Opinion: The Pope Is Right On Climate, Wrong On Offsets

25 June 2015 | Pope Francis’s “Ecumenical Letter on Care for Our Common Home” is elegant, inspirational, and insightful. It may even prove to be transformational if people heed its call to deliver themselves from soul-sucking consumerism and immerse themselves in nature and the brotherhood of man.

The Pontiff rightly identifies the drivers of this mess: our disconnection from nature and from each other, our embrace of absolute freedom as a core spiritual value, and our ability to simply deny inconvenient truths. But he’s weak on the solution front, and he dismisses one of the most effective tools at our disposal because he believes it doesn’t “allow for the radical change which present circumstances require.”

The tool is carbon offsetting, which is the practice of reducing greenhouse-gas emissions by supporting activities that save endangered rainforest, distribute clean-burning cookstoves, or support other clean technologies. In the past five years, indigenous people have used offsetting to save their forests (by tapping a mechanism called REDD+) and demarcate their territories, while rural farmers around the world have used it to develop sustainable land-use practices.

The Pope fears that offsetting “may simply become a ploy which permits maintaining the excessive consumption of some countries and sectors,” which is an old concern about corporate indulgences that let companies “buy their way out” of their obligations to reduce emissions. That, however, isn’t how offsets are designed to work, and our research shows that isn’t even close to what’s happening right now. In fact, far from using offsets to buy their way out of their obligations, most companies are using them to reduce emissions beyond their immediate base of operations.

Earlier this year, we tapped into the Carbon Disclosure Project’s (now just “CDP) database of 1,882 companies, and we found that only 214 of them used offsets. Those 214, however, were using them as part of a comprehensive sustainability strategy, and they were doing a lot more to reduce emissions than were the companies that didn’t offset. In 2013 alone, they spent $41 billion to improve energy efficiency, design lower-carbon products, and educate both their employees and their consumers on the climate challenge – which is exactly the kind of awareness-raising the Pope is pushing for.

Most only turned to offsetting after reducing their own direct emissions, and they usually used their offsets to reduce emissions from their suppliers, and not from themselves.

On top of that, the most popular offsets were those that helped indigenous people and the rural poor save their endangered forests – activities the Pope embraces in other parts of his encyclical.

“It is essential to show special care for indigenous communities and their cultural traditions,” he writes. “For them, land is not a commodity but rather a gift from God and from their ancestors who rest there, a sacred space with which they need to interact if they are to maintain their identity and values.”

Later, he turns to the rural poor more generally, and he highlights their need for marketing and technological support.

“Agriculture in poorer regions can be improved through investment in rural infrastructures, a better organization of local or national markets, systems of irrigation, and the development of techniques of sustainable agriculture,” he writes. “New forms of cooperation and community organization can be encouraged in order to defend the interests of small producers and preserve local ecosystems from destruction. Truly, much can be done!”

Yes! But he fails to note that much is already being done – largely with the help of REDD+ finance. Across the Amazon, for example, indigenous people are using REDD+ in particular and offsetting in general to develop long-term, sustainable agriculture strategies and to support their traditional ways of living. In Africa, indigenous people are using REDD+ finance to secure their land rights and develop sophisticated land-use programs, while similar programs are underway around the world.

Offsetting, however, isn’t a complete and total “fix” to the climate mess, and it isn’t intended to be. Poorly-implemented, it may even become the ploy the Pope worries about. But done right, it’s an incredibly effective tool in a very large toolbox, yet it will only deliver on a large scale if it’s embedded in a functional, well-regulated, and global climate-change response. To develop that response, we need leadership, and the Pope is delivering on that front. Yet leadership that ignores viable, nuts-and-bolts solutions won’t deliver anything but words, and we have plenty of those.

 

Steve Zwick is Managing Editor of Ecosystem Marketplace. The views expressed are his alone and do not necessarily reflect those of Ecosystem Marketplace, Forest Trends, or their affiliates.
This post first appeared on The AnthropoZine. Click here to view the original.
The full findings are available for free in The Bottom Line: Taking Stock of the Role of Offsets in Corporate Carbon Strategies
Additional resources

Opinion: Offsets Are A Tool, Not An Indulgence

22 June 2015 | As twilight crawls across the steep slopes of Kenya’s Aberdares Hills, a mother kneels on her home’s earthen floor to fan the flames licking out of a chimney-like contraption. Where most people would see a block of bricks, she finds freedom. The more efficient “stove” means freedom from her family’s all-consuming demand for firewood fuel and endless miles of walking to gather it. Less time spent gathering firewood means more time to pursue an education. A profession. Less smoke inhalation means freedom to breathe – literally and figuratively.

Seven thousand miles away, a corporate sustainability officer sits across from a man who has just flown into New York City from Nairobi. His company installs efficient cookstoves in Kenya that generate far less carbon dioxide than standard stoves do. His company hired an auditor to verify the project’s climate impacts and earned several thousand carbon “offset” credits for those CO2 reductions. Now he hopes he can recoup his project’s costs by selling the offsets so he can distribute more cookstoves.

The woman sitting across from him represents a Fortune 500 company that generates greenhouse gas emissions, which she assumes will eventually be regulated. Her company needs to account for this future cost of carbon – now.

She’s already set in motion a strategy to slash greenhouse gas emissions by changing their manufacturing process, but what about flights? What about subcontractors? What about unavoidable energy use?

That’s why she’s having this conversation: if she can’t reduce emissions internally now, at least she can neutralize them by enabling less expensive reductions elsewhere through carbon offsetting.

The man from Nairobi is offering an investment in the climate and in sustainable development. It will lower the risk to the forest, empower women, and develop rural livelihoods. And, because of the rigorous process he went through to become carbon-certified, he can actually demonstrate those impacts.

Meanwhile, four thousand miles away at another (probably more ornate) table, Pope Francis is launching a passionate encyclical that calls the world – Catholic and non-Catholic – to climate action.

His 100+ page text indicates his recognition of the monumental crossroads at which decision-makers will pause for year-end climate talks in Paris in December. No longer grappling with questions of “Will they? Won’t they?” so much as “How? And who? And how much?”, negotiators will reveal which governments will acknowledge (“acknowledge” being polite for “pay for”) their contributions to climate change consequences and solutions.
Ahead of this historical crux, the pope directs attention to the church’s desired outcomes, the “shoulds”:  sustainable development, fairness, long-term thinking, and unselfishness. He acknowledges the sheer cost and longevity of the problem in an encyclical that is refreshingly forward about the overwhelming challenge of fixing the climate.

Unfortunately, it also falls back on decade-old, tried-and-untrue critiques of the most flexible means to pay for those solutions when he dismisses offsetting because he believes it doesn’t “allow for the radical change which present circumstances require.” It’s a new twist on the old critique comparing offsets to “indulgences” that let sinners buy their way into Heaven, but it’s a comparison that just doesn’t hold up.

Our research finds tens of thousands of transactions like the one described above – where development objectives are being met through corporate climate responses. For every bad actor – and, yes, they do exist – there are hundreds of people acting in good faith to address the climate challenge.

Overhauling our energy, communications, building, transportation, and communications infrastructure doesn’t happen overnight. It is certainly not cheap. Offsets enable immediate action in the midst of this long-term transition. They are not – and should not be – the sole solution but they are a very necessary part of it. That’s exactly how companies are using them: not “this or that” but “this and that”.

International decision-makers are realizing that with respect to climate finance, it similarly “takes all kinds”. This creativity is critical to craft a pope-scale climate change response, which will cost trillions of dollars – money that no one sector, country, or even hemisphere has at its disposal.

That is why transitioning countries like China and Brazil are bucking the over-simplified paradigm of north-south victimization to make ambitious domestic contributions. It is why organizations like Forest Trends are pursuing public-private solutions like green bonds that attract private capital with public reassurance, to inject real cash into developing country forest protection and sustainable agriculture. It is why Germany and Norway have spent hundreds of millions of dollars in purely-public bilateral finance for Amazon conservation.

It is why carbon offset markets cannot be rejected, because market-based innovations underpin all of these policies as a result of the last decade’s billions of dollars in offset demand. And in the face of the challenges that Pope Francis elegantly describes, no decision-maker should reject proven solutions that bring CEOs, innovators, and at-need communities to the table around real investment in sustainability.

Molly Peters-Stanley is Managing Director of Ecosystem Marketplace, but the views expressed here are her own.

The full findings cited here are available for free in The Bottom Line: Taking Stock of the Role of Offsets in Corporate Carbon Strategies

Opinion: The Pope Is Right On Climate, Wrong On Offsets

25 June 2015 | Pope Francis’s “Ecumenical Letter on Care for Our Common Home” is elegant, inspirational, and insightful. It may even prove to be transformational if people heed its call to deliver themselves from soul-sucking consumerism and immerse themselves in nature and the brotherhood of man.

The Pontiff rightly identifies the drivers of this mess: our disconnection from nature and from each other, our embrace of absolute freedom as a core spiritual value, and our ability to simply deny inconvenient truths. But he’s weak on the solution front, and he dismisses one of the most effective tools at our disposal because he believes it doesn’t “allow for the radical change which present circumstances require.”

The tool is carbon offsetting, which is the practice of reducing greenhouse-gas emissions by supporting activities that save endangered rainforest, distribute clean-burning cookstoves, or support other clean technologies. In the past five years, indigenous people have used offsetting to save their forests (by tapping a mechanism called REDD+) and demarcate their territories, while rural farmers around the world have used it to develop sustainable land-use practices.

The Pope fears that offsetting “may simply become a ploy which permits maintaining the excessive consumption of some countries and sectors,” which is an old concern about corporate indulgences that let companies “buy their way out” of their obligations to reduce emissions. That, however, isn’t how offsets are designed to work, and our research shows that isn’t even close to what’s happening right now. In fact, far from using offsets to buy their way out of their obligations, most companies are using them to reduce emissions beyond their immediate base of operations.

Earlier this year, we tapped into the Carbon Disclosure Project’s (now just “CDP) database of 1,882 companies, and we found that only 214 of them used offsets. Those 214, however, were using them as part of a comprehensive sustainability strategy, and they were doing a lot more to reduce emissions than were the companies that didn’t offset. In 2013 alone, they spent $41 billion to improve energy efficiency, design lower-carbon products, and educate both their employees and their consumers on the climate challenge – which is exactly the kind of awareness-raising the Pope is pushing for.

Most only turned to offsetting after reducing their own direct emissions, and they usually used their offsets to reduce emissions from their suppliers, and not from themselves.

On top of that, the most popular offsets were those that helped indigenous people and the rural poor save their endangered forests – activities the Pope embraces in other parts of his encyclical.

“It is essential to show special care for indigenous communities and their cultural traditions,” he writes. “For them, land is not a commodity but rather a gift from God and from their ancestors who rest there, a sacred space with which they need to interact if they are to maintain their identity and values.”

Later, he turns to the rural poor more generally, and he highlights their need for marketing and technological support.

“Agriculture in poorer regions can be improved through investment in rural infrastructures, a better organization of local or national markets, systems of irrigation, and the development of techniques of sustainable agriculture,” he writes. “New forms of cooperation and community organization can be encouraged in order to defend the interests of small producers and preserve local ecosystems from destruction. Truly, much can be done!”

Yes! But he fails to note that much is already being done – largely with the help of REDD+ finance. Across the Amazon, for example, indigenous people are using REDD+ in particular and offsetting in general to develop long-term, sustainable agriculture strategies and to support their traditional ways of living. In Africa, indigenous people are using REDD+ finance to secure their land rights and develop sophisticated land-use programs, while similar programs are underway around the world.

Offsetting, however, isn’t a complete and total “fix” to the climate mess, and it isn’t intended to be. Poorly-implemented, it may even become the ploy the Pope worries about. But done right, it’s an incredibly effective tool in a very large toolbox, yet it will only deliver on a large scale if it’s embedded in a functional, well-regulated, and global climate-change response. To develop that response, we need leadership, and the Pope is delivering on that front. Yet leadership that ignores viable, nuts-and-bolts solutions won’t deliver anything but words, and we have plenty of those.

 

Steve Zwick is Managing Editor of Ecosystem Marketplace. The views expressed are his alone and do not necessarily reflect those of Ecosystem Marketplace, Forest Trends, or their affiliates.
This post first appeared on The AnthropoZine. Click here to view the original.
The full findings are available for free in The Bottom Line: Taking Stock of the Role of Offsets in Corporate Carbon Strategies
Additional resources

Opinion: Offsets Are A Tool, Not An Indulgence

22 June 2015 | As twilight crawls across the steep slopes of Kenya’s Aberdares Hills, a mother kneels on her home’s earthen floor to fan the flames licking out of a chimney-like contraption. Where most people would see a block of bricks, she finds freedom. The more efficient “stove” means freedom from her family’s all-consuming demand for firewood fuel and endless miles of walking to gather it. Less time spent gathering firewood means more time to pursue an education. A profession. Less smoke inhalation means freedom to breathe – literally and figuratively.

Seven thousand miles away, a corporate sustainability officer sits across from a man who has just flown into New York City from Nairobi. His company installs efficient cookstoves in Kenya that generate far less carbon dioxide than standard stoves do. His company hired an auditor to verify the project’s climate impacts and earned several thousand carbon “offset” credits for those CO2 reductions. Now he hopes he can recoup his project’s costs by selling the offsets so he can distribute more cookstoves.

The woman sitting across from him represents a Fortune 500 company that generates greenhouse gas emissions, which she assumes will eventually be regulated. Her company needs to account for this future cost of carbon – now.

She’s already set in motion a strategy to slash greenhouse gas emissions by changing their manufacturing process, but what about flights? What about subcontractors? What about unavoidable energy use?

That’s why she’s having this conversation: if she can’t reduce emissions internally now, at least she can neutralize them by enabling less expensive reductions elsewhere through carbon offsetting.

The man from Nairobi is offering an investment in the climate and in sustainable development. It will lower the risk to the forest, empower women, and develop rural livelihoods. And, because of the rigorous process he went through to become carbon-certified, he can actually demonstrate those impacts.

Meanwhile, four thousand miles away at another (probably more ornate) table, Pope Francis is launching a passionate encyclical that calls the world – Catholic and non-Catholic – to climate action.

His 100+ page text indicates his recognition of the monumental crossroads at which decision-makers will pause for year-end climate talks in Paris in December. No longer grappling with questions of “Will they? Won’t they?” so much as “How? And who? And how much?”, negotiators will reveal which governments will acknowledge (“acknowledge” being polite for “pay for”) their contributions to climate change consequences and solutions.
Ahead of this historical crux, the pope directs attention to the church’s desired outcomes, the “shoulds”:  sustainable development, fairness, long-term thinking, and unselfishness. He acknowledges the sheer cost and longevity of the problem in an encyclical that is refreshingly forward about the overwhelming challenge of fixing the climate.

Unfortunately, it also falls back on decade-old, tried-and-untrue critiques of the most flexible means to pay for those solutions when he dismisses offsetting because he believes it doesn’t “allow for the radical change which present circumstances require.” It’s a new twist on the old critique comparing offsets to “indulgences” that let sinners buy their way into Heaven, but it’s a comparison that just doesn’t hold up.

Our research finds tens of thousands of transactions like the one described above – where development objectives are being met through corporate climate responses. For every bad actor – and, yes, they do exist – there are hundreds of people acting in good faith to address the climate challenge.

Overhauling our energy, communications, building, transportation, and communications infrastructure doesn’t happen overnight. It is certainly not cheap. Offsets enable immediate action in the midst of this long-term transition. They are not – and should not be – the sole solution but they are a very necessary part of it. That’s exactly how companies are using them: not “this or that” but “this and that”.

International decision-makers are realizing that with respect to climate finance, it similarly “takes all kinds”. This creativity is critical to craft a pope-scale climate change response, which will cost trillions of dollars – money that no one sector, country, or even hemisphere has at its disposal.

That is why transitioning countries like China and Brazil are bucking the over-simplified paradigm of north-south victimization to make ambitious domestic contributions. It is why organizations like Forest Trends are pursuing public-private solutions like green bonds that attract private capital with public reassurance, to inject real cash into developing country forest protection and sustainable agriculture. It is why Germany and Norway have spent hundreds of millions of dollars in purely-public bilateral finance for Amazon conservation.

It is why carbon offset markets cannot be rejected, because market-based innovations underpin all of these policies as a result of the last decade’s billions of dollars in offset demand. And in the face of the challenges that Pope Francis elegantly describes, no decision-maker should reject proven solutions that bring CEOs, innovators, and at-need communities to the table around real investment in sustainability.

Molly Peters-Stanley is Managing Director of Ecosystem Marketplace, but the views expressed here are her own.

The full findings cited here are available for free in The Bottom Line: Taking Stock of the Role of Offsets in Corporate Carbon Strategies

Climate And Sustainability Experts Release New Multi-Language Guide To INDCs

To help interpret the well-known complexities of countries’ Intended Nationally Determined Contributions (INDCs), the Climate Development and Knowledge Network have released an updated version of their popular Guide to INDCs. This new edition continues to focus on Least Developed Countries with new material on Small Island Developing States.


2 June 2015 |
The Ricardo-AEA, a sustainability consultancy, have revised their popular Guide to INDCs, which helps countries to prepare their Intended Nationally Determined Contributions (INDCs) for the UNFCCC (United Nations Framework Convention on Climate Change). This new edition of May 2015 has been revised following discussions with stakeholders and includes new material and specific examples for Small Island Developing States (SIDS) – in addition to its original focus on Least Developed Countries (LDCs). In response to strong demand, the two entities provide this revised edition in French: Guide de Préparation des INDC and in Spanish: Guí­a para las INDCs.

INDCs are contributions by the Parties to the UNFCCC towards achieving the ultimate objective of the Convention: to prevent dangerous human interference with the Earth’s climate. The UNFCCC has invited all Parties to communicate to the secretariat their INDCs well in advance of COP 21 and it will prepare by 1 November 2015 a synthesis report on the aggregate effect of the INDCs that have been submitted before 1 October.

LDCs and SIDS have contributed less to current global emissions than other countries; so the burden of cutting emissions will rest with major economies. However to avoid dangerous levels of global warming, all countries will have to play a role. The UN has communicated that contributions towards a global agreement should reflect the ‘special circumstances’ of these low-emitting countries.

Many LDC and SIDS governments are preparing INDCs and see the advantages in doing so:

  • demonstrating that their plans for economic growth are compatible with low-carbon, climate-resilient development;
  • highlighting how climate mitigation actions can be planned in ways that enhance climate adaptation, and deliver other immediate benefits to society, such as poverty reduction, improved public health, energy access and energy security;
  • capturing the potential for reducing or avoiding greenhouse gas emissions in climate adaptation plans and programmes;
  • encouraging other countries to take equivalent action, and so increasing global ambition and reducing climate impacts; and
  • attracting financial, capacity-building, technology transfer and other types of international support.

This guide seeks to address the broad range of approaches being considered by LDCs and SIDS in preparing their INDCs, including the challenges they face and different national circumstances and levels of capacity, preparedness and ambition. The Guide to INDCs provides a practical example of how an INDC could be structured, with examples to illustrate a narrative and sources of background information.

The Guide to INDCs is not an official publication of the UNFCCC, nor is it endorsed by the UNFCCC. However, it was developed in consultation with a range of stakeholders, including authors of existing INDC guidance, representatives from LDCs, and organisations working with CDKN to support INDC preparations. It draws from the INDCs which have already been submitted, and a range of referenced literature.

 

Additional resources

On The Road To Paris. Next Stop: Bonn, June 2015

Mid-year climate talks begin this week in Bonn, Germany – a critical but largely overlooked pit-stop on the way to year-end talks in Paris. Gustavo Silva-Chavez of Forest Trends points out that land-use issues still account for 24% of all greenhouse gas emissions, and will play a central role in whatever solution emerges in Paris.

 

1 June 2015 | Visas have been secured, travel arrangements have been made, and the international climate policy community including the Forest Trends COP team, is arriving in Germany for the latest round of UN climate change meetings. They will take place 1-11 June in Bonn, Germany and there is added urgency to make significant progress and set the stage for a successful global deal in Paris later this year. Normally, the June UN sessions focus on scientific and technical issues but this year, additional meetings specifically on the draft overall global deal have been added to the agenda.

Starting at last year’s UN meeting in Lima (or COP which stands for Conference of the Parties), countries started to add their preferred options on some of the key issues, including the overall temperature goal, the legal framework, transparency issues, mitigation, finance and REDD+. As a result, when 196 countries start adding their options, we now have a bloated text that has every option possible. Comprehensive? Yes. Ready for an actual negotiation? No.

Why does Bonn Matter?

The negotiations for an overall comprehensive agreement will take place under the current version of the negotiation text that is currently almost 100 pages. The more difficult process of elimination, where specific options are deleted, will wait until the text is shortened and more manageable. It is hard to say what success looks like. 60 pages? 50 pages? There is no exact page number that Forest Trends can point to as a successful outcome but progress has to be made. Otherwise, we will not have time to get down to something that can be negotiated by Ministers and Heads of State in Paris.

Other Issues on the Agenda

REDD+ in SBSTA–Every year, the June negotiations in Bonn focus primarily on scientific and technical issues. These take place under the Subsidiary Body for Scientific and Technological Advice, or SBSTA for short. This is the agenda:

  1. Whether there is a need for further guidance on issues relating to safeguards
  2. Developing methodological guidance on non-market-based approaches
  3. Methodological issues related to non-carbon benefits
Forest Trends believes that the current guidance on safeguards is sufficient for now and that countries must implement and respect these safeguards. Countries should think of the UN safeguards as a “floor” and should aim to strengthen them over time with technical assistance and financing, if needed. We also think that countries are free to decide if they want to access carbon markets or not, but that efforts to dismiss carbon markets are not helpful. Forest Trends has been tracking REDD+ finance flows in 14 countries as part of our REDDX project, and our findings clearly indicate that current financing of REDD+, which is primarily from donor countries and not carbon markets, is insufficient to reduce global deforestation at the scale needed to avoid dangerous climate change. And finally, non-carbon benefits can mean a lot of things but a lack of agreement should not prevent REDD+ from going forward and be a fundamental pillar of mitigation in the Paris agreement.

Land use–The agreement at COP 21 in Paris needs to address all sources of emissions. Although most people think of climate change as a fossil fuel problem, agriculture, forestry, land use change, and other land uses, (the “land sector”), account for about 24% of global greenhouse gas emission. This sector must be part of the Paris agreement and together with NGO partners, Forest Trends will be working to make sure that land use is included in the text out of Bonn.

Forest Trends on the ground

Forest Trends staff will be on the ground covering these meetings, with a focus on the ADP negotiations, as well as mitigation, finance, land use and REDD+ issues. Stay tuned for further updates and follow us on Twitter and Facebook.
Gustavo Silva-Chavez is the Program Manager of Forest Trends’ Forest Trade and Finance program. He can be reached at gsilva@forest-trends.org.

Opinion Rivaling Gold: Ecological Assets Outperform Traditional Commodities

26 May 2015 | The market value of compensatory mitigation credits for wetland, stream and species conservation have risen consistently over the past decade, according to a recent review of publically available mitigation credit price data undertaken by Eco-Asset Solutions Inc. (EASI) of Redwood City, California.

EASI analyzed over 500 available internet records on price information for wetlands and stream credits, California species and habitat credits, along with nutrient credits traded in the Chesapeake Bay and the Susquehanna River Basin. These records ranged from as far back as the late 1980s to this year. The outcome of this comprehensive research is the Mitigation Credit Price Report.

Mitigation credits represent the partial value of ecosystem services such as water filtration, aquifer recharge and biodiversity maintenance. When they are bought, sold or traded in the marketplace they take on the features of other monetized environmental commodities such as carbon credits or renewable energy credits. In each case these credits represent bottom line value to businesses. The value trend for these commodities suggests that mitigation credits have established themselves firmly in the economy.

 EcoAsset1

The positive trend for these wetland, stream and conservation credit values has been strong, based on market value insights made possible by U.S. Army Corps of Engineers’ (ACOE) information presented at the National Mitigation Banking Association (NMBA) annual meeting held in Orlando, Florida.

Steve Martin of the ACOE Institute for Water Resources, illustrated ‘wetland acreage debited’ for various Corps District Offices from 2005 through 2014 (Fig. 1).

 Eco_Asset

The trend line shows a gradual long term rise in credit demand despite the downturn of construction activity (and subsequent decline in mitigation demand) attributed to the recession of 2006-2011.

Acre-debits typically result in demand for mitigation credits used to compensate for development impacts in compliance with the federal Clean Water Act, ensuring no net loss of wetland ecosystem services. Acre-debits may occasionally be satisfied by payment of In Lieu fees or through permittee-responsible mitigation. But the increasing trend has been to rely on third party mitigation credits. Credits are available from approved mitigation banks across the U.S. and represent a form of ecological asset – fungible environmental products or commodities bought and sold in the environmental marketplace.

Summarizing the ACOE District information allows us to develop a trend line for wetland credit demand shown in Fig. 2. Next, combining the ACOE record of credit demand with the average market value of those credits through EASI’s price report provides a first-ever appreciation of the market power of mitigation credits. Credit market value is derived from price information but reliable, representative price data has been hard to find, making EASI’s analysis all the more significant.

EcoAsset8

Crunching the Numbers

Combining the total annual wetland credit demand (Figs. 1 and 2) with average annual credit prices (Fig. 3) illustrates the total value of the U.S. wetlands mitigation credit market between 2005 and 2015 (Fig. 4).

Studying the trend line, which averages annual market value year to year, we see a seven-fold increase (700%) – from roughly $250 M to $1.8 B – in wetland credit market value over the last decade.

Very few market commodities have performed as well over the same period of time.

We might even say that wetland credits have outperformed many traditional commodities. For example, compare the trend lines for wetland credit prices in Ohio, North Carolina and California, or the value of California habitat credits (Figs. 5-6), with value trends for farmland, corn and cattle (Figs. 7- 10).

 Figure 5 Figure 6



Farm and ranch land values have varied modestly from year to year but the decadal trend is relatively flat, averaging about $3500/acre nationally, according to AgWeb.com.
Corn prices, on the other hand have been falling sharply since late 2010, from around $7 per bushel to about $3.80 today.

Prices for live cattle grew in 2014 after plateauing from 2012- 2013. Modest increases are projected for the rest of 2015. This is good news for ranchers since the price of feed has decreased in relation to falling corn prices. Ranch profits will rise if consumers continue to buy beef.

Perhaps of equal interest, ecological asset trends suggest there are new opportunities for rangeland owners on underutilized properties they may own or manage. While mitigation credit prices are high, ranchers may want to develop ecological assets right alongside livestock, hay or other traditional agricultural commodities.

Mitigation credit ‘stacking’, developing multiple eco-asset streams from the same property base, is now an accepted practice in most areas.

 Figure 7

 Figure 8

Eco-assets have outperformed even gold over the past few years. The symbolism of this is irresistible: gold has long been at the center of the world’s international monetary system. Mitigation credits can now be increasingly seen as the focus of value representing monetized ecological health and related quality of life. This reinforces the meaning of what was once a tongue-in-cheek expression – that environmental commodities were like ‘green gold’ representing revenues earned by protecting or restoring ecosystem services.

Green gold is no longer a euphemism based on results of this price trend comparison. In fact, if trends continue, someday soon we may need to differentiate between green gold and ‘gold gold’ – so people will know for sure the kind of value being discussed.

William G. Coleman has 40 years’ experience in environmental and sustainability management, specializing in ecological asset development and market management for agri-business and energy companies. He currently teaches global change and sustainability topics at UC Berkeley Extension and manages his own consulting enterprise, Eco-Asset Solutions Inc. in the San Francisco area. He can be reached at wcoleman@ecoassetsolutionsinc.com.

Is Your Balance Sheet An Effective Management Tool For Today And Tomorrow?

Water challenges, climate change, and other such issues are changing the business operating context like nothing we’ve ever seen before. Future-oriented companies are beginning to consider and account for impacts – with the plan of out-competing laggards to this change in context and business measures.

 

20 May 2015 | CFOs and accountants should be bracing themselves for shake-ups in the coming years – Sarbanes-Oxley type shake-ups, but orders of magnitude more complex, in part because the dynamics of these bubbling changes are more diverse, more widespread, and less well-tracked by the average CFO and accounting team than were the accounting issues that Sarbanes-Oxley addressed.

But they’re not hidden. The Intergovernmental Panel on Climate Change (IPCC) has been highlighting them for decades, and the Carbon Tracker Initiative crystallized them in 2013 for fund managers when it pointed out that most fossil fuel “assets” are, in fact, liabilities. Last year’s Risky Business report pointed out that “Damages from storms, flooding, and heat waves are already costing local economies billions of dollars,” in the words of co-chair Michael Bloomberg.

Yes, the climate is changing, in dangerous and disruptive ways, with further pressure coming from water challenges and corporate water risk, as made clear by the CEO Water Mandate and maps by WRI’s Aqueduct Tool, among many others.

These risks are staring us all in the face, but few companies have accounted for them – although anyone who owns shares in fossil-fuel companies can tell you that the market is beginning to take notice.

Fortunately, a small set of business leaders see the proverbial writing on the wall and have set to work on the next generation of corporate accounting.

For example, sportswear giant Puma developed the Environmental Profit and Loss (EP&L) statement, which is being integrated by its parent, Kering, across all its brands (including Gucci, Stella McCartney, Volcom, and many others). The B Team, co-founded by Jochen Zeitz, Kering’s Director and Chair of the company’s Sustainable Development Committee, has committed to scale these efforts across the business world. Novo Nordisk has published an EP&L. Also, the social business Pants to Poverty has developed Accounting in 3D”, in collaboration with Trucost and GIST. Dow is assessing ”nature’s value to a company, in detail and with monetization that makes integration into financial spreadsheets feasible.

And, for those who say that it will be impossible to change accounting without a standardized format, the response is that efforts are already well-underway as Natural Capital Coalition is supporting the development of a protocol” for corporate natural capital accounting. (Also noteworthy is that work is underway at a country scale on integrating environmental issues into a System of National Accounts (SNA). Splicing environmental issues into Gross Domestic Product (GDP) is being piloted by the World Bank within the Wealth Accounting and Valuation of Ecosystem Services partnership.

Sarbanes-Oxley may turn out to have been a small shift compared to bringing environmental and social issues internal to businesses. Externalities may be on the cusp of being internalized.

At core, the drivers are simply a matter of demand and supply—in this case demand on and supply from ecological, hydrological, and atmospheric systems. Global demand for nature’s services”—such as clean water, wild fish, timber, fertile soils, and many other goods and services—is growing, after years of undercutting the ability of natural systems to produce the supply of these services. Simply put, ecosystem malfunction risk is real. Understanding impacts on, as well as the need for investments in, green infrastructure is key to maintaining a stable business operating context.

In response, forward-looking companies have begun to integrate their impact—such as in the form of EP&L findings—into the classic accounting terminology.

The next step is to complete the full accounting equation: Assets = Liabilities + Equity. With such further developments, accounting will be transformed by creating “Environmental Balance Sheets” (EBS) to complement EP&Ls. An EBS would expand thinking about “environmental assets” far beyond the current approach, including wastewater treatment, smokestack scrubbers, and ‘hard’ / built infrastructure to cut pollution. A real Environmental Balance Sheet would include the functioning ecosystems that provide the services on which a company relies. Just as Kering’s EP&L traces impacts back to the raw material tier, an EBS will take account of the stocks of natural capital on which a company depends and impacts throughout its supply chain. In this way, an EBS would document positive outcomes from corporate investments in watershed protection and function—such as payments for watershed services that Coca Cola is making, or biomimcry-inspired design that eliminates the need for toxic, bio-accumulative, persistent compounds.

With an Environmental Balance Sheet, companies could book asset payments that they are making in restorative land management to ensure long-term access to water. Previously accounted for only as philanthropy, verified reforestation and forest protection projects—work that sequesters carbon, cuts erosion, improves water filtration into underground aquifers, while maintaining biodiversity and local community benefits—would become valuable assets to companies. The corporate finance team could count investments in environmental assets to offset environmental liabilities. In addition, annual benefits produced by that asset—such as carbon credits, stable water supply, and other returns—could balance the environmental losses as recorded in the EP&L and could be used directly by local facilities (especially in the case of water).

Environmental Balance Sheets would enable corporate leaders to put good behavior where it belongs—on the balance sheet— because it delivers real long-term business value to a company.

Measuring long-term, environmental impacts (both negative as well as positive), and attaching values for social and environmental aspects within corporate accounting will transform how companies perceive of and act to avoid impacts. ‘Balancing’ these costs through investing in green infrastructure or product / production redesign would provide incentives to capture the value for companies managing their businesses more sustainably. The financial return on sustainability will become obvious, and corporate managers would be incentivized to act on information now available in the public domain that, if ignored, could cause PR debacles, lost sales and market share.

The bottom line is that accounting was developed to give management an accurate picture of the company and to provide investors with an honest basis for deciding whether to buy in. An Environmental Balance Sheet would do a better job of reflecting corporate impacts, risks, and prospects than current approaches.

The tinder is in place. And the sparks for change are all present. It’s a good time to begin the conversation with your CFO and accounting team.

 

Sissel Waage is Director of biodiversity and ecosystem services at BSR, a non-profit organization working with companies to build sustainable business strategies. David Meyers is Principle of Green Ant Advisors with over 25 years of experience in sustainability, business strategy and management and environmental economics.

Opinion Rivaling Gold: Ecological Assets Outperform Traditional Commodities

26 May 2015 | The market value of compensatory mitigation credits for wetland, stream and species conservation have risen consistently over the past decade, according to a recent review of publically available mitigation credit price data undertaken by Eco-Asset Solutions Inc. (EASI) of Redwood City, California.

EASI analyzed over 500 available internet records on price information for wetlands and stream credits, California species and habitat credits, along with nutrient credits traded in the Chesapeake Bay and the Susquehanna River Basin. These records ranged from as far back as the late 1980s to this year. The outcome of this comprehensive research is the Mitigation Credit Price Report.

Mitigation credits represent the partial value of ecosystem services such as water filtration, aquifer recharge and biodiversity maintenance. When they are bought, sold or traded in the marketplace they take on the features of other monetized environmental commodities such as carbon credits or renewable energy credits. In each case these credits represent bottom line value to businesses. The value trend for these commodities suggests that mitigation credits have established themselves firmly in the economy.

 EcoAsset1

The positive trend for these wetland, stream and conservation credit values has been strong, based on market value insights made possible by U.S. Army Corps of Engineers’ (ACOE) information presented at the National Mitigation Banking Association (NMBA) annual meeting held in Orlando, Florida.

Steve Martin of the ACOE Institute for Water Resources, illustrated ‘wetland acreage debited’ for various Corps District Offices from 2005 through 2014 (Fig. 1).

 Eco_Asset

The trend line shows a gradual long term rise in credit demand despite the downturn of construction activity (and subsequent decline in mitigation demand) attributed to the recession of 2006-2011.

Acre-debits typically result in demand for mitigation credits used to compensate for development impacts in compliance with the federal Clean Water Act, ensuring no net loss of wetland ecosystem services. Acre-debits may occasionally be satisfied by payment of In Lieu fees or through permittee-responsible mitigation. But the increasing trend has been to rely on third party mitigation credits. Credits are available from approved mitigation banks across the U.S. and represent a form of ecological asset – fungible environmental products or commodities bought and sold in the environmental marketplace.

Summarizing the ACOE District information allows us to develop a trend line for wetland credit demand shown in Fig. 2. Next, combining the ACOE record of credit demand with the average market value of those credits through EASI’s price report provides a first-ever appreciation of the market power of mitigation credits. Credit market value is derived from price information but reliable, representative price data has been hard to find, making EASI’s analysis all the more significant.

EcoAsset8

Crunching the Numbers

Combining the total annual wetland credit demand (Figs. 1 and 2) with average annual credit prices (Fig. 3) illustrates the total value of the U.S. wetlands mitigation credit market between 2005 and 2015 (Fig. 4).

Studying the trend line, which averages annual market value year to year, we see a seven-fold increase (700%) – from roughly $250 M to $1.8 B – in wetland credit market value over the last decade.

Very few market commodities have performed as well over the same period of time.

We might even say that wetland credits have outperformed many traditional commodities. For example, compare the trend lines for wetland credit prices in Ohio, North Carolina and California, or the value of California habitat credits (Figs. 5-6), with value trends for farmland, corn and cattle (Figs. 7- 10).

 Figure 5 Figure 6



Farm and ranch land values have varied modestly from year to year but the decadal trend is relatively flat, averaging about $3500/acre nationally, according to AgWeb.com.
Corn prices, on the other hand have been falling sharply since late 2010, from around $7 per bushel to about $3.80 today.

Prices for live cattle grew in 2014 after plateauing from 2012- 2013. Modest increases are projected for the rest of 2015. This is good news for ranchers since the price of feed has decreased in relation to falling corn prices. Ranch profits will rise if consumers continue to buy beef.

Perhaps of equal interest, ecological asset trends suggest there are new opportunities for rangeland owners on underutilized properties they may own or manage. While mitigation credit prices are high, ranchers may want to develop ecological assets right alongside livestock, hay or other traditional agricultural commodities.

Mitigation credit ‘stacking’, developing multiple eco-asset streams from the same property base, is now an accepted practice in most areas.

 Figure 7

 Figure 8

Eco-assets have outperformed even gold over the past few years. The symbolism of this is irresistible: gold has long been at the center of the world’s international monetary system. Mitigation credits can now be increasingly seen as the focus of value representing monetized ecological health and related quality of life. This reinforces the meaning of what was once a tongue-in-cheek expression – that environmental commodities were like ‘green gold’ representing revenues earned by protecting or restoring ecosystem services.

Green gold is no longer a euphemism based on results of this price trend comparison. In fact, if trends continue, someday soon we may need to differentiate between green gold and ‘gold gold’ – so people will know for sure the kind of value being discussed.

William G. Coleman has 40 years’ experience in environmental and sustainability management, specializing in ecological asset development and market management for agri-business and energy companies. He currently teaches global change and sustainability topics at UC Berkeley Extension and manages his own consulting enterprise, Eco-Asset Solutions Inc. in the San Francisco area. He can be reached at wcoleman@ecoassetsolutionsinc.com.

Equivalency, Streamlining and Stacking: Hot Topics Of This Year’s Mitigation Banking Conference

The 18th National Mitigation and Ecosystem Banking Conference saw a refreshing mix of attendees and sessions along with healthy debate regarding key issues in today’s banking industry. Lauren Hutchison, a PhD student in the wetland mitigation field at Texas A&M University-Corpus Christie provides highlights and a brief summary of the annual event.

13 May 2015 | Over 400 people from six countries gathered in Orlando, Florida last week for the 2015 National Mitigation and Ecosystem Banking Conference (NMEBC). This uniquely independent conference drew a wide mix of wetland and conservation bankers, bank investors and consultants as well as regulators and bank stakeholders.

Attendees came for a plethora of reasons. The new kids on the block came to learn how to develop mitigation banks and in lieu fee programs, while individuals knee deep in mitigation banking came to catch up with old friends and talk business. Seasoned attendees expressed an interest in innovative solutions for streamlining the permitting process, credit stacking, joint mitigation and developing incentives for private landowners.

“As always, the conference is the best place to find out what is really going on. No national survey of “stacking” (or whatever else) would turn up any of the stories or examples I heard about just by talking with folks”, said Morgan Robertson, Associate Professor, University of Wisconsin-Madison.

Those who arrived early went on field excursions to mitigation and conservation banks in the Orlando area or participated in workshops that provided the history and nuts and bolts of banking and introduced tracking tools of mitigation banking in the U.S. such as RIBITs and Mitigation Analyst.

Informal forums were held to allow regulators, users and bankers to exchange ideas within these groups – allowing those with similar interests to identify each other and follow-up with one another at a later time – and further gave a flavor for the hot topics surrounding mitigation banking.

Those “hot” topics included among others equivalent standards, credit stacking, streamlining the permitting process, NRDAR (Natural Resource Damage Assessment and Restoration program), the need to take a landscape scale approach, and the issues surrounding the differing use of ratios and conditional and functional assessments.

There were sessions designed to meet the demand of a whole range of attendees. The “Long-term Stewardship Workshop,” session outlined how to develop a mitigation bank from scratch. Facilitators provided attendees with handouts and tools to help navigate the three-step process to develop a mitigation bank: develop a long-term management plan, secure endowment funding and create a site protection instrument such as a conservation easement.

“Performance Guidelines,” was comprised mostly of USACE (US Army Corp of Engineers) employees who focus solely on mitigation related issues. This session allowed the attendees to get inside the head of the USACE and better understand the USACE perspective at the local level.

“Analysis of National Mitigation and Conservation Banking Status and Trends,” included talks on the administrative performance of the USACE since the 2008 Mitigation Rule, regional and national trends in mitigation, and an analysis on the state of the national mitigation market. Not only was this session a great overview of the status of mitigation banking, it also stimulated lots of conversation and questions.

Other sessions provided tools and guidance related to the incorporation of science-based decision-making into mitigation, insight into the roles and strategies of various agencies, and effective communication strategies for use throughout the permitting process.

“If an attendee didn’t know the importance of the 2008 Mitigation Rule prior to the conference, they certainly left the conference with an idea of what is included and just how important the rule is in every day decision-making related to mitigation and mitigation banking”, noted a prominent mitigation banker.

There is no doubt this conference is of great value to individuals working in or interested in the mitigation and conservation banking field. The broad range of participation is refreshing and allows for a symbiosis that is necessary if mitigation banking is going to continue to expand its range and grow in effectiveness.

Access to audio and conference materials are available online. And registration for next year’s conference in Fort Worth, Texas is offered on the NMEBC website as well.

 

Lauren Hutchison is a Graduate Research Assistant at the Harte Research Institute for Gulf of Mexico Studies, Texas A&M University, Corpus Christi.  Her dissertation involves linking wetland structure and functions to ecosystem services for enhanced decision-making related to wetland mitigation policy in Texas. She can be reached at Lauren.Hutchison@tamucc.edu.

Is Private Investment And Coastal Management A Good Or Bad Match?

Nicolas Pascal, of the BlueFinance project, a data collection initiative aimed at developing finance mechanisms for marine conservation management, says market mechanisms have potential to fill a big part of a funding gap that exists in marine conservation. But its practical experience in coastal environments is limited and so more know-how is needed to spur private investment.

This article was originally posted on the Conservation Finance Alliance blog. Click here to read the original.

 

13 May 2015 | Many recent studies have confirmed that total funding for protected areas and biodiversity conservation has to be increased dramatically to achieve the targets set at national or international levels.

Today, 80% of biodiversity finance is generated from non-market mechanisms (Parker et al., ed. 2012), the Global Canopy Programme’s Little Biodiversity Finance Book says. With the exception of philanthropy, non-market mechanisms are public sector mechanisms relying on regulation for their implementation. They cover domestic budget allocation, Official Development Assistance (ODA), debt-for-nature swaps and subsidies reform. The allocation of public finance is primarily a question of political will (and public opinion) and these mechanisms therefore tend to vary with political cycles.

Although these mechanisms could scale-up in the future, market-based mechanisms have a greater potential to increase in scale. The market-based mechanisms could generate up to 50% of biodiversity finance for coral reef in 2020, according to GCP’s Finance Book. Long-term, reliable sources of market financing for biodiversity conservation must be established and strengthened, according to a report note that instruments for conservation finance are diverse. Several classifications, such as tools to internalize the damages and profits, based on the “polluter-pays” or “beneficiary pays”, environmental taxes, taxation of contamination and compensatory measures of impacts (avoid-reduce-compensate sequence), have been proposed.

Recent recommendations from the CBD (Convention on Biological Diversity) identify exploring new and innovative financial mechanisms at all levels with a view to increasing funding to support the three objectives of the Convention. Seven areas of financial innovations have been set out and five of them concern private finance: schemes for payment for ecosystem services; biodiversity offset mechanisms; markets for green products; business-biodiversity partnerships and new forms of charity; development of new and innovative sources of international development finance.

The marine and coastal environment have very few practical experience of these mechanisms and one of the main priorities for the next years is therefore to provide empirical experiences of non-public funding mechanisms for integrated coastal management (ICM).

The real potential of various non-public financial instruments for sustainable long-term financing of ICM has still to be proven though concrete financial flows from the private sector. In that sense, the investor perspective has to be analyzed to propose concrete funding opportunities to the supply side.

From on-going activities of the Bluefinance project, the following preliminary results have been found:

Coral reef ES beneficiaries with potential payment capacity are mainly the tourism industry, end-users, real estate owners and impact investors. These beneficiaries might invest to enhance the ES of scenic beauty, coastal protection (against coastal flood and beach erosion) and fish biomass. Business models to make the project investable must be tested in the field. Agreement with the public sector, through Public-private partnerships (PPPs), must define clearly the management of funds as well as marine tenures. This is a preliminary step that must be defined before designing PES or other financial mechanisms.

Regarding business models, their aim is to provide funding for the initial investments and the management cost of the ICM activities through classic financing (e.g. equity, debt, Tourism User fees) and some more innovative (Payment for Ecosystem Services, bio-banking).  Given the early stage of development of the investment opportunities in marine conservation, initial investors target will include local high-net-worth individuals as well as venture philanthropists. Each of these groups has its own risk-return expectations, liquidity exigencies, investment horizons, ticket sizes and investment product preferences.

Regarding PPPs, agreements can take a wide range of forms, which vary in the degree of involvement of the private entity in a traditionally public infrastructure. Five main categories of PPP agreements have been selected as having the greatest potential for ICM: a parastatal agency, management contracts, leases, concessions and joint ventures. The agreement, which ultimately will be used, will be decided via negotiations between the public and private stakeholders. The objectives of the agreement; balancing between conservation of marine habitats and business enhancement of the ES will form the basis for these negotiations.

Some of these concepts are being explored in the Bluefinance project, which is a special division of Forest Trends’ (publisher of Ecosystem Marketplace) Marine Ecosystem Services (MARES) Program and GRID ARENDAL.  Bluefinance represents a portfolio of projects which aim for rapid uptake of marine ecosystem services information, in order to develop financing mechanisms for conservation and management.

The Bluefinance project is funded primarily by the United Nations Environmental Programme (UNEP), GRID ARENDAL and the Organization of American States (OAS). Demonstration sites are in Barbados, Croatia, Colombia, Mexico and Vanuatu.  A similar approach will be taken in each site; developing challenging business models with private sector balancing financial bottom line with conservation objectives. In Barbados, for example, an Island with a heavy reliance on the Tourism Industry and an extremely well informed and active tourism sector, the focus is on utilizing this sector in the management of marine areas and involving them in a PES system with the Fishers.

Implementation will demonstrate the potential of these instruments in a coral reef setting prior to considering their application at a larger scale and replication in other countries. More precisely, it is expected that the experiences from Barbados will contribute to updating existing guidance on PES, PPPs and tourism concessions to support their increased use in coral reef areas.

 

Nicolas Pascal is an environmental economist and conservation finance professional specializing in marine ecosystems. He can be reached at npascal@forest-trends.org.

New NMBA President Discusses Challenges, Possibilities For Mitigation Banking

6 May 2015 | Not all versions of mitigation are created equal. In fact, equivalency and standards are the fundamental challenges facing the mitigation banking industry today, according to Michael Sprague, founder of the ecological restoration firm, Trout Headwaters Inc, operating out of Montana.

“As disparate as the issues in the industry are, it comes down to those two issues,” he says.

Mitigation banking, which is the restoration and creation of a stream, wetland or wildlife habitat as a compensation for environmental loss elsewhere, delivers a high-quality product in terms of ecological and regulatory benefits, Sprague says. Banking provides conservation in perpetuity, ensuring full compliance with regulatory requirements. But Sprague says there is a lack of high standards in mitigation today and it’s leading to “a race to the cheapest and most expedient form of offsets,” thus creating the biggest risk to mitigation banking.

It’s one of many issues that Sprague will have a chance to address this year. At this week’s National Mitigation and Ecosystem Banking Conference (NMEBC), he will become the new National Mitigation Banking Association (NMBA) president.

This year’s NMEBC, which takes place in Orlando and runs from May 5th to the 8th, has a data-focused element to it. Sprague will play a part in this by hosting a workshop on the latest version of Mitigation Analyst 2.0, a data and analytics system for mitigation and conservation banking.

“It’s a down-and-dirty user workshop that enables folks to really leverage all of this data when they leave the conference,” Sprague says.

After the conference, Sprague is looking forward to a dynamic year building on what he considers to be the success of his predecessor Wayne White. He recently talked with Ecosystem Marketplace about the aforementioned issues as well as on other topics related to his new position and mitigation banking.

Ecosystem Marketplace (EM): What key issues are shaping this year’s conference and the coming year?

Michael Sprague (MS): There is a different tone this year and one that is much more cooperative than in the past. We’re going to expand markets and look for opportunities for advanced compensatory mitigation. The NMBA has also been a huge provider of support for conservation banking so we’re now seeing opportunities in that area. We’re also seeing opportunities for banking in other markets like nutrient credit trading. The Emerging Markets session at the conference will be focused on these types of issues.

For me, over the year, I’m looking to build a five year strategic plan with the help of the (all volunteer) Board of Directors. The plan will dovetail with the Association’s newly hired Executive Director but basically, it will ensure that all the various assets we have, like volunteer time, staff and so on, is leveraged in a way that serves membership in the end.

EM: Can you talk a little more about what you view as the biggest challenges facing mitigation banking today?

MS: Banking sells a high quality product. It’s not a promise, not a prospect but a product. There’s no temporal risk or regulatory risk, which means that we’re not only able to save permittees and agencies time but we’re also able to deliver the highest possible environmental outcome. So the risk to our industry is what I call the race to the bottom. It’s the risk that the cheapest, lowest quality mitigation solution becomes the preferred mitigation alternative. Unfortunately, you can see that risk in some of the programs and offsets today in the US. The broad risks are reasonably consistent: a lack of standards or poor quality standards combined with a lack of equivalency for mitigation methods.

A lot of the problems I encounter could have been solved by simply choosing advanced mitigation with consistent high standards that ensures equivalency in its offsets.

EM: What are your key objectives as president?

MS: This is going to sound dull and boring but we need to put together a strategic plan and create a board member manual among other similar tasks. But I see my key objective as to help the Association grow membership and to work with the Board to deliver benefits to the members. We’ve seen a 12% growth over last year so if we continue to do these two things well, then our future remains bright. Because when we increase our membership, we gain intellectual capacity, the quality of our work improves and our ability to carry out initiatives becomes more efficient. A lot of hands make a lighter lift.

EM: The NMBA recently hired its first Executive Director, Barton James. What does this mean for the Association?

MS: It’s a great step forward to have 24/7 representation to add to our administrative, lobbying and volunteer efforts. We now have someone who is able to guide the ship day-to-day. And specifically, Bart brings us a real depth and expertise in Washington D.C. and I’m excited for what that means for membership.

 

Mitigation Bankers Seek Fulfillment Of Long-Term And New Goals At Annual Conference

The outgoing president of the National Mitigation Banking Association recently gave Ecosystem Marketplace a brief rundown on highlights of the past year and what to expect from this year’s National Mitigation and Ecosystem Banking conference, which should again see a focus on Interior’s landscape-level mitigation strategy. However, this year the strategy’s focus won’t be on its release but rather its implementation.

5 May 2015 | This week, mitigation and conservation bankers from around the US are convening in Orlando, Florida for the annual National Mitigation and Ecosystem Banking Conference (NMEBC), arguably the most important gathering for the mitigation industry. It’s been a progressive year for the sector, says Wayne White, the President of the event’s organizer, the National Mitigation Banking Association (NMBA) with several noteworthy changes.

White recently chatted with Ecosystem Marketplace about the NMBA’s achievements of the last year and significant happenings for the industry. The NMEBC started today and runs through the 8th.

Movement on New Mitigation Strategy

Last year, the Department of Interior (DOI) released a new more inclusive mitigation strategy that encompassed its many agencies: the Fish and Wildlife Service and the Bureau of Land Management to name a couple. As the DOI’s new strategy follows the mitigation hierarchy, which takes full advantage of compensatory mitigation mechanisms such as conservation banking, the strategy has many implications for the banking sector. The NMBA has been heavily involved in working with DOI agencies to implement this new strategy. White named implementation of this plan as the most significant point of 2014.

In fact, Letty Belin, Senior Counsel to the Deputy Secretary in the DOI, and a person closely watching the adoption process play out, is the NMEBC’s keynote speaker this year.

The NMBA’s Forever Goal: Full Implementation of the 2008 Rule

Moving forward on the Final Compensatory Wetland Mitigation Rule, issued in 2008, is what White calls the NMBA’s “forever goal.” The Army Corps of Engineers (USACE) and the Environmental Protection Agency (EPA) passed this rule which says wetland banking is the most effective form of mitigation and should be used above others. But ever since it became a regulation, the Rule has had issues with bankers claiming the USACE fails to enforce it.

This past year, however, White feels they made real progress in part because of the NMBA’s involvement in local activities for the first time. In the past, the NMBA didn’t assist individual Association members having trouble with implementation of the Rule. We thought it was beyond our control, White says.

But this year, the Association tried something new. The NMBA provided national support for local challenges through draft letters the Board of Directors signed. A copy of this letter not only went to the district where the implementation problem originated but also to the USACE and the EPA.

“We’re giving our members support and also displaying to the federal agencies challenges with the 2008 Rule,” White says.

Controversy Continues with Voluntary vs. Compliance

Similar to last year, there has been much talk on the voluntary approaches to conservation-particularly species conservation. While last year, it was the lesser prairie-chicken, this year talk is focused on another wild bird with a western range: the greater sage-grouse. The bird is at-risk after its population plummeted these last decades. Federal agencies are encouraging innovative voluntary conservation to keep the bird off the Endangered Species List.

But White, like many others, is skeptical of this voluntary approach. He notes that one of the first areas to lose funding when money for a development project gets tight is the mitigation. Without compliance, there isn’t a guarantee the mitigation is being implemented, White says.

At any rate, this argument between voluntary and regulated conservation is a debate that shows no signs of going away.

Hiring the NMBA’s First Executive Director

For the first time in its history, the NMBA has hired an Executive Director to work full-time on NMBA policy and implementation objectives. The association’s board of directors chose Barton James, a familiar face on Capitol Hill because of his longtime involvement in conservation policies.

“With Bart up on the Hill making contacts, we really see ourselves making major strides at meeting some of our goals and objectives,” White says.

He notes James’ hiring as one of his key accomplishments. Near the end of last year’s NMEBC, White compared the NMBA to volunteer firefighters where the association’s volunteer board is at a standstill until there is a fire or, in the case of the NMBA, a serious situation regarding the banking industry.

“We need someone working 24/7 and in contact with the relevant agencies consistently to move the policy action forward,” White said last year.

James feels policy action will be his greatest strength as well. As Director of Public Policy at Ducks Unlimited, a nonprofit focused on wetland and waterfowl conservation, James became heavily involved in the policy side of mitigation banking.

“Because of my background, I bring a different dynamic to working with elected officials than many other NMBA members,” James says.

Growing membership and advancing NMBA goals in D.C. are James’ main objectives. He also sees great potential in schooling decision-makers on mitigation banking and all it entails. “Many Capitol Hill staffers and members of Congress know the term but they don’t have a good understanding of the financial benefits it offers.”

On the Agenda

At the conference, Michael Sprague will take over as president of the NMBA officially ending White’s presidency. White says Sprague will continue the Association’s recent endeavors such as expanding member services and participating at a local level. He will also continue to keep the dialogue going between the industry and policymakers, White says, which are efforts rooted in several past NMBA presidents.

Engagement between lawmakers and bankers is evident at the conference with sessions discussing communication between the two spaces as well as the relationship with bank users.

This interaction is much needed, White says. Outside of the DOI’s mitigation strategy, he mentions proposed water policy-currently working its way through the legislature-which seeks to clarify water protected under the Clean Water Act. It carries implications for the banking world with many in the space saying clearer definitions could streamline banking procedures. One session explores water quality credit trading banks while another looks at wetland functions at a watershed scale.

Water policy is something to watch at the conference and throughout the year. As is the mitigation strategy and several other ongoing efforts, White says. But overall, it’s been a good year for the industry, according to White. And while much more needs to be done in order to continue to grow the market and fulfill long-term objectives, White is ready to celebrate his year as president and reflect on what he has learned.

Opinion Rebooting America’s Voluntary Offset Market

The voluntary carbon market arguably delivers benefits to larger society, but only a narrow slice of us are buying. Sheldon Zakreski of The Climate Trust says it’s time for the US federal government to step in with more loan guarantees and outright purchases that would give the market support until private-sector buying materializes.

This article was originally posted on The Climate Trust website. Click here to read the original.

1 May 2015 | Depending who you talk to, the offset market is either alive and well, or dormant.

Consider two recent Ecosystem Marketplace reports. The Taking Stock of the role of Offsets in Corporate Carbon Strategies report notes that in 2013, 14% of companies that disclose their carbon emissions purchased a volume of offsets equivalent to avoiding the emissions associated with using 117 million barrels of oil. Meanwhile, the State of the Voluntary Carbon Markets 2014 report described a stagnant market in 2013 where three of every four offsets were sold to pre-existing clients.

These two truths underscore a huge opportunity, as well as presenting some peril for the future of the voluntary offset market. Although there is clearly a strong foundation of corporate voluntary buyers, the lack of diverse offset supply is a huge impediment to attracting new buyers to the market. Worse yet, if left unchecked, it will likely result in notable departures from the market as companies look for innovative ways to address greenhouse gas emissions.

The Good

The use of offsets as part of a company’s corporate social responsibility (CSR) strategy gained traction as a widespread practice in the early to mid-2000s. Despite the economic recession that began in late 2008, and the failure of federal cap and trade legislation, many companies that began buying offsets in the mid-2000s are still committed to offsets.

Additionally, although federal carbon legislation has failed to re-emerge, corporations are continuing to lead the way towards putting a price on carbon. The CDP (formerly the Carbon Disclosure Project) compiled a database last year that showed 150 companies globally, 29 of which are U.S.-based, use an internal carbon price ranging from $6 to $60 per metric ton of carbon dioxide equivalent emissions.

This near ten year track record of unwavering commitments to addressing corporate carbon footprints, points to the fact that concern and action on greenhouse gas emissions is here to stay; the issue transcends political cycles. It’s been 9 years since An Inconvenient Truth was released, and seven since Congress defeated federal cap and trade legislation.

Even more promising is the cutting-edge corporate trend towards greening their supply chains. Although this is part of a larger initiative, a role for offsets exists here, as last year’s State of the Voluntary Carbon Market research found that 2% of 2013 corporate offset purchases were practice change/supply chain motivated.

The Bad

The offset market is stagnant. Don’t get me wrong. There are notable initiatives from active voluntary buyers such as Microsoft, Interface, Chevy, Coke, Seattle City Light, and Google. These are companies that are truly to be commended for their ongoing commitments, but when was the last time a new entrant has embarked on a significant offset purchase commitment? Meaningful expansion of notable commitments are few and far between.

It could be that most companies are still focusing largely on direct reduction activities. Many offset leaders are well aware that in order to walk the talk, it is wise to strive for substantial internal progress prior to making a noteworthy commitment to offsets. If this is the case, and a rise in offset purchases is inevitable, what kinds of projects and supply will these new entrants find if they decide to buy? Unfortunately this is where the ugly comes into play.

The Ugly

If a company that is interested in entering the market were to assess current supply options, it would find a market long on dated vintages from established sectors such as landfill gas, and a dearth of new project types. For comparison sake, imagine a mobile device market where your choices are various several year old Blackberries, and iPhones or Galaxies are largely a pipe dream. That is basically the state voluntary buyers are encountering in today’s offset market. The result is that there is pent up demand that goes unfilled due to a lack of choice.

Like every other nascent sector, diversity is key for the offset market to grow and stabilize. The promising news is that a lot of groundwork has been done to introduce those iPhone and Galaxy type offsets into the marketplace, especially in the agriculture sector. The challenge lies in what can be done to advance those sectors and provide safeguards that will foment the generation of meaningful volumes of supply.

The Showdown—What Needs to be Done?

There are three key areas that could kick-start the implementation of projects and the generation of new sources of supply.

  1. Don’t just build it—test it

Voluntary market certification standards such as the American Carbon Registry, Climate Action Reserve and Verified Carbon Standard are doing their part to diversify supply by launching new project standards, also known as protocols. In the last few years alone, several new protocols have been introduced in the agriculture sector that offer a pathway for generating offsets through grasslands conservation, rice cultivation and nutrient management practices on farms and in fields.

Such efforts are necessary to diversify supply, but simply releasing a new protocol doesn’t mean that the market will rush to adopt it.

While protocols help in providing a useful guide, they do not eliminate the risks of actually monitoring, verifying and issuing new offsets. This is important because third-party verification is essential for generating real and credible offsets that can be traded. Verification is also generally the largest cost offset suppliers will face. Additionally, there have been several instances were verified volume for new offset project types are generated at a fraction of the anticipated rate.

The implication here is that there is a huge “first mover disadvantage” and worse yet, some promising offset sectors could de dead on arrival following the first verification of the first project.

Mitigating verification risk by subsidizing the initial verification is one way to overcome this uncertainty. This is something standards setting organizations could consider. Otherwise, they face the risk of investing substantial time and effort developing and releasing protocols that are not adopted by offset project developers.

  1. Plant the seed and watch it grow

Given this chicken-egg scenario where buyers are staying out of the market due to lack of supply and suppliers aren’t diversifying the market due to uncertain demand, if ever there was a need for a large new buyer to enter the market, now is the time. Such a buyer exists in the federal government—where a recent executive order increased their prior reduction commitment (28% below 2008 levels by 2020) for federal agencies to 40% below 2008 levels by 2025. The Council on Environmental Quality estimated that the original executive order would result in 101 million mtCO2e reductions by 2020. If federal agencies were allowed to use greenhouse gas offsets as 8% of the reductions they must achieve under the executive order, The Climate Trust estimates they could demand up to 1.35 million offsets per year, creating 15% growth in the voluntary carbon market.

Currently, federal agencies are allowed to purchase renewable energy certificates to meet this target, while offset purchases are prohibited. Removing this constraint could add millions of tons of demand to the market, while saving taxpayer dollars to the extent offsets cost less than other emission reduction options available to federal agencies.

Federal government support of offsets in general—and agriculture specifically—could have the exponential effect of drawing corporate buyers, especially food and beverage companies that are motivated by greening their supply chain.

  1. If it falls—catch it

The third impactful area that could expand supply offerings are financial models that mitigate price risk. Here exists a significant role for impact investors, program related investments from foundations, and government agencies that could invest in, and provide guarantees for nascent agriculture offset projects. Upfront funding is crucial to bridge the many months (sometimes years) it takes to develop a project, as well as launch and verify offsets. However, securing such funding on viable terms has proven elusive; perhaps a barrier that could be bridged is if a guarantee is provided that the funding will be repaid. One way to do this is to apply federal loan guarantee programs to certain offset project types. Full disclosure, The Trust occupies the role of providing early stage capital to carbon reduction projects.

The voluntary carbon offset market has shown resiliency, but it is still a young market that requires nurturing in order for it to grow and flourish. This market will never compare in size and scope to regulated markets, but further investment in building the capacity in the voluntary market is needed. An investment will not only diffuse further knowledge on how to design, implement and operate successful offset projects and deepen the engagement level of corporations, it will also provide a useful roadmap as the policy debate on subnational, national and global emission reduction initiatives proceeds.

Sheldon Zakreski is the Director of Risk Management at the Climate Trust. He can be reached at szakreski@climatetrust.org.

Opinion Rebooting America’s Voluntary Offset Market

The voluntary carbon market arguably delivers benefits to larger society, but only a narrow slice of us are buying. Sheldon Zakreski of The Climate Trust says it’s time for the US federal government to step in with more loan guarantees and outright purchases that would give the market support until private-sector buying materializes.

This article was originally posted on The Climate Trust website. Click here to read the original.

1 May 2015 | Depending who you talk to, the offset market is either alive and well, or dormant.

Consider two recent Ecosystem Marketplace reports. The Taking Stock of the role of Offsets in Corporate Carbon Strategies report notes that in 2013, 14% of companies that disclose their carbon emissions purchased a volume of offsets equivalent to avoiding the emissions associated with using 117 million barrels of oil. Meanwhile, the State of the Voluntary Carbon Markets 2014 report described a stagnant market in 2013 where three of every four offsets were sold to pre-existing clients.

These two truths underscore a huge opportunity, as well as presenting some peril for the future of the voluntary offset market. Although there is clearly a strong foundation of corporate voluntary buyers, the lack of diverse offset supply is a huge impediment to attracting new buyers to the market. Worse yet, if left unchecked, it will likely result in notable departures from the market as companies look for innovative ways to address greenhouse gas emissions.

The Good

The use of offsets as part of a company’s corporate social responsibility (CSR) strategy gained traction as a widespread practice in the early to mid-2000s. Despite the economic recession that began in late 2008, and the failure of federal cap and trade legislation, many companies that began buying offsets in the mid-2000s are still committed to offsets.

Additionally, although federal carbon legislation has failed to re-emerge, corporations are continuing to lead the way towards putting a price on carbon. The CDP (formerly the Carbon Disclosure Project) compiled a database last year that showed 150 companies globally, 29 of which are U.S.-based, use an internal carbon price ranging from $6 to $60 per metric ton of carbon dioxide equivalent emissions.

This near ten year track record of unwavering commitments to addressing corporate carbon footprints, points to the fact that concern and action on greenhouse gas emissions is here to stay; the issue transcends political cycles. It’s been 9 years since An Inconvenient Truth was released, and seven since Congress defeated federal cap and trade legislation.

Even more promising is the cutting-edge corporate trend towards greening their supply chains. Although this is part of a larger initiative, a role for offsets exists here, as last year’s State of the Voluntary Carbon Market research found that 2% of 2013 corporate offset purchases were practice change/supply chain motivated.

The Bad

The offset market is stagnant. Don’t get me wrong. There are notable initiatives from active voluntary buyers such as Microsoft, Interface, Chevy, Coke, Seattle City Light, and Google. These are companies that are truly to be commended for their ongoing commitments, but when was the last time a new entrant has embarked on a significant offset purchase commitment? Meaningful expansion of notable commitments are few and far between.

It could be that most companies are still focusing largely on direct reduction activities. Many offset leaders are well aware that in order to walk the talk, it is wise to strive for substantial internal progress prior to making a noteworthy commitment to offsets. If this is the case, and a rise in offset purchases is inevitable, what kinds of projects and supply will these new entrants find if they decide to buy? Unfortunately this is where the ugly comes into play.

The Ugly

If a company that is interested in entering the market were to assess current supply options, it would find a market long on dated vintages from established sectors such as landfill gas, and a dearth of new project types. For comparison sake, imagine a mobile device market where your choices are various several year old Blackberries, and iPhones or Galaxies are largely a pipe dream. That is basically the state voluntary buyers are encountering in today’s offset market. The result is that there is pent up demand that goes unfilled due to a lack of choice.

Like every other nascent sector, diversity is key for the offset market to grow and stabilize. The promising news is that a lot of groundwork has been done to introduce those iPhone and Galaxy type offsets into the marketplace, especially in the agriculture sector. The challenge lies in what can be done to advance those sectors and provide safeguards that will foment the generation of meaningful volumes of supply.

The Showdown—What Needs to be Done?

There are three key areas that could kick-start the implementation of projects and the generation of new sources of supply.

  1. Don’t just build it—test it

Voluntary market certification standards such as the American Carbon Registry, Climate Action Reserve and Verified Carbon Standard are doing their part to diversify supply by launching new project standards, also known as protocols. In the last few years alone, several new protocols have been introduced in the agriculture sector that offer a pathway for generating offsets through grasslands conservation, rice cultivation and nutrient management practices on farms and in fields.

Such efforts are necessary to diversify supply, but simply releasing a new protocol doesn’t mean that the market will rush to adopt it.

While protocols help in providing a useful guide, they do not eliminate the risks of actually monitoring, verifying and issuing new offsets. This is important because third-party verification is essential for generating real and credible offsets that can be traded. Verification is also generally the largest cost offset suppliers will face. Additionally, there have been several instances were verified volume for new offset project types are generated at a fraction of the anticipated rate.

The implication here is that there is a huge “first mover disadvantage” and worse yet, some promising offset sectors could de dead on arrival following the first verification of the first project.

Mitigating verification risk by subsidizing the initial verification is one way to overcome this uncertainty. This is something standards setting organizations could consider. Otherwise, they face the risk of investing substantial time and effort developing and releasing protocols that are not adopted by offset project developers.

  1. Plant the seed and watch it grow

Given this chicken-egg scenario where buyers are staying out of the market due to lack of supply and suppliers aren’t diversifying the market due to uncertain demand, if ever there was a need for a large new buyer to enter the market, now is the time. Such a buyer exists in the federal government—where a recent executive order increased their prior reduction commitment (28% below 2008 levels by 2020) for federal agencies to 40% below 2008 levels by 2025. The Council on Environmental Quality estimated that the original executive order would result in 101 million mtCO2e reductions by 2020. If federal agencies were allowed to use greenhouse gas offsets as 8% of the reductions they must achieve under the executive order, The Climate Trust estimates they could demand up to 1.35 million offsets per year, creating 15% growth in the voluntary carbon market.

Currently, federal agencies are allowed to purchase renewable energy certificates to meet this target, while offset purchases are prohibited. Removing this constraint could add millions of tons of demand to the market, while saving taxpayer dollars to the extent offsets cost less than other emission reduction options available to federal agencies.

Federal government support of offsets in general—and agriculture specifically—could have the exponential effect of drawing corporate buyers, especially food and beverage companies that are motivated by greening their supply chain.

  1. If it falls—catch it

The third impactful area that could expand supply offerings are financial models that mitigate price risk. Here exists a significant role for impact investors, program related investments from foundations, and government agencies that could invest in, and provide guarantees for nascent agriculture offset projects. Upfront funding is crucial to bridge the many months (sometimes years) it takes to develop a project, as well as launch and verify offsets. However, securing such funding on viable terms has proven elusive; perhaps a barrier that could be bridged is if a guarantee is provided that the funding will be repaid. One way to do this is to apply federal loan guarantee programs to certain offset project types. Full disclosure, The Trust occupies the role of providing early stage capital to carbon reduction projects.

The voluntary carbon offset market has shown resiliency, but it is still a young market that requires nurturing in order for it to grow and flourish. This market will never compare in size and scope to regulated markets, but further investment in building the capacity in the voluntary market is needed. An investment will not only diffuse further knowledge on how to design, implement and operate successful offset projects and deepen the engagement level of corporations, it will also provide a useful roadmap as the policy debate on subnational, national and global emission reduction initiatives proceeds.

Sheldon Zakreski is the Director of Risk Management at the Climate Trust. He can be reached at szakreski@climatetrust.org.

Op-Ed Bioenergy Can Support Climate, Food, Land Restoration If Done Right

Governments have long promoted the use of biofuels like ethanol derived from corn as a relatively clean-burning alternative to coal, but biofuels have gone from hero to zero as people started chopping forests to plant fuel crops. Many environmentalists today are calling for an end to pro-biofuel policies, but Emily McGlynn of The Earth Partners LP says we simply need to use land more efficiently.

19 March 2015 | It’s gospel for some in the environmental community that if we keep converting crops to biofuels, we’ll gobble up farms and forests, leading to food shortages and accelerating climate change. The World Resources Institute recently went so far as to say we should “phase out” a decade of global bioenergy policy.

This would be a mistake, because bioenergy, done well, can and must play an important role in restoring degraded land, supporting food production, and enhancing CO₂ sequestration.

To begin with, it’s indispensable in nearly all scenarios for adequately addressing climate change: in its Fifth Assessment Report, the Intergovernmental Panel on Climate Change indicates that failing to deploy the needed amounts of bioenergy would increase the costs of addressing climate change by 60%, more than any other renewable energy technology, including solar and wind.

What’s more, bioenergy is one of the only technologies that can help us bring emissions back down after they’ve reached dangerous levels, which is very likely to happen, especially when combined with carbon capture and storage technology.

The key for bioenergy, however, is “done well.” What does that mean? Let’s look at three simple examples of how bioenergy production can slow climate change at significant scale by reducing fossil fuels without gobbling farms and forests.

The first involves integrating sorghum, an energy grass, and rice production. The UN Food and Agricultural Organization tells us that rice paddies take up 163 million hectares globally, an area about the size of Alaska. Rice farmers generally leave their paddies fallow, or resting, one year out of three. If we used this fallow time to plant sorghum, we’d get 7 dry tons of biomass per acre, or 938 million tons total each year, enough to offset half of annual U.S. gasoline consumption.

Closer to home, we can look at active pastureland. Ranchers can rotate their herds so that, in summer, pastures can be used to grow perennial energy grasses, like switchgrass, and in winter cattle can graze on cold-season grasses, like ryegrass. If this approach were implemented on half of America’s 587 million acres of pastureland, we could produce 91.5 billion gallons of ethanol, or 60 percent of current U.S. gasoline consumption.

A third example is removing invasive woody brush found extensively throughout native grassland in the south and western United States. In Texas alone, we can sustainably recover several million tons of biomass annually, while increasing pasture productivity, restoring native grasses, and increasing the amount of carbon that gets sponged up by healthy soil.

Obviously, these approaches won’t work everywhere, and to see them implemented on any significant scale we’d have to see dramatic changes in the energy and agricultural sectors – but that can be achieved with strong market signals, policy support, and landowner engagement.

The same math applies to degraded land, of which there’s too much, according to the UN Convention on Combating Desertification. More than 7 billion acres, or three times the size of the United States, are degraded. This costs the global community $40 billion annually in lost productivity, and it threatens food production and rural livelihoods. The objective of food and energy policy should be intensely focused on bringing these lands back into productivity. Rather than abandoning bioenergy, smart policy would encourage growing biomass as a way to build soil carbon, retain and increase soil moisture and nutrients, and create new value for rural communities. Well-designed food security policy would use biomass crops as one tool to improve landscapes and, ideally, allow them to be rotated back into food production.

Critiques of bioenergy and biofuels indicate we shouldn’t use marginal land incapable of food production for biomass crops, but instead let it revert back to natural forests or other high-carbon landscapes to maximize carbon sequestration. Fair enough, but why not do both where possible?

The simple fact is that you usually need human management to successfully restore abandoned or marginal landscapes, because you have to reintroduce native species and natural cycles. Smart restoration can allow for both additional carbon sequestration and biomass recovery.

For example, when reestablishing native grass communities on degraded prairies, the reintroduced grasses can be harvested periodically to replicate the kinds of fires that always happened naturally, providing a source of bioenergy, keeping invasive species at bay, and maintaining diminishing grassland habitat. Because restored prairies store most of their carbon in their extensive root systems, they often increase carbon stocks, even if aboveground biomass is harvested periodically.

Another interesting example is the restoration of pine savannah ecosystems in the U.S. southeast, considered critical to the survival of 40 rare and threatened species. Characterized by widely-spaced pines and periodic fires that promote grasses, pine savannahs can be some of the most biodiverse landscapes outside of tropical rainforests. Restoring this ecosystem often requires removing trees and underbrush to allow sunlight to reach the ground-level grasses. Regular “thinning” like this can keep pine savannahs healthy while also generating biomass.

To sum up, it is useful to highlight potential trade-offs among bioenergy, food production, and carbon sequestration. But rather than concluding that bioenergy should be abandoned, policy makers, rural communities, and the private sector need to work together to implement bioenergy approaches that can generate win-win-wins for food, climate, and ecosystem restoration.

 

Emily McGlynn is Manager for Business Development and Policy at The Earth Partners LP. She can be reached at emily.mcglynn@teplp.com.

Opinion: Yes, The US EPA Can And Should Allow Offsets Under The Clean Power Plan

16 March 2015 | The US Environmental Protection Agency’s (EPA) proposed Clean Power Plan, the agency’s attempt to regulate existing sources of greenhouse gases (GHGs) in the electricity-generating sector under its Clean Air Act authority, may be the most controversial rule proposed by the agency. Weighing in at around 670 pages (with a 750-page technical support document,) it is certainly one of the most complex regulations ever attempted by the agency.

It should also be interpreted as offering the states maximum flexibility in how states handle their emission reductions, as we can see by zeroing in on just two sections of the Clean Air Act: Section 110 and Section 111.

Section 110 governs the State Implementation Plans (SIPs), which are the way in which ambient levels of criteria pollutants (like ozone), are to be enforced. Section 110 allows states to meet these goals in any way they wish as long as they do not interfere with another state’s compliance. Section 111, on the other hand, purportedly deals with reductions from source categories (such as electricity generating units).

Here, we’ll be looking at just two sub-sections of Section 111: Section 111 (b), which deals with new or recently upgraded sources of pollution; and Section 111 (d), which deals with older or existing sources of pollution not regulated by states under Section 110 (or as a hazardous air pollutant) . Since greenhouse gases are the only pollutants that exist in this category, and they have yet to be regulated, section 111(d) is as yet untested. The Clean Power Plan is the EPA’s attempt to do so.

Section 111(d) says the EPA may establish guidelines for how states meet reductions required, and it also says that the procedure governing approval of these state systems should be a “procedure similar to that provided by section 7410[Section 110].”

And guess what? Section 110 clearly leaves room for offsetting, as well as any measure that would reach the target required.

How Does the Clean Power Plan Work?

The Clean Power Plan sets individual targets for GHG emissions rates for each state through a formula the EPA developed, examining how various GHG reduction strategies could be implemented given each state’s own unique circumstances. In determining the state’s targets, the EPA critically made a decision that the Best System of Emissions Reduction (BSER) referenced by the Clean Air Act authority under its Section 111(d) provisions could include reductions in GHG emissions from end-user efficiency gains, electricity dispatch decisions, and new non- or low-carbon sources.

Because these reductions would not technically be from a regulated plant itself, they are characterized as “beyond the fenceline” reductions. It is this decision that is responsible for much of the rule’s complexity as well as the ability of the EPA to propose a more aggressive reduction target than could be achieved by changes at the electricity generating plant itself. This approach, the EPA says, allows the states maximum flexibility in meeting ion targets.

Unfortunately, the EPA has shied away from allowing states maximum flexibility for reductions by refusing to endorse (at this time) the use of GHG offsets, (such as biological offsets or reductions from other unregulated sources) even though the use of offsets is generally recognized as a more efficient way to reach tighter GHG reductions targets.

Lying at the heart of this decision, according to the EPA, is “legal uncertainty.” Because of the controversy in the United States surrounding any regulation of GHGs, the regulations are being, and will continue to be, challenged in court. One of these challenges suggests that in setting up the guidelines for the states, that the EPA (and presumably the states) cannot do any “outside of the fenceline” regulation, asserting that this differs from prior regulation of electricity generating units under other pollutants.

In response, the EPA correctly reasons that its authority under section 111(d) is different from its authority to regulate criteria pollutants under 111(b), and that the BSER can include the “outside the fenceline” reductions suggested, as well as emissions trading between sources. I believe the agency is absolutely correct in this interpretation, but this reasoning would suggest that offsets would also be legally allowed under Section 111(d).

To see why, we have to return to the relationship between Sections 110 and 111(d) that I alluded to at the start – namely, that Section 111(d) specifies that the Best System of Emissions Reduction adopted by a state be modeled on Section 110, which governs the State Implementation Plans . While the EPA has not had cause to consider the full meaning and implications of this statutory phrase before, I believe that it means that 111(d) provides that the “system” of emissions reduction can be anything that meets the target required by the EPA. Section 110 allows the states such autonomy in constructing how they will meet the ambient air quality standards for criteria pollutants. In Union Electric Co. v. EPA, 427 U.S. 246, 96 S.Ct. 2518, 49 L/Ed/ 2d 474 (1976), the Supreme Court upheld the EPA’s position that if a state proposes a strategy that is effective in meeting the ambient air quality standards, the EPA must approve that SIP. This follows statutory language in Section 110(a) and also supports the cooperative federalism at the heart of the Clean Air Act.

Though the EPA seems to distinguish between the reductions itproposes in the Clean Power Plan rulemaking and the use of offsets, if “outside the fenceline” reductions are allowed at all if the states so choose, which I believe they are because of the reference to Section 110, then they can be allowed in other arenas such as offsetting.

What it boils down to is this: Unless the EPA is willing to grant the same sort of flexibility to the states under Section 111(d) that it does under section 110, it reads the reference to section 110 out of the statute, which was not the intent of the drafters.

The EPA seems to be afraid that the use of offsets might be a step too far, and other commentators have suggested that the agency’s power under Section 111(d) becomes more precarious the further it moves from the fenceline. But the applicable law suggests otherwise. While the EPA may be trying to paint a smaller target for legal challenge or simply avoid the politics of proposing something that looks very much like a cap-and-trade system, these distinctions are not based on the law. As such, the EPA should clarify that the states could choose to keep or utilize verifiable offset emissions reductions and be compliant with the Clean Power Plan.

Because some of the states, such as California and the Northeastern states participating in the Regional Greenhouse Gas Initiative already have carbon trading programs allowing for GHG reductions from sources such as verified GHG offsets or other industries (such as the petroleum industry), this clarification would allow these states to keep or utilize such reductions and be compliant with the BSER rulemaking. Additionally, clarifying the allowance of verified offsets and reductions from other industrial sectors (if proposed by a state or states) would facilitate the creation of a GHG trading market, which the agency has correctly determined would allow for more reductions at lower costs.

Victor B. Flatt is the Taft Distinguished Professor of Environmental Law at UNC Chapel Hill School of Law.

Op-Ed Bioenergy Can Support Climate, Food, Land Restoration If Done Right

Governments have long promoted the use of biofuels like ethanol derived from corn as a relatively clean-burning alternative to coal, but biofuels have gone from hero to zero as people started chopping forests to plant fuel crops. Many environmentalists today are calling for an end to pro-biofuel policies, but Emily McGlynn of The Earth Partners LP says we simply need to use land more efficiently.

19 March 2015 | It’s gospel for some in the environmental community that if we keep converting crops to biofuels, we’ll gobble up farms and forests, leading to food shortages and accelerating climate change. The World Resources Institute recently went so far as to say we should “phase out” a decade of global bioenergy policy.

This would be a mistake, because bioenergy, done well, can and must play an important role in restoring degraded land, supporting food production, and enhancing CO₂ sequestration.

To begin with, it’s indispensable in nearly all scenarios for adequately addressing climate change: in its Fifth Assessment Report, the Intergovernmental Panel on Climate Change indicates that failing to deploy the needed amounts of bioenergy would increase the costs of addressing climate change by 60%, more than any other renewable energy technology, including solar and wind.

What’s more, bioenergy is one of the only technologies that can help us bring emissions back down after they’ve reached dangerous levels, which is very likely to happen, especially when combined with carbon capture and storage technology.

The key for bioenergy, however, is “done well.” What does that mean? Let’s look at three simple examples of how bioenergy production can slow climate change at significant scale by reducing fossil fuels without gobbling farms and forests.

The first involves integrating sorghum, an energy grass, and rice production. The UN Food and Agricultural Organization tells us that rice paddies take up 163 million hectares globally, an area about the size of Alaska. Rice farmers generally leave their paddies fallow, or resting, one year out of three. If we used this fallow time to plant sorghum, we’d get 7 dry tons of biomass per acre, or 938 million tons total each year, enough to offset half of annual U.S. gasoline consumption.

Closer to home, we can look at active pastureland. Ranchers can rotate their herds so that, in summer, pastures can be used to grow perennial energy grasses, like switchgrass, and in winter cattle can graze on cold-season grasses, like ryegrass. If this approach were implemented on half of America’s 587 million acres of pastureland, we could produce 91.5 billion gallons of ethanol, or 60 percent of current U.S. gasoline consumption.

A third example is removing invasive woody brush found extensively throughout native grassland in the south and western United States. In Texas alone, we can sustainably recover several million tons of biomass annually, while increasing pasture productivity, restoring native grasses, and increasing the amount of carbon that gets sponged up by healthy soil.

Obviously, these approaches won’t work everywhere, and to see them implemented on any significant scale we’d have to see dramatic changes in the energy and agricultural sectors – but that can be achieved with strong market signals, policy support, and landowner engagement.

The same math applies to degraded land, of which there’s too much, according to the UN Convention on Combating Desertification. More than 7 billion acres, or three times the size of the United States, are degraded. This costs the global community $40 billion annually in lost productivity, and it threatens food production and rural livelihoods. The objective of food and energy policy should be intensely focused on bringing these lands back into productivity. Rather than abandoning bioenergy, smart policy would encourage growing biomass as a way to build soil carbon, retain and increase soil moisture and nutrients, and create new value for rural communities. Well-designed food security policy would use biomass crops as one tool to improve landscapes and, ideally, allow them to be rotated back into food production.

Critiques of bioenergy and biofuels indicate we shouldn’t use marginal land incapable of food production for biomass crops, but instead let it revert back to natural forests or other high-carbon landscapes to maximize carbon sequestration. Fair enough, but why not do both where possible?

The simple fact is that you usually need human management to successfully restore abandoned or marginal landscapes, because you have to reintroduce native species and natural cycles. Smart restoration can allow for both additional carbon sequestration and biomass recovery.

For example, when reestablishing native grass communities on degraded prairies, the reintroduced grasses can be harvested periodically to replicate the kinds of fires that always happened naturally, providing a source of bioenergy, keeping invasive species at bay, and maintaining diminishing grassland habitat. Because restored prairies store most of their carbon in their extensive root systems, they often increase carbon stocks, even if aboveground biomass is harvested periodically.

Another interesting example is the restoration of pine savannah ecosystems in the U.S. southeast, considered critical to the survival of 40 rare and threatened species. Characterized by widely-spaced pines and periodic fires that promote grasses, pine savannahs can be some of the most biodiverse landscapes outside of tropical rainforests. Restoring this ecosystem often requires removing trees and underbrush to allow sunlight to reach the ground-level grasses. Regular “thinning” like this can keep pine savannahs healthy while also generating biomass.

To sum up, it is useful to highlight potential trade-offs among bioenergy, food production, and carbon sequestration. But rather than concluding that bioenergy should be abandoned, policy makers, rural communities, and the private sector need to work together to implement bioenergy approaches that can generate win-win-wins for food, climate, and ecosystem restoration.

 

Emily McGlynn is Manager for Business Development and Policy at The Earth Partners LP. She can be reached at emily.mcglynn@teplp.com.

Opinion: Yes, The US EPA Can And Should Allow Offsets Under The Clean Power Plan

16 March 2015 | The US Environmental Protection Agency’s (EPA) proposed Clean Power Plan, the agency’s attempt to regulate existing sources of greenhouse gases (GHGs) in the electricity-generating sector under its Clean Air Act authority, may be the most controversial rule proposed by the agency. Weighing in at around 670 pages (with a 750-page technical support document,) it is certainly one of the most complex regulations ever attempted by the agency.

It should also be interpreted as offering the states maximum flexibility in how states handle their emission reductions, as we can see by zeroing in on just two sections of the Clean Air Act: Section 110 and Section 111.

Section 110 governs the State Implementation Plans (SIPs), which are the way in which ambient levels of criteria pollutants (like ozone), are to be enforced. Section 110 allows states to meet these goals in any way they wish as long as they do not interfere with another state’s compliance. Section 111, on the other hand, purportedly deals with reductions from source categories (such as electricity generating units).

Here, we’ll be looking at just two sub-sections of Section 111: Section 111 (b), which deals with new or recently upgraded sources of pollution; and Section 111 (d), which deals with older or existing sources of pollution not regulated by states under Section 110 (or as a hazardous air pollutant) . Since greenhouse gases are the only pollutants that exist in this category, and they have yet to be regulated, section 111(d) is as yet untested. The Clean Power Plan is the EPA’s attempt to do so.

Section 111(d) says the EPA may establish guidelines for how states meet reductions required, and it also says that the procedure governing approval of these state systems should be a “procedure similar to that provided by section 7410[Section 110].”

And guess what? Section 110 clearly leaves room for offsetting, as well as any measure that would reach the target required.

How Does the Clean Power Plan Work?

The Clean Power Plan sets individual targets for GHG emissions rates for each state through a formula the EPA developed, examining how various GHG reduction strategies could be implemented given each state’s own unique circumstances. In determining the state’s targets, the EPA critically made a decision that the Best System of Emissions Reduction (BSER) referenced by the Clean Air Act authority under its Section 111(d) provisions could include reductions in GHG emissions from end-user efficiency gains, electricity dispatch decisions, and new non- or low-carbon sources.

Because these reductions would not technically be from a regulated plant itself, they are characterized as “beyond the fenceline” reductions. It is this decision that is responsible for much of the rule’s complexity as well as the ability of the EPA to propose a more aggressive reduction target than could be achieved by changes at the electricity generating plant itself. This approach, the EPA says, allows the states maximum flexibility in meeting ion targets.

Unfortunately, the EPA has shied away from allowing states maximum flexibility for reductions by refusing to endorse (at this time) the use of GHG offsets, (such as biological offsets or reductions from other unregulated sources) even though the use of offsets is generally recognized as a more efficient way to reach tighter GHG reductions targets.

Lying at the heart of this decision, according to the EPA, is “legal uncertainty.” Because of the controversy in the United States surrounding any regulation of GHGs, the regulations are being, and will continue to be, challenged in court. One of these challenges suggests that in setting up the guidelines for the states, that the EPA (and presumably the states) cannot do any “outside of the fenceline” regulation, asserting that this differs from prior regulation of electricity generating units under other pollutants.

In response, the EPA correctly reasons that its authority under section 111(d) is different from its authority to regulate criteria pollutants under 111(b), and that the BSER can include the “outside the fenceline” reductions suggested, as well as emissions trading between sources. I believe the agency is absolutely correct in this interpretation, but this reasoning would suggest that offsets would also be legally allowed under Section 111(d).

To see why, we have to return to the relationship between Sections 110 and 111(d) that I alluded to at the start – namely, that Section 111(d) specifies that the Best System of Emissions Reduction adopted by a state be modeled on Section 110, which governs the State Implementation Plans . While the EPA has not had cause to consider the full meaning and implications of this statutory phrase before, I believe that it means that 111(d) provides that the “system” of emissions reduction can be anything that meets the target required by the EPA. Section 110 allows the states such autonomy in constructing how they will meet the ambient air quality standards for criteria pollutants. In Union Electric Co. v. EPA, 427 U.S. 246, 96 S.Ct. 2518, 49 L/Ed/ 2d 474 (1976), the Supreme Court upheld the EPA’s position that if a state proposes a strategy that is effective in meeting the ambient air quality standards, the EPA must approve that SIP. This follows statutory language in Section 110(a) and also supports the cooperative federalism at the heart of the Clean Air Act.

Though the EPA seems to distinguish between the reductions itproposes in the Clean Power Plan rulemaking and the use of offsets, if “outside the fenceline” reductions are allowed at all if the states so choose, which I believe they are because of the reference to Section 110, then they can be allowed in other arenas such as offsetting.

What it boils down to is this: Unless the EPA is willing to grant the same sort of flexibility to the states under Section 111(d) that it does under section 110, it reads the reference to section 110 out of the statute, which was not the intent of the drafters.

The EPA seems to be afraid that the use of offsets might be a step too far, and other commentators have suggested that the agency’s power under Section 111(d) becomes more precarious the further it moves from the fenceline. But the applicable law suggests otherwise. While the EPA may be trying to paint a smaller target for legal challenge or simply avoid the politics of proposing something that looks very much like a cap-and-trade system, these distinctions are not based on the law. As such, the EPA should clarify that the states could choose to keep or utilize verifiable offset emissions reductions and be compliant with the Clean Power Plan.

Because some of the states, such as California and the Northeastern states participating in the Regional Greenhouse Gas Initiative already have carbon trading programs allowing for GHG reductions from sources such as verified GHG offsets or other industries (such as the petroleum industry), this clarification would allow these states to keep or utilize such reductions and be compliant with the BSER rulemaking. Additionally, clarifying the allowance of verified offsets and reductions from other industrial sectors (if proposed by a state or states) would facilitate the creation of a GHG trading market, which the agency has correctly determined would allow for more reductions at lower costs.

Victor B. Flatt is the Taft Distinguished Professor of Environmental Law at UNC Chapel Hill School of Law.

New European Carbon Exchange Bets On Revival Of Spot Trading

24 February 2015 | Watch out, European compliance traders there’s a new player in town.

The European Environmental Markets (EEM) launched on February 11 as a new exchange platform for spot transactions of European Union Allowances (EUAs) and Certified Emissions Reductions (CERs), meaning that participants can conduct transactions in real time.

While EEM is not the first spot exchange for the European Union’s Emissions Trading System (EU ETS), the once-popular trading option hasn’t been available since 2012. That was when the French exchange BlueNext dissolved after handling more than 1.1 billion metric tonnes of European Union (EU) permits during its prime.

European policymakers saw a bright, shining future for the newly created EU ETS when it launched in 2005. The system enacted pollution caps on nearly 12,000 power plant and other industrial entities. Those that could not reduce their emissions could trade EUAs to comply.

But the EU ETS experienced growing pains that ultimately led to the demise of exchanges such as BlueNext, including outright fraud and a phishing scam that tarnished the reputation of the trading program. However, the bigger challenges for these exchanges may have been the regulatory policies that led to a glut of allowances, with an estimated 1.5-2 billion tonnes flooding the market, and a global recession that pressured demand for the permits.

After years of these challenges, only two exchanges remained standing: the Intercontinental Exchange (ICE) and the European Energy Exchange (EEX).

Spotting a New Opportunity

Despite this turbulent history, newly-launched European Environmental Markets’ CEO Adrian Rimmer believes the time to enter the market is now, especially after EU officials signed off on a plan last year to shore up the EU ETS by withholding 900 million permits from 2014-2016, a temporary solution known as backloading.

“We’re in the fortunate position of having been able to wait for what we think is the right time – clear rules, backloading appearing to be addressed, clarity that the emissions regulation is entrenched and expanding and that the ETS will remain a core part of EU policy,” he said.

But with two exchanges already on the market, why a third? The answer comes back to spot transactions.

Both ICE and EEX offer same-day trading under a daily futures contract, but neither offers spot trading. While the length of time between the two transaction options may be small, it can translate into major differences for corporate compliance entities.

Many organizations do not have a mandate to trade in futures. Even if they do, futures require lines of credit, which entail more management and overhead that spot transactions can skip. “Certainly from a CFO perspective, the lack of a need for credit will be very attractive,” Rimmer said

The organization’s single-minded focus on spot will also lower running costs, to the benefit of its users. Many of the failed exchanges from the past combined multiple sets of proprietary software in their operations – leading to extravagant information technology costs. The older software also required a large back office, since hardly anything was fully automatic.

“It was a lot of behind the scenes,” Rimmer said. “You’d have an electronic front end, but actually a lot of manual processes in the background. People would be running around with bits of paper, posting things and downloading forms.”

EEM’s trading platform is fully automated. It was created by the exchange’s Executive Chairman Wayne Sharpe 25 years ago when he founded the commercial organization Bartercard. Since then, Bartercard has become one of the largest online exchanges in the world and has facilitated over $40 billion in trade via more than 30 million transactions.

What this means for the carbon market is that Sharpe’s platform has been tested for more than 20 years and been upgraded at a cost of more than tens of millions of dollars. The past 3-4 years has been spent tailoring the platform for the European environmental markets.

Looking to the Future

While EEM will test the waters with the compliance markets, Rimmer will not be letting go of his Gold Standard Foundation past completely. The exchange will begin with compliance markets, but then seeks to cover all European environmental markets including voluntary carbon, renewable energy, water and biomass.

“My goal through the Gold Standard has been two things: to continue to demonstrate why carbon markets and climate finance can be credible,” he said “And the second piece is trying to bring that tangible financial value to a wider range of environmental impacts and social impacts than just carbon.”

With the Gold Standard still working on measuring non-carbon impacts through, for example, a proposed Water Benefit Standard, Rimmer hopes to now broaden the financial instruments available to the carbon markets.

“Having focused on credibility for the last five years, I want to focus on liquidity in the market,” he said “It doesn’t matter how credible it is if nobody can access the market and no one can trade in it.”

Industrialized Countries To Start Unveiling Climate-Change Strategies In March

24 February 2015 | If you search for “INDC” on Google News, you’ll end up learning more about what’s happening “in DC” (the US Capitol) than you will about the “Intended Nationally-Determined Contributions” that are the linchpin of a new approach to fixing the global climate mess and that’s a shame, because transparency is a major selling point of INDCs, which are the concrete, specific proposals that developed countries are submitting to the United Nations Framework Convention on Climate Change (UNFCCC) through the end of March, with developing countries being given until June. Although most INDCs aren’t expected until the end of the month, the European Union is expected to publish a preview of its INDC this week.*



INDCs emerged in the closing hours of the 2013 talks in Warsaw, and they were designed to end the futile 20-year quest for a top-down global climate-change treaty that’s designed to be one-size-fits all but almost always ended up suiting no one. In place of that Quixotic quest, we now have a combination of bottom-up and top-down initiatives: INDCs are the bottom-up part, and the treaty currently working its way through the UN process is the top-down part. The two are evolving in an iterative process where developments in one inform the other, and visa-versa. This, however, means that even as countries begin posting their proposed INDCs, it’s not really clear what activities will be recognized under the treaty.

More clarity should come in June, when negotiators will meet in Bonn, Germany, to finalize the draft text that will be put through one last wringer at year-end talks in Paris. The June text should provide enough clarity for all the world’s INDCs to be tweaked and for the UN Climate Change Secretariat to fold them together into a synthesis report by October 1.

At that point, we’ll add up all the activities and hope they keep the earth from warming more than 2°C.

Then, come December, INDCs and the draft text will converge in Paris the culmination of a massive undertaking that’s designed to let individual countries do what they can, but in a way that makes it possible for other countries to compare efforts and that sparks a race to the top as countries vie for positions as climate leaders.

And it begins in earnest on Wednesday, when the European Union unveils its INDC.

What’s in an INDC?

The Lima talks in December  set the minimum requirements for an INDC: they must, at the very least, provide verifiable, quantifiable information on the reference point that countries will take as their base years and target years a step most major emitters have already taken. Indeed, the United States explicitly referenced INDCs when it unveiled its proposed deal with China last year and announced it would reduce its emissions by 26-28 percent, with 2005 as a base year and 2025 as a target year. At the same time, China says it’s emissions will continue to drift upwards, but will peak by 2030 or sooner. The EU says it will reduce its emission by 40 percent, with 1990 as a base year and 2030 as a target.

In addition to base and target years, INDCs must outline the scope and coverage of country activities, their planning processes, and the basic assumptions underlying their reasoning.

Earlier this month, negotiators met in Geneva to produce something akin to a laundry list of activities that will be recognized as an INDC, but they ended up producing an 86-page wish list that included every idea for an INDC that’s kicking around the UNFCCC including six separate options for land-use alone but from here through the June talks, it’s whittle, whittle, whittle, at least in theory.

In a blog post earlier this week, Kelly Levin and David Rich of the World Resources Institute (WRI) identified three questions that they felt the global community should ask when assessing INDCs:

        1. What are the country’s future emissions if its INDC is achieved? Because INDCs are “nationally determined,” each country decides its own appropriate contribution to reduce emissions and keep global warming below 2 degrees Celsius. Because INDCs will come in a variety of forms, it is necessary for the global community to know what each country’s emissions are expected to be in 2025 or 2030 if its INDC is implemented in order to determine if the total effect of all INDCs is sufficient to keep the world within its global carbon budget. It will also be essential to look at the long-term prospects for transformation of emitting sectors to enable a longer-term phase out of emissions.

 

      1. How fair and ambitious is the country’s INDC? Countries are expected to explain how their INDC is a fair and ambitious contribution to the UNFCCC’s objective: avoiding the most dangerous impacts of climate change. Countries may explain fairness through multiple criteria, such as emissions responsibility (such as historical, current, or projected future emissions per capita or total emissions), economic capacity and development indicators (such as GDP per capita), or relative costs and benefits of action. Countries may also explain their ambition in terms of how much INDCs deviate below current “business-as-usual” emissions, or how quickly their economy is decarbonizing. WRI’s Open Climate Network (OCN) is working with eight focus countries to evaluate emissions trends and abatement potential to help inform initial INDCs.
      2. Which planning processes and policies are available for achieving the INDC? In order for international negotiators and civil society to have confidence the INDC will be achieved, each country should define what domestic policies and planning processes exist or will be put in place to achieve the INDC. This information will also be critical for understanding to what extent a country is putting in place policies that will drive transformative change over the longer term.

INDCs and Comparability: A Reading List

To work, INDCs have to be transparent and comparable across countries. If most countries feel the INDCs are fair, the theory goes, they’ll play the game to win, rather than simply not to lose.

In the lead-up to the Lima talks, Niklas Hí¶hne, Hanna Fekete, and Markus Hagemann summarized the challenge on the New Climate blog.

“INDCs of countries with similar circumstances will have to be judged by others to be equally ambitious,” they wrote. “But how can you judge whether a country’s contribution is fair and ambitious in comparison to others, when all 194 countries are very different in development, industrial structure, capabilities and responsibilities and these aspects even change over time?”

It’s a short and quite readable piece that offers five potential indicators and links to several enlightening examples, but for a more philosophical dive, you can turn to “Comparability of Effort in International Climate Policy Architecture“, a discussion paper published at the very beginning of last year by Joseph Aldy of Harvard and William Pizer of Duke in January.

The paper begins by proposing four attributes of a good metric (comprehensive, observable, replicable, and broadly applicable), but its real value is the solid, nuts-and-bolts comparison of ideas that have been in the air for years, and that some countries love and some hate. They look at different ways of measuring emission levels, different ways of thinking about a carbon price, and different ways of using taxes and trade to enforce bilateral agreements to make sure countries don’t inadvertently export their emissions.

Similar ideas surfaced in a less formal context at the University of Chicago late last year,in a debate over what Milton Friedman might do to combat climate change.

If comparability seems overwhelming, check out WRI’s CAIT Equity Explorer. It’s a nifty tool that lets countries make comparisons based on their levels of development, their emissions, and how vulnerable they are to climate change.

For some insight into the INDCs we may see from developing countries, check out “A Mitigation Analysis of CDKN Priority Countries“, which the Climate & Development Knowledge Network (CDKN) published In July. Published by Helen Picot, Kiran Sura and Christopher Webb, it takes stock of efforts already underway in several developing countries including India that together account for 9% of global greenhouse gas emissions.

*CORRECTION: The initial wording of this sentence implied that INDCs would be emerging regularly throughout March. In actual fact, most aren’t expected until the final two weeks of the month. Hat-tip to WRI for pointing out the error.

This Week In Water: The Water Stewards At The Bottom Of The Pyramid

4 February 2015 | Okay, so 2015 may have started on a low note, as the global impacts of water crises hit number one on the World Economic Forum’s list of global risks in 2015.
But this year holds the promise of real progress as well. In New York this fall, world leaders will decide on post-2015 Sustainable Development Goals (SDGs) to replace the expiring Millennium Development Goals. The SDGs set out a roadmap for improving the lives of the poor without, as Circle of Blue puts it, “torching the environmental foundation” of this planet.

In this month’s Water Log, the link between environmental degradation and poverty looms large. We take a look at using microfinance – providing financial services, including loans, to the poor who have historically lacked access to banking or credit – to support payments for ecosystem services (PES). While microfinance models have been hugely successful on a global scale in providing the means for people to escape extreme poverty, they are still rarely used to finance PES. According to Ecosystem Marketplace’sState of Watershed Investment 2014 report, only three active watershed investment projects use some sort of credit mechanism: one in Brazil, one in Costa Rica and one in Nepal. The latter two each use revolving loan funds to finance restoration activities that repair damaged watersheds.

 

Yet micro-lending could in theory deliver additional finance for conservation as well socio-economic benefits for communities.Access to credit also has the potential to attract more investors. The steady cash flow required to attain credit would demonstrate to institutional investors that a watershed restoration project, for instance, is worth backing. So far, tapping microfinance is mostly still an idea. But potential for growth is there, microfinance groups and conservationists agree.

 

Thinking small is also paying off in Bolivia, where where more than 90 per cent of carbon credit revenues under a proposed REDD mechanism were forecast to have gone to just five per cent of the population. Instead, the country has pursued an alternative strategy that focuses on rewarding good behavior – protecting forests and engaging in forest-friendly enterprise – while punishing bad behavior through taxes and fines. This so-called “Bolivian mechanism,” explains Lykke Andersen of the Institute for Advanced Development Studies in Bolivia, results in a “much fairer distribution of the benefits, helping the poor while hurting the big deforesters.”

 

Keep reading to learn more about what’s happening in the watershed investment world in the early days of 2015 – and chins up!

The Ecosystem Marketplace Team

For questions or comments, please contactnewsletter@ecosystemmarketplace.com


EM Headlines

GENERAL

The Environmental Mortgage: Connecting The Dots Between Microfinance And Ecosystem Services

All around the world, we see that environmental degradation and poverty go hand in hand as do sustainable land-use and wealth. This link builds a case for using microfinance – providing financial services, including loans, to the poor who have historically lacked access to banking or credit – to support payments for ecosystem services (PES).

 

Yet while microfinance models have been hugely successful on a global scale in providing the means for people to escape extreme poverty, they aren’t often used to finance PES projects that offer many poverty alleviating benefits. Despite it being risky and costly, both sectors see potential in working together on a larger scale.

Keep reading here.

Putting A Price On Nature Can Benefit The Poor If Done Right

You don’t have to go far in Bolivia to find treasure. It’s everywhere: in the vast Amazonian forests; in Lake Titicaca, which lies nearly four kilometres above sea level in the Andes; in the peaks and rain-gathering waterways of the Andes mountains; or in Bolivia’s 2,000 animal species.

 

And to call all this treasure is hardly romantic because, to some, Bolivia’s natural environment is worth a lot of money.

 

Bolivia is not alone on that front. Program that pay people to sustainably manage environmental assets= are increasingly popular, especially in the global South. But questions about the money’s impact on efforts to reduce poverty and inequality have persisted for decades. Does the cash help poor or indigenous people living in valuable ecosystems? Or is it more likely to benefit rich landowners? In Bolivia and elsewhere, research is beginning to show that these two goals environmental protection and poverty reduction  need not be mutually exclusive.

Keep reading.

Colorado Shrinks The Risk Of Wildfire With Investments In Watershed Services

The late 1990s and early 2000s saw two fires that together burned 150,000 acres of forestland and dumped 40 years’ worth of sediment into Colorado’s Strontia Springs Reservoir. Strontia Springs is a key source of water. It helps supply the 1.3 million customers of Denver Water, a water provider, with clean water. The cleanup effort from those fires cost Denver $26 million on water quality, restoration, reclamation and sediment drainage beginning in 1996 after the first fire-Buffalo Creek Fire.

 

Fire suppression has made wildfire intensity that much worse. But fire isn’t the only threat Colorado’s watersheds are facing. Bark beetle and flooding plus a changing climate all pose a risk to Colorado’s forests and the water that runs through them.

 

Because of these threats – among others – various Colorado water providers have paid over $13 million in watershed investments and forged partnerships to identify and address problems plaguing the state’s forest ecosystems. These activities were highlighted last month during a webinar that showcased findings from Ecosystem Marketplace’s latest State of Watershed Investmentsreport.

Learn more.

Water, Energy, Food: Nexus Thinking Catches On, But Nexus Spending Lags

Brewing giant MillerCoors recently slashed the amount of water and energy it uses to produce barley for its beer, and it did so without losing yields. How? In part by planting vegetation alongside streams and restoring wetlands, which saved them the cost of filtering water before discharging it

 

They’re hardly alone. All around the world, companies and even cities are learning that the wetlands, dunes and sea grass they once took for granted act as natural buffers against hurricanes, enhance water quality, and save energy and resources that would otherwise be spent to construct and operate gray infrastructure. In the new lingo of resource management, they’re recognizing thewater-energy-food nexus and the important role nature œ and, more specifically, natural infrastructure  plays in this nexus.

 

Unfortunately the success stories are the exception that proves the rule, as investment in green infrastructure to solve nexus challenges often falls short of its potential, according to Ecosystem Marketplace’s State of Watershed Investment 2014 report. The survey tracks global investment in watershed services (IWS), and it finds investment lagging potential except in those cases that address interrelated issues such as reducing water use and pollution in agriculture or in increasing resilience to flooding and wildfires.

Keep reading at Ecosystem Marketplace.

In The News

POLICY UPDATES

Des Moines Sues Over Nitrates, Wants Drainage Districts Regulated as Point Sources

Des Moines Waters Works notified three neighboring upstream counties that it plans to sue over nitrate pollution from agriculture in the city’s drinking water supplies. If successful, the suit would have enormous consequences. Essentially, Des Moines is arguing that agricultural drainage districts – those pipes and tiles that drain water from fields across much of the Midwest – should be regulated as point sources, just like a sewage treatment plant or factory that discharges polluted water.

 

Some lawyers think that’s a stretch. The Environmental Defense Fund suggested that rather than picking a fight, the city should look to voluntary incentives to address pollution. Iowa Governor Terry Branstad said that Des Moines had“declared war on rural Iowa. But Des Moines says it had no choice: voluntary methods aren’t working, and seasonal surges in nitrates concentrations in the city’s drinking water are requiring its utility to spend $4,000 a day on additional treatment.

Get full coverage from Circle of Blue.

New Stormwater Suit Means NRDC, EDF and EPA Are At It Again

Eleven years after suing the Environmental Protection Agency (EPA) over their stormwater regulation, two environmental advocacy groups are heading back to court. In 2003, the lawsuit was over strengthening a finalized 1999 rule on regulating stormwater pollution. This time, the Environmental Defense Fund and the National Resources Defense Council are requesting compliance with the 2003 regulations. They’re arguing the EPA continues to fail to regulatestormwater runoff – one of the US’s biggest sources of water pollution – in cities with a population under 100,000. The lawsuit is also pushing for a decision on whether stormwater from forest roads should be regulated – a provision the two organizations claim was covered under the 2003 ruling.

Bloomberg BNA has coverage.

Nearly $2B Is A Lot, But Is It Enough?

Passage of Proposition 1, California’s $7.5B water bond, gives the state the opportunity to rethink and transform its complicated water system, says the deputy director of California’s Water Foundation. Some of that transformation could come in the form of investments in ecosystems like wetlands that filter and store water, and the forests where the bulk of the state’s water originates. While the lion’s share of the funds will flow toward storage projects, $1.9B is allocated for watersheds and flood management – a sum with the potential to help supply long-term water security to an area that badly needs it.

Read more from the Sacramento Bee.

Making the Water Quality Grade Proves Difficult in Chesapeake Bay

The Chesapeake Bay Foundation graded Chesapeake Bay health recently. And while it wasn’t failing, the grade wasn’t good either. The nonprofit gave the Bay a D+ saying bordering states had made progress in terms of water quality but much of the watershed remained heavily polluted. States surrounding the Chesapeake are under a federal mandate to clean up the waterway, and risk losing federal funding if majority of cleanup projects aren’t in place by 2017. Progress on this front is being made, however slow. Virginia’s nutrient trading system, for instance, has received high praise from the federal government and is viewed as a model for other states.

Learn more about the report here.

GLOBAL MARKETS

WQT Finds Itself the Cool Kid in Class

Water quality trading is having a big month. The Electric Power Research Institute (EPRI) just won the US Water Prize for its Ohio River Basin Water Quality Trading Project. Meanwhile, trading is being touted in watersheds across the country as a potential solution to mounting water quality problems: we find reports of interest in a state-wide market in Florida (see next story) and proposed markets in Iowa’s Catfish Creek Watershed, Wisconsin’s Lower Fox River Watershed, and in the Mississippi Gulf region (backed by oil & gas industry concerned about their water risks!).

 

Scaled-Up Trading Proposed to Clean Waterways in the Sunshine State

Water quality trading continues to intrigue Florida as a potential cure to its water pollution problems. While the state has a regional pilot project, officials are contemplating going statewide. They say such a program is cost-effective and can be a shot in the arm for the normally slow and expensive cleanup process. Right now, a statewide program is just an idea: the state is holding workshops, though officials are unsure of how well it will be received. But supporters are finding encouragement in the programs’ success in other states and the fact that many states have ongoing pilot projects. As a lawyer involved in Virginia’s program puts it, “It can be a very elegant solution to a complex problem.”

Read more at the Orlando Sentinel.

US Environmental Water Markets Estimated at $56M in 2013

A new brief on US environmental water markets from WestWater Research found the environmental sector accounting for 40% of volume and 7% of total value traded in all water markets from 2003-2012. That activity amounted to 6.2M acre-feet and $562M in trading values. Leases continue to make up most of the sector’s volume. As for pricing, the purchase cost has increased consistently with the greater market, although prices dipped during the economic downturn from 2008-2009. And these prices have been declining steadily-by nearly 70% as of 2012. But overall, the market has continued to grow with activity varying with region: the Northwest leads while the Rocky Mountain region lags.

Read the report here.

For Want of $1.8 Billion, The Reef Was Lost

To save Australia’s Great Barrier Reef, someone needs to pony up more than $1.3B (AUD$1.8B) according to recent analysis by the resource groups managing the reef catchment. The reef, battered by agricultural pollutants and coral-eating starfish, has lost half its coral cover in recent decades. The funding gap for funding agricultural best management practices, stormwater control, and infrastructure upgrades will exceed $300 million just for the next five years.

 

The report’s authors suggest that current government initiatives are inadequate; although government-funded programs have cut nitrogen loads by 10% and pesticides by 28% since 2008, that may not be enough to meet long-term goals of a 60% reduction in pesticides and 90% compliance with best practice by farmers in the region.

The Guardian has coverage.

The Private Sector Dives Into Colorado Watershed Protection

Communities living along Colorado’s Front Range are receiving help from some major corporations in securing a clean source of water. MillerCoors, Pepsi and the Wells Fargo Foundation are collectively donating $1 million to The Nature Conservancy’s (TNC) restoration work in Colorado’s forests. The funds will help TNC build and implement projects designed to reduce the risk of catastrophic wildfire – caused primarily by drought and fire suppression – with prescribed burning and fuel treatments among other activities. Restoring the forests that catch snowpack and replenish rivers will increase water security for Colorado folks.

Get coverage here.

Heineken’s Track Record in Sustainability Leaves More Than Beer Drinkers Impressed

Brewery giant Heineken is raising the sustainability bar for big corporations with its water-saving initiatives and commitments to slash carbon emissions. And much of Heineken’s work is happening at a community level. After beer-producing operations left regions water-stressed, the company is implementing water stewardship projects in places like Indonesia, giving back on a local level while also ensuring its own sustainability. Activities include planting bamboo trees in Indonesia to halt erosion and digging narrow troughs full of compost material to slow snowmelt and reduce flooding. The brewery was recently rewarded for its efforts with the Water Management award at the Sustainable Business Awards Singapore 2014.

Eco-Business has the story.

EVENTS

GreenBiz Forum – 10% discount through Ecosystem Marketplace

GreenBiz Forum from February 17th to 19th in Phoenix, Arizona brings together an unprecedented partnership between GreenBiz Group, The Sustainability Consortium and Arizona State University to give attendees an unparalleled in-depth look at the key challenges and opportunities facing sustainable business today. Framed by GreenBiz’s State of Green Business report, the high-wattage stage presentations, workshops and networking opportunities make GreenBiz Forum an unforgettable event. Save 10% with Ecosystem Marketplace’s discount code GBF15EM. 17-19 February 2015. Phoenix AZ, USA.

Learn more here.

Nexus 2015: Water, Food, Climate and Energy Conference

The Water Institute at the University of North Carolina at Chapel Hill and collaborators are hosting the Nexus 2015: Water, Food, Climate and Energy Conference on March 15-17 in Chapel Hill, NC, USA. The Conference brings together scientists and practitioners working in government, civil society and business, and other stakeholders to focus on how and why the nexus approach can be used on local and international levels. 15-17 March, 2015. Chapel Hill NC, USA.

Learn more here.

2015 National Mitigation & Ecosystem Banking Conference

The 2015 National Mitigation & Ecosystem Banking Conference, scheduled for May 5-8, 2015, in Orlando, Florida is the only national conference that brings together key players in this industry, and offers quality hands-on sessions and training as well as important regulatory updates. Proven to be “the” place to gain insights, explore new markets and learn from sessions, the 2015 Conference will continue its focus on educational content both advanced and basic sessions as well as moderated exchanges and a variety of mini workshops that help to connect bankers, regulators, users and others involved in this industry. Pre and post- event workshops include Primer 101, Stream Banking, Long-Term Stewardship, Financing & Valuation and more. Hear perspectives from bankers, regulators and users, get updated on regulations, legislation and legal challenges, participate in field trips and benefit from the many opportunities to network! With a high attendance this past year, we anticipate a record attendance in Orlando and encourage you to make plans to submit to present, attend, even sponsor or exhibit! Orlando FL, USA. 5-8 May 2015.

Learn more here.

Putting A Price On Nature Can Benefit The Poor If Done Right

27 January 2015 | You don’t have to go far in Bolivia to find treasure. It’s everywhere: in the vast Amazonian forests; in Lake Titicaca, which lies nearly four kilometres above sea level in the Andes; in the peaks and rain-gathering waterways of the Andes mountains; or in Bolivia’s 2,000 animal species.

And to call all this treasure is hardly romantic because, to some, Bolivia’s natural environment is worth a lot of money.

Bolivia is not alone on that front. Programmes that pay people to sustainably manage environmental assets are increasingly popular, especially in the global South. But questions about the money’s impact on efforts to reduce poverty and inequality have persisted for decades. Does the cash help poor or indigenous people living in valuable ecosystems? Or is it more likely to benefit rich landowners? In Bolivia and elsewhere, research is beginning to show that these two goals environmental protection and poverty reduction need not be mutually exclusive.

Pricing up nature

A recent estimate of the planet’s natural capital is US$125 trillion a year. [1] This figure attempts to capture the value of the ecosystem services essentially all the benefits of a healthy, natural environment provided by such things as carbon-storing trees, drainage basins that prevent flooding and insect life that helps agriculture flourish.

Natural capital is a controversial concept. Many feel putting a price on nature is either impossible or ethically unsound. But its supporters argue that without doing so ecosystem services are at risk of being left out of economic models and decision-making.

“We’re degrading the natural environment and losing species at an alarming rate. So let’s put a value on nature and get it incorporated into these models so that we can start investing in the maintenance, protection or possibly even enhancement of those ecosystem services, says Darren Evans, a conservation biologist from the University of Hull in the United Kingdom.

Programmes to quantify and pay to maintain the value of ecosystem services have existed in one form or another since the 1950s. Today they are known as payments for ecosystem services (PES) initiatives. These schemes pay farmers and landowners for managing land in a way that conserves some targeted environmental resources, for instance a forest, river or species.

But for as long as they have existed, efforts to price nature have been divisive. What has emerged, however, is evidence that the better a scheme is tailored to benefit all stakeholders, the more likely it is to succeed.

Bolivian dissent

One country involved in this battle and its possible resolution is Bolivia. In 2010, the nation hosted the World People’s Conference on Climate Change and the Rights of Mother Earth, a global meeting attended by 30,000 government and civil society delegates. Bolivia consulted the conference on whether to sign up to the UN’s REDD (Reducing Emissions from Deforestation and Degradation) programme.

REDD has some similarities to a PES scheme, but it operates at a global rather than a national scale. It is funded by selling certificates known as carbon credits, which represent carbon emissions saved through the programme, on international carbon markets. At present, 56 developing nations have signed up to the programme, but Bolivia decided against joining after the People’s Agreement drawn up by the World People’s Conference emphatically rejected this move. [2] Later in 2010, President Evo Morales further hardened his nation’s position in an open letter to indigenous peoples entitled: “Nature, forests and indigenous peoples are not for sale. [3]

Lykke Andersen, director of the Center for Environmental-Economic Modelling and Analysis at think-tank the Institute for Advanced Development Studies (INESAD) in Bolivia, says: “Bolivia is really an ideal candidate for participating in a REDD mechanism. It is promising because it has so much forest and so much deforestation. But at the Peoples Conference, the people there rejected REDD strongly. The government accepted that decision and made it a national policy.

Bolivias opposition to REDD illustrates tensions that can cause schemes that put a price on nature to come unstuck, Andersen says. In the case of REDD, the unhappiness was triggered partly because poorer countries would have to reduce emissions while richer countries carried on raising theirs.

Alternative inspiration

With REDD branded a prohibited concept in Bolivia, Andersen says the country’s conservation scientists instead turned for inspiration to smaller, local PES schemes that took poverty alleviation into account.

In 2012, INESAD carried out a countrywide analysis of the likely social and environmental impacts if Bolivia had adopted REDD. [4] The results showed that large-scale adoption of REDD would have decreased deforestation, but would also have increased competition for agricultural land, pushing up food prices and worsening poverty. More than 90 per cent of REDD-related revenues from carbon credit sales would have gone to just five per cent of the population, it forecast.

INESAD also ran the analysis based on an alternative mechanism that Anderson and her team designed. This included financial and technical assistance for sustainable development projects within the forest  and taxes and fines for deforestation. Under this theoretical situation their model showed that the nation’s poor benefitted more and food prices were more stable.

The mechanism Anderson’s team designed has come to be known as the Bolivian mechanism. [5] In 2013, UN-REDD decided to support it with US$1.1 million and Denmark pledged US$26 million. Four pilot projects testing it are currently underway.
“The Bolivian mechanism is based on looking more holistically at forests, by supporting local communities who protect their forests and engage in economic activities that are forest-friendly, while punishing deforesters with taxes and fines, Andersen explains.

“What we showed in the analysis is that the benefits of the REDD mechanism almost exclusively went to the side of reducing emissions, with very little benefit for the people of Bolivia, the rural inhabitants who would have to modify their livelihoods, she says. “With the Bolivian mechanism, there was a much fairer distribution of the benefits, helping the poor while hurting the big deforesters.

Reward and punishment

Unlike REDD, which lacks punitive elements, the Bolivian mechanism goes further than simply paying landowners not to cut down trees which Andersen tartly likens to paying a thief not to steal by also rewarding activities that protect the country’s forests. “It’s a much more healthy system of incentives where you reward the behaviour that you want to see and punish the behaviour that you don’t want to see, she says.

Those most likely to be punished under the system are wealthy agricultural producers, while those most likely to receive payments are poorer Bolivians living and working in forest areas. And the mechanism also aims to make payments to poorer communities more straightforward by requiring legal evidence of land ownership only when levying fines and taxes, rather than when managing payments. This is vital for equity and wealth redistribution as many people that live on the land do not have legal proof of ownership, despite it unequivocally being their home.

Rejecting REDD means losing access to a larger potential pot of funding, but Andersen argues that financing the Bolivian mechanism through foreign aid offers greater stability than relying on volatile carbon markets. Nonetheless, she acknowledges that securing ongoing funding is the mechanism’s biggest challenge.

Paul van Gardingen, director of UK research programme Ecosystems Services for Poverty Alleviation, agrees that PES schemes must be well designed to equitably reward both the poor and wealthy for activities that protect the environment.

“There’s absolutely no question that PES can work, he adds. “But one of the challenges is how you link that up to poverty alleviation.

The problem of land ownership

Land tenure has been a persistent stumbling block for PES, with the worst cases reinforcing rather than alleviating inequalities. This is because many older or poorly designed PES schemes require proof of land ownership, something often only the wealthy have, for payment. Land ownership is often unclear, especially in countries with indigenous or remote rural communities.

But Ina Porras, an economist at UK-based policy research organisation the International Institute for Environment and Development, says there may be better ways of framing a PES programme than by using property rights and land ownership.

Even introducing such a system within a developed country would benefit big landowners most due to land ownership being concentrated among the rich, Porras says. “So we need to think carefully about how benefits are applied.

Costa Rica offers an interesting model in this regard. There, a national PES scheme has been a success since it started in 1997. It has helped raise the country’s forested land cover from a low of 20 per cent in the 1980s to over 50 per cent in 2012. It works by providing contracts to landowners for different types of forest conservation: protection, reforestation, sustainable management and regeneration.

Funding allocations for indigenous associations have also risen steadily, from three to 26 per cent between 1997 and 2012. This was partly due to ongoing redesigns of contract procedures: in 1997, the scheme did not prioritise different social groups on the basis of economic need, resulting in low uptake for indigenous groups with little money; in 2012, however, they were being allocated a set amount of contracts before others could bid.

While the principle of setting aside some contracts for indigenous groups resolves some problems around land tenure, the persistent challenges of fair access to the programme and equitable distribution of benefits still require further analysis, says Porras.

She is studying participation in the Costa Rican programme. In 1997, 44 per cent of funds were paid to cooperatives and associations, but these types of organisations had virtually ceased receiving money by 2012. Meanwhile, payments going to legal entities such as businesses or other legally registered groups have risen from just over a quarter to almost half of total payouts. Understanding these shifts is key to designing PES schemes and ensuring they work for both communities and conservation over the long term.

Looking at the studies by INESAD and Porras, it apparent that there is a need to understand the risk of a PES scheme exacerbating social inequality at the expense of environmental protection, and to design it accordingly.

Van Gardingen says there is now an emerging understanding that “if you are serious about using PES as a method to deliver poverty alleviation then you need to be thinking about the efficiency of the environmental benefits, the efficiency of the social benefits, accept that there’s going to be a trade-off and find the appropriate balance.

Putting A Price On Nature Can Benefit The Poor If Done Right

27 January 2015 | You don’t have to go far in Bolivia to find treasure. It’s everywhere: in the vast Amazonian forests; in Lake Titicaca, which lies nearly four kilometres above sea level in the Andes; in the peaks and rain-gathering waterways of the Andes mountains; or in Bolivia’s 2,000 animal species.

And to call all this treasure is hardly romantic — because, to some, Bolivia’s natural environment is worth a lot of money.

Bolivia is not alone on that front. Programmes that pay people to sustainably manage ‘environmental assets’ are increasingly popular, especially in the global South. But questions about the money’s impact on efforts to reduce poverty and inequality have persisted for decades. Does the cash help poor or indigenous people living in valuable ecosystems? Or is it more likely to benefit rich landowners? In Bolivia and elsewhere, research is beginning to show that these two goals — environmental protection and poverty reduction — need not be mutually exclusive.

Pricing up nature

A recent estimate of the planet’s ‘natural capital’ is US$125 trillion a year. [1] This figure attempts to capture the value of the ‘ecosystem services’ — essentially all the benefits of a healthy, natural environment — provided by such things as carbon-storing trees, drainage basins that prevent flooding and insect life that helps agriculture flourish.

Natural capital is a controversial concept. Many feel putting a price on nature is either impossible or ethically unsound. But its supporters argue that without doing so ecosystem services are at risk of being left out of economic models and decision-making.

“We’re degrading the natural environment and losing species at an alarming rate. So let’s put a value on nature and get it incorporated into these models so that we can start investing in the maintenance, protection or possibly even enhancement of those ecosystem services,” says Darren Evans, a conservation biologist from the University of Hull in the United Kingdom.

Programmes to quantify and pay to maintain the value of ecosystem services have existed in one form or another since the 1950s. Today they are known as payments for ecosystem services (PES) initiatives. These schemes pay farmers and landowners for managing land in a way that conserves some targeted environmental resources, for instance a forest, river or species.

But for as long as they have existed, efforts to price nature have been divisive. What has emerged, however, is evidence that the better a scheme is tailored to benefit all stakeholders, the more likely it is to succeed.

Bolivian dissent

One country involved in this battle — and its possible resolution — is Bolivia. In 2010, the nation hosted the World People’s Conference on Climate Change and the Rights of Mother Earth, a global meeting attended by 30,000 government and civil society delegates. Bolivia consulted the conference on whether to sign up to the UN’s REDD (Reducing Emissions from Deforestation and Degradation) programme.

REDD has some similarities to a PES scheme, but it operates at a global rather than a national scale. It is funded by selling certificates known as ‘carbon credits’, which represent carbon emissions saved through the programme, on international carbon markets. At present, 56 developing nations have signed up to the programme, but Bolivia decided against joining after the ‘People’s Agreement’ drawn up by the World People’s Conference emphatically rejected this move. [2] Later in 2010, President Evo Morales further hardened his nation’s position in an open letter to indigenous peoples entitled: “Nature, forests and indigenous peoples are not for sale.” [3]

Lykke Andersen, director of the Center for Environmental-Economic Modelling and Analysis at think-tank the Institute for Advanced Development Studies (INESAD) in Bolivia, says: “Bolivia is really an ideal candidate for participating in a REDD mechanism. It is promising because it has so much forest and so much deforestation. But at the People’s Conference, the people there rejected REDD strongly. The government accepted that decision and made it a national policy.”

Bolivia’s opposition to REDD illustrates tensions that can cause schemes that put a price on nature to come unstuck, Andersen says. In the case of REDD, the unhappiness was triggered partly because poorer countries would have to reduce emissions while richer countries carried on raising theirs.

Alternative inspiration

With REDD branded a prohibited concept in Bolivia, Andersen says the country’s conservation scientists instead turned for inspiration to smaller, local PES schemes that took poverty alleviation into account.

In 2012, INESAD carried out a countrywide analysis of the likely social and environmental impacts if Bolivia had adopted REDD. [4] The results showed that large-scale adoption of REDD would have decreased deforestation, but would also have increased competition for agricultural land, pushing up food prices and worsening poverty. More than 90 per cent of REDD-related revenues from carbon credit sales would have gone to just five per cent of the population, it forecast.

INESAD also ran the analysis based on an alternative mechanism that Anderson and her team designed. This included financial and technical assistance for sustainable development projects within the forest — and taxes and fines for deforestation. Under this theoretical situation their model showed that the nation’s poor benefitted more and food prices were more stable.

The mechanism Anderson’s team designed has come to be known as the ‘Bolivian mechanism’. [5] In 2013, UN-REDD decided to support it with US$1.1 million and Denmark pledged US$26 million. Four pilot projects testing it are currently underway.
“The Bolivian mechanism is based on looking more holistically at forests, by supporting local communities who protect their forests and engage in economic activities that are forest-friendly, while punishing deforesters with taxes and fines,” Andersen explains.

“What we showed in the analysis is that the benefits of the REDD mechanism almost exclusively went to the side of reducing emissions, with very little benefit for the people of Bolivia, the rural inhabitants who would have to modify their livelihoods,” she says. “With the Bolivian mechanism, there was a much fairer distribution of the benefits, helping the poor while hurting the big deforesters.”

Reward and punishment

Unlike REDD, which lacks punitive elements, the Bolivian mechanism goes further than simply paying landowners not to cut down trees — which Andersen tartly likens to paying a thief not to steal — by also rewarding activities that protect the country’s forests. “It’s a much more healthy system of incentives where you reward the behaviour that you want to see and punish the behaviour that you don’t want to see,” she says.

Those most likely to be punished under the system are wealthy agricultural producers, while those most likely to receive payments are poorer Bolivians living and working in forest areas. And the mechanism also aims to make payments to poorer communities more straightforward by requiring legal evidence of land ownership only when levying fines and taxes, rather than when managing payments. This is vital for equity and wealth redistribution as many people that live on the land do not have legal proof of ownership, despite it unequivocally being their home.

Rejecting REDD means losing access to a larger potential pot of funding, but Andersen argues that financing the Bolivian mechanism through foreign aid offers greater stability than relying on volatile carbon markets. Nonetheless, she acknowledges that securing ongoing funding is the mechanism’s biggest challenge.

Paul van Gardingen, director of UK research programme Ecosystems Services for Poverty Alleviation, agrees that PES schemes must be well designed to equitably reward both the poor and wealthy for activities that protect the environment.

“There’s absolutely no question that PES can work,” he adds. “But one of the challenges is how you link that up to poverty alleviation.”

The problem of land ownership

Land tenure has been a persistent stumbling block for PES, with the worst cases reinforcing rather than alleviating inequalities. This is because many older or poorly designed PES schemes require proof of land ownership, something often only the wealthy have, for payment. Land ownership is often unclear, especially in countries with indigenous or remote rural communities.

But Ina Porras, an economist at UK-based policy research organisation the International Institute for Environment and Development, says there may be better ways of framing a PES programme than by using property rights and land ownership.

Even introducing such a system within a developed country would benefit big landowners most due to land ownership being concentrated among the rich, Porras says. “So we need to think carefully about how benefits are applied.”

Costa Rica offers an interesting model in this regard. There, a national PES scheme has been a success since it started in 1997. It has helped raise the country’s forested land cover from a low of 20 per cent in the 1980s to over 50 per cent in 2012. It works by providing contracts to landowners for different types of forest conservation: protection, reforestation, sustainable management and regeneration.

Funding allocations for indigenous associations have also risen steadily, from three to 26 per cent between 1997 and 2012. This was partly due to ongoing redesigns of contract procedures: in 1997, the scheme did not prioritise different social groups on the basis of economic need, resulting in low uptake for indigenous groups with little money; in 2012, however, they were being allocated a set amount of contracts before others could bid.

While the principle of setting aside some contracts for indigenous groups resolves some problems around land tenure, the persistent challenges of fair access to the programme and equitable distribution of benefits still require further analysis, says Porras.

She is studying participation in the Costa Rican programme. In 1997, 44 per cent of funds were paid to cooperatives and associations, but these types of organisations had virtually ceased receiving money by 2012. Meanwhile, payments going to ‘legal entities’ such as businesses or other legally registered groups have risen from just over a quarter to almost half of total payouts. Understanding these shifts is key to designing PES schemes and ensuring they work for both communities and conservation over the long term.

Looking at the studies by INESAD and Porras, it apparent that there is a need to understand the risk of a PES scheme exacerbating social inequality at the expense of environmental protection, and to design it accordingly.

Van Gardingen says there is now an emerging understanding that “if you are serious about using PES as a method to deliver poverty alleviation then you need to be thinking about the efficiency of the environmental benefits, the efficiency of the social benefits, accept that there’s going to be a trade-off and find the appropriate balance”.

2014: The Year For Nature-Based Solutions?

29 December 2014 | In 2014, concepts like water stewardship and the water-energy-food nexus gained momentum. Combining that growth with the ramifications of weather extremes like the Rim Fire and the California drought that also happened in 2014 makes the year an eventful one for the water sector to say the least. Studiesinitiatives and events aimed at improving global water health marked the past year.

Water, Risk and Business

Water started the year making headlines. To begin with, the World Economic Forum listed water as the third biggest risk facing society in their annual Global Risk report. Several other water-related risks (flood, drought, pollution, scarcity and climate change) were also among the top 10.

Despite the known risk, the private sector’s behavior in terms of addressing this risk varies. Much later in the year, the CDP published itsGlobal Water Report 2014 and found innovative companies, like Unilever and H&M are beginning to act on their water risk. According to the analysis, 82% of companies surveyed are setting goals and targets to reduce water use. However there are still companies unwilling to disclose despite pressure from investors. The energy sector has the lowest level of disclosure even though the sector has some of the highest exposure to water risk.

But the private sector is making progress, as evident in CDP’s report. It’s evident in other areas as well. Companies choosing to becomegood water stewards really took shape this year. In April, the Alliance for Water Stewardship (AWS) launched the first International Water Stewardship Standard with notable companies like General Mills and Nestle committing to the sustainable use of freshwater. The Standard defines criteria for good water stewardship through a six-step improvement framework.

Another significant standard that launched in 2014 was the Gold Standard Foundation’s Water Benefit Standard (WBS) . Initiated by environmental consultancy First Climate with the Gold Standard as an initial partner, the WBS uses the results-based finance approach from the carbon world to generate long-term funding for water projects that also deliver socio-economic benefits.

The rise of nature-based solutions didn’t end with private sector resource management. Addressing citywide challenges like stormwater runoff with natural and green infrastructure is also an increasing occurrence.

A collaborative effort between the NGO The Nature Conservancy and CH2M Hill, an engineering firm, that intends to grow green infrastructure solutions was initiated this year as well.

“Forests, wetlands, and other water-rich ecosystems are the first line of defense against the rising cost and receding availability of clean, healthy water, says Michael Jenkins, President and CEO of Forest Trends, a NGO and Ecosystem Marketplace publisher. “Governments and businesses are finding that investment in watersheds is a cost-effective way to close the gap between what communities have and what they need to manage watersheds.

Making a Difference

More interest in natural infrastructure this year led to greater global awareness of the financial and social values of ecosystem services. This, in turn, led to questions, concerns on the benefits but also dangers of ecosystem services valuations.

One concern surrounding valuations is if and how they will affect policy. And how policy will impact conservation is always a big question. For instance, the economic impact assessment report of California’s Rim Fire by environmental nonprofit, Earth Economics led to ecosystem services loss being factored into the state’s application for federal disaster aid.

Policy Movement in 2014

A groundbreaking piece of legislation passed this year was Peru’s Payments for Ecosystem Services Law. The bill provides a legal framework to support a diverse range of ecosystem services  including greenhouse gas emissions reductions, biodiversity conservation and the preservation of natural beauty.

Another piece of legislation holding relatively big implications for the environment that came out of 2014 was the US Farm Bill. And despite funding cuts to conservation programs and no mention of ecosystem markets, the bill was considered a win for the sector. This was largely due to conservation compliance being tied to federally subsidized crop insurance.

Trading goes Nationwide

The Farm Bill’s recognition of conservation at least reflects a growing mainstream acceptance of the significance of ecological benefits. Another example that portrays this in a larger way is the growth in water quality trading over the last year. Perhaps the biggest movement was the EPRI’s (Electric Power Research Institute) Ohio River Basin Water Quality Trading Project. It’s the world’s only interstate trading program and, if successful, will reduce nearly 100,000 pounds of nutrient pollution flowing into the Ohio River. The trading system operates using farms that generate credits by keeping pollutants from reaching the waterway. The credits are then sold to power plants, sewage facilities and other utilities that cause nutrients to enter the river.

There is also movement to harmonize trading policy and approaches in the US Northwest with support from federal agencies-the Environmental Protection Agency (EPA) and the Department of Agriculture (USDA). More recently, both agencies recognized Virginia’s water quality trading program aimed at cleaning up the Chesapeake Bay, which was initially established in 2005. Maryland also has a program in the works, although the state has struggled to launch it.

In the same vein, Washington D.C.’s Stormwater Retention Credit trading program hit a milestone this year. D.C.’s District Department of the Environment approved the first trade of the program that allows property owners who voluntarily implement green infrastructure that reduces stormwater runoff to earn credits and generate revenue.

An Emerging Trend?

While the appeal of this market-based approach is relatively widespread in the US in terms of testing and development, another mechanism is slowly creeping into the watershed protection space: the revolving loan fund (RLF). During Ecosystem Marketplace’s research for the latest State of Watershed Payments report, authors came across two projects using it and another that does provide some sort of access to loans. The most notable case is in Costa Rica where the non-profit, the Nectandra Institute, established a RLF to restore and protect the San Carlos River. The RLF lets borrowers pay back money over time as benefits from conservation accumulate.

These programs are innovative. A large question, though, is why more projects aren’t using loans to fund watershed protection activities. Because of the multiple social benefits that come from watershed restoration and sustainable land-use, it seems like a space that microfinance institutions would be interested in as well. But as of right now, these institutions aren’t taking much notice. This is likely a subject Ecosystem Marketplace will be looking into over the coming year.

Mangroves Plight

2014 saw increased coverage of the plight of mangrove ecosystems that line Earth’s tropical and subtropical coasts. The critically important salt-adapted trees are disappearing at faster rates than virtually any other ecosystem on the planet. And the loss of mangroves is having tremendous social, ecological and economic impacts. But the greater awareness of mangroves’ importance is spurring action to prevent further loss.

The Nexus Wave

Another issue that received lots of attention in 2014 is the water-energy-food nexus. Interest in this approach to managing water, food and energy in a holistic integrated way is only expected to increase as pressures on each sector increase. Events directed at the private sector on addressing the nexus and initiatives aimed at supporting governments to implement nexus techniques sprang up throughout the year.

The water-energy-food nexus is definitely an area of coverage to follow in 2015.

Closing Out the Year

Further evidence for the nexus’ growing influence can be found at the annual World Water Week in Stockholm. Water and energy was the theme. A side event on natural infrastructure for water and energy was where authors of the State of Watershed Investment 2014 report launched the Executive Summary. They discussed findings which included $12.3 billion in investments from companies and governments that restored and protected 365 million hectares of land-an area larger than India.

Much innovative initiatives, concepts and data came out of 2014. For Ecosystem Marketplace, the year closed out with its Watershed Investments 2014 report published in its entirety.

2014: The Year In Biodiversity

29 December 2014 | 2014 was a big year for species conservation. Although controversial, several new approaches to conservation were put into practice this year as the US Fish and Wildlife Service (FWS) made significant listing decisions under the Endangered Species Act. Plus, the voluntary initiatives to conserve endangered and at-risk species continues to evolve as does the debate over their effectiveness. Needless to say, 2014 was a busy year for FWS regulators, conservation bankers and western landowners and developers.

The Birds

Choosing whether to list or not list the lesser prairie chicken was a big story of 2013 and continued to make headlines well into 2014. The bird’s habitat doubles as prime land for energy development meaning a threatened or endangered listing status would impact the multiple economic activities occurring in the area. The potential consequences of a listing decision spurred landowners and energy interests into action developing voluntary programs intended to conserve the prairie chicken and restore its population without a federal listing.

These programs, in turn, spurred controversy as environmentalists argued the conservation methods they used lacked the rigor of compliance. Several conservation bankers, in particular, came out against the plans claiming they undermined bank business while leaving the species in peril.

In the end, the bird’s rapidly declining population spoke for itself. In late March, the FWS listed the prairie chicken as threatened under the ESA albeit with some exceptions. Farmers, ranchers and other land-users who had voluntary conservation measures approved were exempt from ESA regulations.

Because of these new and somewhat unusual approaches, prairie chicken conservation has big implications for the future of species conservation and is an issue that will undoubtedly unfold more in 2015.

However, the prairie chicken wasn’t the only bird making headlines in 2014. The greater sage-grouse, hailing from the same family as the prairie chicken and containing many of the same problems, is a candidate species with dwindling and fragmented habitat in the western US. And like the prairie chicken, the possibility of an ESA listing had environmentalists, landowners and energy developers scrambling to protect it.

The environmental NGO, Environmental Defense Fund, has developed a habitat exchange for the sage grouse. And two of the 11 states the bird resides in have developed conservation plans. Also this year, the FWS presented its range-wide compensatory mitigation framework for the greater sage-grouse to guide the states in implementing meaningful conservation.

The Service must make a listing decision on the sage-grouse by September 30, 2015. But recently, Congress threw a wrench into the process. In its latest spending bill, representatives didn’t allocate any funds towards listing the bird.

But while this provision is seemingly bad news for the grouse, some environmentalists are viewing it with cautious optimism. They say it gives them time to demonstrate how well the voluntary initiatives, many of them already up and running, can work. The FWS also noted the spending bill provision doesn’t affect conservation plans at state and local levels.

The Big Conference

Species conservation was also a big topic at this year’s National Mitigation and Ecosystem Banking Conference (NMEBC) that was set in Denver. Lesser prairie chicken and greater sage grouse conservation dominated an entire session with in-depth presentations on specific plans and cases.

The NMEBC was far more diverse this year than last and thus, much more engaging. It was wide-ranching in terms of discussing pertinent issues facing the industry today. The conference covered the ongoing debate between the government run habitat conservation plans and conservation banking as well as water rights for wetland banking in the US west. There was also a lot of focus on the Department of Interior’s new mitigation strategy and how that would affect banking.

Good or Bad News for Unlisted Species?

Perhaps one of the biggest announcements to come out of this year’s conference was the possibility of a crediting system for unlisted species created by the FWS and administered at state level. The Service released a draft policy over the summer that began an open comment period that ran throughout the fall.

While feelings were somewhat mixed, some from the banking world took issue with another voluntary initiative. Wayne White, the President of the National Mitigation Banking Association (NMBA) argued because the program’s standards for conservation are lower, the cost to conserve is lower also which then doesn’t provide proper conservation for the species and undermines the true cost of mitigation.

But White, like others, sees potential in a program recognizing conservation credits for unlisted species. But it must be done right, says Timothy Male of Mission: Wildlife.

It’s definitely a topic to follow in 2015. Now that the public comment period is over, the FWS will look to incorporate those comments into the proposal as well as make other revisions before making it final.

Policy News

On the international policy front, Spain’s new Environmental Assessment Act, passed late in 2013, has big implications for conservation banking. Early in the year, David ílvarez Garcí­a of the Spanish organization Mercados de Medio Ambiente, which focuses on market based biodiversity conservation solutions, discussed his take on the new rule.

A Year for Events

2014 was a big year for events. Peru’s hosting of the year-end climate talks spurred much talk on the state of biodiversity in the country. Peru is one of the most biologically diverse places on Earth.

And in June, the Business and Biodiversity Offsets Programme (BBOP) hosted the “To No Net Loss of Biodiversity and Beyond”summit at the London Zoo.

The event brought together professionals from a multitude of sectors that included energy, finance, nonprofit and government in an effort to demonstrate a no net loss of biodiversity-and a net gain even-in the face of development. The event was a big success and was livestreamed to accommodate all those expressing interest.

Harmonizing the Agenda

It was also a big year for integration in terms of integrating global biodiversity targets into other parts of the global agenda. The year’s events indicate this. The United Nation’s climate conference took notice of the linkages between biodiversity and climate with an event and declaration. The declaration called for more integrative research on biodiversity and climate change while the event presented on current knowledge.

Two months before these climate talks, the UN’s Convention on Biological Diversity’s (CBD) 12th Conference of Parties (COP 12) took place in Pyeongchang, South Korea. The theme of this year’s conference was Biodiversity for Sustainable Development. A huge topic of discussion was ensuring integration of biodiversity into the UN’s post 2015 Sustainable Development Goals (SDGs). As negotiations over these goals restart next year in January, this is another issue to follow in 2015.

And like at the climate talks, cross-sector collaboration was brought up during sessions at COP 12. One such session, focused on finance, discussed the emerging links between sustainable forest management and biodiversity conservation.

guidebook was also released this year that explores these synergies though it’s specifically looking at reducing emissions from deforestation and forest degradation (REDD). A Sourcebook: Biodiversity Monitoring for REDD+ offers a four-stage framework that begins by explaining the objectives of monitoring biodiversity for REDD+, then identifies specific indicators that can be used. After that, it progresses into implementation and communication to relevant audiences.

More to Come

Other topics of 2014 surfaced as significant stories as well. The basic unawareness of biodiversity offsets-unless it’s under attack- among consumers is one. It’s a big problem, according to a researcher on the subject who says growth and regulatory support depends on public opinion.

Another issue needing to be addressed is the difference in cost between mitigation and the federal fine when failing to mitigate a development impact properly.

Most of these issues are unresolved or continuing to develop and will be making headlines in 2015.

This Week In Forest Carbon: Lima Call For Action Undergoes Surgery

23 December 2014 | Officials participating in the United Nations (UN) climate talks in Lima, Peru often debated well past the witching hour, but had to pare down the negotiating text to scare up agreement on a final document.
Singapore Environment Minister Vivian Balakrishnan offered a colorful (and somewhat disturbing) metaphor for the compromise: “Before embarking on any surgery, the most important question is whether it is necessary, and you have to ask, ‘What are the potential complications?'” he said. “If you are submitting for circumcision, be careful it doesn’t become an amputation because the surgeon used too big a knife and took too much flesh.”

The “surgery” went forward nonetheless, and the 50-page document shrunk down to a sleek 22 paragraphs. The “Lima Call for Action” set a procedure for countries to submit their Intended Nationally Determined Contributions (INDCs) the country-level emissions-reductions proposals that will serve as the basis of the climate deal expected to be inked in Paris next year. While the previous document included a fair amount of detail, such as several options for including land-use provisions in INDCs, the “circumcised” one is less prescriptive, simply asking countries to explain their “land-use accounting approaches and expected use of market mechanisms.”

 

Going forward, a key point of contention will continue to be the decades-old rift between the developed countries that have historically emitted the most carbon dioxide and the developing countries that currently bear the brunt of the consequences of climate change. But these developing nations are also poised to spew out a dangerous amount of carbon pollution in the coming decades if they do not soon steer towards a low-emissions development path.

 

The Green Climate Fund (GCF) established during the 16th Conference of Parties (COP 16) in Cancun, Mexico aimed to finance this transition, with developed countries pledging $100 billion per year by 2020 for mitigation and adaptation. Countries have been slow in ponying up the dough, but the GCF did reach a critical milestone in Lima as contributions from Norway and Belgium pushed it over the $10 billion threshold.

 

The onus is now on the GCF to assess and secure board approval for projects ahead of COP 21 in Paris. REDD projects could be among those fast-tracked since forest management and land-use have been defined as focus areas of the GCF.

 

“I would be more than delighted if some of the projects approved include forestry projects,” said Héla Cheikhrouhou, GCF’s Executive Director. But given the short time frame to Paris, she warned: “Don’t bring us concepts that will take years to develop.”

 

Here at Ecosystem Marketplace, we’re wrapping up 2014 with some reflections, and we invite you to submit yours. What do you think were the top forest carbon stories of 2014? Rank the stories here, and make sure to give us your 2015 predictions for forest carbon, too! We’ll publish select ones in our New Year’s edition.

 

Wishing you a happy holiday.

The Ecosystem Marketplace Team

If you have comments or would like to submit news stories, write to us at general@forestcarbonportal.com.


News

ANNOUNCEMENT

Call for proposals

The Governors’ Climate and Forests (GCF) Fund issued a call for proposals to its members for efforts to monitor, report, and verify carbon stocks; address key gap areas in the design of jurisdictional programs; and enhance alignment with national efforts to reduce deforestation. Civil society organizations are encouraged to partner with GCF tropical forest member states. Under this round, the GCF Fund is seeking to support projects in Mexico, Peru, Brazil, Indonesia and Nigeria. Proposals are due January 24, 2015.

More information here

 

INTERNATIONAL POLICY

Big Foot

Despite the casual dress code declared due to limited air conditioning, COP 20 in Lima left the largest carbon footprint of any UN climate negotiations, emitting more than 50,000 tonnes of carbon dioxide. Jorge Alvarez, project coordinator for the UN Development Programme broke it down: 20% of the emissions came from the construction of the venue on Peru’s army headquarters, 30% came from air travel as 11,000 people flew to Lima; 15-20% came from local transport (most delegates spent an hour or two per day on buses to get to and from the venue); and the remaining 30-35% came from electricity and food consumed on-site. The emissions were, however, offset with investments in 1,500 square miles of forest protection.

 

20/20 vision

Seven Latin American and Caribbean countries and two regional programs committed to restore 20 million hectares of degraded land by 2020, an area larger than Uruguay. TheInitiative 20×20, officially launched at COP 20, is a major contribution to the Bonn Challenge, a global effort to restore 150 million hectares by the end of the decade. The initiative comes with $365 million in new private investment: $120 million from Althelia, $100 million from Permian Global, $80 million from Moringa, $60 million from Terra Bella, and $5 million from Rare. Projects will restore both natural forests and mosaic landscapes of trees, crops and livestock.

 

NATIONAL STRATEGY & CAPACITY

Ready to get results

Heru Prasetyo, head of Indonesia’s REDD+ Agency, said the country will be ready for results-based payments for reducing deforestation by the end of 2016. The first step was submitting reference levels on Indonesia’s historical deforestation to the United Nations Framework Convention on Climate Change a task completed last week. The reference levels include both deforestation and degradation between 2000 and 2012 and projects that land-use change in Indonesia will result in 439 million tonnes of carbon dioxide emissions per year by 2020 under a business-as-usual scenario. Creating the reference level required pulling together disparate data from several sources across the country and getting different institutions to work together a massive undertaking, according to the REDD+ Agency.

 

A busy day in Korea

The Korean Forest Service (KFS) signed a memorandum of understanding (MOU) with Cambodia to cooperate on UN-REDD programs. “Cambodia has a big presence among the REDD+ countries. Cambodia’s experience and our business know-how from Indonesian projects will help us gain certified emissions reduction credits,” a KFS spokesman told The Korea Herald. On the same day, KFS also signed an MOU with Myanmar on investing in afforestation, in a move they hope will pave the way for future climate investments. The deals were signed at special ministerial meetings on forestry held in Busan, South Korea.

 

PROJECT DEVELOPMENT

A neutral meeting

The Forest Stewardship Council (FSC) committed to purchasing 1,070 carbon offsets to neutralize the emissions from an international event organized by the council. The offsets will come from a REDD+ project in the Shipibo Conibo and Cacataibo indigenous communities in Ucayali, Peru. Developed by Peruvian project developer AIDER under the Verified Carbon Standard and the Climate, Community, and Biodiversity Standards, the project is expected to reduce almost a million tonnes of carbon dioxide. Kim Carstensen, FSC Director General, noted it is difficult for an international organization to avoid travel (and the related emissions) altogether. “The fact that the carbon footprint of an event in Spain can be neutralized by communities in Peru is evidence of the truly global nature of sustainability,” she said.

 

Not the greatest expectations

In 2009, the Jane Goodall Institute received $20,000 in start-up money from Norway to pilot REDD+ in seven villages in the Kigoma region of Tanzania. The villages competed for the cash based on their forest management efforts and even started using innovative smartphone monitoring. Everything seemed to be moving forward but then the first installment of funding dried up, with uncertainty about a second phase. “Everyone Norway and the proponents underestimated the amount of money and work needed to do REDD+, to set up the process. They expected that by now we would be selling carbon, but that has not yet happened,” said Demetrius Kweka, a researcher who has been analyzing REDD initiatives for a new book.

 

FINANCE & ECONOMICS

Coffee as collateral

Althelia Climate Fund has issued Peru’s Cordillera Azul National Park a loan secured by more than eight million carbon offsets for forest conservation and agro-forestry, including activities such as coffee and cocao production. The agreement was announced by Peru’s Environment Deputy Minister Gabriel Quijandria and US Ambassador to Peru Brian Nichols at an event at COP 20 last week. The loan will go to the Center for Conservation, Research and Management of Natural Areas, which manages the 1.4 million hectare park.Cordillera Azul spans tropical cloud and montane forests in the regions of San Martí­n, Ucayali, Huanuco and Loreto in Peru.

 

HUMAN DIMENSION

Front-line monitors

new video released by AIDESEP, a national group representing Amazonian indigenous peoples in Peru, explains their “Veedurí­a Forestal,” a community-based forest monitoring system that is projected to cover the 12 million hectares of titled forests that their communities inhabit. Through the program, forest monitors are trained in local forestry laws and to create a management plan in order to keep tabs on tree extraction, much of which is illegal. “It’s important for us to have sufficient financing, to be able to guarantee that illegal logging doesn’t continue in native communities,” said Daysi Zapata, the Vice President of AIDESEP. Communities are waiting for official title to an additional 20 million hectares of land that are, in practice, community-managed.

 

Marching to the beat

Modeled after the People’s Climate March in New York City last September, thousands of people took to Lima’s streets on December 10th for their own call for climate action  the largest ever in Latin America. The marchers included Peruvians, Bolivians, Ecuadorians and many others, including strong indigenous contingents from all over the world many of whomrisk their lives to oppose extraction projects and are skeptical of pro-business solutions proposed within the UN climate negotiations. “It’s very important to say there is no homogenous position regarding development,” Ivonne Yí¡nez of Accií³n Ecolí³gica/Oil Watch in Ecuador told The Guardian. “A lot of the people here reject oil, reject mining. They even reject business projects that are supposed to be for forests.”

 

SCIENCE & TECHNOLOGY

Not much on the menu

A world without forests would be a hotter and drier one, with serious implications for food production, according to a new study published in Nature Climate Change. Even without taking into account the greenhouse gas (GHG) emissions from deforestation, a world with forest-bare tropics would be 0.7 degrees Celsius warmer and deforested areas would receive between 10% and 15% less rainfall, on average. “Tropical forests are often talked about as the ‘lungs of the earth,’ but they’re more like the sweat glands,” said Deborah Lawrence, the study’s lead author. She found that there are likely “tipping points” of deforestation and that forest clearing in the tropics can affect climates in agricultural regions thousands of miles away.

 

Inhale, exhale

The UN’s Food and Agricultural Organization (FAO) just released its estimates for GHG emissions from the agriculture, forestry and land-use sector in 2012. Here’s the damage: 5.4 billion tonnes of carbon dioxide equivalent (tCO2e) from agriculture, 3.7 billion tCO2e from land conversion (a proxy for deforestation), 0.8 billion tCO2e from degraded peatlands, and 0.4 billion tCO2e from biomass fires. On the other side of the equation, forests absorbed 1.9 billion tCO2e in 2012. The numbers represent an all-time high for agricultural emissions, up 1% over 2011 due to increases in synthetic fertilizer applications, but land-use change emissions decreased as deforestation rates in several countries declined.

 

The best game of laser tag ever

For five weeks last summer, a flying, carbon-counting laser flew over the Tanana Valley of Alaska, which contains an Iowa-sized chunk of boreal forest. Throughout the mission a sensor called G-LiHT fired three different sensors at the landscape lidar lasers to create a 3-D model of the trees; a hyper-spectral camera to pick up color changes that could indicate trees’ age, type, and health; and a thermal camera that determines whether the soil is frozen, melted or dried-out. The data will be used to create a detailed inventory of the forest’s stored carbon, but there is more work to be done. The Tanana Valley contains only about a fifth of Alaska’s unmapped carbon.

 

PUBLICATIONS

The best possible outcome

The Global Landscapes Forum that was sandwiched in between two busy weeks of negotiations in Lima drew 1,700 participants from around the world, and an outcome statement outlines nine key messages that emerged from the event. Among them was the need to scale up landscape finance by reducing risks for investment and transforming capital markets. “Neither REDD+ nor supply chain action can succeed on their own, but these two approaches combined have the potential to achieve the goal of halting deforestation by 2030,” the document states.

 

A multitasking plant

Bamboo forests could store more than one million tCO2e in China alone by 2050, according to a new report from the International Network for Bamboo and Rattan (INBAR). Because bamboo grows quickly and can thrive on degraded sites, it could be used in efforts to combat climate change, according to INBAR,which includes 40 member countries. The plant has multiple uses, from construction to fuelwood to furniture, and in Rwanda there is a legal mandate to plant it along riverbanks to control erosion. In May, EcoPlanet Bamboo verified the first carbon offsets from a bamboo plantation. The company’s Nicaragua project is expected to reduce 1.5 million tonnes of carbon dioxide emissions over 20 years.

 

JOBS

Carbon Research Assistant, Winter/Spring 2015 – Ecosystem Marketplace

Based in Washington D.C., the Research Assistant will be able to commit to 35-40 hours per week to support a range of activities under the Ecosystem Marketplace Carbon Markets Program, including supporting the development of the State of the Forest Carbon/Voluntary Carbon Markets reports. The ideal candidate will have a graduate degree, an interest in conservation finance/payments for ecosystem services and basic knowledge of the carbon markets or another ecosystem service market; excellent writing, verbal communications, research and organizational skills; and excellent working knowledge of Microsoft Excel.

– Read more about the position here

 

Director of Development Earth Innovation Institute

Based in San Francisco, California, the Director of Development will design and lead the implementation strategy of an institutional development strategy for the organization. The position requires working closely with the Executive Director and Board of Directors, and researching individuals and foundations capable of making substantial gifts. The successful candidate will have multiple years of relevant experience at a management level with a not-for-profit as well as demonstrated success in securing revenue targets from both private and public sources.

– Read more about the position here

 

Indigenous Advisor, Social Policy and Practice Program Conservation International

Based in Arlington, Virginia, the Indigenous Advisor will inform and advise the organization on indigenous peoples’ policy positions and needs related to biodiversity and climate change adaptation and mitigation, particularly REDD+. A bachelor’s degree in anthropology, education, political science, indigenous issues or a related field is required, along with five years of experience involving indigenous peoples’ issues. The position involves traveling 35% of the time, often to remote forest areas in developing countries.

– Read more about the position here

 

Communications Manager Nexus Carbon for Development

Based in Phnom Penh, Cambodia, the Communications Manager will manage communication with stakeholders as Nexus expands beyond the carbon markets to open up new mechanisms such as crowdfunding and a working capital fund. The position involves managing a team of two to three people, conducting a revamp of the organization’s websites, developing marketing materials, and creating visual content. The successful candidate will have a minimum of five years of experience in communications or marketing, excellent writing skills, experience managing a team, and strong knowledge of energy and climate change issues.

– Read more about the position here

 

Vietnam Integrated Landscape and Climate Change Planner Winrock International

Based in Hanoi, Vietnam, the Integrated Landscape and Climate Change Planner will develop a process for mainstreaming climate change into government land-use planning practices and direct development from areas in Nam Dinh Province exposed to high climate risk. The position requires master’s level qualifications in land-use planning and at least 10 years of relevant experience. Strong technical skills in spatial planning, familiarity with Geographic Information Systems and direct experience in Vietnam are desirable.

Read more about the position here

 

ABOUT THE FOREST CARBON PORTALThe Forest Carbon Portal provides relevant daily news, a bi-weekly news brief, feature articles, a calendar of events, a searchable member directory, a jobs board, a library of tools and resources. The Portal also includes the Forest Carbon Project Inventory, an international database of projects including those in the pipeline. Projects are described with consistent ‘nutrition labels’ and allow viewers to contact project developers.
ABOUT THE ECOSYSTEM MARKETPLACEEcosystem Marketplace is a project of Forest Trends, a tax-exempt corporation under Section 501(c)3. This newsletter and other dimensions of our voluntary carbon markets program are funded by a series of international development agencies, philanthropic foundations, and private sector organizations. For more information on donating to Ecosystem Marketplace, please contactinfo@ecosystemmarketplace.com.

Thursday in Lima: Indigenous Life Plans And REDD Finance, Bringing It Together

3 December 2014 | Lima | Peru | A consortium of nine environmental and indigenous organizations called AIME (Accelerating Inclusion and Mitigating Emissions) has over the past two years been quietly making tremendous strides in how we look at some of the thornier parts of climate change and offering real hope.

Thursday, the group will present some of their work at the 20th Conference of the Parties (COP 20) to the United Nations Framework Convention on Climate Change (UNFCCC). The presentation will cover a groundbreaking project in the Brazilian Amazon involving indigenous people and their role in keeping carbon locked in trees; a way to connect the Life Plans of indigenous communities with the difficult task of reducing emissions in the atmosphere; and how an overhaul of the typical approach to climate change mitigation is necessary and possible.

In addition to their presentation, AIME members will participate in smaller meetings throughout the COP, including discussions that will focus on the development of a for indigenous REDD (Reducing Emissions from Deforestation and Forest Degradation) fund. Earlier in the week, COP also hosted an AIME event at the restaurant Malabar, the cuisine of which focuses on “sustainable gastronomy,” an innovative way of looking at how edible products of the rainforest can be part of solutions to climate change.

AIME: The Nuts and Bolts

The nine partners in the consortium are led by the D.C.-based international/global nonprofit Forest Trends, and include Earth Innovation Institute, EcoDecision, the Environmental Defense Fund, Metareila Surui Association, IPAM, PRISMA, COICA, and Pronatura Sur. The program launched two years ago, funded by USAID, and works in Brazil. Peru, Colombia, Central America, and Mexico.

Indigenous people and other local communities control about 33% of forest tenure in Latin America. Their stewardship of these swaths of trees which absorb the carbon emissions of our planet is a vital tool in the fight against climate change. Without these forests, the carbon would be released into the atmosphere and contribute to global warming and subsequent climate change. Rather than clear-cut these forests, as logging and mining interests would have them do, indigenous people should be encouraged to do what they have been doing for decades: remain the guardians of this valuable, irreplaceable climate-change solution.

Recognizing this, AIME supports these forest-dependent communities and their conservation efforts. An underlying premise of their work is that maintaining the livelihoods of these communities should be a central part of climate-change solution strategy.

Role of Indigenous People on International Climate Change Stage

The presence of AIME at the COP climate change talks illustrates the growing acceptance of indigenous people “at the table.” No longer the purview of world leaders and scientists, the puzzle that is climate change and our world’s future can only be addressed with the input of people like Almir Suru­, chief of the Paiter-Suru­ community in Brazil.

Among other innovative accomplishments, the Suru developed and signed a historic sale of carbon offsets in 2013, a deal that can serve as a model for other communities seeking alternatives to clear-cutting their land. At COP, the Metareila Suru­ Association, representing the Suru­, will present the community’s long-term development plan and several other ideas that constitute its “REDD+ Project.”

Earth Innovation Institute, part of AIME, will also be part of Thursday’s presentation, explaining a “jurisdictional approach” to finding climate change solutions versus a “project approach.” In this kind of focus, indigenous people work together with donors, donor nations, states and provinces, among other actors, in finding solutions and strategies.

Also presenting as part of AIME will be the indigenous advocacy group COICA (Coordinator of Indigenous Organizations of the Amazon River Basin). They will be discussing their own approach to reducing emissions (Redd+ Indgena Amaz³nico, or RIA), especially in the context of indigenous people’s Life Plans.

For the first time, this year’s COP is home to the “Indigenous Pavilion,” where many of the events centered on the work of these communities will take place. “The Indigenous Peoples hold the knowledge,” reads the information about the pavilion, “worldviews, experiences, and proposals for mitigation, adaptation to slow and overcome the biggest threat for all life forms; the voice of the indigenous peoples can and must be heard by the global actors.”

It is in this context, then, that the AIME consortium seeks to share their experiences and serve as a model of forward-thinking, creative approaches to climate change. As the world watches the high-level COP negotiations over the next weeks with varying degrees of skepticism and support on several smaller but nonetheless important stages, also at COP, stories of proven success will be told. And this year, the world will be listening.

How The Warsaw Climate Talks Spawned The New China-US Climate Deal

This post first appeared on The AnthropoZine. You can view the original here.

 

13 November 2014 | In the beginning was a word, and the word was “commitments”.

In the end was a different word, and the word was “contributions”.

On Tuesday in Beijing, we saw what a difference a word can make when US President Barack Obama and Chinese President Xi Jinping jointly announced they’d contribute to the climate effort by doing things that each could realistically achieve.

Hailed by some as a game-changing bolt from the blue and dismissed by others as too little too late, their announcement is the most visible test to date of a new set of rules that climate-change negotiators established in Warsaw last year – rules that began with one word that changed everything.

“Before the Warsaw talks, we all talked about ‘commitments,'” says Peruvian Environment Minister Manuel Pulgar-Vidal, who will be presiding over December’s talks in Lima. “This year, we’re talking about ‘contributions.'”

Gone for now is the quest for a top-down global deal setting one concrete but unworkable emission-reduction target for all countries, and it is place is a flurry of “Intended Nationally Determined Contributions” (INDC), which are bottom-up proposals that countries around the world will begin submitting to the United Nations Framework Convention on Climate Change (UNFCCC) after December’s talks end. Tuesday’s announcement isn’t just a bilateral deal, but the first indication of what the US will be putting forward: “The United States will submit its 2025 target to the Framework Convention on Climate Change as an ‘Intended Nationally Determined Contribution’ no later than the first quarter of 2015,” the White House said in summarizing Tuesday’s announcement on its web site.

It should come as no surprise that the US and China are providing the first big test of the INDC concept, because they were at the center of the logjam that led to their creation in the first place. Specifically, the United States, Japan, and some other developed countries refused to commit to reductions until developing countries, as well as economic powerhouses like China and Brazil, made commitments of their own. The shift from “commitments” to “contributions” takes the principle of “common but differentiated responsibilities” out of the footnotes and into the forefront of negotiations. In so doing, it turns the talks upside-down.

The idea is simple: negotiators will first see what each country puts on the table, and then they’ll try to incorporate these proposals into a global agreement that will keep the earth’s temperatures from rising more than 2°C. Instead of starting with global limits and deadlines that allow for some flexibility in how they’re achieved, countries are starting with local proposals and then rolling them up into a synchronized global framework.

So, yes, the game changed, but it didn’t change this week in Beijing. It changed last year in Warsaw. On Tuesday, we got to see the change in action..

 

What is an INDC?

 

On December 1, negotiators will arrive in Lima for this year’s climate talks, and their first order of business will be to decide what constitutes a good INDC and what doesn’t. It’s a process that began in Warsaw and reached a fever pitch in Bonn, Germany, after more than two dozen countries submitted their ideas. In July, Kishan Kumarsingh of Trinidad and Tobago and Artur Runge-Metzger of the European Union distilled those proposals into a draft negotiating text on INDCs.

It’s essentially a laundry list of activities that range from “Technology, investment and capacity-building needs” to “International cooperation, including cooperative actions” both of which are core to the US-China agreement and will be central to all INDCs going forward.

But nothing in the draft text is etched in stone, and you can expect it to first bloat from its current form into an incomprehensible mess of phrases, half-phrases, and [bracketed text] before Kumarsingh and Runge-Metzger boil it down into something manageable.

They are co-chairs of the Ad Hoc Working Group on the Durban Platform for Enhanced Action (ADP), which means they, together with Pulgar-Vidal, are charged with herding all of its cats, cattle, and canaries towards agreement on what makes a good INDC.

For now, the only thing everyone agrees on is that INDCs must be transparent and comparable across countries, so that every country gets a fair chance to be recognized for its contributions or compensated for its losses. If most countries feel the INDCs are fair, the theory goes, they’ll play the game to win, rather than simply not to lose. Only when that process is finished can the US, China, or any other country really finalize their own INDCs.

Countries will then spend the first few months of 2015 uploading their INDCs to the UNFCCC web site, ramping up an iterative process designed to blend the bottom-up INDCs with top-down reality checks, culminating, we hope, with a global agreement at the Paris Climate Summit (COP 21) at the end of 2015.

At that point, contributions become commitments again, but they’ll be commitments to specific actions that suit each country’s reality, rather than to a one-size-fits all agreement that, in reality, never quite fit anyone right.

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Steve Zwick is Managing Editor of Ecosystem Marketplace. He can be reached at szwick@ecosystemmarketplace.com.

Staring Down the California Drought: Looking at Solutions to Our Water Crisis

Donate today to Forest Trends (publisher of Ecosystem Marketplace) Crowdrise campaign. Your gift helps protect forests and other threatened ecosystems and contributes to local livelihoods and conservation.

 

3 November 2014 | The punishing California drought has become part of our national consciousness, with the bad news seeming to grow worse each week. Last year was the driest on record for much of the state, and in January of this year, Gov. Jerry Brown declared a drought state of emergency and directed officials to take all necessary actions to prepare for water shortages.
California residents can be heavily fined for wasting water, and nothing seems to escape the drought’s ill effects — including Halloween(pumpkin growers in the state are suffering from the water shortage). The state’s lakes are at “crisis levels,” and the drought will cost the state $2.2 billion and close to 20,000 agricultural jobs this year. Parched forests are vulnerable to forest fires, creating a terrifying and often deadly situation for nearby residents, ever-vigilant for the smell of smoke in the air.

In September, the governor signed legislation to make the state more resilient to drought and strengthen local management and monitoring of the state’s water needs. The problem isn’t just a lack of rain; it’s a lack of resilience in the forests and fields that collect what little rain does come and funnel it into rivers. “We have to learn to manage wisely water, energy, land and our investments,” said Brown. “That’s why this is important.”

Our planet’s water crisis is something we can no longer ignore, and extends beyond California. Indeed, the Intergovernmental Panel on Climate Change this weekend reiterated its warning that water supplies will become more tenuous as the climate changes.

“The fractions of the global population that will experience water scarcity and be affected by major river floods are projected to increase with the level of warming in the 21st century,” the IPCC said.

A Global Crisis

The water crisis has been a part of our global consciousness for years, and the message has been clear: Keep it clean, don’t waste it. But sustainable, working solutions and a full picture of the crisis have been less than straightforward.

Alarms have been raised across the country, as in Ohio where there have been exceptionally high levels of algae found in Lake Erie. The algae produces a toxin for which there are no federal or state standards of acceptable levels — even though it can be lethal. Globally, 70 percent of water use is for agriculture, and agriculture is largely unregulated under the Clean Water Act. That algae blooming in Lake Erie, for example, can be attributed to animal waste and fertilizer run-off from farms.

In the energy sector, too, excessive water usage is a problem. Energy development requires a tremendous amount of water. In coal production, it’s especially high.

The need for a sustainable clean-water solution is clear — and probably not the kind of solution that most people might think of, according to the State of Watershed Investment 2014 report, published by Ecosystem Marketplace, an initiative of the nonprofit Forest Trends. The report might just change the way you think about water — and give you reasons to be optimistic about our future.

The report presents nature-based solutions — forests as filters, for example — to the problem of sustaining the planet’s clean-water supply. And in the face of manifestations of the crisis like California’s severe drought, solutions demand our attention and support.

Nature as Infrastructure: An Answer to the Problem

What has been largely missing from the discussion about our water crisis is the connection between land use and adequate water.

Forests, wetlands, and grasslands work as sponges, saving excess water in the wet season for drier periods of the year, and as filters, removing contaminants that threaten public health. This “natural infrastructure” also regulates local and global climates, and prevents erosion. Protecting and enhancing nature’s ability to do this work keeps water safe and well-timed.

“We’re finding that the global water crisis is forcing governments and business to get creative,” says the report’s lead author, Genevieve Bennett. “Why is Coca-Cola helping the U.S. government reduce the risk of wildfire on forest lands? Why are water utilities paying farmers to go organic? Because it’s often more cost-effective to keep the landscape healthy — and keep your water supplies clean and flowing at their source — than to deal with pollution and supply disruptions after they’ve already happened. For a long time we’ve focused mainly on how to solve water problems through engineering alone.”

Denver found exactly this creativity when it recognized the stakes of increasingly severe forest fires in the city’s catchment. Beyond causing millions of dollars in firefighting costs and property damage, just one fire could result in sediments and heavy metals entering the city’s water supply — increasing treatment costs dramatically. To tackle this issue, the utility Denver Water partnered in 2010 with the U.S. Forest Service to improve forest management in the city’s catchment — reducing wildfire risk, stabilizing soils, and improving the timing of the delivery of snow melt to downstream users. As a result, water user fees in Denver don’t only contribute to keeping the lights on at the treatment plant; they also support the maintenance of critical natural infrastructure on which the city depends.

“We tend to think of water management as something that happens around population centers, for human consumption, but that’s only a small part of the picture,” says Gena Gammie, manager of the Water Initiative at Forest Trends. “The water challenges we face require solutions that stem from broader thinking. We have to consider the landscapes that catch and deliver water, through to the agricultural and energy-production systems our society depends upon.”

The new report shows how water users have begun to creatively engage full landscapes to improve water resources management, complementing the protection of “natural infrastructure” with positive incentives for agricultural producers to implement better land use practices. In fact, the majority of programs tracked by the report work on improving management of productive lands, or combine this strategy with the protection of natural areas.

China, where critical water shortages are a major problem in addition to pollution, is a leader in this kind of investment, “watershed investment,” and its programs account for 90 percent of watershed investment in the world, according to the report. Many such “eco-compensation” programs pay landowners to take degraded or marginal lands out of agricultural cultivation to protect water sources.

Does Watershed Investment Work?: The Need for the Data

The report is one-of-a-kind in the breadth of its tracking of watershed investment programs around the world and its quantification of the impacts of these programs. The information gathered, therefore, can be invaluable in assessing whether watershed investment is actually effective and for which reasons.

The report found, for example, that in 2013, governments and companies invested $9.6 billion in nature-based solutions to the water crisis. At least $6 billion of this funding went to more than 7 million households, and restored and protected 365 million hectares — an area larger than India. This amount of investment is up from transactions in 2011, which Ecosystem Marketplace benchmarked at $8.2 billion. This increase points to continued growth in the sector, and most importantly, governments’ and businesses’ willingness to prioritize clean water supplies — and their appreciation for alternative ways to achieve that end.

The report offers a unique opportunity to discuss these types of programs in depth, and the data it presents are especially important in terms of attracting investment and buyers in watershed investment. “I’m not aware of another source of information out there that attempts to really rigorously track these investments or offer a framework for thinking about them. Natural capital investment is just like any other investment in that you need information to make good decisions,” says Genevieve Bennett.

Trees, Water — and People

Investment in watershed services can reach beyond the land and the water. It can affect people living in and managing the watershed as well, bringing them into the deal. Residents might receive cash payments, technical support, and other needed materials. Projects that work with land users to ensure that investments targeting water benefits also offer sustainable livelihood benefits “are generally more effective over time,” says Gena Gammie.

In cities, too, people can benefit from this kind of investment. “Worldwide, many cities are growing faster than they can sustainably incorporate and meet the needs of new residents,” says Gammie. “So to the extent that watershed investment can function as urban-rural bridges that support, develop or strengthen rural economies in a green and sustainable way, then that’s good for cities, as well.”

An example of such a success story is Working for Water in South Africa, where invasive plants cause tremendous damage and threaten water security. Working for Water, administered through the country’s Department of Environmental Affairs in partnership with local communities, each year provides training and jobs in clearing these plants to 20,000 people, 52 percent of whom are women. The program is recognized internationally for its success in fighting poverty for these workers, and is an example of how the water, food, and environment nexus can be addressed with a holistic solution.

“Watershed investment isn’t just a conservation issue,” says Bennett. “It’s also potentially a very powerful tool for helping us address pressure on our water, energy, and food systems. We should be thinking about natural infrastructure when we consider how to extend basic water services to everyone on this planet, or in preparing for a changing climate or meeting future demand for food or energy.”

An area larger than the size of India — that’s the amount of land over which these kinds of nature-based solution have been implemented successfully. And that means there’s reason for optimism — but only if these kinds of best-practice solutions are scaled up and adopted across our planet.

Today, you have the chance to become part of this work. Until Dec. 5 every gift to Forest Trends will be matched by the Skoll Foundation. Your gift helps protect forests and other threatened ecosystems and contributes to local livelihoods and conservation.

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