CIFOR Says Tenure And Funding Still Dog REDD

The Center for International Forestry Research (CIFOR) recently surveyed 23 subnational forest carbon projects in Brazil, Peru, Cameroon, Tanzania, Indonesia, and Vietnam. Their findings? Project proponents are driven to save forests, but a lack of demand and unclear tenure remain their biggest challenges.

This article was originally posted in CIFOR’s blog. Click here to read the original.

29 April 2014 | Bogor | Indonesia | Actions must be taken to clarify land tenure in forest-rich developing countries, and to improve the economic viability of REDD+ or risk jeopardizing efforts to reduce deforestation and mitigate climate change, a new study based on 23 forest carbon initiatives suggests.  


Hundreds of pilot
initiatives designed to test the feasibility of REDD+, or Reducing Emissions from Deforestation and forest Degradation, have got under way in recent years. But with obstacles mounting and a climate agreement still elusive, some initiative proponents are losing their enthusiasm for REDD+, according to the study, led by the Center for International Forestry Research (CIFOR).

“The initiative proponents are a spirited, determined group of people who believe in what they’re doing to protect forests,” said William Sunderlin, principal scientist at CIFOR and lead author of The Challenge of Establishing REDD+ on the Ground: Insights from 23 Subnational Initiatives in Six Countries.

“But they’re encountering major challenges whose root causes lie outside their project boundaries, particularly tenure insecurity and what we call the ‘disadvantageous economics’ of REDD+,” Sunderlin said. “These subnational initiatives need more committed support from national and international processes to create circumstances that allow REDD+ to function as intended.”

REDD+ emerged in 2007 as a promising mechanism to slow anthropogenic climate change by providing financial incentives to keep forests standing, given that forests absorb carbon from the atmosphere and that deforestation and forest degradation contribute up to 15 percent of global greenhouse gas emissions. For example, in Indonesia, the world’s third largest emitter of greenhouse gases, more than 75 percent of emissions come from conversion of forests to farmland, agriculture and peat fires — roughly equivalent to emissions from about 400 million cars each year.

What makes REDD+ different from previous — and generally unsuccessful — efforts to reduce deforestation is that it is based on performance-based incentives. As originally conceived, REDD+ would generate a revenue stream by placing a financial value on carbon, with forest managers receiving a share of that revenue only if they actually achieved emission reductions or enhanced carbon stocks.

“Conditional incentives give REDD+ an extra point of leverage, but for this system to work, there must be a clear stream of income and it must be clear who is entitled to benefit,” Sunderlin said.

“Our study shows that these aspects in particular are weak, and this is where attention needs to be focused.”

A Contested Landscape

Insecurity over tenure — the right to own, access or use land — remains the biggest challenge for proponents, the study found.

“REDD+ is being established in places where tenure rules are often unclear and contested,” Sunderlin said.

“But the REDD+ rewards system requires clarity over who holds the right to forests or carbon, who is responsible for reducing emissions, and who can claim the benefits.”

In an earlier survey of villages in five countries involved in REDD+, more than half of the respondents reported that at least some of their tenure is insecure, and more than a fifth had been unable to exclude unwanted outsiders. Furthermore, as tenure problems are generally national in scope and origin, resolving them often lies outside proponents’ control.

The challenge, while daunting, is not insurmountable, Sunderlin notes, as path-breaking tenure reforms are beginning to take shape.

In Indonesia, for example, the government has launched the One Map Initiative to improve tenure and land-use planning, and last year a Constitutional Court ruling aimed to grant indigenous people land ownership rights.

The Highest Bidder

Yet for anyone to benefit, REDD+ must generate income in the first place, and the REDD+ revenue stream originally envisioned through trading carbon credits on carbon markets has fallen short of targets.

Undermining efforts to generate revenue are the lack of a binding international climate agreement to induce regulatory changes, weak carbon markets and the ongoing dominance of powerful business interests, according to the study.

“If you think of REDD+ as a bidding process in an auction, where those who make the highest bid can control forest land use, the bid offered by big agricultural companies often outcompetes what can be offered by REDD+,” Sunderlin said.

“This could change with the establishment of new conditions — some combination of development assistance, international or national funds, or a market-based mechanism — that can generate a stream of income from REDD+ and cover the opportunity costs of forest conversion.”

The existing funding gap is estimated at US$15 billion to US$48 billion by 2020, with the supply of carbon credits outstripping demand by 13 to 39 times, according to the International Forest Finance Project. Initiatives such as California’s cap-and-trade program show promise for generating revenue through carbon markets, but, Sunderlin said, “there is still an urgent need for something that does not yet exist.”

Nevertheless, in combination with research turning a spotlight on challenges and possible solutions, the positive developments under way and increasing impetus to act can lead to “breakthrough solutions,” he added.

“There is growing awareness among governments that tenure problems and the economics of REDD+ are fundamental and need to be resolved soon,” Sunderlin said.

“You can’t rule out the possibility of dramatic improvement in climate change mitigation policy in the next few years — simply because world leaders cannot afford to ignore climate change anymore.”

Note: REDD+ will be a key theme of discussion at the upcoming Forests Asia Summit, 5-6 May in Jakarta, Indonesia. At the Summit, panelists will explore how REDD+ initiatives can offer lessons for low-emissions development strategies and contribute to sustainable development. Participants will also look at how REDD+ activities and low-emissions development strategies can support climate change adaptation. Read more here.

For more information about the topics of this research, please contact William Sunderlin at w.sunderlin@cgiar.org.

This Week In Forest Carbon News…

This article was originally published in the Forest Carbon Newsletter. Click here to read to read the original.

 

25 March 2014 | Let’s face it: Donuts are delicious. But we all know that sugary, fried goodness comes at a cost, and thanks to Donuts, Deodorant, Deforestation, a new scorecard, we now know that donuts may be bad news for forests as well as our waistlines. Published last week, the scorecard ranks fast food, personal care, and packaged food companies according to their commitments to keep deforestation-driving palm oil out of their supply chains.

Packaged food companies ranked the highest on the scorecard, with Kellogg’s, Mondolez, Nestlé, and Unilever committing to purging their supply chains of palm oil. And, facing pressure from groups such as Greenpeace and their own consciences, more companies are getting on board. Just last week, Nordic consumer goods giant Orkla promised to remove peatland destruction from its supply chain by 2017. And as of early March, Mars, the maker of M&Ms and other guilty pleasures, committed to no-deforestation sourcing and full traceability by 2015. Further upstream in the supply chain, suppliers Wilmar and Golden Agri-Resources, which together sell 55% of the world’s palm oil, have recently committed to sourcing palm that does not threaten the peat forests that sequester huge amounts of carbon.

However, as the creator of the palm scorecard, Calen May-Tobin, points out, these no-deforestation commitments are much easier said than done. Supply chains are long and winding, and altering the drivers of deforestation requires new relationships and understanding among consumers, corporations, and communities.

The nineteenth Katoomba event hosted by Ecosystem Marketplace’s parent organization Forest Trends in Iguazíº Falls, Brazil last week attempted to do just that by putting palm buyers such as Nestlé and McDonald’s in the same room with producers such as Fiagril and advocates such as Greenpeace. The event brought up questions about the effectiveness of the Roundtable on Sustainable Palm Oil, which covers 14% of palm oil worldwide, and the role of the consumer as the missing link, or perhaps the weak link, in demanding deforestation-free products.

Here in Washington D.C., we are continuing data collection for our State of the Voluntary Carbon Markets and State of the Forest Carbon Markets reports. If you either transacted carbon offsets on the voluntary market in 2013 or developed a forest or cookstove project, we would love to hear from you. Respondents can get the usual perks – including listing in our directory and inclusion of your project on the Forest Carbon Portal, if you wish. The survey will remain open until March 31.

Returning respondents may login to the survey HERE (http://survey.ecosystemmarketplace.com/carbon2014/)
And newbies can sign up HERE (http://survey.ecosystemmarketplace.com/carbon2014/users/users/add)

As always, feel free to contact Allie Goldstein at agoldstein@ecosystemmarketplace.com or (+1) 202-446-1988(+1) 202-446-1988 with any questions about the survey.

 

—The Ecosystem Marketplace Team

 

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


News

INTERNATIONAL POLICY

REDDy to play it safe?
Do global efforts to pay developing countries to reduce greenhouse gas (GHG) emissions from deforestation (known as REDD) aid in the fight for community and indigenous rights, or impede it? About 100 people gathered in Washington D.C. last week for the Fifteenth Dialogue on Forests, Governance, hosted by the Rights and Resources Institute (RRI), to debate this question. Arvind Khare, Executive Director of RRI, warned against moving too quickly towards REDD if ‘safeguards’ for communities are weak and land tenure still contested. Charles Di Leva of the World Bank, on the other hand, said that the current safeguards give communities various opportunities to veto activities they don’t want to take place. “If we were to require title resolution as a prerequisite, we might be excluding communities who want to participate in REDD activities,” he said.

NATIONAL STRATEGY AND CAPACITY

Romance, ravioli…and carbon
Their carbon market is little-known outside of Italy, but Italians transacted 144,515 tonnes of emissions reductions at a combined value of more than a million euros (almost 1.4 million US dollars) in 2012. Three public initiatives dominate demand, with a few companies, such as pasta producer Jolly Sgí¡mbaro, also offsetting emissions. The Nucleo Monitoraggio Carbonio, a stakeholder group of project developers, public administrations, brokers, and buyers, is now working on the Italian Forest Carbon Code, which will “raise the quality bar of the voluntary carbon market in Italy,” according to Lucio Brotto, who has been deeply involved in the process. Read the full interview with Brotto on the Forest Carbon Portal.

West Sumatra on auto pilot

West Sumatra is joining Indonesia’s REDD+ program as a pilot province, unlocking financing to support projects and initiatives in an effort to reduce the steady decline of forest cover in the region, which fell 19% over a 20-year period due to factors such as corruption and ineffective forest management. “West Sumatra has shown the same vision and commitment to reducing deforestation,” said Heru Prasetyo, head of the REDD+ Agency. “This is in line with Indonesia’s commitment to reduce greenhouse gas emissions up to 41% by 2020.”

Zimbabwe going public?
Although Zimbabwe loses about 50 million trees per year, the country has so far not been able to tap into carbon finance to support public REDD+ projects within its borders. Zimbabwe is now working on building the infrastructure and improving its readiness to implement REDD+ projects, including engaging in technical studies of the forests and establishing a REDD+ office within the commission to focus specifically on these issues. Meanwhile, the Carbon Green Africa REDD+ project in Kariba, a private REDD+ project, could generate an estimated $406 million over three decades if the offsets are sold at average prices.

Field tripping
A recent conference held in the Philippines focused on advancing REDD+ in the Asia-Pacific region. Stakeholders from several countries talked about avoiding unintended social and environmental risks related to REDD+, strengthening governance and achieving co-benefits for biodiversity conservation and improved livelihood. They also participated in a field trip to the ancestral domain of the Aeta Ambala tribe at Mount Santa Rita for a close-up view of a conservation agreement in action. The conference participants agreed to work together to share experiences and build the region’s capacity to participate in REDD+ initiatives.

Russia keeps forest watch
Russia is thinking about launching a domestic carbon market to reduce its GHG emissions, but such a market may not be ready by 2020, Oleg Shamanov, the Russian Federation’s climate negotiator, said on the sidelines of the international climate talks in Bonn, Germany. The country wants to limit emissions in 2020 to 75% of 1990 levels. Russia’s forests are the largest in the world but road-building, logging and wildfires have increasingly degraded them, so the Russian government has begun using data provided by Global Forest Watch Russia – a partnership between the World Resources Institute and Russian forest conservation groups – to combat these activities.

PROJECT DEVELOPMENT

Thinking big in Colombia
International development company Chemonics International last week awarded ecoPartners, ClearSky, and Offsetters a second contract to develop project documents for Colombia’s BioREDD program. Under Phase Two, the team will be responsible for creating Project Design Documents for four additional REDD+ projects in Colombia, to be verified by both the Verified Carbon Standard (VCS) and the Climate, Community, and Biodiversity Standard. The BioREDD+ program in Colombia will run from 2011 through 2014, during which $27.8 million will be invested in biodiversity, REDD, and climate change adaptation. In terms of REDD, the goals are to establish a total of eight financed REDD projects covering a million hectares, as well as a carbon baseline for the Pacific and Amazon regions.

Grow rice, not methane
The American Carbon Registry (ACR) last week unveiled the first reduced-methane rice project, which will avoid the emission of 6,700 tonnes of carbon dioxide (tCO2e) over 5,000 acres in California. The same day, ACR announced the expansion of its rice cultivation protocol beyond California to the Mid-South states, including the Mississippi River Delta where much of the rice in the United States is grown. Following the lead of voluntary standards, California is ever so slowly inching toward acceptance of the first agricultural-based offsets into its cap-and-trade program. Regulators also held a workshop last week on a protocol that would incentivize dry seeding or early drainage of rice fields, therefore reducing methane emissions. The protocol will go up for vote in September and could go into effect in January 2015.

FINANCE AND ECONOMICS

Hey, can you spare $30 billion dollars?
Ecosystem services provided by tropical forests are estimated at around $6,120 per hectare per year, but total yearly forest loss still averaged 13 million hectares between 2000 and 2010. Investing $30 billion per year in REDD+ programs could accelerate the transition to a green economy and ensure that REDD+ becomes an important source of income for poor rural communities, according to a new report by the International Resource Panel and the UN REDD Programme. And it’s a drop in the bucket compared to the $480 billion paid in annual global fossil fuel subsidies. But because deforestation is driven by consumption patterns in virtually every sector of the economy, REDD+ must be integrated into all economic planning processes, the report argues.

Cropping up together
A new analysis by consulting firm Trucost compared the value per hectare of monoculture soybean and palm oil cultivation in Brazil to agroforestry – and the results are striking. Growing palm alongside other crops such as cocoa, passion fruit, pepper, and bananas yielded an average of $176,044 per hectare – three times higher than the per-hectare value of palm monocultures. For soybeans, agroforestry techniques yielded 11% more value per hectare ($488 versus $441). Corporate sponsors of the study included seed giant Monsanto and Brazilian beauty company Natura Cosméticos. The natural capital analysis took into account GHG emissions from fertilizer use; provisioning services such as food, timber, and water; and regulating services such as climate stability.

SCIENCE AND TECHNOLOGY

Till tree death do us part
The Amazon’s carbon balance is a matter of life and death: living trees take carbon dioxide (CO2) out of the air as they grow, and dead trees put the GHG back into the air as they decompose. A new NASA-led study published in Nature Communications has confirmed that natural forests in the Amazon remove more CO2 from the atmosphere than they emit, reducing global warming. Lead author Fernando Espí­rito-Santo found that each year, dead Amazonian trees emit an estimated 1.9 billion tons (1.7 billion metric tons) of carbon into the atmosphere. Comparing that to various scenarios, carbon absorption by living trees always outweighed emissions from the dead ones.

HUMAN DIMENSION

Cleaner cow farts
Colombia’s National Development Plan calls for reducing the country’s cattle land from 38 million to 28 million hectares while increasing the number of cattle. The policy – along with some international financing – has reigned in a new era of agroforestry in which ranchers are beginning to raise cattle alongside plantains, coffee, and valuable hardwoods. Though these silvopastoral systems cost between $1,000 and $2,000 to implement, most farmers see a return on investment within two years as cows begin to produce more milk and they rely less on expensive fertilizers. Agroforestry also has an interesting side-benefit for the climate. A study from the International Center for Tropical Agriculture found that cows eating forage from silvopastoral systems produced 20% less methane.

Storm troopers
Despite accounting for just 0.7% of tropical forest area, mangrove deforestation makes up as much as 10% of GHG emissions from deforestation globally. Delegates to the recent Restoring Coastal Livelihoods conference in Indonesia convened to try to reverse the damages of the “blue revolution” that has been converting mangroves to aquaculture ponds for shrimp production. The issue has become more urgent after Typhoon Haiyan, with a death toll north of 6,200 people in the Philippines, tragically demonstrated the dangers of destroying a coastal country’s natural storm protection. “I’m proposing for the Philippines…a minimum 100-meter solid green belt of mangroves and/or beach forests,” Jurgenne Primavera, a mangrove specialist, said.

Fighting for our forests rights

Indigenous and forest peoples have demanded that the international community respect their rights to the forests, lands, territories and natural resources, a demand expressed in the Palangka Raya Declaration on Deforestation and the Rights of Forest Peoples. The declaration – published after an international workshop held earlier this month in Central Kalimantan – includes a demand to halt the production, trade and consumption of commodities derived from deforestation, land grabs and other violations of the rights of forest peoples. It also demands an end to the invasion of forest peoples’ lands and forests by agribusiness, extractive industries, infrastructures, energy and green-economy projects that deny their fundamental rights.

STANDARDS AND METHODOLOGY

Hug a tree in the city
The Climate Action Reserve (CAR) last week released a revised Urban Forestry Protocol after they received feedback that version 1.0 “presented significant hurdles to the successful implementation of urban forest offset projects.” Draft Version 2.0 thus shortened the crediting period, includes a buffer pool to insure against reversals, and introduces social and environmental co-benefits of urban forestry. CAR is holding a workshop in San Francisco on March 26 to solicit comments on the revisions (also available through a webinar), and the public comment period will be open through April 25. CAR is used on the voluntary carbon market, but the California Air Resources Board may consider CAR’s improvements for the state’s compliance Urban Forestry protocol.

PUBLICATIONS

Sharing the REDD wealth
Until 2013, Brazil had been on a six-year winning streak in reversing deforestation, but the streak ended last year when deforestation rates surged 28%. The country is hoping to tap into REDD+ financing to help get back on the right track. And a recent report called Contributions to the National Strategy for Emissions Reduction from Deforestation and Forest Degradation (REDD+): A Proposal for Allocation Between States and the Union pitched a plan that would divide both revenues and responsibilities between the Brazilian states and the federal government, including an 80-20 split of REDD+ units in favor of the states.

Learning the right lessons

A recent paper entitled REDD+ as performance-based aid: General lessons and bilateral agreements of Norway reviewed the key challenges in designing and implementing performance-based aid and examined four bilateral REDD+ agreements Norway has with Tanzania, Brazil, Guyana and Indonesia. One of the main challenges is that donors are too eager to spend money. Payment should only be made if the results are achieved, but there is immense pressure for donors to spend allocated budgets because underspending is seen as a sign of poor planning and performance. And the lessons learned included being realistic about the challenges and not basing all REDD+ aid on performance.

Errors of omission
In November 2013, the US federal government pegged the social cost of carbon at $37/tCO2e in 2007 dollars for 2015, an increase from the $24/tCO2e estimate in 2010. But a new report called Omitted Damages: What’s Missing from the Social Cost of Carbon by EDF, the Institute for Policy Integrity at NYU School of Law and the Natural Resources Defense Council finds that estimate to be on the low side because of the omission of many climate impacts. “The public picks up the tab for the types of extreme weather events that come more frequently with a changing climate,” said Gernot Wagner, a Senior Economist at EDF. “But the government is not fully assessing climate risks in its decision-making.”

JOBS

REDDX Manager – Forest Trends
Based in Washington, D.C., the REDDX Manager will organize and develop new partnerships, communication and fundraising strategies. The successful candidate will have a master’s degree, two to three years of experience managing international programs with multi-million and multi-year budgets, and knowledge of REDD+ finances and payments for ecosystem services (PES) mechanisms. French, Spanish and Portuguese language skills preferred.
Read more about the position here

REDD+ Coordinator – VCS
Based in Washington D.C., the REDD+ Coordinator will join VCS for one year, with the possibility of permanent employment; and will be responsible for coordinating Jurisdictional and Nested REDD+ pilot programs globally. Eligible candidates must have excellent knowledge of REDD+ voluntary and regulated carbon markets, and the implementation of REDD+ programs and/or projects, with a minimum of two years of work experience in the field. Proficiency in French or another language relevant to the Africa or Southeast Asia regions preferred.
Read more about the position here


Senior Program Officer – VCS

Based in Washington D.C., the Senior Program Officer for Agriculture, Forestry and Other Land Use (AFOLU) will be the key point of contact for project developers on AFOLU methodology, and promote the adoption of the standard. The successful candidate will have a minimum of four years of professional experience working in the land use sector, understanding of carbon market concepts (both voluntary and compliance), and willingness to travel, including internationally.

Read more about the position here

Director, CGIAR Research Program on Forests, Trees, and Agroforestry (FTA) – CIFOR
Based in Bogor, Indonesia, the Director will provide intellectual leadership in building a shared vision for the FTA research agenda; facilitate and oversee research outcomes; and manage work plans, budgets, and reporting. The successful candidate will have a PhD in a relevant discipline, at least 15 years of experience, an open and transparent leadership style, and excellent interpersonal and communication skills.

Read more about the position here

Agroforestry Systems Scientist – World Agroforestry Centre
Based in Yaounde, Cameroon, the Agroforestry Systems Scientist for the West and Central Africa region will provide scientific leadership in on-farm agroforestry research on smallholder farms in the humid tropics, with a focus on management systems for cocao, fruit, timber and coffee. The position requires a PhD in Agricultural Science and a minimum of five years work experience, at least four of which must be in developing countries.

Read more about the position here

ABOUT THE FOREST CARBON PORTAL

The Forest Carbon Portal provides relevant daily news, a bi-weekly news brief, feature articles, a calendar of events, a searchable member directory, a jobs board, a library of tools and resources. The Portal also includes the Forest Carbon Project Inventory, an international database of projects including those in the pipeline. Projects are described with consistent ‘nutrition labels’ and allow viewers to contact project developers.

ABOUT THE ECOSYSTEM MARKETPLACE

Ecosystem Marketplace is a project of Forest Trends, a tax-exempt corporation under Section 501(c)3. This newsletter and other dimensions of our voluntary carbon markets program are funded by a series of international development agencies, philanthropic foundations, and private sector organizations. For more information on donating to Ecosystem Marketplace, please contact info@ecosystemmarketplace.com.

 


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General Mills, Colgate-Palmolive Announce Deforestation-free Policies For Palm Oil Sourcing

Two consumer product giants were met with support from environmental groups but were also pushed to make changes faster when they joined the wave of companies committing to deforestation-free palm oil with support from environmental groups.

This article was originally published on Mongabay.com. Click here to read the original.

25 March 2014 | On Monday General Mills and Colgate-Palmolive both announced palm oil policies that go beyond standards set by the Roundtable on Sustainable Palm Oil (RSPO), the industry’s main certification body. The policies include provisions to protect wildlife-rich rainforests and carbon-dense peatlands, while respecting the rights of local communities.

Orphaned Orangutan in Central Kalimantan.Environmentalists say greener palm oil is better for orangutans, whose habitat in Malaysia and Indonesia is being rapidly destroyed for oil palm plantation. Photos by Rhett A. Butler.

The policies are similar to commitments made in recent weeks by Kellogg’s, Mars, and Orkla, although both have shortcomings according to environmental campaigners. Greenpeace says that Colgate-Palmolive’s 2020 target for implementing its policy should be moved up to 2015, while the Union of Concerned Scientists (UCS) says General Mills policy should use the “industry standard” definition of High Carbon Stock forests when determining whether palm oil is free from deforestation.

Nonetheless both groups welcomed the commitments and urged more companies to establish similar deforestation free policies for palm oil in order to show growers there is indeed a market for greener palm oil.

“It’s really up to major brands to turn the tide on the palm oil industry,” said Sharon Smith of the Union of Concerned Scientists, which recently released a scorecard ranking American companies on their palm oil sourcing policies. “If companies start demanding palm oil that’s deforestation-free, peatlands-free and exploitation-free, palm oil producers will start providing a better product. This better oil will also reduce emissions. It’s a win-win for consumers and the environment.”

“Indonesia’s forests are precious to all of us: they are the earth’s lungs, people’s homes, and habitat to countless animals including the endangered Sumatran tiger. But if we don’t stop forest destruction all of this will disappear,” said True Blood actress Kristin Bauer, who recently joined Greenpeace’s campaign to push for more forest-friendly palm oil. “More brands need to step up and follow Colgate’s lead.”


Deforestation in Malaysian Borneo for oil palm plantations.

Greenpeace added that the commitments put more pressure on Proctor & Gamble (P&G), a Colgate-Palmolive competitor that is currently the focus of an aggressive campaign by the activist group.

“With pledges from Unilever, Nestlé, L’Oréal and now Colgate-Palmolive to clean up their supply chains, P&G is choosing to lag behind its competition,” said Areeba Hamid, forest campaigner at Greenpeace International, in a statement. “There’s a huge difference between Colgate’s detailed policy and P&G’s empty commitment to the Roundtable on Sustainable Palm Oil’s weak certification scheme. It’s time P&G joined Colgate, Unilever, L’Oréal and Mars in guaranteeing its products are free from forest destruction.”

Palm oil production is the largest direct driver of deforestation in Malaysia and Indonesia, whose forests are home to endangered orangutans, tigers, rhinos, and elephants.

Additional resources

Indonesian Fires Bring More Haze to Southeast Asia

Unseasonal forest fires in Indonesia are causing respiratory problems and generating carbon emissions. The World Resources Institute uses the new Global Forest Watch tool to find out why and how these fires can be prevented.

This article was originally published on the World Resources Institute website. Click here to read the original.

4 March 2014 | The governor of Indonesia’s Riau province issued a state of emergency last week as thick haze blanketed large areas of the region, closing down schools and airports. According to local officials, more than 22,000 people have been impacted by respiratory problems–with the potential for many more if winds shift the haze to other more densely populated areas such as Kuala Lumpur or Singapore.

Clearing land for timber and agriculture is likely to blame. According to data from Global Forest Watch—a new online system that tracks tree cover change, fires, and other information in near-real time—roughly half of these fires are burning on land managed by oil palm, timber, and logging companies—despite the fact that using fire to clear land is illegal in Indonesia.

This latest haze emergency is reminiscent of a similar one that flared up in Indonesia in June 2013 (see WRI’s coverage of the fires crisis). So what’s different this time around, and what’s the same? We’ll attempt to answer these questions using satellite technology and Indonesian government data found in Global Forest Watch.

How Is this Haze Crisis Similar to that of June 2013?

Our new analysis detected 1,449 “high confidence” fire alerts on the island of Sumatra from February 20-March 3, 2014. Like last June, the fire alerts—which are detected using NASA’s Active Fire Data—are concentrated in the island’s Riau province.

 

Fire Alert

 

And like the June 2013 crisis, almost half of the fire alerts fall within timber, palm oil, and logging concessions.

 

Fire Graph

 

Very distinct clusters of fires can also be seen within specific company concessions. Using Global Forest Watch, everyone can explore these patterns, see the precise locations of the fires day-by-day, and determine which companies are operating in these areas.

 

Fire Image

 

A list of the affected concessions and companies is available at the end of the document. Closer investigation on the ground by Indonesian authorities is needed to pinpoint the exact causes of the fires at these locations and determine whether companies have perhaps broken the strict laws that limit the use of burning.

What Is Different About the New Haze Crisis?

February is an unusual time of year for fires in Indonesia—the normal burning season is April to October. This February has, however, been one of the driest on record in Indonesia and neighboring countries, affecting crop yields and setting the stage for burning. These sorts of dry spells may become more frequent and severe as climate change worsens.

These unseasonable fires are concerning, but there are also some positive, recent advances that could help prevent them from flaring up in the future. For one, stronger policy and market practices are disincentivizing and even penalizing burning and forest-clearing in Indonesia. Singapore, for example, is proposing a new law that would allow it to levy fines on companies—foreign or domestic—that cause transboundary haze events that impact the country. In the current draft bill, companies could face fines of up to US$238,000 for contributing to haze that crosses national borders. This is a rather small fine for the large companies that operate in Indonesia, but the potential impact on their reputations sends a strong signal that businesses need to do a better job of fire prevention.

Additionally, Wilmar, the world’s largest palm oil trader, recently pledged to produce and buy only deforestation-free and fire-free palm oil. Companies may see their valuable contracts with this major trader jeopardized if their concessions are affected by fires.

Furthermore, the world can now monitor these events live through Global Forest Watch. This new platform, launched on February 20 by WRI and more than 40 partners, provides near real-time information on fires and concession data.

More Action Is Needed to Prevent Fires in Indonesia’s Forests

There’s more that Indonesia and other countries should do to address the forest fires problem. While Global Forest Watch relies on the best data available, the Indonesian government has not yet released its most up-to-date concession information. The concession data shown above from the Indonesian Ministry of Forestry gives us a good idea of which companies are operating where, but it has several known inaccuracies. More transparency on the exact locations of concessions would make it easier to monitor and hold companies accountable when fires flare.

This transparency may improve in the near future. In October 2013, ministers from five Southeast Asian nations—including Indonesia—met to discuss haze prevention and agreed to share concession data on a country-to-country basis (though not make it public). Furthermore, the Roundtable on Sustainable Palm Oil (RSPO), an industry group, has adopted a resolution that commits their member companies to share concession data openly.

In the meantime, companies, NGOs, governments, and concerned citizens can go directly to Global Forest Watch to monitor fire alert data and overlay it with data on concessions, protected areas, and land cover. With this information easily accessible, companies, local law enforcement, and governments cannot use ignorance as an excuse for inaction.

  • LEARN MORE: For more WRI analysis on Indonesia’s fires, check out our blog series.

 

Fire Table

 

Ariana Alisjahbana is a research analyst at WRI’s Forests Initiative. She can be reached at ariana.alisjahbana@wri.org.James Anderson is Forests Communications Officer for WRI’s People and Ecosystems Program. He can be reached at janderson@wri.org. Susan Minnemeyer is WRI’s Geographic Information Systems (GIS) Lab Manager. She can be reached at susanm@wri.org.Fred Stolle is Program Manager for WRI’s Forest Landscape Objective. He can be reached at fstolle@wri.org. Nigel Sizer is the Director of WRI’s Global Forest Initiative. He can be reached at nsizer@wri.org.
Additional resources

Palm Oil: From Plantation To Peanut Butter

Palm oil is found in hundreds of products but it’s virtually unheard of by the average consumer despite its production destroying huge swaths of forest in tropical places like Indonesia and Malaysia. But the Union of Concerned Scientists is trying to help change that by promoting awareness as a key step in achieving deforestation-free palm oil development.

This article was originally posted on the Union of Concerned Scientists’ (UCS) blog. Click here to read the original.

3 March 2014 | A couple of years ago, as I waited for my morning coffee to brew and my toast to, er, toast, I was reading the label of my peanut butter jar and had my entire organic, fair trade world thrown for a loop when I saw that my peanut butter
contained palm oil.

Palm oil is everywhere. It is found in thousands of products we use every day from cookies, ice cream, and doughnuts to lotions, soaps, and make up. While there are many benefits to the production and use of palm oil, it is also a major driver of tropical deforestation. How was it that my choices as a consumer, which I thought were pretty “green,” could stand in such contrast to the work I’d spent the better part of a decade devoted to?

What I’ve come to learn over the last few years is that the convoluted path that palm oil takes from plantation to product makes it very difficult for even the most environmentally conscious consumers to know whether the products they buy contribute to deforestation. It’s taken me many years and a lot of firsthand experience to fully understand the scope and scale of the problem.

Starting at the beginning

Corcovado National Park

Primary tropical rainforest in Corcovado National Park, Costa Rica. When forests like this are cleared for palm oil production about 80% of the biodiversity is lost.

The first time I ever heard of palm oil was while studying abroad as an undergrad. I’d just spent a week camping on the beach in Corcovado National Park in Costa Rica where I had my first exposure to intact tropical forests. I woke up every morning at dawn to the sound of countless species of birds and insects; saw Agouti, Kuwaiti, and Peccaries (the tropical equivalent of rabbits, raccoons, and wild pigs) every time I hiked through the forest; and dodged mangoes and cashews thrown by White Faced Capuchin monkeys.

Shortly after our bus left the park we drove through a palm oil plantation. What I saw was worlds apart from the forest I’d just left. Gone were all the diverse species of plants and animals, replaced instead with row upon row of identical palm trees, with very little growing underneath, and no animal life in sight.

As I’d come to learn later, only about 15 percent of animal species that are found in primary forests remain after the forest is converted to palm plantations. That two-hour drive was my first experience with the stark reality of what we lose when forests are cleared and replaced by palm oil.

Getting the whole picture

Palm Oil Plantation

A palm oil plantation on Sumatra in Indonesia. Over the last twenty years plantations like this one have replaced millions of acres of natural forests.

It wasn’t until nearly ten years later, though, when I again spent two hours looking at nothing but palm oil plantations, that the full scope of the problem really hit me.

This time, I was flying over Sumatra, Indonesia. From take-off until landing the view as far as I could see was nothing but palm oil plantations. What I’d seen in Costa Rica was just the tip of the iceberg.

Globally, there are more than 16 million ha of palm oil plantations. That’s an area larger than the state of Georgia! Most palm oil plantations are located in just two countries, Indonesia and Malaysia. While not all of that area has come at the expense of forests, it’s estimated that between 30 and 80 percent of oil palm plantations in those two countries are the result of deforestation. Those forests are some of the last remaining habitat of critically endangered species, like the Sumatran Tiger, Rhinoceros, and Orangutan. When I toured rescue facilities on Sumatra and Borneo I saw dozens of orangutans saved from palm oil plantations, many of which were orphaned babies who’d lost their homes and mothers when the forest was cleared.

Deforestation doesn’t just affect the home of those animals, but ours as well. The clearing of tropical forests releases massive amounts of carbon dioxide, the leading cause of climate change, into the atmosphere.

Worldwide tropical deforestation accounts for around 10 percent of all climate change emissions, and one study estimates every year from 2000 to 2010 land-use from palm oil in just Indonesia produced as much global warming pollution as between 45 and 55 million cars. Flying over the sea of oil palms, spotting the occasional plume of smoke as producers illegally burned their lands for replanting, it was not hard to imagine how demand for palm oil is having such global effects.

What can be done?

Baby Orangutan

Baby orangutans being transferred at a rescue center in Kalimantan, Indonesia. Many orangutans at the center had been rescued from new palm plantations.

Which brings me back to my peanut butter. Having seen firsthand the destruction and devastation that irresponsible palm oil development can cause, I was left wondering if the food I eat and the products I use are contributing to the problem. The answer is that it’s very hard to know for sure.

The road from plantation to product is long and complex. At many points along the supply chain palm oil from different plantations is mixed. This allows palm oil plantation owners who are destroying forests to hide behind the lack of transparency. The best way to hold these bad actors accountable is for the companies that make our cookies, chocolates, conditioners, and cosmetics to commit to not buy any palm oil that causes deforestation and to trace their palm oil back to its origin to ensure it is deforestation-free.

And the best thing for me and you to do to protect tropical forests? Well, the first thing you can do is breathe a sigh of relief, because it’s OK to keep buying products that contain palm oil (no need to give up those Girl Scout cookies quite yet). For reasons I won’t get into here (they involve words like “fungibility” and can be found in our report Recipes for Success), boycotting palm oil has little effect on the amounts and ways it’s produced.

Part of the problem with palm oil is that very few of us have heard of it. Most of us don’t know it’s an ingredient in the products we buy or that it contributes to global warming. So, a few colleagues and I developed an infographic explaining this hidden part of the climate problem.

So be part of the solution—view the infographic.

Then help raise awareness about what palm oil is, how it’s causing global climate change, and how we can pressure companies to adopt deforestation-free palm oil policies.

It may seem like a small thing, given the magnitude of the problem, but little things add up. For instance, last December when the world’s largest trader of palm oil announced a no-deforestation commitment, it called out the role consumer demand played in shaping its policy:

We know from our customers and other stakeholders that there is a strong and rapidly growing demand for traceable, deforestation-free palm oil, and we intend to meet it as a core element of our growth strategy”

The time to act is now, and companies will listen to you, so what are you waiting for?

Caleb May-Tobin is a policy analyst for the UCS’ work on palm oil. He can be reached at cmay-tobin@ucsusa.org.
Additional resources

March 3 Deadline: REDD Training For Southeast Asian Journalists!!!

REDD+ is complicated business, even for seasoned forestry professionals. Now CIFOR is organizing a training workshop for Southeast Asian journalists interested in gaining a better understanding of forestry science in general and REDD+ in particular.

This article was originally posted on the website for the Forests Asia Summit 2014. Click here to read the original.

24 February 2014 | The Center for International Forestry Research (CIFOR) is accepting applications from early to mid-career journalists in Southeast Asia to attend the residential workshop: “Reporting on Forests in Southeast Asia”. The workshop provides journalists with the rare opportunity to see the inner workings of forestry science, through hands-on experience from the field to the conference table.

Held at the CIFOR HQ in Bogor, Indonesia from 30 April – 4 May, 2014 (followed by the 2-day Forests Asia Summit on 5, 6 May), the program will give journalists an opportunity for one-on-one interviews with leading scientists, policy makers and science communicators to explore and understand various issues affecting Southeast Asia’s forests and people including: coastal forests, food security, illegal logging, timber trafficking, livelihoods and climate change.

Click here to apply.

The program will also include seminars on finding the human story in science, reporting politicized science, understanding a research paper, future social media trends and understanding statistics.

Fellows will gain a better understanding of forestry science research methods, cultivate scientific resources and sharpen their reporting skills through innovative teaching methods and a field visit. Fellows will also attend the two-day Forests Asia Summit, and will return to work with dozens of story ideas they can pursue.

Fellows must have the support of their media organization to participate, with the idea that stories they produce coming out of the Summit will be published in their respective media outlets.

What does the Fellowship include?
The Fellowship award includes accommodation, airport transfer, meals, tuition and travel support.

Who should apply?

You should be:

  • A working print, radio, TV or online journalist with at least 2 years of reporting experience
  • A national of an ASEAN member country
  • Interested in forest issues

Apply now

Your application should include:

  • This completed form
  • Your resume/CV
  • Three samples of professional work completed in the last two years (PDF, Word, YouTube. Please advise if VHS or DVDs need to be posted).
  • Letter of support from your Editor confirming:
    • Your participation in the Fellowship
    • Stories coming out of the Fellowship and the Forests Asia Summit will be published by your media organization

Send applications to Michelle Kovacevic at m.kovacevic@cgiar.org by 5pm GMT, Monday 3 March, 2014.

Additional resources

Keys To Launching Successful Forest Landscape Restoration

Forest restoration has the potential to bring millions of hectares of land back to life—a move that could help protect watersheds and ensure food security. The World Resources Institute (WRI) and the IUCN are hoping their global assessment of landscape restoration projects will spur further action.

This article originally appeared on the World Resources Institute website. Click here to read the original.

17 February 2014 | In 2011, WRI, the International Union for the Conservation of Nature (IUCN), and research partners published Landscapes of Opportunity, the first global assessment of where forest landscape restoration might be possible. This map helped build momentum toward the Bonn Challenge, a global commitment to start restoring 150 million hectares—an area three times the size of Spain—of lost and degraded forests by 2020.

Since then, several nations―ranging from the United States to Rwanda―have made Bonn Challenge restoration pledges, with pledges from others on the way. What some nations are asking now isn’t “what” restoration is or “where” it is possible, but “how” can it be done successfully?

To help answer this question, WRI and IUCN assessed more than 20 examples from around the globe of forest landscape restoration over the past 150 years, including both relative successes and failures. Examples came from countries such as Brazil, China, Costa Rica, Ethiopia, India, Nepal, Niger, Panama, Puerto Rico, South Korea, Sweden, Tanzania, and the United States. Lessons from these countries can not only provide insights into what works, but also inspire others to restore.

Forest Landscape Restoration in Action

History tells us that large-scale forest landscape restoration is possible.

Costa Rica witnessed its tropical forest cover decline from 85 percent of its land area at the start of the 20th century to below 30 percent by 1987. Yet through a series of restoration efforts—such as innovative financing approaches, policy reforms, and technical assistance to landowners—the nation’s forest cover climbed back to about 50 percent by 2010. This significant restoration yielded a variety of benefits—such as more forest products, ecotourism, and reduced soil erosion—for the nation’s environment, economy, and citizens.

South Korea restored its forests on a large scale after the Korean War. Between 1953 and 2007, forest cover expanded from 35 percent to 64 percent of the country’s total area, while its population doubled and its economy grew 300-fold. Those who say a country can’t grow its economy and restore its forests at the same time haven’t been to South Korea.

Costa Rica and South Korea are not alone. In the eastern United States, about 13 million hectares of forests recovered between 1910 and 1960. Puerto Rico’s forest cover climbed from 6 percent of the island around 1940 to about 40 percent in 2000. And farmers in southern Niger have miraculously restored 5 million hectares of agroforestry landscapes, improving their livelihoods and helping to reverse desertification.

These countries and others show that forest landscape restoration not only can be done, but can also deliver significant benefits to people and the planet.

Forest Restoration Chart

WRI identified 2 billion hectares of degraded land that offer opportunities for restoration. Click on the map to view a larger version.

Lessons from the Past

So how can countries effectively pursue forest landscape restoration? Three lessons are emerging from our assessment.

First, countries with successful restoration programs were motivated by a wide variety of benefits, including improved water quality, soil retention, increased wood supplies, and job creation. More recently, the focus has expanded to recreation, wildlife and biodiversity conservation, and climate change mitigation benefits.

Second, the desired benefits can change over time. Forest landscape restoration in the southern United States, for example, was driven in the 1920s by a desire to protect watersheds, reduce soil erosion, and restore wood supplies. Later, during the Great Depression of the 1930s, it became a way to restore jobs. In the 1960s, recreation emerged as a priority. And in the decades that followed, wildlife conservation and climate change mitigation became aspirations.

Third, we identified three common themes to successful restoration (Table 1):

  1. A clear motivation. Decision-makers, landowners, and/or citizens were inspired or motivated to restore forests and trees on landscapes.
  2. Enabling conditions in place. These included ecological, market, policy, social, and institutional conditions.
  3. Implementation capacity and resources. Capacity and resources were in place and mobilized to implement restoration on a sustained basis.

 

Restoration Table

Different factors were important in different case studies, suggesting that context is important. No one factor appears to be sufficient to trigger restoration success; a combination was typically needed. And the success factors are inter-related. For instance, performance monitoring can help people adjust their implementation strategies, as well as further motivate restoration by publicizing successes and benefits. Finally, the greater the number of success factors that are in place, the greater the likelihood of successful restoration.

Emerging Tools to Support Future Restoration Efforts

Building on this assessment, WRI and IUCN will be publishing a “Rapid Restoration Diagnostic” that helps identify which success factors already exist and which are currently missing within landscapes being considered for restoration. It is designed to help decision-makers identify factors that must be addressed before investing large amounts of human, financial, or political capital in restoration.

The diagnostic tool will be complemented by an IUCN and WRI handbook to help decision-makers and communities plan and implement on-the-ground forest and landscape restoration. Both are slated to be released in 2014.

In the past, forests have too often been sacrificed in the name of economic development. In the future, we envision forest landscape restoration as an integral part of economic development, providing jobs for rural communities and generating a multitude of renewable goods and services.

History tells us that large-scale forest landscape restoration has been done before. We believe it can be done again.

Let the restoration generation begin!

Stewart Maginnis is head of IUCN’s Forest Conservation Programme. Craig Hanson is the Director of WRI’s People and Ecosystems Program. He can be reached at chanson@wri.org.

Singapore Taps Voluntary Carbon Market With Energy-Efficient Projects

High-tech Singapore has been slow to embrace the voluntary carbon markets, but two in-country projects just sold carbon credits to fund massive upgrades to green LED lightbulbs and improved cooling systems. Ecoinvest Services, the offset retailer, is now looking for interested buyers.

13 February 2014 | Despite its status as a leading Asian economy, Singapore has lagged behind its neighbors in developing carbon offsets. But the sale of two energy efficiency projects could pave the way for more to come in this densely-packed, high-tech country. The first project replaced five chillers, and saved an estimated 2,169 tCO2e, through improved cooling installations at New Tech Park, while the second saves a similar amount – 2,397 tCO2e per annum – replacing inefficient light bulbs with LED lights at Jurong Town. The Jurong Town project refitted more than 86,000 LED in 588 residential building corridors, staircases and communal areas.

“[Singapore] has a great track record in technology so energy efficiency is a good fit,” explains Grattan MacGiffin, a manager at Ecoinvest Services, about the Swiss-based company’s decision to acquire 8,469 Verified Carbon Units (VCUs) from both projects.

India and China have traditionally provided the lion’s share of Asia-based offsets. But Southeast Asia’s total volume of voluntary carbon offsets grew to 3 million tonnes (MtCO2e) in 2012, according to Forest Trends’ Ecosystem Marketplace’s State of the Voluntary Carbon Markets report. Among the newer players contributing to growth in the region – including Thailand, Cambodia, Indonesia, Malaysia and the Philippines – Singapore was noticeably absent.

Not for long, hopes MacGiffin. The success of these initial projects could lead to more offsets in the future as both methodologies could be easily replicated throughout Singapore. “This will be a test case. Let’s see who buys these and maybe we can draw some parallels.”

Now that they have the credits, Ecoinvest will begin the search for buyers. Though it’s too early to identify any specific parties, MacGiffin believes the projects will appeal to a range of buyers because of their emphasis on technology investment and resulting social impact through reductions in energy costs. Businesses understand that it makes sense “to save money as well as to save the environment,” he said.

Sticking true to historic transactions, the European market might be interested. In last year’s State of report, energy efficiency projects in Asia grew significantly in market share and were predominantly purchased by those buyers. Last year’s report also witnessed a significant increase in the purchase of Asian offsets by Asian buyers – so there’s potential for Ecoinvest to find a buyer closer to the projects’ home.

These projects reflect an evolving market, MacGiffin said. “It’s not all about obvious large-scale projects anymore – [people] are exploring different locations, different technologies, different methodologies.”

This Week In Water: A Good Month For Green Infrastructure

The past month saw movement in the green infrastructure space with an assessment on green infrastructure valuation tools and a $50 million fund slated to implement natural infrastructure upgrades in Chicago. Also this month, two papers from Forest Trends offering thoughts on the social impact assessment of investments in watershed services programs.

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

24 October 2013 | Greetings! A new pair of papers from Forest Trends offers initial thoughts on guidance for social impact assessment (SIA) for investments in watershed services (IWS) projects. In addition to the intended environmental outcomes, IWS can have unplanned social or equity impacts. The papers include recommendations for IWS-specific SIA, and a literature review on gender and social impacts related to watershed investments. We invite you to take a look here.  

 

As far as the news, well – sometimes you just have to stop and contemplate your navel. In China, despite success in cleaning up the Xin’an River, officials are wondering whether “eco-compensation” levels were really high enough. A fascinating study of PES projects in Africa suggests that a buyer-seller structure might only work for carbon: for watershed services, perhaps it’s better to use a co-investment model that links different stakeholders and their respective assets (such finance, labor, or land). Another paper asks why valuation studies don’t seem to be influencing policy.


“Natural” or “green” infrastructure has had a good few weeks, with a new guidance report on source water protection, an assessment of green infrastructure valuation tools, and a $50 million pot announced to green up Chicago.

 

We wanted to let you know that Valorando Naturaleza, sister site to Ecosystem Marketplace, will host the second webinar in its report launch series Considering Compensations in Latin America: Carbon Management, Communities And Corporate Responsibility on Friday Oct 25th at 12pm EST. The webinar focuses on green decision making and south-south marketplace developments and will be presented in Spanish.

 

VN.org brings together private sector speakers including Keyvan Macedo of Natura (Brazil), Carlos Berner of the Santiago Climate Exchange (Chile), Valentina Lira of Concha y Toro Winery (Chile) and Sylvia Chaves of Florex (Costa Rica), to discuss how forest carbon offsets fit into their strategies and what their experience has been engaging in such deals. Register here to reserve your place.

— The Ecosystem Marketplace Team

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

Forest Trends’ Fundraising Challenge

Forest Trends’ work doesn’t grow on trees – we rely on readers’ generosity to help keep them standing.

Now through November 22, (and for the cost of a typical lunch!), donations to Forest Trends’ Crowdrise campaign could leverage up to $1 million in matching awards through the Skoll Foundation’s Social Entrepreneurship Challenge. Help Forest Trends expand our vital services to communities and experts on the front lines of ecosystem conservation. $10 will go a long way!

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EM Headlines

GENERAL

Julio Tresierra: Transforming Lives With Investments In Watershed Services

Julio Tresierra has always been obsessed with change. That’s what lured him from his native Peru five decades ago, and it’s what keeps him going at 71. Since then, he’s been traveling the world – both geographically and philosophically – in search of real-world solutions to our deepest societal problems. He found the answers living with the poorest of the poor and working on over 60 social development projects with various civil society organizations and government agencies across Asia, Latin America, and Africa. Eight years ago, Tresierra went to work for the environmental NGO World Wildlife Fund (WWF) in cooperation with CARE, a humanitarian organization specializing in assisting marginalized populations. The result is a global network of pilot projects called Equitable Payments for Watershed Services.

 

Tresierra reasoned that if farmers and ranchers improved the areas upstream of a watershed by preventing sedimentation and erosion, then residents, businesses and landowners downstream, who rely on healthy watersheds to conduct business, would be willing to pay for the service. It would help lift farmers out of poverty, he thought, and also generate a sustainable cycle: farmers in upland areas, which are usually those who live in extreme poverty and grow food for consumption, would benefit from better crops to restore water quality. This would also enable them to sell their crops to local markets or even trade with foreign buyers. Ultimately, an investments in watershed services (IWS) scheme would allow for cooperation between the water sector and other stakeholders operating in a basin, instead of conflict and competition.

Keep reading at Ecosystem Marketplace.

Restoration vs. Renewable Energy: Amateurism Doesn’t Pay

Critics of renewable energy investments usually focus on the relatively high cost of the power they generate. New project proposals require sophisticated financial models that compare permitting, manufacturing, and operating costs against projected power generation rates and pricing over time. On the other hand, environmental restoration proposals are rarely assessed using return on investment calculations. In fact, project developers may need only a before-and-after illustration and a willing land owner to receive funding for a new project. Restoration investments may face criticisms, but not due to their estimated output being more expensive than alternatives. Output is rarely measured using metrics that the public can understand and thus frequently not valued at all.

So why is it, asks Damon Hess of Sitka Technology Group, that the requirements for funding renewable energy are so much more onerous than those for environmental restoration? Public investments in renewable energy projects are meant to spur larger private investments and thus are held to a higher standard, he writes. Public investments in environmental restoration are meant to make us feel good about our commitment to “mother nature” and thus are given treated with kid gloves.

Read Hess’s opinion piece here.

Understanding Social Impacts of Watershed Investments

A new pair of papers from Forest Trends offers initial thoughts on guidance for social impact assessment (SIA) for investments in watershed services (IWS) projects. IWS, like any intervention, likely will result in some negative social or equity impacts, as well as hopefully some positive ones.


The main paper provides recommendations for carrying out SIA in the watershed investment context. The paper draws on an extensive literature on the theory and practice of SIA, on the authors’ experiences of applying SIA in other natural resource contexts, and on discussions from a workshop with IWS program practitioners. It sets out the case for SIA as an issue of self-interest for IWS interventions. “Good practice” SIA can strengthen the design of IWS programs in terms of social sustainability, reduce risk levels, increase capacity for adaptive management, and (if done in a participative way) increase stakeholder participation and ownership of project objectives. An accompanying literature review of gender and other social impacts of IWS projects looks at what the existing literature has to say about wider social impacts of IWS, and examines gender issues specifically in greater detail.

Read the paper.
Read the literature review.

A Changing Climate: Implications for Business

The Intergovernmental Panel on Climate Change (IPCC)’s report Climate Change 2013: The Physical Science Basis is the most detailed assessment of climate science ever. Over 2,000 pages of scientific consensus make clear that climate change is real, that it is happening now and that human influence on the changing climate is more certain than ever.

To help the business community better understand the implications of climate change for their business model, the European Climate Foundation, which promotes energy and climate policy that reduces carbon emissions in Europe, have produced a digestible summary of the IPCC report. Published by the University of Cambridge’s Judge Business School and the Programme for Sustainability Leadership and supported by the ECF, Climate Change: Actions, Trends and Implications for Business distills key findings into an easily readable, but non-the-less scientifically accurate document. The report summarizes scientific basis of climate change projections and anticipated impacts and includes infographics charting the “pathway to two degrees,” i.e. the targeted maximum increase in global temperatures.

Learn more here.

In The News

POLICY UPDATES

A Post-2015 Goal on Water?

There’s a growing drumroll to include a water goal in the post-2015 development agenda’s sustainable development goals; the Millennium Development Goals noticeably lacked one. At a high-level meeting in Budapest earlier this month, a ‘Budapest Statement‘ was developed calling for a dedicated water goal. Targets would include universal access to safe drinking water and sanitation, a shift to integrated basin-level management, reducing pollution and scaling up collection, treatment, and re-use, and increased resilience against the water-related impacts of global changes. UN Secretary General Ban Ki-Moon says he supports a water goal as well: “Water holds the key to sustainable development.”

Read more from IISD News.

Judge Forces EPA’s Hand on Water Pollution Standards in the Mississippi

A decision handed down by a federal judge last month gives the US Environmental Protection Agency (EPA) six months to set numeric (i.e. quantitative) nutrient standards in the Mississippi River basin, or explain why standards aren’t needed. The EPA has since 2008 taken the position that numeric standards should be developed by states, as it did in the case of Florida. But the agency declined to comment on whether it believed standards were needed at all. Environmentalists challenged that in court. Now the EPA has to either find that water quality issues in the 31-state basin don’t merit pollution standards (even though the agency has long said these problems are severe), or undertake a formal rulemaking. That determination need not be limited to the scientific basis for standards, but can consider other factors such as social impacts – an outcome welcomed by farm groups who had taken the EPA side against environmentalists.

E&E News has the story.

The Fate of All Those Valuation Studies

Ecosystem services valuation methodologies are, after two decades of sustained academic attention and debate, finally (reasonably) well-accepted in the environmental economics community. But are they translating into policy change? A recent Institute for Sustainable Development and International Relations (IDDRI) project examined hundreds of journal articles on ecosystem services valuation (ESV) in search of evidence of influence on decision making. What they found: in just 2% of cases, ESV clearly influenced a decision.


Even for the “same half-dozen” examples repeatedly cited, it’s not clear that ESV drove decision-making. “The case that came up most often was New York City paying to protect the Catskills watershed,” explains Raphaí«l Billé, the project’s coordinator. “As the story goes, this was done after an economic valuation showed that it would be cheaper than letting the watershed degrade and building a sophisticated water treatment plant. There is evidence, however, that the decision was made first, and that an economic valuation was commissioned later to strengthen its legitimacy.”

Read an interview with Billé in the latest Marine Ecosytems and Management newsletter (page seven).
Read a paper on IDDRI’s findings.

GLOBAL MARKETS

World’s Largest Brewer Looks Beyond the Fence

In its efforts to manage water and energy consumption, Anheuser-Busch InBev, the world’s biggest brewer, has found it needs to think beyond its own walls, at both its supply chain and the watersheds in which it operates. “Access to safe water is critical for our business and the communities where we live and work, so we need to have sustainable water resources in the areas where we operate,” says Daniel Navaresse, global director of energy and fluids for the company. He says the company plans to support watershed protection efforts around its facilities in seven countries, implement best management practices in key barley-growing areas, and improve efficiencies in beermaking – all by 2017.

Read more at E&E News.

New Report Charts the Path to Natural Infrastructure Investments

A new report from the World Resources Institute, Earth Economics and Manomet Center for Conservation offers a roadmap to investing in natural infrastructure as a complement or supplement to engineered solutions. Natural Infrastructure: Investing in Forested Landscapes for Source Water Protection in the United States sets out the economic and scientific basis for source water protection for water managers. The focus is on concrete lessons, with case examples of successful programs, a review of available tools and approaches, and additional resources for developing a source-water protection strategy in your own watershed. “Natural infrastructure has long been recognized by state drinking water administrators as a powerful and sustainable approach for protecting sources of drinking water and thereby, public health,” said Jim Taft, Executive Director of the Association of State Drinking Water Administrators in a press release. “This guide will be of considerable value to states by providing comprehensive information about innovative tools that will help bring the use of natural infrastructure approaches to scale.”

Read a press release.
Access the report.

Nutrient Trading Eyed in Georgia

Calhoun Utilities may be the site of Georgia’s first nutrient trading program. Plant upgrades to control phosphorus pollution in Weiss Lake would cost several million dollars upfront and another $800,000 annually, according to Jerry Crawford, the utilities’ director of water and wastewater. “With nutrient trading we find a way to remove the phosphorous a cheaper way,” Crawford said. “We would spend $800,000 a year at the waste water plant, or we can spend $200,000 dealing with the poultry farmers.” Participating poultry farmers could sell their nutrient-rich chicken litter to other agricultural producers for fertilizer, rather than letting it run off into the lake – a double win, says Crawford. The utility is currently engaging farmers in the area for pilots.

Read more at the Calhoun Times.

Florida Nitrogen Trade Awakens the Additionality Monster

A proposed purchase by the city of Jacksonsville, FL from a utility is being criticized for a lack of additionality – in other words, the trade lets Jacksonville get credit for nutrient reductions that would have happened anyway. “You’re using money to buy a credit for [pollution] reductions that have already been made. It’s not an addition,” said St. Johns Riverkeeper Lisa Rinaman. “We’re not going to move the needle if we use that [money] to buy water-quality trading credits.” But the utility says under the terms of the sale, its permitted allowance for nitrogen loading will be reduced by 67,000 lbs (i.e. the amount of the trade), meaning that the pollution reductions are real. Water quality trading in Florida was just expanded statewide in June 2013, after a pilot in the Lower St. Johns River basin.

Keep reading at the Florida Current.

Are Eco-Compensation Levels in Anhui-Zhejiang Deal High Enough?

In 2011, Anhui and Zhejiang provinces in China entered into an unusual bet. If water quality in Anhui reached basic standards, then Zhejiang province would pay Anhui 100 million yuan (US $16.4 million). But if pollution persisted, then Anhui would have to pony up. The central government contributed another 300 million yuan (US $49 million) in support of efforts. An article from Xinhua News offers an update: 2012 levels exceeded water quality standards, so Anhui won the bet (though downstream Zhejiang likely considered themselves winners as well).

 

Still, some say the pilot could be improved. Many industrial facilities and agricultural producers were required to cease operations along the Xin’an River. They were compensated for doing so, but many feel the compensation was not high enough. “After two years of treatment, water quality in Xin’an River has improved a lot. But residents in the upper reaches who sacrificed their own interests to protect the ecological environment have not got substantial returns,” said Gu Jiawen, a senior political advisor in Huangshan. “500 million yuan (US $82 million) is not much and even could not pay for the costs of the current environmental protection projects,” added Lu Haining, deputy head of the Huangshan Municipal Environmental Protection Bureau. “The amount of the compensation fund should be increased annually. Otherwise, it cannot be called compensation.”

Read more at XinhuaNet.

ADB Issues High-Level Guidance on Managing the Nexus

The water-food-energy nexus has gotten a lot of press recently, but solutions to nexus issues aren’t always clear. A new report from the Asian Development Bank (ADB) scopes the nexus in Asia and the Pacific and offers guidance on increasing water, food, and energy security. Recommendations include reforming governance, improving data and information, protecting freshwater resources, increasing agricultural water use productivity, and investing in strategic storage (including aquifer recharge). A core suggestion in Thinking About Water Differently: Managing the Water-Food-Energy Nexus – that governments need to take a much longer-term view of water management – isn’t new, but bears repeating.

Read a press release.
Read the report (PDF).

Who Needs a Buyer for PES Projects?

Recent work by the World Agroforestry Centre offers a different way of thinking about program design for payments for ecosystem services (PES). Lead researcher Sara Namirembe looked at 50 “tree-based” PES projects in Africa. She found that efforts based on a high degree of commodification of an ecosystem service, and the identification of a buyer for that service, tended to work only in the carbon space. Instead, “co-investment” models that establish partnerships between stakeholders with different assets (such as land, labor, or finance), instead of buyer-seller relationship, seem to be more successful on the continent. Namirembe suggests this is because have lower requirements for “proving” benefits, since there is no buyer: all participants are on a level playing field.

Read a blog post about the study here.

$4.5m for Marine Ecosystem Valuation in the Coral Triangle

A $4.5 million grant from the Global Environment Facility (GEF) will support efforts in the Philippines and Malaysia to value mangrove, sea grass and coral reef ecosystems services and inform policies and projects aimed at protecting these ecosystems. The “Coral Triangle” that lies between the two countries is the world’s biodiversity epicenter, say project funders. “This wealth of natural capital has the potential to be a major driver of inclusive green growth in the region, if we overcome some huge challenges. We especially need better resource governance regimes, measures to adequately value the environment for current and future generations when calculating economic benefits, and good scientific information to inform decision making and tradeoffs,” says Marea Hatziolos, Senior Environmental Specialist and the World Bank’s team leader for the project.

The Manila Bulletin has coverage

A $50m Green Infrastructure Fund for Chicago

Chicago Mayor Rahm Emanuel announced earlier this month that a $50 million fund has been dedicated to green infrastructure in the city, to be spent over the next five years. It’s welcome news, given that a previous stormwater settlement – the terms of which have been compared to Boston deciding to trade Babe Ruth to the Yankees – between the Metropolitan Water Reclamation District and the EPA included just $325,000 for green infrastructure. Chicago’s aging infrastructure network currently struggles to cope with even small volumes of stormwater. The fund puts Chicago back in the big league with cities like Philadelphia, Milwaukee, New York and Seattle – all of which are making serious investments in green installations. Work is set to start this fall.

Read more here.

Assessing Tools for Green Infrastructure Valuation

A new report from Natural England offers a useful review of valuation tools that estimate monetary benefits of green infrastructure. Nine different examples – including tools like NatCap’s INVEST and the Center for Neighborhood Technology’s ‘Guide to Valuing Green Infrastructure’ – are assessed against research standards for natural science and economics. Summaries of each tool are provided, as well as recommendations for appropriate use. The authors also report on the gaps they find: for example, the tools evaluated don’t seem to cover cultural and provisioning ecosystem services well, nor do they offer methods for valuing ponds, grass verges, or hedges.

Access the report here.

EVENTS

CDP Global Water Forum 2013

CDP’s Global Water Forum will bring together institutional investors, corporations and policy makers to discuss one of the most pressing issues facing the world today: water security. This virtual roundtable will be broadcast live online using cutting edge TelePresence technology, where leaders in their field will apply expert insights on the topic of water security. 31 October 2013. Online.

Learn more here.

Peoples, Land, and Water: The Natural Connection

Land and water has always been the immediate surroundings of peoples in all existences and continents. It has always been the base on which Man depends on for his existence. Land serves as home, a nutrient-filled and agricultural base, a thoroughfare, a religious base, et cetera. Water is all important beginning with the human body made up of water, water also serves as nourishment, used for cooking and the rivers, streams and oceans are home for very many habitats necessary for life. Wars have been fought to protect and preserve land and water space meaning that they are fundamental resource for human survival. Prevailing civilizations and epochs are chronicled with the effects these constituents have on human life. The conference therefore would like to explore these great connections from the humanities, science and social science perspectives. The hope of the conference is to discuss the interconnectedness or relatedness of these three theatres of life for existence/ living and chart a model or value system for the preservation of the resources and sustainable use by the human society. 3-6 November 2013. Contonou, Republic of Benin.

Learn more here.

Irrigation and Water Forum: Water and the Green Economy

The Irrigation and Water Forum (the new name for ICID.UK) and UEA Water Security are hosting a one day conference on Water and the Green Economy. The term ‘green economy’ implies economic growth alongside a decreasing consumption of natural capital. (UNEP’s working definition considers a green economy to be one which results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities). However the conference will mainly be from an agricultural water point of view, and the interpretation of agriculture, water and the economy will be wide; including water and environmental conservation, productivity, the food chain and the role of the private sector. Guidance on attendance and pricing is given below. The final programme is subject to adjustments. The conference is followed by a complimentary networking event. The event will be available to watch on-line to registered participants using the ICE website – contact Tim Fuller for further details. Tim.Fuller@ice.org.uk. London, UK. 8 November 2013.

Learn more here.

Webinar – Green Infrastructure as a catalyst to economic growth

Over the summer Defra and Natural England published a report on the role Green Infrastructure plays as a catalyst to economic growth. This study pulled together evidence from the UK and around the world demonstrating how investment in GI encourages inward investment and attracts increased visitor spending at a local level and saves environmental costs and provides health benefits which in turn boost productivity. As part of the work of the Green Infrastructure Partnership, Natural England will be running a webinar to introduce and discuss the findings of this report. The webinar will be held on 18th of November running from 10:00 until 11:30. If you would like to join this webinar please email Tom.Butterworth@NaturalEngland.org.uk. 18 November 2013. Online.

Learn more here.

Sustainable Water Management Conference

Presenting solutions for balancing the benefits of conservation with the costs, managing infrastructure, developing robust supply models and watershed management plans, water reuse, resource management, green infrastructure and more. 30 March – 2 April 2014. Denver CO, USA.

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

How Carbon Markets Save Lives And Slash Pollution

 

24 October 2013 | Some problems are complex. Others are simple. And often the twain converge.

Take, for example, the complex challenge of climate change. It’s caused by almost everything we do. It impacts us in ways that are difficult to fathom. And fixing it will require us to completely update the global energy sector.

Contrast this with the fairly straightforward problem of indoor air pollution. This one is caused by traditional stoves that burn dirty fuels inefficiently. It kills four million people every year. And fixing it will require us to replace about 1 billion traditional stoves with cleaner varieties.

Simple? Yes — but not easy, because those billion stoves are scattered all across the world, and replacing them also requires marketing, education and training. Aid agencies, nonprofits and commercial manufacturers have spent decades building up successful regional programs, but many are finding it difficult to get that extra bit of finance that can turn medium-sized efforts into larger ones and larger ones into massive ones.

Increasingly our research shows that the critical, final piece of finance is coming from a surprising source.

Stoves and fire pits, it turns out, pump hundreds of millions of tons of carbon dioxide into the atmosphere every year. That makes them part of the climate-change problem, which means we all have an interest in replacing them.

Over the years, standard-setting organizations like the Gold Standard and the Clean Development Mechanism have made it possible to generate carbon offsets by helping distribute clean cookstoves. In some cases, the credits provide deep discounts for poor people and aid agencies, but most of the money goes towards manufacturing, marketing, distribution and testing of stoves and fuels — activities that support a sustainable market that generates reductions many times higher than the number of credits generated.

Last year, carbon markets funneled more than $167 million into clean cookstove distribution, according to our most recent report produced in partnership with the Global Alliance for Clean Cookstoves and unveiled by former US Secretary of State Hillary Clinton last week in New York. That’s a huge proportion of the $246 million that carbon revenues have contributed to the stove sector over time.

The Funding Mosaic: Carbon Finance Is One Piece Of The Puzzle
2013-10-04-CookstovesChart.JPG

The Alliance

The Alliance itself has more than 800 partners around the world, and its aim is to get these efficient stoves into 100 million households by 2020. Our research shows that Alliance partners distributed 8.2 million stoves in 2012 — up from 3.6 million the year before — and that carbon finance helped pay for about half of them.

That’s especially good news for women — because it not only means better health, but less time spent gathering wood and more time spent doing other things that improve their lives. Indeed, the report found that 172 of the Alliance partners had made it a priority to empower women.

Armed with this understanding, social entrepreneurs can now tap into carbon finance to attack other seemingly intractable social challenges — like women’s rights, indigenous empowerment and subsistence farming.

To promote this understanding, the Skoll Foundation supports Forest Trends, the environmental nonprofit that publishes Ecosystem Marketplace and pilots efforts like the Surui Carbon Project in Brazil. Forest Trends was created by foresters to explore the interplay between economy and ecology, and it’s been invited to participate in the Social Entrepreneurs Challenge. Launched on September 30 by the Skoll Foundation and Huffington Post, this is the largest CrowdRise campaign ever, involving scores of social entrepreneurs from around the world. You can participate by shouting us out on Huffington Post or sponsoring us on CrowdRise, where we aim is to raise $45,000 by November 22.

As in cookstoves, a little often goes a long way. If enough of us meet our goals, Skoll will step up with matching funds that we’ll use to expand our coverage into these fascinating and important mechanisms.

Donate Here

Read about cookstoves in Spanish here.

Clean Cookstoves: How They Slash Carbon Emissions

Hillary Rodham Clinton: How The Global Alliance Works



Additional resources

How Forest Carbon Projects
Protect Themselves From Political Risk

Following the landmark use of political risk insurance on a REDD+ project in Cambodia, project developers elsewhere have also tapped into the insurance – most recently on a bamboo reforestation project in Nicaragua. Despite these examples of early mover activity, awareness of political risk coverage and how it can help finance carbon offset projects is still very limited.

27 August 2013 | In 2011, a few years after US-based land-use carbon consultant Terra Global Capital (TGC) launched its Oddar Meanchey REDD Project in Cambodia, it asked the Overseas Private Investment Corporation  (OPIC)  to shield its investment from political risk.

More specifically, the project helps Buddhist monks and other community members reduce greenhouse gas emissions from deforestation and forest degradation (REDD), and it does so in a way that could serve as a template for community-based REDD projects around the world. But it’s located in a country that most investors don’t understand. So TGC asked OPIC, the US government’s primary development finance agency, to provide protection against the risks of expropriation, war, and civil unrest – risks familiar not only to Cambodia, but to countries around the world. In the very first instance of political risk insurance for a forest carbon offset project, OPIC came through with $900,000 in political risk insurance – a service that the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) also offers.

Between the two of them, OPIC and MIGA have so far insured several carbon offset projects around the world designed to promote sustainable forestry, wind farms, and solar energy, allowing them to move forward in some of the world’s riskiest political and economic environments.

Nicaragua’s bamboo kingdom

In 2012, MIGA provided its first political risk insurance to a carbon offset project on the Atlantic Coast of Nicaragua, where EcoPlanet Bamboo (EPB) has been developing a forest carbon offset project to support its work reforesting degraded pasture land with guadua aculeate, a native bamboo species. The project is just one piece of the company’s growing efforts to provide timber manufacturing industries with a sustainable alternative fiber in order to reduce pressure on natural forests.

photo of recently-cleard hillside
The production of palm oil is expanding and threatening forests in  Nicaragua’s coastal region, not far from EcoPlanet Bamboo’s sustainable bamboo plantations. For the land to be primed for palm oil, the forests are being burned, sometimes without removing the timber.

While EPB hopes to use carbon finance to meet debt repayments and support bamboo-processing activities and social programs in the area, MIGA’s $27-million guarantee backs the company’s investment in the purchase and conversion of degraded land into commercial bamboo plantations for the sale and export of bamboo fiber.  

Troy Wiseman, CEO and Co-Founder of EPB, says he was initially attracted to MIGA’s political risk coverage due to the perception of Nicaragua as a high-risk environment, especially in Europe, where EPB had the opportunity to raise debt finance for the project. Despite Nicaragua’s recent economic turnaround, the country still has a reputation among investors as one of Latin America’s least-developed countries, with high poverty rates following decades of political instability. Political risk insurance, he reasoned, could help overcome that hurdle and lower the interest rate at which EPB could access capital.

first planting
In April 2011, land preparation began at EcoPlanet Bamboo Central America’s Rio Siquia Plantation.

“Once we had political risk insurance, you could take the risk argument away because the cost of capital  would come down,” says Wiseman. “It came down for us by about 40%.”

As for the insurance itself, aside from the potential payoff in case an insurance claim is triggered, Wiseman notes that having MIGA on the contract reduces the risk that expropriation even occurs in the first place. MIGA underwriter Gloriana Echeverria says that’s partly because the Nicaraguan government is a shareholder in MIGA, which means it’s literally invested in its performance.

“This reduces the chance of expropriation because the government is unlikely to interfere with a project that has MIGA – and therefore the World Bank – as its partner,” she says. “We’ve gotten involved in over 100 cases where the investor has a certain problem with the government interfering. MIGA can mediate between the government and the investor to arrive at a solution that will make both parties happy.”

Political risk aside, the decision to invest in the project using carbon finance required taking on a significant amount of risk in its own right. “No one really had a proven bamboo methodology at a commercial level that could be duplicated,” says Wiseman. Indeed, EPB is the first organization to use a bamboo-based carbon offset methodology on a project validated under the Verified Carbon Standard (VCS) and the Climate, Community, and Biodiversity Alliance (CCBA), and is also certified under the Forest Stewardship Council for sustainable forest management.

EPB’s project is not a pure carbon offset project insofar as it derives revenues from bamboo sales. MIGA’s financial analysis of the project takes into account all revenue streams. For projects that are strictly dependent on carbon finance, Echeverria says MIGA’s financial analysis could differ in accounting for the financial sustainability of the project. A project relying solely on carbon revenues could be seen as a riskier project to insure.

Navigating the kitchen sink

For project developers trying to distinguish between OPIC and MIGA insurance, the primary difference is that OPIC requires majority US participation in an investment, whereas MIGA is open to nationals of any of its 179 member countries as long as the coverage is for a cross-border investment. MIGA is usually competitive in the riskier countries where investors are more concerned about getting the World Bank umbrella effect of deterrence, whereas OPIC tends to focus its activities in countries where a strong bilateral relationship might exist with the US. There is also a private political risk insurance market, but arguably without the deterrence effect. It is unclear whether carbon offset project developers have used this market.

bamboo growing wild
Guada aculeate bamboo growing wild in their native habitat on EcoPlanet Bamboo’s Rio Kama Plantation. November 2011.

Ultimately, MIGA can provide up to $220 million in insurance coverage per project, whereas OPIC can provide up to $250 million  – both agencies able to provide additional coverage through reinsurance. But how affordable is political risk insurance at the end of the day? And what incentives exist to help project developers invest in poor and risky countries where capital is hard to come by?  

The cost of the policy depends on the country, with insurance premiums rising significantly for particularly high-risk environments. For countries in the middle tier, the insurance itself may not be prohibitively expensive, but cash-strapped project developers looking to tap into political risk insurance can ultimately face additional upfront costs if—unlike EPB or TGC—they aren’t already in compliance with the prerequisite environmental, anti-corruption, and other policies required to land MIGA and OPIC insurance.

“There is already significant environmental work that project developers have to deal with in order to register with VCS and CCBA, which may be costly,” says Ruth Ann Nicastri, Managing Director of Political Risk Insurance at OPIC. “Terra Global Capital had already started those processes before they sought political risk insurance from us, so those costs were already taken into account in their budget. For project developers working on projects that haven’t taken the steps to obtain that kind of rigorous certification, it might be onerous to suddenly have to meet OPIC’s environmental requirements.”

For smaller projects that cannot afford certain evaluations, OPIC sometimes undertakes these evaluations as part of its own due diligence process, she notes. OPIC also provides discounted rates for small businesses, while MIGA provides subsidized rates for investments of $10 million or less with an average 25% discount, with specific rates depending on the country.

Beyond that, some have floated the idea of having public entities, possibly domestic, help subsidize insurance fees. “Depending on the country, it may be possible to provide additional layers of subsidy or premium pricing in a way that could offset political risk insurance premiums,” says Cameron Prell, Senior Counsel at US-based law firm McGuireWoods.

Project developers also have the option to apply to grants from donor agencies such as FMO, the Dutch development bank, that have strong stated interests in sectors relevant to carbon offset projects such as agribusiness, energy, food, and water to underwrite the cost of the insurance premium instead of provide a traditional grant or donation, Wiseman notes.

If a tree falls in the forest…

In spite of early-mover activity, there is still relatively low awareness that political risk insurance is available for forest carbon offset projects through MIGA and OPIC. The default risk management tool remains the buffer pool approach, which requires that project developers set aside carbon credits as reserves in order to cover unforeseen losses in carbon stocks.

“I don’t see the buffer pool approach as having a necessarily conflicting goal as these new emerging products, but the purpose of the buffer pool is definitely not to encourage financing,” says Stephen Matzie, Investment Officer at the US Agency for International Development (USAID), the US federal government’s principal aid agency. “It does require a significant amount of credits over the project’s lifetime, but I think it’s one of those things that can be tweaked to encourage private financing.”

While reportedly cheaper than the buffer pool approach, political risk insurance does not cover the broad set of risks that are technically covered by the buffer pool approach.

“OPIC and MIGA political risk insurance are advisable in many emerging markets that lack a robust regulatory regime for forest carbon,” Prell says. “However, the riskier markets are going to potentially result in higher premiums. Regardless, the insurance products should not be viewed as a sufficient instrument able to cover the current market demand and price risks inherent in forest carbon projects.”

There has been some push to expand the offering of products that can cover exposure to political risk alongside other risks. “The private sector and willing development finance institutions are developing additional guarantees that may address some measure of market risk, including project performance and valuation,” he notes. “The coverage is not 100%, but such mechanisms could provide some measure of risk mitigation for investors.”

USAID’s Development Credit Authority has been a prime innovator in this space, having been approached in early 2012 to develop a special loan guarantee for REDD activities. The agency is now working on several transactions simultaneously, with the one furthest along covering the Choco region in Colombia where it’s helping local communities pull together a REDD project. USAID’s guarantee covers a broad range of risks in addition to political risk, including those associated with verification, weather, and the production of carbon credits.

The path forward

Carbon offset projects continue to enter the pipeline to tap into political risk insurance on a case-by-case basis, including new prospects in Colombia, Brazil, and Indonesia. However, whether the market can see scaled-up adoption is hard to say.

While the use of MIGA’s political risk insurance for carbon offset projects is limited thus far, Prell notes that there has been some discussion about the potential for a new political risk insurance product for forest carbon to be modeled after the index-backed agricultural insurance programs offered by the World Bank’s Global Index Insurance Facility.

On OPIC’s end, Nicastri says, “As far as we can tell, we’re still the only ones willing to cover regulatory risk for forest carbon. However, OPIC is happy to work with other insurers to provide the product to a broader range of investors.”

As for EcoPlanet Bamboo? “We plan to use political risk insurance in every country where we plant bamboo as we embark on a new goal of reforesting 1 million acres of degraded land in Southeast Asia and Brazil, while expanding our current footprint in Africa,” says Wiseman. Some of this work could potentially include a carbon offset element.

Cookstoves Program Aims To
Spread Devices Across Africa And Asia

29 July 2013 |The Bonn International Cooking Energy Forum in Germany was the site for the unveiling of StovePlus, a program to provide residents of developing countries in Africa and Asia with alternatives to inefficient cookstoves. GERES, the French non-profit organization behind the new program, aims to distribute 2 million improved cookstoves in these regions by 2017 through StovePlus.

Nearly 3 billion people in the world rely on solid biomass for cooking and heating on a daily basis, but most of them use inefficient devices and open fires, leading to 4 million premature deaths every year, according to the Global Burden of Disease Study commissioned by the Institute for Health Metrics and Evaluation. Reliance on biomass also puts great pressure on natural resources, putting the world’s forests at risk, GERES notes.

The StovePlus program aims to strengthen the clean cooking sector and provide technical support to project developers in South-East Asia and West Africa, with the support of the Global Alliance for Clean Cookstoves (the Alliance). The Alliance provides funding to the GERES Biomass Energy Lab in Cambodia, one of the services offered in StovePlus. In 2012, the Alliance released a request for proposals (RFP) to enhance capacity for a global network of centers to provide testing, cookstove development, and capacity building services. Thirteen centers were selected for awards in Bolivia, Cambodia, China, Ghana, Honduras, India, Kenya, Nepal, Nigeria, Peru, Senegal, South Africa, and Uganda (lab and field). Under the RFP, $1.6 million was made available to support these centers.

Cookstove projects can provide significant health benefits and empower women – who often walk long distances to collect the necessary wood fuel for heat or cooking purposes – by freeing up their time and increasing their household income, says Jennifer Tweddell, Manager of Carbon Finance and Impact Investing for the Alliance. In addition to reducing greenhouse gas (GHG) emissions, the projects also have the impact of reducing deforestation, she says.

Clean cookstoves have become all the rage in the voluntary carbon markets, with voluntary buyers funneling $80 million toward offsets from these and water filtration projects last year, according to the State of the Voluntary Carbon Markets 2013 report. These household devices that burn fuel more efficiently or not at all (thus reducing GHG emissions while sparing households from harmful smoke inhalation) were the voluntary market’s fourth most popular mitigation activity – transacting 5.8 MtCO2e, or 80% more than in 2011. These projects have so far delivered at least 4 million cookstoves from 45 projects to developing country households with the aid of carbon revenues, the report finds.

In 2012, carbon finance for clean cookstove distribution reached 15 country locations on three continents, according to the report. The most prominent project locations included Peru, Ghana, Mozambique and Kenya.

Developers of cookstove projects are determined to secure buy-in from stove users, with only 2% of clean cookstove projects engaged in stove giveaways and the majority of projects charging users between $2 and upwards of $140 per device, a finding that pleased Tweddell.

“We’re very much in favor of a market-based approach so we’re glad that there aren’t a lot of free giveaways because we really feel that to be sustainable and to reach universal adoption, which would be 500 million households, you can’t do that on donor dollars and (corporate social responsibility),” she says. “You do that through having a thriving marketplace where people at the base of the pyramid are consumers who go out and actually purchase these products from social enterprises that are also making a profit doing that.”

Transactions of clean cookstove offsets were valued at $65.3 million in 2012 – 54% more than in 2011. Over time, the value of private sector support for clean cookstove carbon projects is estimated to be $145 million.

The average price for offsets from clean cookstove projects was $11.3/tCO2e in 2012, representing a 15% fall in price from 2011’s $13.2/tCO2e. The price decline was attributed to the growing volume of available cookstove project offset supply and a lack of clarity regarding certified emissions reduction demand in the European Union Emissions Trading System – a source of demand for some clean cookstove offsets. But the price for cookstove projects was well above the volume-weighted average price of $5.9/tCO2e of all project types seen in 2012.

“I really do think it’s because of all the additional benefits that these projects bring,” Tweddell says. “Certainly, you can tell a really great story about having a health benefit, improving the lives of people in developing countries, as well reducing your carbon emissions.”

In trying to attract investment, the Alliance often hears people talk about the crash of the carbon markets, but the report is very useful because it provides evidence of the higher prices commanded by these charismatic projects, she says.

“That helps us to demonstrate the value to potential buyers, but also to investors who often don’t understand the carbon markets and are a little bit leery of businesses that are reliant on carbon revenues,” she says.

For more findings on cookstoves and other voluntary carbon projects, read the Ecosystem Marketplace report here.

 

Additional resources

How Forest Carbon ProjectsProtect Themselves From Political Risk

Following the landmark use of political risk insurance on a REDD+ project in Cambodia, project developers elsewhere have also tapped into the insurance – most recently on a bamboo reforestation project in Nicaragua. Despite these examples of early mover activity, awareness of political risk coverage and how it can help finance carbon offset projects is still very limited.

27 August 2013 | In 2011, a few years after US-based land-use carbon consultant Terra Global Capital (TGC) launched its Oddar Meanchey REDD Project in Cambodia, it asked the Overseas Private Investment Corporation  (OPIC)  to shield its investment from political risk.

More specifically, the project helps Buddhist monks and other community members reduce greenhouse gas emissions from deforestation and forest degradation (REDD), and it does so in a way that could serve as a template for community-based REDD projects around the world. But it’s located in a country that most investors don’t understand. So TGC asked OPIC, the US government’s primary development finance agency, to provide protection against the risks of expropriation, war, and civil unrest – risks familiar not only to Cambodia, but to countries around the world. In the very first instance of political risk insurance for a forest carbon offset project, OPIC came through with $900,000 in political risk insurance – a service that the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) also offers.

Between the two of them, OPIC and MIGA have so far insured several carbon offset projects around the world designed to promote sustainable forestry, wind farms, and solar energy, allowing them to move forward in some of the world’s riskiest political and economic environments.

Nicaragua’s bamboo kingdom

In 2012, MIGA provided its first political risk insurance to a carbon offset project on the Atlantic Coast of Nicaragua, where EcoPlanet Bamboo (EPB) has been developing a forest carbon offset project to support its work reforesting degraded pasture land with guadua aculeate, a native bamboo species. The project is just one piece of the company’s growing efforts to provide timber manufacturing industries with a sustainable alternative fiber in order to reduce pressure on natural forests.

photo of recently-cleard hillside
The production of palm oil is expanding and threatening forests in  Nicaragua’s coastal region, not far from EcoPlanet Bamboo’s sustainable bamboo plantations. For the land to be primed for palm oil, the forests are being burned, sometimes without removing the timber.

While EPB hopes to use carbon finance to meet debt repayments and support bamboo-processing activities and social programs in the area, MIGA’s $27-million guarantee backs the company’s investment in the purchase and conversion of degraded land into commercial bamboo plantations for the sale and export of bamboo fiber.  

Troy Wiseman, CEO and Co-Founder of EPB, says he was initially attracted to MIGA’s political risk coverage due to the perception of Nicaragua as a high-risk environment, especially in Europe, where EPB had the opportunity to raise debt finance for the project. Despite Nicaragua’s recent economic turnaround, the country still has a reputation among investors as one of Latin America’s least-developed countries, with high poverty rates following decades of political instability. Political risk insurance, he reasoned, could help overcome that hurdle and lower the interest rate at which EPB could access capital.

first planting
In April 2011, land preparation began at EcoPlanet Bamboo Central America’s Rio Siquia Plantation.

“Once we had political risk insurance, you could take the risk argument away because the cost of capital  would come down,” says Wiseman. “It came down for us by about 40%.”

As for the insurance itself, aside from the potential payoff in case an insurance claim is triggered, Wiseman notes that having MIGA on the contract reduces the risk that expropriation even occurs in the first place. MIGA underwriter Gloriana Echeverria says that’s partly because the Nicaraguan government is a shareholder in MIGA, which means it’s literally invested in its performance.

“This reduces the chance of expropriation because the government is unlikely to interfere with a project that has MIGA – and therefore the World Bank – as its partner,” she says. “We’ve gotten involved in over 100 cases where the investor has a certain problem with the government interfering. MIGA can mediate between the government and the investor to arrive at a solution that will make both parties happy.”

Political risk aside, the decision to invest in the project using carbon finance required taking on a significant amount of risk in its own right. “No one really had a proven bamboo methodology at a commercial level that could be duplicated,” says Wiseman. Indeed, EPB is the first organization to use a bamboo-based carbon offset methodology on a project validated under the Verified Carbon Standard (VCS) and the Climate, Community, and Biodiversity Alliance (CCBA), and is also certified under the Forest Stewardship Council for sustainable forest management.

EPB’s project is not a pure carbon offset project insofar as it derives revenues from bamboo sales. MIGA’s financial analysis of the project takes into account all revenue streams. For projects that are strictly dependent on carbon finance, Echeverria says MIGA’s financial analysis could differ in accounting for the financial sustainability of the project. A project relying solely on carbon revenues could be seen as a riskier project to insure.

Navigating the kitchen sink

For project developers trying to distinguish between OPIC and MIGA insurance, the primary difference is that OPIC requires majority US participation in an investment, whereas MIGA is open to nationals of any of its 179 member countries as long as the coverage is for a cross-border investment. MIGA is usually competitive in the riskier countries where investors are more concerned about getting the World Bank umbrella effect of deterrence, whereas OPIC tends to focus its activities in countries where a strong bilateral relationship might exist with the US. There is also a private political risk insurance market, but arguably without the deterrence effect. It is unclear whether carbon offset project developers have used this market.

bamboo growing wild
Guada aculeate bamboo growing wild in their native habitat on EcoPlanet Bamboo’s Rio Kama Plantation. November 2011.

Ultimately, MIGA can provide up to $220 million in insurance coverage per project, whereas OPIC can provide up to $250 million  – both agencies able to provide additional coverage through reinsurance. But how affordable is political risk insurance at the end of the day? And what incentives exist to help project developers invest in poor and risky countries where capital is hard to come by?  

The cost of the policy depends on the country, with insurance premiums rising significantly for particularly high-risk environments. For countries in the middle tier, the insurance itself may not be prohibitively expensive, but cash-strapped project developers looking to tap into political risk insurance can ultimately face additional upfront costs if—unlike EPB or TGC—they aren’t already in compliance with the prerequisite environmental, anti-corruption, and other policies required to land MIGA and OPIC insurance.

“There is already significant environmental work that project developers have to deal with in order to register with VCS and CCBA, which may be costly,” says Ruth Ann Nicastri, Managing Director of Political Risk Insurance at OPIC. “Terra Global Capital had already started those processes before they sought political risk insurance from us, so those costs were already taken into account in their budget. For project developers working on projects that haven’t taken the steps to obtain that kind of rigorous certification, it might be onerous to suddenly have to meet OPIC’s environmental requirements.”

For smaller projects that cannot afford certain evaluations, OPIC sometimes undertakes these evaluations as part of its own due diligence process, she notes. OPIC also provides discounted rates for small businesses, while MIGA provides subsidized rates for investments of $10 million or less with an average 25% discount, with specific rates depending on the country.

Beyond that, some have floated the idea of having public entities, possibly domestic, help subsidize insurance fees. “Depending on the country, it may be possible to provide additional layers of subsidy or premium pricing in a way that could offset political risk insurance premiums,” says Cameron Prell, Senior Counsel at US-based law firm McGuireWoods.

Project developers also have the option to apply to grants from donor agencies such as FMO, the Dutch development bank, that have strong stated interests in sectors relevant to carbon offset projects such as agribusiness, energy, food, and water to underwrite the cost of the insurance premium instead of provide a traditional grant or donation, Wiseman notes.

If a tree falls in the forest…

In spite of early-mover activity, there is still relatively low awareness that political risk insurance is available for forest carbon offset projects through MIGA and OPIC. The default risk management tool remains the buffer pool approach, which requires that project developers set aside carbon credits as reserves in order to cover unforeseen losses in carbon stocks.

“I don’t see the buffer pool approach as having a necessarily conflicting goal as these new emerging products, but the purpose of the buffer pool is definitely not to encourage financing,” says Stephen Matzie, Investment Officer at the US Agency for International Development (USAID), the US federal government’s principal aid agency. “It does require a significant amount of credits over the project’s lifetime, but I think it’s one of those things that can be tweaked to encourage private financing.”

While reportedly cheaper than the buffer pool approach, political risk insurance does not cover the broad set of risks that are technically covered by the buffer pool approach.

“OPIC and MIGA political risk insurance are advisable in many emerging markets that lack a robust regulatory regime for forest carbon,” Prell says. “However, the riskier markets are going to potentially result in higher premiums. Regardless, the insurance products should not be viewed as a sufficient instrument able to cover the current market demand and price risks inherent in forest carbon projects.”

There has been some push to expand the offering of products that can cover exposure to political risk alongside other risks. “The private sector and willing development finance institutions are developing additional guarantees that may address some measure of market risk, including project performance and valuation,” he notes. “The coverage is not 100%, but such mechanisms could provide some measure of risk mitigation for investors.”

USAID’s Development Credit Authority has been a prime innovator in this space, having been approached in early 2012 to develop a special loan guarantee for REDD activities. The agency is now working on several transactions simultaneously, with the one furthest along covering the Choco region in Colombia where it’s helping local communities pull together a REDD project. USAID’s guarantee covers a broad range of risks in addition to political risk, including those associated with verification, weather, and the production of carbon credits.

The path forward

Carbon offset projects continue to enter the pipeline to tap into political risk insurance on a case-by-case basis, including new prospects in Colombia, Brazil, and Indonesia. However, whether the market can see scaled-up adoption is hard to say.

While the use of MIGA’s political risk insurance for carbon offset projects is limited thus far, Prell notes that there has been some discussion about the potential for a new political risk insurance product for forest carbon to be modeled after the index-backed agricultural insurance programs offered by the World Bank’s Global Index Insurance Facility.

On OPIC’s end, Nicastri says, “As far as we can tell, we’re still the only ones willing to cover regulatory risk for forest carbon. However, OPIC is happy to work with other insurers to provide the product to a broader range of investors.”

As for EcoPlanet Bamboo? “We plan to use political risk insurance in every country where we plant bamboo as we embark on a new goal of reforesting 1 million acres of degraded land in Southeast Asia and Brazil, while expanding our current footprint in Africa,” says Wiseman. Some of this work could potentially include a carbon offset element.

Analysis: Greenomics Is Misleading The Public And The Carbon Market On Rimba Raya

An Indonesian entity called Greenomics this month accused the Rimba Raya Biodiversity Reserve Project of failing to secure usage rights and overstating the amount of forest it had saved. A quick dive into available documents, however, shows it’s Greenomics that failed to do its homework.

23 July 2013 | Earlier this month, a document entitled “Rimba Raya Conservation Project’s claims could mislead the public and the carbon market” popped up on an Indonesian site called Greenomics.org. The cover page made two incendiary claims that, if true, would mean that one of the largest REDD projects on the planet had both failed to secure tenure and overstated the amount of forest it had saved.

“Not true that the Indonesian Government has approved 64,000 hectares for Rimba Raya Conservation Project,” the cover proclaimed.

“More than 60% of area whose ecosystem is to be restored under the Rimba Raya Conservation Project was not originally slated for palm oil plantation development,” it blared.

Neither claim, however, is standing up to scrutiny, and a quick literature review shows that the Greenomics “report” selectively references government decrees and letters that support its claims while inexplicably ignoring those that prove it wrong. Indeed, every “smoking gun” the Greenomics authors claim to have discovered is also referenced in the May 2013 Verification Report, which is the document that auditors from SGS Global Services were required to compile in the process of certifying the project under the Verified Carbon Standard (VCS). You can download it by clicking “Verification Report” to the right, or by going to the relevant VCS documents page.

The Greenomics report also fails to differentiate between the project’s accoun/ting area (the 47,237 hectares on which it’s actually generating credits) and its management zone (the 63,828 hectares within which the accounting area lies); and it misrepresents the status of the land at the time the project began. Finally, it claims that notarized letters of support from various ministers have no meaning without secondary letters, but provides no legal basis for that claim.

Additionality

The document rightly points out that 18,642 hectares of the project area are in the Tanjung Puting National Park, and it implies this territory was already protected before the project began. But it ignores readily-available documents that tell the full story. Specifically, it ignores the fact that the state moved the boundary of the park into the project area after the carbon project had already saved that portion of forest.

You can see this by turning to page 12 of the Project Document (see “Project Document”, right) or scrolling to the map below. It shows all of the region’s planned palm oil concessions from 2008, with the then-planned project management zone outlined in green and the carbon accounting area outlined in orange within this. Not coincidentally, the carbon accounting area coincides with a massive area shaded gray – this is land that the government had designated for planned palm oil concessions, despite the Greenomics claims to the contrary. It’s the reason the project came into existence, and it’s why they were credited with preventing 2,462,212 tons of carbon dioxide from being emitted from July 2009 through June 2010.

Here is the map as it appears in the report:photo of Rimba Raya map

The National Park

In this map, the National Park is to the left of the project, because that’s where it was when the project began. It wasn’t until March 2013 – long after the project developers had saved the forest – that the state expanded the park into the project area. At that point, the project developers entered into a Cooperation Agreement (see “Cooperation Agreement”, right) spelling out their new obligations as custodians of a piece of national park, but they had already been protecting the forest for years. Greenomics, however, implies that the project was placed in the park from the start, which it was not.

For additional proof, you can turn to the Additionality Support Documents (see “Additionality Support Documents”, right), which contain licenses granted on the properties before the project began – clearly showing that palm oil developers were lining up to develop the land, and clearly demonstrating that the forest would have been cleared for palm oil if the project not been created.

Who has the Rights?

Greenomics also rambles on and on about the lack of any individual document or decree giving project developers the right to the 64,000 hectares (actually, 63,828) – ignoring two simple facts: one, that the total area isn’t one parcel, but several; and two, that these parcels are governed by different decrees and agreements. The SGS Global Services auditors covered this on pages 11 through 13 of their Verification Report, where they reference each of the decrees and agreements covering each property as well as a letter from the Ministry of Forestry’s Director General of Forestry Planning, Bambang Soepijanto, summarizing and reiterating the project developers’ rights in a letter (see “Working Area Letter”, right). If all this documentation, plus the notarized letter from the minister and the auditors’ report aren’t enough for Greenomics, what is?

Only one of the parcels referenced in these documents is the 36,331-hectare parcel that Greenomics focuses on. Another is the 18,642 hectares for the National Park, which we covered above. Another one, which Soepijanto identifies as being 8,855 hectares, is treated in the Verification Document as two parcels of 2,394 hectares and 6,512 hectares each that had been given over to commercial palm oil operators. Interestingly, the auditors did find some language that at first appeared to annul the project developer’s rights to the first of these small properties, but the issue duly noted and resolved. Finally, there are two smaller parcels of 820 and 95 hectares each – both of which are also referenced by auditors and by Soepijanto.

With so many pieces of the puzzle so readily available, one has to wonder why Greenomics chose to focus on just a few. It does appear they are right about one thing: someone seems intent on misleading the public and the carbon market, but it doesn’t appear to be the Rimba Raya project developers.


Additional resources

This Week in Forest Carbon: Lessons From Vietnam

A new Forest Trends brief compares and contrasts case studies from two villages in Vietnam to highlight the implications of illegal logging on REDD+ and FLEGT as well as the role of community participation and land tenure agreements in forest governance. Meanwhile the Ecosystem Marketplace Carbon Program gears up for its final round of data collection in preparation for the 2013 State of the Forest Carbon Markets report.

This article was originally published in the Forest Carbon newsletter. Click here to read the original.

15 July 2013 | Hot off the Forest Trends press, a  new brief  explores the implications of small-scale illegal logging on REDD+ and Forest Law Enforcement, Governance and Trade (FLEGT) initiatives in Vietnam.

The brief highlights the rationale of clear and secure tenure rights for local people living near forests containing timber – not just to occupy them, but also to sustainably harvest forest assets if they so choose.  Without these rights, locals are excluded from forest benefits and more likely to illegally log. According to the brief, “increasing resources dedicated to law enforcement in the absence of changes in incentive structures” is not enough to stop illegal logging.

To contrast what hasn’t worked in  forest governance in small-scale forest management  and what has worked, Forest Trends presents case studies from the villages of Ban Y and Phuc Minh (whose names have been changed) in Hoa Binh and Binh Dinh provinces. In Ban Y, forest tenure rights granted to villagers by the government excluded tree harvesting rights. As a result, community members were barred from extracting timber from these forests, despite their historical claims on the forests, legal tenure rights, and livelihood needs. Harmful illegal logging ensued, with Ban Y villagers taking on the largest risk and least benefits while government officials, brokers, and traders captured most of the benefits.

 

Conversely in the village of Phuc Minh, while villagers received similar tenure rights as in Ban Y, their forest was not under the prohibitive protection category and instead received support from the German Development Bank for a community forestry project that combined forest protection with sustainable harvest techniques. Villagers actively participated in decision-making on how to distribute timber revenues and remaining harvested timber, prioritizing community members in need and those who complied with forest protection responsibilities.

 

The lessons learned from Vietnam’s forest governance experience have direct implications for FLEGT and REDD+, whose missions both prioritize actions against illegal logging. For forest carbon in particular, the brief stresses that the effectiveness of community-based REDD+ efforts relies on the reorientation of law enforcement to support rather than oppose small-scale forest management. In addition, the brief says the design of REDD+ should combine performance-based payments for forest protection with active use and management by smallholders, since REDD+ payments alone are unlikely to provide sufficient incentives for forest protection.

 

Learn more about Forest Trends’ recommendations on FLEGT and REDD+ in Vietnam  here and keep reading below for the inside scoop on other important forest carbon developments!

 

Here at Ecosystem Marketplace, we are in the final stages of data collection in preparation for our 2013 State of the Forest Carbon Markets report. If your organization has developed forest carbon projects for the voluntary or compliance carbon market in 2012, we invite you to describe your project and any 2012 transactions by participating in our survey before July 31, 2013. This will be the final deadline for organizations wishing to take part in this year’s report.  

 

Forest carbon project developers that provide project-level information – whether or not you have transacted credits yet – can also choose to have their project profiled as the Forest Carbon Portal’s Featured Project. You can also specify your preferred level of confidentiality – from completely open (including transaction prices and volumes) to completely confidential. Create a profile and submit your responses here!

 

—The Ecosystem Marketplace Team

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


News

International Policy

Mission accomplished

After a mission to Panama in early June, an independent investigation and evaluation team  recently published its initial findings regarding Panama’s withdrawal from the UN-REDD+ Programme. After receiving input from a range of in-country stakeholders, the report was compiled by the investigation and evaluation team and later presented at the UN-REDD Policy Board meeting in Lombok, Indonesia at the end of June. Preliminary findings confirm faults in the National Programme design as well as the absence of a participatory process, leading to the exclusion of indigenous peoples in program activities. The investigation and evaluation team plans to return to Panama and release a final report in August.

 

US Policy

Follow the golden rule?

Following a  ruling by the U.S. Court of Appeals for the District of Columbia Circuit  in  Center for Biological Diversity v. U.S. Environmental Protection Agency  (EPA), forest owners are encouraging the EPA to prioritize the completion of amendments to its greenhouse gas regulations in order to take advantage of the carbon benefits of forest bioenergy. The ruling concluded that the EPA “did not adequately justify its decision to temporarily defer biogenic emissions from its greenhouse gas regulations”, but did not clarify whether the EPA could finalize “permanent amendments to its rules regarding the treatment of such emissions.”  The greenhouse gas amendments are expected to greatly impact the degree to which private forest owners in the U.S. are able to provide forest carbon offsets.  

 

Project Development

Disney helps dreams come true

A new  article  translated from Ecosystem Marketplace’s  Valorando Naturaleza  provides an in-depth look into Conservation International’s VCS/CCB-validated Alto Mayo REDD+ project in Peru, and Disney’s $3.5M contribution to the project. Tracing its roots back to 2008, the project has resulted in the mainstreaming of sustainable agriculture practices in the area, preservation of local biodiversity, and the generation of 3 MtCO2 in emissions reductions to date. Of that, 400,000 tCO2e has been attributed to Disney’s contribution and gone toward offsetting the company’s carbon footprint. Disney has since agreed to provide a second grant of $3.5M to Conservation International’s work in Alto Mayo.  

 

A rumble in the jungle

Greenomics Indonesia, a non-governmental conservation organization, recently  accused the Rimba Raya Conservation project for its alleged false claim  of obtaining approval from the Indonesian government for a 64,000-hectare carbon project, reportedly the world’s largest. Vanda Mutia Dewi, national program coordinator for Greenomics Indonesia, asserted that Rimba Raya conservation received an ecosystem restoration permit in March 2013 for only 36,331 hectares of land and believes that of the remaining hectares, 18,642 hectares are in the possession of the Tanjung Putting Conservation Park. Indonesia’s Forestry Ministry said that a cooperation plan agreed to by the Tanjung Putting Conservation Park and Rimba Raya Conservation could not yet accommodate carbon market activities.

 

A minor setback  

Elsewhere in Indonesia, AusAid – the Australian government’s foreign development assistance agency – recently announced its  plan to end its support for a major forest restoration project on the island of Borneo. The $47-million project, known as the Kalimantan Forests and Climate Partnership (KFCP), aimed to restore 200,000 hectares of peatland and reduce 700 MtCO2e over 30 years. However, it encountered approval delays and objection from officials and local communities. Australia’s withdrawal, along with the challenges of Indonesia’s bureaucracy and opposition from multiple parties, could potentially set back Indonesia’s REDD Programme. While the “main thrust” of KFCP has ended, both the Australian and Indonesian governments are discussing which parts of the project could benefit from additional work over this next year.

 

Yunnan in the thicket of it

While seven pilot emissions trading schemes are in various stages of initiation across China,  Yunnan Province launched its own carbon sequestration program  on June 17, when China debuted its National Low-Carbon Day. Yunnan Forestry Investment Company (YFI) sold 17,800 tCO2e worth of carbon credits at 1.07M yuan (US$174,000) to the Guangdong-based Friends of Iron and Steel. The Yunnan Development and Reform Commission brokered the deal. The offset purchase will help finance YFI’s work to plant and maintain forest and bamboo groves, supported by a 30-year lease granted by the provincial government to manage 3,500 ha of unused land in Xishuangbanna Dai Autonomous Prefecture. The project is expected to sequester 550,000 tCO2e over three decades.

 

Judgment day for co-benefits

The following Climate Community & Biodiversity Alliance projects, Abote Community-Managed Reforestation Project, Buffelsdraai Landfill Site Community Reforestation Project, REDD+ de la Concesií³n para Conservacií³n Alto Huayabamba Project, and the New Leaf Carbon Project are  now accepting public comments  on whether their project documents meet CCB requirements. The first two projects will accept comments through July 24, while the latter two will accept comments through July 28.  

 

National Strategy & Capacity  

Binh there, done that  

An Ecosystem Marketplace  article  summarizes Forest Trends’ recent paper on Vietnam’s Forest Law Enforcement, Governance and Trade (FLEGT) and REDD+ initiatives, exploring policies pertaining to illegal logging. Through two case studies in the provinces of Hoa Binh and Binh Dinh, the paper discusses the history behind deforestation in the two regions and examines the lack of clear and secure tenure and land use rights, which has further contributed to deforestation and aggravated an already corrupt forest governance system. According to the paper, in order for FLEGT and REDD+ to succeed, forest governance must support small-scale community forest management with equitable distribution of tenure rights and other benefits to local people.

 

Bridging the Great Wall

As China rolls out seven domestic pilot emissions trading schemes this year – with the city of Shenzhen’s debuting last month – market actors are wondering how carbon offsets will fit into the picture.  A new Ecosystem Marketplace article  provides a breakdown of the types of offsets eligible for trading, existing supply and potential demand, as well as what’s on the horizon. Offset methodologies approved for use by China’s National Development and Reform Commission (NDRC) do not yet cover forestry and land use, which is still in the process of being vetted. Domestic initiatives like the Panda Standard, China’s first voluntary carbon standard, are seeking NDRC approval for their afforestation/reforestation methodologies.  

 

Beyond the forest

In the district of Tanjung Jabung Barat on the Indonesia island of Sumatra, a  Reducing Emissions from All Land Uses (REALU) project  is in full swing. REALU, an initiative funded by the Norwegian Agency for Development Cooperation, “operates in several countries to find out how to reduce greenhouse gas emissions within an entire landscape rather than just from a particular activity or sector.” The REALU project provides technical assistance to help support the Indonesian government’s low-emissions development plans, currently concentrating its efforts on a 16,000-hectare plot of protected peat forest. Central to the work is a low-carbon land-use planning method developed by the World Agroforestry Centre in collaboration with the government’s district planning and development agency.

 

To log or not to log

A new report by The Australia Institute  asserts that it makes more financial sense to conserve the native forests of southern New South Wales for carbon credit generation than to continue logging, valuing forest carbon abatement opportunities at $222 million over the next 25 years. The government of New South Wales does not agree, stating that the report used incorrect assumptions and is based on an unrealistically high carbon price. While the federal government’s Carbon Farming Initiative could broaden its reach in the future, to date, native forestry logging operations are not yet eligible under the scheme.  

 

Ethiopia off on good foot

The REDD Desk recently added  Ethiopia to its collection of REDD+ readiness profiles. As part of the Climate Resilient Green Economy Strategy (CRGE), Ethiopia joins the ranks of the Guyana, Vietnam and Indonesia in building a development plan intended to reduce emissions from the forestry sector and encourage a low-carbon development path. In addition to developing a green economy, the CRGE Strategy intends to help Ethiopia achieve a middle income country status by 2025. Ethiopia is in its second phase of REDD+ readiness with two pilot projects, Bale Mountains Eco-Region REDD+ Project and the Oramia Region REDD+ Pilot Programme, currently underway.  

 

Columbian consultations

At a recent UN-REDD Programme Policy Board meeting, Colombia presented its Readiness Preparation Plan, highlighting both government and non-government participation and consultations with woman and youth. In response, the Policy Board approved  $4 million in funding earmarked for Columbia’s National Programme, as well as another $4 million for a community grant initiative that will provide resources and build capacity in local communities while empowering them to engage in REDD+ activities. Last year, Colombia held an inception workshop for the creation of a Colombia-based market platform for voluntary carbon offset transactions, to have an initial focus on forest carbon.

 

The crown jewel

Over the last ten years, wildfires and mountain-pine beetle infestations have taken their toll on forest land in British Columbia. The B.C. provincial government recently announced a partnership with the Carbon Offset Aggregation Cooperative to plant trees on Crown land,  allowing private-sector companies to engage in carbon offset activities through reforestation efforts. Through the B.C. Forest Carbon Partnership Program, more than one million trees could be planted in the next five years. According to Ben Parfitt, a resource policy analyst with the Canadian Centre for Policy Alternatives, “the success of the private-sector project will likely hinge on the market value of carbon offsets.

 

Science & Technology Review

Seeing hotspots

Recently launched, the  Mitigation Lab, a new laboratory under the World Agroforestry Centre’s Climate Change Unit,  is intended to help researchers identify and quantify GHG emissions from “hotspots” across a variety of ecosystems including forests, agriculture, and dairy farming. The lab’s gas chromatographs are capable of analyzing 120 GHG samples over an eight-hour time period, allowing researchers to compare GHG emissions between landscapes on which climate-smart agriculture has been practiced and those on which it has not – ultimately expected to provide evidence that climate-smart agriculture in fact contributes to climate change mitigation while increasing farm production.

 

Speaking volumes

Scientists and climate change experts are now able to access tree models for forest volume, biomass and carbon stock through an online platform for the first time.  GlobAllomeTree, launched by the Food and Agriculture Organization (FAO) of the United Nations, uses allometric equations to evaluate different forest services like timber production and bioenergy strategies involving forest volume, biomass, and forest carbon, and is expected to support REDD+ efforts. “This is the first time that countries have access to an extensive database of tree models used to evaluate resources worldwide,” says FAO Forestry Officer Matieu Henry. “It allows them to get a clear picture on their forests’ capacities to store carbon.”

 

Publications & Tools

REDD+y to integrate

Integrating Communities into REDD+ in Indonesia, a PROFOR working paper, addresses how REDD+ can tackle underlying community issues such as lack of access to forest land. The report provides background on REDD+ in Indonesia and highlights the need to integrate community development approaches into a REDD+ framework, the role of communities in Indonesia’s forestry sector, as well as mechanisms for addressing a multitude of community-level funding needs.

 

Keep your options open

Published by Forest Carbon Asia,  REDD+ Biodiversity Safeguards: Options for Developing National Approaches  explores the potential to develop a national safeguard approach that would comply with both international policy commitments and national policy frameworks. In light of the Cancun Safeguards and Aichi Biodiversity Targets, this brief discusses REDD+ readiness activities in relation to biodiversity across 20 Asian countries, including a discussion of Vietnam’s national safeguard approach.  

 

Jobs

2 Positions– The Nature Conservancy  

Based in Mexico, the  Agricultural Economist, Yucatan Peninsula  will contribute to the establishment of Mexico’s REDD+ Program on the Yucatan Peninsula and develop the regional/local assessments, tools, and frameworks for the design and implementation of sub-national REDD+ strategies. Candidates should have a Bachelor’s and 5+ years’ experience in conservation practice. Based in Brazil, the Coordinator, Amazon Forest  will provide technical and political leadership and support for The Nature Conservancy’s REDD+ work in the Amazon and will build strategic, scientific and technical capacity among staff and partners on REDD+. Candidates should have a Bachelor’s and experience in REDD+, forest conservation and/or sustainable agricultural production.  

 

Global Climate Change Specialist – ECODIT  

Based in Washington, D.C., the Global Climate Change Specialist will identify ways to integrate clean energy, land use and carbon sequestration, and adaption to climate change and development efforts. Candidates should have a Master’s Degree in a field relevant to climate change-related science and policy and 5+ years of experience in environmental management. Read more about the position  here.

 

Technical Specialist – Plan Vivo Foundation

Based in Edinburgh, the Technical Specialist will select and prepare approved methodologies for projects to use under Plan Vivo Standard 2013 and coordinate and conduct technical reviews of project documents. Candidates should have a Master’s in ecosystem services or a related discipline such as environmental management or forestry. Read more about the position  here.  

 

Junior REDD+ Policy Consultant – Climate Focus

Based in Thailand, the Policy Consultant will support the USAID funded “Lowering Emissions in Asia’s Forests” (LEAF) project and will help coordinate work and prepare advice on issues affecting REDD+ policy design. Candidates should have a Bachelor’s Degree and 3+ years of experience in natural resource management, forest policy, or the carbon markets. Read more about the position  here.  

 

2 Positions – Conservation International

Based in Botswana, the  Manager, Government Liaison and Environmental Policy  will be responsible for liaising with the Government of Botswana on matters related to the Gaborone Declaration and supporting policy research on Natural Capital Accounting, PES and REDD. Candidates should have a Master’s or PhD in environmental, political or social sciences and 2+ years’ experience in environmental policy. Based in Indonesia, the  Deputy, Chief of Party  will oversee a team in the North Sumatra program area and will be responsible for local coordination, monitoring and development of the annual Sustainable Landscapes Partnership program workplan. Candidates should have a Bachelor’s in natural resource management or a related field and 7+ years’ experience with public-private partnerships.  

 

2 Positions – World Wildlife Fund

Based in Zambia, the  Community Forest Lead, Community-Based Forest Management Program  will be responsible for leading efforts to sustainably manage 700,000 hectares of Participatory Forest Management Areas in Zambia. Candidates should have a Master’s in rural development, forestry, natural resource management or a related field and 7+ years’ experience. Based in the Democratic Republic of the Congo, the  Chief of Party, Central Africa Forest Ecosystems Conservation  will direct staff, oversee grant, sub-grants and consulting contracts and coordinate with staff from WWF and partner organization on a daily basis. Candidates should have at least a Master’s in forestry, conservation biology or a related field and 8+ years’ field experience.  

 

Chief of Party – CARE  

Based in Zambia, the Chief of Party will contribute to the USAID/Zambia’s Climate Change Program Objective and the Community-Based Forest-Management Program for REDD+ Readiness. Candidates should have at least a Master’s Degree in forestry, ecosystem services, natural resource management, or international development and 10+ years of leadership experience in managing international development programs. Read more about the position  here.

 

ABOUT THE FOREST CARBON PORTAL

The Forest Carbon Portal provides relevant daily news, a bi-weekly news brief, feature articles, a calendar of events, a searchable member directory, a jobs board, a library of tools and resources. The Portal also includes the Forest Carbon Project Inventory, an international database of projects including those in the pipeline. Projects are described with consistent ‘nutrition labels’ and allow viewers to contact project developers.

 

ABOUT THE ECOSYSTEM MARKETPLACE

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Additional resources

China’s Carbon Emissions
Traders Await Offset Demand

As China rolls out seven domestic pilot emissions trading schemes this year – with the city of Shenzhen’s debuting last month – market actors are wondering how carbon offsets will fit into the picture. Here, we provide a breakdown of the types of offsets eligible for trading, existing supply and potential demand, as well as what’s on the horizon.

 

9 July 2013 | Designated as China’s first special economic zone back in 1980, the fast-growing city of Shenzhen has come to epitomize the country’s move toward market-oriented economic policies. On June 18, Shenzhen set yet another precedent when it launched the first of seven pilot programs to help pave the way for a national cap-and-trade program.

Under the pilot program, 635 companies in Shenzhen, responsible for about 38% of the city’s emissions, face obligations to reduce their carbon intensity by 6.68% on average per year by 2015.

The first day of trading on the Shenzhen Emissions Rights Exchange saw eight transactions of emissions allowances completed for a total of 21,112 tCO2e. Allowance prices ranged from 28 to 32 yuan per tonne, close to the expected price of 30 yuan per tonne (US$4.89).

While only allowances have been traded so far, emitters have the option of trading carbon offsets in the form of Chinese Certified Emission Reductions (CCERs), which are issued by the National Development and Reform Commission (NDRC). The NDRC allows existing projects registered with the UN’s Clean Development Mechanism (CDM) to register as CCER projects – a source of potential relief for CDM suppliers reeling from the protracted collapse in prices for CDM project offsets (CERs) and the recent ban on CERs from non-least developed countries for use in the European Union Emissions Trading Scheme (EU ETS).

Beyond the historically strong relationship between suppliers of Chinese renewable energy offsets and European buyers, there is potential for CERs from China-based projects to fetch higher prices from domestic buyers should the pilots manage their prices well. With more than 70% of the world’s CERs issued in China as of the end of 2012, a big question on the minds of Chinese CER suppliers is how much domestic demand they can actually expect to absorb existing and new offset supply.

Ramping up

Initial reactions to China’s new pilot activities have generally been positive among stakeholders, but elements of the system remain hazy. Liable emitters are expected to not only monitor, report, and verify their emissions, but also to participate in auctions. For the bulk of Chinese companies, trading offsets – or allowances for that matter – is an unfamiliar arena.

“Even the few Chinese companies that are in a joint venture with a European or international company that has experience in the EU ETS or California’s market are just now getting organized,” notes Jeff Swartz, Director of International Policy at the International Emissions Trading Association (IETA), which oversees a working group in China to build capacity for the new pilots. “Policymakers haven’t actually traded allowances or purchased offsets, so there’s an imperative need to share information and work with companies in existing systems that have.”

What’s eligible?

In March, the NDRC released its first batch of 52 CCER methodologies eligible for domestic emissions trading, all of which are adapted from existing CDM methodologies.

The list stays true to China’s traditional focus on renewable energy, energy efficiency and fuel switch, and methane. It also controversially includes methodologies for HFC-23 and N2O industrial gas offsets, which the EU ETS banned post-2012 in response to critique regarding their environmental integrity.

Some say it is important for industrial gas suppliers to be able to access the domestic market – now their only major prospective source of demand – for recourse, however, a recent analysis by Climate Bridge – a major China-based project developer and wholesaler – expresses concern that the inclusion of industrial gas projects could crowd out China’s domestic offset market and potentially subject pilot schemes to low carbon prices as experienced in the EU ETS.

Offsets from non- or pre-CDM projects are eligible for voluntary emissions trading if they apply methodologies that have been approved by the NDRC, according to interim government regulations. While not explicitly stated, this could potentially provide a bridge for projects developed to the Verified Carbon Standard (VCS) and Gold Standard, which certify many of their projects according to CDM methodologies.

NDRC-approved methodologies do not yet cover forestry and land use, which the NDRC said it is still vetting alongside other CDM methodologies. Domestic initiatives like the Panda Standard, China’s first voluntary carbon standard developed by the China Beijing Environment Exchange and BlueNext with the support of Winrock International, are in the process of seeking approval from the NDRC for afforestation/reforestation methodologies.

Gauging demand

Domestic demand for offsets will inevitably vary between Shenzhen and other emerging pilots. After factoring in the level of emission reduction targets and allowances provided through the system (totaling 100 MtCO2e between 2013-2015 for Shenzhen alone), the scope of supply and demand for offsets will depend on the existing supply of offsets eligible for use under each pilot, as well as limits set on the use of offsets against emitters’ compliance obligations (tentatively 10% on average across China’s various planned pilots).

“Policymakers are very aware of the fact that if they open up a fire hydrant, they could have a situation in which supply exceeds demand,” says Swartz. “However, I suspect they face a difficult situation in restricting offsets because some of the companies that they’re asking to participate in the ETS from the compliance point of view have also supplied CDM offsets in the past.”

Given China’s large existing offset supply in certain areas, many project developers have been slow to embark on new projects until sufficient demand can soak up existing inventories. Climate Bridge’s analysis  predicts that Shenzhen will have limited potential for new offset project development, as “the existing CER supply in this region already makes up more than 8% of the capped emissions.” The company expects other pilot jurisdictions like Tianjin, on the other hand, to have strong demand for new CCERs given the dearth of existing CDM projects in the area.

Greater demand (and clarity) ahead?

Over the course of this year, other pilots are busy incubating in the cities of Beijing, Tianjin, Shanghai, Chongqing, and the provinces of Hubei and Guangdong – each setting their own limits on offset location and project type. The plan is to eventually link the schemes together as a foundation for a national cap-and-trade program as early as 2016, following the release of China’s next Five-Year Plan.

Should China’s carbon market eventually link with other markets abroad, China would be a net exporter of offsets, at least for the foreseeable future. The probability of cross-border linkages is still pretty slim at this point according to Wenjie Zhuang, Senior Project Manager at Climate Bridge.

“China’s carbon market is in early stages – there is no national-level program yet,” she says. “And while the design of China’s pilot schemes has drawn lessons from trading systems all over the world, they also show many innovations in design.”

Small Scale Illegal Logging In Vietnam:
Implications for FLEGT And REDD+

Key results from a Forest Trends paper on the government of Vietnam’s Forest Law Enforcement, Governance and Trade (FLEGT) and the country’s REDD+ initiatives finds that illegal logging can only be curtailed with policies promoting small scale forest use and management that benefit the local communities.

8 July 2013 | Strategies attempting to curb illegal logging in Vietnam must provide forests benefits for the local communities in order to be effective. This means clear and secure tenure rights are distributed to the local people.

It’s a key lesson to consider in the Forest Law Enforcement, Governance and Trade (FLEGT) and Reduced Emissions from Deforestation and Forest Degradation (REDD+) initiatives currently pursued by the Government of Vietnam and the focus of NGO and Ecosystem Marketplace publisher Forest Trends’ Information Brief on Vietnam deforestation.

The brief examines two case studies from Hoa Binh and Binh Dinh provinces that illustrate how differences in the allocation of clear and secure tenure and use rights affected the prevalence of illegal logging. In the small Dao village of Ban Y (all village names have been changed), villagers were not given meaningful tenure rights to the local forest. Villagers can only derive benefit from the forest if they actively participate in illegal logging. In the Kinh village of Phuc Minh, villagers received full tenure rights, with the result that the villagers themselves protected local forests against outside encroachment guaranteeing a sustainable timber harvest and long term benefits.

Background

Despite the Government of Vietnam’s attempts to increase enforcement, illegal logging is still a pressing concern in Vietnam today. The trade in illegally sourced timber involves a range of actors from large-scale and powerfully connected networks to small-scale operators, and affects all forests across the country and including those zoned for protection. The persistence of small-scale illegal logging has given rise to significant public concern and increasingly severe law enforcement efforts by the central government.

The Vietnamese media typically portrays small-scale Illegal logging as being perpetrated by poor villagers who invade government property containing natural forest with valuable timber. Corrupt forest protection officers are described as turning a blind eye on the villagers’ illegal practices, and they all collude with traders to perpetuate this trade in illegal timber for personal gain. Media and government recount this simplified story, leading to widespread calls upon the central government to strengthen law enforcement by “cleaning up” Vietnam’s forest protection apparatus and increasing the human and financial resources allocated to enforcement.

Research shows that this conventional account of small-scale illegal logging is overly simplistic. Illegal practices are not simply due to the presence of poor villagers, corrupt local officers and illegal traders. Nor is the widespread presence of illegal logging simply due to a lack of law enforcement. Illegal practices instead reflect a combination of factors, a key one being the lack of tenure rights given to local people living near forests containing valuable timber, thus legally excluding them from forest benefits including those from timber. Increasing resources dedicated to law enforcement in the absence of changes in incentive structures for all involved will not work.

Ban Y: Small-Scale Illegal Logging in a Protection Forest

In 1995, government policies on forestland allocation granted individual households in Ban Y tenure rights for forestland. However, this transfer of tenure rights did not include the concurrent transfer of tree harvesting rights to the villagers. The local forestlands were classified as protection forests for watershed protection. Households were not allowed to extract any timber from these forests, despite their historical claims on the forests, legal tenure rights and livelihood needs.

Despite the prohibition, villagers began to cut trees for cash income. Villagers used relatively harmful “cut and run” extractive techniques, typically damaging a dozen smaller trees when cutting and hauling each big log, leaving branches and small trees behind. This damage is increasingly further within forest areas as high value trees are being progressively depleted. Timber cut in the forest near Ban Y was brought to Huu Bang, a timber trading village near Hanoi, and eventually ended up as furniture in Vietnam’s domestic markets.

Despite mandates to check the legality of timber harvesting, trade and transport of timber, a complex chain of government officials allowed the illegally sourced logs to be transported between Ban Y and Huu Bang, and were facilitated by traders, local brokers and village leaders.

In this case study, one single timber trader was a critical facilitator, making payments to village leaders, local brokers (called “lawmakers” by villagers), tax and traffic officers. The local brokers would in turn make payments to other government officials who would ultimately allow the timber to pass into the wholesale markets (Figure 1). The trader’s truck encountered no difficulties when passing through a series of checkpoints overseen by various local government officials.

Among all actors involved in getting the timber from tree to market, Ban Y villagers benefitted the least and bore the most risk. While collectively government officials (23) and brokers (2) captured the most (39%) of the benefits, on a per capita basis the trader made the most profit (Figure 2). Villagers received 30% of total benefits, but the benefit was spread between numerous villagers, and they spent more time and bore more risks (e.g., injuries associated with logging and hauling of the tree) than the other groups. The average return for a day’s labor was a mere 29,000 VND (or US$1.80 in 2004, when the research was undertaken). The trader obtained 9% of the total benefit as a single person and was not exposed to the same kinds of risks as the villagers. A wholesaler in Huu Bang received 22%.

Why did the villagers cut the trees?

The 1995 forestland allocation in Ban Y did not ensure forest protection. While the villagers received formal rights to the land, they did not receive any rights to the trees on the land. Villagers were unable to translate the formal rights into tangible benefits for themselves – either for cash income or subsistence needs.

As might be expected, villagers in Ban Y ignored the government’s restriction placed on the forest and continued to conduct their customary practices in the forest with reference to the rights that they had enjoyed historically. “Forest belongs to villagers” was a common expression, allowing villagers to justify the logging regardless of the government’s prohibition. They were driven by high demand and lucrative prices being offered on the domestic timber market. Despite the low nominal benefits, the prices being offered by local traders enticed the villagers to collude with the trader and local officials. The tale of Ban Y is repeated across Vietnam, driving the depletion of timber and degradation of forests.

Phuc Minh: Forest Protection and Management by Village Community

Similar to Ban Y village, the village of Phuc Minh received the formal tenure rights (The district People’s Committee granted the village tenure rights to the forest for a 50-year period under a single title) to the forest lands around their village. However, in this case, the Phuc Minh forest lands were not placed in the prohibitive protection category. In fact, with technical and financial supports from German Development Bank (KfW) through a community forestry project, the allocation was given with the understanding that villagers would combine forest protection with low-impact logging to ensure both positive social and environmental outcomes. The German Reconstruction Bank (KfW)-funded project aimed to improve local livelihoods and forest conditions by way of community forest management (Community forest management rested on the allocation of 364 ha of natural forest containing valuable timber to Phuc Minh village in 2008), helping the villagers’ Community Forest Management Board to establish community forest protection and development regulations which set out the rights and duties of the community with regard to forest use and management. Villagers and project staff report that community management put an effective stop to illegal activities. The villagers received the permission to harvest trees only after they demonstrated an increase in timber volume and forest value since the time of allocation.

Technical and financial assistance from the KfW project undoubtedly increased not only the ability of villages to obtain meaningful rights to forest resources, but also their technical capacity. The project trained villagers in forest inventories, silvicultural management, and harvesting techniques. Villagers conducted a forest inventory to determine the status and timber value of the forest they had been allocated. They contracted technical staff to develop and submit forest management and sustainable timber harvesting plans to the district People’s Committee for approval. They conducted the first timber harvest in 2010-2011, extracting almost 100 m3 of timber through sustainable harvesting techniques.

Villagers assumed an active role in decisions about the use of the harvested timber. They decided to give preference to community members in need. With support from the project and local authorities, the Community Forest Management Board organized a tender process for the sale of the remaining timber. They also decided how to use generated revenues after paying the applicable resource tax and fees to the Commune People’s Committee. Retaining around 60% of total revenues, villages decided to fund the operations of the Community Forest Management Board, pay for protection activities and invest a significant share in the village forest development fund.

Perhaps most importantly, villagers who could prove compliance with their responsibilities for forest protection were allowed to withdraw operational funds from a collective village savings book established with the Bank for Social Policies. This savings book was funded out of revenues from the harvested timber in recognition of the wider benefits generated by the villagers’ forest and the expenses incurred by villagers in protecting the forest.

Community forest management was successful in Phuc Minh not only because villagers derived tangible benefits from the forest and participated in decision-making but also because their benefits were linked to performance in forest protection. Support provided by the KfW project clearly also contributed to the success.

Tapping the potentials of small-scale forest management

Ban Y and Phuc Minh offer two contrasting cases on how forest governance can accommodate small-scale forest management. The comparison demonstrates that in the context of similar law enforcement arrangement existed in the two villages, the critical significance of the full package of tenure and use rights which enable villagers’ ability to derive tangible benefits from forests for sustainable forest management.

The observations from Ban Y demonstrate that villagers will not make constructive contributions to forest management if they are not given full tenure rights including the use right or are excluded from forest benefits. The inability of the villagers to benefit from nearby forest resources enticed villagers to team up with a timber trader because they were not able to derive benefits from the forest otherwise. Local officials colluded in the illegal practice for personal gains. Villagers benefitted from the arrangement benefit but ended up gaining the least among all involved actors. This provided little incentive for villagers to manage the forest in a sustainable manner.

Experience from Phuc Minh shows that villagers will take on a constructive role for sustainable forest management if they are given full tenure rights–in this case including the right to harvest timber from the forest. Secure tenure rights and guaranteed timber harvests resulted in a strong incentives for community members to work together with local forest protection officers to protect the forest and prevented the emergence of the coalition driving illegal logging in Ban Y.

These insights reveal that law enforcement alone will not solve the problem of small-scale illegal logging in Vietnam. In the worst case, further criminalization of logging would provide added impetus to illegal activities by empowering corrupt local officials, increasing the profits made by traders and wholesalers, and diminishing the benefits accruing to villagers.

The centrality of tenure rights calls for renewed emphasis on forestland allocation to local communities and forest reclassification from protection to productive purposes. The significance of tenure right also questions the continuing use of short-term contracts in forest protection and management because they do not involve the transfer of tenure rights.

Implications for FLEGT and REDD+

The insights presented above have direct implications for Vietnam’s Forest Law Enforcement, Governance and Trade (FLEGT) and Reduced Emission from Deforestation and Forest Degradation (REDD+) initiatives. Objectives and measures to combat illegal logging figure prominent in both. The Voluntary Partnership Agreement (VPA) to be signed with the European Commission (EC) in the future accords high significance to actions stopping illegal logging. Similarly, Vietnam’s proposal for the second phase of the UN-REDD Programme foresees allocation of significant funds for measures against illegal logging.

Currently, the emerging EC – Vietnam FLEGT VPA is supposed to cover both imported and domestically produced wood materials. Domestic illegal logging will only be curtailed if Vietnamese policies promote governance that accommodates small-scale forest use and management, and allows local communities to benefit from the forest. Additional, specific implications for FLEGT are:

  • The emphasis in Vietnam’s FLEGT needs to be more on the G than the E, i.e. emphasize governance reforms over simple forest law enforcement.
  • The legality definition under FLEGT will only serve legal forest governance if it makes suitable adjustments to Vietnam’s current legal framework, including rights to villagers’ right to timber from natural forests currently managed by State entities.
  • The development of Vietnam’s FLEGT VPA requires broad-based consultations with all kinds of stakeholders at national and local levels.

Similarly, REDD+ will achieve reductions in deforestation and forest degradation only if REDD+ actions accord small-scale forest management a constructive role. Specific implications include the following:

  • Full-scale implementation of REDD+ requires the expansion of forestland allocation to local communities in order to provide positive incentives for villagers’ participation through real benefits derived from the forest.
  • The design of REDD+ needs to combine performance-based payments for protection of forests with their active use and management by smallholders because REDD+ payments alone are unlikely to provide sufficient incentives for protection.
  • REDD+ requires a reorientation of law enforcement from obstructing to supporting small-scale management.

Key Messages

  • Villagers’ lack of clear and secure tenure rights is a key driver of small-scale illegal logging
  • Sole reliance on law enforcement is likely to aggravate small-scale illegal logging because it provides local officials more opportunities for bribery
  • FLEGT will reduce illegal logging only if forest governance accommodates small-scale forest management
  • REDD+ will increase forest carbon stocks only if law enforcement supports small-scale forest management instead of obstructing it
Additional resources

Cookstoves Program Aims To Spread Devices Across Africa And Asia

29 July 2013 |The Bonn International Cooking Energy Forum in Germany was the site for the unveiling of StovePlus, a program to provide residents of developing countries in Africa and Asia with alternatives to inefficient cookstoves. GERES, the French non-profit organization behind the new program, aims to distribute 2 million improved cookstoves in these regions by 2017 through StovePlus.

Nearly 3 billion people in the world rely on solid biomass for cooking and heating on a daily basis, but most of them use inefficient devices and open fires, leading to 4 million premature deaths every year, according to the Global Burden of Disease Study commissioned by the Institute for Health Metrics and Evaluation. Reliance on biomass also puts great pressure on natural resources, putting the world’s forests at risk, GERES notes.

The StovePlus program aims to strengthen the clean cooking sector and provide technical support to project developers in South-East Asia and West Africa, with the support of the Global Alliance for Clean Cookstoves (the Alliance). The Alliance provides funding to the GERES Biomass Energy Lab in Cambodia, one of the services offered in StovePlus. In 2012, the Alliance released a request for proposals (RFP) to enhance capacity for a global network of centers to provide testing, cookstove development, and capacity building services. Thirteen centers were selected for awards in Bolivia, Cambodia, China, Ghana, Honduras, India, Kenya, Nepal, Nigeria, Peru, Senegal, South Africa, and Uganda (lab and field). Under the RFP, $1.6 million was made available to support these centers.

Cookstove projects can provide significant health benefits and empower women – who often walk long distances to collect the necessary wood fuel for heat or cooking purposes – by freeing up their time and increasing their household income, says Jennifer Tweddell, Manager of Carbon Finance and Impact Investing for the Alliance. In addition to reducing greenhouse gas (GHG) emissions, the projects also have the impact of reducing deforestation, she says.

Clean cookstoves have become all the rage in the voluntary carbon markets, with voluntary buyers funneling $80 million toward offsets from these and water filtration projects last year, according to the State of the Voluntary Carbon Markets 2013 report. These household devices that burn fuel more efficiently or not at all (thus reducing GHG emissions while sparing households from harmful smoke inhalation) were the voluntary market’s fourth most popular mitigation activity – transacting 5.8 MtCO2e, or 80% more than in 2011. These projects have so far delivered at least 4 million cookstoves from 45 projects to developing country households with the aid of carbon revenues, the report finds.

In 2012, carbon finance for clean cookstove distribution reached 15 country locations on three continents, according to the report. The most prominent project locations included Peru, Ghana, Mozambique and Kenya.

Developers of cookstove projects are determined to secure buy-in from stove users, with only 2% of clean cookstove projects engaged in stove giveaways and the majority of projects charging users between $2 and upwards of $140 per device, a finding that pleased Tweddell.

“We’re very much in favor of a market-based approach so we’re glad that there aren’t a lot of free giveaways because we really feel that to be sustainable and to reach universal adoption, which would be 500 million households, you can’t do that on donor dollars and (corporate social responsibility),” she says. “You do that through having a thriving marketplace where people at the base of the pyramid are consumers who go out and actually purchase these products from social enterprises that are also making a profit doing that.”

Transactions of clean cookstove offsets were valued at $65.3 million in 2012 – 54% more than in 2011. Over time, the value of private sector support for clean cookstove carbon projects is estimated to be $145 million.

The average price for offsets from clean cookstove projects was $11.3/tCO2e in 2012, representing a 15% fall in price from 2011’s $13.2/tCO2e. The price decline was attributed to the growing volume of available cookstove project offset supply and a lack of clarity regarding certified emissions reduction demand in the European Union Emissions Trading System – a source of demand for some clean cookstove offsets. But the price for cookstove projects was well above the volume-weighted average price of $5.9/tCO2e of all project types seen in 2012.

“I really do think it’s because of all the additional benefits that these projects bring,” Tweddell says. “Certainly, you can tell a really great story about having a health benefit, improving the lives of people in developing countries, as well reducing your carbon emissions.”

In trying to attract investment, the Alliance often hears people talk about the crash of the carbon markets, but the report is very useful because it provides evidence of the higher prices commanded by these charismatic projects, she says.

“That helps us to demonstrate the value to potential buyers, but also to investors who often don’t understand the carbon markets and are a little bit leery of businesses that are reliant on carbon revenues,” she says.

For more findings on cookstoves and other voluntary carbon projects, read the Ecosystem Marketplace report here.

 

Additional resources

Perseverance Pays Off For
Massive Indonesian REDD Project

Five years in the making, the Rimba Raya Biodiversity Reserve Project  has overcome seemingly insurmountable political challenges to become one of the largest-ever REDD projects to see its emission reductions verified under the Verified Carbon Standard by proving that it reduced greenhouse gas emissions by more than two million tons in one year – and may reduce nearly 120 million by the time it finishes.

4 June 2013 | Two years ago, Indonesia’s Rimba Raya Biodiversity Reserve was on the rocks after the country’s Ministry of Forestry  turned more than half of its 80,000 hectares over to palm oil interests – an act that prevented it from becoming the first carbon project to generate credits under the Verified Carbon Standard (VCS) for saving endangered rainforest and reducing greenhouse gas emissions from deforestation and forest degradation (REDD). By the end of last year, however, the project had been saved – reportedly after intervention by powerful forest friends like Singapore-based businessman Rusmin Widjaja, Central Kalimantan Governor A. Teras Narang, and several green-minded wives of high-ranking officials. VCS then signed off on its design, and all that remained was for an independent auditor to make sure that the design was, in fact, being implemented and the promised emission-reductions were, in fact, taking place.

Last week, independent auditor SCS Global Services confirmed that the project had, in fact, prevented the emission of roughly 2.2 million tons of carbon dioxide into the atmosphere over the year ending in July, 2010, meaning it can now sell 2,181,352 Verified Carbon Units (VCUs) from that period. Over the course of its 30-year life, the project aims to reduce emissions by 119 million tons.

Located in  the state of Central Kalimantan, it covers almost 64,000 hectares and aims to preserve carbon-rich tropical peat swamp and forest, originally slated for development into palm oil plantations, while also providing a critical reserve for endangered Orangutans.

“The Rimba Raya project has undergone a lengthy and complex review process,” said Dr.  Robert J. Hrubes  , SCS Executive Vice President. “The scale of this project is truly precedent setting, demonstrating a strong market value in preserving forests.”

The region has suffered from high rates of deforestation and is home to over 94 threatened and endangered species, including the Bornean Orangutan. Orangutan Foundation International, operated by renowned primatologist and conservationist Dr.Birute Mary Galdikas  , is the NGO Partner and Project Beneficiary for the project. The sale of carbon credits will fund the preservation of critical Orangutan habitat.

“Rimba Raya will be one of the most important Orangutan conservation projects in the world, said Galdikas.  “It is nothing less than the promise of survival for the endangered Orangutan.”

“We are exhausted but overjoyed to have earned verification for the Rimba Raya project,” said  Todd Lemons  , CEO of InfiniteEARTH, the project developer. “While this project has faced monumental hurdles, SCS’ experience assessing REDD projects proved invaluable for fairly evaluating our compliance with the VCS standard and verifying that these emissions reductions are as real and valuable as we believe they are.”

The project also meets the requirements of the Climate, Community and Biodiversity Alliance (CCBA) standard by supporting the livelihoods of local communities and the area’s rich biodiversity. It was the first in the world to earn Triple Gold Validation under the CCBA standard.

Additional resources

Analysis: Greenomics Is Misleading The Public And The Carbon Market On Rimba Raya

An Indonesian entity called Greenomics this month accused the Rimba Raya Biodiversity Reserve Project of failing to secure usage rights and overstating the amount of forest it had saved. A quick dive into available documents, however, shows it’s Greenomics that failed to do its homework.

23 July 2013 | Earlier this month, a document entitled “Rimba Raya Conservation Project’s claims could mislead the public and the carbon market” popped up on an Indonesian site called Greenomics.org. The cover page made two incendiary claims that, if true, would mean that one of the largest REDD projects on the planet had both failed to secure tenure and overstated the amount of forest it had saved.

“Not true that the Indonesian Government has approved 64,000 hectares for Rimba Raya Conservation Project,” the cover proclaimed.

“More than 60% of area whose ecosystem is to be restored under the Rimba Raya Conservation Project was not originally slated for palm oil plantation development,” it blared.

Neither claim, however, is standing up to scrutiny, and a quick literature review shows that the Greenomics “report” selectively references government decrees and letters that support its claims while inexplicably ignoring those that prove it wrong. Indeed, every “smoking gun” the Greenomics authors claim to have discovered is also referenced in the May 2013 Verification Report, which is the document that auditors from SGS Global Services were required to compile in the process of certifying the project under the Verified Carbon Standard (VCS). You can download it by clicking “Verification Report” to the right, or by going to the relevant VCS documents page.

The Greenomics report also fails to differentiate between the project’s accoun/ting area (the 47,237 hectares on which it’s actually generating credits) and its management zone (the 63,828 hectares within which the accounting area lies); and it misrepresents the status of the land at the time the project began. Finally, it claims that notarized letters of support from various ministers have no meaning without secondary letters, but provides no legal basis for that claim.

Additionality

The document rightly points out that 18,642 hectares of the project area are in the Tanjung Puting National Park, and it implies this territory was already protected before the project began. But it ignores readily-available documents that tell the full story. Specifically, it ignores the fact that the state moved the boundary of the park into the project area after the carbon project had already saved that portion of forest.

You can see this by turning to page 12 of the Project Document (see “Project Document”, right) or scrolling to the map below. It shows all of the region’s planned palm oil concessions from 2008, with the then-planned project management zone outlined in green and the carbon accounting area outlined in orange within this. Not coincidentally, the carbon accounting area coincides with a massive area shaded gray – this is land that the government had designated for planned palm oil concessions, despite the Greenomics claims to the contrary. It’s the reason the project came into existence, and it’s why they were credited with preventing 2,462,212 tons of carbon dioxide from being emitted from July 2009 through June 2010.

Here is the map as it appears in the report:photo of Rimba Raya map

The National Park

In this map, the National Park is to the left of the project, because that’s where it was when the project began. It wasn’t until March 2013 – long after the project developers had saved the forest – that the state expanded the park into the project area. At that point, the project developers entered into a Cooperation Agreement (see “Cooperation Agreement”, right) spelling out their new obligations as custodians of a piece of national park, but they had already been protecting the forest for years. Greenomics, however, implies that the project was placed in the park from the start, which it was not.

For additional proof, you can turn to the Additionality Support Documents (see “Additionality Support Documents”, right), which contain licenses granted on the properties before the project began – clearly showing that palm oil developers were lining up to develop the land, and clearly demonstrating that the forest would have been cleared for palm oil if the project not been created.

Who has the Rights?

Greenomics also rambles on and on about the lack of any individual document or decree giving project developers the right to the 64,000 hectares (actually, 63,828) – ignoring two simple facts: one, that the total area isn’t one parcel, but several; and two, that these parcels are governed by different decrees and agreements. The SGS Global Services auditors covered this on pages 11 through 13 of their Verification Report, where they reference each of the decrees and agreements covering each property as well as a letter from the Ministry of Forestry’s Director General of Forestry Planning, Bambang Soepijanto, summarizing and reiterating the project developers’ rights in a letter (see “Working Area Letter”, right). If all this documentation, plus the notarized letter from the minister and the auditors’ report aren’t enough for Greenomics, what is?

Only one of the parcels referenced in these documents is the 36,331-hectare parcel that Greenomics focuses on. Another is the 18,642 hectares for the National Park, which we covered above. Another one, which Soepijanto identifies as being 8,855 hectares, is treated in the Verification Document as two parcels of 2,394 hectares and 6,512 hectares each that had been given over to commercial palm oil operators. Interestingly, the auditors did find some language that at first appeared to annul the project developer’s rights to the first of these small properties, but the issue duly noted and resolved. Finally, there are two smaller parcels of 820 and 95 hectares each – both of which are also referenced by auditors and by Soepijanto.

With so many pieces of the puzzle so readily available, one has to wonder why Greenomics chose to focus on just a few. It does appear they are right about one thing: someone seems intent on misleading the public and the carbon market, but it doesn’t appear to be the Rimba Raya project developers.


Additional resources

Can Katoomba 18 Help
The Miyun Reservoir?

More than 200 delegates to Katoomba 18 from as far away as Peru, Switzerland, and Ghana will be spending the next three days in China’s troubled Miyun Reservoir. Their aim: to trade experiences, share lessons learned, and make recommendations to project developers at Miyun on designing and implementing effective watershed investments.

17 May 2013 | BEIJING | People’s Republic of China | On the hour-and-a-half drive to the Miyun reservoir from Beijing, you can’t miss all the trees. Recently-planted seedlings – mostly deciduous, with neatly painted white trunks – grow in orderly rows, stretching for miles, filling every spare patch of ground in the countryside. Trees have been planted in old agricultural fields, along the banks of rivers, and even in dried-up riverbeds.

In the age of climate finance, REDD, and forest carbon, it’s a little-known fact that the biggest afforestation program in the world is in China, and is actually driven by water, not carbon. The Sloping Lands Conversion Program, which has delivered billions of dollars to forests, is just the biggest of dozens of similar efforts that incentivize projects in China.

We’ll be spending the next three days by the Miyun reservoir, talking to experts from all over the world about how to build a better forest compensation model. The occasion is the 18th Katoomba meeting. Hosts Forest Trends and the Beijing Forestry Society have brought together more than 200 people in China – from countries from Peru to Switzerland to Ghana – to trade experiences, share lessons learned, and – this brings us to the reservoir – make recommendations to project developers at Miyun on designing and implementing effective watershed investments.

Understanding the Miyun

As much as 70 percent of Beijing’s surface water supply comes from the Miyun reservoir, but the water is disappearing. Surface flows have fallen by two-thirds over the last decade. Pollution is a growing problem and a bit of a moving target. There have been extensive efforts to implement soil and water conservation structures around the reservoir, but in the meantime other problems have appeared.

“Ten years ago I would have said erosion is the biggest problem in the Miyun reservoir,” Madame Duan Shuhuai, Professorate Senior Engineer at the Beijing Water Authority, told the Katoomba audience. “But now we are most worried about household garbage, wastes from animals and fertilizer.”

The communities surrounding the reservoir are much poorer than the nearby capital. Annual income levels in the area are estimated in official statistical yearbooks at $623/year, compared to the national average of $964. A recent rapid assessment in the field by Forest Trends partners put the actual number even lower – in the range of $228-407/year.

A History of Investments

Beijing municipality has aggressively backed a range of efforts to restore and create forests in the watershed, including “eco-compensation” programs that pay communities to plant trees. More than 18,000 hectares have been planted around the reservoir. Today, there is more than 70% forest cover in the area.

A GEF-funded project implemented by the Beijing Forestry Society and UNDP from 2007-2011 also worked to develop capacity in upstream communities for forest management, as a way to get more trees in the ground, provide alternative livelihoods (and thus in theory limit pollution) and build climate resilience.

Those efforts, said Sun Mingchen, Director General of the Fengning County Forestry Bureau in a Friday morning panel, were successful in many ways: they resulted in tenure being granted to private landholders and stressed participatory planning approaches.

But trees are slow to mature, Sun pointed out. In the meantime, landholders who have switched livelihoods from farms to forests find themselves with a production timeline that doesn’t match up with their income needs. “The delayed benefits from trees mean farmers need compensation in the period before trees mature,” said Sun.  

Designing a Smarter Project

Meanwhile, water risk continues to hover in Beijing. Pollution downstream reaches a grade 4 out of 5 (1 being cleanest), and yet information about the precise nature of pollutants or their sources is scarce: there is no systematic monitoring of hydrological indicators like flow rates or nutrient pollution levels.

Similarly, despite Beijing’s heroic investments, little is known about their socio-economic impacts. Are payment levels high enough to attract sufficient participation? Are the trees increasing flows into the reservoir, as expected, or actually contributing to the falling water levels?

The new proposed pilot in the Miyun reservoir aims to try to answer some of these questions. Project developers believe that a more rigorous understanding of hydrological and social impacts will improve design and ongoing management. And success in Miyun will help demonstrate that natural infrastructure will have an important role to play in safeguarding water security – and far less expensively than projects like the South-North Water Transfer Project, a massive infrastructure initiative to bring water to cities like Beijing the dry North from the Yangtze River more than 1,000 kilometers away to the south.

The pilot has the benefit of not starting from scratch: it already has a natural buyer (Beijing) and sellers (poor upstream communities) and builds on years of previous efforts to safeguard the Miyun reservoir.

Katoomba: The Secret Ingredient?

Now, project developers hope to also build on years of expertise developing watershed investment projects around the world – which is where Katoomba conference-goers come in. They represent leading projects around the globe, as well as some of the most cutting-edge ecosystem services policy and project design experience out there. Over the next three days, they’ll be intensively briefed on the watershed and relevant subjects.

A major goal of the conference is to tap the collective wisdom of practitioners, policy-makers, and other actors, and develop a concrete set of recommendations for advancing the Miyun project. We can’t wait to see what they come up with.

 

 

 

 

 

China Aims For Scale, Scope, And Reach
In Payments For Ecosystem Services

China’s eco-compensation programs are among the most comprehensive payments for ecosystem services on the planet, but delegates to the 18th Katoomba Meeting in Beijing say they must reach more people in more segments if they are to deliver lasting environmental benefits.

Click to hear closing remarks from Katoomba XVIII.

16 May 2013 | BEIJING | People’s Republic of China | The hardest part about dealing with externalities isn’t where they begin, but where they end – as Niu Chonguan pointed out at the public segment of Katoomba XVIII: Forests, Water, and People, which took place here on Thursday.

“Everyone agrees that the beneficiary pays,” said Niu, who is Deputy Director General of the Department of Soil and Water Conservation at the Chinese Ministry of Water Resources. “But beneficiaries are not just downstream users. They’re also those benefiting from reduced flood risks or reduced disasters from sandstorms.”

Moving forward, he said, the question is whether these groups should be enticed to pay as well and how we might quantify the relative share of benefits of each. It’s a question that cut to the heart of the whopping 25 first-day presentations, because eco-compensation levels for soil & water conservation payments are supposed to be set based on valuation of ecosystem services and resulting ecological and downstream improvements, instead of on the cost of intervention, which is how most watershed investments tracked by Ecosystem Marketplace are calculated.

The same day, Zhang Qingfeng of the Asian Development Bank highlighted the need to bring in more private-sector investment, while several presenters highlighted the need to spread the concept institutionally.

“We’ve been talking about many of the ways to scale up – but we’re just not looking at it clearly,” said Forest Trends CEO Michael Jenkins as the day would to a close. “One of the ways is we have to get away from our own institutional silos. If we don’t collaborate, we’re still going to talking about scaling up twenty years from now.”

He echoed the sentiments of Zhang and Niu, calling for the inclusion of new beneficiaries and also of more segments of society.
 
“To me, it’s not just a scaling up but a scaling out,” he said. “So when we look at the whole suite of panelists that we have here – government representatives, some private sector folks, NGOs, academics, we should have had more community representatives but there are some obviously in the audience.”

The private meeting begins on Friday, and will involve smaller workshops geared towards generating specific outcomes.

 

 

 

ADB Water Boss Courts Private
Buyers For Chinese Water Markets

On the opening day of the 18th Katoomba meeting in Beijing, the Asian Development Bank’s (ADB) Water Resources Specialist, Zhang Qingfeng, offers an update on new trends in Chinese eco-compensation – including early steps towards encouraging private-sector investments in China’s natural infrastructure.

16 May 2013 | Beijing | China is the world’s largest investor in watershed protection, with nearly $7.5 billion spent in 2011 on restoring and safeguarding the country’s water supplies at their sources. That dwarfs activity in the rest of the world – for comparison, every other country combined spends a bit more than $700 million every year.

But unlike in other countries, virtually 100% of China’s investments come from the government.

In our recent State of Watershed Payments 2012 report, there is plenty of diversity in the way environmental incentives are used around the world to protect water.

But patterns also emerge: beverage companies from Tanzania to France have decided to look outside their gates to the larger watershed in order to address water risk. Agricultural producers from Minnesota to Kenya are compensating communities upstream for sending clean water their way. Hydropower operators everywhere see the logic behind watershed management to limit erosion and maintain flows in rivers. And just about everywhere you look, there’s an NGO mediating these deals, designing conservation plans, and monitoring outcomes.

But there are no good corollaries when it comes to the Chinese model of ‘eco-compensation’. In many respects, it’s uniquely Chinese. Financing and policy directives are much more coordinated at a national level, compared to the diffuse grassroots projects that are so common elsewhere on the planet. NGOs play a very small role at present. And as we mentioned, the only party that’s paying for restoration is the government.

That’s why Zhang Qingfeng’s presentation this morning was so intriguing.

Is there a role for the private sector in a traditionally public effort?

Zhang, Lead Water Resources Specialist with the ADB, took the stage to make the case for opportunities for public-private partnerships in China on eco-compensation projects.

Businesses, he said, are perhaps better positioned to play a role in eco-compensation in China than at any time in the past. Beverage companies or water utilities, for example, are natural buyers. And private-sector opportunities exist in providing market services and infrastructure as well. Traders could play important roles in nascent carbon cap-and-trade, water quality trading, and water rights trading markets, or forest exchanges. Sixteen environmental exchange centers are already active in Shanghai and Beijing, Zhang noted.

Meanwhile, the government could begin to “shift from buyer to enabler.” That means providing regulatory drivers, training and information, and mapping and setting priorities for environmental values – defining conservation goals on behalf of the public, but finding ways to encourage new players and new sources of finance to enter the market.

The Chisui Watershed Pilot

A groundbreaking effort to do just this is underway in the Chishui River watershed, where UNDP, WWF, and ADB are backing a new public-private financing mechanism.

They’ve gotten initial agreement from Moutai, a major liquor company, to pay into a new water fund that focuses on converting sloping agricultural lands to forests, “ecological farming,” and de-intensifying livestock production in the upper catchment. Payments will go to farmers and landholders, and are meant to cover the costs of the interventions and foregone income. Details of the fund are expected to be finalized in the next few months. Other contributors are also lined up – the GEF has committed $2 million to supporting the mechanism, and other liquor producers in the watershed are also being courted.

It sounds like a straightforward enough water fund, but this is a very new model in China.

And government even here remains in a sense the buyer. Moutai’s contributions go to the provincial government, which then channels the money into projects in the Chishui watershed.

“Could we more directly link the buyer and provider?” Zhang asked. In China, that’s still an open question.

Private-sector barriers to investment in China sound awfully familiar

In the meantime, these efforts have yielded some useful lessons. Public-private partnerships like the Chishui project will have a slow go of it until some institutional and policy questions are resolved. Zhang listed a few major challenges to private investments – and this is actually where China starts sounding like the rest of the world.

  • Legal frameworks, particularly water use rights, need to be clarified. – Regulations enabling and providing guidance for private participation would be helpful.
  • The relationships between multiple administrative stakeholders at varying levels are still be worked out when it comes to implementing projects like these, leading to uncertainty from a private perspective.
  • A shift toward results-based projects would be welcomed, as opposed to the status quo of paying for practice: buyers want to know what they’re paying for.
  • Standard contractual agreements linking ecosystem services providers with service buyers are nonexistent; as we mentioned, in the Chishui case funds are still passing through the government.

On the public front, No signs of slowing down

Of course, don’t expect to see that $7.5 billion figure shrinking. Zhang expects to see continued growth in public investment in eco-compensation, citing new policy drivers like a national key function regional zoning plan, water conservation being prioritized in 2011 in key policy documents, national eco-compensation regulation on the way (which, incidentally, highlighted diversified funding sources and private sector participation), and “ecological progress” recently being established as a national priority.

The government also will remain the key buyer, through a variety of mechanisms. Direct payments, compensation to households for creation of protected areas, compensation of less-developed regions for past and current environmental damage, an eco-compensation fund to protect watershed services, and other incentive-based direct payment mechanisms are all in the arsenal.

 

 

China:
The Unappreciated Eco-Entrepreneur

We’ve all heard how China’s voracious economic growth is destroying its air, water, and forests – but few know of the country’s burgeoning market-based response, which aims to halt environmental degradation by incorporating the value of nature’s services into the production process.   EM parent Forest Trends has published an exhaustive inventory of these efforts.

7 May 2013| China, today the world’s second-largest economy, has quietly seized a leadership role in the evolving field of environmental markets. Its global financial force drives some of the largest public payments and markets for ecosystem services (PES/MES) programs in the world, particularly with carbon and water markets, yet China’s market-based initiatives remain relatively unknown. This is surprising, given the country’s increasing importance in the world economic order and critical role for future international climate negotiations.

A study of China’s developing ecosystem services reveals the amazing breadth and scale of what is currently happening on the ground. The environment is an important area for engagement with China; the central government says it is eager to learn from outside experience and collaborate with international organizations to develop capacity, broaden and refine its policy toolkit, and better evaluate and improve its current programs.

The world, as well, has much to learn from China; the sheer scale of the country’s ongoing ecological payment programs and policy innovations suggests a hidden wealth of untapped experience exists that could provide valuable lessons and insights to both domestic and international policymakers and practitioners of PES and MES schemes.

Ecosystem Markets Serve Economic Growth

Policymakers in China have become increasingly interested in developing new approaches for environmental policy to address the country’s multiplying conservation challenges and resource constraints in the face of break-neck economic growth. This led China’s central and local governments to rapidly expand its range of policy and program innovations, many under the broad heading of “eco-compensation,” which lay the groundwork for the development of ecosystem services markets.

As a result, the country’s public sector drives some of the largest public payment schemes for ecosystem services in the world – and this includes local governments, which are rapidly adapting centrally-designed eco-compensation programs to their own needs.   They are also creating hybrid programs that weave together and draw upon multiple central and provincial policies and funding sources.   They create their own distinct initiatives that often feed back into central government policy development.

The result has been a highly diverse mosaic of initiatives and public programs.   They incorporate payments or market-based concepts into national, provincial and municipal levels. And they are almost all primarily developed and funded domestically, with relatively little involvement of international expertise or funding.  

Range of Programs

China’s broad range of ecosystem programs includes watershed, carbon, timber, landscape amenities, biodiversity conservation and anti-desertification services. An increasing number of initiatives aim to protect watershed services and resolve conflicts over the rights and access to water resources. China has also actively embraced the Clean Development Mechanism (CDM) of the Kyoto Protocol as well as voluntary carbon markets as means to finance a transition to renewable, cleaner and more efficient energy systems.  

Other programs include China’s green and organic food certification system, the central government’s green procurement program and green product label certification system, promotion of energy efficiency, central and local government subsidies and fees regarding the impacts of development and infrastructural projects on soil erosion and watersheds, as well as continuing experimentation with air and water pollution emissions trading.

Policy circles have been abuzz with debate on how to improve these programs as well as how to explore and develop other market-based tools and regulatory innovations to better address China’s environmental and development challenges.

Inside China’s Markets

To understand these market’s potential, it is important to first understand how they operate today.

Most of China’s https://ecosystemmarketplace.com/pages/dynamic/article.page.php?page_id=9700§ion=news_articles&eod=1“>eco-compensation policies and market-based environmental initiatives are domestically driven and funded, and are geographically concentrated in China’s richer, coastal regions.

Watershed ecosystem services are by far the biggest driver of eco-compensation policy in China, and where most local innovation is occurring.   Even forest-related programs have been initiated due to water-related problems.   For example, large-scale flooding in Southwest and Northeast China in 1998 spurred China to launch its Conversion of Cropland to Forests and Grassland (CCFG) program, which we examined in detail in https://ecosystemmarketplace.com/pages/dynamic/article.page.php?page_id=9700§ion=news_articles&eod=1“>the first installment of this series.

Private-sector involvement has been small, but opportunities for growth exist. The majority of existing market-based initiatives in China are government-mediated, publicly-administered programs that use public funds to pay land users for the stewardship of ecosystem services on their land. Although the public sector is clearly the dominant player in these ecosystem service provision programs, government ministries and provincial governments often emphasize in their policy documents the development of multi-jurisdictional and multi-sectoral policy frameworks that diversify funding sources.

Local Innovations

Meanwhile, the wide variety of ecosystem markets developing locally throughout China reveals a significant degree of local innovation. This innovation is spurred by resource constraints and the need to find innovative ways to improve resource management and resolve regional administrative and property rights issues that span geographic boundaries.  

Local variations in eco-compensation policies in China take three main forms.   They include central government policies, local innovations independent of central policies and hybrid developments.  

In the majority of cases, central-government policies provide frameworks for local innovation by stipulating for local matching funds or administrative support, or delegating management authority and the development of standards and fee structures to provincial or local governments. In addition to the CCFG, other examples include China’s water and soil conservation law, and policies governing the implementation and support of local eco-agricultural programs.

Significant local-level innovation also occurs in the creation of eco-compensation schemes and market-based instruments for environmental policy. The vast majority of these innovations resolve issues surrounding water resources, their effective sustainable protection and equitable and efficient distribution. Examples include arrangements between Beijing and Hebei regarding the upper watershed of the Miyun reservoir; water rights trading and water-based eco-compensation policies between various municipalities and irrigation districts and cost-sharing and integrated watershed management between various city governments.

Perhaps the most interesting and clearly the most innovative policies involve hybrid policies where local governments draw upon and weave together multiple central and provincial policies and funding sources to address local environmental concerns. The Jinhua River Watershed provides a good example of this type of hybrid innovation.   Here, in addition to local water rights trading and downstream development zone policies, governments also draw upon funding from State Forestry Administration policies.  

The Property Rights Issue

Significantly, the Chinese term shengtai buchang jizhi, meaning “eco-compensation mechanisms”, encompasses PES schemes as well as policies that foster cooperation between various levels of government to finance and share environmental protection and restoration costs. The term’s growing use and importance within China’s developing environmental policy framework indicates the greater emphasis on not only developing innovative market-based instruments for environmental policy, but also on resolving property rights and equity issues surrounding the use and protection of natural resources.

Getting the Word Out

Developments on the ground in China have been rapid, and policymakers still face numerous challenges in creating effective and financially sustainable policies. Part of this is because many of China’s policymakers are still new to PES and market-based instruments in general. This, combined with a dearth of platforms for dialogue and information-sharing in China between government ministries, academic institutions and the private sector results in having a significant share of PES and MES-like programs, activities and initiatives unrecognized, undocumented and “off the radar.” Existing information sources are generally sector-specific, with minimal cross-sectoral information, comparison and analysis.

Moving Forward

As a result, policymakers and practitioners in China and internationally have not been able to fully benefit from China’s own growing wealth of experience gained in just under 10 years developing innovative market-based policies for conservation. China’s experiences provide insight into the implementation and outcomes for evolving ecosystem markets worldwide.   They can illustrate relationships between local institutions, social capital, property rights, local environmental conditions, equity and poverty, and how these interact with different program designs influence program efficiency and outcomes.

A clearer and more comprehensive picture of the status of markets for ecosystem/environmental services in China, the key actors, and the distribution of these activities and programs across ecosystem services and regions could provide valuable insights for policymakers.   Cross-learning and collaboration across government ministries would benefit, illustrating where further research should be targeted, and where the private sector could most easily and effectively be brought in as a key partner and stakeholder in environmental programs.

To move forward, there is a need for greater documentation and analysis of existing programs and developing cross-sectoral platforms for dialogue, information-sharing and cross-learning between policymakers, practitioners, stakeholders and experts and linking to global innovations.

China Today; the World Tomorrow

China’s extensive innovations in ecosystem markets offer tremendous opportunities for knowledge and growth in these evolving markets.   China’s ongoing, large-scale experiments in PES and other environmental policy innovations should be comprehensively studied to learn where further research should best be targeted and where the private sector could most easily and effectively be brought in as a key partner and stakeholder in environmental programs.

As nations face ongoing challenges to fund conservation, China’s initiatives can provide guidance and insights that offer untapped lessons on policy experiments of potentially great importance for policymakers worldwide.  

Michael Bennett is  leading   Forest Trends’ efforts to  assess and track the  current status and   development of PES in China, and to lay the groundwork for a China Katoomba   Group. Prior to working with Forest Trends, he was  a  post-doctoral  researcher  at the  Center for   Chinese  Agricultural Policy, Chinese Academy of Sciences. He is also  currently a research fellow at the Environmental Economics Program in China,  College of Environmental Sciences and Engineering, Peking University.   He can be reached at mbennett (at) forest-trends.org.

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

NOTE:   This article has been adapted from Markets for Ecosystem Services in China: an Exploration of China’s “Eco-Compensation” and Other Market-Based Environmental Policies, a comprehensive inventory of Payments for Ecosystem Services (PES) in China published by Ecosystem Marketplace parent Forest Trends, together with the Peking University College of Environmental Sciences and Engineering, the Policy Research Center for Environment and Economy, Ministry of Environmental Protection, China, and the Natural Capital Project.   You can download the full report to the right.

 

 
Additional resources

China’s Carbon Emissions Traders Await Offset Demand

As China rolls out seven domestic pilot emissions trading schemes this year – with the city of Shenzhen’s debuting last month – market actors are wondering how carbon offsets will fit into the picture. Here, we provide a breakdown of the types of offsets eligible for trading, existing supply and potential demand, as well as what’s on the horizon.

 

9 July 2013 | Designated as China’s first special economic zone back in 1980, the fast-growing city of Shenzhen has come to epitomize the country’s move toward market-oriented economic policies. On June 18, Shenzhen set yet another precedent when it launched the first of seven pilot programs to help pave the way for a national cap-and-trade program.

Under the pilot program, 635 companies in Shenzhen, responsible for about 38% of the city’s emissions, face obligations to reduce their carbon intensity by 6.68% on average per year by 2015.

The first day of trading on the Shenzhen Emissions Rights Exchange saw eight transactions of emissions allowances completed for a total of 21,112 tCO2e. Allowance prices ranged from 28 to 32 yuan per tonne, close to the expected price of 30 yuan per tonne (US$4.89).

While only allowances have been traded so far, emitters have the option of trading carbon offsets in the form of Chinese Certified Emission Reductions (CCERs), which are issued by the National Development and Reform Commission (NDRC). The NDRC allows existing projects registered with the UN’s Clean Development Mechanism (CDM) to register as CCER projects – a source of potential relief for CDM suppliers reeling from the protracted collapse in prices for CDM project offsets (CERs) and the recent ban on CERs from non-least developed countries for use in the European Union Emissions Trading Scheme (EU ETS).

Beyond the historically strong relationship between suppliers of Chinese renewable energy offsets and European buyers, there is potential for CERs from China-based projects to fetch higher prices from domestic buyers should the pilots manage their prices well. With more than 70% of the world’s CERs issued in China as of the end of 2012, a big question on the minds of Chinese CER suppliers is how much domestic demand they can actually expect to absorb existing and new offset supply.

Ramping up

Initial reactions to China’s new pilot activities have generally been positive among stakeholders, but elements of the system remain hazy. Liable emitters are expected to not only monitor, report, and verify their emissions, but also to participate in auctions. For the bulk of Chinese companies, trading offsets – or allowances for that matter – is an unfamiliar arena.

“Even the few Chinese companies that are in a joint venture with a European or international company that has experience in the EU ETS or California’s market are just now getting organized,” notes Jeff Swartz, Director of International Policy at the International Emissions Trading Association (IETA), which oversees a working group in China to build capacity for the new pilots. “Policymakers haven’t actually traded allowances or purchased offsets, so there’s an imperative need to share information and work with companies in existing systems that have.”

What’s eligible?

In March, the NDRC released its first batch of 52 CCER methodologies eligible for domestic emissions trading, all of which are adapted from existing CDM methodologies.

The list stays true to China’s traditional focus on renewable energy, energy efficiency and fuel switch, and methane. It also controversially includes methodologies for HFC-23 and N2O industrial gas offsets, which the EU ETS banned post-2012 in response to critique regarding their environmental integrity.

Some say it is important for industrial gas suppliers to be able to access the domestic market – now their only major prospective source of demand – for recourse, however, a recent analysis by Climate Bridge – a major China-based project developer and wholesaler – expresses concern that the inclusion of industrial gas projects could crowd out China’s domestic offset market and potentially subject pilot schemes to low carbon prices as experienced in the EU ETS.

Offsets from non- or pre-CDM projects are eligible for voluntary emissions trading if they apply methodologies that have been approved by the NDRC, according to interim government regulations. While not explicitly stated, this could potentially provide a bridge for projects developed to the Verified Carbon Standard (VCS) and Gold Standard, which certify many of their projects according to CDM methodologies.

NDRC-approved methodologies do not yet cover forestry and land use, which the NDRC said it is still vetting alongside other CDM methodologies. Domestic initiatives like the Panda Standard, China’s first voluntary carbon standard developed by the China Beijing Environment Exchange and BlueNext with the support of Winrock International, are in the process of seeking approval from the NDRC for afforestation/reforestation methodologies.

Gauging demand

Domestic demand for offsets will inevitably vary between Shenzhen and other emerging pilots. After factoring in the level of emission reduction targets and allowances provided through the system (totaling 100 MtCO2e between 2013-2015 for Shenzhen alone), the scope of supply and demand for offsets will depend on the existing supply of offsets eligible for use under each pilot, as well as limits set on the use of offsets against emitters’ compliance obligations (tentatively 10% on average across China’s various planned pilots).

“Policymakers are very aware of the fact that if they open up a fire hydrant, they could have a situation in which supply exceeds demand,” says Swartz. “However, I suspect they face a difficult situation in restricting offsets because some of the companies that they’re asking to participate in the ETS from the compliance point of view have also supplied CDM offsets in the past.”

Given China’s large existing offset supply in certain areas, many project developers have been slow to embark on new projects until sufficient demand can soak up existing inventories. Climate Bridge’s analysis  predicts that Shenzhen will have limited potential for new offset project development, as “the existing CER supply in this region already makes up more than 8% of the capped emissions.” The company expects other pilot jurisdictions like Tianjin, on the other hand, to have strong demand for new CCERs given the dearth of existing CDM projects in the area.

Greater demand (and clarity) ahead?

Over the course of this year, other pilots are busy incubating in the cities of Beijing, Tianjin, Shanghai, Chongqing, and the provinces of Hubei and Guangdong – each setting their own limits on offset location and project type. The plan is to eventually link the schemes together as a foundation for a national cap-and-trade program as early as 2016, following the release of China’s next Five-Year Plan.

Should China’s carbon market eventually link with other markets abroad, China would be a net exporter of offsets, at least for the foreseeable future. The probability of cross-border linkages is still pretty slim at this point according to Wenjie Zhuang, Senior Project Manager at Climate Bridge.

“China’s carbon market is in early stages – there is no national-level program yet,” she says. “And while the design of China’s pilot schemes has drawn lessons from trading systems all over the world, they also show many innovations in design.”

Perseverance Pays Off ForMassive Indonesian REDD Project

Five years in the making, the Rimba Raya Biodiversity Reserve Project  has overcome seemingly insurmountable political challenges to become one of the largest-ever REDD projects to see its emission reductions verified under the Verified Carbon Standard by proving that it reduced greenhouse gas emissions by more than two million tons in one year – and may reduce nearly 120 million by the time it finishes.

4 June 2013 | Two years ago, Indonesia’s Rimba Raya Biodiversity Reserve was on the rocks after the country’s Ministry of Forestry  turned more than half of its 80,000 hectares over to palm oil interests – an act that prevented it from becoming the first carbon project to generate credits under the Verified Carbon Standard (VCS) for saving endangered rainforest and reducing greenhouse gas emissions from deforestation and forest degradation (REDD). By the end of last year, however, the project had been saved – reportedly after intervention by powerful forest friends like Singapore-based businessman Rusmin Widjaja, Central Kalimantan Governor A. Teras Narang, and several green-minded wives of high-ranking officials. VCS then signed off on its design, and all that remained was for an independent auditor to make sure that the design was, in fact, being implemented and the promised emission-reductions were, in fact, taking place.

Last week, independent auditor SCS Global Services confirmed that the project had, in fact, prevented the emission of roughly 2.2 million tons of carbon dioxide into the atmosphere over the year ending in July, 2010, meaning it can now sell 2,181,352 Verified Carbon Units (VCUs) from that period. Over the course of its 30-year life, the project aims to reduce emissions by 119 million tons.

Located in  the state of Central Kalimantan, it covers almost 64,000 hectares and aims to preserve carbon-rich tropical peat swamp and forest, originally slated for development into palm oil plantations, while also providing a critical reserve for endangered Orangutans.

“The Rimba Raya project has undergone a lengthy and complex review process,” said Dr.  Robert J. Hrubes  , SCS Executive Vice President. “The scale of this project is truly precedent setting, demonstrating a strong market value in preserving forests.”

The region has suffered from high rates of deforestation and is home to over 94 threatened and endangered species, including the Bornean Orangutan. Orangutan Foundation International, operated by renowned primatologist and conservationist Dr.Birute Mary Galdikas  , is the NGO Partner and Project Beneficiary for the project. The sale of carbon credits will fund the preservation of critical Orangutan habitat.

“Rimba Raya will be one of the most important Orangutan conservation projects in the world, said Galdikas.  “It is nothing less than the promise of survival for the endangered Orangutan.”

“We are exhausted but overjoyed to have earned verification for the Rimba Raya project,” said  Todd Lemons  , CEO of InfiniteEARTH, the project developer. “While this project has faced monumental hurdles, SCS’ experience assessing REDD projects proved invaluable for fairly evaluating our compliance with the VCS standard and verifying that these emissions reductions are as real and valuable as we believe they are.”

The project also meets the requirements of the Climate, Community and Biodiversity Alliance (CCBA) standard by supporting the livelihoods of local communities and the area’s rich biodiversity. It was the first in the world to earn Triple Gold Validation under the CCBA standard.

Additional resources

Small Scale Illegal Logging In Vietnam: Implications for FLEGT And REDD+

Key results from a Forest Trends paper on the government of Vietnam’s Forest Law Enforcement, Governance and Trade (FLEGT) and the country’s REDD+ initiatives finds that illegal logging can only be curtailed with policies promoting small scale forest use and management that benefit the local communities.

8 July 2013 | Strategies attempting to curb illegal logging in Vietnam must provide forests benefits for the local communities in order to be effective. This means clear and secure tenure rights are distributed to the local people.

It’s a key lesson to consider in the Forest Law Enforcement, Governance and Trade (FLEGT) and Reduced Emissions from Deforestation and Forest Degradation (REDD+) initiatives currently pursued by the Government of Vietnam and the focus of NGO and Ecosystem Marketplace publisher Forest Trends’ Information Brief on Vietnam deforestation.

The brief examines two case studies from Hoa Binh and Binh Dinh provinces that illustrate how differences in the allocation of clear and secure tenure and use rights affected the prevalence of illegal logging. In the small Dao village of Ban Y (all village names have been changed), villagers were not given meaningful tenure rights to the local forest. Villagers can only derive benefit from the forest if they actively participate in illegal logging. In the Kinh village of Phuc Minh, villagers received full tenure rights, with the result that the villagers themselves protected local forests against outside encroachment guaranteeing a sustainable timber harvest and long term benefits.

Background

Despite the Government of Vietnam’s attempts to increase enforcement, illegal logging is still a pressing concern in Vietnam today. The trade in illegally sourced timber involves a range of actors from large-scale and powerfully connected networks to small-scale operators, and affects all forests across the country and including those zoned for protection. The persistence of small-scale illegal logging has given rise to significant public concern and increasingly severe law enforcement efforts by the central government.

The Vietnamese media typically portrays small-scale Illegal logging as being perpetrated by poor villagers who invade government property containing natural forest with valuable timber. Corrupt forest protection officers are described as turning a blind eye on the villagers’ illegal practices, and they all collude with traders to perpetuate this trade in illegal timber for personal gain. Media and government recount this simplified story, leading to widespread calls upon the central government to strengthen law enforcement by “cleaning up” Vietnam’s forest protection apparatus and increasing the human and financial resources allocated to enforcement.

Research shows that this conventional account of small-scale illegal logging is overly simplistic. Illegal practices are not simply due to the presence of poor villagers, corrupt local officers and illegal traders. Nor is the widespread presence of illegal logging simply due to a lack of law enforcement. Illegal practices instead reflect a combination of factors, a key one being the lack of tenure rights given to local people living near forests containing valuable timber, thus legally excluding them from forest benefits including those from timber. Increasing resources dedicated to law enforcement in the absence of changes in incentive structures for all involved will not work.

Ban Y: Small-Scale Illegal Logging in a Protection Forest

In 1995, government policies on forestland allocation granted individual households in Ban Y tenure rights for forestland. However, this transfer of tenure rights did not include the concurrent transfer of tree harvesting rights to the villagers. The local forestlands were classified as protection forests for watershed protection. Households were not allowed to extract any timber from these forests, despite their historical claims on the forests, legal tenure rights and livelihood needs.

Despite the prohibition, villagers began to cut trees for cash income. Villagers used relatively harmful “cut and run” extractive techniques, typically damaging a dozen smaller trees when cutting and hauling each big log, leaving branches and small trees behind. This damage is increasingly further within forest areas as high value trees are being progressively depleted. Timber cut in the forest near Ban Y was brought to Huu Bang, a timber trading village near Hanoi, and eventually ended up as furniture in Vietnam’s domestic markets.

Despite mandates to check the legality of timber harvesting, trade and transport of timber, a complex chain of government officials allowed the illegally sourced logs to be transported between Ban Y and Huu Bang, and were facilitated by traders, local brokers and village leaders.

In this case study, one single timber trader was a critical facilitator, making payments to village leaders, local brokers (called “lawmakers” by villagers), tax and traffic officers. The local brokers would in turn make payments to other government officials who would ultimately allow the timber to pass into the wholesale markets (Figure 1). The trader’s truck encountered no difficulties when passing through a series of checkpoints overseen by various local government officials.

Among all actors involved in getting the timber from tree to market, Ban Y villagers benefitted the least and bore the most risk. While collectively government officials (23) and brokers (2) captured the most (39%) of the benefits, on a per capita basis the trader made the most profit (Figure 2). Villagers received 30% of total benefits, but the benefit was spread between numerous villagers, and they spent more time and bore more risks (e.g., injuries associated with logging and hauling of the tree) than the other groups. The average return for a day’s labor was a mere 29,000 VND (or US$1.80 in 2004, when the research was undertaken). The trader obtained 9% of the total benefit as a single person and was not exposed to the same kinds of risks as the villagers. A wholesaler in Huu Bang received 22%.

Why did the villagers cut the trees?

The 1995 forestland allocation in Ban Y did not ensure forest protection. While the villagers received formal rights to the land, they did not receive any rights to the trees on the land. Villagers were unable to translate the formal rights into tangible benefits for themselves – either for cash income or subsistence needs.

As might be expected, villagers in Ban Y ignored the government’s restriction placed on the forest and continued to conduct their customary practices in the forest with reference to the rights that they had enjoyed historically. “Forest belongs to villagers” was a common expression, allowing villagers to justify the logging regardless of the government’s prohibition. They were driven by high demand and lucrative prices being offered on the domestic timber market. Despite the low nominal benefits, the prices being offered by local traders enticed the villagers to collude with the trader and local officials. The tale of Ban Y is repeated across Vietnam, driving the depletion of timber and degradation of forests.

Phuc Minh: Forest Protection and Management by Village Community

Similar to Ban Y village, the village of Phuc Minh received the formal tenure rights (The district People’s Committee granted the village tenure rights to the forest for a 50-year period under a single title) to the forest lands around their village. However, in this case, the Phuc Minh forest lands were not placed in the prohibitive protection category. In fact, with technical and financial supports from German Development Bank (KfW) through a community forestry project, the allocation was given with the understanding that villagers would combine forest protection with low-impact logging to ensure both positive social and environmental outcomes. The German Reconstruction Bank (KfW)-funded project aimed to improve local livelihoods and forest conditions by way of community forest management (Community forest management rested on the allocation of 364 ha of natural forest containing valuable timber to Phuc Minh village in 2008), helping the villagers’ Community Forest Management Board to establish community forest protection and development regulations which set out the rights and duties of the community with regard to forest use and management. Villagers and project staff report that community management put an effective stop to illegal activities. The villagers received the permission to harvest trees only after they demonstrated an increase in timber volume and forest value since the time of allocation.

Technical and financial assistance from the KfW project undoubtedly increased not only the ability of villages to obtain meaningful rights to forest resources, but also their technical capacity. The project trained villagers in forest inventories, silvicultural management, and harvesting techniques. Villagers conducted a forest inventory to determine the status and timber value of the forest they had been allocated. They contracted technical staff to develop and submit forest management and sustainable timber harvesting plans to the district People’s Committee for approval. They conducted the first timber harvest in 2010-2011, extracting almost 100 m3 of timber through sustainable harvesting techniques.

Villagers assumed an active role in decisions about the use of the harvested timber. They decided to give preference to community members in need. With support from the project and local authorities, the Community Forest Management Board organized a tender process for the sale of the remaining timber. They also decided how to use generated revenues after paying the applicable resource tax and fees to the Commune People’s Committee. Retaining around 60% of total revenues, villages decided to fund the operations of the Community Forest Management Board, pay for protection activities and invest a significant share in the village forest development fund.

Perhaps most importantly, villagers who could prove compliance with their responsibilities for forest protection were allowed to withdraw operational funds from a collective village savings book established with the Bank for Social Policies. This savings book was funded out of revenues from the harvested timber in recognition of the wider benefits generated by the villagers’ forest and the expenses incurred by villagers in protecting the forest.

Community forest management was successful in Phuc Minh not only because villagers derived tangible benefits from the forest and participated in decision-making but also because their benefits were linked to performance in forest protection. Support provided by the KfW project clearly also contributed to the success.

Tapping the potentials of small-scale forest management

Ban Y and Phuc Minh offer two contrasting cases on how forest governance can accommodate small-scale forest management. The comparison demonstrates that in the context of similar law enforcement arrangement existed in the two villages, the critical significance of the full package of tenure and use rights which enable villagers’ ability to derive tangible benefits from forests for sustainable forest management.

The observations from Ban Y demonstrate that villagers will not make constructive contributions to forest management if they are not given full tenure rights including the use right or are excluded from forest benefits. The inability of the villagers to benefit from nearby forest resources enticed villagers to team up with a timber trader because they were not able to derive benefits from the forest otherwise. Local officials colluded in the illegal practice for personal gains. Villagers benefitted from the arrangement benefit but ended up gaining the least among all involved actors. This provided little incentive for villagers to manage the forest in a sustainable manner.

Experience from Phuc Minh shows that villagers will take on a constructive role for sustainable forest management if they are given full tenure rights–in this case including the right to harvest timber from the forest. Secure tenure rights and guaranteed timber harvests resulted in a strong incentives for community members to work together with local forest protection officers to protect the forest and prevented the emergence of the coalition driving illegal logging in Ban Y.

These insights reveal that law enforcement alone will not solve the problem of small-scale illegal logging in Vietnam. In the worst case, further criminalization of logging would provide added impetus to illegal activities by empowering corrupt local officials, increasing the profits made by traders and wholesalers, and diminishing the benefits accruing to villagers.

The centrality of tenure rights calls for renewed emphasis on forestland allocation to local communities and forest reclassification from protection to productive purposes. The significance of tenure right also questions the continuing use of short-term contracts in forest protection and management because they do not involve the transfer of tenure rights.

Implications for FLEGT and REDD+

The insights presented above have direct implications for Vietnam’s Forest Law Enforcement, Governance and Trade (FLEGT) and Reduced Emission from Deforestation and Forest Degradation (REDD+) initiatives. Objectives and measures to combat illegal logging figure prominent in both. The Voluntary Partnership Agreement (VPA) to be signed with the European Commission (EC) in the future accords high significance to actions stopping illegal logging. Similarly, Vietnam’s proposal for the second phase of the UN-REDD Programme foresees allocation of significant funds for measures against illegal logging.

Currently, the emerging EC – Vietnam FLEGT VPA is supposed to cover both imported and domestically produced wood materials. Domestic illegal logging will only be curtailed if Vietnamese policies promote governance that accommodates small-scale forest use and management, and allows local communities to benefit from the forest. Additional, specific implications for FLEGT are:

  • The emphasis in Vietnam’s FLEGT needs to be more on the G than the E, i.e. emphasize governance reforms over simple forest law enforcement.
  • The legality definition under FLEGT will only serve legal forest governance if it makes suitable adjustments to Vietnam’s current legal framework, including rights to villagers’ right to timber from natural forests currently managed by State entities.
  • The development of Vietnam’s FLEGT VPA requires broad-based consultations with all kinds of stakeholders at national and local levels.

Similarly, REDD+ will achieve reductions in deforestation and forest degradation only if REDD+ actions accord small-scale forest management a constructive role. Specific implications include the following:

  • Full-scale implementation of REDD+ requires the expansion of forestland allocation to local communities in order to provide positive incentives for villagers’ participation through real benefits derived from the forest.
  • The design of REDD+ needs to combine performance-based payments for protection of forests with their active use and management by smallholders because REDD+ payments alone are unlikely to provide sufficient incentives for protection.
  • REDD+ requires a reorientation of law enforcement from obstructing to supporting small-scale management.

Key Messages

  • Villagers’ lack of clear and secure tenure rights is a key driver of small-scale illegal logging
  • Sole reliance on law enforcement is likely to aggravate small-scale illegal logging because it provides local officials more opportunities for bribery
  • FLEGT will reduce illegal logging only if forest governance accommodates small-scale forest management
  • REDD+ will increase forest carbon stocks only if law enforcement supports small-scale forest management instead of obstructing it
Additional resources

China Uses Market-Like Mechanisms To
Promote Reforestation Of Sloping Lands

Rapid expansion of agriculture has led to the destruction of forested hills critical for regulating water flows. China’s expansion has been bigger and faster than most, and so are its problems. But the notoriously top-down government has responded with a centrally funded yet incredibly decentralized, flexible, and locally-administered solution.

30 April 2013 | Until the middle of the last century, Fuzhou, China enjoyed regular flows of clean water from the Min River. But that began to change with the advent of urbanization in upstream cities like Sanming and Nanping, and with deforestation in hills surrounding those cities. This brought irregular flows of dirty, unsanitary water to Fuzhou. Now the city is paying roughly $800 million annually to each of those cities. The money is used to administer regional water management programs that encourage farmers to reforest the denuded hills and implement sustainable land-use practices.

It’s all part of the Min River Watershed Water Resource Protection Eco-Compensation Program – one of several uniquely Chinese efforts to promote healthy watershed stewardship on a grand scale. Like dozens of Payments for watershed services (PWS)-also known as investments in watershed services (IWS)-programs underway across the world, China’s eco-compensation programs aim to tap the flexibility of markets to promote responsible and cost-effective watershed stewardship. Unlike those other efforts, however, this one has the heft of China’s powerful central government behind it. That’s made it possible for them to achieve unrivaled scale – to the point that China accounted for 91% of watershed investments in 2011, according to Ecosystem Marketplace’s State of Watershed Payments 2012 report. This one country almost singlehandedly generated all of the $ 7.46 billion in watershed transactions that came out of Asia that year.

The term “eco-compensation” is an all encompassing term that covers government initiatives to improve environmental management with a focus on water resources and watershed management. While eco-compensation is a uniquely Chinese concept, it shares DNA with PWS, because it offers market-based – or at least market-like – solutions to environmental challenges. Eco-compensation is almost entirely driven by the government – primarily the national government, although local implementation varies place to place. Sometimes, compliance is mandatory. It has strong elements of wealth transfer from urban to rural and from richer to poorer members of society, and that means to those most environmentally impacted. It’s also happening at an unprecedented scale. Much of China’s involvement and innovation in this sector is due to the nation’s growing environmental problems. The rapid economic growth in China has put increased pressure on the nation’s water supply and other resources.

China’s biggest and most successful eco-compensation program so far has been the Conversion of Croplands to Forests and Grasslands, (CCFG) otherwise known as the Sloping Lands Conversion Program. The CCFG initially aimed to convert 14.67 million hectares of cropland to forests and afforest about the same amount of land that is currently wasteland, according to a study on the program called China’s Sloping Land Conversion Program: Institutional Innovation or Business as Usual? The program has since been frozen at 9.2 million hectares.

The Genesis

The CCFG program was implemented after flooding across China in the 1990s displaced millions of people and killed thousands. According to the same study on CCFG, sloping cropland contributes 65% of the 2-4 billion tons of silt that is dumped into the Yangtze and Yellow-China’s longest and most productive rivers- every year, and that’s the focus of this program.

In order for this program to work, farmers don’t necessarily have to stop farming but they do have to alter their land-use practices. While many farmers find other sources of employment, the program uses several creative approaches like agroforestry that allows farmers to continue working on the land. As part of the program, the government provides compensation to farmers. At one time, farmers could be paid with grain or cash but now all payments are in cash.

By 2003, the program was being implemented in more than 2000 counties in 25 provinces. As of 2007, the program had retired and afforested over 9 million hectares of land-an area slightly smaller than the state of Maine-according to a report on CCFG.

In 2011, the CCFG program was the largest land reforestation program in the world and was responsible for 47% of China’s Investments in Watershed Services, according to State of Watershed Payments 2012.

Eco-Compensation vs PES

The innovative approaches CCFG used – like contract rural landowners as direct stewards of ecological services- helped generate widespread momentum for eco-compensation in China.

Eco-compensation envelopes a variety of frameworks. This includes direct payments from government to individuals or community suppliers of watershed ecosystem services. It covers compensation to households or regional governments for taking regulatory action towards conservation or protecting a fragile ecosystem among other deeds. Eco-compensation can also include some sort of fee or tax to increase funding or incentives on restoration and environmental management.

Although the central government is driving the policy and footing much of the bill, the program enjoys flexibility in how the policy directive can be implemented locally. This has positives and negatives. On the plus side, it has fostered variety and experimentation on the ground, which in theory promotes models that work. But because of the low information sharing between government ministries, academic institutions and the private sector, several eco-compensation programs are undocumented. It’s created a system that’s difficult to evaluate and tough to track. Also, China as a whole is new to market-based instruments causing some market-like activities to remain under the radar.

Moving Forward

With solid financial backing from the Chinese government to implement these market based instruments that are improving efficiency, eco-compensation has the potential to bring real and much-needed reform to China’s water resource management and also help China develop an economic model that is sustainable. In 2009, China’s National Development and Reform Commission (NDRC) and other government agencies hosted the “International Conference on Payments for Ecological Services” in an attempt to share experiences and provide opportunities to invest and operationalize eco-compensation programs. The NDRC is also developing a national Eco-compensation Ordinance, and the national government has stressed promotion and improvement of eco-compensation as a key component of the environmental targets of its 12th Five-Year Plan. Chin’s Five-Year Plans are a series of social and economic incentives laid out by the Chinese government. The current guideline, the 11th Five-Year Plan (2011-2015) focuses on tackling environmental challenges like carbon emissions and water pollution.

Eco-compensation will likely be integrated into China’s zoning laws in the future as well. In a new zoning system, development rights and restrictions are distributed based on the ecological services of the land.

Much more work needs to be done, however, and it remains to be seen if the eco-compensation trend will truly solve China’s water problems.

Forest Trends’ Katoomba Group will be discussing this issue further as it unfolds at their next meeting-Katoomba XVIII: Forests, Water and People, to take place next month in China. The meeting will draw on talks with leading experts, practitioners, policymakers and investors from China and abroad to try and solve the water crisis using nature-based solutions.

 

 

China Aims For Scale, Scope, And ReachIn Payments For Ecosystem Services

China’s eco-compensation programs are among the most comprehensive payments for ecosystem services on the planet, but delegates to the 18th Katoomba Meeting in Beijing say they must reach more people in more segments if they are to deliver lasting environmental benefits.

Click to hear closing remarks from Katoomba XVIII.

16 May 2013 | BEIJING | People’s Republic of China | The hardest part about dealing with externalities isn’t where they begin, but where they end – as Niu Chonguan pointed out at the public segment of Katoomba XVIII: Forests, Water, and People, which took place here on Thursday.

“Everyone agrees that the beneficiary pays,” said Niu, who is Deputy Director General of the Department of Soil and Water Conservation at the Chinese Ministry of Water Resources. “But beneficiaries are not just downstream users. They’re also those benefiting from reduced flood risks or reduced disasters from sandstorms.”

Moving forward, he said, the question is whether these groups should be enticed to pay as well and how we might quantify the relative share of benefits of each. It’s a question that cut to the heart of the whopping 25 first-day presentations, because eco-compensation levels for soil & water conservation payments are supposed to be set based on valuation of ecosystem services and resulting ecological and downstream improvements, instead of on the cost of intervention, which is how most watershed investments tracked by Ecosystem Marketplace are calculated.

The same day, Zhang Qingfeng of the Asian Development Bank highlighted the need to bring in more private-sector investment, while several presenters highlighted the need to spread the concept institutionally.

“We’ve been talking about many of the ways to scale up – but we’re just not looking at it clearly,” said Forest Trends CEO Michael Jenkins as the day would to a close. “One of the ways is we have to get away from our own institutional silos. If we don’t collaborate, we’re still going to talking about scaling up twenty years from now.”

He echoed the sentiments of Zhang and Niu, calling for the inclusion of new beneficiaries and also of more segments of society.
 
“To me, it’s not just a scaling up but a scaling out,” he said. “So when we look at the whole suite of panelists that we have here – government representatives, some private sector folks, NGOs, academics, we should have had more community representatives but there are some obviously in the audience.”

The private meeting begins on Friday, and will involve smaller workshops geared towards generating specific outcomes.

 

 

 

ADB Water Boss Courts Private Buyers For Chinese Water Markets

On the opening day of the 18th Katoomba meeting in Beijing, the Asian Development Bank’s (ADB) Water Resources Specialist, Zhang Qingfeng, offers an update on new trends in Chinese eco-compensation – including early steps towards encouraging private-sector investments in China’s natural infrastructure.

16 May 2013 | Beijing | China is the world’s largest investor in watershed protection, with nearly $7.5 billion spent in 2011 on restoring and safeguarding the country’s water supplies at their sources. That dwarfs activity in the rest of the world – for comparison, every other country combined spends a bit more than $700 million every year.

But unlike in other countries, virtually 100% of China’s investments come from the government.

In our recent State of Watershed Payments 2012 report, there is plenty of diversity in the way environmental incentives are used around the world to protect water.

But patterns also emerge: beverage companies from Tanzania to France have decided to look outside their gates to the larger watershed in order to address water risk. Agricultural producers from Minnesota to Kenya are compensating communities upstream for sending clean water their way. Hydropower operators everywhere see the logic behind watershed management to limit erosion and maintain flows in rivers. And just about everywhere you look, there’s an NGO mediating these deals, designing conservation plans, and monitoring outcomes.

But there are no good corollaries when it comes to the Chinese model of ‘eco-compensation’. In many respects, it’s uniquely Chinese. Financing and policy directives are much more coordinated at a national level, compared to the diffuse grassroots projects that are so common elsewhere on the planet. NGOs play a very small role at present. And as we mentioned, the only party that’s paying for restoration is the government.

That’s why Zhang Qingfeng’s presentation this morning was so intriguing.

Is there a role for the private sector in a traditionally public effort?

Zhang, Lead Water Resources Specialist with the ADB, took the stage to make the case for opportunities for public-private partnerships in China on eco-compensation projects.

Businesses, he said, are perhaps better positioned to play a role in eco-compensation in China than at any time in the past. Beverage companies or water utilities, for example, are natural buyers. And private-sector opportunities exist in providing market services and infrastructure as well. Traders could play important roles in nascent carbon cap-and-trade, water quality trading, and water rights trading markets, or forest exchanges. Sixteen environmental exchange centers are already active in Shanghai and Beijing, Zhang noted.

Meanwhile, the government could begin to “shift from buyer to enabler.” That means providing regulatory drivers, training and information, and mapping and setting priorities for environmental values – defining conservation goals on behalf of the public, but finding ways to encourage new players and new sources of finance to enter the market.

The Chisui Watershed Pilot

A groundbreaking effort to do just this is underway in the Chishui River watershed, where UNDP, WWF, and ADB are backing a new public-private financing mechanism.

They’ve gotten initial agreement from Moutai, a major liquor company, to pay into a new water fund that focuses on converting sloping agricultural lands to forests, “ecological farming,” and de-intensifying livestock production in the upper catchment. Payments will go to farmers and landholders, and are meant to cover the costs of the interventions and foregone income. Details of the fund are expected to be finalized in the next few months. Other contributors are also lined up – the GEF has committed $2 million to supporting the mechanism, and other liquor producers in the watershed are also being courted.

It sounds like a straightforward enough water fund, but this is a very new model in China.

And government even here remains in a sense the buyer. Moutai’s contributions go to the provincial government, which then channels the money into projects in the Chishui watershed.

“Could we more directly link the buyer and provider?” Zhang asked. In China, that’s still an open question.

Private-sector barriers to investment in China sound awfully familiar

In the meantime, these efforts have yielded some useful lessons. Public-private partnerships like the Chishui project will have a slow go of it until some institutional and policy questions are resolved. Zhang listed a few major challenges to private investments – and this is actually where China starts sounding like the rest of the world.

  • Legal frameworks, particularly water use rights, need to be clarified. – Regulations enabling and providing guidance for private participation would be helpful.
  • The relationships between multiple administrative stakeholders at varying levels are still be worked out when it comes to implementing projects like these, leading to uncertainty from a private perspective.
  • A shift toward results-based projects would be welcomed, as opposed to the status quo of paying for practice: buyers want to know what they’re paying for.
  • Standard contractual agreements linking ecosystem services providers with service buyers are nonexistent; as we mentioned, in the Chishui case funds are still passing through the government.

On the public front, No signs of slowing down

Of course, don’t expect to see that $7.5 billion figure shrinking. Zhang expects to see continued growth in public investment in eco-compensation, citing new policy drivers like a national key function regional zoning plan, water conservation being prioritized in 2011 in key policy documents, national eco-compensation regulation on the way (which, incidentally, highlighted diversified funding sources and private sector participation), and “ecological progress” recently being established as a national priority.

The government also will remain the key buyer, through a variety of mechanisms. Direct payments, compensation to households for creation of protected areas, compensation of less-developed regions for past and current environmental damage, an eco-compensation fund to protect watershed services, and other incentive-based direct payment mechanisms are all in the arsenal.