Preserving Prairie Potholes

28 June 2008 | Adolph Feyereisen thought he knew all the ways to farm his 1040 acres in Emmons County, North Dakota. He’d taken over a dairy operation from his father in the 1960s, ran that until 1975, and then raised beef for a decade before dropping that to become a crop adjuster. Now that he’s semi-retired, he’s back to beef, along with small grains like barley and wheat.

But his latest cash crop is novel to the agricultural economy of the plains: sequestered carbon.

Last January, conservation group Ducks Unlimited purchased both a perpetual easement on Feyereisen’s native grassland and the rights to the carbon stored under that 272 acres. DU then passed the easement along to the Fish & Wildlife Service, but is bundling Feyereisen’s carbon with the carbon from scores of other North Dakota landholders and selling it on the open market, perhaps to a corporation in search of a significant carbon offset.

The short-term plan is to invest the proceeds from the carbon market in new habitat protection in the plains states. Then, if that works out, DU could take its 11.5-million-acre track record of habitat restoration and turn it into a revenue-generating portfolio to accelerate its conservation work.

For some of the most important and threatened waterfowl habitat in North America, the plan comes just in time.

 

The Brokers

“These are some of the best credits I’ve ever seen or been a part of,” says Radha Kuppalli of New Forests, a Sydney-based company helping to broker the deal.

Better known for forest management, New Forests is working with Equator Environmental, LLC to package the DU carbon for the voluntary carbon market. Equator provides financing to help fund carbon purchases, and will sell the credits to investors looking to downsize their carbon footprint. Equator and New Forests will work together to ensure that the credits meet high standards.

“Every single element that you can think of in a carbon project — additionality, quantification protocols, leakage, permanence — everything that you need to address is here,” says Kuppalli. “There is such an enormous biodiversity component.”

 

To Farm or Not to Farm

That’s precisely DU’s interest. Feyereisen’s 272 acres is native prairie, never tilled because it’s quite rocky and hilly. It’s also pocked with glacial potholes — shallow, watery depressions left by the glaciers. He’s never planned to plow it, but that doesn’t mean it can’t be done.

“They just have to rip the rock out,” says Feyereisen. “The equipment they’ve got now, it doesn’t take much. To say land can’t be farmed in this day and age, the way technology is going, that’s probably a pretty far-fetched statement.”

 

Abundance of Birds

Before the advent of European settlers, the Prairie Pothole Region in the Dakotas was at the heart of the world’s largest grassland, the Great Plains of North America. Feyereisen’s potholes are just a few of the millions of glacial potholes that cover some 100,000 square miles, harboring rich stores of aquatic plants and animals. Pintails, mallards, gadwall, blue-winged teal, shovelers, canvasbacks—each spring millions of ducks nest in the grasslands adjoining the potholes. Many other birds—lesser scaup, wigeon, green-winged teal, Canada geese and snow geese—use the area as a staging ground in their migration to the boreal north.

These fowl riches brought DU to the region almost at its inception, beginning habitat restoration in the adjacent Canadian portion as early as 1938. Since then, the organization has done restoration work on 11.5 million acres throughout much of the United States. But the potholes remain a priority: DU considers the area the most important and threatened waterfowl habitat in North America. Agriculture has already destroyed or altered more than half of the potholes. And climate change is the new threat on the horizon; the Wildlife Society projects a loss of as much as 90% of U.S. wetlands by 2080.

 

Competing Interests

Meanwhile, agricultural pressures are building. Ironically, climate concern has helped heat up the biofuels sector, putting further pressure on food prices that were already being ratcheted up by rising petroleum prices and natural disasters. Vagaries in federal agricultural policy are also having an impact. The Conservation Reserve Program (CRP), which rewards farmers for converting highly erodible cropland to grass, has been unable to compete with the hot ag land market as the 10 to 15 year contracts have expired. Almost 420,000 acres of North Dakota CRP land — more than 12 percent of the state’s total — were lost back to cropland in 2007 alone.

Federal ability to do conservation work in North Dakota is abridged as well; a political backlash against federal lands resulted in legislative veto power over the expenditure of federal duck stamp money to purchase habitat in the state. That leaves the private sector.

“Wildlife belongs to the public, yet private property – and therefore private landowners – really have all the habitat, so you have to work with them,” explains Jim Ringelman, DU’s Director of Conservation Programs for the Dakotas and Montana. DU has been working with private landowners for decades, developing tools and credibility.

 

Underground Carbon

Its carbon work began a couple of years ago, as the voluntary carbon market was beginning to solidify. While the carbon storage potential of forests rises in plain site, grasslands hide their carbon underground. Prairie plants sink deep roots five to nine feet into the plains, stockpiling carbon away from the oxidizing forces that would release it into the atmosphere. The Agricultural Research Service already had some local data on sequestration potential. With support from the Plains CO2 Reduction (PCOR) Partnership, DU worked with soil scientist Larry Cihacek of North Dakota State University to measure carbon stores under native prairies and restored grasslands.

It was an ideal research situation: Grasslands restored under the conservation reserve program range in age from a couple of years to 20 years.

“We could sample in one or two years a huge range of vintages,” explains Ringelman.

DU research shows that the north plains grassland sequester an average of 1.485 tons* of CO2 equivalent per acre per year. And while forest types in DU’s restoration portfolio can put away three to six times that, the acreage of the grassland resource is large enough to make it a potentially major player.

 

Adding Above and Below

Enter the US Fish & Wildlife Service, whose Grassland Easement program operates in the Prairie Pothole Region with a short budget and a backlog of interested participants. DU’s plan is to buy perpetual grassland easements and carbon credits at the same time. The easements are passed on to the FWS, and the carbon credits are bundled and resold to finance more conservation.

“It keeps the land in the private landowners’ hands,” explains Tammy Fairbanks of the FWS. “It doesn’t change their use on the property. They can still graze it, hay it, and get an income off it, and they pay taxes on it. The government does not have an operation and maintenance cost on that property. So we have the habitat protection, but we don’t have the cost of managing it.”

The DU assistance also cuts down on the FWS backlog, protecting habitat in imminent danger—the pothole counties of North Dakota alone have lost 88,000 acres of native prairie since 2002.

 

Meager Resources

“We need resources in the order of many tens of millions if not hundreds of millions to do what we need to get done,” adds Ringelman. “We have no hope of getting that through the traditional sources – the duck stamp money. This is big potential for us to accelerate our work. It’s revenue of the order of magnitude that we think is necessary to really make the kind of conservation footprint that we need to have to save the critical habitats. And it comes at an ideal time because current crop prices are putting a whole new set of pressures on grasslands.”

 

All the Ingredients

A number of elements make the DU plan exciting, beginning with the federal foundation.

“Having a perpetual easement held and monitored and enforced by the US Fish and Wildlife Service is extremely valuable,” says Kuppalli. “You’ve got the federal government backing your product. It’s really enabling. If you’re investing in carbon, or you’re a carbon buyer, you have to choose between a perpetual easement helped by a lands trust versus one held by the federal government?”

But while a federal program enables the project, Kuppalli is also quick to point out that federal programs and subsidies for corn and other commodities create countervailing forces.

The private element is important too, argues Dick Kempka, who spent years developing GIS technology for DU before jumping recently to Equator as vice president of sales.

“Seventy percent of the opportunity in the ecological asset market will be on private land,” he says. “If you can’t work on private land, you’re probably not going to be a big player in this arena.”

Incorporating grassland into the voluntary carbon market is another coup.

“Whatever business you’re in, you want to have a diversified portfolio,” he says. “There is a lot of benefit to restoring grassland and having tonnage be available right away, in a market where most feel there will be an annualized accounting.”

Then there is the Ducks Unlimited brand.

“That’s the big selling point,” he argues. “The social benefits associated with offsets are much better than any type of geologic sequestration, or methane capture. The bottom line is if I’m a pre-compliant utility, or a carbon-neutral socially responsible type of investor, these types of offsets very much fit the bill because they’re going to get other benefits from it – whether they’re explicit or implicit.”

 

Rethinking Agricultural Value

Ringelman hopes to change the very definition of agricultural value in the plains.

“There is a notion here that we have to pump up the economy of the state, and that grassland – particularly native prairie – is just a land cover that’s waiting for a higher and better use to come along,” he says. “Now we have a chance through this carbon work to show them that look, there’s more to this land. It’s more than just cutting hay and running cows on it. You’re also sequestering carbon. You’re doing a lot of things that people are going to start paying for, so let’s hold on to this here and take another look at it.”

DU plans to keep pushing the ecosystem services envelope, looking at water quality and possibly biodiversity offsets as well.

 

Exploring Biodiversity Offsets

“What we do with restoring wetlands has big water quality benefits. I think that’s not very far off,” says Ringelman. “Biodiversity is a little bit funkier.”

Funky, but not far-fetched. Birds traverse North America from key breeding areas like the prairie pothole to wintering areas. And populations are often limited by what happens on the breeding grounds. The Henslow’s sparrow, for example, breeds in the plains grasslands, but winters to the south, often in populated coastal areas.

“Maybe the time’s not far off that when someone does a project that’s affecting wintering habitat and sparrows down there, they’ll be coming to us (because) we can really have a population affect working with on this end of the flyway,” says Ringelman.

Feyereisen thinks a little more down to earth.

“My kids are willing to leave it like it is, and I would hope it would be like it is,” he says. “If I want to be selfish about it, this is one way to make sure it is.”

 



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

Please see our Reprint Guidelines for details on republishing our articles.

* The initial posting of this story misstated the figure as 1.485 million tons. We regret the error.

Additional resources

Study Says Banks Are Still Financing Deforestation. Here Is How They Can Stop

29 July 2015 | The UN Environment Programme (UNEP) and the Natural Capital Declaration (NCD) today unveiled the “Soft Commodity Forest-Risk Assessment” (SCFA), which is a set of simple guidelines that banks and other financial institutions can use to measure and reduce the impact that their agricultural clients have on deforestation. It builds on the work of WWF and other green NGOs, but it adds in financial feedback developed by NCD, which promotes the use of natural capital accounting in financial products and services.

When NCD and UNEP began applying the SCFA to financial institutions, however, it found that only 13 of the 30 banks surveyed had developed financial products and services specifically aimed at promoting the production and trade of sustainable commodities. The important “soft” commodities include palm oil soy and beef – the major drivers of tropical deforestation. Most financial institutions have no systematic way of measuring their clients’ exposure to deforestation liability risk, or even whether they are in compliance with local laws. This is despite the attention focused on deforestation commitments in the New York Declaration on Forests, the Consumer Goods Forum, and the Tropical Forest Alliance, as well as country commitments to reduce greenhouse gas emissions.

The findings and recommendations are published in a report entitled “Bank and Investor Risk Policies for Soft Commodities”, which also serves as a how-to for the SCFA. Accompanying it is a free Excel-based tool meant for financial institutions to assess their own lending and investment policies against those of the 30 others.

“Financial institutions can use the SCFA tool to evaluate how their policies compare to sector peers in addressing deforestation or forest degradation risks linked to these commodities,” the report states. “Meeting these criteria would strengthen the individual financial institution’s performance in relation to the benchmark included in the SCFA tool.”

The guidelines provide both minimum and best-practice recommendations, with the minimums focusing on disclosure and the best practices focusing more on formal policies that address environmental and social impacts. For example, a best practice might require companies receiving loans from banks to achieve certification under the Roundtable on Sustainable Palm Oil or the Roundtable on Responsible Soy within a certain timeframe.

The report highlighted some institutions for managing their environmental risk, and singled out the African Development Bank, FMO Development Bank, the International Finance Corporation, Standard Chartered Bank, and Sumitomo Mitsui Trust Bank.

Almost all financial institutions disclose general sustainability policies or policies focused to some extent on the production of agricultural commodities, but many do not disclose evidence of specific activities to monitor companies’ compliance with these policies on an ongoing basis.

More And More People Are Suing To Slow Climate Change. Will Companies Finally Recognize The Cost Of Their Emissions?

20 July 2015 | High in the Andes of Peru, the glaciers that feed Lake Pallqaqucha are melting. Down below, the lake itself is swelling; and if it bursts its banks, Saul Luciano Lliuya’s farm will flood, as will his village of Huaraz and much of the surrounding countryside. So Lliuya is proactively suing a German energy company for 1% of the damages, because the carbon majorsreport showed that the company was responsible for 1% of the world’s greenhouse gas emissions. Meanwhile, a nonprofit organization in Belgium is preparing to sue the Belgium government into taking more climate action after a court in the neighboring Netherlands ruled that its own government had violated human rights by not doing enough to combat climate change.

These are just a handful of several pending cases that test the ability of our legal system to address climate change, and attorney Carroll Muffett says they stem partly from the failure of international climate negotiators to deliver results.

“A lot of the energy and progress around fixing climate change is going to go to litigation,” says Muffett, who is President and CEO of the Center for Environmental Law, an advocacy organization.

Most of the lawsuits are against governments, but the risk for companies are increasing as well, says David Hunter, Director of the Program on International and Comparative Environmental Law at American University’s Washington College of Law.

“We’re at the point where the tide of litigation on climate change is only going to grow, and at this point, the major producers and emitters will be compelled to treat this issue more seriously,” Muffett says.

If these lawsuits are successful, it could transfer climate risk from victims to emitters – hopefully bolstering the business case for reducing emissions, and possibly providing support for carbon markets as an interim solution for companies that can’t reduce internally yet.

Climate Court

The ruling in the Dutch case perhaps made it the most famous of these climate court cases, but there are many others in different stages of development. Along with the aforementioned cases in Belgium and Peru, a coalition of NGOs, citizens and academics successfully sued the Indonesian government over the impacts coal mining has on the environment and people. But in that case there were specific companies causing specific damage locally – on the ground, in the water, and in the air. Climate change is more diffuse and more of a challenge, but six South Pacific nations announced last month their intent to sue fossil fuel companies for their contribution to climate change.

Meanwhile, in the US, a Northwestern nonprofit called Our Children’s Youth is organizing youth-led lawsuits for climate justice – and winning. In one such case, a Supreme Court judge ordered the state of Washington to consider statewide emission reductions.

All of these cases would have seemed improbable at best just a few short years ago, when the island city of Kivalina, Alaska sued multiple energy companies for the damages climate change has already caused them as they sink into the sea. They lost their case after a federal court ruled it was a political – rather than a legal – issue, placing the onus on governments rather than companies.

“Early cases failed because the law wasn’t ready to deal with this, and the science wasn’t there,” says Muffett.

Science Changes the Game

But times have changed. And the needed science to back climate change impact cases is increasingly available.

“What we’re seeing as the science gets better and better are plaintiffs who can point to very compelling and often government-endorsed scientific information saying this is the harm specific to me and I can trace it to climate change,” says Muffett.

The science – or, more accurately, the general public’s understanding of science and accountability – improved on a number of levels, thanks to efforts like the carbon majors report, which traces the majority of emissions released into the atmosphere over the last 150 years to 90 entities. It essentially exposes them to the risks of accountability, and indeed it forms the basis of Saul Luciano Lliuya’s lawsuit against RWE, the German energy provider.

That’s important because a huge challenge regarding climate lawsuits is proving the personal harm done that allows a plaintiff to sue a defendant, says Sladye Hawkins Dappen, an environmental attorney and former council to Ecosystem Marketplace publisher Forest Trends.

“In US law, it’s hard to show concretely that someone has been harmed by any one particular company’s action because often the company contributes a small fraction to the harm,” she says.

An Offsetting Connection?

As already evident, responses will vary with some companies accepting responsibilities and making necessary alterations, while others won’t, Muffett says.

Hunter says he could see a role for offsetting but is unsure of how it might play out. The most likely scenario he sees is one where companies pledge to use offsetting as a way of addressing climate risk in the future. Offsetting won’t necessarily impact an existing court case because the harm has already happened, Hunter explained. But the practice could be one component of a settlement agreement and as a way to move forward and prevent future impacts.

Businesses that have already been offsetting can use it as a line of defense against potential lawsuits.

“It will help determine a company’s level of negligence. The company can say it was investing in carbon offsets instead of denying science,” Hunter says.

Companies being able to distance themselves from climate denial could come in handy. A new Union of Concerned Scientists report,The Climate Deception Dossiers, unearths a deliberate campaign by the fossil fuel industry to mislead the public on the risks and impacts of climate change.

The Offsets Option

On a national scale, there is also potential for an increase in offsetting. Governments may choose to meet required ramped up emission reductions targets through the carbon markets, says Sarah Deblock, the EU Policy Director at the International Emissions Trading Association. Countries could turn to other options as well though, such as a tax or increased efficiency standards.

“For the Dutch to meet their obligation as a country, they may have to enter into the offset market more significantly,” says Hunter, using the Netherlands as an example. The country hasn’t yet announced how it will meet the additional targets. Deblock along with several others following the case believe the Dutch government will contest the decision.

Not a Sure Thing

The ruling in the Netherlands doesn’t necessarily signal a new normal regarding climate legal action, says Dappen. Laws are different depending on the place. For instance, the precautionary principle, which requires precautionary actions for activities causing potential harm to the public, is stronger in Europe than in the US.

But legal and political differences won’t curb litigation, just increase the variety, Muffett says. “The litigation that we’re moving into is going to be as diverse as the impacts of climate change itself,” he says.

And while legal action isn’t a sure thing, it’s proved itself in the past. Dappen notes the legal action against coal plants as a successful example-although other factors such as the price of natural gas factor in.

Muffett and Hunter both note the wave of tobacco litigation eventually shifted in the plaintiff’s favor.

“If I was in the fossil fuel industry, I would be looking at the tobacco model with a substantial amount of concern,” says Muffett.

Ecological Restoration Is A $25 Billion Industry That Generates 220,000 Jobs

8 July 2015 | Powerhouse industries like agriculture and energy along with their supporters in the US legislature lined up to contest the recently-finalized Clean Water Rule. As usual, their argument is economic: expanding the Clean Water Act’s jurisdiction, they argue, kills jobs. The counter-argument is also economic: regulation may kill some jobs, but it creates others – and, in the long term, it provides the clean air, clean water, and stable climate needed to support a healthy economy.

Now there are numbers to bolster that argument: according to a new study entitled “Estimating the Size and Impact of the Ecological Restoration Economy”, environmental regulation is driving a $25-billion-per year “restoration industry” that directly employs more people than coal mining, logging or steel production – but fewer than oil and gas or auto manufacturing.

“People want to know big picture numbers on industries,” said report author, Todd BenDor, an Associate Professor of City and Regional Planning with an environmental specialty at the University of North Carolina at Chapel Hill. “We basically find ecological restoration is a $9.5 billion industry employing about 126,000 people directly.” On top of that, he found, the restoration economy indirectly generates $15 billion and 95,000 jobs, bringing restoration’s total economic output value to nearly $25 billion.

In terms of direct employment, it ranks behind the oil and gas sector (200,000 jobs) and automaking (175,000), but ahead of coal mining (79,000), logging (54,000) or steel production (91,000).

“There are downsides to environmental regulations but there may be upsides as well. And one of the upsides may be a larger and stronger ecological restoration industry which has a major economic spillover effect,” said BenDor.

Quality of Life and Job Security

“This study diffuses the jobs versus the environment debate we’ve had for years,” said George Kelly, Chief Markets Officer at Resource Environmental Solutions, a large company that mitigates for ecological impacts.

He also noted that these jobs can’t be shipped abroad. “They have to be delivered here on the ground, domestically and locally,” he said.

“Restoration of natural infrastructure is the win-win solution, creating jobs and long term benefits even after the job is done,” said Amanda Wrona, the Knowldedge and Learning Lead at The Nature Conservancy.

But perhaps one of the most noteworthy finds didn’t have to do with the figures directly. BenDor noticed significant momentum in certain places for ecological restoration.

“There’s a lot of development in places such as Oregon, North Carolina and Louisiana where governments are really treating restoration as an industry that should grow and prosper,” he said. North Carolina, for instance, is using tax incentives to encourage watershed restoration

What is the Restoration Economy?

Report authors defined ecological restoration as any activity intended for ecological uplift resulting in a functioning ecosystem that delivers a suite of ecosystem services. They defined the restoration economy as economic activities that contribute to these efforts thus including the industries that carry out the work.

The range of industries is wide and includes project planning, engineering, consulting, legal services, forestry, landscape and earthmoving. Below is a list of the top 15.

 Top 15 industries within the restoration economy by estimated sales, 2014.
Top 15 industries within the restoration economy by estimated sales, 2014.

These industries worked mostly on water-related activities. Wetland, aquatic and riparian and marine and estuarine restoration and management comprised the top spots for restoration type, according to the study’s figures.

Recognizing the Restoration Economy

The study isn’t meant to be an all-encompassing analysis on the restoration industry. Rather, its intent is to start a trend of more in-depth research that leads to a fuller understanding of the restoration economy, BenDor said.

“We want to forge a path forward and establish a methodology for doing this,” he said. He mentioned partnerships with such organizations as the National Mitigation Banking Association or the Society of Ecological Restoration that have vested interests in this industry, as something he’s looking to pursue.

Greater information on this industry will also lead to more well-rounded policy debates on the economic impact of environmental regulations like the Clean Water Rule, BenDor said.

“I think this kind of information will support a cost-benefit analyses that could lead to policy promoting restoration,” said Kelly.

He also noted the report will help investors in understanding the range of opportunities within the restoration industry.

Creating a Metric

Measuring this obscure part of the US economy was no easy task, BenDor said, in part because it’s never been done before on a national scale. Locally, there is data. Oregon, for instance, does extensive work in this area. “There’s a Silicon Valley-type thought about restoration in Oregon,” BenDor said.

Also, restoration isn’t the only type of activity these firms carry out, BenDor explained. For example, CH2M Hill is a massive global engineering firm that implements various forms of restoration. However, the company also performs a bunch of other services that have nothing to do with restoration.

The entire business can’t be categorized as a restoration firm. To solve this problem, report authors conducted a national web-based survey collecting data on the percentage of a firm’s employment and sales that is based on restoration activities.

Starting from Scratch

Kelly noted difficulties in the past in terms of moving initiatives forward because of a lack of data. When the NMBA advocated for a capital gains treatment for credits, it had to prove to the Office of Management and Budget how many jobs these environmental markets generated. At the time though, we didn’t have the information, Kelly said.

“It involved a lot of assumptions, but we basically just said there’s a set of firms or a set of activities that we’re going to define as the ecological restoration economy. These are the people involved,” BenDor said.

He emphasized that this study is not a cost-benefit analysis. Nor is it even a comprehensive benefit analysis because the authors’ sole focus is jobs and output-its economic impact. The study doesn’t quantify the environmental benefits like clean water and air that restoration projects generate.

But even just in terms of impact, BenDor believes the study’s estimates are conservative. It’s likely we missed elements in the supply chain and restoration’s impact is actually larger, he said.

This Week In Water: A Brazil Matrix And Supply Chain Risk

This month, Ecosystem Marketplace publisher Forest Trends launched an interactive map and database tracking and categorizing over 2,000 payments for ecosystem services in Brazil called the Brazilian Matrix of Ecosystem Services. In other news, a diverse national water quality trading network released a program-building guide.

This article was originally published in the Water Log newsletter. Click here to read the original.

29 June 2015 | Greetings! Brazil holds more than 12% of the world’s freshwater, but citizens in some parts of the country – most notably Sí£o Paulo – have been suffering unprecedented drought this year, in part because of past failure to appreciate the linkages between forests and water supplies. In some quarters, however, the drought has led to a second look at the interlocking services Brazil’s vast natural resources provide: the carbon that its forests keep locked up as they regulate water and the thousands of species of plants and hundreds of species of birds and freshwater fish in its Canada-sized Cerrado, among others.


Brazil’s incredible natural heritage is the
raison d’íªtre for a boom in innovative market-based mechanisms to preserve the country’s natural capital.
We’re excited to announce a new initiative launching this month from Ecosystem Marketplace publisher Forest Trends with the support of Brazilian non-profit organization Fundo Vale and the Good Energies Foundation: the Brazilian Matrix of Ecosystem Services (Matriz Brasileira de Serviços Ecossistíªmicos), an interactive map and database of more than 2,000 payments for ecosystem services programs across Brazil categorized by type: water, carbon, biodiversity, sustainable agriculture, livestock, and bundled projects.

 

The Matrix, which has been more than three years in the making, can act as an information and decision-support tool for Brazilian market-makers: “It’s essential for us to understand that all ecosystem services are interconnected if we’re to develop a new and innovative market,” said Mauricio Moura Costa, Executive Director of Bolsa Verde do Rio, an Brazilian organization promoting market mechanisms for environmental compliance.

 

In other news this month, leaders continue to connect the dots between agriculture, water risk, and supply chains. Start with a look at a new report from Ceres that examines the blind spots between corporations and the farmers in their supply chains. South African Breweries is chipping away at the problem with a new sustainable barley program; meanwhile a new initiative in Gujarat, India, will pay farmers to install solar-powered irrigation pumps in an effort to lessen pressure on groundwater.


Speaking of supply chains, we’re hiring! Ecosystem Marketplace’s Supply Change initiative is seeking a research assistant to help us track corporate commitments to reduce ecological impacts in supply chains.

 

Finally, water quality trading in the United States got a boost this month with a new publication from the National Network on Water Quality Trading for stakeholders wondering whether and how to build a trading program. The guide breaks down key decision points and design options, bringing much-welcomed clarity to a technical and complicated process. Learn more and get a copy here.

 

— The Ecosystem Marketplace Team

For questions or comments, please contact newsletter@ecosystemmarketplace.com

GENERAL

Brazilian Ecosystem Services Matrix Brings Transparency To Environmental Finance

Brazil is not only a hotbed of ecosystem services, it’s also testing grounds for the market-like payments for ecosystem services approach to conserve and manage these natural services. And now, a new initiative launching this month provides a comprehensive way to track, understand and scale these programs using an interactive mapping and database system.

Learn more here.

Mixed Initial Responses To Final US Clean Water Rule

The US Environmental Protection Agency and the US Army Corps of Engineers finalized their Clean Water Rule in late May. First impressions of the rule, meant to clarify which wetlands and streams are covered under the Clean Water Act, are mixed.

Keep reading at EM.

POLICY UPDATES

Murray-Darling Buybacks Funding Sinks Under New Government

Late last month, Australia’s Liberal Party made good on its campaign promise to cap federal spending on buybacks in the Murray Darling Basin. Buybacks, under which the government buys and effective retires water rights to keep water instream in the beleagured river system, will be capped at 1.5 billion cubic meters (m3) out of a total target of 2.75 billion m3. Funds will be redirected to infrastructure improvements – which critics have pointed out cost three times as much per drop of water restored.

Circle of Blue has the full story.

Resistance to New Clean Water Rule Floods Capitol Hill

Earlier this month, the Senate Environment and Public Works Committee approved the Federal Water Quality Protection Act, which would force the Environmental Protection Agency and the Army Corps of Engineers to rewrite their recently finalized Clean Water Rule. The Federal Water Quality Protection Act now goes to the Senate floor.

Learn more from EP Newswire.

California Learns Water Conservation from the Masters

Residents of Tucson, Arizona are rooted in a thrifty water culture, with water cops, water-harvesting systems, natural desert vegetation, and more expensive rates for higher users. Now, nearby states like California, still grappling with the region’s dry conditions, are starting to pay attention.

Al Jazeera America has coverage.

Plans to Make the Great Lakes Region a Vision of Water Sustainability

A Great Lakes interstate agency, the Credit Valley Conservation Authority, is attempting to re-design water management in the region so it captures the efficiencies and benefits of natural water systems. Starting with several pilot projects and leveraging private finance to fund stormwater management, the Authority intends to implement green infrastructure measures, which will build resiliency and sustainability both ecologically and economically, the agency says.

 

Learn more.

Grenada Rebuilds the Reefs

Grenada’s government in partnership with the United Nations Environment Programme (UNEP) is embarking on an ambitious initiative to restore coral reefs surrounding the island country. Kerricia Hobson of Grenada’s Ministry of Agriculture, Lands, Forestry, Fisheries and the Environment noted to the Inter Press Service the multiple benefits of reefs, including supporting the tourism and fisheries industry and coastline protection.

Keep reading here.

GLOBAL MARKETS

They Just Wrote the Book on Water Quality Trading

The National Network on Water Quality Trading, a water quality trading-focused coalition of government agencies and environmental and industry organizations, released a reference document meant to promote the effective development of trading programs. It builds on 11 key design components complete with examples and pros and cons of each approach.

Learn more.
Read about it on the USDA blog.
Download the document (pdf).

‘Til the Well Runs Dry

More water was removed than replaced in 21 of the world’s largest 37 aquifers in the last decade, signaling alarming rates of groundwater depletion, a new study using NASA satellite data finds. Researchers hope the study leads to improved groundwater management, but demand for this resource is only increasing as the California drought lingers and densely-populated regions lack alternative water sources.

Read it at the Washington Post.

New Government Web Platform Puts Environmental Markets on Display

The US Department of Agriculture made public a new online platform that showcases its work supporting the growth of environmental markets. The site is full of success stories, the department says, and will continue to be updated with new tools and news on the subject.

Check out the new platform.

A Sunny Solution to Groundwater Depletion and Poverty in India

The International Water Management Institute of Sri Lanka hatched a new scheme that incentivizes Indian farmers to conserve groundwater. Farmers using solar-powered irrigation pumps can sell excess electricity back to the state, an innovative mechanism that reduces groundwater depletion while aiding the rural poor.

Learn more at National Geographic.

Growing a Connected System Of Farmers and Buyers

Few global food companies are assessing water risk in their agricultural supply chains, according to Ceres’ new report, which identifies a lack of good data on water use in farming operations as a major obstacle. The nonprofit recommends a shift away from fragmented supply chains to integrated systems, which it says will help streamline data collection and make collaboration and communication between corporate food buyers and growers easier.

Get coverage at National Geographic.
Download the report.

Canadian Insurance Sector Bullish on Natural Infrastructure

Despite recent high-profile flood disasters in Calgary and Southern Albert, most Canadians can’t get overland flood insurance (a fact that makes Canada unique among G8 countries). Private insurers say they can’t cover costs or even accurately price risk, since the country’s floodplain maps are unreliable and the natural infrastructure that can absorb or redirect flooding isn’t up to the challenge posed by climate change. Now, the insurance sector is helping support the development of a natural infrastructure adaptation program focused on wetlands.

Learn more.

New Mexico Ramps Up Watershed Investment Portion of Infrastructure Package

New Mexico Governor Susana Martinez announced an additional $3.5 million in funding for watershed restoration in priority areas on public lands. The funds supplement $6.2 million allocated last year as part of an $89 million capital infrastructure spending law.

KWRG has coverage.

Ecosystem Services: The Secret to Low-Cost Farming?

New research finds that enhancing ecosystem services, like natural pest control and soil health maintenance, in reduce farming costs for agricultural operations. Payments for ecosystem services schemes can play a role in making a shift to sustainable agriculture and then help farmers to maintain these systems.

Read it at Huffington Post.

Water Market Believers Continue to Pitch its Potential in California

Advocates of thriving water markets in California point to Australia’s successful use of the mechanism to survive ten years of drought as a prime example of its potential. Supporters say the drought-prone state already has the necessary infrastructure to move water around which, at the least, supports market-oriented policy if not the massive system the Aussies have implemented.

Keep reading here.

A Difference of Opinion Over the Meaning of Conservation Funds in Florida

Three environmental organizations have sued the Florida legislature over what they say is misuse of funds slated for water protection and land purchases for conservation, claiming lawmakers spent millions of dollars on activities unrelated or loosely related to conservation. The group is seeking a court declaration preventing conservation funds from being used as general revenue.

Reuters covers the suit.

SAB Builds a Better Brew with Sustainable Barley

South African Breweries (SAB) recently kicked off a sustainable agriculture program in the South African city of Taung. The initiative is part of SAB’s Better Barley Better Beer, aimed at supporting green economic development and SAB’s own supply chain management efforts.

Read a press release.

JOB LISTINGS

 

Research Assistant – Supply Change

Forest Trends’ Ecosystem Marketplace – Washington DC, USA

As companies commit to reduce the ecological impacts of their commodity supply chains, Supply Change provides transparency to their progress – and tracks commitments that count. The Supply Change project is a transformational resource for businesses, investors, governments, and the civil society organizations that support and hold them accountable; providing real-time information on the extent and value of commitment-driven commodity production and demand.

Learn more here.

Climate Scientist, Climate & Energy Program

Union of Concerned Scientists – Washington DC, USA

The Washington, DC based Climate Scientist will carry out research and analysis, outreach, and media activities in support of the Climate and Energy Program. In particular, this position will serve as a resource to the UCS media team by providing robust, timely, accessible, and policy-relevant information on climate science with an emphasis on impacts and adaptation.

Learn more here.

Program Manager – Climate Change and Sustainability

Environmental Science Associates – Northern CA, USA

ESA’s Sustainable Communities Group helps clients navigate the increasingly complex and interconnected needs of business, environment, and society, as climate change and other stressors increase the need for informed decision making and effective stakeholder communication. We serve public and private sector clients, offering planning, technical assistance, and policy expertise in climate change, energy, water, transportation, solid waste, and resource conservation. ESA is seeking an experienced and creative Planner/Program Manager to work under our Sustainable Communities Program Director assist with business development, manage projects, provide technical direction, and forge internal (cross-practice) and external partnerships that will lead to successful outcomes for a diverse range of projects.

Learn more here.

EVENTS

6th SER World Conference on Ecological Restoration

SER (Society for Ecological Restoration) 2015 in Manchester aims to be the major restoration event of the year. Building on recent successful world congresses and regional meetings such as SER Europe 2013 in Finland, we hope to attract a large number of academics and practitioners who will share good practice and network successfully in one of the homes of the industrial revolution. The title: “Towards resilient ecosystems: restoring the urban, the rural and the wild” should provide something for everyone, whether working in highly urbanised, ex-agricultural, or natural wild environments. We mean this conference to be as inclusive as possible and are keen to showcase not only the important scientific developments, issues and solutions, but also the cultural, educational and artistic aspects of restoration ecology. We are hosting a wide range of different types of events during the conference period, with pre-conference training workshops, conference symposia posters, workshops, and oral presentations, as well as half day field trips to see landscapes at first hand. 23-27 August 2015. Manchester, United Kingdom.

Learn more here.

EPA-USDA National Workshop on Water Quality Markets

USDA and EPA are cosponsoring a National Workshop on Water Quality Markets. This event is hosted by the Robert B. Daugherty Water for Food Institute at the University of Nebraska and coordinated by The Conservation Fund. The Workshop will highlight recent progress in water quality trading across the country with an emphasis on policy, resources, and tool development. The Workshop will provide EPA and USDA with an opportunity to lay out their vision for the role of water quality markets in advancing conservation and water quality goals, and provide you with the tools to engage in water quality markets. 15-17 September 2015. Lincoln NE, USA.

Learn more here.

SOCAP 15

We are a network of heart-centered investors, entrepreneurs, and social impact leaders who believe in an inclusive and socially responsible economy to address the world’s toughest challenges. Since 2008, SOCAP has created a platform where social impact leaders can connect and present their ideas to a global audience. Our annual flagship event in San Francisco is the largest conference for impact investors and social entrepreneurs and has drawn more than 10,000 people. 6-9 October 2015. San Francisco CA, USA.

Learn more here.

8th ESP World Conference: Ecosystem Services for Nature, People and Prosperity

The 8th World ESP conference’s central theme is ‘Ecosystem Services for Nature, People and Prosperity’. The conference will pay special attention to the public and private sector dialogue on how the ecosystem services concept can be used to support conservation, improve livelihoods and engage the business community. We especially encourage delegates from businesses to attend the ESP conference in order to discuss challenges and opportunities in using the concept of ecosystem services to achieve conservation and sustainable use of our ‘natural capital’ within a market-context. The conference will provide an excellent platform to engage with experts who can generate solutions to these challenges and start making a difference in practice. 9-13 November 2015. Stellenbosch, South Africa.

Learn more here.

FLARE Network Conference

IFRI is developing a Community of Practice, Forests & Livelihoods: Assessment, Research, and Engagement (FLARE) network which aims to advance the state of knowledge regarding forest-based livelihoods. By bringing together representatives of key stakeholders – donor organizations, environmental and social NGOs, development agencies, and research organizations – we will build on and leverage existing expertise and efforts to share and advance cutting edge knowledge and conversations on forest-based livelihoods. Ultimately, the goals of FLARE are to generate usable information and methodologies for collecting it; develop, promote and share the findings of the group; and implement such tools, knowledge, and methods to improve monitoring efforts and, ultimately, the efficacy of forest-dependent livelihood interventions around the world. 27-30 November 2015. Paris, France.

Learn more here.

CONTRIBUTING TO ECOSYSTEM MARKETPLACE

Ecosystem Marketplace is a project of Forest Trends a tax-exempt corporation under Section 501(c)(3).The non-profit evaluator Charity Navigator has given Forest Trends its highest rating (4 out of 4 stars) recognizing excellence in our financial management and organizational efficiency.


Additional resources

New Conservation Bank Aims
To Save The Roaming Sage-Grouse

29 June 2015 | Wyoming is a land of wide skies and open fields – of country-sized ranches, ugly energy pits, and massive wind farms. It’s also one of 11 US states and 2 Canadian provinces where the humble (and going-extinct) greater sage-grouse resides.

Like the people of Wyoming, the sage-grouse likes its space – it needs 230 square miles to thrive – and that’s the problem. While the sage grouse can live alongside cattle and other grazing animals, it perishes in the fragmented habitat left by farming, energy development, and urban expansion, according to the US Fish and Wildlife Service (FWS). These threats, combined with other perils like invasive plants and wildfires, are driving the sage grouse toward extinction.

The FWS listed the sage-grouse as a candidate species under the Endangered Species Act (ESA) with plans to announce a listing decision in September. Because an ESA listing intends to bring a species back from the brink of extinction, the regulations are rigid. Western developers worry an ESA listing on a species with such a wide range will severely deter economic growth, said Theo Stein, a Public Affairs Specialist for sage-grouse at the FWS.

In an effort to proactively conserve and restore the sage-grouse to healthy populations without ESA regulations, the Sweetwater River Conservancy (SRC) opened the first conservation bank for the greater sage-grouse in March. Although it contains just 55,000 acres of prime sagebrush, the Conservancy owns 700,000 acres, a land mass the size of Rhode Island that spans three mountain ranges. The bank has plenty of space to expand should demand for sage-grouse credits require it.

The greater sage grouse’s requirement of large amounts of contiguous prairie also makes the SRC’s bank the largest in the US. Aside from the relatively new conservation banks for another grouse – the lesser prairie chicken – species banking is typically done on smaller scales involving animals that don’t require as much space.

It’s important to conserve on the proper scale, said Brian Kelley, a wildlife biologist at the Conservancy. “Instead of an acre here and 50 acres there, this sage-grouse conservation bank could signal a paradigm shift in the way conservation is done,” he said.

Three Decades of Decline

“Greater sage-grouse is a species that doesn’t like change,” said Stein. Nevertheless, the bird has struggled with an altered landscape for over a century as its historic range has been cut by over half, according to the Bureau of Land Management (BLM). Once numbering in the millions, the Department of Interior population estimates vary from 200,000 to 500,000, which is roughly a 30% decline since 1985. The only reason the bird wasn’t listed in 2010 was because the FWS said it lacked capacity to implement the listing status.

Western interests saw this as an opportunity to thwart a listing. They launched a massive proactive conservation movement that spanned energy companies, federal and state agencies and ranching and farming operations. Wyoming was one of the leaders, Stein said. It set up a state-wide conservation strategy that includes prime habitat spots preserved for conservation known as core areas.

Building a Bank

In this pro-sage-grouse political climate, Jeff Meyer, SRC’s co-founder and Managing Partner, purchased thousands of acres in central Wyoming with the intention of building a wind farm. He was correct in thinking the region has vast potential for wind power, Stein said. But what he didn’t realize was the spot was also right in the middle of a core area for sage-grouse conservation. And renewable energy is part of the energy development that harms the bird, according to the FWS.

SRC then switched to establishing a conservation bank. Initially, the company had performed intensive high-tech data-collection on the property to determine its wind power potential and found the land had great potential to generate mitigation credits.

Also, this region of Wyoming is home to a number of historic cattle ranches. SRC soon realized that pastureland, if managed sustainably, could operate in harmony with sage-grouse populations.

“The nature of the ranch landscape really leant itself to what this species needs: big, open and un-fragmented land,” said Kelly.

This means the bank requires grazing management plans that incorporate both livestock production and sage-grouse goals with activities such as vegetation monitoring factored in. Keeping the ranches in operation is an important part of the bank’s success because it incorporates local interests, Kelly said.

“Open spaces are important to Wyoming residents but maintaining their economic base is important also. A bank fits into this nicely because it allows for open space and for economic development through mitigation,” he said.

A Market requires Demand

The sage-grouse bank is opening up for business with roughly 32,000 credits to sell. “The next step is attracting clients,” said Stein.

The question of demand for these credits is a major one. A candidate species listing drives some demand, but an ESA listing drives most of it, said Mark Sattelberg, the FWS Wyoming Field Office Supervisor. However, new incentives are springing up.

Wyoming’s sage-grouse conservation strategy follows the mitigation hierarchy, according to its summary document, where development is encouraged outside core areas and requires mitigation for all projects that must occur within habitat strongholds.

On top of the state-wide mandate, the BLM and the Forest Service recently released an updated version of its sage-grouse conservation efforts. Included in it is a mitigation component requiring developers follow the mitigation hierarchy and compensate for unavoidable impacts. This is significant because together the agencies manage two-thirds of sagebrush lands. And last year, the DOI launched a new mitigation strategy referencing the hierarchy and calling for landscape-level activity.

Environmental NGO The Nature Conservancy’s announcement to establish a sage-grouse conservation bank in Nevada in partnership with gold mining company, Barrick Gold, is further evidence of a blossoming market for sage-grouse credits.

The Environmental Defense Fund’s-another environmental NGO- habitat exchanges are also in the works in Colorado, Wyoming and Nevada. These ventures focus on land management incentives to ranchers in exchange for sage-grouse conservation.

Sattleberg said he knows of three ranchers looking into conservation banking. “They’re looking into what it would take and it takes quite a bit upfront,” he said, noting interest from some ranchers will remain as interest and nothing more.

Quality Products?

At the core of all these conservation measures must be quality and they must deliver a net-benefit for the species, said Deborah Mead, the National Conservation Banking Coordinator with the FWS.

“If these initiatives aren’t established to compensatory mitigation standards, then you have to ask if the species still warrants a listing,” she said. And while this will surely frustrate those involved in the voluntary proactive activities, the interest of the species must be put first, she said.

It’s an important point to make with the various versions of conservation offered. If the FWS decides the sage-grouse does require a listing status, the current conservation activities will be assessed or re-assessed through an ESA lens, Mead said. “It’s good that people are getting out in front and taking voluntary actions on the landscape, but it should be clear whether these actions meet regulatory standards or not,” she said.

At any rate, Eric Holst, Senior Director of Working Lands at EDF, said the momentum for conserving the sage-grouse is a positive thing. “I see this as an opportunity to assemble the federal and state agencies, energy interests and other private-sector parties together to grow sage-grouse populations,” he said.

Kelly said: “It’s a different way of thinking about conservation and a new way of applying the tools we have.”

 

Indigenous People Build Fund For Direct Access To Climate Finance, Push For More Active Role In Proceedings

24 June 2015 | BONN/BARCELONA | Indigenous leader Juan Carlos Jintiach says he was ecstatic when governments around the world pledged $1 billion to end deforestation at last year’s climate summit in New York. He especially liked Norway’s pledge of $20 million per year to help indigenous people secure their rights. But he also knew what would happen next, as NGOs around the world quickly submitted proposals, and Norway issued a short-list of 53 finalists.

“In the end, only five indigenous organizations were invited to present final proposals,” says Jintiach, who at the time had just stepped down as Director for Economic Development of pan-Amazonian indigenous federation COICA.

“That’s how it always is,” he says. “We’ll be talking to governments directly, and asking them why they always have these bilateral government-to-government discussions, and then we’ll see $100 million change hands, and we’ll say, ‘What’s that for?’, and they’ll say, ‘That’s for indigenous people.'”

 

Left-to-Right: Juan-Carlos Jintiach (COICA), Jorge Furagaro Kuetgaje (COICA), Josien Tokoe (COICA), and Estebancio Castro Diaz (International Alliance of Indigenous and Tribal Peoples of Tropical Forests) at climate talks in Bonn.

Chris Meyer of the Environmental Defense Fund (EDF) says that at least $50 million in funding linked to reduced deforestation or “REDD+ finance” has already been allocated for indigenous people, but it’s in limbo, scattered among the Forest Carbon Partnership Facility, the UN-REDD Program, and the Forest Investment Program – and that’s after he deducts 20% for administration and overhead.

“It’s not that the programs are doing anything nefarious,” he says. “It’s just that they’re bureaucratic and need to see a lot of things happen before they can release money.”

“I understand their reasoning,” says Jintiach. “They can’t just dump a bunch of money on us – I understand the need for accountability – but I think we can deliver that accountability.”

The Birth of the Indigenous Amazon Fund

In the last few years of his tenure, Jintiach had a front-row seat at the “grant games”, as COICA teamed up with NGOs like EDF, Woods Hole Research Center, and even Ecosystem Marketplace publisher Forest Trends to secure direct funding from large donors like the United States Agency for International Development (USAID), which is supporting COICA and a consortium of NGOs (including Forest Trends) under a program called AIME, which among other things helps indigenous people position themselves for REDD+ finance.

Current COICA director Edwin Ví¡squez Campos has been working to ready the organization and its members for REDD+ finance, and at mid-year climate talks in Bonn, COICA’s head of Environment, Climate Change and Biodiversity, Jorge Furagaro Kuetgaje, announced the creation of an Indigenous Amazon Fund, which is the brainchild of COICA consultant Roberto Espinoza and is designed to act as a kind of central bank for indigenous people across the Amazon.

Two weeks later, Campos announced that COICA would also seek to establish a more forceful presence in multilateral organizations like the Governors’ Climate and Forests (GCF) Task Force, which is a network of subnational governments and governors working to address climate-change multilaterally.

At the GCF annual meeting in Barcelona, COICA was joined by Central America’s AMPB, the Mesoamerican Alliance of Peoples and Forests.

“We’re at the Table”

“We believe we share many common characteristics and core beliefs with the jurisdictions represented in the GCF,” the AMPB declaration stated. “We actively participate in the region´s REDD+ processes, emphasizing the importance of community forest rights, and offering our experiences as key lessons and cornerstones for addressing deforestation in our jurisdictions.”

COICA’s statement was more prescriptive and called for active indigenous participation in the development of national climate action plans, or INDCs (Intended Nationally-Determined Contributions), and asked for a signed agreement with the GCF recognizing COICA participation in strategic planning and implementation.

The Evolution of the Amazon Indigenous Fund

Jintiach, who now is an analyst in COICA’s Economic Development Cooperation, says the Indigenous Amazon Fund is being created based on feedback from donor nations and with support from EDF and other NGOs.

“Juan Carlos raised this issue with us last year, when we were working with him on the indigenous mapping project [which was announced at climate talks in Lima],” says EDF’s Meyer. “He’s been working with us ever since to see how we implement it, and also talking to donors to get a better feel for what they look for.”

The fund proposal will be refined at a series of COICA meetings, beginning in August, but Jintiach and Meyer both say some basic ground-rules have already been established.

“One thing is clear: COICA won’t be running it,” says Jintiach. “We’re spearheading it, but we’re not a bank, and we don’t want to become one, and donors won’t want that, either.”

 

The Indigenous Amazon Fund is designed to be an independent entity answerable to an outside board of directors.

Based on donor feedback, COICA and others are now suggesting the creation of a non-profit entity, with an independent board of directors as well as an advisory board, says Meyer.

“This is still nebulous and to be determined, but there is this window in the next six months for indigenous leaders to consult among themselves and figure out what they want,” he says. “With COICA, we need to help to build a lot of capacity to understand how these administrative mechanism funds work, based on existing intermediary funds like Funbio (the Brazilian Biodiversity Fund), and we can then help them create a proposal that’s hopefully good enough for Norway to say, ‘OK, we’re going to put whatever is left [of the $100 million pledged] directly into this indigenous fund, and hopefully get other countries to contribute to it as well.'”

“Once the fund exists, if donors want to give to indigenous peoples, we can say, ‘Here is a fund for indigenous peoples,'” says Jintiach. “If they need to see transparency, we can say, ‘Here are the books.'”

Beyond REDD+

Although REDD+ finance was the impetus for creating the fund, it’s ultimately designed to handle banking, loans, and other financing operations.

“Something like Canopy Bridge, which is a platform for indigenous producers to market their products, could be supported through the fund,” says Meyer.

“Exactly,” adds Jintiach. “In Ecuador, we developed an indigenous cacao cooperative, but the benefits go to intermediaries, because the banks, they ask for lots of requirements that we as indigenous people find difficult.”

He says an Indigenous Amazon Fund would better be able to assess indigenous programs for their viability because it would be run by people who understand indigenous business practices.

“We need a financial institution that understands how our economies work on the ground,” he says. “Our people need to develop their own economies.”

Jintiach expects to have a formal proposal by the end of August, and Meyer estimates the start-up costs at less than $1 million.

“This is really for the next generation,” says Jintiach. “For my generation, this kind of finance was all new to us, but kids today understand its importance. They’re the ones who will move this forward.”

Additional Resources

Read COICA’s statement (Spanish) to the GCF here.

New Conservation Bank Aims To Save The Roaming Sage-Grouse

29 June 2015 | Wyoming is a land of wide skies and open fields – of country-sized ranches, ugly energy pits, and massive wind farms. It’s also one of 11 US states and 2 Canadian provinces where the humble (and going-extinct) greater sage-grouse resides.

Like the people of Wyoming, the sage-grouse likes its space – it needs 230 square miles to thrive – and that’s the problem. While the sage grouse can live alongside cattle and other grazing animals, it perishes in the fragmented habitat left by farming, energy development, and urban expansion, according to the US Fish and Wildlife Service (FWS). These threats, combined with other perils like invasive plants and wildfires, are driving the sage grouse toward extinction.

The FWS listed the sage-grouse as a candidate species under the Endangered Species Act (ESA) with plans to announce a listing decision in September. Because an ESA listing intends to bring a species back from the brink of extinction, the regulations are rigid. Western developers worry an ESA listing on a species with such a wide range will severely deter economic growth, said Theo Stein, a Public Affairs Specialist for sage-grouse at the FWS.

In an effort to proactively conserve and restore the sage-grouse to healthy populations without ESA regulations, the Sweetwater River Conservancy (SRC) opened the first conservation bank for the greater sage-grouse in March. Although it contains just 55,000 acres of prime sagebrush, the Conservancy owns 700,000 acres, a land mass the size of Rhode Island that spans three mountain ranges. The bank has plenty of space to expand should demand for sage-grouse credits require it.

The greater sage grouse’s requirement of large amounts of contiguous prairie also makes the SRC’s bank the largest in the US. Aside from the relatively new conservation banks for another grouse – the lesser prairie chicken – species banking is typically done on smaller scales involving animals that don’t require as much space.

It’s important to conserve on the proper scale, said Brian Kelley, a wildlife biologist at the Conservancy. “Instead of an acre here and 50 acres there, this sage-grouse conservation bank could signal a paradigm shift in the way conservation is done,” he said.

Three Decades of Decline

“Greater sage-grouse is a species that doesn’t like change,” said Stein. Nevertheless, the bird has struggled with an altered landscape for over a century as its historic range has been cut by over half, according to the Bureau of Land Management (BLM). Once numbering in the millions, the Department of Interior population estimates vary from 200,000 to 500,000, which is roughly a 30% decline since 1985. The only reason the bird wasn’t listed in 2010 was because the FWS said it lacked capacity to implement the listing status.

Western interests saw this as an opportunity to thwart a listing. They launched a massive proactive conservation movement that spanned energy companies, federal and state agencies and ranching and farming operations. Wyoming was one of the leaders, Stein said. It set up a state-wide conservation strategy that includes prime habitat spots preserved for conservation known as core areas.

Building a Bank

In this pro-sage-grouse political climate, Jeff Meyer, SRC’s co-founder and Managing Partner, purchased thousands of acres in central Wyoming with the intention of building a wind farm. He was correct in thinking the region has vast potential for wind power, Stein said. But what he didn’t realize was the spot was also right in the middle of a core area for sage-grouse conservation. And renewable energy is part of the energy development that harms the bird, according to the FWS.

SRC then switched to establishing a conservation bank. Initially, the company had performed intensive high-tech data-collection on the property to determine its wind power potential and found the land had great potential to generate mitigation credits.

Also, this region of Wyoming is home to a number of historic cattle ranches. SRC soon realized that pastureland, if managed sustainably, could operate in harmony with sage-grouse populations.

“The nature of the ranch landscape really leant itself to what this species needs: big, open and un-fragmented land,” said Kelly.

This means the bank requires grazing management plans that incorporate both livestock production and sage-grouse goals with activities such as vegetation monitoring factored in. Keeping the ranches in operation is an important part of the bank’s success because it incorporates local interests, Kelly said.

“Open spaces are important to Wyoming residents but maintaining their economic base is important also. A bank fits into this nicely because it allows for open space and for economic development through mitigation,” he said.

A Market requires Demand

The sage-grouse bank is opening up for business with roughly 32,000 credits to sell. “The next step is attracting clients,” said Stein.

The question of demand for these credits is a major one. A candidate species listing drives some demand, but an ESA listing drives most of it, said Mark Sattelberg, the FWS Wyoming Field Office Supervisor. However, new incentives are springing up.

Wyoming’s sage-grouse conservation strategy follows the mitigation hierarchy, according to its summary document, where development is encouraged outside core areas and requires mitigation for all projects that must occur within habitat strongholds.

On top of the state-wide mandate, the BLM and the Forest Service recently released an updated version of its sage-grouse conservation efforts. Included in it is a mitigation component requiring developers follow the mitigation hierarchy and compensate for unavoidable impacts. This is significant because together the agencies manage two-thirds of sagebrush lands. And last year, the DOI launched a new mitigation strategy referencing the hierarchy and calling for landscape-level activity.

Environmental NGO The Nature Conservancy’s announcement to establish a sage-grouse conservation bank in Nevada in partnership with gold mining company, Barrick Gold, is further evidence of a blossoming market for sage-grouse credits.

The Environmental Defense Fund’s-another environmental NGO- habitat exchanges are also in the works in Colorado, Wyoming and Nevada. These ventures focus on land management incentives to ranchers in exchange for sage-grouse conservation.

Sattleberg said he knows of three ranchers looking into conservation banking. “They’re looking into what it would take and it takes quite a bit upfront,” he said, noting interest from some ranchers will remain as interest and nothing more.

Quality Products?

At the core of all these conservation measures must be quality and they must deliver a net-benefit for the species, said Deborah Mead, the National Conservation Banking Coordinator with the FWS.

“If these initiatives aren’t established to compensatory mitigation standards, then you have to ask if the species still warrants a listing,” she said. And while this will surely frustrate those involved in the voluntary proactive activities, the interest of the species must be put first, she said.

It’s an important point to make with the various versions of conservation offered. If the FWS decides the sage-grouse does require a listing status, the current conservation activities will be assessed or re-assessed through an ESA lens, Mead said. “It’s good that people are getting out in front and taking voluntary actions on the landscape, but it should be clear whether these actions meet regulatory standards or not,” she said.

At any rate, Eric Holst, Senior Director of Working Lands at EDF, said the momentum for conserving the sage-grouse is a positive thing. “I see this as an opportunity to assemble the federal and state agencies, energy interests and other private-sector parties together to grow sage-grouse populations,” he said.

Kelly said: “It’s a different way of thinking about conservation and a new way of applying the tools we have.”

 

Norway Supports The Governors’ Task Force To The Tune Of $25 Million

Norway broke new ground in supporting the Governors’ Climate and Forests Task Force this week when the country announced $25 million in financing to the initiative over a 4-year period. While the funds have potential to plug significant funding gaps, they could also encourage other countries to follow Norway’s example.

18 June 2015 | BARCELONA | During this week’s annual Governors’ Climate and Forests Task Force (GCF) meeting here, Hanne Bjurstrom emphasized the importance of markets as well as on-the-ground activities that require subnational support.

“Last year we saw the importance of subnational leadership in driving the international agenda,” said Bjurstorm, Norway’s special envoy on climate change. She also cited subnational commitments such as the Rio Branco Declaration, an agreement among 13 rainforest nation governors to slash deforestation by 2020, during her speech at the GCF event.

These comments were perhaps expected as the GCF is a collaboration of states and provinces from seven countries with the shared goal of reducing emissions from deforestation and forest degradation (REDD) using jurisdictional approaches.

A more surprising comment was what Bjurstrom announced shortly afterward: 200 million Norwegian krone (roughly USD $25 million) in financial support to the GCF fund. The money flows through the Norwegian Agency for Development Cooperation (NORAD) and will be distributed over a 4-year period, Bjurstrom said.

“We realized the important work being done at the subnational level and wanted to support it,” said Bjurstrom. “This is the right moment to act.”

It’s the most significant amount of finance the fund has received to date, Bjurstrom said. It is also noteworthy because the funds flow directly to GCF member states and provinces. The ability of the GCF member states and provinces to directly access funds is key, she said.

“This money is specifically for the GCF Fund with no strings attached,” Bjurstrom said.

The direct access to funds makes Norway’s contribution special, agreed Danae Azuara, a Project Manager in Mexico with environmental NGO the Environmental Defense Fund,. “It is recognition to the subnational action that is incentivizing innovative solutions.”

More details on this announcement are expected but Bjurstrom said she hopes Norway’s action will encourage other countries to step up and do the same.

In terms of allocation, typically, 80% of all funds flow to capacity building (technical assistance and training, institutional structure and policy framework among other activities) said Ben Ayade, the Governor of Nigeria’s Cross River State, a GCF member. However, he stressed the importance of on-the-ground activity.

“Capacity building is great, but not more important than planting trees. Success in forests can only be measured by forest cover,” Ayade said.

Bjurstrom noted this point as well in highlighting on-the-ground progress and her support of subnational approaches to deliver deforestation reductions. During her GCF speech, she cited jurisdictions as having the potential to improve agriculture’s sustainability and productivity while at the same time protecting and restoring remaining tropical forests.

 

The Sustainability Strategy That No One Talked About

15 June 2015 | When Sean Kinghorn started his new job as a senior sustainability manager at the software company Intuit, he wasted little time in proposing an ramped-up emissions reductions goal to the company’s executives.

His plan involved cutting emissions 20% under a 2012 baseline by 2020 and targeting both direct and indirect emissions, categorized as scope 1, 2 and 3 emissions. He also suggested using offsets to deepen the impact beyond this 20% reduction.

“Since I was two months into the honeymoon phase, I kind of put my neck out there and said, ‘I do not believe in us investing in offsets unless we’re going to set a science-based goal and be incredibly aggressive for all of our scopes.’ And they said yes,” Kinghorn said, speaking during a panel discussion at the Sustainable Brands conference in San Diego last week.

Since then, the maker of TurboTax and QuickBooks has purchased enough offsets to make the company carbon neutral across all three scopes. It buys from avoided deforestation projects in Borneo and Madagascar, a biomass project in Brazil, and wind, cookstoves, and biomass projects in India – as well as two projects in the United States.

Volcom, the lifestyle brand that markets apparel to surfers, skateboarders, and snowboarders, also practices “offset-inclusive carbon management,” purchasing tonnes from Wildlife Works’ Kasigau REDD+ project that protects 200,000 hectares of dryland forest in Kenya.The brand uses offsets to neutralize the emissions of its sporting events while parent company Kering offsets all scope 1 and 2 emissions on the business side. In addition, Kering has set a target of directly slashing carbon emissions 25% by 2016 across all of its brands, using 2012 as a baseline.

“Our carbon mentors came from within,” said Derek Sabori, Volcom’s VP of Global Sustainability. “For us, the idea of carbon offsets was introduced to us thanks to our parent company Kering.”

Quiet Leadership

Intuit and Volcom are in good company. Fourteen percent of corporations reporting emissions data to CDP engage in carbon-inclusive carbon management, according to recent Ecosystem Marketplace research. Far from “greenwashing,” these offset buyers – which include major consumer-facing brands such as Coca-Cola, Toyota, Delta Air Lines, Clorox, Sony, and many others – invest in direct emissions reductions activities such as energy efficiency and low-carbon product design at a higher rate than companies that don’t offset. Offset-buyers spent a collective $41 billion on these carbon-cutting activities in 2013 and were five times more likely to use an internal price on carbon.

 

CDP data reveals that a higher proportion of offset-buying companies engage in direct emissions reduction activities compared to companies that don’t offset, according to Ecosystem Marketplace analysis. | Figure design by Eszter Bodnar.

However, both Kinghorn and Sabori admit that they haven’t yet done much marketing around their companies’ offsetting programs – or even sustainability in general – something that Kinghorn sees as a big miss.

“We’ve built up a good inventory of sustainability stories,” added Sabori. “Now we have to figure out how to tell those.”

Tell it From the Treetops

Recent social media attuned initiatives such as Stand for Trees and NatureBank are beginning to bridge the communication gap around carbon offsetting.

Since its launch in February, Code REDD’s Stand for Trees initiative has facilitated 35,000 tonnes worth of carbon offset sales from a dozen avoided deforestation projects across Brazil, Cambodia, Colombia, the Democratic Republic of the Congo (DRC), Indonesia, Kenya, Madagascar, Peru, Zambia, and Zimbabwe. The Stand for Trees website mimics an online shopping experience and allows individuals to purchase offsets in tonne or half-tonne increments, for $10 or $5, respectively – and then share the purchase on social media channels.

“What we really wanted to do is take this wonky, technical REDD mechanism and this crazy acronym and translate it into something that made sense for people on a human level, on a personal level,” said Gina Angiolillo, Communications Director at Code REDD.

 

A screenshot from Stand for Trees, which makes purchasing REDD offsets as easy as online shopping.

NatureBank, an online platform being developed by British Columbia-based carbon offset originator Offsetters, also aims to use technology and social media to make carbon offsetting more accessible. Offsetters CEO James Tansey describes the platform as akin to Facebook or eBay for nature. Users will be able to earn “nature coins” by clicking through different forest carbon projects, pick a line on a map and watch footage from a drone as it flies through a rainforest, and buy “digital rights” to certain hectares of land conserved through a carbon investment.

“What people get emotionally connected to and excited about is the idea of conserving some of the almost priceless assets in terms of forest natural capital,” said Tansey. “People don’t get excited about something as abstract as carbon offsets.”

NatureBank will be operational next month, with the goal of mobilizing $1 billion in conservation carbon finance by 2018.

Going Viral

As part of the ongoing Stand for Trees campaign, Code REDD reached out to the Saint Louis-born rap artist and activist Prince Ea to see if he’d be interested in getting involved. Prince Ea visited the Kasigau Corridor REDD project in Kenya and the Mai Ndombe REDD project in the DRC. The result was the provocative video “Sorry” in which the rapper apologizes to future generations for destroying the planet – then flips a switch on his message halfway through to say it’s not too late. The video was released on Earth Day of this year and was viewed 12 million times in the first 12 hours. It has since reached more than 66 million views on Facebook.

“How do you get people to care? Well, you have to care,” Prince Ea, whose real name is Richard Williams, said during a plenary session at Sustainable Brands, where he got a standing ovation.

 

In the epilogue to his “Sorry” video, Prince Ea questions the idea of destroying forests for money.

Stand for Trees is early proof that corporate offsetting programs have brand value, Angiolillo said. “We can talk to companies and say, we know that consumers get it – we had 20,000 of them purchase a tonne on our site,” she said.

The “gaming” aspect of NatureBank also aims to make the concept of offsetting more approachable – even fun.

“The inspiration here is that if you can get millions of people to buy FarmVille and Angry Birds, then surely you can do something on the gamification front with conservation,” Tansey said.

Ramping up Demand

Demand for carbon offsets on the voluntary market grew 14% last year to 87 million offsets, according to Ecosystem Marketplace’s Ahead of the Curve: State of the Voluntary Carbon Markets 2015 report, released last week. However, average prices fell to an all-time low of $3.8/tonne as offset suppliers faced a buyer’s market. Suppliers such as Offsetters and Code REDD’s Stand for Trees remain hopeful that the percentage of companies that engage in offsetting will grow.

“Any lightbulbs that needed to be changed should have been changed by now,” said Angiolillo, referring to the increasing sophistication of companies’ sustainability efforts. “So I think now that we’ve moved along far enough in this space, we are opening up a whole new potential set of offsetters who have done the things they need to do on their own side first, and now they have no more excuses.”

Indeed, scope 3 emissions accounted for three-quarters of offset buyers’ emissions, according to Ecosystem Marketplace’s analysis of public CDP disclosures – the elephant in the room in terms of companies’ true climate impact. Since these emissions occur upstream in a company’s supply chain (e.g. land-use change associated with the procurement of raw materials) or downstream in customer’s use products (e.g. the energy used when a consumer plugs in a company’s phone or refrigerates their food products), they are difficult to tackle in the short-term. Offsetting is one way to address these indirect emissions immediately.

 

More than 70% of companies’ reported scope 3 emissions come from customer’s use of their products, according to Ecosystem Marketplace research. | Graphic design by Eszter Bodnar.

Intuit’s measures to cut emissions include upgrading equipment to enhance energy efficiency in the company’s data centers, installing solar panels on its California buildings, increasing video conferencing capabilities to cut down on employee travel, and innovating towards “digital distribution” of all of its products to avoid packaging and shipping emissions. But all of these things take time.

“We need to invest in offsets now because I believe the planet can’t wait,” said Kinghorn.

New Analysis Offers Pathways For Scaling Up Climate Finance To $100 Billion Mark

Meeting the objective of $100 billion in climate finance by 2020 can be achieved, according to a new World Resources Institute (WRI) study. The NGO released the study, which lays out multiple methods that harnesses public and private sources to meet the target, at climate talks this week in Bonn.

This article was originally a WRI press release.

 

5 June 2015 | New analysis from World Resources Institute finds countries can achieve the goal of mobilizing $100 billion per year in international climate funding by 2020. The new paper finds the goal can be reached through multiple pathways and will require bringing in funding from various sources, including the public and private sectors.

Getting to $100 Billion: Climate Finance Scenarios and Projections to 2020 is one of the first quantitative analyses of funding scenarios to achieve the $100 billion goal. WRI’s paper finds greater clarity and stronger commitments will be necessary to reach the funding target, but if all considered sources are included, climate finance could total $109 to $155 billion in 2020 under projections of low/medium growth and leverage.

“An international climate agreement at COP21, including agreement on finance, depends on developed countries providing a credible pathway to honor their commitments with strong provisions for predictable and adequate climate finance,” said Athena Ballesteros, director, sustainable finance initiative, World Resources Institute. “While $100 billion is not sufficient on its own to create a low-carbon transformation, it is an important political goal to signal developed countries’ are committed to scaling up climate finance.”

Four public and private financing sources that might count toward the $100 billion goal are grouped into potential funding scenarios and projected forward from 2012 to 2020, using various growth rates and assumptions about how much private investment could be leveraged by public dollars. All four potential pathways require steady increases in public finance and inclusion of new funding sources to reach the $100 billion by 2020 goal:

  • Scenario one, which includes developed country climate finance alone, will not reach $100 billion by 2020, unless it grows at an annual rate of 25 percent.
  • Scenario two, which adds the private sector finance leveraged by developed country climate finance, could meet the target only under a high growth/high leverage projection.
  • Scenario three, which includes developed country climate finance and MDB climate finance and private sector investment leveraged by both these sources could meet the $100 billion target under a medium growth/medium leverage projection.
  • Scenario four, which combines developed country climate finance and MDB climate finance and private sector leverage and climate-related ODA, could reach the $100 billion under a low growth rate/low leverage projection.

“Forging an agreement on the path to $100 billion is essential to build trust and bring countries together ahead of the Paris climate conference in December,” said Michael Westphal, senior associate, WRI and the paper’s lead author. “We urge negotiators to use the report’s recommendations as a political middle ground to move the world toward the $100 billion goal.”

Getting to $100 Billion outlines three key recommendations to achieve a credible and politically feasible path forward:

  • Developed nations should commit to increasing all public funding flows above current levels to 2020 – as of 2012 climate-specific finance totaled $17 billion.
  • Developed countries should consider using new and innovative sources of finance including redirection of fossil fuel subsidies, carbon market revenue, financial transaction taxes, export credits, and debt relief – many of which have so far been underutilized to mobilize climate finance.
  • Parties should clarify the definition of climate finance and development of methodologies, including those for calculating and attributing leveraged private sector investment, to improve accounting and reporting

“As stated by President Hollande, we can’t secure an agreement in Paris without an agreement on finance,” said Pascal Canfin, senior advisor for international climate affairs, WRI. “Therefore, showing a credible and balanced pathway towards the $100 billion goal is an issue of strategic importance for the upcoming G7 summit.”

 

Additional resources

Brazilian Ecosystem Services Matrix Brings Transparency To Environmental Finance

5 June 2015 | Brazil holds more than 12 % of the world’s freshwater, but citizens in some parts of the country – most notably Sí£o Paulo – have been suffering unprecedented drought this year – in part because of a failure to appreciate the linkages between forests and water supplies. That failure, however, has led to a renewed appreciation of the interlocking services its vast natural resources provide: the carbon that its forests keep locked up as they regulate water and the thousands of species of plants and hundreds of species of birds and freshwater fish in its Canada-sized Cerrado, among others.

 

The Brazil Ecosystem Services Matrix lets users track ecosystem service programs across all of Brazil..

The country is also home to thousands of programs that use payments for ecosystem services (PES) to fund conservation by recognizing the value of those services. In Brazil, the best-known form of PES is REDD – an acronym for programs that conserve endangered forest by harnessing carbon finance to “Reduce Emissions from Deforestation and Degradation”, but the most advanced programs cover water – often by restoring forests that regulate rivers.

For such programs to deliver on their potential, decision-makers have to know what works and what doesn’t – but until recently, that information was scattered in isolated pockets across the country. It changed last week when Ecosystem Marketplace publisher Forest Trends unveiled the Brazilian Matrix of Ecosystem Services (Matriz Brasileira de Serviços Ecossistíªmicos), with the support of Brazilian non-profit organization Fundo Vale and the Good Energies Foundation. The Matrix is a database of more than 2,000 PES programs across Brazil categorized by type: water, carbon, biodiversity, sustainable agriculture, livestock, and “multiple”. The “multiple” category refers to those that bundle several ecosystem services into one payment plan or embed the service cost into a product price such as certified timber.

“The most visible aspect of the Matrix is the interactive map, which we call the ‘visualizer,’” says Beto Borges, who spearheaded the effort within Forest Trends. “We also summarized the key findings in a booklet called ‘Economic Incentives for Ecosystem Services in Brazil’ (Incentivos Econí´micos para Serviços Ecossistíªmicos no Brasil), and we made them available on a poster, which you can find if you go to the Matrix home page and click on ‘documentos’, but it’s really huge.”

“It’s essential for us to understand that all ecosystem services are interconnected if we’re to develop a new and innovative market,” said Mauricio Moura Costa, Executive Director of Bolsa Verde do Rio, an Brazilian organization promoting market mechanisms for environmental compliance, speaking at the event. “The concept of the Matrix is what distinguishes the work that’s been developed by Forest Trends.”

Makings of the Matrix

Fundo Vale first approached Forest Trends after seeing Ecosystem Marketplace’s Global Matrix, a similar database of ecosystem markets, but on a worldwide scale. The two organizations developed the Brazilian Matrix jointly over more than three years, with support from the Good Energies Foundation.

 

Beto Borges (left) introduces the Brazil Matrix of Ecosystem Services in Sí£o Paulo.

Developers plan a second phase, which will include work with the Brazilian Biodiversity Fund, a non-profit organization, and possibly government ministries as well.

Although designed as a decision-making tool for use within the country, the Matrix can also provide an opportunity for people outside the country to understand the country’s rich blend of programs – and not just the isolated few that have received international attention, says Borges.

Acre is not the only thing happening on PES, and the Surui REDD project isn’t the only carbon project,” he says. “Water is actually more developed than carbon.”

Fulfilling a Need

The Matrix was primarily created to fill the knowledge gaps and gain a deeper understanding of ecosystem services and the payment mechanisms meant to protect them. Developers of the tool intend to address issues such as social benefits, scale, effectiveness, challenges and opportunities.

And with Brazil’s vast ecological assets combined with the country’s heavy involvement in innovative compensation programs, potential for PES is huge.  In an early proposal document, Borges said these practices – PES – can drive significant investments for a true green economy that alters the existing paradigm which promotes development at the cost of the environment.

As the landscape of ecosystem markets is constantly changing, an ultimate objective of the Matrix is establishing a roadmap for stakeholder engagement, according to the 2012 proposal document – which also describes the tool as a ‘living’ database that evolves with the market but its inclusive analysis can provide stability and guidance. The matrix creates a simple and direct way to visualize and follow global and regional trends of environmental markets in Brazil, the web page reads.

A Joint Public Private Effort

Cristina Maria do Amaral Azevedo, Deputy Secretary of Environment for the State of Sí£o Paulo, said the initiative could reduce transaction costs and draw in the private sector.

“With government resources alone, it will not be possible to make viable any PES public policy” she said. “Dialogue and cooperation among the private sector, civil society and governments will provide the answer for how to advance with PES in Brazil at scale.”

The information the Matrix provides offers a bridge between the public and private sectors. PES can harness private dollars for conservation in a sustainable way and fill the funding gap that exists currently as conservation activities are largely publicly funded. The Matrix allows for a healthy progression and incorporation of compensation schemes into land-use strategies and regulatory development, the booklet reads.

The accompanying report was authored by environmental researchers Carlos Eduardo Frickmann Young and Leonardo Barcellos de Bakker, who note that PES doesn’t let government off the hook. Instead, they say, it requires strong environmental policy that supports sustainable development. Government must still enforce protection on protected areas as well as other environmental regulation, they say. The Matrix simply makes everyone’s role more visible and transparent.

“The Matrix developed by Forest Trends allows not only the acceleration of the decision-making process, but also provides an opportunity for convergence between the private sector, the public sector and civil society,” said Walter Lazzarini,  President of the Environmental Council at FIESP (Federation of Industries of Sí£o Paulo/ Federaçí£o das Indíºstrias do Estado de Sí£o Paulo).

Impact on Legislation

The matrix identifies strengths and weaknesses of existing PES projects while also analyzing synergies among the various entities and best approaches for them to work together. Comments streaming in regarding the Matrix note the growing belief that the tool could influence a more comprehensive national PES law in Brazil. The nation has an existing law that defines ecosystem services and mentions PES.

“The discussion of payments for environmental services has not yet led to a consensus in Brazil,” said Francisco Gaetani, Executive Secretary of the Ministry of the Environment. “The Brazilian Matrix developed by FT can contribute to the drafting of a law that’s denser, more robust, and more likely to succeed, because it reflects the reality of more than 2,000 field initiatives.”

 

Additional resources

Voluntary Buyers Spend Nearly $4.5 Billion on Offsets Over Last Decade

The voluntary carbon markets have served as the testing ground for compliance programs all over the world, even moving forward when efforts to implement mandatory cap-and-trade programs stalled. This has led to the voluntary markets having an influence that extends well beyond the nearly one billion offsets transacted over the last decade, according to Ecosystem Marketplace’s latest State of the Voluntary Carbon Markets report.

3 June 2015 | Washington, D.C. | When the international negotiations take center stage in Paris this December in the hopes of reaching an agreement to rein in climate change beginning in 2020, negotiators will be able to draw on the lessons learned in the voluntary carbon markets, according to a new report from Forest Trends’ Ecosystem Marketplace.

Companies, governments, and individuals voluntarily spent just under $4.5 billion to purchase nearly one billion carbon offsets from projects that halt deforestation, install renewable energy, promote energy efficiency, distribute cleaner-burning cookstoves and more, according to Ecosystem Marketplace’s Ahead of the Curve: State of the Voluntary Carbon Markets 2015 report.

National and subnational government officials have leaned on the experiences of the voluntary markets in building their compliance programs, meaning the voluntary markets have influence that goes beyond their relatively small size. For example, the offset component of California’s cap-and-trade program was largely built on project methodologies initially tested in the voluntary markets, which paved the way for pre-compliance offsets to flow into the regulatory program despite a year-long postponement to the program’s launch. And South Africa’s carbon tax, currently scheduled to begin in 2016 after also being delayed, will welcome domestically-sourced carbon offsets generated under the Gold Standard and the Verified Carbon Standard (VCS) – stalwarts of the voluntary markets.

“However, while compliance markets have turned to the voluntary markets for inspiration on project types, standards and more over the years, this relationship is a two-way street in that the voluntary markets take demand cues from developing compliance markets and proposed legislation and regulation,” said Kelley Hamrick, Carbon Program Associate at Ecosystem Marketplace and Lead Author of the report.

This is most clearly reflected in the pricing of voluntary carbon offsets, which has experienced peaks and valleys driven by policy signals (or lack thereof). The global average price peaked at $7.3/tonne in 2008 as momentum appeared to be building toward the United States implementing a national cap-and-trade system to reduce these emissions. But prices began to decline in subsequent years as carbon trading legislation faltered in the U.S. Senate. The global average price has consistently fallen since 2011, when it became clear that nations would fail to ratify another phase of the Kyoto Protocol, to reach an all-time low of $3.8/tonne. Historically, the average price of voluntary offsets is $5.8/tonne over the decade Ecosystem Marketplace has tracked these projects.

“With few positive policy signals in the carbon markets in 2014, the year witnessed the voluntary market’s lowest average price per tonne on record – sending a clear signal to policymakers in the lead-up to the Paris talks,” Hamrick said.

An evolving market

From year to year, the project type most in demand has evolved, driven by policy signals and supply-demand fundamentals, according to the report. In 2009, landfill methane projects experienced the highest transaction volumes as U.S. buyers bet on these projects becoming eligible for the national cap-and-trade market being debated at the time or in California’s developing cap-and-trade market – a gamble that failed to pay off on both counts and created a major oversupply of these offsets. In 2011-2012, wind projects topped the charts due to their relative cost-effectiveness compared to other project types – the price differential being critical to European buyers, the primary purchasers of voluntary offsets, who were trapped in a major economic crisis at the time.

In recent years, however, REDD (Reduced Emissions from Deforestation and Forest Degradation) offsets have overtaken wind as the dominant project type, trading at an all-time high of 25 million tonnes in 2014, in large part due to funding from public sector entities in Germany and Norway committed to avoiding deforestation in tropical countries. Through the “REDD Early Movers” program, these European governments are funding avoided deforestation in Brazil’s Acre state and nationally in Ecuador and Colombia. These “payments for performance” are not offsets, meaning countries cannot deduct the reductions from their own emissions, but they rely on traditional carbon market infrastructure, and represent the kind of government-to-government deals that may become increasingly common. These agreements contributed $90 million to 2013-2014 market value.

“I think that (public-sector involvement) is something that is going to continue, which is good,” said Agustin Silvani, Managing Director of Carbon Finance for NGO Conservation International. “But what worries me is that many of these initiatives say they want to attract the private sector and they want to work with the private sector, but there is no mechanism for the private sector to engage, which is frustrating for the project developers. It’s worrying because if not designed correctly it could crowd out whatever private finance is there instead of seeking ways to leverage it.”

Deforestation contributes up to one-fifth of global emissions annually, and hundreds of companies are committing to purge deforestation from their supply chains. As international climate negotiators debate the potential inclusion of REDD offsets in a potential agreement emerging from the Paris talks, it is noteworthy that REDD offsets now have a slight edge on the list of most transacted voluntary project types with 84.5 million tonnes compared to the 84.3 million offsets transacted from wind projects over the last decade, according to the report.

“Whatever comes out of Paris will most likely not be super robust in terms of a globally legally binding agreement,” Silvani said. “It’s going to be a series of pledges and contributions, but nothing top-down like Kyoto. How does REDD form part of that? I think that remains to be seen, but it will be a big part of some countries’ national contributions and everything is positive for REDD to continue.”

2014 in the spotlight

In 2014, the volume of offset transactions rose 14% from the previous year to reach 87 million tonnes, from the 76 million tonnes tracked by Ecosystem Marketplace the previous year. However, the overall value only rose 4% to $395 million, according to the report, as a result of the average price shrinking to $3.8 per tonne from $4.9 per tonne in 2013. Offsets from household devices (cookstoves and water filtration) retained the highest average price by project type at $6.4 per tonne – although the price of these offsets also declined from the previous year’s $8.7 per tonne average.

Avoided deforestation offsets led the pack in 2014, guided by the $50 million to reduce deforestation in Ecuador through the REDD Early Movers program. Renewable energy projects were also in demand with nearly 14 million offsets transacted last year, according to the report.

The road to Paris

Countries that will play critical roles in the Paris talks have received notable shares of the voluntary financing pie for carbon offset projects. Over the last decade, the United States took the gold in terms of voluntary offset transactions, with the largest volume at the highest prices of any country (136 million tonnes of offsets valued at nearly $700 million), owing partially to the preference that domestic buyers such as automaker General Motors have for U.S.-based projects. Brazil, which will play a key role in the discussions on REDD, takes the silver (40 million tonnes valued at $233 million) due in part to the commitment of the government of Germany – another major player in the Paris talks – to pay the state of Acre to avoid deforestation in its jurisdiction. Turkey – not expected to be a major player in the international talks – takes the bronze (32 million tonnes at $207 million) as home to most of the renewable energy offsets supplied to European buyers – the largest regional purchaser of voluntary offsets over the last decade.

Several least developed countries have also benefitted from voluntary carbon finance, including Cambodia (4.3 million tonnes valued at $40 million) – home to Terra Global Capital’s Oddar Meanchey forestry project, which has received financing courtesy of software giant Microsoft’s internal carbon fee program. The Democratic Republic of Congo – home to the second-most forested area in the world after Brazil – has also benefitted from voluntary carbon finance (4.6 million tonnes worth nearly $21 million).

 

Additional resources

REDD+ And Green Supply Chains: The Yin And Yang Of Saving Forests

1 June 2015 | Fast-food companies get a bad rap, but with good reason. Their beef often comes from farms and fields that were tropical rainforests just a few short years ago, as does the soy they feed their chickens and the palm oil they use to make their shortening bread. Even their coffee and the paper they use to package their products often come at the expense of forests – and let’s not even talk about the Styrofoam. But “often” isn’t the same as “always”, and ultimately, it’s we, the consumers, who drive demand – because we do have a choice.

McDonald’s, for example, stopped buying beef from the Brazilian Amazon a decade ago, and on Earth Day of this year, it announced that all of its beef, poultry, coffee, packaging, and palm oil would be “deforestation free” within the next five years. On top of that, scores of other companies signed the New York Declaration on Forests late last year, vowing to cut deforestation in half by 2020 and end it by 2030.

But do such pledges matter? And how do we know which ones work and which ones don’t? Holly Gibbs of the University of Wisconsin-Madison says there’s evidence that voluntary, large-scale moratoriums work – and work faster than still-emerging public finance forest protection under the right circumstances. Ecosystem Marketplace initiative Supply-Change.org shows that some individual voluntary efforts are, in fact, delivering as well – while others are just beginning to take root, and the basic answer is: “it’s complicated”.

To begin with, consumer-facing companies like McDonald’s and Wal-Mart don’t raise their cows and soybeans themselves – they buy from middlemen which most of us have never heard of: like Brazilian meatpacking giant JBS (a $45-billion-per year behemoth that’s the largest meat-processing company in the world) or Marfrig Global Foods (Brazil’s third-largest meatpacker, with a still-stunning $8 billion in yearly sales).

Then there’s the legal framework. Brazil has pretty good laws backed by a world-class space agency for monitoring from the sky, but a Forest Trends study showed that about half of all deforestation globally happens illegally – making it hard for companies to know what’s clean and what isn’t, even if they really want to. For cash-strapped developing countries, policing the forests isn’t a top priority.

To address the challenge, a mosaic of market-based mechanisms and legal interventions is emerging, enabled by new technologies and growing consumer awareness. Some of these efforts are already delivering results, while others need to be nudged along – and that may be where performance-based financing like REDD comes into the picture.

Promises Kept

Earlier this year, the Global Canopy Programme published the Forest 500, a list of the 500 entities – private and public – that have the power to end deforestation, and it ranked them according to their deforestation pledges. Shortly afterwards, Ecosystem Marketplace published Supply-Change.orgto help everyone track the actual actions that companies are taking to meet those pledges. While these two initiatives are shining a light on individual efforts, Gibbs published research on the effects of two massive, voluntary moratoriums on beef and soy from the Amazon. These weren’t individual – and often undefined – promises like the New York Declaration, but binding moratoriums with clear deadlines and means of verification.

The first study looked at the effects of a voluntary 2006 moratorium on chopping trees in the Amazon to plant soy. It was published in January and showed that only 1 percent of new soy productionin Brazil came at the expense of the forest. “Before the moratorium, 30 percent of soy expansion [in the Brazilian Amazon] occurred through deforestation, and after the moratorium, almost none did,”said Gibbs.

The second study, published in May, looked at the effects of a 2009 moratorium imposed by consumer-facing meat buyers and less well-known but equally critical meatpackers like Brazil’s Marfrig Beef. Under the agreement, the meatpackers agreed to stop buying from ranchers who chop the forest, and Gibbs found that deforestation had, in fact, plunged dramatically on participating ranches – but it also increased elsewhere.

Plugging the Gaps

Taken together, the two reports demonstrate the power that demand-driven actions can have – as well as the limitations. In the case of soy, deforestation plunged dramatically within the Amazon under the moratorium, but it increased in the Cerrado grasslands and savanna east of the Amazon. In the case of beef and cattle, some deforestation simply moved down the supply chain – to farms that raise calves and sell them to “fattening farms”, which then sell them to slaughterhouses.

“In practice, the agreements regulate only direct purchases from supplying farms, thus ignoring calving ranches and other indirect parts of the supply chain,” the beef report says. “Cattle fattened on noncompliant properties with deforestation can leak to slaughterhouses that lack full monitoring systems; these cattle can also be laundered by moving them to a compliant ranch for direct sale to a slaughterhouse.”

The biggest problem, however, isn’t cattle from deforested land “leaking” into participating slaughterhouses; it’s simply the fact that even the global buyers now participating in the moratoriums don’t have universal reach – as evidenced by the fact that 80% of Brazil’s beef is consumed domestically.

“We monitor more than 8,000 suppliers, but we’ve cut 2,000 of them off because they don’t meet our criteria,” says Mathias Almeida, Sustainability Manager at Marfrig Beef, which is a signatory to both moratoriums. “So, we eliminated 2,000 ranches, but they’re all, as far as I know, still in business – because someone else has stepped up to buy from them.”

For Dan Nepstad, that’s where public finance for regional forest protection comes in – as we’ll see in a bit.

From Trickle to Torrent

A forester by training, Nepstad has been working in the Amazon for 30 years and now runs the Earth Innovation Institute, an environmental NGO focused on sustainable forest management and rural economics.

“It’s great that companies are taking on ambitious goals like zero deforestation supply chains, but when they start implementing that, they bump up against the limits of the farm-by-farm approach,” he says. “It’s really expensive, and if you have to segregate your product – meaning you’re dealing with soy, palm, beef, etc. in separate streams – then it’s more expensive.”

He says sustainability officers are just now beginning to wrestle with that expense – and the complicated nature of supply chains in general – as they seek to keep the promises their bosses have committed to.

Gibbs agrees on the complication front, but she says the cost of monitoring has been overstated.

“In both the case of soy and cattle, we don’t see that these agreements are limiting production or limiting economic growth,” she says. “For example, following the soy moratorium, the soy area planted doubled. Following the cattle agreement, JBS’ profitability more than doubled, and the number of slaughterhouses in the Amazon increased by 350% – from 9 slaughterhouses in 2008 up to 32 in 2015.”

If companies are continuing to invest, she says, it’s because the cost of monitoring isn’t much of a burden; but there are, she adds, other challenges that smaller suppliers are struggling to meet – challenges that are about to explode, if early analysis of data from Supply-Change.org is any indication.

That analysis, published as Corporations, Commodities, and Commitments that Count, shows that most of the few companies that have successfully reduced their impact on forests needed more than five years to do so. The new wave of companies scrambling to get green have set goals that are long on ambition but short on know-how. Most of them, for example, are keying off of the year 2020 – which is already less than five years away.

“It’s the dawn of a new decade,” the report notes. “It’s a nice even number. For the 65 companies that made new commitments in 2014, a commitment year of 2020 was five whole years away. For those stepping up to the plate in 2015, it’s only four years away. Then three years in 2016, two in 2017, and so on – until companies should logically consider later target years. But until now, only three in 198 companies report post-2020 goals.”

And, the report notes, the number of “goals” with no target date has tripled since 2009 – indicating a lot of talk but little walk. On top of that, roughly 85% of companies making zero-deforestation pledges believe they can simply buy products that are certified low-deforestation.

“That’s disturbing,” says Nepstad. “It shows a demand for simple, low-cost solutions – but if you look at the complexity of the supply chain and the challenges that a company like JBS (Brazil’s largest meatpacking company) is facing, you realize how hard it is to meet that demand.”

He’s proposing an approach somewhere between the biome-wide a moratoria that Gibbs tracked and the farm-by-farm certification programs currently underway.

Jurisdictional Certification: a Partial Solution?

Nepstad would like to see states or even sub-regions within states (i.e. “jurisdictions”) use public climate finance to build regional certification programs, so that buyers can trust purchases of several commodities from thousands of suppliers in a given region.

“This way, a company like Marfrig doesn’t have to do the farm-by-farm filtering itself, and a buyer in Europe doesn’t have to try and understand this complex process,” says Nepstad. “Instead, they would know that if they buy from this jurisdiction or that, then they’re safe.”

Gibbs sees the allure, and says that public finance could help supplemental programs costs down the road, but she’d rather see an immediate focus on more moratoria.

“REDD+ (acronym for public forest conservation finance), particularly at the jurisdictional level, is still developing, and shouldn’t be viewed as a replacement for farm-by-farm filtering that has been demonstrated effective for soy and cattle in the Brazilian Amazon,” she says. “Jurisdictional REDD+ could be an ‘add-on’ for supply-chain solutions, but the farm-by-farm monitoring of the Soy and Cattle Moratoria have been demonstrated to lead to changes within months, whereas REDD+ has been a very slow boil over many years.”

Low-Emission Rural Development

Beyond the Brazilian Amazon, the governments of Norway, the United States, and the United Kingdom are using public finance for avoided deforestation to support sustainable agriculture through the Initiative for Sustainable Forest Landscapes, which funnels these payments through the World Bank’s BioCarbon Fund to smaller forest countries or to individual states within larger nations, beginning with Ethiopia’s Oromia State and Zambia’s Luangwa Valley. The activities they cover include everything from certification of sustainably-harvested commodities to community conservation, and the amounts are based on how much the countries can reduce their greenhouse gas emissions from deforestation and forest degradation.

Like Acre, the payments aren’t offsets – none of the countries will use the reductions to lower their own footprints – and Nepstad advocates the use of the term “LED” (Low-Emission Rural Development). It’s a term that The Nature Conservancy and others have also used, and which Nepstad broadly defines as the use of carbon finance to “improve rural livelihoods, create jobs, improve services, increase market access and investment, and protect and restore natural capital.”

A Mosaic of Solutions

Peruvian indigenous leader Juan-Carlos Jintiach says low emissions development is a cornerstone of his “Indigenous REDD” initiative.

“If you look at a state like Acre, you see that they used REDD income to support indigenous land-use practices,” he says. “I think we can apply a similar strategy in Igarapé Lourdes (the indigenous territory shared by the Arara and Gavião of Rondônia), but we still have some work to do.”

The key, he says, is identifying low-cost, high-impact activities that can nudge a state’s agriculture sector in a more sustainable direction – and that probably means a mosaic of market-based mechanisms and legal interventions, all enabled by new technologies and growing consumer awareness.

Targeted Spending

Gibbs is leery of regional certification programs, which she says can end leading to pockets of intensified destruction.

“The jurisdictional approach could reward municipalities that could easily comply,” she says. “For example, a municipality with little remaining forest or with strong NGO involvement in recent years could be seen as a model, low-risk jurisdiction. The problem is that the high-risk municipalities closer to the forest frontier and with less governance will continue with business as usual, while the moratoria led to change across the entire Amazon including those high risk locales”.

She’d rather see public forest conservation finance directed into programs that help small ranchers develop simple technologies that can help them become more efficient.

“We’ve been encouraging producers to stop clearing forests by intensifying production for years, and they always respond with, ‘How?’” she says. “They’ve repeatedly asked for ‘more technical know-how and more financing,’ so in my mind, that’s something that jurisdictional REDD could provide.” Almeida agrees.

“We have huge amounts of degraded land in the Amazon that can be recovered both for cattle production in a more intensive way or crop production,” he says. “REDD can be used to promote technical systems and technology for producers who are engaged in land recovery and intensification.”

He also said he’d like to see financial guarantees for take-off agreements to encourage long-term purchasing arrangements with ranchers who follow good practices.

“Right now, all of our purchases are short-term – like week-to-week,” he says. “If we need to buy, or if a rancher needs to sell, we pick up the phone and call around. He sells to the highest bidder, and we buy from the lowest.”

Like Nepstad, he also advocates jurisdictional efforts, and offered the state of Pará’s Green Municipalities Program (Programa Municípios Verdes) as an example. Developed in partnership with municipalities, NGOs, and the private sector, the program helps entire municipalities develop green supply chains by offering tax incentives and also withholding subsidies – which are, to many, the elephant in the deforestation room. A working paper by the Overseas Development Institute identified nearly $500 billion in agricultural subsidies worldwide, compared to just $8.7 billion committed to avoiding deforestation.

Laws and the Cost of Compliance

 Not surprisingly, the greater the area registered under Brazil’s CAR system, the lower the rates of deforestation. Credit: The Nature Conservancy
Not surprisingly, the greater the area registered under Brazil’s CAR system, the lower the rates of deforestation. Credit: The Nature Conservancy.

Many countries have laws to protect their forests, but the challenge is finding the money to enforce them. Under Brazil’s Forest Code, for example, landowners in the Amazon can only deforest 20% of their land, while those in the Cerrado can only clear 35% for agriculture. The same law requires all private lands be listed in the Rural Environmental Registry (Cadastro Ambiental Rural, or CAR), and it restricts finance in municipalities with less than 80% of the properties registered.

“Public enforcement of environmental laws is a formidable task in the Brazilian Amazon, which covers an area six times the size of Texas,” says Gibbs. “But these market-based interventions are leading to rapid changes in the beef industry within a period of months, even in very remote areas.”

In 2013, The Nature Conservancy used satellite data to compare deforestation rates São Félix do Xingu, a municipality in the Brazilian state of Pará, to CAR registration rates and found higher registration correlated with lower deforestation.

Gibbs found the same correlation – but she also found surprising results when she looked to see who was cheating and who was playing fair.

“Only 115 people out of several thousand soy farmers have violated the Soy Moratorium since 2006, but over 600 of them have violated the Forest Code,” she says. “So, this same group of farmers is five times more likely to violate the governmental policy than they are to violate the private sector agreement.”

She sees a role for public forest conservation finance in helping governments build up their capacity to monitor the forest – a role that it is already playing, in Brazil and around the world – and adds that the one thing everyone agrees on is that no one has all the answers.

“We have a lot of tools now, and none of them are extraneous or irrelevant,” she says. “I’m sure there is a need for all of these polices or approaches – but the question is: where and how?”

This Week In Water: Everybody’s Talking About The Clean Water Rule

Parties with an interest in regulations falling under the Clean Water Act are still sorting out the implications of the recently finalized Clean Water Rule. Meanwhile, green infrastructure scored several victories this month as New York City, Detroit and Xiamen contemplate using the practice to manage stormwater overflows.

This article was originally published in the Water Log newsletter. Click here to read the original.

 

29 May 2015 | After a year of controversy and debate among environmentalists, farming interests, landowners and legislators, the US Environmental Protection Agency and Army Corps of Engineers released a new rule this week which seeks to clarify which wetlands and streams are protected under the Clean Water Act. The rule has likely impacts on a number of regulatory programs – and a high likelihood of meeting future litigation as permittees, environmentalists, and others sort out its implications.

In other stories this month, interest in green infrastructure and low impact development (LID) by cities is picking up rapidly, if the volume of news is any indication. New York City published monitoring results from three demonstration projects showing a better-than-expected 20% cut in stormwater flow to sewers, while cities from Xiamen to Detroit are also getting on board.

It’s about time. As a recent white paper from Veolia and the International Food Policy Research Institute points out, even under the best case scenario, “water quality is still projected to deteriorate dramatically” globally in the coming years, and especially in Asia. Despite the bad news, the paper’s conclusions are noteworthy. The authors call for new infrastructure investment but also soft-path solutions: watershed-scale approaches, better management of rural and upstream areas, and water quality trading.

The search for solutions to water quality challenges is evident in a flurry of recent news on trading mechanisms. Progress is underway on a new trading program in Arkansas, while the city of Santa Rosa, California, will pay $330,000 to a vineyard for nutrient offset credits. Meanwhile, nutrient trading is being floated in basins from the Baltic to India’s Ganga River, as a cost-effective strategy to manage enormous water pollution challenges.

 

As always, you don’t have to wait til next month to get the latest on natural infrastructure finance and trends. Subscribe to us on Twitter, and check out our daily news feed.

— The Ecosystem Marketplace Team

For questions or comments, please contact newsletter@ecosystemmarketplace.com

 

Opinion – Rivaling Gold: Ecological Assets Outperform Traditional Commodities

After completing a price trend comparison between environmental products and traditional commodities, a long-time analyst of ecosystem markets says compensatory credits for wetland and species conservation are outperforming commodities like corn and farmland and even gold – giving a more literal meaning to the term ‘green gold.’

Read it at Ecosystem Marketplace.

 

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: more know-how is needed to spur private investment.

Learn more.

 

POLICY UPDATES

The Stormwater Challenge: China looks for Solutions in Low Impact Development

Following a report that found 81% of China’s coastal waters are polluted with nutrients and other forms of pollution, the government is launching ‘Sponge’ City pilots to take place in 16 cities. Focused on low impact development solutions for stormwater runoff, the pilots will implement certain techniques in order to use 70% of captured rainwater, providing a water source for drought-prone areas and reducing flooding.

Get the full story from WEF’s Stormwater Report.

 

EPA, Corps Release Clean Water Rule into Contentious Atmosphere

After a year of controversy and debate among environmentalists, farming interests, landowners and legislators, the US Environmental Protection Agency and Army Corps of Engineers released a new rule this week which seeks to clarify which wetlands and streams are protected under the Clean Water Act. The rule has likely implications for a number of regulatory programs including the National Pollutant Discharge Elimination System permit program and Section 404 wetlands dredge/fill permitting. The final rule will be published in the federal register in the next few weeks; analysts suggest that litigation over portions of the rule are likely in the future.

Read analysis from Barnes & Thornberg, via Lexology.

 

Work on Arkansas’ New Trading Program Begins in Earnest

Following passage of supporting legislation in the Arkansas state legislature this spring, decision-makers and environmental groups are assembling the pieces of a nutrient trading program in the Beaver Lake watershed. Legislators and the governor will select an advisory panel to regulate trades and guide program design – including whether trading will take the form of an offset system, exchange program, or compliance association. Meanwhile, the Beaver Watershed Alliance is busy identifying potential demand among utilities in the watershed.

The Northwest Arkansas Democrat-Gazette has coverage.

 

Far-flung Countries Bond Over Market Mechanisms and Water Pollution

Given similarities between northern Europe’s Baltic Sea and the Chesapeake Bay in the United States, a consortium of Baltic-area institutions and the US Department of Agriculture joined forces to analyze the two bodies of water and develop best management strategies. One finding: flexible market-based mechanisms like water-quality trading were deemed the best method to achieve cost-effective pollution control.

Learn more at the USDA blog.

 

Farmers Agree to Water Cuts as California Drought Worsens

Drought-stricken California farmers in the Sacramento-San Joaquin River Delta agreed to giving up a quarter of the water they have rights to use, in part because they fear much larger cuts down the road as the state’s historic drought shows no sign of ending. Cuts will come through continuing water conservation – farmers have been keen to remind the state of their ongoing efforts – and letting land lie fallow.

Read it at the New York Times.

 

GLOBAL MARKETS

High Marks for Green Stormwater Projects in NYC

The New York City Department of Environment released a report on progress made on three neighborhood-scale green infrastructure demonstration projects intending to curb the amount of stormwater flowing into the city’s sewer system. Results were good as the initiatives outperformed expectations, cutting flows to sewers by more than 20 percent.

Learn more via WEF’s Stormwater Report.
Read the report.

 

In Philippines, USAID Joins Forces with Coca-Cola and Sustainable Business Group

A new partnership between the United States Agency for International Development (USAID), Coca-Cola Philippines and the Philippine Business for Social Progress group will secure safe drinking water in the Philippines’ Leyte, Iloilo, Maguindanao, Misamis Oriental and Basilan provinces. The partnership focuses on green infrastructure interventions like groundwater infiltration wells, permeable pavers, rainwater harvesting and storage, flood water diversion and storage, and watershed protection and restoration.

Read more at the Manila Times.

 

Accounting for Water Risk? Never Been Easier

A new online tool developed especially for the business community enables companies to assess the true cost of their water use and account for their water impacts. Creators, EcoLab and Trucost, say the Water Risk Monetizer is an adaptable tool that can be used by large and small companies alike.

Learn more.

 

Santa Rosa Inks $330k Nutrient Offset Deal With Vineyard

The City of Santa Rosa, California recently got a regulatory stamp of approval for a nutrient offset to the tune of $330,000. The city will pay Jackson Family Wines and their partner Krasilsa Pacific Farms for phosphorus credits generated through manure removal on a former dairy recently converted to vineyard. The offset represents 23,345 lbs of avoided phosphorus pollution (at around $14 per lb). The city will bank the credits for future compliance needs: thanks to the current drought and a wastewater reuse project, it hasn’t recently made any wastewater discharges that would trigger regulatory fines.

The Press Democrat has the story.

 

Wild Lands Deliver Clean Water to Big Cities

Metropolises struggling to supply their inhabitants with a clean and steady supply of water can look to Boston and New York City. For these cities, watershed investment programs continue to deliver clean water requiring little filtration or pumping to city residents, thanks to conservation activities in surrounding rural areas.

National Geographic has coverage.

 

A Payments for Ecosystem Services Project to Save Sri Lanka’s Surviving Mangroves

Sri Lanka intends to be the first and only nation in the world with a plan to protect all its remaining mangrove forests. The country’s plan revolves around providing microloans to women for business training, and to guard the mangroves against ongoing deforestation pressures.

The Guardian has coverage.

 

A Call for Corporate Water Stewardship in Africa

In order to build proper water infrastructure in Africa and ensure water quality and quantity through resilient ecosystems, water professionals in Tanzania are pushing for public-private partnerships to finance water stewardship efforts. “We must grasp the big picture connected to water and bring together investors, bankers, economic players and public officials to tackle the infrastructure deficit in new and creative ways,” says World Water Council President Benedito Braga.

Read it at All Africa.

 

Ceres Report Helps Businesses Wake Up to Water Risk

Ceres, a nonprofit organization focused on environmental sustainability, analyzed nearly 40 companies regarding their water risk management finding that less than half evaluate risk throughout supply chains while 60% assesses water risk at their own production sites. Coca-Cola and Unilever scored some of the top marks but, overall, Ceres stressed the need for collaborative efforts that build water security and healthy watersheds to ensure sustainable water supplies.

Learn more from National Geographic.

 

Stormwater Management Goes Green in DC – Slowly

Rather than construct underground tunnels to store sewage-rainwater overflow, Washington D.C. will use green infrastructure, which will allow pollution to filter slowly back into the ground through practices like green roofs and porous pavements, to manage its stormwater overflows. The bad news however, is the plan could take up to five years to implement-meaning more raw sewage flowing into D.C. waterways.

Read more at the NRDC Switchboard blog.

 

Will the Motor City Build a Blue Stormwater System?

The US city of Detroit is investigating green infrastructure to ease the stormwater overflows that are currently overwhelming the city’s aging sewage system. Officials are backing a pilot project that would divert stormwater running off impervious surfaces into a nearby constructed wetland. The potential cost-savings associated with green infrastructure, which figures prominently in the Detroit Future City visionary framework, are a major draw for the cash-strapped city.

Learn more from the Detroit Free Press.

 

JOB LISTINGS

 

Policy Associate

The Nature Conservancy – Arlington VA, USA

The Global Affairs Policy Associate supports The Nature Conservancy’s conservation goals by working with multi-disciplinary teams, focal area teams and TNC’s field offices to develop and implement a strategy to advance policies, partnerships and agreements at the global, regional and national levels. She/he will support The Nature Conservancy’s work in providing expert advice on climate finance to the Government of Peru as COP President in the lead up to Paris and as co-chair of the Green Climate Fund’s board. She/he will also work as part of the Global Freshwater Team to advance and implement the policy and financial components of the Conservancy’s strategy around sustainable hydropower development.

Learn more here.

 

Climate Change Adaptation Intern

Conservation International – Virginia, USA

The intern will help with various outreach materials, including peer reviewed publications that need to be completed as part of the IKI EbA solutions project. This exciting project, which aims to improve the understanding and use of the ecosystem-based adaptation in three geographies (South Africa, Philippines and Brazil) is ending soon and we are in the process of combining and summarizing all the information gathered. Work will include the search for references to be included in outreach materials, manuscript editing and formatting and preparation of a brochure that will include the results of the project.

Learn more here.

 

EVENTS

River Basin Management 2015 Conference

River Basin Management 2015 is the 8th Conference in a series of conferences which marks the growing international interest in the planning, design and management of river basin systems. Changes in the landscape, use of the land and climate conditions lead to a continuous revaluation of river basin management objectives. This requires the development of better measuring tools as well as the use of increasingly accurate computer software. The objective of this series of conferences is to bring together practitioners and researchers in academia and industry in the hope that their interaction will foster mutual understanding and lead to better solutions for river basins. 17-19 June 2015. Coruna, Spain.

Learn more here.

 

World Forum on Ecosystem Governance

The World Forum on Ecosystem Governance is modeled after the World Economic Forum, but with a focus on the planet’s natural capital. The Forum will periodically bring together world specialists and leaders to promote more effective governance to respond to ecosystem threats. The first event is the High Level Consultations from 25-27 June 2015 in Guiyang City, Guizhou Province, China, followed by the Young Professionals’ Academy on 27 October 2015 in Beijing, China. The Technical Roundtable Discussions will be held 28-30 October 2015 in Beijing, China and will build around the guidance provided by the High Level Consultations. The World Forum on Ecosystem Governance is a partnership of the International Union for Conservation of Nature (IUCN), the IUCN Commission on Ecosystem Management (CEM), the Chinese State Forestry Administration (SFA), and the Beijing Municipal Government. The 1st World Forum on Ecosystem Governance will serve as a pilot for an expanded Forum in 2017. 25-27 June 2015. Guiyang City, China.

Learn more here.

 

6th SER World Conference on Ecological Restoration

SER (Society for Ecological Restoration) 2015 in Manchester aims to be the major restoration event of the year. Building on recent successful world congresses and regional meetings such as SER Europe 2013 in Finland, we hope to attract a large number of academics and practitioners who will share good practice and network successfully in one of the homes of the industrial revolution. The title: “Towards resilient ecosystems: restoring the urban, the rural and the wild” should provide something for everyone, whether working in highly urbanised, ex-agricultural, or natural wild environments. We mean this conference to be as inclusive as possible and are keen to showcase not only the important scientific developments, issues and solutions, but also the cultural, educational and artistic aspects of restoration ecology. We are hosting a wide range of different types of events during the conference period, with pre-conference training workshops, conference symposia posters, workshops, and oral presentations, as well as half day field trips to see landscapes at first hand. 23-27 August 2015. Manchester, United Kingdom.

Learn more here.

 

8th ESP World Conference: Ecosystem Services for Nature, People and Prosperity

The 8th World ESP conference’s central theme is ‘Ecosystem Services for Nature, People and Prosperity’. The conference will pay special attention to the public and private sector dialogue on how the ecosystem services concept can be used to support conservation, improve livelihoods and engage the business community. We especially encourage delegates from businesses to attend the ESP conference in order to discuss challenges and opportunities in using the concept of ecosystem services to achieve conservation and sustainable use of our ‘natural capital’ within a market-context. The conference will provide an excellent platform to engage with experts who can generate solutions to these challenges and start making a difference in practice. 9-13 November 2015. Stellenbosch, South Africa.

Learn more here.

CONTRIBUTING TO ECOSYSTEM MARKETPLACE

Ecosystem Marketplace is a project of Forest Trends a tax-exempt corporation under Section 501(c)(3).The non-profit evaluator Charity Navigator has given Forest Trends its highest rating (4 out of 4 stars) recognizing excellence in our financial management and organizational efficiency.

 


Additional resources

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.

Early Action: Not So Fast In California Offsets Program

California’s offset market was the source of about nine million compliance offset transactions in 2014, according to an Ecosystem Marketplace analysis. However, that number could have been even higher if the evaluation of early action carbon offset projects by California regulators had not moved at a snail’s pace, according to stakeholders.

19 May 2015 | When California regulators announced they would give certain voluntary carbon offset projects an opportunity to transition into their compliance market, it was seen as a potential reward to the innovators and risk takers who invested in these projects early on before a clear compliance signal was sent. In reality, those actors are now being penalized because their projects are being sent to the back of the line, stakeholders said.

Ecosystem Marketplace tracked nine million compliance offsets specifically transacted for the California program in 2014 – a volume that would have been higher had it not been for the slow issuance of offsets to early action carbon projects, according to project developers and investors speaking at the Climate Action Reserve’s (CAR) Navigating the American Carbon World conference in Los Angeles last month.

To date, the California Air Resources Board (ARB) has issued about 19.5 million offsets from 120 projects. Forestry projects account for the largest volume by project type at more than 9.6 million offsets issued to 17 forestry projects – 10 of which were early action projects.

“Early action projects, particularly forestry, have been very slow to transition,” said Roger Williams, President of Blue Source, which develops forestry projects. “We have situations where we have projects that have been kind of stuck in the queue for over a year. That certainly has been frustrating for us because these are projects that have been reviewed by verifiers, by registries, by a second verifier, prior to landing on ARB’s desk. We really need that to accelerate because there are deadlines coming up after which these projects can’t transition.”

The Backstory

Early action offset projects are voluntary projects that have been issued offsets by approved voluntary registries for emissions reductions that occurred between January 1, 2005 and December 31, 2014. Projects developed under five approved ARB compliance protocols are eligible to transition to the compliance regime.

The first step in the process, according to the CAR web site, is to list the early action project with the ARB, which has approved the listing of 109 early action projects to date. They must then undergo regulatory verification, including an assessment of conflict of interest and a desk review to confirm the validity of the initial verification. After that, developers may request that ARB issue offsets to the project, which triggers a full review by the ARB of all project documents.

To transition, these projects had to be successfully listed under a compliance protocol with an Offset Project Registry (OPR) by February 28, 2015. The projects have to complete the early action conversion process by an August 31, 2016 deadline or they will lose the ability to receive ARB offsets under this pathway. However, there are no mandated deadlines for the ARB to complete its evaluation of early action projects.

“The challenge is that for the early action projects, many of which were done a long time ago, there’s no clock,” said Greg Arnold, Managing Partner of CE2 Capital Partners. “Trying to make sure those get expedited in some meaningful fashion is really the challenge of creating the offset supply.”

In contrast, there is a 45-day deadline for the evaluation of offset projects undertaking the ARB’s compliance pathway – meaning the project was developed under a compliance offset protocol established by the ARB – although the process can be extended if ARB staffers require more information.

In practice, this has resulted in developers who took an early risk on voluntary projects that may or may not have been allowed to transition into the compliance regime being forced to sit on the sidelines and wait for their projects to be evaluated. But these pioneers should be rewarded for their willingness to take risks early in the process so it should be high on the ARB’s priority list to get those projects through the approval process rather than subjecting them to a discouraging slow conversion process that could fail to result in the issuance of offsets, said Julian Richardson, CEO of Parhelion Underwriting.

“I think speed is a huge challenge for the market,” he said.

“We understand the concern, but expect to complete our review of all early action projects prior to any deadlines in the regulation,” an ARB spokesman said.

Moving at a Snail’s Pace

The slow regulatory approval of early action projects, combined with the invalidation risk that continues to plague the market (see “Invalidation Risk Still Shadows California Offsets Market”), is a primary area of needed improvement, Williams said. And there is a solution – namely for the ARB to rely on the work done by verifiers and registry officials during a verification process that has been in place for years, he said. In trying to re-verify the work already done, the ARB is unnecessarily increasing the risk and uncertainty for landowners – already subject to 100-year permanence requirements under the ARB’s forestry protocols, forestry stakeholders said.

“We feel like there is a little bit of a duplication of efforts in this overall process to getting credits issued,” Williams said. “I think it’s our hope in this next phase that will pull back a little bit.”

“Otherwise, in our minds, why are we paying $50,000 for verification if that’s going to be done over again at the level of ARB,” he added.

Stakeholders do not doubt that ARB staffers are working incredibly hard to evaluate these early action projects, but the number of employees focusing specifically on the offsets program is small. And that small team is charged with working on amendments related to the offset program, such as the planned inclusion of Alaska-based forestry projects into the program, evaluating and developing new protocols, and issuing offsets to compliance and early action projects.

“They are working hard and need more help,” Arnold said.

However, Williams believes the staffing challenge could be resolved by directing a portion of the allowance auction revenues or adding an issuance fee of about 10 cents per offset that developers would happily pay to hire staff and speed up the process. The agency is always open to input, but commenting on these suggestions would be premature, the spokesman said.

Sharing the Load

Outside of staffing up, the ARB could also enlist the voluntary registries to perform more functions to quicken the evaluation process. Standards that have been designated as OPRs – the American Carbon Registry, the Climate Action Reserve and the Verified Carbon Standard – already perform such tasks as conducting the conflict of interest evaluation of verifiers and reviewing verification reports for projects on the compliance pathway. But the OPRs have almost no role in processing early action projects even though they originally issued the offsets on the voluntary side, meaning that it is “solidly on the ARB’s plate to move those projects forward,” said Rachel Tornek, CAR’s Vice President of Programs.

“I think it’s probably difficult for ARB to allow an outside body to administer part of their program,” she said. “I think there is a reasonable level of hesitancy. Any manager knows it’s difficult to delegate, but it’s something you have to do.”

With the passing of the end of the listing deadline, there is a new sense of urgency to get these early action projects through the pipeline before they lose the opportunity to convert these projects, because if they don’t make that August deadline, they won’t be able to convert and be issued offsets under the early action pathway.

“We really do need to get moving to get those credits to market,” Tornek said. “And I think there will be opportunity for us to streamline the processes with ARB and a little more willingness to allow the work of the OPRs work to stand on its own.”

This Week In Biodiversity: A Race To The Bottom?

The annual National Mitigation and Ecosystem Banking Conference happened this month with the incoming National Mitigation Banking Association (NMBA) president citing low standards and a lack of equivalency in mitigation products as the fundamental challenges facing the industry today. Meanwhile, outside of the US, researchers explore integrating biodiversity into REDD+ in Indonesia.

This article was originally posted in the Mit Mail newsletter. Click here to read the original.

18 May 2015 | This month hundreds came to Orlando for the National Mitigation and Ecosystem Banking Conference. The conference is always an opportunity to reflect on the state of the industry: the past year’s successes, key regulatory developments, and new opportunities.

Outgoing NMBA President Wayne White chatted with Ecosystem Marketplace about his tenure, citing work with Department of Interior agencies on implementing Interior’s new, more ambitious mitigation strategy as a significant achievement this year by the NMBA. Another success was a new approach to supporting NMBA members in local efforts to push for full enforcement of the 2008 Final Compensatory Wetland Mitigation Rule.

 

Incoming NMBA president Mike Sprague says he’ll focus on opportunities for new growth and continued outreach: “There is a different tone this year and one that is much more cooperative than in the past,” he tells EM. He’ll also push for continued high standards for mitigation. “Banking sells a high quality product. 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: a lack of standards or poor quality standards combined with a lack of equivalency for mitigation methods.”

 

High standards are also the subject of a new framework of ecological restoration principles that aim to set a global standard. We’ve also got stories on how to integrate biodiversity into REDD+ in Indonesia and biodiversity tipping points in the Amazon. And in the United States, recent decisions – on declining to list a greater sage grouse sub-population and on judicial review of Clean Water Act jurisdiction assertions by the Corps – may signal which way the wind will blow as these issues play out at a bigger scale in the coming months.

 

Read on,

—The Ecosystem Marketplace Team

 

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

 

New NMBA President Discusses Challenges, Possibilities For Mitigation Banking

Michael Sprague was officially named the new President of the National Mitigation Banking Association this month at the annual National Mitigation and Ecosystem Banking Conference. During a conversation with Ecosystem Marketplace, Sprague noted his key objectives for the coming year, which include a ramp up of activities that influence policy, as well as problems that continue to plague banking.

Read it here.

 

Outgoing NMBA President Reflects on Old and New Goals for Banking in 2015

Wayne White, 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. White named implementation of this plan as the most significant point of 2014. He also chatted with EM on progress pushing the Corps on enforcement of the 2008 Rule with a new local approach, and why the voluntary-versus-regulated conservation debate isn’t going away anytime soon.

Learn more at Ecosystem Marketplace.

 

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: more know-how is needed to spur private investment.

Keep reading.

 

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, where hot topics included equivalent standards, credit stacking, streamlining the permitting process, and NRDAR (the Natural Resource Damage Assessment and Restoration Program).

Read it at Ecosystem Marketplace.

Are Sage Grouse a Security Issue?

The Armed Services Committee within the US House of Representatives has likened greater sage-grouse conservation to an “extreme environmental agenda,” saying the birds’ protection measures on federal lands are costing the Department of Defense millions. Late last month, the Committee issued the National Defense Authorization Act, which would prevent the Fish and Wildlife Service from listing the sage-grouse under the Endangered Species Act and restrict federal conservation plans. Environmental groups point out that the Defense Department has never requested such a provision despite the impacts claimed.

Lexology has analysis from Nossaman LLP.

 

Amazon Rainforest Teeters On Point of No Return

There is a species loss threshold in the Amazon rainforest where, once crossed, biodiversity loss will rapidly accelerate along with attendant damages. According to a recent study, the Brazilian Amazon is either dangerously close to passing this threshold or has already done so in some areas. The study maps the impact that deforestation has on entire regions of the Amazon, finding that habitat fragmentation is a key reason for the rapid species decline that happens with widespread forest loss. When forest cover descends to 43%, biodiversity loss quickens to between two and eight major species for every 10% of forest that is further lost. Report authors recommend landscape level management that encompasses private land to stem this loss, as opposed to the farm-by-farm approach to protecting biodiversity that is currently being used.

Read more at Mongabay.

 

NMBA Brings on its First Executive Director

The National Mitigation Banking Association have chosen an individual well-versed in national conservation policy and familiar to Washington D.C.’s inner circles to serve as the organization’s first Executive Director. “Barton James brings a wealth of experience to our membership through his work on and off Capitol Hill, within the Federal government, and at leading conservation organizations,” said then NMBA President Wayne White. The Executive Director is intended to fulfill needed day-to-day operations while acting as the NMBA’s official spokesperson and overseeing membership-related activities.

Read a press release here.

 

What the Mono Basin Sage-Grouse Listing Decision tells us about ESA Listings

Much to the dismay of some conservation organizations, the US Interior Secretary announced late last month the Fish and Wildlife Service will not recommend an Endangered Species Act (ESA) listing status for the Mono Basin sage-grouse, a unique bi-state population living along the Nevada-California border. The decision to withdraw the listing comes largely because of a furious push to conserve the bird by federal agencies, scientists, landowners and conservation organizations.

 

Environmental groups like WildEarth Guardians and the Center for Biological Diversity blasted the decision arguing that serious threats to the bi-state sage-grouse (which have an estimated population of 1800-7400 birds) remain unaddressed, leaving the species vulnerable to the threat of extinction.

 

On a broader level, the decision not to list the Mono Basin sage-grouse may foreshadow Interior’s decision on the much more consequential listing of the related greater sage-grouse, a bird numbering in the hundreds of thousands and ranging over eleven states heavily invested in oil and gas drilling, mining and renewable energy.

E&E has the story.

 

Aprí¨s le Déluge, The Money?

A federal court is still determining just how much oil company BP should be charged for the Deepwater Horizon catastrophe that killed 11 people and spilled 5 million barrels into the Gulf in 2010. Communities in the five states that saw their seafood and tourism industries decimated by the spill continue to be affected as they wait on the fine money to fund restoration projects like sea grass protection, dune restoration and stormwater improvements. When the money does eventually flow to the states, it will largely be because of the bipartisan RESTORE (Resources and Ecosystems Sustainability, Tourism Opportunities and Revived Economies) Act, passed by Congress. Whereas the Treasury usually receives fine money, the Act requires 80% of it – estimated to be as much as $13B – to go to the impacted states.

Read more at USA Today.

 

Judicial Review Case Portends a Pushback on Clean Water Act Jurisdiction Assertions

Last month the US Court of Appeals for the Eighth Circuit handed down a decision that Clean Water Act (CWA) jurisdiction assertions are subject to judicial review. The case has potential ramifications for a forthcoming final rule clarifying “waters of the US” that fall under CWA jurisdiction. The rule could mean a bigger, clearer playing field for the mitigation industry, but has proven controversial in other quarters.

 

In Hawkes v. US Army Corps of Engr’s, the court sided with the Hawkes Company’s contention that lacking an opportunity for judicial review, appellants are forced to “incur substantial compliance costs (the permitting process), forego what they assert is lawful use of their property, or risk substantial enforcement penalties” without other adequate alternative remedies.

Get analysis from Hunton Williams via Lexology.

 

A Blue Carbon Market Grows for Louisiana’s Deltaic Wetlands

Between storm protection, fisheries, tourism, wildlife habitat and the oil industry, the ecosystem services of Louisiana’s coastal wetlands are too great to be ignored. And since the 2010 Deepwater Horizon Oil spill, the region has been a hub of innovation seeking ways to protect quickly-eroding but critically valuable deltaic wetlands. One local wetland restoration company, Tierra Resources, is harnessing the blue carbon market to finance conservation work. The region’s main electricity provider, Entergy, has come out as a big supporter, funding Tierra Resources’ initial activity and now participating in a project. “We are married to our service area,” said Entergy’s Corporate Social Responsibility Director. “And with the loss of the wetlands, it has taken away one of the barriers that protects us and our customers from storm casualty loss.”

Forbes has the story.

 

Mitigation Roundup

 

 

Getting the Ball Rolling on Global Standards for Ecological Restoration

Ecological restoration is often ambiguously defined. Now, an assorted group of professionals from the fields of ecology, economics, law, geography, philosophy and political science have developed a framework outlining four principles to follow to deliver best results when implementing restoration projects. The principles are; ecological integrity, long-term sustainability, accounting for past and future variables, and engaging society. Comparing it to the New York Declaration on Forests, authors feel the framework could serve as a binding and robust international structure that – because of the diverse background of its creators – is applicable across a multitude of contexts.

Learn more here.

 

A Key Component of Biodiversity Conservation? Biodiversity

New research urges REDD+ (Reducing Emissions from Deforestation and Forest Degradation) project developers to take into account carbon-rich regions of Indonesia’s vast forestland are not necessarily biodiversity-rich. The study addresses the claim that REDD, as a rule, offers big benefits for biodiversity. But to capture those benefits, researchers say, biodiversity-specific management will need to be integrated into project planning and design. This is already happening in REDD projects in other parts of the world like Tanzania and Brazil where there is a focus on high-biodiversity areas. Researchers recommend incorporating Indonesia’s lowland forests that have high biodiversity value into REDD+ projects despite their containing below-average carbon content.

Learn more at Mongabay.

 

JOB LISTINGS

 

Conservation Manager

WWF – Antananarivo, Madagascar

Based in Madagascar, the Conservation Manager heads the Conservation Division and provides leadership, strategic direction and technical support for the development, implementation and monitoring and evaluation of WWF’s conservation strategy and programme in the Madagascar & West Indian Ocean Region, in compliance with WWF’s priorities, policies and standards and under the guidance of the Country Director. The Conservation Manager provides advice to the Country Director on pertinent conservation issues in the region.

Learn more here.

 

Fundraising and Partnership Manager

WWF – Antananarivo, Madagascar

The Fundraising and Partnership Manager is responsible for i) overall fundraising management activities of the organization, including the development and implementation of a 3 – 5 year fundraising strategy to financially support and strategically advance MWIOPO’s Madagascar and WIO’s environmental conservation activities; ii) development and maintenance of effective partnerships that are relevant to the WWF Madagascar conservation strategy. This senior position reports directly to the Country Director, is a member of the senior management team.

Learn more here.

 

EVENTS

 

2015 Conservation Finance Boot Camp

The Conservation Finance Network at Island Press is pleased to announce the 2015 Conservation Finance Boot Camp training course being held at the Yale School of Forestry and Environmental Studies in partnership with the Yale Center for Business and the Environment. Now in its ninth year, this intensive week-long course aims to help professionals utilize innovative and effective financing strategies for land resource conservation, restoration, and stewardship. The course will offer in-depth information on trends and opportunities in public funding, private investment capital, bridge financing and loans, gifts and grants, income from the land, and monetized ecosystem services. There will be a strong emphasis on practical, hands-on tools and lessons from relevant case studies. Attendees will have an opportunity to consult with conservation finance experts on projects or problems from their work. The course will also serve to convene a peer network of committed conservation professionals working on similar issues across the nation. Past attendees have included U.S. and international conservationists, foundation leaders, land trust board members, executive directors, private investors, business executives, and academics. Opportunities for networking will be built in throughout the week in order to foster long-term professional relationships and support networks among attendees and presenters. 1-5 June 2015. New Haven CT, USA.

Learn more here.

 

SOCAP 15

We are a network of heart-centered investors, entrepreneurs, and social impact leaders who believe in an inclusive and socially responsible economy to address the world’s toughest challenges. Since 2008, SOCAP has created a platform where social impact leaders can connect and present their ideas to a global audience. Our annual flagship event in San Francisco is the largest conference for impact investors and social entrepreneurs and has drawn more than 10,000 people. 6-9 October 2015. San Francisco CA, USA.

Learn more here.

 

8th ESP World Conference

The Ecosystem Services Partnership (ESP) is a worldwide network, founded in 2008, to enhance the science and practical application of ecosystem services. To facilitate the needed dialogue between scientists, policy makers and practitioners ESP organises an annual international conference in different parts of the world. The central theme is ‘Ecosystem Services for Nature, People and Prosperity’. The conference will pay special attention to the public and private sector dialogue on how the ecosystem services concept can be used to support conservation, improve livelihoods and engage the business community. 9-13 November 2015. Stellenbosch, South Africa.

 


Additional resources

Invalidation Risk Still Shadows California Offsets Market

The decision by California regulators to invalidate carbon offsets generated at an incineration facility in Arkansas last year continues to cast a dark cloud over the North American carbon markets. The invalidation risk for offsets bound for the U.S. state’s program remains a barrier in completing deals, with more invalidations potentially on the horizon, as stakeholders made clear at the Climate Action Reserve’s carbon markets conference.

18 May 2015 | Invalidation. It was a word that was mentioned early and often, almost always in a negative context, during the Climate Action Reserve’s (CAR) Navigating the American Carbon World (NACW) conference in Los Angeles last month.

The California Air Resources Board’s (ARB) review and subsequent invalidation of 88,955 ozone-depleting substances (ODS) offsets generated at the Clean Harbors Incineration Facility in El Dorado, Arkansas was for many NACW attendees the major source of disruption in the state’s offset program in 2014. After a lengthy inquiry that began in late May, the ARB proceeded in November with the invalidation of these offsets generated by a project from developer EOS Climate because the facility was out of compliance with its federal operating permit.

The invalidation inquiry was “one of the lowlights” in the California offsets program last year, said Julian Richardson, CEO of Parhelion Underwriting, which provides an insurance product that covers the invalidation risk in the California program.

“What we do know is that there will be further invalidations, but we don’t know when they will be and we don’t know which projects,” he said.

The ARB’s decision to invoke the so-called buyers’ liability provisions was blamed for a lack of liquidity in the offsets market. However, Ecosystem Marketplace research shows that ODS projects, despite the cloud cast by the inquiry, still comprised nearly 60% of the compliance offset transactions that reported a project type in 2014, with an average price of $9.7/tCO2e.

Still, project developers and financiers say the lingering uncertainty caused by the invalidation risk is scaring potential participants away from participating in California’s cap-and-trade program, which will ultimately throw the supply of offsets out of balance. The maximum offset demand during the program’s second compliance period (2015-2017) is nearly 92 million offsets – well above the roughly 19.5 million offsets issued by the ARB to date.

But only a limited number of regulated entities are expected to use the full 8% of offsets they are allowed to use to meet their compliance obligations, due largely to the invalidation risk and a lack of available offsets. For example, regulated entities could have used up to 11.6 million offsets to meet their 2013 compliance obligations by November 2014, but only 1.7 million offsets were actually surrendered.

“We’re seeing that firsthand from landowners who are truly interested and want to participate and are willing to take that long-term commitment, but are really nervous about that liability,” said Roger Williams, President of Blue Source, which develops forestry projects.

Where’s the Risk?

For participants in the California offsets market, the key issue was not the volume of offsets ultimately invalidated by the ARB, which represented a miniscule percentage of the offsets issued by the regulators.

“The invalidation risk in practice to date has really been very, very small,” said Greg Arnold, Managing Partner of CE2 Capital Partners. “The difficulty is with the construct of the buyers’ liability itself. I understand some of the reasoning behind why it’s been done, but it’s probably a market construct that, hopefully as the ARB gets more comfortable, can be relaxed.”

The main cause for concern is the lack of clarity over where the ARB staff will draw the line on what truly constitutes a violation rising to the level of invalidation. The ARB attempted to provide some clarity in a February guidance document, including by defining the scope of the invalidation with regard to each eligible project type. For forestry projects, for example, the ARB specified that the invalidation provisions would come into play if there were any violations of environmental, health and safety requirements associated with activities within the project area that directly affect carbon stocks. The ARB specified that these activities included planting and harvesting, among others, but not external activities such as transportation of logs to mills. However, the document raised many more questions than it answered for some stakeholders.

“We’re supportive of the invalidation rule,” said Brian Shillinglaw, Associate Director, Investments and Operations, Carbon Investments & Policy for developer New Forests. “We think ARB did the right thing. However, there is an extreme lack of clarity as to the scope of that risk.”

Under the ARB’s current guidelines, for example, an entire reporting period worth of offsets can be invalidated due to a violation lasting only a single day. This creates particular challenges for forestry projects as the majority of the value of offsets derived from those offsets could be generated during the first reporting period, putting the entire project in jeopardy, Williams said.

“We think that’s not necessary and a bit of an overreach and should be corrected,” he said.

While not able to address the specific issues raised by Williams and others, the ARB has committed to providing additional clarity in Frequently Asked Questions documents on this topic as warranted, an ARB spokesman said.

“We are not considering any changes to buyer liability,” he said.

Stakeholders cited the length of the invalidation inquiry as another inherent risk in the process. The Clean Harbors investigation began in late May, with a preliminary decision issued in October and a final decision released the following month.

“It was long and drawn out,” Richardson said. “It didn’t necessarily create the certainty that we wanted. We were all looking forward to seeing what an invalidation event would actually look like. And it provided some clarity, but it also created some additional questions.”

The length of the investigation can be blamed partly on the competing priorities of the ARB staff, which is also tasked with reviewing and issuing offsets for submitted projects, a process that can be excruciatingly slow for developers of early action projects (see story).

Managing Invalidation Risk

Multiple contract structures have developed in response to the buyers’ liability provisions featured in California’s program, including Golden California Carbon Offsets (CCOs) in which the seller bears the risk of replacing an offset with an allowance or replacement offset if the original offset is invalidated. Ecosystem Marketplace’s research shows that Golden CCOs generated a premium price 12-13% higher than the other contract structures, albeit in a small sample size of responses.

Another option is to purchase an insurance policy that indemnifies the owner of the offset for the replacement cost of an invalidated offset, a policy first offered by Parhelion in partnership with CAR.

“We’ve had a very good uptake on this, particularly since Clean Harbors,” Richardson said.

The Canadian province of Quebec – California’s partner in the Western Climate Initiative (WCI) cap-and-trade program – has developed its own method of managing the risk of invalidations for the offsets submitted for compliance in its program. The province sets aside 4% of offsets to cover reversals or invalidations.

“It’s effectively a buffer pool that’s been created, which is a perfectly legitimate way to manage that risk,” Richardson said. “What it does is take some liquidity out of the market by having those offsets tied up in a buffer pool. That is an asset the Quebec government is effectively sitting on. It’s fine, but it’s not the most efficient way to go. I don’t think it would actually draw any more players into the California market.”

In contrast, California’s buffer pool only covers the unintentional reversal of offsets generated by forestry projects in limited circumstances where it is clear that the reversal occurred due to no fault of the developer or landowner, for example, in situations where there is a beetle infestation or forest fire.

Causing Friction

The invalidation risk continues to create friction in the development and sales process despite the best efforts to manage it, Arnold said.

“Investing in these projects is a difficult business,” he said. “Those regulatory guidelines give investors pause. It makes it harder to sign up project sponsors. It makes it harder to want to invest because at the end of the day, you really don’t have a clear perception of how many credits you might receive once you’ve made your investment. Until that happens, we’re going to have an offset market that functions like this: it makes progress, but it never fully reaches its potential.”

And there are regulated entities that consider and ultimately reject the opportunity to purchase offsets for compliance due to the invalidation risk, as farming firm JG Boswell decided, because the price differential between Golden CCOs and allowances offered at auction by the ARB is not wide enough to encourage them to take on the invalidation risk.

“We won’t participate in buying offsets until that risk is eliminated,” a company official said at the NACW conference.

“It doesn’t surprise me to hear you say that,” Richardson responded. “We’ve talked to some compliance entities with some pretty substantial obligations and they are saying it’s pretty difficult to get into the offset market.”

As California keeps the door open to additional WCI partners – Ontario recently announced its intention to join California and Quebec’s carbon trading program – stakeholders expressed concern the buyers’ liability provisions could be a barrier to such linkages.

“As other jurisdictions think about joining this program or creating other programs, there’s clearly a point of view that there should be no invalidation risk,” Arnold said. “No buyer liability is really the term and that will help the free flow of capital into the markets and provide more liquidity and really make it easier for this to be a more functional market than it is today.”

Additional resources

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.

REDD+ And Green Supply Chains: The Yin And Yang Of Saving Forests

22 September 2015 | Fast-food companies get a bad rap, but with good reason. Their beef often comes from farms and fields that were tropical rainforests just a few short years ago, as does the soy they feed their chickens and the palm oil they use to make their shortening bread. Even their coffee and the paper they use to package their products often come at the expense of forests – and let’s not even talk about the Styrofoam. But “often” isn’t the same as “always”, and ultimately, it’s we, the consumers, who drive demand – because we do have a choice.

McDonald’s, for example, stopped buying beef from the Brazilian Amazon a decade ago, and on Earth Day of this year, it announced that all of its beef, poultry, coffee, packaging, and palm oil would be “deforestation free” within the next five years. On top of that, scores of other companies signed the New York Declaration on Forests late last year, vowing to cut deforestation in half by 2020 and end it by 2030.

But do such pledges matter? And how do we know which ones work and which ones don’t? Holly Gibbs of the University of Wisconsin-Madison says there’s evidence that voluntary, large-scale moratoriums work – and work faster than still-emerging public finance forest protection under the right circumstances. Ecosystem Marketplace initiative Supply-Change.org shows that some individual voluntary efforts are, in fact, delivering as well – while others are just beginning to take root, and the basic answer is: “it’s complicated”.

To begin with, consumer-facing companies like McDonald’s and Wal-Mart don’t raise their cows and soybeans themselves – they buy from middlemen which most of us have never heard of: like Brazilian meatpacking giant JBS (a $45-billion-per year behemoth that’s the largest meat-processing company in the world) or Marfrig Global Foods (Brazil’s third-largest meatpacker, with a still-stunning $8 billion in yearly sales).

Then there’s the legal framework. Brazil has pretty good laws backed by a world-class space agency for monitoring from the sky, but a Forest Trends study showed that about half of all deforestation globally happens illegally – making it hard for companies to know what’s clean and what isn’t, even if they really want to. For cash-strapped developing countries, policing the forests isn’t a top priority.

To address the challenge, a mosaic of market-based mechanisms and legal interventions is emerging, enabled by new technologies and growing consumer awareness. Some of these efforts are already delivering results, while others need to be nudged along – and that may be where performance-based financing like REDD comes into the picture.

Promises Kept

Earlier this year, the Global Canopy Programme published the Forest 500, a list of the 500 entities – private and public – that have the power to end deforestation, and it ranked them according to their deforestation pledges. Shortly afterwards, Ecosystem Marketplace published Supply-Change.org to help everyone track the actual actions that companies are taking to meet those pledges. While these two initiatives are shining a light on individual efforts, Gibbs published research on the effects of two massive, voluntary moratoriums on beef and soy from the Amazon. These weren’t individual – and often undefined – promises like the New York Declaration, but binding moratoriums with clear deadlines and means of verification.

The first study looked at the effects of a voluntary 2006 moratorium on chopping trees in the Amazon to plant soy. It was published in January and showed that only 1 percent of new soy production in Brazil came at the expense of the forest. “Before the moratorium, 30 percent of soy expansion [in the Brazilian Amazon] occurred through deforestation, and after the moratorium, almost none did,” said Gibbs.

The second study, published in May, looked at the effects of a 2009 moratorium imposed by consumer-facing meat buyers and less well-known but equally critical meatpackers like Brazil’s Marfrig Beef. Under the agreement, the meatpackers agreed to stop buying from ranchers who chop the forest, and Gibbs found that deforestation had, in fact, plunged dramatically on participating ranches – but it also increased elsewhere.

Plugging the Gaps

Taken together, the two reports demonstrate the power that demand-driven actions can have – as well as the limitations. In the case of soy, deforestation plunged dramatically within the Amazon under the moratorium, but it increased in the Cerrado grasslands and savanna east of the Amazon. In the case of beef and cattle, some deforestation simply moved down the supply chain – to farms that raise calves and sell them to “fattening farms”, which then sell them to slaughterhouses.

“In practice, the agreements regulate only direct purchases from supplying farms, thus ignoring calving ranches and other indirect parts of the supply chain,” the beef report says. “Cattle fattened on noncompliant properties with deforestation can leak to slaughterhouses that lack full monitoring systems; these cattle can also be laundered by moving them to a compliant ranch for direct sale to a slaughterhouse.”

The biggest problem, however, isn’t cattle from deforested land “leaking” into participating slaughterhouses; it’s simply the fact that even the global buyers now participating in the moratoriums don’t have universal reach – as evidenced by the fact that 80% of Brazil’s beef is consumed domestically.

“We monitor more than 8,000 suppliers, but we’ve cut 2,000 of them off because they don’t meet our criteria,” says Mathias Almeida, Sustainability Manager at Marfrig Beef, which is a signatory to both moratoriums. “So, we eliminated 2,000 ranches, but they’re all, as far as I know, still in business – because someone else has stepped up to buy from them.”

For Dan Nepstad, that’s where public finance for regional forest protection comes in – as we’ll see in a bit.

From Trickle to Torrent

A forester by training, Nepstad has been working in the Amazon for 30 years and now runs the Earth Innovation Institute, an environmental NGO focused on sustainable forest management and rural economics.

“It’s great that companies are taking on ambitious goals like zero deforestation supply chains, but when they start implementing that, they bump up against the limits of the farm-by-farm approach,” he says. “It’s really expensive, and if you have to segregate your product – meaning you’re dealing with soy, palm, beef, etc. in separate streams – then it’s more expensive.”

He says sustainability officers are just now beginning to wrestle with that expense – and the complicated nature of supply chains in general – as they seek to keep the promises their bosses have committed to.

Gibbs agrees on the complication front, but she says the cost of monitoring has been overstated.

“In both the case of soy and cattle, we don’t see that these agreements are limiting production or limiting economic growth,” she says. “For example, following the soy moratorium, the soy area planted doubled. Following the cattle agreement, JBS’ profitability more than doubled, and the number of slaughterhouses in the Amazon increased by 350% – from 9 slaughterhouses in 2008 up to 32 in 2015.”

If companies are continuing to invest, she says, it’s because the cost of monitoring isn’t much of a burden; but there are, she adds, other challenges that smaller suppliers are struggling to meet – challenges that are about to explode, if early analysis of data from Supply-Change.org is any indication.

That analysis, published as Corporations, Commodities, and Commitments that Count, shows that most of the few companies that have successfully reduced their impact on forests needed more than five years to do so. The new wave of companies scrambling to get green have set goals that are long on ambition but short on know-how. Most of them, for example, are keying off of the year 2020 – which is already less than five years away.

“It’s the dawn of a new decade,” the report notes. “It’s a nice even number. For the 65 companies that made new commitments in 2014, a commitment year of 2020 was five whole years away. For those stepping up to the plate in 2015, it’s only four years away. Then three years in 2016, two in 2017, and so on – until companies should logically consider later target years. But until now, only three in 198 companies report post-2020 goals.”

And, the report notes, the number of “goals” with no target date has tripled since 2009 – indicating a lot of talk but little walk. On top of that, roughly 85% of companies making zero-deforestation pledges believe they can simply buy products that are certified low-deforestation.

“That’s disturbing,” says Nepstad. “It shows a demand for simple, low-cost solutions – but if you look at the complexity of the supply chain and the challenges that a company like JBS (Brazil’s largest meatpacking company) is facing, you realize how hard it is to meet that demand.”

He’s proposing an approach somewhere between the biome-wide a moratoria that Gibbs tracked and the farm-by-farm certification programs currently underway.

Jurisdictional Certification: a Partial Solution?

Nepstad would like to see states or even sub-regions within states (i.e. “jurisdictions”) use public climate finance to build regional certification programs, so that buyers can trust purchases of several commodities from thousands of suppliers in a given region.

“This way, a company like Marfrig doesn’t have to do the farm-by-farm filtering itself, and a buyer in Europe doesn’t have to try and understand this complex process,” says Nepstad. “Instead, they would know that if they buy from this jurisdiction or that, then they’re safe.”

Gibbs sees the allure, and says that public finance could help supplemental programs costs down the road, but she’d rather see an immediate focus on more moratoria.

“REDD+ (acronym for public forest conservation finance), particularly at the jurisdictional level, is still developing, and shouldn’t be viewed as a replacement for farm-by-farm filtering that has been demonstrated effective for soy and cattle in the Brazilian Amazon,” she says. “Jurisdictional REDD+ could be an ‘add-on’ for supply-chain solutions, but the farm-by-farm monitoring of the Soy and Cattle Moratoria have been demonstrated to lead to changes within months, whereas REDD+ has been a very slow boil over many years.”

Low-Emission Rural Development

Beyond the Brazilian Amazon, the governments of Norway, the United States, and the United Kingdom are using public finance for avoided deforestation to support sustainable agriculture through the Initiative for Sustainable Forest Landscapes, which funnels these payments through the World Bank’s BioCarbon Fund to smaller forest countries or to individual states within larger nations, beginning with Ethiopia’s Oromia State and Zambia’s Luangwa Valley. The activities they cover include everything from certification of sustainably-harvested commodities to community conservation, and the amounts are based on how much the countries can reduce their greenhouse gas emissions from deforestation and forest degradation.

Like Acre, the payments aren’t offsets – none of the countries will use the reductions to lower their own footprints – and Nepstad advocates the use of the term “LED” (Low-Emission Rural Development). It’s a term that The Nature Conservancy and others have also used, and which Nepstad broadly defines as the use of carbon finance to “improve rural livelihoods, create jobs, improve services, increase market access and investment, and protect and restore natural capital.”

A Mosaic of Solutions

Peruvian indigenous leader Juan-Carlos Jintiach says low emissions development is a cornerstone of his “Indigenous REDD” initiative.

“If you look at a state like Acre, you see that they used REDD income to support indigenous land-use practices,” he says. “I think we can apply a similar strategy in Igarapé Lourdes (the indigenous territory shared by the Arara and Gaviao of Rondonia), but we still have some work to do.”

The key, he says, is identifying low-cost, high-impact activities that can nudge a state’s agriculture sector in a more sustainable direction – and that probably means a mosaic of market-based mechanisms and legal interventions, all enabled by new technologies and growing consumer awareness.

Targeted Spending

Gibbs is leery of regional certification programs, which she says can end leading to pockets of intensified destruction.

“The jurisdictional approach could reward municipalities that could easily comply,” she says. “For example, a municipality with little remaining forest or with strong NGO involvement in recent years could be seen as a model, low-risk jurisdiction. The problem is that the high-risk municipalities closer to the forest frontier and with less governance will continue with business as usual, while the moratoria led to change across the entire Amazon including those high risk locales”.

She’d rather see public forest conservation finance directed into programs that help small ranchers develop simple technologies that can help them become more efficient.

“We’ve been encouraging producers to stop clearing forests by intensifying production for years, and they always respond with, ‘How?’” she says. “They’ve repeatedly asked for ‘more technical know-how and more financing,’ so in my mind, that’s something that jurisdictional REDD could provide.” Almeida agrees.

“We have huge amounts of degraded land in the Amazon that can be recovered both for cattle production in a more intensive way or crop production,” he says. “REDD can be used to promote technical systems and technology for producers who are engaged in land recovery and intensification.”

He also said he’d like to see financial guarantees for take-off agreements to encourage long-term purchasing arrangements with ranchers who follow good practices.

“Right now, all of our purchases are short-term – like week-to-week,” he says. “If we need to buy, or if a rancher needs to sell, we pick up the phone and call around. He sells to the highest bidder, and we buy from the lowest.”

Like Nepstad, he also advocates jurisdictional efforts, and offered the state of Parí¡’s Green Municipalities Program (Programa Municí­pios Verdes) as an example. Developed in partnership with municipalities, NGOs, and the private sector, the program helps entire municipalities develop green supply chains by offering tax incentives and also withholding subsidies – which are, to many, the elephant in the deforestation room. A working paper by the Overseas Development Institute identified nearly $500 billion in agricultural subsidies worldwide, compared to just $8.7 billion committed to avoiding deforestation.

Laws and the Cost of Compliance

Many countries have laws to protect their forests, but the challenge is finding the money to enforce them. Under Brazil’s Forest Code, for example, landowners in the Amazon can only deforest 20% of their land, while those in the Cerrado can only clear 35% for agriculture. The same law requires all private lands be listed in the Rural Environmental Registry (Cadastro Ambiental Rural, or CAR), and it restricts finance in municipalities with less than 80% of the properties registered.

“Public enforcement of environmental laws is a formidable task in the Brazilian Amazon, which covers an area six times the size of Texas,” says Gibbs. “But these market-based interventions are leading to rapid changes in the beef industry within a period of months, even in very remote areas.”

In 2013, The Nature Conservancy used satellite data to compare deforestation rates Sí£o Félix do Xingu, a municipality in the Brazilian state of Parí¡, to CAR registration rates and found higher registration correlated with lower deforestation.

Gibbs found the same correlation – but she also found surprising results when she looked to see who was cheating and who was playing fair.

“Only 115 people out of several thousand soy farmers have violated the Soy Moratorium since 2006, but over 600 of them have violated the Forest Code,” she says. “So, this same group of farmers is five times more likely to violate the governmental policy than they are to violate the private sector agreement.”

She sees a role for public forest conservation finance in helping governments build up their capacity to monitor the forest – a role that it is already playing, in Brazil and around the world – and adds that the one thing everyone agrees on is that no one has all the answers.

“We have a lot of tools now, and none of them are extraneous or irrelevant,” she says. “I’m sure there is a need for all of these polices or approaches – but the question is: where and how?”

 

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.

Emerging From The Darkness: New Process Aims To Tackle Black Carbon

Soot and smoke no longer blanket London and other Western cities like they once did, but these and other forms of “black carbon” continue to plague families in developing countries. Now a new Gold Standard methodology will offer clean cookstoves projects the chance to access a new source of funding for reducing these emissions.

23 April 2015 | While carbon dioxide (CO2) is currently the dirty word of climate change, another pollutant – black carbon – has been chugging out of tailpipes and charcoal grills. A key component of soot, black carbon is pure carbon that results from incomplete combustion. It doesn’t stay in the atmosphere for centuries like CO2 does, but it’s deadly for those who breathe it, and it contributes to climate change when it settles on reflective surfaces such as glaciers. Its danger is so clear and present that Congress actually came together in 2009 to regulate it in the United States. But while these measures have helped reduce black carbon in the U.S., the pollutant remains pervasive elsewhere in the world and disproportionally affects the poor.

Poorly-burned fuels account for an estimated 25% of all black carbon emissions globally, and 84% of that comes from households in developing countries. These small particles have a large impact: the World Health Organization estimates that nearly 4.3 million people, mostly women and young children, die from indoor air pollution annually.

Black Carbon: The Challenge of Measuring

Because of its short time in the air, black carbon is classified as a “short-lived climate pollutant” (SLCP), which means it’s not among the six global warming pollutants covered by most climate policies. A 2013 study, however, found that black carbon is second only to CO2 as a leading cause of global warming – largely because its warming impact is 460-1,500 times higher in the short term. As a result, governments and public organizations have become more interested in addressing black carbon’s impacts – and, most recently, funded a new methodology for dealing with black carbon.



Certification ≠ Offset

Released by the Gold Standard Foundation (GSF) and developed by a group of cookstove organizations – including Project Surya, The Energy and Research Institute, the Global Alliance for Clean Cookstoves, Nexleaf Analytics and the University of California at San Diego – the new methodology will award a certification to organizations that reduce black carbon.

The certification shouldn’t be confused with carbon offsets: companies that emit recognized greenhouse gases like CO2 can’t reduce their carbon footprints by reducing black carbon elsewhere. Certification will, however, let projects earn recognition for the black carbon it eliminates, which in turn may attract new buyers or qualify it for additional funding.

Since it is first-of-its-kind, the initial methodology will only be available to cookstove projects that have also measured their carbon dioxide emissions reductions. It will serve as a test run for future work in the field – and set the stage for an additional financing source besides carbon offsets.

Opening a New Path to Finance

Unlike many carbon offset project types, such as wind or solar, cookstove projects rely heavily on changing human behavior – first by marketing and selling the stoves, then by following up for training and maintenance. Though cookstove carbon offsets often sell for some of the highest prices in the voluntary carbon markets (at an average of $10.4 per tonne of carbon dioxide equivalent last year), the profit often isn’t enough to cover the full costs of the project.

“The reality is, Verified Emission Reductions (VERs) aren’t enough,” said Owen Hewlett, Chief Technical Officer at GSF. “There’s a gap for the more advanced cookstoves.”

With the new methodology, project developers can continue to sell their carbon offsets to private buyers, but can use additional certification for black carbon reduction to attract separate financing – most likely from public sources.

“In the early days, I suspect [buyers] will be mostly bilateral donors” since they understand black carbon, Hewlett said.

Hewlett was referring to the Climate and Clean Air Coalition, which was started by the governments of Bangladesh, Canada, Ghana, Mexico, Sweden and the U.S., along with the United Nations Environment Programme (UNEP) in 2012 to address SLCPs. Since then, as recognition of the need to reduce SLCP has grown, membership has exponentially increased to 44 members, the European Commission, and 54 non-state actors like UNEP.

There is also potential for private sector investment, according to Nithya Ramanathan, another methodology participant who is President of the nonprofit technology company Nexleaf Analytics and Co-Lead of Project Surya, a cookstove project based in India that focuses specifically on reducing black carbon, methane and ozone emissions. “We don’t have confirmed buyers yet. I think initially, in the first month or two, donors and countries who are motivated to reduce particulate emissions may be a good fit to help catalyze this market, but private sector buyers would be needed almost immediately in order to help establish a healthy price for the certified outcomes.”

Nexleaf plans to target possible early adopter organizations that have already shown an understanding of black carbon, but recognized that eventually the organization will need to start educating carbon offset buyers unfamiliar with black carbon.

Black Carbon Finally in the Spotlight

Addressing black carbon emissions would improve the chances of global temperature rise remaining below the maximum target of 2 degrees Celsius set under international climate negotiations, according to a study by UNEP.

So why hasn’t black carbon been addressed before now?

The answer lies in the relative permanence of SLCPs compared to other climate pollutants. Black carbon typically persists in the atmosphere for a few days. In contrast, CO2 molecules may remain in the atmosphere for decades – about a quarter of the CO2 emitted today will still be in the atmosphere 1,000 years from now. This means that cutting CO2 emissions was long considered a more urgent problem, since once a tonne is emitted into the atmosphere it’s not easily removed. However, slashing SLCPs would have a more immediate impact, with the potential to prevent 0.6 degrees Celsius of warming by 2050.

“SLCPs haven’t really been considered under the international negotiations,” said Mike MacCracken, Chief Scientist for Climate Change Programs at the Climate Institute, a non-profit organization that has focused on climate protection since 1986. “There was a sense at the time [back in the early climate negotiations] that CO2 emissions would really get addressed, so the concern focused on long-term prospects of climate change control.”

MacCracken has seen that interest change in recent years as the international negotiations have failed to produce a global commitment on climate change. But for all its potential for emissions reductions, SLCPs lack the scientific research and standards devoted to CO2.

“It’s not as well established in the scientific community as a tonne of CO2, for example. So there’s less research, less data,” said Hewlett.

Cooking up a Certification Scheme

Since black carbon’s lifespan is measured in days, its impact is highly localized depending on the region, season and local weather. So, unlike CO2, it matters where in the world it is emitted. That makes it more difficult to include in a global carbon trading mechanism. For instance, a farm in the U.S. would not be able to offset black carbon in India. Even if the units were the same, the climate impact could differ depending on such details as the cloud cover in each location or whether the winds carried the black carbon higher into the atmosphere.

Given the scientific uncertainty surrounding impact, the GSF methodology focuses on simply measuring the emissions reductions and will provide a ‘certified outcome statement’ that confirms the project’s “Black Carbon Equivalent (BCe) Emissions Reductions,” alongside Gold Standard VERs. Since BCes are not a carbon dioxide equivalent, they cannot be substituted with VERs. The certification is meant only as an additional element of a project’s verified impact, not a replacement for the carbon offset.

“The key of it really is that definition of impact – that’s the bit we’re hoping to explore more, and extend into further,” Hewlett said. “[Black carbon] is well established as a climate forcer that operates on a short timescale, but the scientific community is still establishing the impact of black carbon. It could be very different from Nepal to India or Greenland, due to the local climate conditions.”

For example, in India, black carbon has been linked to disrupting monsoon rainfall patterns and affecting millions of livelihoods, while in Greenland, black carbon that lands on surface snow absorbs more of the sun’s heat and increases snowmelt.

Hewlett is particularly interested in exploring the health impacts of reducing black carbon emissions, but cautioned that such a methodology would require even more technical advisory committees.

“Part of the balance to strike here is maintaining technical rigor,” he said. “What we’d like to do with the Gold Standard is move towards measuring health impacts in a detailed way, to establish governance and technical advisory committees and get members on board with that,” he said. “We want to make sure the right people would look at it.”

Thus, for now, the new methodology focuses only on quantifying the black carbon emissions reductions – not the co-benefits of those reductions. “What the methodology isn’t attempting to do in this first pass is to actually quantify the impact… We’re staying on our toes to see the best direction to take this because there’s a number of impacts you could look to quantify.”

The “best direction” will largely depend on the market’s response to black carbon, according to Ramanathan.

“At this stage, because black carbon is relatively new from a carbon market perspective, we thought it best to start as a certified outcome and test the market to see what people are willing to pay,” she said. “As and when we have more data on that, we’d have a better case to move forward.”

 

Additional resources

New Credit Card Aims To Spur Individual Carbon Offset Purchases

Individuals have traditionally been a miniscule source of demand in the voluntary carbon markets. A new company called Sustain:Green is hoping to change that by offering consumers a credit card that makes over the traditional customer reward structure to allow them to finance the purchase of carbon offsets.  

27 April 2015 | Would you like some carbon offsets with those fries?

It may seem like a silly question, but if Sustain:Green has its way, some of the money generated from the purchases made by its customers – even French fries – will find its way into the voluntary carbon markets.

Sustain:Green hopes to utilize customer rewards structures typically offered by credit card companies, like cash back, and direct the funds toward purchasing certified carbon offsets.

Sustain:Green CEO Arthur Newman previously worked on Wall Street and focused on the cap-and-trade market in the United States and the use of carbon offsets to offset carbon footprints as a former partner for Carbon Capital Advisors. He cites this experience working with large organizations in the carbon market as inspiration for the development of the credit card.

Newman recognized the limited scope of individual actions in the offsets market, and wanted to create an opportunity for individuals to take action like organizations do. Once individuals have taken basic steps to reduce their carbon footprint by, for example, changing out old lightbulbs for new, more efficient lightbulbs, it becomes incrementally more difficult and expensive to reduce their environmental impact.

Untapped Market?

Individual offset purchases have been minor contributors to the overall volume of voluntary carbon market transactions. In 2013, Ecosystem Marketplace found that just over 200,000 tonnes of carbon dioxide equivalent (tCO2e) were transacted by individuals, with an average price of $17.4/tCO2e. For comparison, the overall carbon offset market transacted 76 million offsets in 2013, with an average price of $4.9/tCO2e.

When asked about the relatively small size of the individual market, Newman is quick to point out the challenges for connecting individuals to the carbon market. He notes that offsets have not been marketed to consumers in a successful manner.

“Some airlines offered offsets after you purchased a plane ticket, but we feel that in a price sensitive purchasing transaction like airline tickets, this the wrong time to be asking a consumer to spend more money,” he said.

Additionally, the ability to purchase offsets from different companies based on different verification standards can be confusing to those not well-versed in the nuances of carbon offsets. Questions about transparency and what was being purchased may have also stymied the market.

“People often have had little transparency into what their offsets were going to fund and how the money was to be used,” Newman said. “Transparency was not high in many instances a decade ago when the market was born.”

Quick and Easy

The company started with the idea to of making offsets convenient and free, he said. What Sustain:Green is trying to do with its credit card and the individual consumer is to make offsetting as easy, transparent and cheap as possible.

While offsets aren’t free for Sustain:Green, they have gone as far as they can to make purchasing offsets free for its customers. “The difference with the Sustain:Green card is that we are giving these offsets away for free as a reward,” Newman said “People are not charged additionally for them, and there is no annual fee for having the card. Additionally, the rewards are automatically tied to spending.”

To do this, the card, which is financially backed by Commerce Bank, offers what works out to be the equivalent of 2.7% cash back on purchases, not including the 5,000 pounds that users receive upon the first purchase. But instead of consumers receiving cash back to purchase individual offsets, the money will be used by Sustain:Green to purchase offsets through the American Carbon Registry (ACR). ACR is a nonprofit enterprise of Winrock International focused on developing carbon offset standards and methodologies, and also serving as a clearing house to register, verify, and oversee offsets projects, and issue offsets from projects.

“I do really like the concept in that people don’t really have to do anything,” said Mary Grady, Director of Business Development for ACR, who secured and has already used a Sustain:Green card. “All they are doing is living their normal lives and shopping and while they’re doing that, they’re offsetting. I think it’s really interesting and I’m hoping it will be successful.”

As more consumers sign up for and start using the card, Sustain:Green will “fill up a ‘bucket’ of money to provide seed funding to get projects going.” Once the bucket is full enough, Winrock International and ACR will suggest projects for Sustain:Green to invest in. Cardholders will also be allowed to suggest projects that will be vetted by ACR, and then all the information will be put up on the Sustain:Green website and cardholders will be able to vote for projects they want to fund.

The card has the other added environmental benefit of being biodegradable. This was something Sustain:Green specifically pursued, because Newman says “people overlook the amount of credit cards that get thrown away each year – it’s about half a billion credit and debit cards every year.”

The new card is marketed as biodegradable, but compostable may be a better term. “It takes about six months to biodegrade, and just has to come into contact with soil bacteria, all you have to do is cut it up and bury in the dirt,” He said.

Getting Those Pounds of Carbon

Digging into the numbers, the Sustain:Green MasterCard offsets two pounds of CO2 for every one dollar spent by the consumer, and will offset an additional 5,000 pounds of CO2 if the first purchase is made within 90 days of opening the account. In addition, if consumers spend $1,250 within any given quarter, Sustain:Green will retire 2,500 pounds of offsets as a bonus, for up to a total of 10,000 additional pounds of CO2 per year. The bonus would be in addition to the offsets earned by the consumer for making purchases on the card.

For comparison, if carbon offsets were purchased separately by consumers through the SustainGreen offset store, an equivalent amount of carbon offsets would cost the consumer $136 based on the $15 per tonne price offsets sell for in the online store.

Just do it (to Save the Rainforest)

Sustain:Green partnered with Mata no Peito, a coalition initiative to support organizations and communities to protect and replant forests throughout Brazil. Mata no Peito is funded through the retirement of Nike carbon offsets, the originators of the project. When Sustain:Green, or any of the other participants, purchases and retires certain carbon offsets, all of the money is donated to the Mata no Peito fund, which provides seed investments to projects in the Brazilian rainforest.

“It’s kind of a double win,” Grady said of Sustain:Green’s participation in Nike’s Mata no Peito.

Newman describes the organization as “effectively a Kickstarter for the Brazilian rainforest. They come up with market-based solutions for deforestation. In other words, they’re looking for the root causes of deforestation, and trying to develop projects that address causes of deforestation and some of the impediments to reforestation. Money that is donated gets the projects off the ground, and projects are designed to generate their own offsets, which are then sold to provide continuous financing.

The card is still relatively new, and is gaining users who will ultimately fund the conservation projects in the Amazon. Newman hopes that users will see the benefit of using the credit card to purchase their necessities and carbon offsets at the same time.

By using the card, not only are consumers offsetting their carbon footprint but they are also helping to fund rainforest preservation without having to change their behavior much beyond choosing which card to use for purchases.

“This is a way to commit to doing something, and it happens automatically, seamlessly,” he said. “You don’t have to worry about the funny rules with cashback cards. Automatic is a really nice way to say I’m making a commitment, this is something I think is important, and I’m using this card as a way to do it.”

 

Katy Sater was previously a research assistant for Ecosystem Marketplace.

 

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.