha, as well as this assessment of agriculture within the UNFCCC.

21 January 2013 | The 2012 United Nations Climate Change Conference in Doha officially launched the Durban Platform for Enhanced Action (ADP), which aims to establish a new legal instrument by 2015 that comes into force by 2020.

At this point, it would be wise to take a step back and assess how the multiple streams of progress achieved under the AWG-KP, AWG-LCA, ADP and REDD-Plus ultimately set the stage for the future of land-use issues under the UNFCCC.

There is no doubt that REDD-Plus and LULUCF, while not perfect, have advanced beyond the expectations of many.

The former, in particular, has managed to create for itself a platform that does not entirely depend on the UNFCCC for action but instead has created enough good will among governments and diverse stakeholders to go on their own and generate valuable experiences that establish early action for forest protection.

And LULUCF, while for a long time full of controversy over complex accounting rules and environmental integrity issues, has emerged with a relatively robust mandatory accounting system for forest management activities.

Agriculture, on the other hand, has largely fallen on the wayside under the LCA, having failed to secure a political and substantive basis for further work beyond just sectoral approaches. This gap has been the subject of much debate outside the negotiations as agriculture was largely seen as a make or break issue for both the Cancun and Durban conferences. And yet, its downplaying persists under the LCA. Under KP, cropland and grazing land management are included as eligible activities under LULUCF but only as voluntary activities. This is mainly due to difficulties in accounting, although breakthroughs have been made in recent negotiations and informal discussions that could potentially influence future discussion towards mandatory and comprehensive accounting for LULUCF that would include agriculture.

All this begs the question of where, how and when will land-use issues be taken up starting 2013. And such questions should be considered against the backdrop of change that the ADP is catalyzing in terms of focus and shifting discourses.

So while the ADP sets out on its visioning and work planning processes, we quickly speculate on the possible futures of REDD-Plus, agriculture and land-use change in the UNFCCC.

REDD-Plus

The ADP addresses large, sweeping questions such as improving the level of ambition on emissions reduction and financing, MRV, and establishing the role of mitigation mechanisms such as REDD-Plus towards assisting developed and developing countries meet commitments.

Timing-wise, the years between 2013, 2015, and 2020 could be organized to explicitly scale-up phase 1 and phase 2 activities in developing countries, with the SBI monitoring implementation, sharing best practices, and promoting further demonstration and experimentation.

This would mean that come 2015, a clear signal from the ADP should already have been established to create demand and drive investment into REDD-Plus around the world. And this can only be achieved with clear decisions under the ADP on how REDD-Plus will interact with elements such as raised mitigation commitments from both developed and developing countries, MRV, finance, and new market mechanisms under a new protocol, and not to mention language within the ADP and the new protocol supporting continued country efforts to establish REDD-readiness and demonstration.

Come 2020, when a new protocol with all these elements is officially in place, REDD-Plus can transition smoothly into phase 3, where hopefully a far larger institutional machinery will keep supply and demand for REDD-Plus stable, and financial support for performance based payments are sustained through REDD-Plus credits by developed countries, or by in-country support through NAMAs.

What makes REDD-Plus ultimately interesting to watch between 2013 and 2015 is if it will go the path that LULUCF did under the KP of entertaining drawn-out negotiations towards a strict, rules-based accounting regime. As Parties slowly realize the potential of REDD-Plus likely emerging as the most accepted, advanced, and cost-effective model by 2020 for meeting emissions reduction commitments under a new climate regime, it remains to be seen if the ADP will steer discussions towards establishing stricter accounting rules or allow for an organic expansion of effort and collaboration between developed and developing countries towards “climate-effective” outcomes, or a complicated expression of both.

At this point, it would be very hard to speculate on this matter, pending discussions under the ADP, and not to mention the two huge elephants in the room: integrating or collapsing agriculture and REDD-Plus under LULUCF discussions under a new protocol, and treatment of REDD-Plus as an official flexible mechanism in a post-2020 regime. It would therefore be absolutely critical to kick-off Doha’s visioning process with a frank expression of views around the above topics.  

Agriculture and LULUCF

As mentioned previously, while LULUCF may have won a small victory with its continuity into the second commitment period of the KP, its fate with regards to a new protocol in 2020 is, quite frankly, still anybody’s guess. This is so much more the case with agriculture per se, with some Parties feeling more comfortable folding it into LULUCF, or keeping separate to avoid “contamination”, or even strictly treating it as a driver of deforestation under REDD-Plus.

There are moves by several developed and developing countries alike to further close perceived loopholes in LULUCF and this involves calls to institute a comprehensive net- net accounting regime, or in other words, a mandatory accounting system for the whole land-use sector that includes emissions and removals from forest, cropland, grazing land, wetland, and peatland management. Under a new protocol, such a system would likely ensure the highest level of environmental integrity but would in turn require profound political will.

And on this note, we again speculate that before any of these issues become ripe for discussion with respect to a new protocol that is “applicable to all” (“but not uniform in application” as some countries are quick to add), the broader issue of how land-use activities, including REDD-Plus, are to be treated will first have to be clarified.

For instance, will LULUCF remain a mechanism for developed countries to meet emission reduction commitments? Which developed countries are eligible to access it as a flexible mechanism? Is LULUCF applicable to developing countries in terms of meeting NAMAs? Can LULUCF including agriculture be considered under new market mechanisms for developing country participation? How does REDD-Plus interface with LULUCF both as a potential NAMA and a flexible mechanism?

At this stage, we can only surmise that if a renewed focus on mitigation and financing is established under the ADP, that REDD-Plus, agriculture and LULUCF can become major elements of a “mitigation mechanisms” workstream that is closely tied to MRV, financing and new market mechanisms. Under this workstream, we can also go as far as to predict that Parties will work very hard to establish a “dynamic differentiation” between developed and developing countries on the applicability of accounting rules and financing modalities, while developed countries in particular will work very hard towards broadening the scope of and their access to potentially new flexible mechanisms established under this workstream.

The authors are affiliated with the Ateneo School of Government and have written this in that capacity and not as members of the Philippine Delegation to the UNFCCC negotiations. The support of the Climate and Land Use Alliance for preparing this update is also acknowledged but all responsibility for it is by the authors.

This article has been adapted from the working paper “The Road to Doha: The future of REDD-Plus, agriculture, and land-use change in the UNFCCC”, published by the Foundation for International Environmental Law and Development (FIELD) and available for download here. Please cite the original when referencing or sharing.

Additional resources

Watershed Payments Topped
$8.17 Billion In 2011

Today marks the release of Ecosystem Marketplace’s State of Watershed Payments 2012 report and with it some significant findings that include China leading the world in watershed investments and a US $2 billion increase on the protection of watersheds as a method to ensure safe water supplies as well as double the number of water initiatives being developed since 2008.

17 January 2013 |   The number of initiatives that protect and restore forests, wetlands, and other water-rich ecosystems has nearly doubled in just four years as governments urgently seek sustainable alternatives to costly industrial infrastructure, according to a new report from Forest Trends’ Ecosystem Marketplace.

“Whether you need to save water-starved China from economic ruin or protect drinking water for New York City, investing in natural resources is emerging as the most cost-efficient and effective way to secure clean water and recharge our dangerously depleted streams and aquifers,” said Michael Jenkins, Forest Trends President and CEO. “80 percent of the world is now facing significant threats to water security. We are witnessing the early stages of a global response that could transform the way we value and manage the world’s watersheds.”

The report, State of Watershed Payments 2012, is the second installment of the most comprehensive inventory to date of initiatives around the world that are paying individuals and communities to revive or preserve water-friendly features of the landscape. Such features include wetlands, streams, and forests that can capture, filter, and store freshwater.

Experts at Forest Trends’ Ecosystem Marketplace, which tracks a variety of programs that provide “payments for environmental services” or PES, find investments in watershed services emerging in both the developed and developing world as a “powerful new source for financing conservation”—and also a way to provide new “green” income opportunities for rural communities.

The report counts at least 205 programs—up from 103 in 2008—that in 2011 collectively generated US $8.17 billion in investments, an increase of nearly $2 billion above 2008 levels. The report also identifies a raft of new programs gearing up for launch in the next year. “The level of activity is far more intense than it was just a few years ago when we began tracking these types of investments,” Jenkins said.

For the most part, the watershed investment programs documented in the report involve relatively simple exchanges, but the return on investment can be considerable.

For example, authorities in China are providing new health insurance benefits to 108,000 residents in struggling communities that lie upstream of the bustling southern coastal city of Zhuhai in exchange for adopting land management practices that will improve drinking water for the region. The program is just one among many such efforts underway in China, which emerged in the Ecosystem Marketplace report as the world leader in using investments in watershed services to deal with water challenges. In fact, China accounts for 91 percent of the watershed investments in 2011 documented in the report.

China has the lowest amount of freshwater resources per capita of any major country in the world, according to the World Bank, and water scarcity and water pollution already cost China 2.3 percent of its gross domestic product. “Water insecurity poses probably the single biggest risk to the country’s continued economic growth today, and the government has clearly decided that its ecological investments will pay off,” the Forest Trends report states.

On the other side of the world, officials in New York City were faced with the prospect of spending billions of dollars on new water treatment infrastructure. They opted instead for a much cheaper program that compensates farmers in the Catskills for reducing pollution in the lakes and streams that provide the city with its drinking water. The effort has been credited with, among other things, keeping safe drinking water flowing from city taps throughout Hurricane Sandy and its aftermath—filtration plants and water infrastructure require electricity to function, while natural ecosystems function throughout even the longest power outages.

But China and New York City are not alone in grappling with major water-related challenges. In the United States, the Environmental Protection Agency reports that in the last five years almost every region has experienced water deficits and at least 36 states will face some type of water shortage in 2013. Ecosystem Marketplace documents 68 watershed payment programs in North America and 18 more in development that respond to these challenges. Leading the charge are Oregon, Washington state, and also Minnesota.

Meanwhile, in the developing world, 700 million people in 40 countries face water shortages. Today, one third of the World Bank’s loan portfolio involves water projects. And though investments in watershed services are growing rapidly, they are tiny compared to the estimated US $1 trillion per year that will be needed through 2025 to meet water supply and sanitation demands. Analysts at Ecosystem Marketplace note that devoting even a small fraction of these investments to “green” solutions that protect water at its source—compared to “gray” solutions like water treatment facilities—could generate huge returns by simultaneously providing water security along with a host of environmental and social benefits.

Inventorying Investments in “Natural Infrastructure”

The Ecosystem Marketplace inventory of watershed investments reveals a wide array of creative and innovative approaches around the world where, faced with major water challenges, “leaders and communities have opted to invest in our natural infrastructure and reward the people who protect it.”

For example:

  • In South Africa, a US $109-million investment in rooting out water-hogging invasive plants—a single eucalyptus tree can guzzle 40,000 gallons of water a year—currently employs 30,000 previously unemployed people and has returned an estimated US $50 billion worth of water- related benefits, such as vastly improved stream flow.
  • In Sweden, a local water authority found it cheaper to pay for a program to establish blue mussel beds in Gullmar Fjord to filter nitrate pollution than build a new treatment facility on shore.
  • In Latin America, the trend in water programs is to offer compensation other than cash for protecting water resources. In Bolivia’s Santa Cruz valley, for example, more than 500 families receive beehives, fruit plants, and wire (which is used for, among other things, fencing to keep livestock away from rivers and stream banks) in return for their water protection efforts.
  • Fukuoka City in Japan has no major water supply within its boundaries, so it is supporting a water source conservation fund that pays for forest management and land acquisition in a nearby watershed that supplies the city with its drinking water.
  • In Uganda, a beer brewer is paying for the protection of wetlands to retain their valuable capacity to maintain a steady and abundant supply of clean water. A similar project is in development in Zambia, funded in part by SABMiller subsidiary Zambian Breweries PLC.
  • In Kenya’s Lake Naivasha basin, a consortium of large-scale horticulture operations, ranchers, and hotel owners near the lake are providing smallholder farmers with vouchers for agriculture inputs in exchange for implementing practices that can reduce farm run-off, which damages irrigation systems and harms biodiversity and landscape beauty. Farmers are using the vouchers to buy high-yield crop varieties that provide more profits as well as food for their families.

Investing in a Portfolio of Ecosystem Services

“The benefits from these watershed programs extend far beyond water: they support biodiversity, reduce greenhouse gas emissions, and provide income for the rural poor,” said Genevieve Bennett, lead author of the report and a research analyst with Ecosystem Marketplace.

Bennett said work is already underway to tap these synergies and make conservation even more lucrative by combining investments in watershed services with payments for other types of ecosystem services. For example, in Vietnam, tourism operators make investments in watershed conservation that are based, in part, on the estimated values of a pristine landscape for the tourism industry. In the US state of Georgia, the Carroll County government has created stream-bank mitigation credits on land that was originally acquired to protect key water source areas. And in Indonesia, watershed investments have been packaged with credits for conserving carbon stored in forested areas.

One disappointing finding, according to Forest Trends, was the limited participation of the private sector in paying for watershed services—despite the fact that a majority of the Global 500 companies report experiencing water-related challenges. Forest Trends identified only 53 programs that included private sector participation, the majority of which involved beverage companies. Instead, most of the programs tracked in the report are operated by NGOs or governments.

“It may be that many companies are waiting to see programs become better established,” Bennett said. “Unlike the carbon trading world, water lacks well-established tools and standards that help companies to understand and mitigate their risk, and that seems to be a major hurdle.”

Overall, Bennett and her colleagues believe the market for investments in watershed services is primed for considerable growth, particularly as economic conditions improve. They find evidence indicating that China’s “already massive investments” will increase significantly, along with investments in Latin America and the United States.

Additional resources

In Our World: A Global Wrap Of Economy And Ecology

Mainstream news and science publications have been digging deeper and deeper into concepts central to environmental finance, and the International Institute for Environment and Development (IIED) recently began identifying some of the best coverage in this sphere. Here’s the first of these installments.

The In Our World series appears on the IIED website. Click here to read this post in its original format.

4 March 2013 | As China’s air pollution problems persist, people there are calling for more action – and the media is taking the rare step of amplifying those calls.

The Atlantic has a video that will let you take ten minutes to understand china’s environmental emergency.

China’s struggle with development and pollution is just one of the many topics concerning the environment. Below, are recent issues concerning the environment and development-some from the real world and some from the online world.

Enviro-philosophy

In this pair of posts, journalist Keith Kloor asks Is the Anthropocene doomed? and What Should the Anthropocene Look Like

Kloor refers to Jon Foley, director of the Institute on the Environment at the University of Minnesota, who challenges environmentalists with an essay that begins… We are supposed to be in the business of changing the world. The question is: are we?

Risk and Resilience

Garry Peterson at the Resilience Science blog, has been looking into the World Economic Forum’s Global Risks 2013 report, which he calls “an interesting, but one eyed view of the global risk landscape.

Communicating for Sustainability

Dan Kahan, who leads the Cultural Cognition Project at Yale Law School, answers his own question: “What would I advise climate science communicators

Laurie Bennett creative director at Futerra says Telling stories is great for sustainability marketing.

Randy Olson says the “climate movement HAS to take the skeptics seriously (not ignore them), but should refuse to engage with climate skeptics in IRRATIONAL VENUES.” Read more in his blog post “Ignore or Boycott?”

Forests, People, Wildlife, Conservation

In The Guardian, John Vidal reports that the World Bank’s own evaluators say its investments support logging and do little to help rural poor people.

Researcher Maureen McCarthy wrote about conflict between chimpanzees and people in Uganda. SciDev.Net reports on the first meeting of the Intergovernmental Platform on Biodiversity and Ecosystem Services.

Keith Kloor reports on a new review paper in the journal Science about how many species there are and how fast they are going extinct – and how the media has interpreted it in different ways.

Southern Climate News

In Tanzania, Maasai herders breed fewer, stronger cattle to tackle climate change.

The Philippines makes climate change a top 2013 priority

New Voices

Anju Sharma has set up a new blog, called “It must be said!” She has already posted about the Green Climate Fund and the Intergovernmental Platform on Biodiversity and Ecosystem Services

Anna de Costa has started a new series at her Seeking Alchemy blog called Voices of the Anonymous. It “aims to explore some of the stories behind the unseen in India; those who form the backbone of India’s economy, who we rely upon every day but rarely see, let alone consider beyond the assumptions we might have.” Part one is here.

Mike Shanahan is IIED’s press officer.
Additional resources

Soil Carbon Lands Market Opportunities Through New Offset Methodology

12 December 2012 | Vast stretches of fertile loess deposits have helped shape the Palouse and Columbia Plateau region of the United States into one of the world’s most agriculturally productive regions. Loess, which means loose in German,  is also susceptible to erosion. Over the past century,  intensive farming of wheat, barley, peas, lentils and other crops has taken a major toll on the region’s soil and water resources and pushed native grasslands and biodiversity close to extinction.

The Earth Partners (TEP), an alliance of professionals working in finance, project development, ecosystem restoration and land management, developed a soil carbon quantification methodology – recently approved for use under the Verified Carbon Standard (VCS) – to support more sustainable methods of agriculture and other land use. The methodology is the first to cover all eligible carbon offset activities in VCS’s agricultural land management category, providing new market opportunities for emission reductions and removals from projects that improve soils in farmlands, grasslands, and rangelands.

Sowing the method

TEP and Shepherd’s Grain – a leading wheat producer group of family farmers – are piloting the methodology across seven million acres of the Palouse and Columbia Plateau region as one of the world’s largest aggregated land-based carbon offset projects to date.

Individual farmers cover the expenses of any eligible offset activities like no-till, direct seeding, crop rotation, or improved soil management on their own. When it comes to applying the methodology itself, however, farmers enrolled in the project don’t have to pay a cent. The project developer – in this case TEP – quantifies the soil carbon on each participating farm prior to banking carbon credits.

“The methodology provides a standard way to bring to the marketplace what many landowners think they have in the way of carbon assets but haven’t been able to tap into because there was formerly no standard method in place for measurement or monetization of these assets,” says Steven Apfelbaum who heads TEP’s science team and owns Applied Ecological Services, TEP’s operating partner.

As it works to market the project, TEP hopes the Palouse project can serve as a robust, land-based agricultural carbon offset project that is both cost-effective and flexible enough to enroll producers at a large scale – and provide a model for rollout to other regions.

The method behind the method

Apfelbaum first contacted key soil scientists a decade ago about a soil carbon method produced by the United States Department of Agriculture that dates 30 years back. These scientists went on to help TEP conduct demonstration projects for soil carbon measurements throughout the Americas. Beyond agriculture, TEP tested the method on degraded landscapes in mine lands, prairies, grasslands, forest lands, savannah lands, and wetlands.

USDA scientists and other researchers historically quantified soil carbon field by field, measuring the farm field in isolation of the larger landscape. TEP fine-tuned the method by adopting a modified process that afforded them more flexibility to apply the method at different scales.

The process involves pre-sampling various settings on the landscape covering different land uses in order to obtain a measure of the statistical variance on the landscape, followed with a comprehensive GIS-based stratification of the landscape. In turn, TEP is able to statistically sample at a landscape scale, up to millions of acres.

This modified approach not only saves time, but brings the cost of managing soil carbon from tens of dollars per acre down to pennies per acre.

Tapping into the US market

“We can measure and tell the story with clear statistics for the value of what early adopters started doing – years ago in some cases,” notes Apfelbaum. “But if the marketplace penalizes early adopters, then we lose a valuable part of the agricultural community.”

By taking TEP’s soil carbon methodology under its wing, VCS – a standard that has engaged both industry and land users in the voluntary carbon markets – can help reward early adopters by certifying use of the methodology on carbon offset projects.

While VCS enables early adopters, it does not facilitate access to the same level of demand for credits that a compliance market-approved protocol could. To scale up use of the methodology in the US requires early actors to dip their toes in an environment that still has years ahead of it before it can realistically reach a federal cap-and-trade scheme or provide a stable price on carbon.

Soil carbon is not yet on the list of eligible project types being considered for coverage under California’s nascent cap-and-trade scheme  –  or under the Western Climate Initiative more broadly. In past interactions with TEP, California’s Air Resources Board (ARB) reviewed the soil carbon methodology and acknowledged soil carbon as a potential future project type for the scheme. TEP hopes to reengage with the ARB to push for a regional protocol on soil carbon now that the method is VCS-approved and the Palouse project is underway.

The Palouse project currently sits at 100,000 acres under contract. If the ARB were to adopt a regional protocol in support of the methodology, the project could enroll additional producers across the seven million acres on which TEP has already implemented mapping, stratification, and sampling. At full scale, the project could produce over 15 million offset credits per year.

TEP hopes to locate similar eco-agricultural regions to develop protocols or projects based on its new methodology. The possibilities are vast in the US alone, whether involving wheat in Montana, corn and soybeans in the Midwest, cotton in the South, or fruit and horticulture back in California.

“The value proposition of soil carbon can appeal to anyone in the agricultural supply chain – from vehicle manufacturers to farm equipment producers to food producers,” says Chas Taylor, TEP’s Director of Business Development, regarding potential buyers.

“State entities and others with environmental concerns beyond carbon would also be stakeholders – for instance, on improved watershed health from reduced erosion.”

Soil carbon in context

While the newly VCS-approved soil carbon methodology applies primarily to agricultural projects under VCS’s agricultural land management program, the method can accommodate much broader application.

“We’ve used the exact same method with simply a different soil sampling instrument to work in other project types including wetlands and peatlands,” says Apfelbaum. “We’re looking at adding additional modules including those for peat and biochar, and see great versatility in this method going forward.”

When it comes to how soil carbon stands up against other land-based project types on non-permanence risk, Apfelbaum says the soil carbon methodology doesn’t burden project developers with many of the risks inherent to forest methods. Most soil carbon fractions that TEP works with are relatively stable compared to forest carbon levels. Changes in land use – for example, the introduction of cut-and-burn practice – don’t upset soil carbon levels to the same degree that forest fires, insects or diseases upset forest carbon.

Conservative measures like setting aside a buffer pool for carbon credits, used on forestry projects to insure against non-permanence risk, can still come in handy on soil carbon projects.

“We’ve proposed buffer pools,“ says Apfelbaum, “but primarily to align with the investment that might be made on a particular project and the physical reliability of the data.”

Prior to the sale of carbon credits, a project developer might choose to perform soil carbon sampling at a lower level of certainty in order to save on laboratory testing costs – and put up a buffer pool to offset the uncertainty. As revenues from carbon credit sales start to flow, the project developer could afford to refine the statistics and reduce the size of the buffer pool accordingly.

“If we can aggregate larger landscapes using the soil carbon method, we can come in equal or far less expensive than the forestry methods that we’ve seen,” says Apfelbaum.

Scaling beyond

The global stakes are high, with soil carbon levels in most agricultural fields and many other landscape types currently reduced by 60 to 90 percent compared to historic levels. An article in Science states that up to 50 percent or more of global greenhouse gas emissions can be offset annually over the next 30+ years by regrowing soil carbon.

Outside the US, the approach is being demonstrated in Australia and New Zealand, while also cropping up in conversations in Africa, Asia, Europe, and South America – with those interested traveling to the US for hands-on training.

To date, verifier organizations largely lack the in-house soil expertise to evaluate projects. For those looking to employ outside help, there is no shortage of technically trained soil scientists capable of using the method, given that most of the methods used for soil sampling around the world fall back on the USDA’s standard manuals – on which TEP’s methodology is based.

Apfelbaum stresses the need for verifiers to think at the landscape level, and to understand that there are ways to work with variability over time and space at scale. “Verifier checklists are currently largely developed around parcel-scale or small-scale rather than ecosystem-scale thinking,” he notes.

Movers and shakers like the World Bank – which saw approval of a soil carbon methodology it supported earlier this year – and the UN Food and Agriculture Organization have advocated for soil carbon offsets to be a vehicle for driving climate-smart agriculture in developing countries.

Negotiations on climate-smart agriculture and the potential uptake of soil carbon under the Clean Development Mechanism (CDM) ended inconclusively last Friday in Doha, as African countries argued with developed countries  over whether to focus funding on adaptation or mitigation activities.

How Two Different Studies Found Consensus On Emissions From Tropical Deforestation

When researchers from two separate institutions measured carbon emissions from deforestation using different techniques, they came to the same number: 3.0 gigatons per year from 2000 through 2005. This could help end a long-standing debate and give policymakers the clear benchmark they need for establishing future targets.

22 January 2013 | In order for the United Nations to achieve its goal of reducing carbon emissions from tropical deforestation by 50% between now and 2020, they have to know the amount of emissions that is currently caused by destroying tropical forests. Now they do: it’s roughly three gigatons per year, or at least was from 2000-2005. And they know that with surprising certainty, according to a synthesis of separate findings from Winrock International and the Woods Hole Research Center. A policy brief, Progress Towards a Consensus on Carbon Emissions From Tropical Deforestation was first published at global climate talks last month and shows that, despite initial differences, the data on gross carbon dioxide emissions from tropical deforestation was consistent. Gross carbon emissions accounts for the amount of carbon emitted from a deforested area but doesn’t account for carbon stored in any new vegetation planted on that land.

By achieving this scientific consensus, researchers have given policymakers an unbiased, historic benchmark to use in discussing agreement on a target of reducing emissions from gross tropical deforestation to below 1.5 Gt of carbon per year, the joint analysis reads.

The two studies initially had very different results. After analyzing their findings together, they found the Woods Hole group was measuring emissions on a broad perspective that included forest degradation and was over a longer period of time. Woods Hole’s original amount of emissions from deforestation was much higher at 8.1 Gt. But after excluding degradation and aligning their timeframes, the separate studies came to the same conclusion despite differences in data sets, methodologies and models.

They were unable to come to a consensus on forest degradation as well as emissions from peat and mineral soils. Participants agreed that properly measuring degradation was much more difficult than measuring deforestation, although with the right data and tools, scientists involved in the study believe it very feasible.

“Both studies offer insights into different ways to measure tropical deforestation,” says lead author Alessandro Baccini, an Assistant Scientist at WHRC. “The fact that we were able to reconcile these different studies across very different sets of data and methodologies should provide reassurance to policymakers that they can act with science on their side.”

Analyses like these are part of a movement toward accurate measurements and away from reliance on countries’ self-reported data through forestry services assessments which is unreliable and varying. “We’re reducing the uncertainty with these new measurements,” says Daniel Zarin, Director of Programs at the Climate and Land Use Alliance, which helped initiate the joint analyses.

The study will also provide NGOs, scientists and national governments with the technology and infrastructure investments they will need to measure and evaluate deforestation. Both organizations are hoping the analysis will force policymakers to act, especially in the REDD+ negotiations.

In terms of REDD+, Heike Schroeder, a senior lecturer on climate change and international development at the University of East Anglia says there needs to be a focus on the root causes of deforestation. The threat agriculture poses to forests, for example, is secondary to the immediate need to secure a food supply to the globe’s growing population. For REDD+ to be successful, synergies between forests and sectors like agriculture and energy need to be created.

“We need to address both carbon and human livelihood objectives when addressing REDD+,” says Schroeder.

Schroeder sees a growing trend towards an overall landscape sector rather than purely a forestry sector. Greater engagement with these competing interests can help provide sustainable practices and alternative livelihoods that will avoid leakage from REDD projects. Initiatives like Climate Smart Agriculture appear to be successful approaches to climate-friendly farming.

And with this benchmark of 3 Gt, REDD and other deforestation strategies now have a concrete target they can aim for. Zarin of the Climate and Land Use Alliance believes cutting this number in half by 2020 is not only doable but can be done by 2015. The international community, he says, should be aiming to reduce emissions from deforestation by 75% by 2020.

Even with this new objective in the forestry sector, Zarin says the real target we should be striving for is to keep 80% of fossil fuels in the ground and thus preventing Earth’s temperature from rising 2 degrees.

Watershed Payments Topped $8.17 Billion In 2011

Today marks the release of Ecosystem Marketplace’s State of Watershed Payments 2012 report and with it some significant findings that include China leading the world in watershed investments and a US $2 billion increase on the protection of watersheds as a method to ensure safe water supplies as well as double the number of water initiatives being developed since 2008.

17 January 2013 |   The number of initiatives that protect and restore forests, wetlands, and other water-rich ecosystems has nearly doubled in just four years as governments urgently seek sustainable alternatives to costly industrial infrastructure, according to a new report from Forest Trends’ Ecosystem Marketplace.

“Whether you need to save water-starved China from economic ruin or protect drinking water for New York City, investing in natural resources is emerging as the most cost-efficient and effective way to secure clean water and recharge our dangerously depleted streams and aquifers,” said Michael Jenkins, Forest Trends President and CEO. “80 percent of the world is now facing significant threats to water security. We are witnessing the early stages of a global response that could transform the way we value and manage the world’s watersheds.”

The report, State of Watershed Payments 2012, is the second installment of the most comprehensive inventory to date of initiatives around the world that are paying individuals and communities to revive or preserve water-friendly features of the landscape. Such features include wetlands, streams, and forests that can capture, filter, and store freshwater.

Experts at Forest Trends’ Ecosystem Marketplace, which tracks a variety of programs that provide “payments for environmental services” or PES, find investments in watershed services emerging in both the developed and developing world as a “powerful new source for financing conservation”—and also a way to provide new “green” income opportunities for rural communities.

The report counts at least 205 programs—up from 103 in 2008—that in 2011 collectively generated US $8.17 billion in investments, an increase of nearly $2 billion above 2008 levels. The report also identifies a raft of new programs gearing up for launch in the next year. “The level of activity is far more intense than it was just a few years ago when we began tracking these types of investments,” Jenkins said.

For the most part, the watershed investment programs documented in the report involve relatively simple exchanges, but the return on investment can be considerable.

For example, authorities in China are providing new health insurance benefits to 108,000 residents in struggling communities that lie upstream of the bustling southern coastal city of Zhuhai in exchange for adopting land management practices that will improve drinking water for the region. The program is just one among many such efforts underway in China, which emerged in the Ecosystem Marketplace report as the world leader in using investments in watershed services to deal with water challenges. In fact, China accounts for 91 percent of the watershed investments in 2011 documented in the report.

China has the lowest amount of freshwater resources per capita of any major country in the world, according to the World Bank, and water scarcity and water pollution already cost China 2.3 percent of its gross domestic product. “Water insecurity poses probably the single biggest risk to the country’s continued economic growth today, and the government has clearly decided that its ecological investments will pay off,” the Forest Trends report states.

On the other side of the world, officials in New York City were faced with the prospect of spending billions of dollars on new water treatment infrastructure. They opted instead for a much cheaper program that compensates farmers in the Catskills for reducing pollution in the lakes and streams that provide the city with its drinking water. The effort has been credited with, among other things, keeping safe drinking water flowing from city taps throughout Hurricane Sandy and its aftermath—filtration plants and water infrastructure require electricity to function, while natural ecosystems function throughout even the longest power outages.

But China and New York City are not alone in grappling with major water-related challenges. In the United States, the Environmental Protection Agency reports that in the last five years almost every region has experienced water deficits and at least 36 states will face some type of water shortage in 2013. Ecosystem Marketplace documents 68 watershed payment programs in North America and 18 more in development that respond to these challenges. Leading the charge are Oregon, Washington state, and also Minnesota.

Meanwhile, in the developing world, 700 million people in 40 countries face water shortages. Today, one third of the World Bank’s loan portfolio involves water projects. And though investments in watershed services are growing rapidly, they are tiny compared to the estimated US $1 trillion per year that will be needed through 2025 to meet water supply and sanitation demands. Analysts at Ecosystem Marketplace note that devoting even a small fraction of these investments to “green” solutions that protect water at its source—compared to “gray” solutions like water treatment facilities—could generate huge returns by simultaneously providing water security along with a host of environmental and social benefits.

Inventorying Investments in “Natural Infrastructure”

The Ecosystem Marketplace inventory of watershed investments reveals a wide array of creative and innovative approaches around the world where, faced with major water challenges, “leaders and communities have opted to invest in our natural infrastructure and reward the people who protect it.”

For example:

  • In South Africa, a US $109-million investment in rooting out water-hogging invasive plants—a single eucalyptus tree can guzzle 40,000 gallons of water a year—currently employs 30,000 previously unemployed people and has returned an estimated US $50 billion worth of water- related benefits, such as vastly improved stream flow.
  • In Sweden, a local water authority found it cheaper to pay for a program to establish blue mussel beds in Gullmar Fjord to filter nitrate pollution than build a new treatment facility on shore.
  • In Latin America, the trend in water programs is to offer compensation other than cash for protecting water resources. In Bolivia’s Santa Cruz valley, for example, more than 500 families receive beehives, fruit plants, and wire (which is used for, among other things, fencing to keep livestock away from rivers and stream banks) in return for their water protection efforts.
  • Fukuoka City in Japan has no major water supply within its boundaries, so it is supporting a water source conservation fund that pays for forest management and land acquisition in a nearby watershed that supplies the city with its drinking water.
  • In Uganda, a beer brewer is paying for the protection of wetlands to retain their valuable capacity to maintain a steady and abundant supply of clean water. A similar project is in development in Zambia, funded in part by SABMiller subsidiary Zambian Breweries PLC.
  • In Kenya’s Lake Naivasha basin, a consortium of large-scale horticulture operations, ranchers, and hotel owners near the lake are providing smallholder farmers with vouchers for agriculture inputs in exchange for implementing practices that can reduce farm run-off, which damages irrigation systems and harms biodiversity and landscape beauty. Farmers are using the vouchers to buy high-yield crop varieties that provide more profits as well as food for their families.

Investing in a Portfolio of Ecosystem Services

“The benefits from these watershed programs extend far beyond water: they support biodiversity, reduce greenhouse gas emissions, and provide income for the rural poor,” said Genevieve Bennett, lead author of the report and a research analyst with Ecosystem Marketplace.

Bennett said work is already underway to tap these synergies and make conservation even more lucrative by combining investments in watershed services with payments for other types of ecosystem services. For example, in Vietnam, tourism operators make investments in watershed conservation that are based, in part, on the estimated values of a pristine landscape for the tourism industry. In the US state of Georgia, the Carroll County government has created stream-bank mitigation credits on land that was originally acquired to protect key water source areas. And in Indonesia, watershed investments have been packaged with credits for conserving carbon stored in forested areas.

One disappointing finding, according to Forest Trends, was the limited participation of the private sector in paying for watershed services—despite the fact that a majority of the Global 500 companies report experiencing water-related challenges. Forest Trends identified only 53 programs that included private sector participation, the majority of which involved beverage companies. Instead, most of the programs tracked in the report are operated by NGOs or governments.

“It may be that many companies are waiting to see programs become better established,” Bennett said. “Unlike the carbon trading world, water lacks well-established tools and standards that help companies to understand and mitigate their risk, and that seems to be a major hurdle.”

Overall, Bennett and her colleagues believe the market for investments in watershed services is primed for considerable growth, particularly as economic conditions improve. They find evidence indicating that China’s “already massive investments” will increase significantly, along with investments in Latin America and the United States.

Additional resources

REDD+ And The Future Of Climate-Safe Agriculture

REDD+ emerged from the Doha climate talks well ahead of overall negotiations, despite disagreement over how to verify and validate emission-reductions. Indeed, REDD and LULUCF appear to be evolving into a larger mechanism that incorporates climate-safe agriculture as well, according to REDD-plus facilitator Tony La Vií±a, who co-authored this analysis on the eve of the Doha conference.

This article has been adapted from the working paper “The Road to Doha: The future of REDD-Plus, agriculture, and land-use change in the UNFCCC”, published by the Foundation for International Environmental Law and Development (FIELD) and available for download here. The full paper offers a comprehensive summary of REDD-plus and LULUCF negotiations in the lead-up to Doha, as well as this assessment of agriculture within the UNFCCC.

21 January 2013 | The 2012 United Nations Climate Change Conference in Doha officially launched the Durban Platform for Enhanced Action (ADP), which aims to establish a new legal instrument by 2015 that comes into force by 2020.

At this point, it would be wise to take a step back and assess how the multiple streams of progress achieved under the AWG-KP, AWG-LCA, ADP and REDD-Plus ultimately set the stage for the future of land-use issues under the UNFCCC.

There is no doubt that REDD-Plus and LULUCF, while not perfect, have advanced beyond the expectations of many.

The former, in particular, has managed to create for itself a platform that does not entirely depend on the UNFCCC for action but instead has created enough good will among governments and diverse stakeholders to go on their own and generate valuable experiences that establish early action for forest protection.

And LULUCF, while for a long time full of controversy over complex accounting rules and environmental integrity issues, has emerged with a relatively robust mandatory accounting system for forest management activities.

Agriculture, on the other hand, has largely fallen on the wayside under the LCA, having failed to secure a political and substantive basis for further work beyond just sectoral approaches. This gap has been the subject of much debate outside the negotiations as agriculture was largely seen as a make or break issue for both the Cancun and Durban conferences. And yet, its downplaying persists under the LCA. Under KP, cropland and grazing land management are included as eligible activities under LULUCF but only as voluntary activities. This is mainly due to difficulties in accounting, although breakthroughs have been made in recent negotiations and informal discussions that could potentially influence future discussion towards mandatory and comprehensive accounting for LULUCF that would include agriculture.

All this begs the question of where, how and when will land-use issues be taken up starting 2013. And such questions should be considered against the backdrop of change that the ADP is catalyzing in terms of focus and shifting discourses.

So while the ADP sets out on its visioning and work planning processes, we quickly speculate on the possible futures of REDD-Plus, agriculture and land-use change in the UNFCCC.

REDD-Plus

The ADP addresses large, sweeping questions such as improving the level of ambition on emissions reduction and financing, MRV, and establishing the role of mitigation mechanisms such as REDD-Plus towards assisting developed and developing countries meet commitments.

Timing-wise, the years between 2013, 2015, and 2020 could be organized to explicitly scale-up phase 1 and phase 2 activities in developing countries, with the SBI monitoring implementation, sharing best practices, and promoting further demonstration and experimentation.

This would mean that come 2015, a clear signal from the ADP should already have been established to create demand and drive investment into REDD-Plus around the world. And this can only be achieved with clear decisions under the ADP on how REDD-Plus will interact with elements such as raised mitigation commitments from both developed and developing countries, MRV, finance, and new market mechanisms under a new protocol, and not to mention language within the ADP and the new protocol supporting continued country efforts to establish REDD-readiness and demonstration.

Come 2020, when a new protocol with all these elements is officially in place, REDD-Plus can transition smoothly into phase 3, where hopefully a far larger institutional machinery will keep supply and demand for REDD-Plus stable, and financial support for performance based payments are sustained through REDD-Plus credits by developed countries, or by in-country support through NAMAs.

What makes REDD-Plus ultimately interesting to watch between 2013 and 2015 is if it will go the path that LULUCF did under the KP of entertaining drawn-out negotiations towards a strict, rules-based accounting regime. As Parties slowly realize the potential of REDD-Plus likely emerging as the most accepted, advanced, and cost-effective model by 2020 for meeting emissions reduction commitments under a new climate regime, it remains to be seen if the ADP will steer discussions towards establishing stricter accounting rules or allow for an organic expansion of effort and collaboration between developed and developing countries towards “climate-effective” outcomes, or a complicated expression of both.

At this point, it would be very hard to speculate on this matter, pending discussions under the ADP, and not to mention the two huge elephants in the room: integrating or collapsing agriculture and REDD-Plus under LULUCF discussions under a new protocol, and treatment of REDD-Plus as an official flexible mechanism in a post-2020 regime. It would therefore be absolutely critical to kick-off Doha’s visioning process with a frank expression of views around the above topics.  

Agriculture and LULUCF

As mentioned previously, while LULUCF may have won a small victory with its continuity into the second commitment period of the KP, its fate with regards to a new protocol in 2020 is, quite frankly, still anybody’s guess. This is so much more the case with agriculture per se, with some Parties feeling more comfortable folding it into LULUCF, or keeping separate to avoid “contamination”, or even strictly treating it as a driver of deforestation under REDD-Plus.

There are moves by several developed and developing countries alike to further close perceived loopholes in LULUCF and this involves calls to institute a comprehensive net- net accounting regime, or in other words, a mandatory accounting system for the whole land-use sector that includes emissions and removals from forest, cropland, grazing land, wetland, and peatland management. Under a new protocol, such a system would likely ensure the highest level of environmental integrity but would in turn require profound political will.

And on this note, we again speculate that before any of these issues become ripe for discussion with respect to a new protocol that is “applicable to all” (“but not uniform in application” as some countries are quick to add), the broader issue of how land-use activities, including REDD-Plus, are to be treated will first have to be clarified.

For instance, will LULUCF remain a mechanism for developed countries to meet emission reduction commitments? Which developed countries are eligible to access it as a flexible mechanism? Is LULUCF applicable to developing countries in terms of meeting NAMAs? Can LULUCF including agriculture be considered under new market mechanisms for developing country participation? How does REDD-Plus interface with LULUCF both as a potential NAMA and a flexible mechanism?

At this stage, we can only surmise that if a renewed focus on mitigation and financing is established under the ADP, that REDD-Plus, agriculture and LULUCF can become major elements of a “mitigation mechanisms” workstream that is closely tied to MRV, financing and new market mechanisms. Under this workstream, we can also go as far as to predict that Parties will work very hard to establish a “dynamic differentiation” between developed and developing countries on the applicability of accounting rules and financing modalities, while developed countries in particular will work very hard towards broadening the scope of and their access to potentially new flexible mechanisms established under this workstream.

The authors are affiliated with the Ateneo School of Government and have written this in that capacity and not as members of the Philippine Delegation to the UNFCCC negotiations. The support of the Climate and Land Use Alliance for preparing this update is also acknowledged but all responsibility for it is by the authors.

This article has been adapted from the working paper “The Road to Doha: The future of REDD-Plus, agriculture, and land-use change in the UNFCCC”, published by the Foundation for International Environmental Law and Development (FIELD) and available for download here. Please cite the original when referencing or sharing.

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Should Israel Embrace Biodiversity Financing Programs?

Israel’s biodiversity is under threat from a list of sources that include urbanization, water scarcity and habitat loss. To beat this threat, a group of scientists, government officials, market experts and others are examining biodiversity financing programs from around the world to implement in Israel that will improve conservation.

This article has been adapted from “Financial Conservation in Israel”, a Financial Innovations Lab ® Report published last week by the Milken Institute and available for download here.

30 July 2012 Urbanization, industrialization, and climate change are taking a greater toll on the planet by the day. Human activity is having a profound effect on the ecosystems that surround us. As populations increase and once open land is developed, species and habitats disappear. This destruction affects water quality, soil erosion, and agricultural productivity.

A Downward Trend

These trends are starkly apparent in densely populated Israel, where water is scarce and competition over land use is fierce. Located at the nexus of three continents, it has always been home to an exceptional diversity of flora, fauna, and complex ecosystems. For a nation of such small land area, it boasts a disproportionate percentage of global biodiversity.

But as population density has grown steadily over the past decade, there has been a sharp increase in commercial and residential development in once-pristine areas that supported a rich variety of animal and plant life.

Vultures, multiple bat species, and Eurasian otters (lutras) are just a few of the many creatures whose numbers have dwindled to critical levels. The Hula painted frog, which was thought to be extinct, has been spotted again, but it remains on the brink.

Scientists have warned that up to one-third of the plant life along Israel’s coast may be in jeopardy. And disappearing sand dunes threaten the survival of unique desert creatures.

There is an urgent need for improved conservation. But previous efforts to protect the country’s environmental assets have largely relied on regulatory policies alone, with a focus on designating protected areas through a national park system and statutory land-use master plans. This has proven ineffective in stopping habitat fragmentation and degradation as a result of agricultural, residential, commercial, and industrial development.

An Upgraded Conservation Plan

Biodiversity, as a public good and as a pool of environmental assets, is currently undervalued and at risk. There has been no incentive to change market behaviors toward land use. Public budgetary expenditures for conservation of open areas, for the national parks authority, and for sustainable local development have been inadequate.  

In recent years, however, financial mechanisms have been created around the world to create new incentives and new momentum for conservation efforts. Payments for ecosystem services, land auctions, and other compensation programs have been utilized in multiple countries.

Biodiversity banking, for example, creates opportunities for developers to trade the offsets of potential destruction while earning revenues on increasing land values.

The time has come for Israel to join the ranks of both developed and emerging nations around the world that have adopted biodiversity financing programs. The programs now in place include watershed and wetland protection, water services, soil conservation, wildlife protection and carbon sequestration, land management agreements, recreation, and initiatives to clear invasive alien plants and restore the beauty of the natural landscape.

Is It Viable?

Could these ideas work in Israel? The Milken Institute, in conjunction with Israel’s Ministry of Environmental Protection, convened a Financial Innovations Lab ® to evaluate potential incentive programs and other financial mechanisms that could be used to appropriately value the nation’s biodiversity.

The session brought together a diverse group of scientists, capital market experts, governmental officials, foundation executives, architects, and land developers to design potential models and localize the best international solutions to fit the Israeli context.
Participants discussed how to achieve the optimal level of conservation while maintaining cost efficiency. Following presentations on specific programs in countries like the United States and Australia, participants debated which models could be most applicable to Israel. There was a focus on identifying and overcoming potential barriers to the adoption of these models. Participants then suggested examining case studies to further test the feasibility of financial mechanisms to align environmental protection with economic growth in Israel.
 
 

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Valuing the Arc: Five-Year Experiment Draws to a Close

The downward flow of water from the Eastern Arc Mountains of Africa generates up to half of Tanzania’s power and provides much of Dar es Salaam’s drinking water. As agriculture moves up the slopes, however, it destroys the natural ecosystems that support the ancient catchments.   A five-year effort to value those ecosystem services wraps up this month.

9 March 2012 | If anyone knows the value of the Eastern Arc Mountain ecosystem, it will be 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.

Until now, however, neither 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 are only taking into account things like timber prices and logging permit values,” says Jambiya. “Things such as carbon sequestration and, especially, 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. Often the official water fees are not paid, making the resource effectively free.   The values of biodiversity are even worse in terms of valuing their market value.”

The two are among a handful of experts spearheading a five-year research and policy project called
Valuing the Arc“, which wraps up this month. 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 helped with efforts 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)”.

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 area of 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 for their domestic use, including washing in the rivers.

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. It is freely available on the Internet, and has been downloaded more than 2500 times.   NatCap alone is using it to support more than a dozen other projects around the world.

“You can use only the modules you care about, and customize those to your situation,” he says. “Every week, I get an e-mail from someone on the NatCap team telling us about a new project that used the tool, and it’s quite impressive what people are doing there.”

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.”

The project is broken into six teams: one for carbon, one for water, one for biodiversity, one for timber, one for non-timber forest products, and one for agriculture.

Early Rewards

In 2010, Cambridge University used the carbon team’s map to provide the government with two hypothetical maps showing the state of Eastern Arc carbon decades from now.   One map showed the state of carbon sequestration if the government adopted a sustainable development approach to the mountains, and the other showed what would happen under business as usual.   (Ricketts and Burgess contributed to a paper on the two scenarios, which was published in the Journal of Environmental Management).

That same year, the Tanzanian government used the carbon maps to demonstrate its growing REDD readiness at the 15th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP 15) in Copenhagen. That led to a grant from the Norwegian government to expand the carbon mapping across all of Tanzania, beginning in January, 2011.

Mapping Other Ecosystem Services

Ricketts says even more tangible fruit will come due when results are published in March.

“For the last nine months we’ve been synthesizing the six services into multi-service assessments,” he says.   “Basically, trying to say where the value for each one is coming from, and where the overlap is.”

Some time around March, 2012, they hope to publish the results, showing the impact of different land-use practices on agriculture growth, urban health, urban growth, and other ecosystem-dependent.

“The science is to take the alternative scenarios and tell people what the consequences of each pathway are for a big bundle of ecosystem services,” says Ricketts.   “The big bundle is what we’re doing now.”

After the papers are out, they will hold a workshop for stakeholders who have been working with the project for the past five years.

Will Beneficiaries Become Buyers?

As the measurements become more concrete and targeted, Burgess believes the beneficiaries of ecosystem services will become buyers – 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.

 

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Canadians Explore REDD Potential for Indigenous Groups

Indigenous groups around the world stand to benefit from emerging carbon markets, but only if they have clear legal rights to carbon income and know how to harness those rights.   Two new studies highlight both the potential for gain and the lack of knowledge about how to take advantage of it.   The focus is Canada, but the lessons are universal.

19 April 2011 | Winnipeg | The International Institute for Sustainable Development has issued two reports as part of the First Nations Carbon Collaborative to help build the capacity of First Nations to take part in existing and emerging carbon markets.

The collaborative is a community-driven initiative spearheaded by IISD, the Centre for Indigenous Environmental Resources and three First Nations living within Canada’s frontier forests.

Undefined carbon rights and a lack of experience prevent First Nations from accessing carbon markets, even though many of them live within and around the boreal forest region that stores 30 per cent of the world’s carbon, according to 2007 research by Woods Hole Research Center.

The literature review indicates there is little information about First Nations in Canada and carbon markets and that this void will need to be filled before First Nations can become active carbon market participants.
 
The best practices review found that local ownership enhances potential carbon market benefits, well beyond job creation. The review highlights the need to establish realistic timeframes, as capacity building can take considerable resources and time to deal with such issues as governance, transmitting local and traditional knowledge, operational training, youth development and succession planning.

As an initial capacity-building activity, the University of Toronto’s Centre for Environment in cooperation with the First Nations Carbon Collaborative will be hosting a free First Nations and carbon webinar series every Wednesday from 1:00 to 2:30 p.m. (EST) beginning April 20 and ending May 25, 2011.

Webinar topics will include carbon 101, indigenous rights to carbon, emissions trading policies/legislation in Canada, carbon financing, offset projects and First Nations case study carbon projects. Assembly of First Nations Grand Chief Shawn Atleo will open the webinar series. Grand Chief Edward John, the North American representative to the United Nations Permanent Forum, will also be a guest speaker.

For more information, please contact the IISD project manager Vivek Voora, who can be reached at [email protected] or (204) 958-7797, or the IISD media and communications officer Nona Pelletier, who can be reached at [email protected] or (204) 958-7740.

 

First-Ever African Soil-Carbon Deal Signed at Hague Investment Fair

NOTE:   This article is a breaking story.   It will be expanded and re-posted as a top story within the next week.

3 November 2010 | THE HAGUE | Netherlands | Small-holder farmers in Kenya are changing their farming practices and earning carbon credits. This is a result of the first soil carbon project approved in Africa, which seeks to improve food security, help address climate change, and improve the lives and livelihoods of rural dwellers who today live in poverty. The agreement to purchase the carbon credits which the project generates, the Emission Reductions Purchase Agreement (ERPA), was signed today in a ceremony held at the Global Conference on Agriculture, Food Security and Climate Change in The Hague.   Representatives from the Ministry of Agriculture in Kenya, Vi Agroforestry and the World Bank presented the project to the media and delegates at the Investment Fair of the conference.

The agreement adds the benefits of carbon finance to a sustainable agricultural land management project based on changes in the practices of farmers in Kenya which not only increase productivity but also sequester carbon dioxide from the atmosphere. The project, developed with the support of the Africa Region of the World Bank, generates carbon credits which are sold to the BioCarbon Fund. It allows small-holder farmers in Kenya to access the carbon market and receive carbon revenues through the adoption of productivity enhancing practices and technologies.

Not only is this the first project that sells soil carbon credits in Africa, but it is also paving the way for a new approach to carbon accounting methodologies, which do not yet exist for this nascent area. As Kenya ramps up its participation in carbon markets, this project illustrates concretely how carbon finance can support both the environment and generate revenues for local communities. Although the value of the ERPA exceeds this, the direct benefit to communities is over $350,000 with an initial payment of $80,000 to be made in the first year, 2011, based on project performance with payments for the sequestered carbon.

The Kenya Agricultural Carbon Project, implemented by the Swedish non-governmental organization Vi Agroforestry, is located on 45,000 hectares in the Nyanza Province and Western Province of Kenya. There, small-holder farmers and small-scale business entrepreneurs are trained in diverse cropland management techniques such as covering crops, crop rotation, compost management and agroforestry.   These practices increase the yield of the land and generate additional sources of income for the farmers through the payment for environmental services in the form of carbon credits.

“We are proud to be part of the development of this ground-breaking project. The development of a new methodology for carbon sequestration in agriculture has great direct benefits for the farmers in Kenya and tremendous potential for scaling up. Without the support of the World Bank and the Kenyan Government, this project would not have been possible”, says Henrik Brundin of Vi Agroforestry.

The project is an example of a triple win strategy: implementing policies and programs that will, first, increase farm productivity and incomes; second, make agriculture more resilient to variations in climate, and thus promote stability and security; and, third, help make the agriculture sector part of the solution to the climate change problem rather than part of the problem.

“The approval of this first soil carbon project in Africa is an important step in extending carbon finance to include agriculture. The potential for carbon sequestration in the soil is estimated at 5.5 gigatons annually with good land management practices, equivalent to 13% of current emissions from all sectors. So soil carbon has a huge contribution to make to addressing the climate change challenge”, says Dr. Andrew Steer, Special Envoy for Climate Change, World Bank.

The BioCarbon Fund is an initiative with public and private contributions, administered by the World Bank.   It purchases emission reductions from afforestation and reforestation projects under the CDM, as well as from land-use sector projects outside the CDM, such as projects that reduce emissions from deforestation and forest degradation and increase carbon sequestration in soils through improved agriculture practices. In addition, the BioCarbon Fund, which was created to help open the carbon market, develops methodologies and tools that are in the public domain.

Isabel Hagbrink of the World Bank can be reached in Washington at [email protected].   Robert Bisset of the World Bank can be reached in the Hague at [email protected]

The New FCP Helps Forge the Global Forest Carbon Community

Marketplaces have long provided a place where buyers and sellers can swap not only bids, offers, and products, but also ideas.   Now Ecosystem Marketplace’s Forest Carbon Portal does the same, with a user-generated community-oriented version upgrade that launched last week.   Here’s an overview of the new features.

22 February 2009 | In the year since Ecosystem Marketplace launched the Forest Carbon Portal, the Portal has become one of a handful of go-to sites for people looking to develop, invest in, or buy credits from forest carbon projects around the world.   It keeps track of nearly 100 forest carbon projects around the world, and aggregates news and information from Ecosystem Marketplace and scores of other sites.

As of last week, the Portal offers new functions designed to help weave the world’s disparate forest carbon projects into a cohesive global community.

Users can, for example, create profiles and join a community, a Facebook of sorts for forest carbon professionals where they can search for and privately message each other. In addition, members of the community can comment on articles and upload their own projects, resources, events and job opportunities in a Jobs Board.

Carbon Connections

While it has been a pleasure to answer your questions, now you can pose them to a greater audience or join and start discussions in ‘Carbon Connections’, a discussion forum for those interested in forest/terrestrial carbon issues.

Coming soon, Carbon Connections will also function as a news bulletin in which you can post announcements and subscribe to get daily emails of what topics and announcements have been posted (similar to the Climate L Forum, which is our own favorite source).

User Categories

Users are divided into three different categories according to their user permissions and rights. The hierarchy of permissions and rights according to users’ roles is the following:

  • Members: Authenticated users that have joined the community (or created an account) will have a profile in the member directory, can privately message other members, comment on articles, upload resources, events and job opportunities and participate in ‘Carbon Connections’.
  • Project Managers: In addition to the permissions and rights of other authenticated members, these users have indicated they have information about ‘operational or pipeline’ projects and would like to upload projects onto the Project Inventory. Operational projects are those that have sold credits and/or been validated to a third party standard. Pipeline projects are all other projects.
  • Writers: For trusted users who have shown leadership in this forest carbon ‘community’ we will expand their role to be able to create and edit their own articles. Please express your interest in becoming a writer for the Forest Carbon Portal community at [email protected].

You wouldn’t know it by looking at it now, but the Forest Carbon Portal wasn’t always this exciting.

Origins

The Forest Carbon Portal is a specialized satellite site of Ecosystem Marketplace, the leading source of markets and payments for ecosystem services (PES). EM in turn was spawned at a Katoomba Group meeting in Switzerland in 2003 when the PES professionals gathered there by Forest Trends realized the need to bring greater transparency and comprehensive information in the nascent field of environmental service markets with the goals of achieving meaningful conservation outcomes and benefits to local communities.

Five years later, in December 2008, Forest Trends released the Portal under the purview of EM to provide a central repository of information for forest carbon professionals (a truly dedicated group that even gathers after working hours in Washington, DC, to play Forest Carbon Trivia hosted by the Portal and yours truly).

Services

The Portal started with a “toolbox” of resources ranging from methodologies to policy briefs, market analysis, a calendar of events, and daily forest carbon news. By February, 2009, we had begun to categorize and summarize news and articles to provide a digestible format for our users to keep up to date with what was happening monthly in the forest carbon world. As methodologies started being developed, we experimented with a “Methodology Watch”.

Forest Carbon Project Inventory and Map

From the start, we maintained an inventory of about a dozen forest carbon projects around the world, and the Portal also featured a very cool interactive Google map pinpointing the location of these forest carbon projects. Users could search for projects by country, as well as by a variety of criteria such as project type, standard, registry and size. Projects were described in consistent ‘nutrition labels’.

By August 2009 the Forest Carbon Project inventory had grown to about 80 projects worldwide. This inventory provided the backbone for and culminated into the State of the Forest Carbon Markets 2009 report.

Join the Community

In May, we initiated a “Request for Proposals” for a web development firm to develop a new, open source, user generated site. We picked Forum One, a local Washington, DC firm, and they helped us refine our goals with the site, our target audience and the functionality we needed to put in place to meet those objectives. It has been a nine-month long process to overhaul the site. We hope the new portal will facilitate greater discussion and connectivity among forest carbon practitioners worldwide.

Getting Started

If you are a first time user and you have a resource, an event, a project or a job opportunity you would like to post or if you want to participate in Carbon Connections, please click here for a 2-page detailed instructions guide located on the homepage and the ‘Library and Tools’ page. In order to be able to perform the aforementioned actions and to help seed the community, users need to join the community by creating profiles. It takes less than two minutes to do this. Users who do not join will still be able to view content but will not have the ability to manipulate it or interact with other members.

We hope you join the community and find it useful.  

And if you see anything that needs improvement, that’s what “Carbon Connections” is for.

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Climate Change to Slash Carbon Capacity of Forests: Study

Deforestation accounts for 20% of all greenhouse gas emissions, and the ability of forests to extract carbon from the atmosphere is key to combating climate change by reducing emissions from deforestation and forest degradation (REDD). A new study, however, says that just a slight increase in global temperatures could damage this ability.

20 April 2009 | The ability of forests to act as carbon sinks is “at risk of being lost entirely” to climate change-induced environmental stresses that threaten to damage and even decimate forests worldwide, according to a new report presented at the current session of the United Nations Forum on Forests (UNFF), which runs through the end of the month at the UN Headquarters in New York City.

“Adaptation of Forests and People to Climate Change – A Global Assessment” was coordinated by the Vienna-based International Union of Forest Research Organizations (IUFRO) through the Collaborative Partnership on Forests (CPF), an alliance of 14 international organizations that each has substantial forestry programs.

Authored by 35 of the world’s top forestry scientists, it provides the first global assessment to date of the ability of forests to adapt to climate change and is expected to play a key role in next week’s UNFF discussions. The report presents the state of scientific knowledge regarding the current and projected future impacts of climate change on forests and people along with options for adaptation.

“We normally think of forests as putting the brakes on global warming, but in fact over the next few decades, damage induced by climate change could cause forests to release huge quantities of carbon and create a situation in which they do more to accelerate warming than to slow it down,” said Risto Seppí¤lí¤, a professor at the Finnish Forest Research Institute (Metla) and Immediate Past President of IUFRO, who chaired the expert panel that produced the report.

Scientists hope the new assessment will inform international climate change negotiations, set to resume in December in Copenhagen, where forest-related deliberations thus far have focused mainly on carbon emissions from deforestation. The analysis shows that officials also must consider how the world’s forests are likely to suffer—and perhaps severely—as the earth gets warmer.

While deforestation is responsible for about 20 percent of greenhouse gases, overall, forests currently absorb more carbon than they emit. The trees and soils of the world’s forests are capturing and storing more than a quarter of the world’s carbon emissions.

The problem, scientists say, is that this critical carbon-regulating service could be lost entirely if the earth heats up 2.5 degrees Celsius (4.5 degrees Fahrenheit) or more relative to pre-industrial levels, which is expected to occur if emissions are not substantially reduced.

The study notes that the higher temperatures — along with the prolonged droughts, more intense pest invasions, and other environmental stresses that could accompany climate change — would lead to considerable forest destruction and degradation. This could create a dangerous feedback loop in which damage to forests from climate change significantly increases global carbon emissions which then exacerbate the greenhouse effect.

The warning from scientists that forests are in danger of flipping from a net sink to a net source of carbon emerged from an exhaustive analysis of how different forest ecosystems worldwide would be affected under specific climate change scenarios developed by the Nobel-prize winning UN Intergovernmental Panel on Climate Change (IPCC).

The authors of the report, some of whom also serve on the IPCC panel, noted that the impacts in different ecosystems would vary over time.
In fact, the authors found that the risk of losing forests as a net carbon sink is significant even in relatively conservative scenarios in which countries achieve modest emissions reductions and stabilize greenhouse gas concentrations. The loss becomes much more likely in scenarios where curbs fail to take effect and emissions continue on their current, upward trend.

“Policymakers should focus greater attention on helping forests and the people who live around them adapt to anticipated problems,” said Professor Seppí¤lí¤. “For example, wider application of well-understood sustainable forestry practices, which offer a range of benefits, could help forests avoid some of the damage induced by climate change.”

Threats, but also Benefits, of Climate Change

The study observes that as climate change progresses over the next decades:

• Droughts are projected to become more intense and frequent in subtropical and southern temperate forests, especially in the western United States, northern China, southern Europe and the Mediterranean, subtropical Africa, Central America and Australia. “These droughts will also increase the prevalence of fire and predispose large areas of forest to pests and pathogens,” the study says.

• In some arid and semi-arid environments, such as the interior of the American west, forestry experts worry that climate change could be so dramatic that timber productivity could “decline to the extent that forests are no longer viable.”

• Decreased rainfall and more severe droughts are expected to be particularly stressful for forest-dependent people in Africa who look to forests for food, clean water and other basic needs. For them, the scientists predict climate change could mean “deepening poverty, deteriorating public health, and social conflict.”

• In certain areas, climate change could lead to substantial gains in the supply of timber. The combination of warming temperatures and the fertilizing effect of increased carbon in the atmosphere could fuel a northward expansion of what is known as the boreal forest, the coniferous timber lands that run across the earth’s northern latitudes and include forests in Canada, Finland, Russia and Sweden. Research from the report indicates that climate change could cause more than a 40 percent increase in timber growth in Finland. In fact, the study concludes that the increased growth in boreal forests could be large enough to spur a drop in timber prices worldwide. However, over the long-term, if climate change continues at the current pace the boreal expansion eventually will be offset by an increase in insect invasions, fires, and storms.

The scientists warn that efforts to adapt to climate change may end up providing forests with only a temporary respite.

“Even if adaptation measures are fully implemented, unmitigated climate change would, during the course of the current century, exceed the adaptive capacity of many forests,” said Professor Andreas Fischlin of the Swiss Federal Institute of Technology, who is one of the lead authors of the study and a coordinating lead author with the IPCC. “The fact remains that the only way to ensure that forests do not suffer unprecedented harm is to achieve large reductions in greenhouse gas emissions.”

Forestry experts acknowledge that more research is needed to better understand precisely how climate change will impact forests and how effective different adaptation responses will be. But they say the challenge to policy makers is that they must act even in the face of imperfect data because “climate change is progressing too quickly to postpone action.”

Additional resources

New V-Carbon “Stamp of Approval”

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.

11 September 2008 | Earlier this week, we examined a buyer’s guide for evaluating developers of voluntary carbon offset projects, and now comes CarbonOffsetList.org, a guide that lists all projects that meet nine criteria that Environmental Defense Fund believes make an offset trustworthy.

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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RGGI Results Due Monday: Are Regional Initiatives Ushering in the Forestry Age?

Regional and state climate efforts are putting forestry offsets on a fast track toward guiding US regulations aimed at reducing emissions from deforestation and forest degradation (REDD). With the results of Thursday’s regional auction of allowances due out Monday, the Ecosystem Marketplace examines the role of forestry in two leading initiatives.

Third in the Series “REDD in the USA”

15 September 2008 | “Ten states, from Maryland to Maine, are already implementing their own regional cap and trade, undertaking the nation’s most serious effort yet to tackle climate change,” said US Congressman Lloyd Doggett on Thursday, as he opened committee debate over his own proposed federal cap-and-trade legislation – one of several kicking around Capitol Hill this fall.

“And California has joined six other states and four Canadian provinces in a similar effort,” he added – reminding us that schemes are in the works well beyond Washington, DC, and that federal lawmakers will be keeping an eye on regional developments as they forge a federal regime.

Pre-compliance trading for the ten-state Regional Greenhouse Gas Initiative (RGGI) started in February and has scheduled the nation’s first auction of greenhouse gas emission allowances for September 25, with a compliance period that begins in January, 2009. At the same time, the agency overseeing implementation of California’s AB 32, the state’s Global Warming Solutions Act passed in 2006, is to complete an implementation plan this fall.

RGGI: Early but Ineffective?

RGGI itself provides a framework within which states draft specific regulations, says Sarah Woodhouse Murdock, Boston-based eastern US region climate change program manager for the Nature Conservancy.

Some states, however, are still in the process of finalizing their rules and regulations within the RGGI framework, she says, adding that only a handful will be ready in time for this month’s auction.

Another auction is slated for December.

“Hopefully by December most all of the states will be ready to participate,” she says.

Forestry’s Limited Role

The initiative created five offset categories that would be recognized under the program, and afforestation (or tree-planting) is one of them.

The others are methane capture, capture of emissions from transmission lines, agriculture waste digestion and green building initiatives that result in more efficient use of natural gas.

Despite the inclusion of afforestation offsets, however, developers of forestry projects have virtually ignored RGGI and are focusing on the California initiative – for a variety of reasons.

To begin with, there’s a perception that RGGI has simply allocated too many allowances.

“It’s a repeat of EU ETS I (the first round of the European Union’s Emissions Trading Scheme), where governments gave away more allowances than there were emissions,” says one European project developer.

Then there’s the fact that the Northeast has already reforested large swathes of previously degraded land, leaving little room for afforestation projects. States outside the RGGI region can host offset projects and sell those offsets into the RGGI states, but in order to do that the outside states have to sign a memorandum of understanding with a RGGI state, Murdock says.

“That hasn’t happened yet, and it is not 100 percent clear what exactly needs to be in that MOU,” she adds, describing the lack of clarity as “probably an administrative oversight.”

The afforestation rule includes baseline requirements along with specifications for additionality, permanence and other details. “Each state adopted that model rule,” Murdock says. “There was no flexibility in the offset provisions for the states. It was kind of an up or down for them. That made sure that each state’s rules on the offsets were consistent with each other.”

Will RGGI See REDD?

Reduced Emissions from Deforestation and Degradation (REDD) are not recognized under the RGGI scheme – mainly because North American forests are largely protected already, and drafters felt they couldn’t meet the additionality requirements.

The state of Maine’s Department of Forestry, however, has requested the inclusion of offsets generated from active forest management, reduced impact development, biomass plantations, and afforestation on urban and community lands into RGGI in the future.

“While the opportunity for these other three project types may be more limited, we believe they provide a valid offset mechanism and should be considered,” the department said in a joint statement issued by Environment Northeast, the Manomet Center for Conservation Sciences, and the state’s Department of Environmental Protection.

Ellen Hawes, forestry policy analyst with Environment Northeast in Portland, Maine, says about 50 stakeholders including academics, non-governmental organizations and industry have been working on a draft project protocol for forest management this summer and are hoping to present it to a RGGI’s staff this fall.

“We’re working on finalizing some of the details,” she says. “We originally were planning on presenting it to the staff working group after the first auction. If we finalize the details with the stakeholders by mid-Ocotober we may submit it to them for an initial review.”

Hawes says the staff does not expect to have time to probe deeply into the proposal and start developing necessary guidance or documentation until after next January. Subsequent to that, she says at least six to nine months will be required to work through details and take comments. The states involved would also have to amend their own RGGI legislation.

“They haven’t given us a timeline, but it would be something of a lengthy process,” she says, adding that the most detailed sections of the proposal have been developed for active forest management.

“We’re working on coming up with more details on urban community forestry,” she says. “We’d like to work out something for avoided deforestation. We’ve mentioned starting with reduced impact development but the level of detail on that is not quite as well developed as the forest management protocol.”

Limited Scope

Over-allocation isn’t the only knock on RGGI. Critics also point to its narrow focus: only regulated electric utilities that generate 25 megawatts or more are included in the program and are eligible to use the offsets in meeting their emission allowance requirements.

Then there are limits on the amount of a regulated entity’s emission reduction requirements that can be met through offset. RGGI includes an initial 3.3 percent limit on the amount of offsets that can be used by any one generator to meet its compliance obligations, but raises the ceiling as prices climb and other “trigger events” occur – which project developers say makes demand difficult if not impossible to project and sets the stage for violent downward price moves.

“It’s essentially a market on training wheels,” says Ricardo Bayon, a partner and co-founder of EKO Asset Management Partners (and former director of the Ecosystem Marketplace). “They’ve essentially set it up for only one sector – electricity – and they’ve set up a series of essential price caps on the market. So when the price is X there is a small amount of offsets allowed. If the price goes up more offsets are allowed. And if the price goes up further even more offsets are allowed.”

In simplest terms, the law describes two trigger events that can lead to more offsets being sold: one if the price hits $7 per ton in 2005 dollars, in which case offsets can be used to satisfy five percent of the compliance obligation; and another if the price hits $10 per ton in 2005 dollars, in which case offsets can be used to satisfy ten percent of the compliance obligation and other criteria are relaxed.

In actual fact, it’s more complicated than that, and RGGI has set up a web page summarizing the trigger events and other aspects of the scheme.

“Everybody wanted the price to be low,” says Bayon. “It is basically a market that has been hampered by all kinds of regulatory worries about the price of a credit. That, I think, is part of the reason why a lot of the key market players are paying more attention to California than they are to RGGI.”

Murdock doesn’t dispute the impact of low or volatile prices on project developers, but says the sliding scale isn’t the problem. Indeed, most programs under development have a limit on the percentage of an emitter’s allowances it can meet through offsets, and she says the sliding scale doesn’t add much to the price risk that forestry projects already face, and ceases to be an issue once prices have passed the second trigger point – which will only happen if allocations are properly managed.

If allocations are too generous, then prices will never reach a level where afforestation offsets are viable, she says.

“Are there any afforestation offsets at below $5 a ton?” she asks. “We did do a study of that and our answer to that … was that there are very, very few afforestation offsets at that price within the RGGI region.”

In pre-compliance trading, prices have barely managed to breach the $5 per ton level – which is even lower than offsets from many voluntary projects.

All Eyes on California

The Nature Conservancy is also actively monitoring and working with California on its implementation of AB 32 – a scheme that has also garnered more attention from project developers, even though it is still in development.

“There was a recognition of the important role that forests play in climate policy, and there was a place for them in that bill,” says Louis Blumberg, San Francisco-based director of forest and climate change policy for the group.

“Overall, I’m optimistic that there will be a robust role for forests in general in the state,” he adds. Based on the preliminary draft plan released in June “it looks like there will be – you can’t say for certain because the plan was very general – but it looks like there will be offsets.”

Last October, the California Air Resources Board (ARB), which is responsible for the implementation of AB 32, also adopted forest project protocols developed by the California Climate Action Registry for voluntary early options.

“To me that’s a good sign that there will be forest carbon projects as part of the cap and trade offset program in AB 32,” Blumberg says.

Bayon notes that anybody involved in a forestry project under the registry protocol will “essentially get early action credit in the system they set up down the line.”

Comprehensive Coverage

California, in contrast to RGGI, involves all gases and all sectors in its climate change effort, and the targets they have set are much more aggressive, Bayon says, adding, “The magnitude of the reduction required by AB 32 is far beyond anything we’ve seen anywhere. It is a huge reduction commitment.”

Analysts with Deutsche Bank AG in Paris have just released a report concluding the California legislation makes the state a global leader on climate change. They predict it will result in a carbon price range of $15 a ton under a best-case scenario of abatement via offsets in the cap-and-trade scheme. A $60 per ton price would result from a base-case scenario of abatement via fuel-switching in the power-generation sector.

“California’s approach to reducing emissions is holistic and innovative,” says Mark C. Lewis, the bank’s managing director for commodities research. “The extra flexibility the cap-and-trade scheme provides should ensure that the overall targets are delivered at minimum cost – provided the cap-and-trade scheme is allowed to dovetail seamlessly with the direct-control measures.”

Unanswered Questions

Blumberg, however, says that California’s plan is still vague and “very general at this point. There is no real hard commitment in the draft plan.” A final plan is expected to be released in this fall. The Nature Conservancy and other groups are participating in a comment and public meetings process in which Blumberg says his group is asking for more specifics and commitments from the board.

“They have indicated there will likely be some geographic limit on offsets, but they’re not clear about that,” he says. “And they have also indicated that up to 10 percent per capped entity might be allowed for offsets. They haven’t committed but that’s what they have said so far.”

Looking to Forestry

California officials have also said the state would be looking for the forestry sector to produce five million metric ton of emission reductions by 2020, which would be three percent of the total reductions anticipated.

“So there is that indication that forests are part of the state’s plan and that’s a good sign,” Blumberg says.

“The protocol is there,” adds Bayon. “It’s a measurement mechanism of what does a forestry project look like. Anybody who wants to submit a project can submit a project. There’s no limit. There are just standards that have to be met.”

Beyond the Border

State officials have also mentioned that Mexico might be a place where offset projects would be allowed, albeit with some restrictions possible. The California plan has also talked about the possibility of linking the state’s offset system to the 18-month-old Western Climate Initiative, which released a draft design for a regional cap-and-trade program in July but is not nearly as advanced as AB 32 or RGGI.

“I think we’re going to ask them to go for unlimited offsets with no geographic restrictions,” Blumberg adds, acknowledging that when a state is developing its own program some people believe the program should stay entirely within the state.

“We have a different view,” he says. “We think that there is a role for international projects that is legitimate and that any project that produces a verifiable climate benefit with high standards should be included. So we’ll see how they come down on that.”

California Sees REDD

Project types expected to be included in the California implementation include reforestation or afforestation, avoided deforestation or forest conservation and approved forest management, he says. “There are three project types right now and they are working on an urban forestry protocol as well,” he says.

The details on those project types are included in the California Climate Action Registry’s 250-page document describing project base lines and requirements for developers. The Registry has been working on those requirements since 2001 and they are considered to be very robust, Blumberg notes.

The Registry also has an ongoing protocol workgroup that is looking at issues surrounding additionality, permanence, leakage and baseline definition.

“They are looking at all of these issues,” Blumberg says. “We think they have been addressed very robustly, if you will, in the first round of the current protocol. But they are continuing to refine them, I think. So we’ll see how that plays out.”

Pilot Projects Underway

California, Blumberg notes, is already demonstrating the viability of a forest carbon market for several forest project types. One of those is the Garcia River Forest project, which the Nature Conservancy is working on with the Conservation Fund. The Conservation Fund owns the land.

“We have reductions from that forest that have been verified to ARB approved standards by third party verification and authenticated by the California Climate Action Registry and those have been purchased wholeheartedly by the Pacific Gas & Electric Co. for their Climate Smart program,” he says. “We think we are showing some of the international skeptics how it can be done here.”

Blumberg and others said the federal climate change program may eventually be stronger than and preempt the state program. Bayon agrees.

“I’m frankly less concerned about RGGI because I think the long-term impact of California will be bigger than RGGI,” he says. “And the real interesting thing is what comes out at the federal level in the end.”

Trickling up?

“What we’ve seen in California clearly indicates that the US will take a much different stance on forestry than the Europeans do,” says Bayon. “Forestry offsets are already being allowed in California pre-compliant.”

If the state did not have the California Climate Action Registry forestry protocols this might not be true, Bayon says. And if the recent language of the federal Boxer-Lieberman-Warner climate bill did not endorse forestry efforts, it might be a different story, he adds, while noting that the future of forestry in US climate change efforts is “very bright”, especially when compared to the current climate change regime in Europe.

In Europe, Bayon notes, only 15 industries have been capped and RGGI is capping only electricity production. “California has gone further and says anybody who emits,” he notes. “There are no limits.”



Phil Burgert is a writer and editor based in Oak Park, Ill. He can be reached at [email protected].

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Additional resources

Is the Future of Forest Offsets Already Here?

Many environmentalists believe the carbon market has the potential to promote healthy forest management in the United States, and the Conservation Fund’s Chris Kelly argues it is happening right now under the California Climate Action Registry forest protocols. Others say the CCAR protocols will require significant changes to fulfill their promise.

First in the Series “REDD in the USA”

22 August 2008 | Chris Kelly is spending his summer trying to catch the one that got away. In Kelly’s case, what got away was a forest — the 13,900 acre Gualala River Forest in southwestern Mendocino County in California.

Back in February, 2004, Kelly almost purchased the Gualala – along with acreage to the north and south of it – on behalf of his employer, the non-profit Conservation Fund. He hoped to protect the prime forestland from being transformed into subdivisions and vineyards.

“I wanted to buy the entire 55,000 acres,” remembers Kelly, “but I had to do it in eight months. This land had been in timber production for decades. I couldn’t raise enough money.”

He settled for the northern 24,000 acres, known as the Garcia River Forest, while the land owner held onto the Gualala River Forest in the middle, and a 19,000-acre tract to the south was sold to a vineyard.

Now Kelly has a second chance at saving the Gualala and, in a strategy that would have seemed outlandish just a couple years ago, is depending on leveraging income from carbon credits to finance the purchase.

Kelly can point to much more than the potential of carbon revenue. He has a track record of turning carbon talk into cash.

Early Action Boosts CCAR

California’s aggressive greenhouse gas commitment has been good for forest carbon credits.

The California Air Resources Board (CARB) is the agency responsible for implementing the plans to reach California’s ambitious goal of returning to 1990 GHG levels by 2020. While CARB is busy developing the cap-and-trade system at the center of this effort, it has recommended a number of early actions businesses can take in the interim, including purchasing emission reductions from state forestry projects. In late 2007, CARB endorsed the forestry protocols developed by the California Climate Action Registry (CCAR) to do it. This endorsement suggested that CCAR credits could be viable offsets under California’s cap-and-trade system and transformed CCAR forestry credits from a feel-good voluntary purchase into a solid pre-compliance bet in California – and beyond.

Last month, the Western Climate Initiative released a Draft Design of the Regional Cap and Trade program and included forestry projects as one of three project types listed “as a priority for investigation and development to participate in the offset system.” Because of California’s role in WCI and its leadership in forestry, that investigation will surely follow the CCAR experience closely.

Many observers believe CCAR’s reach could extend further.

“CCAR stands the best shot at being adopted for a national system,” says Sean Carney, a broker at Cantor CO2e specializing in the forestry sector. “When people look at CCAR, they see it as the pre-compliance standard.”

Indeed, drafts of a recently defunct US Federal Bill, the Boxer-Lieberman-Warner “Climate Security Act of 2008”, suggested that CCAR credits could, with approval of the US Federal Environmental Protection Agency (EPA), be viable offsets under a national cap-and-trade system.

In February, CCAR listed Kelly’s forest conservation management effort in the Garcia River Forest as the second project in its registry, joining a similar effort in the Van Eck Forest by Pacific Forest Trust (PFT).

Buyers promptly lined up to purchase Kelly’s newly minted Certified Reduction Tons (CRTs). They included Pacific Gas & Electric(PG&E), NatSource, 3Degrees, and Cantor CO2e.

“There’s way more demand out there that we can satisfy,” he says, adding that he recently stopped marketing CRTs from the Garcia because he’s sold out through 2012.

Kelly has more credits in the pipeline: he stewarded two other projects through the CCAR process on land that the Conservation Fund purchased back in 2006, and hopes to bring those CRTs (an estimated 80,000 a year) to market soon.

The New Meaning of “Carbon Credit”

But what really excites Kelly is the prospect of leveraging that pent-up carbon demand to help Conservation Fund purchase an entirely new piece of land: the Gualala River Forest. First, he’s looking for up-front commitments from buyers to purchase offsets from projects he’ll implement once the Conservation Fund assumes ownership of the land. Second, he’s taking those buyers’ commitments to lenders to borrow additional money to fund the forest purchase.

That type of carbon finance wasn’t available to Kelly when he tried to buy the Gualala the first time around four years ago. Kelly credits the maturation of the carbon market in the interim, which he dubs “a game changer.”

A Matter of Time?

With such promising deal structures and bountiful demand, one would assume the market would be flooded with new forest projects. But it isn’t. Six months after the Garcia and the Van Eck projects became listed at CCAR, they remain the only projects.

While Kelly’s work may be exciting, its impact is unquestionably limited. The Conservation Fund’s current carbon activities effect roughly 50,000 acres of forest. That’s in a state with 16 million acres of forest, which is losing 30,000 acres each year due to poor management practices on federal lands alone, according to a recent study by the Forest Foundation.

The Conservation Fund and PFT both argue that supply simply needs time to catch up to demand.

“There have been market imbalances before,” says PFT co-founder and president Laurie Wayburn, adding that CCAR’s forest protocols are relatively new, and actors are still ramping up to deliver offsets to the marketplace. Like the Conservation Fund, PFT says it is actively developing additional forestry projects and expects to bring them to market within the next year.

Educating the Landowners

Much of that time is being used to explain the system. Landowners simply need more education about the potential impact of carbon finance on forest management.

“People are getting up the learning curve,” says Robert Parkhurst, environmental policy manager for PG&E. In May, PG&E issued a Request for Proposals (RFP) for up to one million tons of CCAR carbon reductions to come from reforestation and methane projects. Parkhurst was pleased by the response.

“There are new players that have submitted projects,” he says, adding that he spends a great deal of time educating his potential vendors about the ins and outs of carbon project development. “This isn’t part of their core business.”

Permanence and the Easement Debate

Lack of education may be a problem among many of the state’s smaller landowners, but larger landowners say they understand how the current CCAR protocol works; they just don’t like it.
Sierra Pacific, for example, owns 1.6 million acres of California forest land, making it the state’s single biggest private owner. Spokesman Mark Severts says the company would like to develop carbon projects, but argues the current protocols simply prevent it.

At issue is a requirement for projects to have a conservation easement, which is a binding commitment that places permanent restrictions on land. In the Gualala River Forest, for example, Kelly would like to receive a conservation easement that prohibits subdivision and agriculture conversion.

The conservation easement provides an assurance of permanence to the carbon buyer, explains Michelle Passero, senior climate policy advisor for The Nature Conservancy (TNC) and a main architect of the CCAR forest protocols. “It’s an effective tool.”

But Severts argues that the conservation easement is a blunt instrument for landowners with large working forests where flexibility of land use is a key asset. “Almost no landowner is going to do that,” he says.

PG&E’s Parkhurst disagrees.

“There are a large number of landowners who are willing” to put a conservation easement in place, he says, sorting through a stack of carbon project proposals. “We haven’t capped out those resources.”

Reframing the Easements Debate

Sierra Pacific has another beef with the conservation easement: it isn’t a good way to deliver the permanence requirement necessary for the carbon markets. Guaranteeing a reduction of emissions and making blanket promises about land use are not the same thing, Severts points out. A landowner can promise not to develop land via a conservation easement, and then a fire can come through and wipe out the carbon stocks anyway.

The Conservation Fund and PFT dealt with that problem in their landmark deals by agreeing to leave a portion of credits from their early projects unsold, so they they could be used to cover such contingencies. But that kind of effort isn’t required by the CCAR protocols as currently written.

Sierra Pacific and other industrial forest landowners shared their concerns with CARB, which asked a working group to make revisions after it approved the current protocols.

The working group has a tricky mandate, articulated by member Robert Hrubes of Scientific Certification Systems: “What can be done to open up greater landowner participation and at the same time maintain the integrity of the system?”

That means tackling not only the conservation easement question, but also other thorny issues like refining definitions for baseline and leakage as well as folding public lands into the mix. The group features a wide variety of stakeholders and has been meeting for ten months now. They are due to make recommendations to CCAR in November with a proposal moving to CARB by February or March.

The Insurance Approach

The working group is looking closely at a method adopted by the Voluntary Carbon Standard (VCS) in which offset developers participate in an insurance pool that covers the projects in the case of non-delivery. Instead of using a blanket promise about land use like a conservation easement to guarantee credits, VCS asks developers to pay for the risk inherent in their plans.

“We’ve evolved to look at permanency from the risk of non-permanence,” says John Nickerson, who chairs the working group for CCAR. “It’s a real improvement over where the current protocols are.”

A successful revision of CCAR protocols may encourage more landowners to participate in the forest carbon economy, but it also may reveal an even more stubborn obstacle to large-scale participation: low prices.

Supply, Demand, Integrity… and Price

CCAR credits are trading in the neighborhood of $10 a metric ton these days. That’s in an economy where sending redwood to the timber mill pays roughly $30 a ton. In short, it’s still far more economical to harvest trees for timber than save them for carbon.

“Right now, the numbers don’t support action,” explains Gary Rynearson of Green Diamond Resources, another large private landowner, and another member of the CCAR working group. “Every landowner isn’t going to run out and participate at these prices.”

Forest developers could bank their credits and speculate on a growing carbon market, but that would require adopting a different business model.

That means the only groups with a true incentive to participate are those with charges to preserve forests – and not just make money off of them. In short, groups like the Conservation Fund and PFT.

Carbon Finance – or Carbon Philanthropy?

In his search to finance the Gulala River Forest, the Conservation Fund’s Kelly isn’t seeking out hedge funds speculating on the carbon market. He’s approaching foundations with environmental mandates which provide loans that most commercial lenders would not.

If Kelly leverages his prospective forestry carbon credits to raise debt to buy the Gulala, it will be a significant advance for the carbon market. When he can take those credits to a lender motivated solely by profit, that will be another.

Ted Rose consults companies and organizations on carbon offsets and renewable energy credits. He is based in Boulder, Colorado, and can be reached at [email protected].

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Additional resources

Keeping Abreast of BBOP Consultation Process

You can’t offset what you can’t measure, which is why the Business and Biodiversity Offsets Program (BBOP) is asking for feedback on how to calculate both the amount and type of biodiversity that a given development will destroy and the degree to which biodiversity offsets will rectify the loss. The Ecosystem Marketplace tells you how to express your views.

16 August 2008 | More and more people are clear on the basic concept of environmental offsets: namely, that you can best reduce global levels of some pollutants by concentrating first on the easiest to eliminate, and then tackling the more difficult-to-reduce polluters.

It works for carbon dioxide emissions, because a ton of CO2 emitted in China does the same damage to the atmosphere as does a ton of emissions in the United States – but what about biodiversity offsets?

If you wipe out a species of bird in Montana, can you offset it by saving pandas in Tibet?

Of course not! After all, a biodiversity offset should ensure that neither biodiversity nor ecosystem functions are systematically degraded or lost from a given landscape – generally meaning no net loss of biodiversity in that landscape and, when possible, a net gain.

But what if you’re building a pipeline through territory inhabited by, say, a rare breed of camel – such as China’s endangered wild Bactrian? Can you offset that loss of habitat by restoring nearby habitat for related breeds of the same species? And how do you know that a given band of animals is really something unique?

These questions were faced by developers of a pipeline called the Petro China West-to-East Gas Transmission Project, and when genetic tests eventually determined that the camels were “evolutionarily distinct” from their brethren, the pipeline was re-routed – for a price.

Though not really an offset, the action illustrates the quandaries faced across the world as human development comes to terms with the inherent value of biodiversity and the cost of preserving it.

BBOP and the Measurement Question

The Business and Biodiversity Offsets Program (BBOP) is a global partnership of 40 organizations launched in 2004 by Forest Trends (publisher of the Ecosystem Marketplace) to determine when biodiversity offsets are appropriate and when they are not, and to come up with detailed protocols ensuring they are done right when implemented.

A cornerstone of the project is the development of the BBOP Learning Network and the publication of the BBOP Biodiversity Offset Design Handbook, which will ultimately offer a step-by-step guide for developing biodiversity offset projects.

In order to make sure the handbook benefits from a diverse range of views and expertise, BBOP has published a comprehensive series of consultation papers available to anyone who registers for the consultation process.

The first paper, “Thresholds for Biodiversity Offsets”, dealt with the fundamental question of how to decide whether or not impacts can be offset and how far to pursue each step of the mitigation hierarchy. Consultation closed on August 8.

The Second paper, Loss/Gain Quantification Methodologies, was posted last month, and the consultation period ends this coming Friday: August 22, 2008 – the same day that condultation closes on the Draft Stakeholder Participation and Biodiversity Offsets Issues paper.

September 1: Cost-Benefit Deadline

Two other deadlines are also rapidly approaching, the first on September 1:

Draft Cost Benefit Handbook: This draft Handbook offers draft guidance on how to use economic tools of valuation and cost-benefit analysis to compensate indigenous peoples, local communities and other local stakeholders for any residual impacts of the project, and the offset, on their biodiversity-based livelihoods and amenity.

September 12: Super Friday

Then comes Friday, September 12, 2008 – the closing date for comments on the four remaining papers:

Multipliers: This paper offers draft guidance on the application of multipliers, time discounting and certain other methods to manage the risks inherent in biodiversity offset design and implementation.

Site Selection and Landscape Level Planning: This paper offers draft guidance on alternative methods to select sites for biodiversity offsets and how to plan a biodiversity offset to contribute to planning at the landscape scale.

Impact Assessment and Biodiversity Offsets: This paper offers information and draft guidance on the relationship between impact assessment and the design and implementation of biodiversity offsets.

Draft Offset Implementation Handbook: This draft Handbook offers information and draft guidance on how to define the roles and responsibilities of stakeholders and legal, institutional and financial aspects of implementing a biodiversity offset, how an offset management plan can be developed, and how the offset can be monitored and evaluated.


For questions and comments, please contact: Steve Zwick, Managing Editor, [email protected]

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The Dean of Dung is Back and Full of Gas!

7 August 2008 | After a few swigs of scotch, Peter Hughes got an idea. This manure trader extraordinaire (above right, in his element) was already making money trucking nutrient-laden manure out of the overextended Chesapeake Bay watershed and dumping it onto nutrient-deprived strip mined land.

Removing the guano – and its contaminants – from the watershed paid out in water quality credits, while delivery of fertilizer where it was needed provided another income stream.

But there was so much manure and so little demand.

“We had these long-term credit contracts and I knew we would need long-term disposal sites,” he says, recalling the free-associations that led to his inspiration.

Coal-fired power plants, he realized, need biomass for fuel…

And chicken dung is, well, just that.

According to data extrapolated from the National Association of Development Organizations, Pennsylvania chickens are so prolific in their poop that they excrete enough to power most of the homes within the watershed, a land mass twice the size of Ireland.

To sweeten the deal, Hughes’ market plan includes bundling several environmental trading programs including nutrient trading, carbon offsets and production-tax credits. Thanks to the revenue he expects these programs to generate, he calculates that he could deliver his unusual fuel source for free — turning the fuel’s sale into pure profit.

Knitting together varied environmental markets along with his chicken-dung plans could, of course, be messy. Naysayers disapprove of stacking all these markets together, worrying that so doing could reduce payments for ecosystem services to an accounting game in which the environment loses out. Regulators, meanwhile, say they lack clear directions on how to calculate the effort.

Nonetheless, the value of manure-fueled energy is real. The technology is perfected. And the quantity of manure is certainly plentiful. Ignoring its potential would be, well, like flushing money down the toilet.

 

Henry Ford, Move Over

The Henry Ford of poop power, Hughes is already an acknowledged leader in this nascent environmental-market movement. The earnest 34-year-old makes a good straight man when speaking about his smelly specialty. But a look at his accounting indicates he may be the one laughing all the way to the bank.

First, thanks to the global energy shortage, dried manure can be up to twice as cheap to burn as oil, Hughes estimates. Next, global warming and other environmental concerns spawned environmental trading programs that could fund the start-up costs for processing this fuel source. And finally, discarded burned manure ash can be turned into fertilizer. This puts purchasing power into every stinking ounce of manure, making it not only environmentally friendly but downright economical.

Meanwhile, gasoline prices doubled over the past year. Americans’ short love affair with corn-based ethanol appears headed for an unhappy ending as food prices bear the brunt of the sudden grain shortfall. And technology to convert often-touted prairie grasses to fuel has not yet been perfected.

But chicken manure is here and it’s ready. Hughes said he anticipates his manure-based fuel –no longer fragrant when processed – will hit the market by 2010.

 

Not Rocket Science

Nearly anything containing carbon, hydrogen and oxygen can be converted into a fuel source or biofuel, scientists acknowledge. This clearly includes the gassy substance of manure.

In fact, technology to convert manure to energy has been around for decades. In Europe, particularly the Netherlands and the United Kingdom, energy plants have long burned poultry litter to generate electricity.

“This is not rocket science,” Hughes said from his office in Lancaster, PA. “This is stuff people already know how to do.”

But until oil prices hit $70 per barrel, the effort to convert manure to fuel in the United States was not economically competitive. With oil now costing nearly twice that, converting manure to methane suddenly became cost effective.

Adding to poop’s sudden popularity is the US federal government’s anti-global-warming initiative passed earlier this year. It requires that biofuels make up 25 percent of total fuel use by 2022. As a result, manure-fed power plants have sprung up in several states including Connecticut, Delaware and Wisconsin.

In Pennsylvania, where coal is plentiful, Hughes said his company, Red Barn Trading, is negotiating 20-year contracts with three coal-fired power plants to retrofit their plants to burn dried manure as an additional power source. Similar to coal, the burned manure creates steam that turns a turbine that generates electricity.

Although dried manure produces approximately half the power or BTUs of an equivalent amount of coal, manure is plentiful, puts no miners at risk and releases less harmful nitrous and sulfur oxide into the air when burned. Moreover, the power plants are building what are called “scrubbers” to remove the nitrous and sulfur oxide entirely.

 

Cinderella Dung

Getting rid of manure has historically been seen as a problem, not a solution. Officials in Hughes’ home state of Pennsylvania, the nation’s third-largest egg-producing state, long searched for environmentally friendly ways to get rid of mountains of the stinking mess.

Rich in nitrogen and phosphorus, some can be used as fertilizer. But the excess washes into waterways, spawning vast algae blooms. It promotes bacteria growth, consumes the water’s oxygen and causes massive fish kills in the adjacent Chesapeake Bay.

The Chesapeake 2000 Program, an offspring of the Clean Water Act, assigns Pennsylvania and six other states a deadline of 2011 to cut by forty percent the levels of nitrogen, phosphors and sediments that leach into the Bay.

Pennsylvania, by far the largest emitter, decided to promote a relatively new environmental market called nutrient trading to provide part of the solution. Wastewater treatment plants that process human waste can upgrade their plants to minimize their discharges. Or, with nutrient trading, they can offset excess discharges by purchasing credits from upgraded plants or from farms that reduce their nutrient inputs beyond mandated requirements.

Hughes first turned manure into money as a nutrient trader. He trucks dried manure from henhouses on 22 farms out of the Chesapeake Bay watershed and dumps it onto nutrient deprived strip-mined land. He then gets paid as an aggregator for selling the farmers’ nutrient-reduction credits to wastewater treatment plants required to lesson their nutrient load.

At first farmers were wary about offers to pay them for unloading their debris, Hughes said. Their hesitation turned to astonishment when he told them that he could sell it as fuel.
Beverly Hillbillies: Move over

A modern-day Jed Clampett, Hughes struck oil when he realized that he could potentially combine several environmental trading programs to turn dung into fuel.

His company, Red Barn, expects to get nutrient credits for reducing the amount of manure-laden phosphorus that would otherwise leach into waterways. It could get carbon-offset credits for substituting this biomass for carbon-spewing fuels. And the company could also qualify for production-tax credits for not burning fossil fuels.

Hughes plans to again work as an aggregator. This time, he would match wastewater treatment plants looking for nutrient-reduction credits with farmers who accumulated credits and reduced nutrients by turning their manure into fuel.

He also plans to sell carbon-reduction credits either on the United States’ current voluntary market or on the mandatory market many anticipate will be enacted after the upcoming presidential election.

And coal companies that add manure to their feedstock could qualify for production tax credits – nearly two cents per kilowatt-hour for ten years – to cover the cost of converting their plants into renewable energy facilities.

The trading programs, according to Hughes’ calculations, would cover the cost of delivering the manure to the coal-fired plants. Because he is in the middle of negotiations, he declined to say what he will charge for the actual product. But he estimated that for consumers, manure-based fuel would cost half the price of oil.

And that is not the end of the bonanza. Drawing on Red Barn’s origins, Hughes plans to take the phosphorus-rich ash left over from the burned manure, pelletize it and sell it as fertilizer.

“It’s the perfect environmental storm,” Hughes said.

 

Too Good to Be True?

While most investors participate in only one trading program at a time, Hughes plans to cash in on three of them.

His plans to bundle various environmental-offset credit markets sounds great in theory, said Carl Lucero, National Leader for Clean Water at the USDA’s Natural Resources Conservation Service. And Hughes may be successful in doing so. But in general, Lucero said, the infrastructure required to oversee a process involving multiple federal laws such as the Endangered Species Act, the Clean Water Act and the Clean Air Act does not yet exist.

The main problem involves ensuring that a venture such as the one envisioned by Hughes produces environmental savings that would not have otherwise existed.

Environmentalists worry that bundling credits could shortchange environmental goals.

 

Is It Additional?

For example, Hughes plans to remove nutrient-laden manure from the watershed to earn money by creating fuel. But the government created nutrient, carbon and other trading programs to spur additional reductions that would not have happened had the programs not existed. Does Hughes’ single venture produce additional environmental savings in the areas of clean water and clean air? Or, by taking advantage of multiple environmental credit programs does it, in a sense, double dip? And if so, to what extent?

The sooner these issues are worked out, many agree, the stronger these markets will become.

“Currently,” said Lucero, “it’s like someone wants to buy a steak but the farmer has to sell him the whole side of beef. If we bundle, he can sell the roast, the ribs and the ground beef” separately to whomever wants to buy it.

 

Turning Manure to Money

Regardless of whether Hughes succeeds in taking advantage of all or one of the environmental markets available, his plans to turn manure into money appear all but inevitable.

Just look at the math. Already Hughes has access to 22 barns of manure, each of which gets filled with 350 tons of the stuff every six weeks. That’s 7700 tons of manure, enough to power 1,527 homes, according to data from the National Association of Development Organizations.

And that’s just the beginning. As the third-largest egg-producing state in the nation, Pennsylvania could have enough chicken dung to power every home in the state. Moreover, if manure from chicken’ fellow farm animals – cows, turkeys, etc. – were processed, it could generate enough electricity to meet up to three percent of North America’s entire consumption needs, according to Dr. Michael E. Webber from the University of Texas at Austin.

Glenn Carpenter, a national leader for animal agriculture said that “farmers used to think they had too much manure and couldn’t get rid of it.” Just back from a national dairy science meeting in Indianapolis filled with farmers; Carpenter added that “now they see their manure as gold.”



Alice Kenny is a prize-winning science writer and a regular contributor to the Ecosystem Marketplace. She may be reached at [email protected].

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VCS Opens Can of Registries

For nearly as long as there’s been talk of a Voluntary Carbon Standard, VCS supporters have been haggling over how to track Voluntary Carbon Units. The VCS Association says its decision to assign that task not to one but to four separate registries kept in synch via UN-designed messaging protocols will deliver the best solution – but hasn’t put the matter to rest. The Ecosystem Marketplace tells you why.

29 July 2008 | Registries are the backbone of any environmental market – coordinating as they do everything from the way credits originate to how they are validated and verified to how they are tracked through their lifetime and retirement. It’s a difficult task under any circumstances, and critics of the Voluntary Carbon Standard (VCS) Association’s decision to authorize four registries for tracking Voluntary Carbon Units (VCUs) in a scheme set to go live September 29 say it will only add to the complexity and increase the chances of double-counting.

One market player even derided the multi-registry solution as “a decision not to make a decision.”

Edwin Aalders, acting CEO of the VCS Association, vehemently disagrees – and says the multi-registry approach is all about competition, with the four registries – run by Caisse des Depots, TZ1, Bank of New York Mellon (BNYM), and APX – being chosen based on two factors: their ability to service all traders, large and small, and their ability to dig into the nitty-gritty of who owns what.

“The real shaking out came when we got into looking at how various registries deal with custodial services,” he says. “Some of them just had simple spreadsheet applications, while others had the kind of robust documentation that you would expect if you were, say, buying shares in a company.”

He says that, rather than chose one specific registry, they decided to set criteria – such as the use of proper independent third-party custodial services – and then give any comers who passed the test a chance at the game.

“If we limit ourselves to one registry today, we may find tomorrow that someone has come up with more economical ways of running things,” he says.

Tony Nunes, who runs the registry set up by BNYM, adds other benefits to using a multi-registry approach.

“It’s about having four different kinds of registries in different parts of the world providing global access for all types of participants,” he says. “That’s critical if this is going to work.”

Indeed, the blend of registries reflects the emerging makeup and geography of the ecosystem marketplace, with three of the four being run by financial institutions in different parts of the world (Caisse des Depots is in France; BNYM is in North America; and TZ1 is in New Zealand), and the fourth being run by a well-established environmental infrastructure provider (APX, which is also based in North America, manages more than two billion environmental certificates – including those of the California Climate Action Registry and the Gold Standard registry, as well as the major US renewable energy registries).

That diversity, however, has also spawned contentious answers to the critical question of how to coordinate the registries so that the same list of projects is replicated across all platforms accurately and in real time.

Messaging is the Message

At issue is the set of messaging standards that will be used to keep the registries synchronized with each other.

Such standards are akin to a common language that financial entities – including registries – use to communicate with each other, and the VCS Association had to choose between two lingua registras: the one used by banks and brokerages around the world, and the one used by national registries dealing in Certified Emission Reduction certificates (CERs) governed by the Kyoto Protocol.

In the end, the Association settled on the UN standards, called Data Exchange Standards (DES), but left the door open for a later switch to the standards advocated by the financial community – namely, the International Organization for Standardization’s “ISO 15022” standards.

Dueling Standards

Under the UN system governing Kyoto, individual nations maintain their own registries but can pass credits into the global market via something called the International Transaction Log (ITL), which was set up by the United Nations to verify and register credits, track them, note their passing upon retirement, and act as a central hub through which credits pass when being transferred between owners using different registries.

The UN developed DES to make sure that all registries are working with the same set of definitions. It lays out detailed contingencies for communicating about events unique to environmental securities.

ISO 15022, on the other hand, lays down rules and guidelines on how to build messaging systems for financial transactions such as the transfer of equities, money, and – now – environmental securities. It was developed in part by the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a not-for-profit cooperative launched by a handful of banks in 1973 that has evolved to include more than 8,000 financial institutions in more than 200 countries. Among other things, SWIFT provides the network through which money and securities are transferred across the world.

“If the ISO 15022 message standards are used, they could be carried over the SWIFT network,” says Peter Ware, SWIFT’s manager of industry initiatives. “If the UN standards are used, they would probably be carried over the Internet or through VPNs.”

For now, all four registries have committed to use the UN’s DES in order to meet the September 29 launch date, but Aalders says that decision is not etched in stone.

“We expect that we will shortly have the initial rules in place so that registries will be able to undertake their internal programming,” he says. “We also continue to follow any market developments and initiatives that would work towards a standard process with the aim of seeing if we need to adopt this at a later stage.”

APX, meanwhile, has been given the task of developing a central data base for keeping track of registries. This data base, however, will not be a hub like ITL.

Mi Casa, Su Casa

Unlike Kyoto, the VCS and its four registries will work under a so-called “nostro vostro” arrangement – where entities hold each other’s assets, and the “hub” depends on where the credits originated.

“The best example of nostro vostro is the way banks interface,” says Helen Robinson, Chief Executive, TZ1 Registry. “When travelling, you can withdraw money from an ATM machine from a different bank because each bank has an account on the other bank, so that when you withdraw money, it goes through a robust network methodology that ensures that the money is there and the transaction can proceed.”

Likewise, each VCS registry will have an account on each of the other three registries, and if credits held in one registry are sold to someone who wants to use a different registry, the credits are transferred, and a record is held in the issuing registry.

To prevent double-counting, new credits can only be issued on one registry, which assigns a serial number to the credit and then keeps track of the registry throughout its lifetime. That “issuing registry” then becomes a de facto “hub” for trading in that particular credit – meaning that if credits that originated on that registry are then transferred between two of the other registries, they first have to pass through the originating registry.

When credits are either issued or retired, that information is bounced to the project data base, which is owned by VCS but administered by APX. Credits will be recorded in both the project data base and the issuing registry when they are created, and again when they are retired – but it is up to the issuing registry to track the credits as they change hands.

The Quest for Credibility

Critics of using DES say the voluntary markets face challenges the compliance markets don’t have to deal with.

“In the Kyoto Protocol’s Clean Development Mechanism (CDM), the regulatory body defines what an offset is,” says Aalders. “If you get a CER issued, you know you have a ton of carbon reductions that have been recognized by the institution and the host country.”

But voluntary credits are evolving entities created and coordinated by the private sector. As a result, they face a greater credibility gap than do compliance credits, says Robinson.

“If there is not robust interoperability between registries, it could undermine the credibility of the VCS,” she says. “This is more so than in the compliance market, because voluntary credits are still trying to earn the public’s trust.”

The DES Advantage

Marc Demarest, a lead software designer with APX, concedes that financial market protocols and the SWIFT network should be used to connect the registries to exchanges – but insists that DES is the best way for registries to communicate among themselves, and offers a very simple reason:

“That’s what the DES was designed to do,” he says. “It was built from the ground up to deal with the particular nature of environmental commodities – how they’re originated, validated, verified, and then traded, retired, or cancelled.”

He cites a litany of unique scenarios that only happen in environmental markets and for which SWIFT does not yet have messaging protocols – such as how to deal with a credit that goes bad.

“DES has a covenant mechanism requiring the project proponent to purchase equivalent numbers of valid instruments and replace the invalid ones with valid ones,” he explains. “It’s complex – especially when, say, the default happens nine months through a yearly period and the credits have been dispersed into the accounts of hundreds of people. How do you identify where those credits are and replace them in a way that does not create duplicity (replacement of the old credit with the new before purging the old)? DES has an answer, but SWIFT does not.”

The SWIFT Advantage

SWIFT’s Ware says the answers are in the works, and that the advantages of weaving the registries into the global SWIFT network far outweigh the disadvantage of having to retool ISO 15022 for carbon registries.

“We have a standards department looking at flows and relating them back to ISO 15022 message standards,” he says. “So far, it looks like we already have standards that can meet that need.”

Ware points out those message standards are just one aspect of the debate because of SWIFT’s status as a network over which messages can be carried.

“With DES, the registries will still need to implement a communication platform,” he says. “Most of the users are already connected and using the (ISO 15022) standards, and new users who connect with us are automatically connected to 8,000 other end points.”

Seeking the Competitive Edge

Regardless of how the messaging debate plays out, each registry believes it has a competitive edge over the others. Caisse des Depots, for example, will tout its status as an early mover in sustainable development and carbon finance, as well as its massive balance sheet.

Bank of New York Mellon (BNYM) will tout its status as the world’s largest trustee and depositary, with more than four million documents and $23 trillion in custody and administration.

“We have proven that we can manage the transfer and ownership of securities on a grand scale,” says Nunes. “We are also the first group to have proactively launched a carbon registry for voluntary carbon credits in 2006, when VCS-1 came out, and we already have more than two million credits registered, and are in the process of building out our registry to include other types of carbon credits.”

TZ1 will tout its ability to offer diverse carbon holdings in one place, thanks to its “meta-registry” structure, which links registries, banks, and exchanges regardless of the products they deal in so.

“The TZ1 Registry accepts multiple types of verified carbon credits to provide a holistic inventory carbon view,” says Robinson. “We provide a single core depository of carbon assets, as opposed to different segregated systems for different standards or regions.”

APX, meanwhile, will tout its experience and the fact that it already manages more than two billion environmental certificates – including those of the California Climate Action Registry and the Gold Standard registry, as well as the major US renewable energy registries.

“This will be our 9th major deployment of a market system, and we believe we’ve got state-of-the-art solutions for this type of application,” says APX Vice President Reiner Musier.

He, like the others, concedes the field could grow. But he also – like the others – believes the market will eventually settle on just one or two registries.

And they all agree their registry will be among those chosen two.



Steve Zwick is Managing Editor of the Ecosystem Marketplace. He can be reached at [email protected].

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Seeing the Forest for the Carbon From Space

Brazil may lead the world in deforestation, but it’s also a leader in using technology to try and reverse the process. The next step is measuring the amount of carbon captured in trees – and making sure it stays there. Ecosystem Marketplace examines the latest developments.

Sixth in a Series leading up to the 14th Katoomba Meeting in Mato Grasso, Brazil.

20 March 2009 | “We have only God to protect us here,” said a Brazilian farmer recently in the Washington Post, referring to the constant threat of being kicked off farmland he had cleared in the Bom Futuro protected area in the Amazon basin.

“I fought for this. I gave my blood and my sweat,” he continued. “They can’t take it away.”

This vision of deforestation as an engine of job creation and economic growth is compelling in a country like Brazil, where poverty remains widespread. But deforestation also represents the destruction of priceless ecosystems and valuable carbon sinks.

Although reconciling these two visions will not happen overnight, payments for Reduced Emissions from Deforestation and Degradation (REDD) are being considered as part of a future climate agreement, and would help shrink the estimated 20% share of annual global CO2 emissions attributed to deforestation.

The REDD idea is simple: Provide monetary incentives to stimulate popular and political will to preserve forests and their capacity to store carbon emissions. Ensuring that this actually happens is far from straightforward, but Brazil is well-placed to participate. The country has at once the largest rainforest, the highest rate of clearing, and the best deforestation monitoring systems in the world.

 

Measuring Deforestation in Brazil

Indeed, thanks to state-of-the-art, satellite-based monitoring systems, we find out each December in excruciating detail exactly where detectable deforestation has happened in Brazil over the previous 12 months. And with lesser detail but every two weeks, the environmental ministry receives a report on where large-scale destruction is taking place. Finally, if you’ve ever wondered whether your teak coffee table was sustainably produced – well, the Brazilians can’t tell you that, but as of December 2008 they can tell you exactly where their forests are being whittled away due to selective logging and other forest degradation activities.

Still, there are limits to the capabilities of Brazil’s eyes in the sky. And as we will see, this has implications for the design of a global REDD payment system designed to stimulate sustainable forestry.

 

Early Eyes in the Sky

The origins of Brazil’s use of satellite-based remote sensing systems to monitor forests stretch back to the 1960s, when astronauts aboard the Gemini spacecraft first snapped photos of Earth from orbit. This spurred NASA to launch, in 1972, Landsat 1, the first of seven Landsat satellites dedicated to photographing the earth’s surface. As part of its nascent aerospace program, Brazil built a Landsat receiving station in 1974 that would acquire and analyze raw data as the satellite passed overhead.

In 1988, Brazil’s government started PRODES (Programa de C¡lculo do Desflorestamento da Amaz´nia), charging the National Institute for Space Research (Instituto Nacional de Pesquisas Espaciais, or INPE) with systematically estimating annual deforestation in the Amazon and establishing a baseline for Amazonian forest cover.

 

Fourteen Years of Paper Maps

For the next fourteen years, analysts would pore over printouts of Landsat images taken during every year’s August dry period, looking for areas of new deforestation. Adding up each 30-meter pixel of deforestation, they generated an annual report of the thousands of square kilometers of forest lost since the previous year.

With the advent of faster and cheaper computers, as well as the launch of the first Sino-Brazilian CBERS satellite in 1999, PRODES went digital.

 

The Digital Advantage

Since 2002, after digitizing its historical data archive, INPE’s analysts have been able to focus their efforts on areas with high probability of deforestation. A digital workflow allows INPE to map incremental deforestation more quickly, isolate hotspots of deforestation, and better understand the drivers of deforestation. This ability to quickly visualize and spatially analyze clear-cutting over wide areas and over time, then mash it up with other data such as maps of population density or conservation areas, makes satellite monitoring of forests all the more compelling.

Still, it’s one thing to know how much deforestation is happening, and another to actually stop it. By the time INPE takes its detailed calculations of deforestation to the government, it’s too late.

 

Timely Information Means Deterrence

But since 2004, the DETER system (Sistema de Detec£o de Desmatamentos em Tempo Real) has helped overcome this limitation, using lower resolution satellite data to provide far more timely information to the government. DETER leans heavily on data updated every one to two days by the MODIS sensor aboard NASA’s Terra satellite platform, and automatically feeds Brazil’s environmental ministry (IBAMA) alerts of flagrant cases of deforestation or forest degradation larger than 250 square meters every two weeks. While striving for accuracy, INPE recognizes that DETER cannot be perfect in such a short timeframe.

“We are much more interested in helping the government, giving them support for their [enforcement] actions,” says Thelma Krug, spatial statistician and director of international affairs at INPE.

 

Measuring Degradation: The Next Challenge

Krug explains that clear-cutting is fairly obvious with a decent sensor, and doesn’t require slow, expensive ground-truthing to ensure that estimates from space match the reality on the ground.

“Once you see forest turning into ground, you don’t need to go and check,” she says.

Identifying small-scale forest degradation, on the other hand, requires another level of technical sophistication, as well as a working definition of the term.

Often referred to as “the ‘second D'” because of the acronym REDD, degradation occurs where only a few trees may have been harvested, but where lasting damage to the ecosystem and the forest’s capacity for carbon sequestration may exist.

It’s the kind of damage that’s difficult to detect from space, and, according to Matthew Hansen, a senior remote sensing scientist at South Dakota State University, it’s also difficult to define.

Whether it’s removing a few trees per hectare or measuring ecosystem quality, “the second ‘D’ in REDD for me is really difficult,” he says.

Undaunted, INPE launched its DEGRAD program last year to provide a detailed, annual estimate of degraded forest area, which according to the December 2008 report is actually more widespread in the Amazon than is clear-cutting.

 

The Insidious Danger of Degradation

Whatever the problems with measurement, environmental geographer Ruth DeFries of Columbia University points out that the danger of degradation is “not so much the direct carbon emissions” – after all, your coffee table will remain in good condition for decades – “but what it does to the forest – it makes it more susceptible to fire” that can level huge areas of forest.

And once logging roads are built for selective logging, degradation can lead to future deforestation as loggers push deeper into the forest and farmers take over at the forest edge. According to Krug, a 1999 study showed that 30% of forests degraded in the 1990s were already clearcut by the end of the decade.

 

New Advances in Measuring Degradation

While detecting degradation is not as straightforward as detecting clear cutting, it is within the capabilities of current technology and will surely improve as more experimental systems are refined.

Japan’s new ALOS radar satellite, for example, can “see” through clouds, and Carlos Souza, a researcher at the research institute Imazon (Instituto do Homem e Meio Ambiente da Amazonia), has developed a system to identify degradation much more quickly than INPE.

Of course, as with deforestation, knowing how much degradation is happening is not the same thing as stopping it, as can be deduced from Brazil’s status as a leader in both forest monitoring and forest loss. Souza argues that the difficulty of stopping degradation in near real time “is not the sensor’s capability, but the political will to do so.”

 

The Biomass Challenge

Politics aside, satellite monitoring falls flat when it comes to measuring changes in carbon sequestered in biomass. Such measurements are essential to tracking emissions reductions, so the challenge is twofold: how do you measure change in biomass on a meaningful scale in a country like Brazil, where the Amazon basin covers some 4 million square kilometers? And how do you ensure reasonable accuracy?

Patrick van Laake, assistant professor at the International Institute for Geo-Information Science and Earth Observation in the Netherlands, is not alone when he argues that biomass cannot currently be measured very reliably. Change in biomass representing sequestered carbon is slow, as a percentage of total forest biomass.

“We’re talking about several percent per year maybe,” says van Laake. Annual estimates would be swamped by the margins of error in current techniques for estimating biomass from remotely sensed data.

 

Biomass Solutions

There are at least three solutions. At one end of the spectrum is simplicity. Hansen believes REDD policy discussions are ahead of operational capabilities. While helpful for pushing remote sensing science forward, ambitions for REDD “are squarely in research and development on the remote sensing side,” he says. For example, measuring biomass using satellite-based LIDAR (Light Detection and Ranging, also known as laser radar) is promising but can’t be done yet because such satellites are still on the drawing board.

In any case, Hansen would “not go for the full unified field theory of carbon accounting. I just don’t think that’s doable right now” outside of experimental research contexts. Still, he thinks decent carbon stock reference maps would be useful for starting to set up REDD.

Krug highlights the urgency of action to reduce emissions and also urges simplicity as a starting point. After all, by the end of a quest for measurement perfection, she says, “the forests will be gone”. Instead, she calls for a REDD system that supplies useful data now but has room for “a progressive increase of knowledge” of what is happening on the ground.

 

Combining the Remote and the Immediate

At the other end of the spectrum are companies like ImageTree, a US-based firm that combines advanced LIDAR and high-resolution aerial photography with field measurements to analyze forest structure at the sub-meter level. The company doesn’t measure all biomass directly, rather it uses improved on-the-ground forest-sampling techniques to estimate the carbon stored in individual trees. Extrapolating to entire forests, ImageTree claims it can provide estimates of carbon stocks with unparalleled accuracy.

Chuck Anderson, Image Tree’s vice president of ecomarket development, argues that such fine detail will be essential to track the progress of “literally tens of thousands of individual projects going on within countries to meet national objectives to reducing emissions.”

Investors are likely to need the more detailed information that ImageTree can provide, and the company recently announced plans to start mapping Central American forests. But even if the logistics of scaling up to the Amazon basin, let alone the entire tropics, were practical, this level of detail could be overkill for a REDD system.

 

Building up a Presence on the Ground

A third solution for large-scale monitoring depends heavily on people on the ground. Van Laake says that instead of using questionable biomass estimates from distant satellites or rough averages for entire ecoregions, countries should invest in capacity building and on-the-ground measurements by the people who live in and depend on forests – give them tape measures and clipboards and pay them to measure biomass, something he is trying to do with the NGO Kyoto: Think Global Act Local.

To those who suggest that this would be a logistical nightmare, or that the numbers might be inflated to increase REDD payments, he reminds us that “what we’re interested in is reversing the emissions.” Indeed, “rather than asking how you can organize the measurement, ask yourself how we can organize the emissions reductions.” The logistics of the latter are more difficult, and ultimately more important.

Ben Vickers has been working on ensuring sustainable, local management of forests as senior program officer for the Regional Community Forestry Training Center for Asia and the Pacific. He argues that governance reform and behavior change must be at the center of REDD, supplemented by remote sensing. “There is an absolute need for accuracy at the highest level using remote sensing, but it’s not going to be any good if you’re not changing patterns on the ground.”

After all, if there’s no change on the ground, if real people in Bom Futuro trying to feed their families keep cutting down trees, there won’t be REDD revenue for anyone. Or many trees.



Robin Kraft
works on environment and energy issues at the Center for Global Development, a think tank in Washington, DC. He can be reached at [email protected].

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Guaraqueaba: Where the Buffalo Roamed

If efforts to save the tropical rainforests by Reducing Emissions from Deforestation and Degradation (REDD) ever yield large-scale results, it will be in part because of demonstration projects like those in Brazil’s Guaraqueaba Environmental Protection Area.

Fifth in a series leading up to the 14th Katoomba Meeting in Mato Grasso, Brazil.

18 March 2009 | The first Asian Water Buffalo to cross the Pacific staggered onto dry land in Brazil more than a century ago, and quickly took to the country’s lush prairie grasses, making cattlemen wealthy in the process. By the 1970s, their progeny had outgrown the plains and were being herded into the rainforests, often at the hand of government-sponsored deforestation projects – even as environmentalists decried the immorality of putting agriculture before ecology.

By the early 1980s, however, environmental economists began winning converts among Brazilian regulators to the idea that healthy rainforests deliver more economic value in the form of environmental services than do cattlemen and their buffalo.

The Economics of Nature

Key among these services is regulation of the atmosphere and the earth’s temperature, with the Intergovernmental Panel on Climate Change (IPCC) estimating that rainforest destruction contributes roughly 20% of all greenhouse gasses.

The result is a growing body of progressive environmental protection mechanisms, and an increasing number of industrial emitters who believe they can offset their industrial emissions by saving rainforests – a process called Reducing Emissions from Deforestation and forest Degradation (REDD).

At least two non-governmental organizations (NGOs) saw the potential early on: the US-based Nature Conservancy (TNC) and Brazil-based Sociedade de Pesquisa em Vida Selvagem e Educao Ambiental (Society for Wildlife Research and Environmental Education, SPVS).

Together, with funding from American Electric Power (AEP), General Motors, and Chevron, they began the process of purchasing 19,000 hectares of degraded land in eastern Brazil’s newly-designated Guaraqueaba Environmental Protection Area, which lies in an ecosystem that has been recognized as a World Biosphere Reserve by the United Nations Economic and Social Organization (UNESCO), making it one of the planet’s highest priorities for conservation.

The quality of the land ranged from standing forest to degraded pasture, and the companies hoped to offset their greenhouse gas emissions by saving the existing forests from destruction and restoring the degraded lands.

A Forty-Year Experiment

The 40-year project aims not only to reduce emissions by avoiding deforestation in the Atlantic Rainforest, but also to test and expand the limits of REDD financing to restore degraded lands across the region and to create jobs for local inhabitants. On top of all this, project developers also aimed to develop procedures that can be replicated across the surrounding 314,000 hectares of protected land.

Bill Stanley, who runs TNC’s global climate-change initiative, says the technological phase is already proving fruitful. “These projects and others have basically settled the debate over whether we can measure carbon in trees,” he says. “SPVS has been especially good at measuring species diversity and promoting its development, and the tools they helped develop are being applied in other places as well.”

Now, he says, the challenge is more social than scientific.

“The technical issues that a lot of people thought were the major obstacles to these types of projects are not the major obstacles at all,” he says. “The most difficult thing is coming up with strategies for protected forests that will work for local people and for the governments involved and that will be sustainable.”

Creating the Public Infrastructure

In 1985, the state of Paran¡ reversed its policy of promoting agriculture in the Atlantic Rainforest and instead created the Guaraqueaba Environmental Protection Area (EPA), mandating a phased shift to “sustainable use” of lands as determined by the EPA committee. Then, in 1992, the state initiated the ICMS Ecologico, a sales tax designed to raise funds for conservation.

Meanwhile, in neighboring Bolivia, TNC and Bolivian NGO Fundaci³n Amigos de la Naturaleza (FAN) were putting together the first forest emissions reduction project based on Kyoto Protocol standards to be verified by a third party. That project, the Noel Kempff Mercado National Park, caught the eye of environmental NGOs across Latin America.

Realizing that income from ICMS Ecologico is a drop in the bucket compared to both income from agriculture and the cost of restoring degraded land, SPVS devised a plan to harvest funding from carbon offsets to purchase three private properties in the Guaraqueaba EPA which they wanted to convert to private nature reserves (Reserva Particular do Patrim´nio Natural, RPPN).

The Post-Kyoto Forestry Challenge

On the technology front alone, SPVS’s plans for Guaraquaba were nothing if not ambitious. They wanted to save endangered forests from the chain saw, re-plant old forests, and nurture degraded forests back to health with as little intervention as possible. All of this meant making sure than any reforestation came as close as possible to reviving the exact same blend of trees that had been chopped down for grazing.

But they faced a serious challenge: the 1997 Kyoto Protocol had come into effect without a provision for generating offsets by saving endangered forests, leaving many NGOs in the lurch.

“We expected a lot of big companies to come in and put a lot of money into these forests,” says Miguel Calmon, who at the time was a consultant with the environmental services arm of Winrock International, a global NGO that, among other things, develops methodologies for measuring the amount of carbon captured in trees. “We had trained almost 40 other NGOs in how to conduct feasibility studies, how to structure products, how to monitor carbon sequestration, etc. so that they wouldn’t risk being unprepared when the money came,” he says. “But that never happened.”

In 2000, Calmon joined TNC, and is currently director of the group’s Atlantic Forest Conservation Program.

Tapping the Voluntary Market

With compliance offsets off the table, SPVS decided to look for corporate investors interested in “gourmet” offset – those offering benefits beyond mere carbon sequestration. Having worked with TNC since the early 1990s, SPVS turned to them for help on the financing.

The timing couldn’t have been better. AEP had just contacted TNC to find out how it could offset its emissions by saving a piece of the rainforest, and the energy concern was willing to spend $5.4 million to do so. General Motors and Chevron soon joined the discussions as well, and SPVS began approaching local landowners with offers.

By 2000, the NGO began purchasing what eventually became 19,000 hectares of private land spread over three private reserves: the Serra do Itaqui Natural Reserve, the Cachoeira Natural Reserve and the Morro da Mina Natural Reserve.

They dubbed the three properties the Guaraqueaba Climate Action Project, and then began putting their theories to the test.

“Assisted Natural” Regeneration

Roughly 30% of the funds went to land acquisition, with the remainder being placed in an endowment fund that is intended to provide funding well beyond the project’s 40-year life. In the near term, the endowment will cover the cost of carbon monitoring and other expenses related to the upgrade of the reserve. Long-term, the fund is designed to cover the cost of management of the reserve and working with local communities.

On degraded lands, SPVS chose to let as much forest return on its own as possible rather than to actively re-plant. Where re-planting was necessary, they hired locals to dig through the land in search of native seeds that had lay dormant under the grazing fields.

“That was a real production,” says Stanley. “They brought the seeds to a nursery and did everything they could to get them to germinate – submerging them, cutting them – anything to get seedlings they could plant.”

To make sure the extra effort pays off in all ways possible, TNC brought in Calmon’s former employer, Winrock International.

“We basically took their methodologies and moved them forward,” says Gilberto Tiepolo, TNC’s Forest Coordinator. “For example, we quantified the differences in the amount of carbon that different species of tree capture, which makes measurement more accurate.”

That work will pay off for other groups as well – helping to provide more certainty for both buyers and sellers around the world.

Giving Back to the Community

All of these labor-intensive activities had the advantage of bringing undocumented locals into the employment system for the first time, and the project still has roughly 50 people from the region working for it full-time, ranging from forest rangers to reforestation technicians.

SPVS also conducts ongoing training workshops in skills such as ecology, first aid, and search and rescue, and has also been working to promote sustainable business in and around the reserve. The group recently helped set up a beekeeping enterprise for the production of honey, and is in talks with more than 100 farmers interested in the production of organic bananas.

“SPVS is looking at lots of different ways of generating income not only in the reserve, but in the surrounding communities,” says Calmon. “Only then will you really do something about the economic drivers of deforestation.”

Keeping It Real

After purchasing the land, SPVS sent all of the buffalo off to slaughter and also conducted interviews with farmers to make sure they weren’t simply taking the money and clearing land someplace else.

“There’s a lot of debate as to how far we should go with that,” says Calmon. “We do what we can, and the C³digo Florestal does place limits on the amount of forest that a farmer can chop down – but we all know there is a lot of illegal logging, and ultimately the only way to really eliminate leakage is to create incentives for not doing it.”

He says that local farmers are beginning to take heed, and that SPVS and other NGOs meet regularly to discuss ways of expanding the model across the entire Guaraqueaba.

“We used to have agriculture cooperatives, and now we have to think about forestry cooperatives,” he says. “In the future the model should not focus on land acquisition per se, but work with land-owners to help them profit by keeping their forests alive.”

Steve Zwick is Managing Editor of Ecosystem Marketplace. He can be reached at [email protected].

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Breaking News: Three VCS Registries Open On Their Own

The three carbon registries supporting the Voluntary Carbon Standard’s “meta-registry” have begun listing Voluntary Carbon Units, but they aren’t yet communicating with each other as planned.

17 March 2009The Voluntary Carbon Standard (VCS) Association has soft-launched a global network of registries for keeping track of Voluntary Carbon Units (VCUs), but users will not be able to transfer credits between registries until later this month or early April.

Once the link is complete, the three separate registries will be kept in synch via UN-designed messaging protocols (a fourth registry pulled out). The three registries (APX, TZ1, and Caisse des Depots) launched their individual platforms on Tuesday, March 17.

 

Further Coverage

From Ecosystem Marketplace: VCS Opens Can of Registries. Detailed analysis of the transfer mechanism.

From Environmental LeaderCarbon Registry Caught in Fits and Starts. Coverage of Tuesday launch.



Steve Zwick is Managing Editor of Ecosystem Marketplace. He can be reached at [email protected].

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In the Year 2035 If Ecosystem Markets Keep Man Alive

The new book Dry Spring: The Coming Water Crisis of North America, is an environmental cautionary tale with a hopeful ending delivered courtesy of ecosystem markets. Here, author Chris Wood shares with the Ecosystem Marketplace his vision of a world in which that hopeful ending is realized.

6 July 2008 | A new regime of eco-payments in our economy means that my grandchildren pay less for products that contain less accumulated environmental impact. Industry pays for the ecosystem services its processes require, embedding those costs in the price of products (motivating the most successful businesses to work ceaselessly to reduce them).

As a result, spending patterns have changed. Buyers are drawn to features of design and durability that will keep them happy with their purchases for years. Throwaway “consumer” goods have almost vanished from shelves, priced out of the market by eco-charges.

The higher price of the manufactured things that most people use only occasionally, such as power tools or vacation equipment, lies behind the current explosion of rental centers.

We’re seeing more social consuming: participation in popular group activities like dinner or hiking clubs that, for many, have replaced recreational shopping.

 

A Boom in Ecosystem Services

A city now includes the costs of the eco-services its citizens consume in any of a variety of public charges, from the nearly ubiquitous city-centre congestion fees, to water bills, property taxes and development permit fees. Tenants see the same charges on the individually metered utility bills that are mandatory now in most communities.

The money from these levies, together with industrial eco-payments, flows to accredited eco-service providers, either locally or through the global eco-markets launched in the ’20s in New York, London and other financial centers.

It supports a burgeoning new economic sector. Wild-land management consortia, ecosystem “bio-neering” firms and habitat construction companies are booming. In urban areas, employment in restoring and recreating ecosystems has more than offset the jobs lost in the retreat of big-box retailing. The number of cars on the road has plummeted, and many of the new green spaces occupy acreage once devoted to parking lots.

 

Biodiversity Banking

The few old-school environmentalists of my own age claim vindication that the environment is at last being properly valued. But they grieve (along with younger techno-Edeners) the ongoing cascade of extinctions, as scores of species lose their last fragments of habitat.

The public mourning for these has produced contradictory responses. With each species that is extinguished, some people find less reason to go out of their way to save the next.

“They’re gone anyway,” folks sometimes say.

In the same way, Asian carp and other species once scorned as invasive “aliens” are being rehabilitated in public opinion these days as climate-change survivors. Non-profit stewardship groups and public environment agencies pay a premium for ecosystems that provide migration corridors for endangered species.

 

The New Urban Landscape

Almost every North American community now requires “green” street design and rain harvesting. Building codes insist on dual plumbing, with grey water collected for on-site or community reuse. Retrofitting a cistern in an older house has become as automatic a re-do as installing new kitchen counters. Montreal recently became the latest urban region to twin its entire water system for separate distribution of potable and “wash-down” water.

Air travel has become pricy, but those who do fly into North American cities no longer look down on industrial deserts of asphalt, concrete and tar-and-gravel roofing. Instead, they see kilometres of patchwork meadow: “green” roofs, planted with local grasses and shrubs. These reduce owners’ heating and cooling costs and lessen flash runoff from rain.

Some large factories have even turned their roofs into revenue opportunities, leasing them out to farmers for cultivation or qualifying for eco-payment credits. You can see cows grazing or grapes ripening above sprawling industrial complexes.

Other businesses are locating where plumbing connections to “upstream” industries let them take advantage of lower-cost “used” water. Some have cut their ties to municipal mains entirely and provide their staff with premium bottled water for refreshment.

Stream-bed erosion and pollution from street runoff have been dramatically
curtailed in most urban areas, despite increasingly heavy rain, without the need either to expand storm drains or to add municipal waste treatment plants. Those are now more often known as “recovery” facilities.

Sanitary wastes are turned into saleable wash-down water with a residual byproduct of compost material. That, in turn, finds a ready market in the mitigation industry, where it is used to rehabilitate retired parking lots and other degraded landscapes into viable wetlands, meadows, savannahs and growing forests.

Thanks to these changes in streetscaping, building design, and home and
commercial water use, no North American city has had to condemn a valley for new dammed storage in over a decade. The expanding reuse of water for landscaping and commercial purposes has allowed existing treatment plants in most cities to serve growing populations with ease.

 

Challenges Continue

The future is no surer than it ever was. But we have arrived at the year 2035 with our human civilization intact. And our continent’s economy today is more responsive to its impact on the environment than it has been at any time since before the Industrial Revolution.

Not only did we get the water part right but, in doing so, we ended the estrangement of our species from nature. Let’s celebrate 2034 as the first year in many when we used less of Gaia’s bounty than our share of the planetary ecosystem produced. Our environmental account has returned, after many decades, to the black — or perhaps we should say, to the green. Our part of the planet can claim, cautiously, to be mending.



Adapted from the epilogue to
Dry Spring: The Coming Water Crisis of North America, published jointly by Publishers Group West (Canada) and Raincoast Books (USA), and available at Amazon.com.

Canadian journalist and author Chris Wood can be reached through his web site, www.bychriswood.com.

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Rio’s Atlantic Forest Fund: Spreading the Environmental Wealth

The Brazilian Biodiversity Fund (FUNBIO) is testing a new approach to disbursing funds collected under Brazil’s Environmental Compensation Law. Dubbed the “Atlantic Forest Fund”, it’s designed to create a massive pool of liquidity for all forms of environmental finance impacting protected areas in the state of Rio de Janeiro.

Fourth in a series leading up to the 14th Katoomba Meeting in Mato Grasso, Brazil.

12 March 2009 | When Carlos Minc needed someone to set up a mechanism for disbursing funds to worthy environmental projects under Brazil’s Compensaçí£o Ambiental (Environmental Compensation Law), he called the Brazilian Biodiversity Fund (FUNBIO), a non-governmental organization (NGO) set up in 1995 to support government action in support of biological diversity.

True to that mission, FUNBIO’s financial mechanisms unit responded with the blueprint for a project that has since become the “Atlantic Forest Fund”, an ambitious endeavor that goes well beyond Minc’s goal of creating a support mechanism for the Compensaçí£o Ambiental and is best described as a statewide ecosystem marketplace that aims to channel private money into ecosystem development projects, regardless of whether that money comes from Payments for Ecosystem Services (PES) or from philanthropy.

“It’s called a fund, but it’s not really a fund in the legal sense of the word,” says André Ilha, who is Director of Biodiversity and Protected Areas for the state’s Instituto Estadual do Ambiente (INEA), which was formed through the merger of several state environmental agencies over the past two years. “It’s more accurately described as a financial mechanism which will provide the means of applying more efficiently and with more control and transparency all of the money assigned to the creation and implementation of parks and reserves administered by the state government.”

The mechanism recently launched in pilot form after Manoel Serrí£o, who heads FUNBIO’s financial mechanisms unit, and his team spent two years surveying the environmental and regulatory landscape of the state’s protected areas – a process that involved documenting the threats to protected areas and their current state of degradation, identifying potential and existing solutions, charting potential and current income flows, and compiling an analysis of the various laws and institutions impacting the areas. Making that data freely-available became the first step in creating a mechanism that Serrí£o believes will lead to a more transparent and liquid market for ecosystem finance across the state.

“It was during this research phase that we realized what a tremendous opportunity exists now for non-governmental organizations (NGOs) to play a role in administering significant resources for protected areas,” he says.

Long-Time Coming

The Compensaçí£o Ambiental came into force in 2000 and echoes other laws that promote species banking, wetland banking, and water quality trading – all of which are based on the premise that if you damage the environment, you should carry the cost of fixing it.

In the case of the Compensaçí£o Ambiental, payments are directed towards protected areas equivalent to the International Union for Conservation of Nature (IUCN)’s Category One (nature reserve, free of development) or Category Two (limited protection) Protected Areas, and money collected under the law is earmarked for five specific uses: studies for the creation of new reserves, the creation of management plans, sorting out land-tenure issues, purchasing goods and services necessary for managing an area, and management-related research.

Unlike most PES schemes, however, the Compensaçí£o Ambiental doesn’t establish a price tied directly to the market cost of replacing damaged areas, but instead requires the assessment of a licensing fee based on the un-mitigatable impact of the project development, the proceeds of which are then channeled to conservation projects in protected areas.

Because the fee was initially based on a percentage of the project’s development cost, some companies fought the law in court, claiming the fee was arbitrary and not related to environmental impact. Last year, the Supreme Court agreed.

Now the compensation fee is capped at 1.1% of the industrial project’s development cost, and the court is overseeing the creation of an impact-driven process for issuing licenses.

All parties have already agreed that a “Compensation Chamber” made up of representatives from industry, academia, government, and the environmental community should review projects submitted for funding, but the Court has still not passed judgment on how the final guidelines should deal with funds already collected, as well as a variety of other issues.

Once these issues are resolved and the guidelines clarified, the federal licensing agency will adapt its formula according to the ruling. Then, because licenses are issued by either federal or state authorities (depending on the type of project and whether its impacts cross state borders), each state will transpose the federal formula into its own system.

Regardless of whether the licensing agency is state or federal, the money will flow to protected areas administered by the state or even municipalities, depending on which areas are directly impacted or near the project – but companies paying the fees have some leeway in determining how the money is spent.

Compliance Choices

Under Compensaçí£o Ambiental, a company has three ways to spend the licensing fee, provided the money goes to one or more of the five activities specified by the law.

The first option is for a company to execute the payment itself, which theoretically leaves the door open to something akin to US-style mitigation offsets, but in practice means companies administer every detail of the project themselves.

“Companies don’t like this, because it means they have to put a lot of effort into an activity that is not core to their operations,” says Ilha.

So far, the only company to take this option is the private-public energy group Petrí³leo Brasileiro (PetroBras), which was able to sub-contract the environmental offset for a hydroelectric plant it purchased.

The next option is to deposit the fee into the responsible environmental agency, which Ilha and Serrí£o say would burden regulatory agencies with administrative tasks they are not designed to handle.

“You’re taking money that’s private and free and transparent and not burdened by administrative requirements imposed on governments and then putting it into that system,” adds Serrí£o. “Plus, if the money doesn’t get spent by the end of the fiscal year, it is absorbed into the larger government budget and is no longer earmarked for environmental purposes.”

The final option is to put the money into a financial mechanism like the Atlantic Forest Fund.

Minc, who last year became Brazil’s federal Environment Minister, had contacted FUNBIO because of the group’s work in administering the Amazon Protected Areas Program (ARPA).

“With ARPA, FUNBIO managed to distribute R$ (Brazilian Real) 55 million among several NGOs without raising legal disputes or challenges,” says Ilha. “That indicates that they work competently and in a way that keeps all stakeholder happy, which is quite an accomplishment.”

The Role of the Fund

Under the scheme, FUNBIO opens a bank account in the company’s name, and the company deposits its compensation fee into the account. FUNBIO then acts as the permanent administrator of the funds – but only under the watchful eyes of regulators and contributing companies.

“We and the companies are free of the burden of having to do this directly, while FUNBIO – which has the structure to administer the fund – does what it is good at,” says Ilha. “Every step is registered in the system, so that the environmental sector of the government has instant access, as do external organs such as courts and public ministries. You have absolute transparency, and projects are developed more efficiently than they have been so far.”

The Diversification Advantage

The mechanism is divided into several components, chief among them being the compensation fund for administering money collected under the Compensaçí£o Ambiental and the donation fund for administering money from philanthropic donors. Within the compensation fund, an endowment fund is to be maintained to cover recurring expenses such as maintenance and repair of facilities on protected areas.

“Money coming into the compensation fund for compliance purposes can only be used for a limited number of activities laid out by the law, while money coming into the donation fund can be used according to the donor’s own specific criteria,” says Ilha.

“When we talk about a fundraising strategy, we’re not interested just in the volume of funds, but in the diversity of the funding sources,” adds Serrí£o. “That’s because the source determines what can be done with compensation money. If it comes from the compensation scheme, it is limited to five uses, but if you have a diversity of donor sources, it’s possible for us to expand beyond these five things.”

That makes it easier for donors and NGOs with compatible but narrow mandates to find each other. The donation fund is even flexible enough to channel carbon payments and biodiversity payments – but individual states have to decide whether they want to recognize payments REDD.

“You have some donors that only want to support family farming around protected areas, for example,” says Serrí£o. “When we receive a request from the protected area to support family farms, we have the ability to point them in the right direction – even if we’re not administering the money.”

More Than Just Money

Indeed, Serrí£o believes that the overall transparency generated by the fund’s existence will have knock-on benefits that resonate well beyond the money it directly disseminates.

“Money doesn’t have to flow through the mechanism, but the mechanism has to know what is out there,” he explains.

That, he says, not only encourages NGOs across the state to communicate with each other and focus on common goals, but also creates the kind of transparency that private-sector donors increasingly demand.

The Benefit of a Guiding Principle

Then there’s the matter of focus: the fund’s existence has forced the development of a more coherent vision for all protected areas.

“It’s requiring the creation of a medium-term planning process, and forces us to take stock of what’s available on the resource front and what demand exists from the protected areas,” says Serrí£o. “We can design the fund with a clear idea of what the state of the protected areas should be in four years.”

That vision, and the promise of a concentrated pool of capital to help carry it out, is already providing an incentive for NGOs and others active in the protected areas to draw up detailed proposals designed to meet specific targets. What’s more, because projects proposed for compliance purposes have to be approved by a governance council comprised of representatives from industry, government, and the environmental community, there should be more pre-vetted projects for non-compliance donors to choose from.

Cash Brings Cash

Early on, FUNBIO decided to design the fund’s scope based on the most conservative estimates of the amount of money the compensation mechanism might deliver. That meant beginning with roughly R$75 million already sitting in escrow for Compensaçí£o Ambiental, and putting out word that roughly R$100 million more should be available for conservation projects over the next four years from the Compensaçí£o Ambiental.

But there could be more cash in the kitty. While charting the landscape, FUNBIO found that protected areas in the state of Rio tend to attract significant amount of investment for environmental projects.

“It’s an interesting perspective,” says Serrí£o. “When you talk to a mayor, they’re likely to say that protected areas cost money and take away jobs, but we’ve found the opposite: places with protected areas are getting investment because of compensation and complementary investments, such as royalty payments from petroleum – and environmental investments are the 10th largest economy in the state of Rio.”

The Measure of Success

Because of its scope, the test of the fund’s effectiveness will lie not in the achievement of individual projects, but in the state of the protected areas four years down the road.

“We will be able to evaluate how areas have progressed from no infrastructure in place to plenty of infrastructure to fully functioning protected areas. We will know if a protected area has progressed from being a paper park to a truly consolidated protected area.”

The Pilot Initiative

Like the larger fund, the pilot project involves two mechanisms: one using the rules from the compensation fund, and one using rules from the donation fund.

The R$3.1 million compensation payment comes from German steel and engineering giant Thyssen-Krupp, while the donation of R$510,000 comes from Germany’s KfW Bank Group (formerly the Kreditanstalt fí¼r Wiederaufbau, or Reconstruction Credit Institute).

“It’s like hiring an architect to create a blueprint for house,” says Serrí£o. “We’ve given the state of Rio a blueprint for the mechanism, and now we’ve offered to build a scale model – the pilot project – to put that into practice to show you what it will look like.”

If the mechanism takes hold, you can bet it will spread to other states as well. At least four other Brazilian states have already begun the process of adapting the process to their own needs.



Steve Zwick is Managing Editor of Ecosystem Marketplace. He can be reached at [email protected].

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Oregon Experiments with Mixed Credits

California and Oregon have long been friendly environmental policy rivals. California has set environmental standards in many areas, particularly air quality. Oregon wrote the first bottle bill, the first state land-use law, and the first state climate-change law. But on the species banking front, California dominates, 94 to 2. An innovative new multi-credit system being pioneered in the Willamette Valley could change the game.

28 February 2009 | Three years ago, Oregon looked ready to re-invent conservation banking. Instead of establishing separate banks to offset wetland damage and other habitat loss caused by transportation construction, the Oregon Department of Transportation (ODOT) was going to roll it all into one package.

On this web site Bill Warncke, ODOT’s Mitigation and Conservation Program Coordinator, laid out an innovative approach that would address multiple resources simultaneously – including wetlands, water quality, fish and wildlife habitat, and endangered species.

Just months later, however, the plan was shelved.

State and federal agencies were hesitant about the accounting – and perhaps uncomfortable about the fact that the idea came from within the regulated community. A revision of ODOT’s work plan also significantly reduced the amount of habitat ODOT would harm. Backtracking to a more traditional conservation banking approach, ODOT chartered the first species bank in the state, a vernal pool bank, and is continuing work on a bank to protect the Oregon chub.

Oregon’s Challenges

Given the state’s focus on environment and its penchant for innovation, conservation banking in Oregon has been surprisingly slow to develop. Partly it’s because the species mix is not amenable. The timber value of 1000 acres of old growth forest is so high that it dwarfs any potential banking payoff. It’s also difficult to determine an appropriate banking strategy for a wide ranging species like salmon. Furthermore, many of the listed species in the state are plants, and the Section 9 consultations required by the Endangered Species Act that help drive banking don’t generally cover plants.

Kemper McMaster spent 30 years with the Fish and Wildlife Service, finishing his career with eight years in the Oregon office where he oversaw compliance with federal environmental laws. Now with California-based Wildlands, Inc., he’s helping develop its mitigation portfolio in the Pacific Northwest.

“We’re in the early phases,” he says. “Do we really want to do it?”

Regulatory Pushback and Sausages

A special mix of drivers, people, and market conditions make conservation banking work, but despite Oregon’s progressive reputation, McMaster still runs into bureaucratic resistance – regulators who believe that “banks promote development,” he says.

“It takes a policy attitude at senior managerial levels to bring banking to bear in an organized policy framework. And it takes staff-level engagement to implement those policies,” he continues. “In all cases, it somewhat resembles sausage-making. It’s a great product at the end, but getting there can be something you really don’t want to watch.”

Keeping Multi-Resource Credits Alive

Events in Oregon do merit a close watch. The multi-resource credit approach dropped by ODOT has been kept alive by activists and the consultants who helped develop it. With backing that reaches into the Governor’s office, Oregon is now home to several major projects that could profoundly shape the direction of conservation banking.

The Institute for Natural Resources at Oregon State is involved in a two-year research project to better integrate wetland and endangered species issues into the Byzantine transportation planning process. Sarah Vickerman, at the Portland office of Defenders of Wildlife, is spearheading an effort to develop a voluntary Marketplace for Nature in the Willamette and Chesapeake Bay regions.

The “Other” Ecosystem Marketplace

Furthest along, however, is the Ecosystem Marketplace Initiative of the Willamette Partnership.

The story begins in 1998, with efforts to develop a restoration plan for the Willamette River Basin, which includes much of Portland and extends south from there. The Willamette Partnership was formed in 2004, with input from incoming Governor Ted Kulongoski, to implement the restoration plan. The coalition includes conservationists, municipal leaders, businesses, farmers and scientists, and its goal is increasing the pace, scope, and effectiveness of conservation in the basin.

Finding the Regulatory Soft Spot

Building a market in ecosystem services was an early priority. In January of 2006, Harvard Business School strategy guru Michael Porter evaluated Oregon’s business plan and suggested that if the state could establish a regulatory environment that was both pro-business and pro-sustainability it would be “epic” for regional economic development. Later that year, the Partnership won a $779,000 Targeted Watershed Grant from the U.S. Environmental Protection Agency to assist in the design of the technical and legal framework needed to facilitate credit trading and banking of ecosystem service credits.

Leadership coalesced as well. In December of 2007, the Oregon Leadership Conference – a mainstream economic development project – put the establishment of an ecosystem marketplace on its agenda. Allen Alley, Governor Kulongoski’s Deputy Chief of Staff, and Bill Gaffi, General Manager of Oregon’s Clean Water Services, argued for a state-wide focus on ecosystem markets:

“Oregon is uniquely positioned to create the infrastructure that makes an ecosystem services marketplace possible, in part because a number of Oregon businesses, agencies, and non-profits have already made considerable market development investments.”

The Sum of the Parts

David Primozich, executive director of the Wilamette Partnership, says that ultimately an integrated market in ecosystem services should produce superior environmental results.

Environmental laws address specific problems like wastewater discharge or habitat destruction, but it’s impossible to cover everything. Even under full compliance with all existing federal and state regulations, ecosystem health in the Willamette Basin would probably continue to decline.

“If we look at the environment species-by-species, habitat-by-habitat and water-quality-parameter by water-quality-parameter – and we continue to manage and regulate in that way – we’ll always be dealing with the parts of an overall system, but the sum of those parts will not achieve our environmental goals,” says Primozich.

Narrow Goals and Broad Needs

For example, water temperature is a critical part of salmon habitat. Many municipalities and businesses are required by environmental regulations to offset discharges of warm water. Water temperature is a narrow environmental goal, and it can be achieved a variety of ways – including techniques that provide a variety of environmental benefits.

“The regulatory agencies are statutorily limited,” says Primozich. “They don’t have the ability right now to reward better, more comprehensive restoration of the type we need, in the places where we need it.”.

The result, he says, is that businesses will choose “projects that are really geared toward reducing temperature without regard to what the environment actually needs.”

The Ecosystem Service Advantage

Using an ecosystem services model, cities and businesses that release clean but warm water into rivers could finance the planting of streamside shade trees, wetland restoration, or floodplain reconnection. These systems cool water naturally, and provide many other ecological benefits besides. They are also expected to cost less than engineering solutions to water temperature.

“We know we’re not going to get the results we need ecologically if we don’t find a way to reward better, more comprehensive restoration,” says Primozich.

“We want the markets to facilitate strategic investment,” adds Sarah Vickerman, of Defenders of Wildlife, and a leading proponent of the ecosystem markets. “We don’t expect the market to do everything, but to help meet broader ecological goals we definitely want to build mechanisms to be able to combine these different markets,”

For example, in an area with a lot of endangered species, “if you have to do an individual bank for every species, it’s going to be a nightmare, and you will not get the scale. Projects are going to be small and scattered. So we would prefer a mechanism that deals with multiple species, even those that aren’t listed.”

The Complexity Conundrum

The big problem here is counting all the values in a way that satisfies the regulatory agencies. In 2007 the Partnership received a $656,000 Conservation Innovation Grant from the Natural Resources Conservation Service for “building a transparent and trusted accounting system”. The “Counting on the Environment” project will lay the groundwork for the Willamette Ecosystem Marketplace, an integrated ecosystem services market serving the entire Willamette Basin.

“If you’re going to measure across the landscape the benefits being provided by the ecosystem, then we need measurement systems that nobody has reached agreement on yet,” says Kevin Halsey, a consultant with Parametrix, which has been working on the project since the idea first hatched at ODOT. “There is always going to be this dynamic tension between a system that is simple enough to operate and robust enough to tell us something meaningful.”

It’s a paradigm shift. Environmental measurements used by the EPA such as the pollutant-focused TMDL (Total Maximum Daily Load) are very technical.

The Simplicity Solution

“Almost by default we have to go to engineered solutions to get to that level of rigor,” says Halsey. “You can’t really have compliance, or a guarantee of compliance, if what you’re trying to do is restore habitat. That’s one of the things that [in the past] has moved us away from an ecosystem approach, that requirement that we need to be able to calculate something down to such a minute amount.” Of course, the numbers still matter. “Once we have a way to count it that the regulators can agree to, then we have the ability to work with those land managers and help them understand the asset value of restoration.”

“We’re desperately trying to figure out a way to balance the precision in measuring these things with the practicality of implementing them,” adds Vickerman. “Because you want them to be credible, you want them to be scientifically valid. You want all of that and, at the same time, you could spend more money on measuring stuff than the benefits you get on the ground, if you’re not careful.”

Let the Project Begin!

In February of 2009 the “Counting on the Environment” working group reached agreement on the first currencies to test, agreement on the basic methods used to calculate the credits, and agreement on a strategy for integrating all of these values into a single market. As many as 5 pilot projects could be completed in the next two years.

“All the agencies that would need to approve this are at the table,” says a hopeful Bobby Cochran, the project manager, adding that they all agreed the five currency types being considered for the first phase are appropriate: wetland, prairie, salmonid, water quality for nutrients, and water quality for temperature.

“Everything we’re engaged in now is working toward regulatory approval for functions-based accounting,” says Primozich.

To complicate things, a site could score high as salmonid habitat, but have six in-stream barriers between the habitat and the fish population. It scores functionally as habitat, but is not of much value to the fish resources the project is trying to protect and restore.

“You’ve got a whole range of factors to consider,” he says. “How much of that is a mathematical, technical process that gets incorporated into the credit calculation tool, and how much is a policy process that gets incorporated into the rules?”

All pilot sites are potentially eligible for conservation credit transactions, though the landowners could choose to retire the credits instead. Field visits begin in March for all 5 sites. Among the first is Delta Ponds, a 150 acre site near Eugene, off the main stem of the Willamette River. The virtual exercise of calculating credits will include wetlands, water temperature, and salmonids. Target date for regulatory approval is August of 2009, with restoration to be completed a year later.

Ultimately, the Willamette could provide the first fully functional model of valuing a panoply of ecological services. This is just the beginning, cautions Cochran. “We’re doing what we can. This is version one.”



Erik Ness writes about science and the environment from Madison, Wisconsin. You can reach him through his website, www.erikness.com.

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Chesapeake Bay Water Scheme Gains Traction

Can Water Quality Trading (WQT) help revive the Chesapeake Bay? Perhaps – but only if each of the six Bay states and the District of Columbia agree to recognize discharge reductions in one state as credits in another. The Ecosystem Marketplace examines a voluntary initiative led by Forest Trends and the Katoomba Group designed to do what politics-as-usual has so far failed to accomplish.

25 June 2008 | Will Baker was all smiles at the June 10th Global Katoomba Meeting in Washington, DC.

“I would like to thank my new best friend, Dick Coombe,” he laughed, referring to the Regional Assistant Chief for the Natural Resources Conservation Service (NRCS).

Coombe had just announced a $500,000 Conservation Innovation Grant (CIG) for a project initiated two years ago by Katoomba Group and Forest Trends (publisher of the Ecosystem Marketplace) and since joined by the Chesapeake Bay Foundation (CBF), of which Baker is president, as well as the World Resources Institute (WRI) and others.

“We take the responsibility of what you’ve bestowed upon us very, very seriously,” added Baker.

That responsibility is the creation of a cluster of voluntary Water Quality Trading (WQT) pilot projects in the Chesapeake Bay Watershed, which spreads over 64,000 square miles and encompasses the District of Columbia and parts of New York, Pennsylvania, Delaware, Maryland, Virginia, and West Virginia.

Fragmentation and the Law

WQT schemes have been piloted across the watershed, but with little success – often because the discharge limits that should drive demand have been slow to materialize.

What’s more, each individual state is currently responsible for setting its own discharge limits and laying down the ground-rules for offsets in its part of the watershed, regardless of what the other states are doing. Such a fragmented approach simply doesn’t work in a shared body of water.

“The goal of this initiative is to develop instruments that can move across state borders,” says Forest Trends President Michael Jenkins, adding that voluntary reductions alone will not solve the Bay’s problems. “We’re hoping to illuminate the way, so that a future regulated market can think about a regional approach to these issues – sort of like an RGGI (Regional Greenhouse Gas Initiative) for water.”

The Market Mandate

Coombe, who was also instrumental in developing New York City’s innovative payment for watershed services deal, cited several reasons for awarding the grant.

In the short term, he says, the existence of a well-structured market mechanism can entice polluters to reduce their discharges even before rules and regulations exist. In the long term, he believes the project can help promote the development of uniform standards across the Bay, and that these standards will also promote the development of more and better mechanisms down the road.

“This fund can help develop water credit trading here in the Chesapeake Bay,” he says. “That’s crucial, because it could leverage additional dollars by bringing a market-based approach to a situation where you have a clear and present danger to the health of the Chesapeake Bay, and there’s a high risk of not moving quickly.”

Coombe envisions an evolving scheme that learns from its mistakes, and says the diverse array of partners involved in the project made the decision to award the grant that much easier.

“It’s really just an idea at this point,” he says, “but it’s an idea that’s fleshed out with an interesting group of partners like the Chesapeake Bay Foundation, Katoomba Group, Forest Trends, and WRI, who bring a lot of international expertise to the table.”

Dan Nees is an associate at one of those partners, the WRI, and he believes a well-structure market mechanism is the sine qua non of reviving the Bay.

“The entire Chesapeake Bay restoration effort will happen within markets,” he says. “Markets are the framework for everything that we do in our society – so we’ll do it with markets, or we won’t do it at all.”

Making the Market

The project, initially dubbed the “Nutrient Neutral” Fund, was conceived two years ago by Ricardo Bayon, then Director of the Ecosystem Marketplace and currently a Partner and Co-Founder of EKO Asset Management Partners.

He presented the idea to Jenkins, and together they began shopping it to potential partners and supporters, like the US Environmental Protection Agency (EPA), the US Department of Agriculture (of which the NRCS is a part), and various state environmental agencies. One of the groups they approached, the Blue Moon Fund, responded with a start-up grant of $25,000 and $25,000 more in matching funds that became available with the announcement of the CIG.

“The next step is to hire someone who can go out and pound the pavement and talk to the companies,” says Bayon.

The Carbon Precedent

Bayon says the still-unnamed project is patterned after efforts launched by early carbon innovators like the Carbon Neutral Company.

“We realized that the next big market is likely to be water,” he says, “And we started thinking of what happened in the carbon markets, and the fact that those markets grew in part because people like Future Forests (now the Carbon Neutral Company) and others were out there before the market developed trying to get people to buy carbon neutrality.”

The Pitch to Companies

Once the fund (Bayon prefers the term “nitrogen management company”) has an administrative team is in place, it will begin trying to persuade both “point-source” emitters like wastewater treatment plants and “nonpoint-source” emitters like farms to join the scheme – possibly by holding out the promise of a “Bay Friendly” or similar stamp of approval as a lure.

“I would love to get the Tysons and Purdues of the world involved in this,” says Jenkins. “Those are companies that understand the value of a good reputation – and they certainly have room to reduce their discharges.”

Bayon believes that if such groups join the scheme, they will be motivated to reduce their discharges even before the offset phase becomes active.

“The first thing that will happen is that they will have to determine how much they’re emitting,” he says. “This is a huge step, because once they see it, they’ll say, ‘I can reduce that,’ so we will probably see reductions on-site before they have to buy offsets.”

The Learning Curve

Then comes the hard part. After all, the scheme isn’t just selling offsets: it’s selling the more nebulous idea of participating in a program designed to see if offsets work.

“We want to have a bay-wide system that people will buy into,” says Jenkins. “It will be a mix of things – maybe a portfolio of 16 different, experimental projects – which is exactly what this type of program should be.”

In addition to point-source and nonpoint-source dischargers, Jenkins expects financial institutions to participate.

“For them, it’s about getting knowledge,” he says. “They’ll just come in, hopefully make an investment, suck all our knowledge up, and then be the ones to run with this going forward – and that’s fine. That’s a fair trade.”

Getting It Right

Experiment or not, the scheme is ultimately about results, says Tom Simpson, who heads the University of Maryland’s Chesapeake Bay Agricultural Programs and is acting as an adviser to the project.

“Any company that buys offsets will want to make sure that it’s investing in practices that result in real impacts,” he says. “For that reason, we need good, defensible estimates of the impact of the practices that we fund, as well as certainty that they are done right and maintained and operated, and probably some kind of verification system to ensure they are there over the long term.”

That will require plenty of tedious groundwork – such as the establishment of baselines, the development of ways of measuring runoff, and the modeling of various practices. Bayon says that will all pay off in the long term.

“The carbon markets got attacked when they were starting out – and are still getting attacked,” he says, adding that participating companies should be prepared to accept that they’ll end up reducing more than they get credit for.

“We have to be able to prove the additionality measurement, and be very conservative,” he says. “So, if you think you can generate five offsets, sell only three.”

Jenkins concedes it will be a fine line to walk.

“We have to keep things flexible, because we’ll be learning as we go,” he says. “But we also have to make sure that it’s above reproach.”

Image “Chesapeake Bay 2005” courtesy of Liam Gumley, Space Science and Engineering Center, University of Wisconsin-Madison.

Steve Zwick is Managing Editor of the Ecosystem Marketplace. He can be reached at [email protected].

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Now Online: “State of the Voluntary Carbon Markets 2008”

OTC volume of voluntary emission offsets nearly tripled in 2007, and Ecosystem Marketplace has once again teamed up with New Carbon Finance to crunch and analyze this fascinating market. The full report is now available for download.

Subtitled “Forging a Frontier” to highlight the emergence of more than twenty independent standards for verifying and validating voluntary offsets, this year’s State of the Voluntary Carbon Markets report has been compiled from 150 suppliers of carbon offsets, as well as registries and brokers.

The report was made possible with funding from top sponsors MGM International, EcoSecurities, Evolution Markets, APX Inc., as well as sponsors Blue Source, Baker McKenzie, Cantor CO2e, Sterling Planet, TÃœV SÃœD, and Equator Environmental.

This year’s survey identified several key trends in the voluntary carbon markets. Among the highlights:

• The average price paid to offset one tonne of CO2 or equivalent greenhouse gases rose 49% from 2006 to 2007, from $4.10/t to $6.10/t. Prices ranged from as a low as $1.80/t to as high as $300/t.

• Volume in the over-the-counter (OTC) market nearly tripled in 2007, to 42 million tonnes of carbon credits. Combined with the 23 million tonnes transacted on the CCX in 2007, a confirmed total volume of 65 million tonnes was transacted in the voluntary carbon market in 2007.

• Ecosystem Marketplace and New Carbon Finance valued the international OTC market at $258 million in 2007. Together with the CCX, which was valued at $72 million, the global voluntary market was worth a total of $331 million in 2007. This more than triples the 2006 market value of $97 million.

• In the OTC market, energy efficiency, renewable energy, methane destruction, and forestry/land based projects were the most dominant project types in 2007.

• The percentage of projects sourced from Asia nearly doubled, from 22% in 2006 to 39% in 2007, while the percentage of projects sourced in Africa actually declined both in market share (6% to 2%) and – more disturbingly – in absolute terms.

• Buyers of voluntary credits tend to purchase offsets that most closely resemble those of the compliance market rather than indulge in the sort of experimentation and innovation that many believe the markets offer.

“We’re seeing significant growth, almost tripling in volume, as well as signs of maturation in the market, such as standards and registries,” explained Katherine Hamilton, an author of the report and Associate Director at Ecosystem Marketplace.

“According to our estimates, the market value has even grown stronger than absolute volumes as buyers are willing to pay more for their offsets. Relative to 2006 the market value has grown by 240%, which is significantly higher than even the regulated markets,” noted Milo Sjardin, Head of North American Operations at New Carbon Finance.

About the Voluntary Carbon Market

Environmentally-aware companies have been funding clean development projects to offset their CO2 emissions for two decades, and until the Kyoto Protocol came into force, such transactions were entered into voluntarily, rather than to comply with emerging mandatory cap-and-trade schemes. Since the advent of the Kyoto Protocol, the voluntary niche has served as testing ground for new technologies and methodologies.

About Ecosystem Marketplace

Ecosystem Marketplace, a project of the non-profit Forest Trends, is a leading source of information on environmental markets and payment schemes for ecosystem services. In particular, we are interested in market-based approaches to the conservation of water-related ecosystem services, carbon sequestration, and the myriad benefits of biodiversity. Our publicly available information sources include annual reports, quantitative market tracking, weekly articles, daily news, and newsletters designed for different payments for environmental services stakeholders.

About New Carbon Finance

New Carbon Finance is the leading provider of information, analysis and insights into the North American, European and global carbon markets. New Carbon Finance constantly strives to provide the most accurate projections of future carbon market prices using proprietary fundamental analysis and models. The research underlying this report provides a crucial quantitative platform that will substantially enhance the understanding of the fast moving voluntary carbon market.

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