REDD+ projects are progressing even as uncertainty surrounds how this transition to later phases will be financed. ForestsClimateChange, an information hub on global climate issues, asks a group of individuals working within the forestry realm who should step up. Here is an introduction to the debate.
This article was originally published on the ForestsClimateChange website. Click here to read the original.
24 February 2014 | Emissions from deforestation and forest degradation are said to account for 10-17 percent of global emissions. of the most quick and cost-effective ways to reduce greenhouse gas emissions.
It was under this premise that in 2007, the UN Framework Convention on Climate Change agreed to develop a mechanism to see money channeled to tropical forested countries to incentivize them to adopt practices that reduce emissions from deforestation and forest degradation (known as REDD+).
Over the years, REDD+ finance has come from many different sources – international funding from aid budgets, private sector involvement in low-carbon development projects, national budgetary support, investments addressing deforestation drivers and various other multilateral and bilateral channels.
But as countries transition from REDD+ Phase I (readiness) and Phase II (demonstration) to Phase III (results-based actions), payments and other forms of compensation need to be offered for verifiable emission reductions. These payments will require significant sums of additional funding.
REDD+ projects are already starting to generate credits. But demand is low. And supply is expected to grossly exceed market demand in the next five years.
Cutting off finance sends a strong signal of indifference and uncertainty to projects that may be reducing deforestation and delivering multiple social and environmental benefits. It may also discourage countries to press on with the complex, long-term governance reforms that REDD+ has catalyzed.
The right incentives need to be in place for forest country governments and the private sector, who can then commit the necessary financial, human and political capital.
So does the task for driving demand fall to governments? Or should other actors step up and put their money where their mouth is?
We send our debaters into The Ring.
Michelle Kovacevic is the Editor of ForestsClimateChange.org. She can be reached at [email protected].
17 February 2014 | California’s Yurok people and Australian project developer New Forests yesterday announced that they have successfully registered the first forest carbon project developed under the California Air Resources Board’s (ARB) protocol for US forests. Located near the Klamath River, the Improved Forest Management project over 7,660 acres of Douglas fir and mixed hardwood will issue 704,520 offsets, destined for California’s compliance carbon market.
“Our partnership with New Forests will provide the Tribe with the means to boost biodiversity, accelerate watershed restoration, and increase the abundance of important cultural resources like acorns, huckleberry and hundreds of medicinal plants that thrive in a fully functioning forest ecosystem,” said Thomas P. O’Rourke Sr., Chairman of the Yurok Tribal Council.
On the voluntary side, the last installment of Ecosystem Marketplace’s buyer series explores why the National Geographic Society – perhaps best known for the stunning photos featured in its magazine – has been investing in forest carbon. Nat Geo purchases offsets from a reforestation project in Panama, an avoided deforestation (REDD) project in Brazil, and another REDD project in the Yaeda Valley of Tanzania to neutralize the impact of various aspects of its operations.
“Some people are not going to be comfortable using carbon offsets to counter their greenhouse gas (GHG) emissions,” National Geographic’s Chief Sustainability Officer Hans Wegner admits. “But we feel they are a viable way to deal with those emissions we cannot eliminate in our operations. So long as they are third-party certified, audited, and properly accounted for, we consider them an important tool.”
In global news, the United Nation’s (UN) Millennium Development Goals are set to expire in 2015, and countries are hard at work coming up with some new resolutions to rudder global development over the next generation. Forests are one of 32 themes addressed in the Sustainable Development Goals (SDGs), which a 30-member UN Open Working Group discussed in Indonesia last week.
Peter Holmgren, the Director of the Center for International Forestry Research (CIFOR), made a presentation to the group, highlighting the fact that forests are relevant to many of the other items on the world’s to-do list, from poverty eradication to food security to sustainable agriculture to water. Unlike the Millennium Development Goals, which were sector-specific, the SDGs will be set more holistically – lending themselves to a ‘landscape approach,’ Holmgren says. He suggests nine specific forest metrics that could be used to track progress going forward.
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.”
Chevrolet has been one of the most active and prominent buyers of carbon credits in the voluntary market in recent years. Now a potentially game-changing new program financed by the automaker aims to reward US-based colleges and universities for renewable energy and energy efficiency projects undertaken via a new methodology under the Verified Carbon Standard.
13 February 2014 | When Ball State University joined the American College and University Presidents Climate Commitment (ACUPCC), it vowed to slash its greenhouse gas emissions 40% by 2020. Then it identified nine pilot projects to help it achieve its goal “as funding becomes available”.
Now Automaker Chevrolet is helping to make some of that funding available by purchasing roughly 400,000 to 500,00 carbon credits from institutions of higher learning that undertake energy-efficiency and renewable-energy projects.
Not only is Chevrolet buying the credits, but the company financed the development of a new methodology that made their creation possible. The exact price the automaker will pay each institution for credits is confidential, but likely around $5 per metric ton.
“It could potentially be a game-changer in carbon reduction and the carbon market,” said David Tulauskas, director of sustainability for General Motors, Chevrolet’s parent company. “For the first time, it offers a streamlined, easy process for universities and colleges, many have set a target to become carbon neutral in the future, a way to monetize this.”
Specifically, the methodology developed under the Verified Carbon Standard (VCS) provides the procedures for quantifying reductions in “Scope 1”, or direct, stationary combustion emissions and “Scope 2”, or indirect, electricity emissions achieved as a result of campus-wide interventions or through Leader in Energy and Environment Design certification of individual buildings.
“There hasn’t been a convenient way for higher ed institutions to enter the carbon market and to effectively participate,” said Robert Koester, professor of architecture and chair of the Ball State University Council on the Environment. With the new methodology, “that barrier is gone.
Colleges and universities are increasingly pursuing clean energy and energy efficiency projects as part of a widespread sustainability movement in the higher education community, which has a built-in base of students already passionate about addressing the climate issue and eager to ensure their schools are doing their parts to reduce carbon emissions.
Ball State University in Muncie, Indiana is applying the new carbon-reduction methodologies and selling some of the carbon reductions from installing the largest geothermal system at a U.S. college.
At last count, 679 campuses – about 15% of the roughly 4,000 colleges and universities across the United States – are engaged in an aggressive effort to reduce their carbon emissions as part of the ACUPCC. Under this commitment, the institutions agree to complete an emissions inventory, set a target date and interim milestones for achieving climate neutrality and take immediate steps to reduce greenhouse gases, among other things.
“That’s what this methodology really is about,” Talauskas said. “It’s about rewarding those leaders, those innovators that are going beyond business as usual.”
If Chevrolet had not financed and promoted the development of the methodology, these progressive institutions would not have the mechanism to access the voluntary carbon market in a trusted way, Koester said.
The Pioneers
Ball State University in Muncie, Indiana and Valencia College in Orlando, Florida are the first to apply these new methodologies with pilot projects. Ball State’s pilot involves selling some of the carbon reductions from installing a geothermal system while Valencia will use Chevrolet’s funds to finance additional energy efficiency retrofits.
“They have first mover advantage so they’re getting a bit of premium,” Tulauskas said. “There’s some real skin in the game and some real benefits to the universities, to the students and the climate.”
Valencia College in Orlando, Fla. is participating in the Chevrolet carbon-reduction initiative as a pilot project. Chevrolet’s funds will be used for additional energy efficiency retrofits on campus.
Chevrolet has committed to buying at least 30,000 to 40,000 credits from Ball State, which often had trouble finding the money to engage in clean energy and efficiency initiatives, Koester said. The university is not alone in that regard as other institutions are often forced to draw from tight operations budgets for these types of programs, he said.
“Chevrolet’s intervention is changing that game because now there’s a way for universities to actually acquire funding to undertake projects that will drive more deeply the carbon reductions laid out in their climate action planning,” Koester said. “It’s a really significant incentive pool.”
“We should be able to achieve carbon neutrality sooner as a result of this kind of incentive,” he observed.
Chevrolet is the largest US corporate buyer of voluntary carbon credits, purchasing offsets at above-average prices, according to Forest Trends’ Ecosystem Marketplace’s 2013 State of the Voluntary Carbon Markets report.
In 2010, the company voluntarily committed to reduce up to eight million metric tons of carbon and pledged about $40 million to the effort. Chevrolet has reduced about 7.6 million tonnes to date and the new offset purchases will complete that commitment.
To develop the new methodology, which has been approved by the VCS, Chevrolet worked with an advisory team led by the Climate Neutral Business Network with support from the Bonneville Environmental Foundation, the U.S. Green Building Council (USBGC) and the Association for the Advancement of Sustainability in Higher Education. The methodology uses a combination of performance benchmark and project method approaches to assess additionality and quantify campus-wide and/or building-specific emission reductions.
“We’re excited that there is a durable methodology and we’re excited that Chevy’s investment actually supports project teams on the ground,” said Chris Pyke, vice president, research for the USBGC.
Valencia College
It really provides an integrated solution from the sense that it provides not only the methodology, but also the underlying financing,” said David Antonioli, Chief Executive Officer, VCS Association.
Chevrolet hopes other corporates will follow its lead and commit to purchasing carbon credits from higher education institutions under the new methodology, Tulauskas said.
“Once Chevy has stepped out of the picture … we’re still positioned as an institution to continue to play in (the voluntary) market,” Koester said.
Food security is a critical yet complex issue, and CGIAR (formerly the Consultative Group on International Agricultural Research) has issued a new set of pictograms designed to help people who need to communicate it do so with pictures.
7 February 2014 | Big Facts is an open-source, online library of pictograms designed to illustrate the nexus of climate change, agriculture and food security. It is intended to provide a credible and reliable platform for fact checking amid the range of claims that appear in reports, advocacy materials and other sources. Full sources are supplied for all facts and figures and all content has gone through a process of peer review.
Anyone is free to download, use and share the facts and graphic images.
The Big Facts project is led by the CGIAR Research Program on Climate Change, Agriculture and Food Security (CCAFS). CCAFS is a strategic partnership of CGIAR and Future Earth, led by the International Center for Tropical Agriculture (CIAT). CCAFS brings together the world’s best researchers in agricultural science, development research, climate science and Earth System science, to identify and address the most important interactions, synergies and tradeoffs between climate change, agriculture and food security.
Impact investing is already driving social change in small ways, but it has the potential to completely change the way we address societal challenges. Here’s how we can tap existing financial products and services to scale up in a meaningful way.
This article was originally posted on the Global Learning Exchange website that’s focused on social impact investing. Click here to read the original.
7 February 2014 | Impact investing will struggle to gain scale and relevance without both the participation of mainstream capital markets, and investment professionals and the expansion into more traditional and non-private financial products.
A key step is to increase awareness by educating financial advisors and capital markets intermediaries about the opportunities for their clients in the impact investing space. These gatekeepers are beginning to recognize the trends to provide responsible investment services to wealthy clients and millennials. But we need to meet them where they exist, in mainstream products and services. Relationship-driven, value-added services for investors and companies are all key components in the evolution and growth of our markets and cannot be replaced by “Invest Now” technology-only solutions.
An informative 2012 industry survey of financial advisors titled Gateways to Impact by Hope Consulting stated that 69% of financial advisors were interested in using impact and sustainable investments to grow their practices. It also made it clear that financial advisors and other capital markets professionals can help investors “dip their toes” into the impact investing waters via the use of defined research products and public investment vehicles versus self-directed private investments, which many financial advisors are reluctant and/or not permitted to utilize.
Create A Wider Variety of Investable Impact Focused Securities
The creation of mainstream investment products and services has been pioneered by companies such as Calvert Social Investment Foundation with their Community Investment Notes and Microplace, an online broker dealer, which facilitated the sale of registered impact investments available in small investable increments ($20) to retail investors. However, the recent announcement by Microplace that, after 7 years, it no longer offer these services, underscores the challenge of mainstreaming impact investments.
Currently, the market for impact investment is very private placement centric and in the U.S. private placement investments are generally limited to accredited individuals and institutions. However, public and registered securities offerings, which do not have the accreditation limitations, expand the universe of investors who are able to participate in the impact investing space. Products like the TriLinc GlobalImpact Fund are often open to non-accredited investors and at more affordable minimum investment levels.
The report by Sonen Capital Evolution of an Impact Portfolio: From Implementation to Resultswas very effective in describing the asset classes that can define a diversified impact investing strategy. The report also provided examples of a variety of acceptable investments, from CD’s to private equity and publicly traded equities.
Develop Impact Focused Metrics and Services for Smaller Publicly Traded Companies
Data and corporate profile platforms like the Social Stock Exchange (which, despite its name, is not an exchange or transactions platform) provide a valuable venue for impact reports and information about public companies which possess a high degree of social responsibility. Public companies benefit from the additional visibility and transparency which increases trading liquidity and demand for their securities. For investors the Social Stock Exchange provides a data service where they can identify public companies that could make appropriate investments for their impact portfolios.
A U.S. effort called the Small Cap Public Company Project, which represents over $30 billion in investor assets from asset managers such as Portfolio 21, Trillium, Walden Asset Management, Boston Common, Calvert and others, is engaging small capitalization public companies to encourage them to report on their impact and become visible and investable to the impact investing space. This is an important step in creating a new class of public impact reporting company, which is currently dominated by large Fortune 500 companies in the form of ESG reporting.
Use Technology to Increase Efficiency, Access & Collaboration
In my opinion, the impact investing space does not need a “separate” exchange in order to scale and the cost to start such an entire exchange infrastructure may be prohibitive. However, the need for the impact space to employ technology creating effective aggregation for issuers, investors and 3rd party service providers (from private capital to public markets) is clear.
In the long run, however, technology and data solutions alone will not move the space into the mainstream. Although there are now many online technology platforms promising issuer to investor direct access, private placement investments are not “Self Service”. These online venues coupled with the use of qualified capital markets and financial intermediaries are essential for this to be effective.
Putting It Together
The creation of mainstream financial products combined with engaging capital markets professionals and qualified service providers with appropriate technology and data solutions will help remove significant barriers for scale thereby moving the dial in using capital as a vehicle for good.
Ecosystem Marketplace’s briefing for the business community on water risk, published this month, provides the sector with nature-based solutions to their water challenges while citing companies that have already met with success using this approach. Preparations are underway for two upcoming Katoomba events-one in Brazil in March and the other in Peru in April.
This article was originally published in the Water Log newsletter. Click here to read the original.
30 January 2014 | Greetings! This month we published our latest piece of market intelligence, a briefing for business on managing water risk at the landscape level. Building on data from the State of Watershed Payments report and our inventory of projects, we benchmark companies employing “nature-based” solutions to their water challenges.
Business leaders from Coca-Cola to SABMiller to Sony are experimenting with natural infrastructure investments that address many of the operational risks at the top of their lists – including supply disruptions and emerging regulations – while saving money, increasing resilience to climate and natural disaster shocks, and improving relations with local communities. We also talk about what our ‘State of’ findings mean for business: whether anticipated new regulations, unseen risks, or new sites and sectors of opportunity.
The Threat Beyond The Factory Walls: What Businesses Are Missing About Water Risk
The Elk River in the US state of West Virginia made headlines around the world when a small and preventable chemical spill there left more than a quarter-million people without clean water for over a week. Most water risk, however, is much less dramatic. Colombian beer-maker Bavaria Brewery, for example, realized the extent of the risk it faced when its water bills began increasing a few years back.
The cause, it turned out, was a gradual shift to cattle-ranching and farming on the high-altitude grasslands above Bogotí¡, known in Spanish as parí¡mos. In a chain of events familiar to water managers around the world, large quantities of sediment began washing downstream out of the degraded parí¡mos. In the city, the Aqueduct and Sewage Company of Bogotí¡ had to carry out additional treatment on the water before it met acceptable standards, and passed the costs of treatment on to water users like Bavaria – which is how a brewery suddenly became very interested in what was happening in the mountains.
Like Bavaria, companies all over the world face risks that come from beyond the fence line of their operations. But so far, few businesses are addressing – or even thinking about – water risk at a landscape level. A recent CDP survey of Global 500 firms found that two-thirds had targets for internal water management within their direct operations, but just four percent had set goals for managing water risk in their supply chain, and only three percent did so for risk at the watershed level. New research from Ecosystem Marketplace, however, suggests the private sector may be starting to pay attention.
Nothing focuses the capitalist mind like high worth. If natural ecosystems can be demonstrated to have high value in the goods and services they provide, then – or so the thought goes – governments whose responsibility it is to ensure they are protected will be compelled to meet their obligations, while the private sector will see real benefit in investing. Communities and property rights owners will be stronger stewards, acting as individuals and as societies in ways so as to avoid undermining the golden goose.
We have seen this work in practice, and only a fool would argue that stressing the value of nature is a waste of breath. But what roles does economic valuation play in this? Is economic analysis always necessary to achieve conservation or sustainable use? And do economic analyses always lead to the expected, desirable outcomes? Tundi Agardy, a marine conservation expert and the director of Forest Trends’ Marine Ecosystem Services Program, discusses her views on the benefits and dangers of ecosystem services valuations.
Water Is A Top Three Global Risk, Says World Economic Forum
Too much, too little, too dirty. For the third consecutive year, reckless use and abuse of water is seen by global authorities as having the potential to seriously disrupt social stability, upend business supply chains, imperil food and energy production, and generally make life miserable for billions of people, according to the World Economic Forum’s annual Global Risks report.
The various threats to the planet’s supply of fresh water rank third – behind debt crises in key economies, and persistent unemployment – on the list of convulsive planetary threats of greatest concern to more than 700 business, government, and nonprofit leaders who responded to the Geneva, Switzerland-based think tank’s annual survey.
The security and quality of the world’s water, however, goes even deeper than its bronze-level citation. At least three of the top ten risks identified in the World Economic Forum’s survey are principally problems fundamentally involving water. Problems involving water are generally viewed as having effects confined to a specific community or region. But the authors of the Global Risks study argue that water shortages and bursts of surpluses caused by flooding are systemic risks that reach much further.
Maryland Marsh Plans To Rise Above The Rising Tides
The tall pine that stands at the edge of the marsh looks permanent to the untrained eye, but when we step off the pavement and onto the forest floor, the ground sways like a mattress. We’re standing on what Erik Meyers calls terra infirma. “This is all history,” he says. “This is all going to be gone.”
Maryland’s Blackwater National Wildlife Refuge is disappearing due to sea level rise and is fast converting into open water. But non-profit The Conservation Fund in partnership with other organizations and federal agencies have crafted a plan to save the critical bird habitat with an adaptation strategy involving marsh migration upslope.
A New Strategy To Improve Water Quality One Targeted Watershed At A Time
More than 15,000 streams, rivers, and lakes in the United States are too polluted with nutrient runoff to support wildlife, be enjoyed recreationally, or serve as a drinking water source. In the Mississippi River Basin (MRB), a region that encompasses about 41 percent of the continental United States, the majority of the local water quality pollution stems from farming activities involving fertilizer and livestock manure use. The MRB drains into the Gulf of Mexico, where the county’s largest “dead zone,” an oxygen-devoid region, forms every spring and wipes out aquatic life and fisheries.
Few programs have seen widespread success in tackling either local or the Gulf’s growing water quality problems, but an emerging initiative could present a way forward. The U.S. Department of Agriculture (USDA) launched the Mississippi River Basin Healthy Watersheds Initiative (MRBI) in 2009. New research from the World Resources Institute finds that with some specific improvements, the MRBI’s new approach could play a key role in improving the nation’s inland and coastal water quality.
Clean air, fresh food, medicine and shelter are just a few of the services we get from forests. The United Nations recognized this recently with a report compiled by three agencies highlighting the benefits of paying forest owners for caring for these resources and services. The United Nations Environment Programme (UNEP), UN Economic Commission for Europe (UNECE), and the Food and Agriculture Organization (FAO) assembled the report with the intent that it serve as a tool for governments to create legislation supporting sustainable behavior in Europe’s forests. The report encourages a scaling-up of payments for ecosystem services (PES) projects. It notes PES are particularly effective in creating a system that sustains the service while also empowering local communities, by initiating opportunities or helping to maintain an income. Coca Cola’s bottling plant in Tagua, Portugal, for instance, pays local forest owners to maintain their forests. A healthy forest ensures a properly filtered supply of water for the plant. The report includes several best practice examples like this, but also stresses the importance of having sound policy in place in order for PES to function at its best.
A third Ohioan city has become interested in green infrastructure. Akron, like Cleveland and Cincinnati, wants to reduce its sewer overflows by keeping excess runoff out of them. Green initiatives like permeable pavement, rain barrels, retention basins and green roofs can make that happen. At present Akron’s sewer overflows dump two billion gallons of waste into the Cuyahoga and Little Cuyahoga Rivers, and into the Ohio and Erie Canal. Akron currently has a consent decree to address stormwater pollution, which doesn’t include any natural infrastructure elements, pending in district court. The city now wants to withdraw part of the decree to include green initiatives, which city officials also feel will be less expensive. There is local support from environmentalists. But there’s also concern that a revised plan will take too long in providing a solution for the pollution problem.
A new study suggests that sustainably managing Fiji’s forests will have an unexpected benefit: protecting the country’s coral reefs. “Small adjustments to the proposed terrestrial protected areas can deliver large benefits to coral reefs,” Carissa Klein of the University of Queensland tells Mongabay. Even when only land-based conservation goals are pursued, benefits to the reefs were shown to increase by as much as ten percent. Fiji’s government has committed to protecting 20 percent of land area and 30 percent of inshore waters by 2020; the study’s results will inform the selection of protected areas in the future.
Australia Reaches Into the Piggybank to Help Irrigators
For the first time, the Australian government will sell off some of its water licenses to farmers, to help irrigators manage
hot weather. Water allocations managed by the Commonwealth Environmental Environmental Holder are intended to guarantee enough instream flows to support the Murray-Darling River basin’s health, which has long been negatively affected by large withdrawals for agriculture and other uses. Barnaby Joyce, Minister of Agriculture under the newly-elected government, says the government will build up its holdings again once rainfall returns. The Greens party are sharply critical of the decision and the precedent it sets; other conservation groups says such trading won’t be harmful as long as environmental outcomes are monitored and transparent to the public.
A Push for Water Equality in the Andes With Benefit-Sharing Mechanisms
CPFW-Andes (Challenge Program on Water and Food – a CGIAR initiative) is launching benefit-sharing mechanisms (BSM) among ten basins in Peru, Ecuador, Bolivia, and Colombia. Because there often is a disconnect between those who use water resources and those who care for them at their source, BSM attempts to right this problem by redistributing water rights equally for everyone in a watershed. It’s a flexible model related to payments for ecosystem services, although not market-driven. Instead, the mechanisms are developed through a consultative process that involves local communities.
Water Quality Trading for Compliance: Unpacking Permit Language
Typically, water quality trading in the US is driven by permit language that allows dischargers to trade to meet compliance. A new report from the Electric Power Research Institute (EPRI) examines eighteen case studies using National Pollutant Discharge Elimination System (NPDES) permits incorporating trading, with an eye to illuminating how water quality markets can help meet NPDES obligations. Interestingly, the authors find that in several cases permits acknowledging trading have not yet actually traded; in other cases credits were purchased but not ultimately used for permit obligations.
Reciprocity Drives Investments in Watershed Services in Bolivia
A watershed investment scheme in Bolivia is not only having a positive impact on the global climate while preserving forests, but boosting the livelihoods of locals in the meantime. Via Reciprocal Water Arrangement (or ARA – Acuerdos Recíprocos por Agua – in Spanish), downstream water users pay upstream landowners to conserve forest lands. This, in turn, ensures a healthier supply of water flows downstream. They’re paid by way of in-kind compensation like beehives, fruit trees seedlings or barbed wire.
Nigel Asquith of Fundacion Natura Bolivia, a partner organization in the project, explains it this way: “Every [US]$20 invested by donors in a local water fund has been matched locally with $30, which purchases a beehive to compensate for conservation of two hectares of water-sustaining forest for five years. Honey revenue per hectare of forest conserved is US$5 per year, so within five years the landowner has not only used the US$20 of donor funds to conserve two hectares of forests but has also sold US$50 worth of honey.” Since the first ARA was developed in Bolivia, 30 municipal governments and water cooperatives have joined the movement. “The ARA model does not focus on paying the opportunity cost for conservation, which can be very expensive, but on changing social norms,” said Maria Teresa Vargas, also of Fundacií³n Natura Bolivia.
A University of North Carolina (UNC) report assesses the ‘restoration economy,’ measuring the size of this sector, which includes conserving and restoring ecosystems and mitigation activities. Results found an active restoration scene in the US contributing growth and jobs, with the preliminary number for national direct economic spending at $10.6 million annually. Restoration economy assessments have largely been done on a small scale up until now, so its full value isn’t always captured. Linking jobs creation to the ‘green economy’ has also been difficult – partly because defining the green economy is complex as well. UNC is further conducting a nation-wide survey that should provide an exact figure on jobs directly created and sustained by the restoration economy.
A new case study from the Property and Environment Research Center (PERC) looks at the success of the Scott River Water Trust – despite red tape and legal difficulties in California surrounding water transfers – and considers how the model might be deployed elsewhere to lessen California’s water woes. The trust leases small volumes of water from farmers along the Scott River; the water is left instream to help protect salmon and steelhead during times of low flows.
New Study Adds Weight to “Natural Sponges” Theory of Forests
A new study published in the Water Resources Research journal has provided further evidence supporting the ‘sponge effect’: essentially, forests absorb excess water from storms and reduce peak runoff, while releasing water during droughts. It also supported the argument that forests slow runoff relative to deforested areas. The report was based on results taken during 450 tropical storms in Panama’s forests. Because the report, which was completed by the Smithsonian Tropical Research Institute, found that forests release more water during the dry season, it underscores forests’ importance to year-round flows and downstream agriculture activities and, in Panama’s case, powering the Panama Canal.
A new national network on water quality trading in the US will distill experiences from markets across the country to define best practices, principles for program design, and lessons learned from design choices. Coordinated by the Willamette Partnership and the World Resources Institute, dialogues between stakeholders will be captured in two documents, forthcoming next year: an ‘Options and Considerations’ document and a summary of principles and practices. The network plans to initially focus on point-nontpoint trades.
The Rim fire that torched 257,135 acres of Stanislaus National Forest last summer and fall could cost as much as $736 million in ecosystem services lost in the first year post-fire alone, says an Earth Economics report. The report was completed for the San Francisco Public Utility Commission, which relies on the burned area for water supplies and hydropower. Other districts are monitoring the area, as well, watching for soil erosion and debris in their water supply. The fire killed all vegetation on 98,000 acres, not only releasing a huge amount of carbon into the atmosphere, but preventing capture of the gas on the land for decades to come. Aside from carbon storage, the report also cites watershed functions, aesthetic values and recreational services lost to the fire. Data for Earth Economics’ report was gathered in September before the end of the fire. They are considering the figures presented in the study as initial and conservative, as later damages are not included.
Natural Gas uses Less Water than Coal, Even With Fracking
Researchers with the University of Texas say that natural gas as an energy source uses significantly less water than coal, even after the hydraulic fracturing process – known to require a lot of water – is taken into account. Natural gas-fired power plants can save up to 35 times more water than when coal is used, the report found. It also found that if all of Texas’ 423 power plants operated on coal, the energy industry would have consumed over 30 billion gallons more of water. Still, other studies have shown that fracking can contribute to water shortages where activities are intensely concentrated or located in water-scarce areas.
Inspired by a vision of people and nature thriving together, the Pisces Foundation is dedicated to improving the environment for present and future generations. After hiring its first full-time staff in fall 2012, the foundation embarked upon a strategic planningprocesswhich has defined its vision, mission, and principles, as wellas specific goals and outcomes for three areas of focus: environmental education, climate & energy, andwater. To implement its new strategy, the foundation seeks a Program Officer to lead its water work. This position reports to the Executive Director and will play an important role in a dynamic, growing philanthropy.
Global Water Partnership (GWP), an intergovernmental organisation with its global secretariat in Stockholm, Sweden, is recruiting a Senior Communications Officer. Reporting to the Head of Communications, the incumbent is expected to bring strategic thinking and practical skills to developing and managing communications activities.
Webinar: Ecosystem Services Harmonization in Theory and Practice
The scientific community and policy makers recognize marine and coastal ecosystem services (MCES) as extremely important for human survival. Peer reviewed assessments to date, however, have used a variety of terms and classifications for ES which have caused confusion and misinterpretation of the results and hindered communication among involved parties. The European Commission’s Joint Research Centre research group has reviewed the scientific literature to assess the state of the art of existing MCES assessments, identify gaps and limitations, and propose ways forward. A wide variety of methodologies, terminologies, and ES classification systems were identified. Based on the existing approaches, the research group also identified the main research gaps, proposed an integrated ES classification system, and gave clear definitions of ES tailored to the marine environment. This webinar will demonstrate this work and will go beyond the scientific component by exploring potential practical implications. Evangelia Drakou of the EC’s Joint Research Centre will discuss the applicability of the integrated MCES classification system for systematically organizing MCES information and enabling interoperability among existing MCES online platforms. Webinar co-sponsored by Marine Ecosystem Services Partnership and OpenChannels.org. 5 February 2014. Online.
Webcast: The Legal Status of Environmental Credit Stacking
Environmental credit markets have been established to offset impacts to wetlands, endangered species’ habitat, water quality, and the global climate system. Potential participants have explored the concept of credit stacking, whereby a conservation project can produce credits in multiple markets. The rules governing sales of these stacked credits are still in development and proper balance must be struck to protect the environment and the market participants. Royal C. Gardner, Stetson University College of Law, and EPRI’s Jessica Fox have written a comprehensive article entitled The Legal Status of Environmental Credit Stacking (Ecology Law Quarterly), providing background on environmental markets, credit stacking, and considerations for a credit stacking protocol. The authors offer six considerations to strike a balance between the public interest in environmental mitigation and the credit producers’ personal interest in financial return. 11 February 2014. Online.
Nexus 2014: Water, Climate, Food and Energy Conference
The Water Institute at the University of North Carolina at Chapel Hill and collaborators will host the Nexus 2014: Water, Food, Climate and Energy Conference on March 5-8, 2014 to examine the thoughts and actions related to a nexus approach. The co-Directors of the Conference are Jamie Bartram, Director of The Water Institute, and Felix Dodds, Associate Fellow at the Tellus Institute, with support from an International Advisory Committee. The Conference will bring together scientists and practitioners working in government, civil society and business, and other stakeholders focusing on the questions of how and why the nexus approach is, and can be, used on international and local levels. 5-8 March 2014. Chapel Hill NC, USA.
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.
An impressive slate of legislators and policymakers have joined the lineup for AMWA’s 2014 Water Policy Conference in April. Key members of Congress and Administration officials will share their insights on national developments that will affect the nation’s water utilities in months and years to come. Attendees will also have the opportunity to share their views with the speakers. 6-9 April 2014. Washington DC, USA.
This annual meeting will focus on “10 years of moving research to solutions.” Participants will have the opportunity to model, explore, characterize, bank, inject, extract, treat, and predict all subsurface needs with everything groundwater related. 4-7 May 2014. Denver CO, USA.
2014 National Mitigation & Ecosystem Banking Conference
The only national conference that brings together key players in this industry, and offers quality hands-on training and education sessions and important regulatory updates. Learn from & network with the 400+ attendees the conference draws, offering perspectives from bankers, regulators, and users. 6-9 May 2014. Denver CO, USA.
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.
The coming year could be a good one for the environment, with China cleaning its air, palm olil moving towards sustainability, and the world at large finally starting to get a handle on climate change. These are some of the more optimistic projections from the World Resources Institute (WRI) as it identifies what it believes will be the top stories of 2014.
This article was originally published on the WRI website. Click here to read the original.
29 January 2014 | All years are important, but decisions made in 2014 will have a striking impact for decades to come.
Here’s the point: How cities grow—economically and demographically—will be critical in whether we fail or succeed in the fight against climate change and poverty. Poorly designed, sprawling cities can exacerbate existing greenhouse gas and congestion problems. (Cities already account for 70 percent of global greenhouse gas emissions, and some cities already lose 10 percent of their GDP to congestion alone.) Alternatively, compact, low-carbon cities—featuring sustainable transport systems and people-centric design—can improve quality-of-life and drive economic opportunity.
A growing number of city leaders are beginning to act – and often showing more vision and action than national leaders. This year could significantly accelerate this trend, as a number of key meetings of city leaders can help build political momentum. In February, mayors from the C40 (a group of more than 60 global cities committed to action on climate change) will gather for a summit meeting in Johannesburg. And other major gatherings of mayors in Singapore in June and Colombia in April offer opportunities for best practices to be shared and replicated.
But nowhere will the focus on cities be greater in 2014 than in Brazil as it plays host to the World Cup. All eyes will be on the 12 cities where games will be played.
One the most urbanized, large countries in the world, Brazil has already experienced some of the worst problems of pollution and inequality—as well as some of the most inspiring innovations that are benefitting both citizens and the environment. Urban transport illustrates both. Vehicle emissions caused more than 4,600 premature deaths in Sao Paolo in 2011, and in June last year, more than 1 million protestors took to the streets to demand better urban transport systems and other city services.
At the same time, a new national law requires 3,000 cities to create people-centered city mobility plans by 2015. One hundred cities already have bus-rapid-transit (BRT) systems in place that carry more than 12 million passengers per day.
What image of Brazilian city life will remain in the minds of the 3 million extra visitors and the 3.2 billion World Cup television viewers—and what impact might it have? And, as Brazil faces elections and urban unrest, will its city and national leaders pursue a path towards greener and more efficient cities?
2) Restoration: A 2 Billion Hectare Opportunity
Every minute of every day for the past 13 years, the world has lost an area of forest the size of 50 soccer fields.
The greatest tragedy is that much of all the forest we have lost now has little economic or ecological value. WRI has mapped 2 billion hectares of such degraded land—equivalent to twice the size of China—and shown that much of it can be turned from wasted and unused land into forests, agricultural fields, and other productive uses.
Some countries are beginning to seize this opportunity. The Bonn Challenge, a global commitment for restoration established in 2011, calls for 150 million hectares of deforested and degraded land to be restored by 2020. Restoring this amount of land could bring $84 billion in economic benefits annually and close the greenhouse gas “emissions gap” by one-fifth.
Brazil, Costa Rica, El Salvador, Rwanda, and the United States have already made commitments to the Bonn Challenge, pledging to restore a collective 20 million hectares. This year could be a year of increased momentum. As leaders seek ways of addressing climate change in a way that would boost rather than reduce jobs and incomes, restoration could emerge as the greatest “win-win” of all. Countries will meet again in Bonn in June to potentially seek additional pledges, and the Heads of State Summit on Climate Change in September offers another opportunity to bloom into a global movement.
3) Sustainable Palm Oil: A New Era?
Palm oil has become one of the most ubiquitous ingredients—found in everything from candy bars to cosmetics to cooking oil. More than half of all supermarket items contain it, and its demand will continue to sky-rocket as the global “middle class” rises from 2 to 5 billion between 2010 and 2030.
But it currently comes at a very high cost: It is one of the leading causes of deforestation in tropical areas.
There are signs that the traditional expansion path – cut down the forest to plant oil palm – may be changing. Western companies, led by the likes of Unilever, Nestle, and Proctor and Gamble – are increasingly committing to phasing out all palm oil that has been produced through deforestation. About 15 percent of world trade is now certified as “sustainable” by the Roundtable on Sustainable Palm Oil (RSPO), a collection of more than 1,000 businesses, retailers, investors, and NGOs working to curb deforestation. This is a good start, but so far just scratching the surface.
This year could mark the beginning of a tipping point. Not only established groupings such as the Consumer Goods Forum, but also Asian-based majors such as Wilmar, the second-largest palm oil trader in the world, are now making commitments to deforestation-free production.
Particularly important is the emergence of technologies that enable monitoring to take place. For example, February will see the launch of Global Forest Watch, a high-resolution, Google map-based tool showing deforestation taking place in near-real time. Developed by WRI with key partners, it provides overlays of concessions and protected areas, enabling deforestation to be identified and responsible companies named. This and other tools will provide for the first time the ability to monitor commitments, and will enable all participants in the supply chain—including consumers, shareholders, and NGOs—to distinguish good from bad performance. This theme will be highlighted at the World Economic Forum in Davos this week.
Will this increased transparency encourage more sustainable palm oil? Will other industries like soy, beef, and cocoa follow?
4) China: Clearing the Air?
In 2013, Beijing experienced a whopping 189 days of dangerous air pollution. This choking smog is due largely to China’s massive coal consumption, which constitutes 50 percent of the world’s total.
This year will see a major step-up in action to address pollution. How effective will it be?
In June 2013, China’s State Council approved a $277 billion, five-year, anti-pollution plan—the biggest ever anywhere. A ban was placed on new coal-fired power plants in China’s three key cities—Beijing, Shanghai, and Guangzhou—and tighter pollution regulations were put on 10 additional areas. In an effort to seek less polluting energy sources, more than half of China’s new energy capacity in 2013 came from renewable energy.
This year will see new spending and policy innovations come into force. The pilot cap-and-trade system in five cities and two provinces will be implemented for the first time.
How will it go? Will it indicate that China will be ready for nation-wide implementation, as is currently planned? What will leaders learn from these initiatives? And will it indicate that China can shift away from coal and toward cleaner energy sources?
5) A New Standard for U.S. Power
Last year’s announcement by President Obama of a comprehensive U.S. Climate Action Plan—which reaffirmed the national target of reducing emissions by 17 percent below 2005 levels by 2020—now needs to be implemented. Power plants account for one-third of U.S. greenhouse gas emissions, so reducing these emissions represents one of the most important opportunities.
On June 1, 2014, the U.S. Environmental Protection Agency (EPA) is scheduled to announce new guidelines for existing power plants. (Just last week, they entered the rules for new power plants into the Federal registry). According to WRI analysis, meeting the 17 percent target will require that these regulations reduce power plant emissions by 31 percent by 2020 and by 74 percent by 2035 (below 2011 levels).
Critics will claim that this would impose too high a price on the economy. How effective will those critics be? There is mounting evidence that if the regulations are strong but flexible, the costs will be small and manageable, and that smart regulations can boost technology and competitiveness.
Already nearly 100 coal-fired power plants have closed in the United States in the past two years. And the Union of Concerned Scientists recently showed that nearly half of the remaining 1,050-odd coal-fired plants are old (43 years on average) and ripe or ready for replacement.
This year will also see the opening of the path-breaking Kemper power plant in Mississippi, applying carbon capture and storage at scale. Will the stories be about the era of CCS finally arriving, or more about cost and schedule over-runs?
6) The Year of Global Momentum on Climate Change?
U.N. Secretary-General Ban Ki-Moon will host a heads-of-government summit on climate change in September – probably the largest meetings of global leaders on climate ever. Its intent is to create political momentum in the lead-up to the planned global climate deal to be finalized in Paris in December 2015. Will it?
The coming months will see the unveiling of major analytical reports that could influence the Summit outcome. In March and April, the Intergovernmental Panel on Climate Change will issue its crucial reports on the impacts of climate change and on policy options. In the summer, a major report on the U.S. economy, Risky Business, will be issued. Sponsored by Tom Steyer, Hank Paulson, and Michael Bloomberg, it will provide new evidence on the sharply increased risk the United States is imposing upon itself by not leading more vigorously on climate change. And finally, the Global Commission on the Economy and Climate, led by President Felipe Calderon, Nick Stern, and Luisa Diogo—and comprising a stellar group of global political and business leaders and some of the world’s top economists—will issue its report, The New Climate Economy. This will provide the most up-to-date evidence on the benefits and costs of climate action.
Will all this evidence, coupled with the growing concerns about extreme weather events, be enough to create incentives for firm action? What’s clear is that the world is currently heading in the wrong direction – towards a 3-5 degree Celsius rise in temperatures. Could 2014 change that?
7) The Year of Elections: Which Way Will They Choose?
It’s likely that more people will vote in democratic national elections this year than in any other in history. The stakes are high: Three of the world’s four largest democracies—Brazil, India, and Indonesia—will elect heads of government this year.
Together, these countries account for 25 percent of the global population and 40 percent of the world’s poor. In each of these nations, there are crucial issues relating to social, economic, and environmental futures. The European Union will also hold its elections at a time when European leadership on sustainable development is under threat form political and economic pressures in some member countries. And the mid-term Congressional elections in the United States will influence whether the country can be a global leader on climate and energy.
Moving from current patterns of production and consumption toward a path that is more productive, equitable, and sustainable is a choice. And 2014, more than most, is a year of choices.
LEARN MORE: View the Stories to Watch 2014 Powerpoint presentation, video, and other resources on WRI’s Event page.
Andrew Steer is the President and CEO of WRI. He can be reached at [email protected].
Wetland mitigation banking is a growing industry in the US but its complexities run deep and as of right now, it lacks a proper analysis evaluating the risk facing both bankers and regulators. But two industry analysts are making progress with a paper offering guidance on market risks. Here is a brief summary of the 22 risks the authors discuss.
The paper, written by Patrick W. Hook and Spenser T. Shadle, two recent joint-degree graduates of Yale’s School of Forestry and Environmental Studies and School of Management, is meant to be a comprehensive reference for newcomers to the mitigation scene from the business and finance sector as well as for regulators. It draws out the most critical risks separate participants face and offers strategies to manage this risk when possible. The study is based on existing writings on this subject as well as interviews with industry participants on the most significant risks.
Short History of Wetland Mitigation
The creation of the Clean Water Act (CWA) in 1972 not only helped curb the ongoing pollution of US’ waterways, but it also established the significance of wetlands to local and national economies. And as time went on, amendments were passed that continued to solidify their importance. Section 404 of the CWA puts the US Army Corp of Engineers (Corps) in charge of monitoring dredging and filling activities. Then the government adopted a ‘no net loss’ of wetlands policy.
With these federal regulations came an ecosystem services market based around mitigating wetland loss.
Fulfilling wetland compensatory mitigation requirements can be done using three options. They are Permittee-Responsible Mitigation (PRM), In-lieu Fees (ILF) and wetland mitigation banking. For the banking option, the bank restores, enhances, creates or preserves an area of wetland which generates credits. Developers offset their negative impacts on wetlands by purchasing credits from a wetland bank.
Navigating Wetland Mitigation Markets
The paper discusses different types of risk and divides them into two categories: those faced by entrepreneurs/investors and those faced by regulators.
Entrepreneur risk is divided further into four parts:
General Risk
Requirement of large initial capital outlay-the complex entitlement process (locating, certifying and managing) of a mitigation bank is expensive and requires a lot of capital.
Loss of key people– because there are few large organizations within the industry and the positions are often specific, losing “key people,” technical experts, managers and executives, is an especially significant loss.
Difficulties deploying committed capital – it can be challenging for entrepreneurs to meet criteria for an increase in a mitigation banking investment and then there is the risk that they won’t deliver on expected results because locating suitable banking property is difficult.
Regulation Risks
Supply of credits delayed or reduced-this prolongs the entitlement process and could be the greatest risk for entrepreneurs especially if the reasons for delay are out of their control.
Demand for credits delayed or reduced-An inefficient and slow permitting process-which permits developers by requiring compensatory mitigation- will affect credit sales schedules and thus a bank’s rate of return.
2008 rule applied unevenly – Industry participants argue the Rule isn’t enforced evenly causing different interpretations to affect supply and demand and can be disadvantageous for mitigation banking in some areas.
Rules change on what must be offset Changing CWA and mitigation regulation can influence credit demand and thus poses as a risk to entrepreneurs.
Other Industry-Specific Risks
Deviation from forecasted credit prices– Accurately determining credit price is difficult and forecasting the price is near impossible without the added challenge of being the first in the market where there are no existing credit prices to base an estimate.
Quantity risk: not able to sell all credits or not able to sell on projected schedule– Even if bankers receive their credits on time, there is still the risk they won’t sell all of their inventory.
Forced to sell credits at wrong time-Bankers are forced to sell credits at a disadvantageous time when prices are lower than they would be at a later time because of an immediate need for cash to keep the bank functioning or for other reasons.
Entrepreneur does not realize a terminal value upon sale of property-Bankers calculate a terminal value (the selling price for the property) and then fail to find a buyer once all the credits have been sold which hampers future use of the property and is made worse for bankers because there is no long-term financial management of the land.
Project Specific Risks
Hydrological/biological processes do not perform as planned-Because of the complexities involved in wetland mitigation banking, the banks don’t always perform as planned.
Design or construction errors-Engineering, planting and other aspects in the implementation or design phase could cause the bank to fail.
Project Management Failure-If entrepreneurs don’t meet the requirements for a certain project because of a lack of understanding or other reasons, they risk unplanned expenses and scheduling conflicts.
Damage to site from natural disasters– Wetland banks are vulnerable to extreme weather and although these events won’t affect the entitlement of the bank, they can cause significant delays.
For regulator risk, the paper lists four types.
Inadequate endowment or site protection mechanism for long-term maintenance of site-Without an adequate site protection mechanism that ensures long-term care of the bank site is one of the greatest risks the Corps face because without it the site may degrade.
Conflicting easement on property-Existing easements, liens or other interests can encumber the process and conflict with the conservation easement necessary to create a mitigation bank.
Temporal loss of wetlands– Temporal loss is a threat to the Corps’ ‘no-net loss’ policy on wetlands and, while banking seeks to eliminate this type of loss, it’s still a factor because the market relies on advanced credits that don’t provide mitigation ahead of development impacts.
Compensation at the expense of avoidance and minimization-In the mitigation process, developers must first prove they have avoided and minimized an impact to the best of their ability, but with the growth of mitigation banking, the concern that the Corps has become relaxed on these prerequisites has grown as well.
The paper then discusses the risks facing both the regulator and the entrepreneur. There were three risks they associated with both.
Geographic service area changes, or is not spatially appropriate-For regulators, there is the risk that regional offices won’t properly balance ecological and economical considerations which threatens the integrity of the industry as well as financial soundness. Any alterations the Corps makes to the banking property, such as alters the size, after arrangements have been agreed on can critically impact the banker.
Competitors do not play by the same rules-Bad-acting entrepreneurs can build inferior banks at a lower cost damaging both the long-term ecological health of the wetlands and the industry’s reputation. When regulators lower requirement standards, the quality of banks is lowered also.
Reputation hurt by selling credits to unpopular development-Both the Corps and bankers-by either requiring forms of mitigation or selling credits- could damage their reputation by engaging in the mitigation process with unpopular development activities like fuel pipelines.
Hook and Shadle’s paper goes on to suggest ways to manage and minimize risk that can’t be avoided. For instance, choosing a bank site in a district that favors the industry is a smart decision as is developing relationships with regulators. This will ensure the regulator is acting in the banker’s best interest and help control possible risks. The paper also mentions building financial models for valuing risk.
In conclusion, the authors note the need for a more formal analysis on how entrepreneurs and investors should manage the banking industry’s risk especially when considering private sector involvement. The private sector will want to know the price of risk. But incomplete and low quality data has hindered past evaluations of mitigation banking, the authors say.
Once the wetland mitigation market has developed successful methods to understand, manage and value their risk, the authors say, those best practices could be applied to other emerging ecosystem services markets like nutrient trading and conservation banking.
Most companies around the world understand that climate change poses a serious risk to their operations, but they say a lack of regulatory direction is preventing them from taking action. Meanwhile, few of them really know how much deforestation they have in their supply chains, according to the Climate Disclosure Project.
21 January 2013 | All around the world, companies are growing leery of climate change, with 72% of those surveyed in the Carbon Disclosure Project’s (CDP) Supply Chain Report 2013–14 identifying climate change as a serious risk. Tellingly, 90% of those who identified climate change as a risk said that regulatory uncertainty was compounding the problem. E.I. du Pont de Nemours and Company says that “as it makes long term capital and R&D investment decisions, the uncertainty surrounding new regulations adds complexity to those business decisions.”
Interestingly, 56% of the 2,868 companies that answered the survey said that climate change also represents an opportunity as consumers become more receptive to low-carbon products and services.
At the same time, 38% of suppliers reported no documented processes for assessing and managing climate-related risks – echoing CDP findings published in November showing that most businesses don’t yet understand the risk that deforestation presents to their supply chain.
While water risk was ranked third among the World Economic Forum’s Global Risk 2014 report, at least three of the study’s top 10 risks are directly related to water problems like pollution and scarcity prompting report authors to argue these risks reach further than originally thought and must be solved through public-private collaboration.
This article was originally published on the Circle of Blue website. Click here to read it in its original format.
20 January 2014 | Too much, too little, too dirty. For the third consecutive year, reckless use and abuse of water is seen by global authorities as having the potential to seriously disrupt social stability, upend business supply chains, imperil food and energy production, and generally make life miserable for billions of people, according to the World Economic Forum’s annual Global Risks report.
The various threats to the planet’s supply of fresh water rank third – behind debt crises in key economies, and persistent unemployment – on the list of convulsive planetary threats of greatest concern to more than 700 business, government, and nonprofit leaders who responded to the Geneva, Switzerland-based think tank’s annual survey. The latest Global Risks report, released today, is the ninth in a series that dates to 2006.
The various threats to the planet’s supply of fresh water rank third on the list of convulsive planetary threats of greatest concern.
The security and quality of the world’s water, however, goes even deeper than its bronze-level citation. At least three of the top ten risks identified in the World Economic Forum’s survey are principally problems fundamentally involving water:
The failure to avert or adapt to climate change.
Floods and droughts fostered by extreme weather events.
Water scarcity and pollution at the root of food contamination and supply crises.
The Global Risks report uses a broad analytical lens. Its 60 pages of spider web charts and bold colors serve to highlight the complexity and interconnections between risks and regions. The strands are so tightly woven that no government, business, or charity acting alone can solve them, said the report’s co-author Margareta Drzeniek-Hanouz, director and lead economist of the World Economic Forum’s Global Competitiveness and Benchmarking Network.
“The issues are so big that they cannot be resolved by the business sector or the political sector alone,” Drzeniek-Hanouz told Circle of Blue. She added: “The report’s overarching recommendation is for public-private collaboration.”
Produced and stored within well-defined basins, problems involving water are generally viewed as having effects confined to a specific community or region. But the authors of the Global Risks study argue that water shortages and bursts of surpluses caused by flooding are systemic risks that reach much further.
Resource depletion increases the pressure on political systems, cultures, and economies.
The report cites research, for example, showing that a terrible drought in Syria from 2006 to 2011 set the table for the country’s civil war. Crop failures in the countryside prompted farmers to move to cities where existing economic and social pressures boiled over. Conflict was not an inevitable outcome, the report’s authors said, but resource depletion increases the pressure on political systems, cultures, and economies.
In 2010, drought and poor harvests in Russia, a large grain producer, led to export restrictions. Higher prices rippled through commodity markets, increased costs for bread, and added a tailwind to the Arab Spring revolt. A year later flooding in Thailand snapped global supply chains and caused car and computer manufacturing to crater.
Smaller, local skirmishes over water also are becoming more frequent. Just this week, two people were killed in South Africa during a protest over water shortages. Though the root cause in this case was mismanagement of water, the importance of a reliable supply was tragically confirmed.
The Global Risks report also takes note of longer-term trends involving the security of the world’s fresh water reserves. Climate change is a slow-motion lurch toward atmospheric conditions that will fundamentally change life on Earth in the coming decades, the authors said. A warming world will likely increase the likelihood of both engulfing floods and chronic drought. It will lift the oceans and put a treasure chest of property at risk – assets with an insured value of more than $US 10 trillion on the U.S. Atlantic and Gulf Coasts alone.
Roughly 600 million people also live in areas less than 10 meters (32.8 feet) above sea level. Low-lying Bangladesh and the Mekong River delta – two of the most densely populated regions on the planet – are endangered. Pacific Island nations are already seeing their homelands eroded and, in preparation for the day their homes will need to be abandoned, are testing the legal bounds of asylum.
In the continental interiors, extreme weather often takes the form of devastating scarcity or overwhelming abundance of water. Droughts destroy crops, and floods demolish homes. If dry conditions endure, a host of repercussions follow. Forests become a tinderbox awaiting a spark. Rivers shrivel, cutting hydropower generation, reducing the amount of water to cool power plants, and putting countries with a poorly managed electrical grid at risk for blackouts, as happened in Venezuela in 2009 and 2010. Worst of all, the competition for scarce food and water supplies heats up – sometimes with world-changing results.
Shifts in the Global Winds
Since 2006, when the first Global Risks report was made public, much has changed. The early editions emphasized macroeconomic risks: oil price shocks, a collapse in asset prices, or a decelerating Chinese economy. Chronic diseases, both in the rich world and in developing countries, made the list as did infectious pandemics. Risks were ranked according to economic losses and number of deaths, which gave greater weight to those risks more easily measured in dollar terms. Environmental risks such as water supply, climate change, and natural disasters were considered “core” risks but were firmly in the second-tier.
In the latest report, macroeconomic threats still rank high. After all, anxiety about global debt tops the list. But water and climate change have pushed upward. The report still uses economic loss and deaths as guidelines, but they are not assessed as overtly. Perception matters more.
Respondents were asked to assess 31 pre-selected risks based on the risk’s likelihood and severity in the next decade. For the first time, respondents were instructed to select the five risks they thought most concerning. Women and people younger than 30 were more likely than men and people older than 30 to perceive environmental risks more seriously. More young people have been included in the survey in recent years – one possible explanation for water’s rise.
The report encourages its respondents to consider the long term. Yet the window for avoiding the gravest threats is closing as the atmosphere gets warmer. Recent research on water scarcity makes that clear.
An increase in global average temperatures by 2 degrees Celsius compared to today will increase the number of people living with absolute water scarcity by 40 percent, according to a study published in December from dozens of researchers in China, Europe, Japan, and the United States. Absolute scarcity is defined as less than 500 cubic meters per person per year within a country. The increase in those living with scarcity is in addition to what would be expected from population growth.
“Every degree matters now,” said Jacob Schewe, the report’s lead author, and a scientist at the Potsdam Institute for Climate Impact Research.
“The fundamental impact that climate change has on global water resources is becoming very clear now.”
“The fundamental impact that climate change has on global water resources is becoming very clear now,” Schewe added in an email to Circle of Blue. “We need reliable, quantitative knowledge about these impacts in order to support adaptation. But ultimately, there will be limits to what societies can adapt to, so climate change mitigation is crucial as the risk of water scarcity increases with rising temperatures.”
How to achieve that? The risk report asserts that a weakening U.S., a growing China, and a jumbled middle requires new forms of global decision-making if systemic risks such as climate change are to be addressed. In fact, respondents selected a failure in global governance as the risk most connected to all others.
The report’s recommendations in this regard are thin and generic-buzzwords about multi-stakeholder action and “agile and responsive multilateral governance.” However, the purpose of the report is to be “a platform for discussion,” said Drzeniek-Hanouz. Perhaps attendees at the forum’s annual winter meeting in Davos, Switzerland next week will ponder a stronger recipe.
Brett Walton is a Seattle-based reporter for Circle of Blue with interests in infrastructure, pricing, Pacific Northwest and the Southwest. He can be reached at [email protected].
The Department of Interior seeks a department-wide strategy to mitigation while the conservation banking industry argues over a controversial plan that includes a special 4(d) rule for lesser prairie chicken conservation. Also, Ecosystem Marketplace released a briefing offering guidance to the private sector on nature-based investments.
This article was originally published in the MitMail newsletter. Click here to read the original.
20 January 2014 | We ring in 2014 with some unfinished business from last year, including ironing out a department-wide mitigation strategy for the US Department of Interior.The Fish and Wildlife Service is expected to play a central role in crafting this strategy, at the same time that the Service is also revising its 1981 Mitigation Policy and developing a new Endangered Species Act Compensatory Mitigation Policy. These efforts, which include new guidance on conservation banking, will likely support the Department’s mitigation strategy.
We’re also keeping tabs on the new inclusion of a five-state plan for protecting the lesser prairie chicken that the US Fish and Wildlife Service wants to include in a special 4(d) rule proposal.
The plan establishes a strategy to conserve prairie chicken habitat, employing a set of incentives-based landowner programs, along with mitigation and efforts to reduce threats. 75% of mitigation will be short term – five to ten years – while the remaining 25% will take the form of long-term conservation. That structure is a sharp departure from typical habitat mitigation, which has typically made permanent protection a core requirement. Under the plan, permanently-protected strongholds will maintain a prairie chicken population, while “moving habitat” will create satellite populations that disappear and reappear over time.
Several parts of the plan have met with opposition from practitioners inside the mitigation banking community. Common Ground Capital (CGC), a conservation banking company with a primary focus of creating landscape-level banks for prairie chickens,has argued that the relatively new concept of ‘moving’ short term conservation won’t deliver on needed results. CGC said the approach would reduce compliance costs to industry at the expense of the grouse, calling temporary mitigation (or “term” mitigation) untested and lacking in a regulatory framework. And because of the bird’s dire situation, bankers feel the prairie chicken isn’t the right species to try it out on. You can get our full coverage of the debate here.
Ecosystem Marketplace is also pleased to announce that we’ve just released a new briefing developed specially for the private sector, on investments in nature-based solutions to the global water crisis. We invite you to take a look here.
—The Ecosystem Marketplace Team
If you have comments or would like to submit news stories, write to us at [email protected].
Conservation Banking Becomes A Reality In Spain
A meeting of the Spanish Congress late last year was short but meaningful. The legislature approved a new Environmental Assessment Act and for the first time, conservation banking was included. Under Spain’s Act, the banking credits are called environmental titles. The Spanish Environment Ministry will oversee the industry approving banks and determining where these ‘titles’ will be used. The credits will then be traded in a free market with a single registry. While the Act won’t achieve total incorporation of conservation banking into Spain’s environmental policy, it provides guidance on how to develop or become involved in a conservation banking scheme. It also initiates development of new environmental rules where conservation banking can play a larger role.
Department of Interior Seeks A More Inclusive and Effective Mitigation Policy
The Department of Interior is attempting to establish a department-wide mitigation strategy that will protect natural resources as the US prepares for an expected rise in development projects on public lands. The new strategy aims to streamline the mitigation process with better coordination between different sectors involved. The effects of climate change will be a priority of the new approach. A focus will be on mitigation efforts that improve the resilience of our nation’s resources in the face of climate change. Other focuses of the new strategy include integration of mitigation in the planning and design phases and ensuring the durability of those measures. Transparency and consistency throughout the process are other core elements.
FWS Revises Rule On Lesser Prairie Chicken Conservation To Include WAFWA Plan
The US Fish and Wildlife Service (FWS) is altering a special rule proposal issued in May on conserving dwindling lesser prairie chicken populations. FWS now would like to incorporate a plan that enables energy developers to practice voluntary conservation. A consortium of energy companies and NGOs in collaboration with the Western Association of Fish and Wildlife Agencies (WAFWA) created the Lesser Prairie Chicken Range-wide Conservation Plan (RWP) to proactively conserve chicken habitat-mitigating species loss – so a listing won’t be necessary. In return for voluntary conservation, the energy companies receive assurance that even if the chicken is listed, they won’t face additional regulations.
But the plan is facing opposition from some in the conservation banking sector, who argue that it that relies on untested methods – including heavy reliance on short-term mitigation – and will not deliver needed results.
Wetlands Carbon Credits Could Swim Into California Market
Carbon finance could soon play a critical role in the restoration of California’s wetlands, with a coalition of stakeholders developing a methodology that would allow wetlands restoration projects in the state to generate credits for both the voluntary carbon market and California’s cap-and-trade program, if the state Air Resources Board (ARB) deems them eligible.
While state and federal initiatives have raised more than $100 million for wetland restoration over the past decade, funding remains insufficient to meet restoration goals of up to 100,000 acres of marsh, according to stakeholders who see potential for carbon market revenues to fill the funding gap for wetland projects in the Sacramento-San Joaquin Delta, Suisun Marsh, and California coastal areas.
A new year is upon us, but the top stories of 2013 in biodiversity and wetlands may well be the biggest headlines of 2014, as many of them remain unresolved. Ecosystem Marketplace takes a look back at the key news items we covered last year.
Delegates to the Intergovernmental Platform on Biodiversity and Ecosystem Services (IPBES) agreed on an ambitious five year work program at the Platform’s second session last month in Antalya, Turkey. The “Antalya Consenus” included the decision to produce a series of assessments in the coming years: on the relationship between pollination and food production, on land degradation and links to biodiversity and ecosystem services, and on invasive species. Delegates also agreed on rules and procedures for IBPES, a framework for collaborating with UN bodies, and to establish a task force on indigenous knowledge systems. Anne Larigauderie, formerly of DIVERSITAS and the International Council for Science (ICSU), was appointed Head of the IPBES Secretariat in Bonn, Germany.
$33M to Add Biodiversity to the Ag Supply Chain in the UK
A £20 million (US $32.9 million) pot to support landowners’ creating conservation credits in the UK is looking for takers. Funds will be channeled through a partnership between AB Agri, a food supply chain organization, and offset brokers the Environment Bank. “Through the new partnership, we are aiming to create or restore 1,000 hectares of valuable wildlife habitats delivered through £20 million of new offset funding,” said AB Agri’s David Langlands. Tom Tew, Chief Executive of the Environment Bank, added, “This is an unprecedented chance to create a robust network of wildlife habitats on hundreds of farms across the UK.”
Madhya Pradesh Meets Resistance on Biodiversity Benefit-Sharing Levy
The state of Madhya Pradesh in India will become the first to make use of provisions in the 2002 State Biodiversity Act that allow it to institute a benefit-sharing levy on companies using bio-resources. Firms can be levied for between 2-5 percent of turnover according to the Act. However, legal battles over what constitutes a bio-resource have already begun, with the National Green Tribunal being asked to rule on whether coal falls into this category. Proceeds from the levy would fund biodiversity management committees. Soya processors, sugar mills, distilleries, herbal medicine manufacturers, enzyme and organism users are also expected to be subject to the tax.
Chesapeake Appalachia Ordered to Spend $6.5M on Wetland and Stream Cleanup
A subsidiary of Chesapeake Energy was hit with big penalties for damages to wetlands and streams from its natural gas extraction activities. Chesapeake Appalachia will spend an estimated $6.5 million on restoration at 27 sites to compensate for unauthorized discharges of fill into local waterbodies in West Virginia, and pay a $3.2 million civil fine for Clean Water Act violations. The company will likely make use of credits from wetland mitigation banks in addition to carrying out its own mitigation actions. In December 2012, the company pleaded guilty to unauthorized discharges in another case in the area, paying a $600,000 restoration penalty.
December saw Plan Vivo release an updated version of their standard for community payments for ecosystem services. The standard certifies a broad swathe of land management and livelihood projects with ecosystem and biodiversity benefits. Certified project credits can be marketed in carbon (as “Plan Vivo certificates”), watershed, or biodiversity-driven ecosystem markets.
NYC Seeking Partners for a New Wetland Bank Serving the City
The New York City Economic Development Corporation (NYCEDC) last month announced a request for expressions of interest (RFEI) for partners in developing a 68-acre site for a wetland mitigation bank on the west shore of Staten Island. The bank will support development of waterfront areas elsewhere in the city. It would also be one of the first mitigation banks in New York state.NYCEDC and the NYC Department of Parks and Recreation seek a partner to assist in financing, constructing, and operating the bank. Expressions of interest are due by February 14th.
A few news bites on wetland and conservation banking from around the USA:
Michigan’s St. Clair County recently broke groundon a 27-acre site for a wetland bank, after waiting ten years to get a permit from the Michigan Department of Environmental Quality.
York City Council in South Carolina will pay $156,000 for creditsto mitigate for impacts, estimated at 240 feet of stream and one acre of wetland, related to a road project. Taylor’s Creek Mitigation Bank will provide the credits.
Mitigation Solutions USA’s Muddy Boggy Conservation Bankin Oklahoma, supplying American Burying Beetle credits, was recently approved.
Thameslink Aims for Net Gain in Biodiversity Compensation in South London
A new biodiversity compensation project in the UK initiated by Network Rail’s Thameslink Programme is aiming for “net gain” from impacts. Thameslink Programme is supporting native vegetation plantings in south London, as part of a larger effort to restore the Great North Wood which historically stood in the area. The project will demonstrate new metrics for biodiversity compensation recently developed by the government. “Thameslink is the first Network Rail project to set a ‘net gain’ target for biodiversity and, by doing so, we hope to set a precedent not just for rail projects but for all construction projects,” said Amelia Woodley, Environment Manager for Thameslink. “To achieve a net gain we are committed to following the mitigation hierarchy of avoidance, mitigation and then compensation as last resort.” Biodiversity offsets have been recently hammered in the press in the UK over fears of their leading to loss of habitat.
A new partnership between Conservation International and Hewlett Packard is designed to collate and crunch a vast network of ecological data on tropical forests. The HP Earth Insights programwill link multiple datasets and support a new ‘Wildlife Picture Index’ of tropical forest biodiversity. “Previously, most indices of biodiversity were based on data from scientific literature, which has a long lag time from collection to publication,” writes Peter Seligmann, CEO of Conservation International, in a piece up at HuffPo. “This meant that policymakers were making decisions based on information that was often five years old. Big data and information technology will help us change that.”
The Guardian has a summary of a recent live chat on natural capital valuation. Conversation ran from the potential downsides of valuation, to defining natural capital and getting businesses on board. Participants from universities, the IUCN, and companies like SABMiller and PwC all weighed in.
The U.S. Water Alliance’s Business Advisory Council will host a conservation banking roundtable, Mitigating Impacts to Water Resources and Species Habitat: Evolving Standards and New Trends, on March 24, 2014 in Pittsburgh, Pennsylvania to discuss recent developments and explore new opportunities to mitigate impacts to improve the overall health of water resources and species habitat after permittees have avoided and minimized project impacts. The roundtable will be a full day event and convene local and national leaders from utilities, academics, regulators, nonprofits, and extractive industries, such as mining, oil and gas, and others, with a strong draw from Pennsylvania, Ohio, and West Virginia. 24 March 2014. Pittsburgh, PA. Attendance is by invitation only, but if interested in participating please contact Hope Hurley at [email protected].
2014 National Mitigation & Ecosystem Banking Conference
2014 National Mitigation & Ecosystem Banking Conference
The only national conference that brings together key players in this industry, and offers quality hands-on training and education sessions and important regulatory updates. Learn from & network with the 400+ attendees the conference draws, offering perspectives from bankers, regulators, and users. 6-9 May 2014. Denver, Colorado.
This gathering will be the first global conference on approaches to avoid, minimise, restore, and offset biodiversity loss. It will bring together experts and professionals from business, governments, financial institutions, NGOs, civil society and research, and intergovernmental institutions with an interst in demonstrating no net loss and preferably a net gain of biodiversity. Sponsored by BBOP, Wildlife Conservation Society, Zoological Society of London and Forest Trends. London, UK. 13-14 June 2014.
Conference on Ecological and Ecosystem Restoration
CEER is a Collaborative Effort of the leaders of the National Conference on Ecosystem Restoration (NCER) and the Society for Ecological Restoration (SER). It will bring together ecological and ecosystem restoration scientists and practitioners to address challenges and share information about restoration projects, programs, and research from across North America. Across the continent, centuries of unsustainable activities have damaged the aquatic, marine, and terrestrial environments that underpin our economies and societies and give rise to a diversity of wildlife and plants. This conference supports SER and NCER efforts to reverse environmental degradation by renewing and restoring degraded, damaged, or destroyed ecosystems and habitats for the benefit of humans and nature. CEER is an interdisciplinary conference and brings together scientists, engineers, policy makers, restoration planners, partners, NGO’s and stakeholders from across the country actively involved in ecological and ecosystem restoration. 28 July – 1 August 2014. New Orleans, LA.
Kinship Conservation Fellows is a ground-breaking environmental leadership program that emphasizes market-based solutions to environmental problems. Kinship’s dynamic global network of 174 Fellows in 46 countries and 6 continents is collaborative, entrepreneurial, and dedicated to effective conservation. Applications for the 2014 Program will be open until January 27, 2014.
AWF is currently seeking a talented individual who will be responsible for managing AWF’s project in the Mbeya region of Southern Tanzania integrating Sustainable Agricultural Development with Biodiversity Conservation. Reporting to AWF’s Chief Operating Officer (COO), the Project Manager will manage all aspects and implement parts of AWF’s three-year program in Southern Tanzania, including overseeing the work portfolio, and ensuring the successful and timely completion of the project.
The Center for International Forestry Research (CIFOR) is a nonprofit, global facility dedicated to advancing human well-being, environmental conservation and equity by conducting research to help shape effective policy, improve the management of tropical forests and address the needs and perspectives of people who depend on forests for their livelihoods. CIFOR is a member of the CGIAR Consortium. Our headquarters are in Bogor, Indonesia, with offices in Asia, Africa and South America. CIFOR is looking for Post-Doctoral Fellow: Impact of Sustainable Intensification on Landscapes and Livelihoods.
If you have comments or would like to submit news stories, write to us at [email protected].
Conservation Banking Becomes A Reality In Spain
A meeting of the Spanish Congress late last year was short but meaningful. The legislature approved a new Environmental Assessment Act and for the first time, conservation banking was included. Under Spain’s Act, the banking credits are called environmental titles. The Spanish Environment Ministry will oversee the industry approving banks and determining where these ‘titles’ will be used. The credits will then be traded in a free market with a single registry. While the Act won’t achieve total incorporation of conservation banking into Spain’s environmental policy, it provides guidance on how to develop or become involved in a conservation banking scheme. It also initiates development of new environmental rules where conservation banking can play a larger role.
Department of Interior Seeks A More Inclusive and Effective Mitigation Policy
The Department of Interior is attempting to establish a department-wide mitigation strategy that will protect natural resources as the US prepares for an expected rise in development projects on public lands. The new strategy aims to streamline the mitigation process with better coordination between different sectors involved. The effects of climate change will be a priority of the new approach. A focus will be on mitigation efforts that improve the resilience of our nation’s resources in the face of climate change. Other focuses of the new strategy include integration of mitigation in the planning and design phases and ensuring the durability of those measures. Transparency and consistency throughout the process are other core elements.
FWS Revises Rule On Lesser Prairie Chicken Conservation To Include WAFWA Plan
The US Fish and Wildlife Service (FWS) is altering a special rule proposal issued in May on conserving dwindling lesser prairie chicken populations. FWS now would like to incorporate a plan that enables energy developers to practice voluntary conservation. A consortium of energy companies and NGOs in collaboration with the Western Association of Fish and Wildlife Agencies (WAFWA) created the Lesser Prairie Chicken Range-wide Conservation Plan (RWP) to proactively conserve chicken habitat-mitigating species loss – so a listing won’t be necessary. In return for voluntary conservation, the energy companies receive assurance that even if the chicken is listed, they won’t face additional regulations.
But the plan is facing opposition from some in the conservation banking sector, who argue that it that relies on untested methods – including heavy reliance on short-term mitigation – and will not deliver needed results.
Wetlands Carbon Credits Could Swim Into California Market
Carbon finance could soon play a critical role in the restoration of California’s wetlands, with a coalition of stakeholders developing a methodology that would allow wetlands restoration projects in the state to generate credits for both the voluntary carbon market and California’s cap-and-trade program, if the state Air Resources Board (ARB) deems them eligible.
While state and federal initiatives have raised more than $100 million for wetland restoration over the past decade, funding remains insufficient to meet restoration goals of up to 100,000 acres of marsh, according to stakeholders who see potential for carbon market revenues to fill the funding gap for wetland projects in the Sacramento-San Joaquin Delta, Suisun Marsh, and California coastal areas.
Food security is a critical yet complex issue, and CGIAR (formerly the Consultative Group on International Agricultural Research) has issued a new set of pictograms designed to help people who need to communicate it do so with pictures.
7 February 2014 | Big Facts is an open-source, online library of pictograms designed to illustrate the nexus of climate change, agriculture and food security. It is intended to provide a credible and reliable platform for fact checking amid the range of claims that appear in reports, advocacy materials and other sources. Full sources are supplied for all facts and figures and all content has gone through a process of peer review.
Anyone is free to download, use and share the facts and graphic images.
The Big Facts project is led by the CGIAR Research Program on Climate Change, Agriculture and Food Security (CCAFS). CCAFS is a strategic partnership of CGIAR and Future Earth, led by the International Center for Tropical Agriculture (CIAT). CCAFS brings together the world’s best researchers in agricultural science, development research, climate science and Earth System science, to identify and address the most important interactions, synergies and tradeoffs between climate change, agriculture and food security.
We take a look back at the forest carbon highlights in 2013, a year of supply-side success and demand-side growing pains. In this newsletter, our expert readers offer their predictions for the New Year, including continued momentum on landscape approaches for reducing greenhouse gas emissions and the prominence of forestry in the upcoming international climate negotiations in Lima.
This article was originally published in the Forest Carbon newsletter. Click here to read the original.
17 January 2014 | It’s that time of year again – the time we look back over our shoulders at the last 12 months of forest carbon news and take stock (pun intended, as always) of what may lie ahead in 2014. Our Ecosystem Marketplace retrospective tells the story of 2013, and readers ranked the top stories of the year. Below are some of the highlights.
As for us, we’re resolving to bring you the best news and analysis on forest finance in 2014 and gearing up for our 2014 State of survey that tracks transactions from forest carbon projects around the world.
If you have comments or would like to submit news stories, write to us at [email protected].
2013 Highlights
Supply-side success In June, Brazil’s Paiter-Surui people became the first indigenous people in the world to generate REDD+ credits. 2013 also saw the Mai Ndombe REDD+ project in the Democratic Republic of Congo completing its first offset sale, and the Oddar Meanchey REDD+ project in Cambodia also achieved an important milestone: The project is the first to earn the Climate, Community and Biodiversity Standard’s “Triple Gold” designation. Stateside, California issued its first (non-REDD) forestry offsets in November 2013. High-profile demand Demand for forest carbon offsets remains touch and go. On the one hand, high-profile buyers such as Disney and Latam Airlines are putting their stamp of approvals on forestry offsets with big purchases from Peruvian projects. An ongoing buyers series delves into the motivations of four entities that have taken a leadership role in supporting forest carbon projects: carpetmaker Interface, logistics group Deutsche Post, publisher Macmillan and conservation nonprofit National Geographic. And last month, California put its first forestry offset buyers on the books.
…but not enough of it On the other hand, as retailers and project developers know all too well, offsets from even the highest quality projects aren’t exactly flying off the shelves. Our 2013 State of the Forest Carbon Markets report found over the years, at least 26.5 million hectares of forest – an area about the size of Ecuador – has been planted, managed or protected due to climate finance. However, our survey respondents said they could do much more: Forest carbon projects could generate 1.4 billion offsets over the next five years – but only if the demand for that volume of emissions reductions materializes.
Avoided deforestation grows up The “REDD Rulebook” approved at the 19th Conference of the Parties (COP) of the United Nations Framework Convention on Climate Change (UNFCCC) marks the most progress to date on the mechanism to curb deforestation in developing countries through performance-based payments. At an exclusive event, UNFCCC Executive Secretary Christiana Figueres said she sees a definite future for market-based mechanisms such as Reducing Emissions from Deforestation and forest Degradation (REDD) in the new international climate agreement. A few weeks later, the World Bank approved the methodological framework for its Carbon Fund, unlocking $390 million for forest conservation. Seeing the landscape for the trees COP18 in Doha in 2012 closed a door on Forest Day while opening a window for Landscape Day – marking a global move to look beyond the forest in order to reverse the drivers of deforestation. That approach bore fruit in 2013. After a decade of focusing on renewable energy projects, the Gold Standard this year improved is afforestation/reforestation guidelines while preparing to expand its protocols into agroforestry, improved forest management, improved livestock management and agriculture. Our 2013 coverage more intentionally zoomed out to the landscape scale by, for instance, looking at ways avoided deforestation projects can at the same time promote climate-safe agriculture.
(Less) risky business Last spring, the Climate Action Reserve and insurer Parhelion created an insurance product for the California carbon market that would indemnify buyers against the risk that the offsets they purchase could later be invalidated by the California Air Resources Board (ARB). The idea of insurance became even more important when ARB considered a proposal to shift the invalidation risk of forest offsets to buyers – the Board will consider the proposal again this April. Outside of California, project developers such as EcoPlanet Bamboo, which has a reforestation project in Nicaragua, are looking to mitigate political risk through insurance.
Our expert readers can’t exactly forecast the future, but they often come close. Last year, they predicted a growing interest in projects that offer co-benefits beyond carbon sequestration and in projects “nested” within jurisdictional frameworks. Both were major themes in 2013.
In 2014, readers are looking ahead to COP20 in Lima, Peru, which David Antonioli of VCS predicts “will truly be the Forestry COP, with a big focus on REDD+.” He sees an increased integration of agriculture and forestry, with a continued spotlight on creating sustainable landscape approaches in 2014.
David Rokoss of Offsetters Climate Solutions sees land-based carbon protocols expanding in 2014, with more mangroves and grasslands projects being developed. But whether the UN process will catch up with the voluntary market’s landscape approach remains to be seen.
“The recent climate change negotiations hosted in Warsaw acknowledged the important role that forests play in the global climate crisis… However, we are still waiting to see whether agriculture activities will also be recognized,” wrote Pieter van Midwoud of The Gold Standard Foundation.
Whether the completed “REDD Rulebook” will open up the floodgates of climate finance – or just a trickle – also remains to be seen. Some are more optimistic than others.
“REDD will continue its incremental march towards market legitimacy, but I don’t see a compliance market commitment to REDD within the year,” said Rokoss. “[However] we could very well see additional jurisdictions release emissions policy that includes both offsets and in particular land-based offsets through forestry programs, similar to what we have in California.”
Harold Buchanan, CEO of CE2 Carbon Capital, predicts the ARB’s quest to include REDD in its cap-and-trade program will be suspended indefinitely due to complexities such as the implications of the program’s buyer liability policy. “Compliance buyers would never buy them,” he said.
And the word from Peru, our COP20 host?
“For Peru, 2014 is going to be the year of serious change regarding companies and their relationship with the environment,” wrote Alessandro Riva of the Peru Carbon Fund, which this year created a new carbon standard specific to the country’s legal landscape.
Jobs
REDD+ Legal Consultant – Global Canopy Programme
Based in Oxford, the REDD+ Legal Consultant will work on the research and writing of a new Little REDD+ Book of Law. The publication will present a series of clear policy options to decision-makers to share lessons of legal best practice and opportunities for legislative reform to support the scaling up of REDD+. The successful candidate will have a postgraduate degree in environmental law and significant experience working on legal issues related to REDD+.
Team Leader for Xepian REDD+ Project in Southern Laos – Österreichische Bundesforste AG Based in Laos, the Team Leader will lead the implementation of a REDD+ project in the Xepian Protected Area. The role includes building institutional capacity among the park administration; improving enforcement and patrolling the project area; promoting alternative income generation among the local population in the buffer zone; and setting up an internal monitoring system for greenhouse gas emissions. The ideal candidate will have an advanced university degree, at least five years of relevant work experience, and knowledge of English, German, and Lao.
Head of Department of Forestry and Environmental Resources – NC State University Based in Raleigh, the Head of the Department of Forestry and Environmental Resources at North Carolina State University will provide vision and direction to the Department, leading faculty across a wide diversity of disciplines to excellent teaching, research, engagement and scholarship. The job requires promoting the Department regionally, nationally and internationally. Candidates must have earned a PhD or equivalent and have 10 years or more of professional natural resources experience.
Forestry and NRM Technical Advisor – India Partnership for Land Use Science Based in New Delhi, the Forestry and NRM Technical Advisor will guide the technical implementation of Forest-PLUS, a five-year sustainable landscapes initiative between USAID and the Government of India. The program seeks to accelerate India’s transition to a low emissions economy by taking REDD+ actions to scale. The successful candidate will have an advanced degree in forestry management or a related field, at least 10 years of forestry and natural resource management experience, and be fluent in English and Hindi.
Read more about the position here Malawi REDD+ MRV Specialist –Terra Global Capital Based in Malawi, the REDD+ MRV Specialist will support the upcoming USAID-funded Malawi Integrated REDD Demonstration Program. The position involves managing the implementation of carbon development work plans in Malawi with in-country partners; working closely with the Terra Global Capital team in San Francisco; managing field surveys and social appraisals to collect land use data; conducting spatial analyses; and coordinating training sessions and discussions with government and communities. Candidates must have an advanced degree in forestry, ecology or a related field and a minimum of eight years of relevant work experience, including at least five years of experience in Africa (preferably Malawi).
Call for JNR Expert Applicants – Verified Carbon Standard The Verified Carbon Standard is seeking practitioners with significant expertise in the development and/or assessment of REDD+ programs to serve as expert reviewers around the Standard’s new Jurisdictional and Nested REDD+ (JNR) Framework. These experts will review more than a dozen jurisdictional programs that are now seeking validation under VCS JNR.
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 [email protected].
Impact investing is already driving social change in small ways, but it has the potential to completely change the way we address societal challenges. Here’s how we can tap existing financial products and services to scale up in a meaningful way.
This article was originally posted on the Global Learning Exchange website that’s focused on social impact investing. Click here to read the original.
7 February 2014 | Impact investing will struggle to gain scale and relevance without both the participation of mainstream capital markets, and investment professionals and the expansion into more traditional and non-private financial products.
A key step is to increase awareness by educating financial advisors and capital markets intermediaries about the opportunities for their clients in the impact investing space. These gatekeepers are beginning to recognize the trends to provide responsible investment services to wealthy clients and millennials. But we need to meet them where they exist, in mainstream products and services. Relationship-driven, value-added services for investors and companies are all key components in the evolution and growth of our markets and cannot be replaced by “Invest Now” technology-only solutions.
An informative 2012 industry survey of financial advisors titled Gateways to Impact by Hope Consulting stated that 69% of financial advisors were interested in using impact and sustainable investments to grow their practices. It also made it clear that financial advisors and other capital markets professionals can help investors “dip their toes” into the impact investing waters via the use of defined research products and public investment vehicles versus self-directed private investments, which many financial advisors are reluctant and/or not permitted to utilize.
Create A Wider Variety of Investable Impact Focused Securities
The creation of mainstream investment products and services has been pioneered by companies such as Calvert Social Investment Foundation with their Community Investment Notes and Microplace, an online broker dealer, which facilitated the sale of registered impact investments available in small investable increments ($20) to retail investors. However, the recent announcement by Microplace that, after 7 years, it no longer offer these services, underscores the challenge of mainstreaming impact investments.
Currently, the market for impact investment is very private placement centric and in the U.S. private placement investments are generally limited to accredited individuals and institutions. However, public and registered securities offerings, which do not have the accreditation limitations, expand the universe of investors who are able to participate in the impact investing space. Products like the TriLinc GlobalImpact Fund are often open to non-accredited investors and at more affordable minimum investment levels.
The report by Sonen Capital Evolution of an Impact Portfolio: From Implementation to Resultswas very effective in describing the asset classes that can define a diversified impact investing strategy. The report also provided examples of a variety of acceptable investments, from CD’s to private equity and publicly traded equities.
Develop Impact Focused Metrics and Services for Smaller Publicly Traded Companies
Data and corporate profile platforms like the Social Stock Exchange (which, despite its name, is not an exchange or transactions platform) provide a valuable venue for impact reports and information about public companies which possess a high degree of social responsibility. Public companies benefit from the additional visibility and transparency which increases trading liquidity and demand for their securities. For investors the Social Stock Exchange provides a data service where they can identify public companies that could make appropriate investments for their impact portfolios.
A U.S. effort called the Small Cap Public Company Project, which represents over $30 billion in investor assets from asset managers such as Portfolio 21, Trillium, Walden Asset Management, Boston Common, Calvert and others, is engaging small capitalization public companies to encourage them to report on their impact and become visible and investable to the impact investing space. This is an important step in creating a new class of public impact reporting company, which is currently dominated by large Fortune 500 companies in the form of ESG reporting.
Use Technology to Increase Efficiency, Access & Collaboration
In my opinion, the impact investing space does not need a “separate” exchange in order to scale and the cost to start such an entire exchange infrastructure may be prohibitive. However, the need for the impact space to employ technology creating effective aggregation for issuers, investors and 3rd party service providers (from private capital to public markets) is clear.
In the long run, however, technology and data solutions alone will not move the space into the mainstream. Although there are now many online technology platforms promising issuer to investor direct access, private placement investments are not “Self Service”. These online venues coupled with the use of qualified capital markets and financial intermediaries are essential for this to be effective.
Putting It Together
The creation of mainstream financial products combined with engaging capital markets professionals and qualified service providers with appropriate technology and data solutions will help remove significant barriers for scale thereby moving the dial in using capital as a vehicle for good.
Motivations: “sustainability is as important as profits”
Process: hired a sustainability consultant who works closely with the CEO, project sourcing partners include Atmosfair, CarbonFund.org, and Carbon Neutral
Offset project types: various, including cookstoves, reforestation, renewable energy (wind and geothermal), ozone-depleting substances, and landfill gas
Cost: $200,000 spent in 2012 ($2.25 – $28.00 per metric tonne CO2e)
Volume: 39,500 MtCO2e is 2012, up from 32,000 MtCO2e in 2011
Publisher Macmillan isn’t looking for a pat on the back for their sustainability efforts; with a goal of reducing greenhouse gas emissions 65% by 2019, they’re after more “courageous action” on climate change. Purchasing high-quality offsets fits carefully into the picture, and the company looks for “symmetry,” investing in projects near their supply chain.
16 January 2014 | In 2009, Macmillan’s CEO, John Sargent, had an environmental awakening. Positioned at the helm of the privately owned publishing company, he explained to employees his concern about climate change and announced that sustainability was now just as important to the company as profits.
But when the marketing team asked whether they could begin communicating Macmillan’s greening to customers, Sargent said wait. Though he believes in the possibility of “doing well by doing good,” the latter is not a means to the former but rather a stand-alone commitment of environmental stewardship and responsibility to future generations. Sargent did not want to risk greenwashing by publicizing Macmillan’s sustainability initiatives prematurely.
With the help of sustainability consultant Bill Barry, Sargent decided to tackle all of Macmillan’s emissions – both direct and indirect. That meant dealing not only with the carbon dioxide exhaled from the company’s paper mills and car fleets, but from emissions generated across its supply chain, such as those from the milling process, and everything in between.
When they were first starting out, Sargent asked Barry how much progress he thought they could make by 2019, then a decade away. Barry responded that “a 50% reduction in emissions would be a real stretch, but [possible] if you want to dig in and really go after it.” However, Sargent wanted to push even further and came up with the goal of a 65% reduction by 2019.
Since then, the company has shifted to sourcing its paper from mills with a significantly higher renewable energy component, reducing scope 3 emissions by 40% on an intensity basis and reducing 16,000 MtCO2e annually. It also changed almost all vehicles in its 150-car fleet to hybrids, installed efficient lighting and motion sensors in its warehouses, and even drilled an exploratory well to see if a facility in Virginia could be heated and cooled by geothermal energy (turned out it couldn’t). This all-out sustainability strategy meant that, for Macmillan, carbon offsetting was a last resort—a step it takes only when the company has maxed out on reducing its own carbon footprint.
“John and I are both a little dubious about offsets,” Barry said. “It’s an easy way to assuage guilt, show quick progress, or go for a PR boost. The real challenge for industry is to radically change how they perceive the environment and climate change and then to take courageous action to correct what they can about their processes that improves their situation.”
The company therefore dipped into carbon offsetting cautiously. In 2010, the first year it chose to buy carbon offsets, Macmillan invested $25,000 in a single project: Atmosfair’s clean cookstove project in Nigeria, which distributes stoves that are 80% more efficient than the ones traditionally used in the region. Since 2010, Macmillan has expanded its offsetting efforts each year, adding non-profit Carbonfund.org and for-profit The Carbon Neutral Company as partners.
The company has purchased offsets from a wind project in China, a geothermal project in Indonesia, a landfill gas project in New York, a destruction of ozone-depleting substances project in Arkansas, and forest projects in Panama, Canada, Louisiana, Georgia, and Texas. In choosing offset projects, Barry looks for “symmetry”—he likes to invest in places related to Macmillan’s supply chain, where they have made scope 3 emissions. The wind project in China, for instance, is close to where the company prints its children’s books.
Macmillan CEO John Sargent positioned the company for a 65% reduction in carbon dioxide emissions by 2019. (Screenshot from sustainability.macmillan.com)
“Symmetry” is often a motivation for investing in forest carbon offsets. Ecosystem Marketplace’s 2013 State of the Forest Carbon Markets report found that—more so than on the overall voluntary carbon market—the top buyer sectors on the forest carbon market relied on land-based natural resources. For a publisher like Macmillan whose main product comes from paper, reforestation projects are a logical choice in terms of mitigating the negative environmental consequences of doing business.
Macmillan’s carbon reductions are, as Sargent promised, decoupled from economic indicators: though 2012 profits were off slightly from the company’s robust 2011 earnings, its sustainability efforts intensified over that time period.
“I can’t say we’re seeing a traditional financial return on the money we invest in our sustainability efforts,” said Barry. “Sargent is the driver behind all this, and for him, it’s really about doing the right thing.”
Less than 5% of all companies have acted on the impact that landscape-level water disruptions can have on their bottom line. The few companies that have, however, are developing solutions that can be used to head off water shortages around the world. A new Ecosystem Marketplace report examines what works, what doesn’t, and why.
14 January 2013 | The Elk River in the US state of West Virginia made headlines around the world when a small and preventable chemical spill there left more than a quarter-million people without clean water for over a week. Most water risk, however, is much less dramatic. Colombian beer-maker Bavaria Brewery, for example, realized the extent of the risk it faced when its water bills began increasing a few years back.
The cause, it turned out, was a gradual shift to cattle-ranching and farming on the high-altitude grasslands above Bogotí¡, known in Spanish as parí¡mos. In a chain of events familiar to water managers around the world, large quantities of sediment began washing downstream out of the degraded parí¡mos. With stabilizing vegetation gone after decades of expansion by smallholders and trampling by livestock, the soil was exposed to wind and rain, and erosion quickly increased. In the city, the Aqueduct and Sewage Company of Bogotí¡ had to carry out additional treatment on the water before it met acceptable standards. Ultimately, the costs of this extra treatment were passed on to water users like Bavaria – which is how a brewery suddenly became very interested in what was happening in the mountains.
Like Bavaria, companies all over the world face risks that come from beyond the fence line of their operations. Businesses often have little control over threats to their water supplies. A changing climate can increase the prevalence of drought or floods. Growing populations begin draining the aquifer to irrigate their crops. A new factory nearby might begin polluting a shared river, as recently happened in West Virginia.
But so far, few businesses are addressing – or even thinking about – water risk at a landscape level. A recent CDP survey of Global 500 firms found that two-thirds had targets for internal water management within their direct operations, but just four percent had set goals for managing water risk in their supply chain, and only three percent did so for risk at the watershed level.
New research from Ecosystem Marketplace, however, suggests the private sector may be starting to pay attention. About one in four watershed investment projects worldwide counts a business as a financial supporter, according to a new Executive Summary for Business based on Ecosystem Marketplace’s latest State of Watershed Payments report. In the European Union, Africa, and Southeast Asia, the private sector is actually the most common backer of projects – a striking finding in a field dominated by the public sector. Altogether, companies have spent $94-100 million to date on watershed protection and restoration.
Watershed Thinking
A watershed, i.e. a basin where all water ultimately flows to a single body like a river or lake, is typically the basic unit of management for public officials and scientists. And for firms like Bavaria, a watershed approach also has appeal: after all, a company can either swallow higher treatment costs, maybe try to conserve water on-site – or it can go directly to the source of the problem.
In Bogotí¡, Bavaria began paying into a local water fund in 2009. The fund, supported by the Nature Conservancy, the Aqueduct and Sewage Company, and the National Parks administration, pays agricultural producers in the parí¡mos to move cattle off of steep slopes, switch to more ecologically friendly farming practices, and replant degraded areas. The trust fund also helps to pay for monitoring and maintaining protected lands in two national parks close to the city.
Bavaria recently estimated that it’s paid $240,000 into the fund so far, and will ultimately see costs for water treatment fall by $458,000 every year in its supply area. Overall, the water fund saves the city about $3.5 million per annum.
So-called “water stewardship” strategies like Bavaria’s are gaining traction in the environmental world. The authors of the CDP report noted that their investor signatories rewarded watershed-based approaches: “They recognize that water stewardship is associated with a forward-looking, resilient company with a sound understanding of its risk profile.” A group of environmental NGOs including TNC, WWF, and the CEO Water Mandate in 2013 released a beta standard guiding businesses step-by-step in crafting a stewardship strategy of their own.
Advocates of water stewardship promise more effective risk management, better relations with local stakeholders, and the possibility of lower costs for clean water supplies. But are businesses listening?
Diverse Approaches
The full-length State of Watershed Payments report catalogs financing for nature-based solutions to water challenges around the world, from using mussel beds to filter out pollutants in a Swedish fjord, to a jobs program in South Africa that systematically removes water-guzzling invasive plant species in order to alleviate water scarcity in that country.
The Executive Summary for Business highlights developments of interest to business in this new arm of environmental finance. It’s also the first effort to date to systematically inventory water stewardship approaches around the world: analyzing current business engagement, patterns in financing, and crucial policy and institutional developments. The dataset underlying the report is the result of a survey of more than three hundred projects across the globe.
Companies tracked in the report frequently faced rising costs to their operations, as water supplies shrank or pollution increased due to events outside the company’s control. Concerns about local reputation or a desire to support sustainable livelihoods in the surrounding community are also common motivations.
But most often, companies take a watershed approach as a response to regulatory pressures: either as a compliance strategy, or to get out in front of a policy shift toward nature-based solutions that Ecosystem Marketplace observed in many countries. Regulatory, accounting, and tax systems are gradually being restructured to create both incentives and hard obligations to protect natural functions. For example, Philadelphia recently revamped its stormwater fee pricing structure to drive financing toward green infrastructure like green roofs or permeable pavement in the city. In China, a central government push for “eco-compensation” for environmental damages has meant for business stricter enforcement of regulations, mandatory relocations, and new environmental fees.
Investments: The Big Picture
Despite these pressures, uptake by business has been uneven. Beverage, manufacturing, and utility companies frequently explored water stewardship strategies, according to Ecosystem Marketplace’s research. Meanwhile, mining and apparel firms are conspicuously absent from the dataset, despite these sectors’ significant exposure to water risk.
Business contributions are also only a very small part of total spending on nature-based solutions for water. Ecosystem Marketplace estimates that, globally, at least $8.2 billion is spent each year to preserve and rehabilitate forests, wetlands, and other water-rich features of the landscape. Private sector funding represents less than 1% of that. Money instead largely comes from the public coffers, led by China and the United States.
Still, private sector support may be instrumental in getting a project off the ground, as observed in the EU, Africa, and Southeast Asia. And large multinational firms find themselves in an excellent position to import successful strategies from one country to another.
Bavaria Breweries, for example, is a subsidiary of SABMiller, one of the largest brewers in the world (group revenues in 2012 exceeded $31 billion). SABMiller has committed to a “beyond-the-breweries” approach in many of the countries where it operates, including in Peru, Tanzania, South Africa, Ukraine, Colombia, Honduras, India and the USA.
In South Africa, the firm found that it would need to shift to groundwater pumping to meet its water needs in coming decades, at a cost of at least $700,000 a year. A risk assessment suggested that for the same amount of money, the company could invest in clearing invasive plant species through partnerships with South Africa’s public works program “Working for Water,” which had the added benefits of creating an additional 50 jobs per year in the catchment and boosting the brewery’s local reputation.
Similar efforts by Coca-Cola, Sony, Nestlé and other firms have also yielded lower costs, resilience to water and climate shocks, and better relations with the communities where the firms operate. Coca-Cola has committed to returning the full equivalent of its water use to nature and local communities by 2020 through water stewardship efforts, and is already more than halfway there. Nestlé spends more than $8 million each year to protect its water sources in North America, France and Switzerland by supporting efforts like organic farming, open space preservation, and using floodplain meadows to naturally filter out pollutants from water before they enter river systems.
Navigating the “Landscape approach”
Unfortunately, businesses interested in watershed investments should prepare for a rocky playing field for first-comers. Putting together a viable investment mechanism requires engaging local stakeholders, establishing the science, designing projects, and administering funds. These efforts can pay off in the long term, but are time-consuming and hardly business as usual for would-be water stewards.
Companies often navigate these obstacles by partnering with government agencies or local civil society groups, rather than trying to develop an investment mechanism on their own. A business might also contribute to a water fund – like Bavaria did in Colombia – or simply buy an offset certificate from a third party like the Bonneville Environmental Foundation, which represent the replenishment of water to overburdened river systems.
Unlike carbon, nearly every landscape-scale water risk management operates under its own distinct mechanism. There are no standardized offset credits, and few centralized markets or platforms for exchange. Instead, projects are driven by what’s likely to work locally. In Kenya, hoteliers and flower growers pay farmers through water users’ associations for actions like reducing their pesticide and fertilizer use. In the United States, Coca-Cola works with the United States Forest Service to safeguard clean water in strategic areas on public lands. Water funds financed by a collection of local users are popular in Latin America. The briefing notes half a dozen basic mechanisms; partnerships with public and civil organizations already active in the community are so far the most popular model, and responsible for the greatest share of finance.
The Bottom Line
2014 may prove to be water stewardship’s year. Fears about rising water risk, the carbon world’s recent embrace of landscape approaches, and natural capital’s growing profile in the business world all add to the momentum.
Ecosystem Marketplace finds that business financing for nature-based solutions roughly tracks with growth in watershed investments overall, at about 3% per year so far.
Whether that figure ticks upward depends in large part on clearing a way forward for business, according to the briefing. The enormous diversity of project models has been a benefit in tailoring efforts to local contexts, but it also is likely a source of confusion. Project standards, synthesis of best practices, and tools and guidance for watershed investments are all in short supply.
While the ideas of green infrastructure and sustainability are becoming more prominent, there is little talk of how the hedge fund space will affect efforts to transition to a clean environment. Here, Thomas H. Stoner Jr. and Peter Backlund of the Butterfly Project, a collaborative organization aimed at decarbonizing economies, discuss the possible impacts of hedge fund trading activities.
7 January 2014 | Newsrooms and dinner table talk hum with observations about crazy weather patterns and natural disasters from Hurricane Sandy to Philippine typhoons. Scientists blame rising CO2 levels caused by human activities, mainly energy production and use, and the greenhouse effect. The energy industry is finger-pointing at the coal sector in a battle over solutions between nuclear energy, clean burning natural gas and natural resources like wind and solar power. Glowing articles on the “fracking revolution” and the rapid rise of new energy technologies have dominated the financial presses.
Meanwhile, academic institutions and government-funded programs are fueling research on the potential impact of climate change by the end of the century. There are countless studies on the potential impact of rising CO2 beyond key thresholds calculated by parts per million in our atmosphere (last year CO2 concentration levels exceeded 400 ppm for the first time in more than 800,000 years).
In the absence of aggressive actions to limit emissions, they are projected to reach about 800 ppm by the end of the century. The entire world will become much warmer – heat waves, severe forest fires, intense rainfall, and floods will be more common, and sea levels will rise by as much as a meter. The consequence will be both a natural and economic disaster for our entire planet.
Many are asking, what governments around the world will do to avoid such a calamity? Will they ever organize themselves under a Kyoto-style framework to address the problem by putting a price on carbon through either capping and trading emission allowances or imposing a global tax? The question is a good one. But the more important question is, how will investors and businesses respond to limitations on emissions, or even the likelihood of limitations? And how will they respond when they realize climate change itself threatens their operations and future income opportunities?
Let’s look beyond the emergence of the so-called “impact investors” that are gaining steam in every trading market center, investing in renewable energy or sustainable agriculture. Let’s, in fact, dismiss them as just another trendy rebranded phenomenon of socially responsible investing.
Let’s instead focus on the steely-eyed hedge fund trader with one finger on the buy button and one on the sell. Let’s go to the extreme. Imagine the math wizard who graduated from Wharton who trades by day and plays on-line gambling at night just to keep the adrenalin flowing. How will new climate data begin to shape his thinking?
Capital Expenditures on oil and coal deposits
Hedge fund day traders with the capacity to buy and sell securities nearly instantaneously at a global scale can either add trillions of dollars to our world values by driving up our indexes or take that value right off the table in a matter of hours. Buying and selling is coordinated by the emergence of a new worldview; typically one that is backed up by data. These guys love numbers and they understand accounting principles. What they don’t like are hidden liabilities, which by definition, tend to be larger than what can be seen. Day traders know this and they can run for cover unlike any other investor.
The Potsdam Institute has a calculation that traders can easily grasp. To keep temperature increases from exceeding 2 degrees Celsius, an aspiration already endorsed by many nations, global emissions between now and 2050 have to stay below 550 GtCO2. The world’s existing fossil fuel reserves represent potential emissions of about 2700 GtCO2.
Much of these reserves are valued as assets by publicly traded companies. The top 100 listed coal companies and the top 100 oil and gas companies represent potential emissions of 745 GtCO2. What will happen when investors start to believe that the majority of these reserves have to stay in the ground? Or that suppliers can only exploit them by paying for removal of equivalent quantities of carbon from the atmosphere? Day traders will hit the sell button and the carbon bubble will pop.
Sea level Rise and Storm Damage
“Super-storm” Sandy in October 2012 was a large and unusual weather event that caused massive damages and focused media and popular attention on the issue of climate change and hurricanes. Yet the real lesson is not yet widely appreciated. Sandy’s significance has less to do with the impact of climate change on hurricane intensity and more to do with the impact of the slow and steady rise in sea level and what this means for the future habitability of coastal areas.
A recent analysis by scientists at NCAR and Climate Central indicates that the current rate of sea level rise means that what is currently a “100-year” or “1 in 100 year” flooding event at the Battery in New York City (near Sandy’s “ground zero”) will become a “1 in 15 year” event by 2050. What is now seen as extreme coastal flooding at that site is projected to become about six times more likely over the next 3-4 decades, even while population in the area continues to grow.
How will this impact the wealth of the area, the profit margins of developers, insurers, and reinsurers, and the decisions made by those who invest in such activities, including the day trader who owns an expensive beach house? How will climate change, politics, and economics interact in this instance? Will insurers be allowed to price risk appropriately? Can coastal development continue at its currently projected rate?
This is just the tip of the iceberg in considering the value of climate data for the enlightened day trader. Under the surface, how will businesses respond to the day trader? Business may be slow to react. Businesses don’t usually interact with the day trader directly. But other investors will see the changing values as indices change. Bankers will become increasingly concerned about regulatory risk as local governments seek to impose environmental costs on energy development. Venture capitalists will look beyond the changing tides to find opportunities for low carbon or zero carbon alternatives. Conventional energy providers will go from nearly unlimited sources of capital to exploit their reserves to taxation as depletion allowances are eliminated and tolls are erected to internalize these costs. Values for conventional energy will drop to the floor.
By considering the capital markets, we see that it is the day traders that will act as the gods from Mt. Olympus with the capacity to cause tragedy or triumph within a single 8-hour trading day. The speed and significance of their actions will be unparalleled to any action a single government, or even a collection of governments, might ever make. But that doesn’t mean that governments shouldn’t act. If governments fail to put a price on carbon, it is inevitable that the capital markets will impose their own penalties. If governments do act, then what we should expect to see is capital markets quickly adjusting and finding ways to reward the victors.
Thomas H. Stoner Jr. is the author of Small Change, Big Gains, Reflections of an Energy Entrepreneur (2013) and the founder of Project Butterfly. Peter Backlund serves on the board of directors of Project Butterfly. He is also the former Director of the Integrated Science Program and External Relations at the National Center for Atmospheric Research.
The coming year could be a good one for the environment, with China cleaning its air, palm olil moving towards sustainability, and the world at large finally starting to get a handle on climate change. These are some of the more optimistic projections from the World Resources Institute (WRI) as it identifies what it believes will be the top stories of 2014.
This article was originally published on the WRI website. Click here to read the original.
29 January 2014 | All years are important, but decisions made in 2014 will have a striking impact for decades to come.
Here’s the point: How cities grow—economically and demographically—will be critical in whether we fail or succeed in the fight against climate change and poverty. Poorly designed, sprawling cities can exacerbate existing greenhouse gas and congestion problems. (Cities already account for 70 percent of global greenhouse gas emissions, and some cities already lose 10 percent of their GDP to congestion alone.) Alternatively, compact, low-carbon cities—featuring sustainable transport systems and people-centric design—can improve quality-of-life and drive economic opportunity.
A growing number of city leaders are beginning to act – and often showing more vision and action than national leaders. This year could significantly accelerate this trend, as a number of key meetings of city leaders can help build political momentum. In February, mayors from the C40 (a group of more than 60 global cities committed to action on climate change) will gather for a summit meeting in Johannesburg. And other major gatherings of mayors in Singapore in June and Colombia in April offer opportunities for best practices to be shared and replicated.
But nowhere will the focus on cities be greater in 2014 than in Brazil as it plays host to the World Cup. All eyes will be on the 12 cities where games will be played.
One the most urbanized, large countries in the world, Brazil has already experienced some of the worst problems of pollution and inequality—as well as some of the most inspiring innovations that are benefitting both citizens and the environment. Urban transport illustrates both. Vehicle emissions caused more than 4,600 premature deaths in Sao Paolo in 2011, and in June last year, more than 1 million protestors took to the streets to demand better urban transport systems and other city services.
At the same time, a new national law requires 3,000 cities to create people-centered city mobility plans by 2015. One hundred cities already have bus-rapid-transit (BRT) systems in place that carry more than 12 million passengers per day.
What image of Brazilian city life will remain in the minds of the 3 million extra visitors and the 3.2 billion World Cup television viewers—and what impact might it have? And, as Brazil faces elections and urban unrest, will its city and national leaders pursue a path towards greener and more efficient cities?
2) Restoration: A 2 Billion Hectare Opportunity
Every minute of every day for the past 13 years, the world has lost an area of forest the size of 50 soccer fields.
The greatest tragedy is that much of all the forest we have lost now has little economic or ecological value. WRI has mapped 2 billion hectares of such degraded land—equivalent to twice the size of China—and shown that much of it can be turned from wasted and unused land into forests, agricultural fields, and other productive uses.
Some countries are beginning to seize this opportunity. The Bonn Challenge, a global commitment for restoration established in 2011, calls for 150 million hectares of deforested and degraded land to be restored by 2020. Restoring this amount of land could bring $84 billion in economic benefits annually and close the greenhouse gas “emissions gap” by one-fifth.
Brazil, Costa Rica, El Salvador, Rwanda, and the United States have already made commitments to the Bonn Challenge, pledging to restore a collective 20 million hectares. This year could be a year of increased momentum. As leaders seek ways of addressing climate change in a way that would boost rather than reduce jobs and incomes, restoration could emerge as the greatest “win-win” of all. Countries will meet again in Bonn in June to potentially seek additional pledges, and the Heads of State Summit on Climate Change in September offers another opportunity to bloom into a global movement.
3) Sustainable Palm Oil: A New Era?
Palm oil has become one of the most ubiquitous ingredients—found in everything from candy bars to cosmetics to cooking oil. More than half of all supermarket items contain it, and its demand will continue to sky-rocket as the global “middle class” rises from 2 to 5 billion between 2010 and 2030.
But it currently comes at a very high cost: It is one of the leading causes of deforestation in tropical areas.
There are signs that the traditional expansion path – cut down the forest to plant oil palm – may be changing. Western companies, led by the likes of Unilever, Nestle, and Proctor and Gamble – are increasingly committing to phasing out all palm oil that has been produced through deforestation. About 15 percent of world trade is now certified as “sustainable” by the Roundtable on Sustainable Palm Oil (RSPO), a collection of more than 1,000 businesses, retailers, investors, and NGOs working to curb deforestation. This is a good start, but so far just scratching the surface.
This year could mark the beginning of a tipping point. Not only established groupings such as the Consumer Goods Forum, but also Asian-based majors such as Wilmar, the second-largest palm oil trader in the world, are now making commitments to deforestation-free production.
Particularly important is the emergence of technologies that enable monitoring to take place. For example, February will see the launch of Global Forest Watch, a high-resolution, Google map-based tool showing deforestation taking place in near-real time. Developed by WRI with key partners, it provides overlays of concessions and protected areas, enabling deforestation to be identified and responsible companies named. This and other tools will provide for the first time the ability to monitor commitments, and will enable all participants in the supply chain—including consumers, shareholders, and NGOs—to distinguish good from bad performance. This theme will be highlighted at the World Economic Forum in Davos this week.
Will this increased transparency encourage more sustainable palm oil? Will other industries like soy, beef, and cocoa follow?
4) China: Clearing the Air?
In 2013, Beijing experienced a whopping 189 days of dangerous air pollution. This choking smog is due largely to China’s massive coal consumption, which constitutes 50 percent of the world’s total.
This year will see a major step-up in action to address pollution. How effective will it be?
In June 2013, China’s State Council approved a $277 billion, five-year, anti-pollution plan—the biggest ever anywhere. A ban was placed on new coal-fired power plants in China’s three key cities—Beijing, Shanghai, and Guangzhou—and tighter pollution regulations were put on 10 additional areas. In an effort to seek less polluting energy sources, more than half of China’s new energy capacity in 2013 came from renewable energy.
This year will see new spending and policy innovations come into force. The pilot cap-and-trade system in five cities and two provinces will be implemented for the first time.
How will it go? Will it indicate that China will be ready for nation-wide implementation, as is currently planned? What will leaders learn from these initiatives? And will it indicate that China can shift away from coal and toward cleaner energy sources?
5) A New Standard for U.S. Power
Last year’s announcement by President Obama of a comprehensive U.S. Climate Action Plan—which reaffirmed the national target of reducing emissions by 17 percent below 2005 levels by 2020—now needs to be implemented. Power plants account for one-third of U.S. greenhouse gas emissions, so reducing these emissions represents one of the most important opportunities.
On June 1, 2014, the U.S. Environmental Protection Agency (EPA) is scheduled to announce new guidelines for existing power plants. (Just last week, they entered the rules for new power plants into the Federal registry). According to WRI analysis, meeting the 17 percent target will require that these regulations reduce power plant emissions by 31 percent by 2020 and by 74 percent by 2035 (below 2011 levels).
Critics will claim that this would impose too high a price on the economy. How effective will those critics be? There is mounting evidence that if the regulations are strong but flexible, the costs will be small and manageable, and that smart regulations can boost technology and competitiveness.
Already nearly 100 coal-fired power plants have closed in the United States in the past two years. And the Union of Concerned Scientists recently showed that nearly half of the remaining 1,050-odd coal-fired plants are old (43 years on average) and ripe or ready for replacement.
This year will also see the opening of the path-breaking Kemper power plant in Mississippi, applying carbon capture and storage at scale. Will the stories be about the era of CCS finally arriving, or more about cost and schedule over-runs?
6) The Year of Global Momentum on Climate Change?
U.N. Secretary-General Ban Ki-Moon will host a heads-of-government summit on climate change in September – probably the largest meetings of global leaders on climate ever. Its intent is to create political momentum in the lead-up to the planned global climate deal to be finalized in Paris in December 2015. Will it?
The coming months will see the unveiling of major analytical reports that could influence the Summit outcome. In March and April, the Intergovernmental Panel on Climate Change will issue its crucial reports on the impacts of climate change and on policy options. In the summer, a major report on the U.S. economy, Risky Business, will be issued. Sponsored by Tom Steyer, Hank Paulson, and Michael Bloomberg, it will provide new evidence on the sharply increased risk the United States is imposing upon itself by not leading more vigorously on climate change. And finally, the Global Commission on the Economy and Climate, led by President Felipe Calderon, Nick Stern, and Luisa Diogo—and comprising a stellar group of global political and business leaders and some of the world’s top economists—will issue its report, The New Climate Economy. This will provide the most up-to-date evidence on the benefits and costs of climate action.
Will all this evidence, coupled with the growing concerns about extreme weather events, be enough to create incentives for firm action? What’s clear is that the world is currently heading in the wrong direction – towards a 3-5 degree Celsius rise in temperatures. Could 2014 change that?
7) The Year of Elections: Which Way Will They Choose?
It’s likely that more people will vote in democratic national elections this year than in any other in history. The stakes are high: Three of the world’s four largest democracies—Brazil, India, and Indonesia—will elect heads of government this year.
Together, these countries account for 25 percent of the global population and 40 percent of the world’s poor. In each of these nations, there are crucial issues relating to social, economic, and environmental futures. The European Union will also hold its elections at a time when European leadership on sustainable development is under threat form political and economic pressures in some member countries. And the mid-term Congressional elections in the United States will influence whether the country can be a global leader on climate and energy.
Moving from current patterns of production and consumption toward a path that is more productive, equitable, and sustainable is a choice. And 2014, more than most, is a year of choices.
LEARN MORE: View the Stories to Watch 2014 Powerpoint presentation, video, and other resources on WRI’s Event page.
Andrew Steer is the President and CEO of WRI. He can be reached at [email protected].
The year is winding down and the top stories of 2013 in biodiversity and wetlands may be the biggest headlines of 2014 as many of them remain unresolved. The lawsuits in Louisiana over their coastal wetlands are ongoing, as is the decision over how best to conserve the dwindling prairie chicken. Here’s a look back.
23 December 2013 | We started the new year with a TEEB (The Economics of Ecosystems and Biodiversity) report, emphasizing maintenance and enhancement of wetlands as a key element in a sustainable economy.
Then Forest Trends’ Business and Biodiversity Offsets Programme (BBOP) released an updated Overview document with its Principles on Biodiversity Offsets, introduction to the Standard on Biodiversity Offsets, and supporting materials.
We asked whether biodiversity proponents would embrace business in 2013. October 2012’s Biodiversity COP in Hyderabad, India failed to engage the private sector – largely because business, as the leading destroyer of habitat, is seen as the enemy, writes Joost Bakker of the Global Nature Fund in an opinion piece for Ecosystem Marketplace.
Also in January, the US Supreme Court heard oral arguments in Koontz v. St. Johns River Watershed Management District, a case centered on the question of whether the government can deny a land-use permit because the applicant refused to accept conditions requiring a private individual to dedicate resources to a public use. The Court’s May ruling clarified that permitting agencies can’t require compensation on lands which they control. But the ruling did emphasize principles of proportionality and the nexus in determining appropriate mitigation, with the burden of proof likely falling on mitigators.
The US Fish & Wildlife released a five-year workplan in March for clearing its backlog of 455 candidate species – giving parties hoping to keep certain candidates off the Endangered Species list a deadline for solutions.
Wetland and conservation banking market movers convened at the National Ecosystem and Mitigation Banking Conference in New Orleans in May, where highlights included launch of the Mitigation Analyst tool, analysis by Ecosystem Investment Partners’ Katherine Birnie showing that projects using bank credits enjoy a speedier approval process than other mitigation approaches, and President & CEO of The Conservation Fund Larry Selzer calling on mitigation and conservation professionals to think a less “old school utility” and a little more “Silicon Valley.” We videoblogged our way through the conference.
President Obama announced an ambitious new climate plan dramatically scaling up the deployment of renewable energy. But Obama’s plans took no steps to clarify or streamline the permitting process for mitigating wildlife impacts, leaving questions as to whether compensatory mitigation rules are in any shape to take on a boom in renewables.
In July, the Natural Capital Declaration marked the beginning of its Phase II, wherein it will begin implementing major commitments to integrate natural capital – the ecological goods and services the Earth provides that yields direct and indirect benefits, like water and timber – into financial accounting, disclosure and reporting.
We learned about a bi-national fisheries conservation project between communities residing along both sides of the Sarstoon River in Belize and Guatemala. Project developers hope to establish a model for transboundary cooperation by building an organized union of local fisherfolk with decision-making capabilities over the region’s natural resources.
Also in July, the New Orleans-area flood protection authority’s Board of Commissioners filed suit against 97 oil and gas companies, saying industry activities have severely degraded wetlands crucial to flood protection in the Gulf. Gov. Jindal responded by firing commissioners who voted for the lawsuit and eliminating the authority’s funding.
Then in December came a surprise announcement that the state’s suing the Corps instead, for $3 billion in damages from levee collapses along the Mississippi River Gulf Outlet. The levee board’s suit apparently interfered with these plans.
Also that month, the Business and Biodiversity Offsets Programme (BBOP) released a six-step process for determining what can and cannot be offset.
Alberta province in Canada unveiled a new wetland policy in September that establishes a mitigation hierarchy and ranking system for wetlands, and will create a fee system for developers to support wetland restoration or public education to mitigate unavoidable impacts.
The UK Department of Environment, Food and Rural Affairs released a consultation paper for public comment on implementing biodiversity offsets at a national scale. The proposal has set off a heated debate within the nation’s environmental community over whether offsets are a useful economic tool for conservation or a “license to trash.”
A cross-party panel of MPs examining the proposed program recently found the current plan “overly simplistic” and recommended more stringent metrics and assessment requirements.
The EPA and Corps proposed a joint rulemaking in September to clarify waterbodies covered under the Clean Water Act. The proposed rule rests on an EPA report which seems to support an expansion of jurisdiction. The rule is currently under review by the Office of Management & Budget.
Later that month, Interior Secretary Sally Jewell signed Order 3330, aiming to establish a department-wide mitigation strategy to streamline mitigation processes and improve coordination between sectors, as the US prepares for growth in development projects on public land.
In November, Spain’s legislature approved a nationwide bill that includes the use of conservation banking as a compensatory tool to achieve no-net-loss of species from development projects and other land-use impacts.
In December of this year, the US Fish & Wildlife Service sought to incorporate a five-state plan advanced by the Western Association of Fish & Wildlife Agencies, energy companies, and NGOs into a 4(d) special rule proposal for the lesser prairie chicken (LPC). The plan relies heavily on short-term mitigation – 75% of conservation efforts would take the form of 5-10 year contracts – and a large in-lieu fee program.
Advocates of conservation banking say the approach is untested and inappropriate for the LPC. During an open commenting period earlier this year, banker Common Ground Capital (CGC) submitted a letter arguing that the FWS’ strategy should be based around proven mitigation results like conservation banking.
CGC aims to create a cluster of prairie chicken banks across five states in the Great Plains. So far, CGC has secured 86,000 acres of land spread across three states, and each bank will provide at least 10,000 acres of uninterrupted prairieland. “Chicken banks are arguably the first real effort to port the conservation banking model into a landscape-scale mitigation model,” CGC Principal Wayne Walker tells Ecosystem Marketplace.
The year is winding down and the top stories of 2013 in biodiversity and wetlands may be the biggest headlines of 2014 as many of them remain unresolved. The lawsuits in Louisiana over their coastal wetlands are ongoing as is the decision over how best to conserve the dwindling prairie chicken. Here’s a look back.
23 December 2013 | We started the new year with a TEEB (The Economics of Ecosystems and Biodiversity) report, emphasizing maintenance and enhancement of wetlands as a key element in a sustainable economy.
Then Forest Trends’ Business and Biodiversity Offsets Programme (BBOP) released an updated Overview document with its Principles on Biodiversity Offsets, introduction to the Standard on Biodiversity Offsets, and supporting materials.
We asked whether biodiversity proponents would embrace business in 2013. October 2012’s Biodiversity COP in Hyderabad, India failed to engage the private sector – largely because business, as the leading destroyer of habitat, is seen as the enemy, writes Joost Bakker of the Global Nature Fund in an opinion piece for Ecosystem Marketplace.
Also in January, the US Supreme Court heard oral arguments in Koontz v. St. Johns River Watershed Management District, a case centered on the question of whether the government can deny a land-use permit because the applicant refused to accept conditions requiring a private individual to dedicate resources to a public use. The Court’s May ruling clarified that permitting agencies can’t require compensation on lands which they control. But the ruling did emphasize principles of proportionality and the nexus in determining appropriate mitigation, with the burden of proof likely falling on mitigators.
The US Fish & Wildlife released a five-year workplan in March for clearing its backlog of 455 candidate species – giving parties hoping to keep certain candidates off the Endangered Species list a deadline for solutions.
Wetland and conservation banking market movers convened at the National Ecosystem and Mitigation Banking Conference in New Orleans in May, where highlights included launch of the Mitigation Analyst tool, analysis by Ecosystem Investment Partners’ Katherine Birnie showing that projects using bank credits enjoy a speedier approval process than other mitigation approaches, and President & CEO of The Conservation Fund Larry Selzer calling on mitigation and conservation professionals to think a less “old school utility” and a little more “Silicon Valley.” We videoblogged our way through the conference.
President Obama announced an ambitious new climate plan dramatically scaling up the deployment of renewable energy. But Obama’s plans took no steps to clarify or streamline the permitting process for mitigating wildlife impacts, leaving questions as to whether compensatory mitigation rules are in any shape to take on a boom in renewables.
In July, the Natural Capital Declaration marked the beginning of its Phase II, wherein it will begin implementing major commitments to integrate natural capital – the ecological goods and services the Earth provides that yields direct and indirect benefits, like water and timber – into financial accounting, disclosure and reporting.
We learned about a bi-national fisheries conservation project between communities residing along both sides of the Sarstoon River in Belize and Guatemala. Project developers hope to establish a model for transboundary cooperation by building an organized union of local fisherfolk with decision-making capabilities over the region’s natural resources.
Also in July, the New Orleans-area flood protection authority’s Board of Commissioners filed suit against 97 oil and gas companies, saying industry activities have severely degraded wetlands crucial to flood protection in the Gulf. Gov. Jindal responded by firing commissioners who voted for the lawsuit and eliminating the authority’s funding.
Then in December came a surprise announcement that the state’s suing the Corps instead, for $3 billion in damages from levee collapses along the Mississippi River Gulf Outlet. The levee board’s suit apparently interfered with these plans.
Also that month, the Business and Biodiversity Offsets Programme (BBOP) released a six-step process for determining what can and cannot be offset.
Alberta province in Canada unveiled a new wetland policy in September that establishes a mitigation hierarchy and ranking system for wetlands, and will create a fee system for developers to support wetland restoration or public education to mitigate unavoidable impacts.
The UK Department of Environment, Food and Rural Affairs released a consultation paper for public comment on implementing biodiversity offsets at a national scale. The proposal has set off a heated debate within the nation’s environmental community over whether offsets are a useful economic tool for conservation or a “license to trash.”
A cross-party panel of MPs examining the proposed program recently found the current plan “overly simplistic” and recommended more stringent metrics and assessment requirements.
The EPA and Corps proposed a joint rulemaking in September to clarify waterbodies covered under the Clean Water Act. The proposed rule rests on an EPA report which seems to support an expansion of jurisdiction. The rule is currently under review by the Office of Management & Budget.
Later that month, Interior Secretary Sally Jewell signed Order 3330, aiming to establish a department-wide mitigation strategy to streamline mitigation processes and improve coordination between sectors, as the US prepares for growth in development projects on public land.
In November, Spain’s legislature approved a nationwide bill that includes the use of conservation banking as a compensatory tool to achieve no-net-loss of species from development projects and other land-use impacts.
In December of this year, the US Fish & Wildlife Service sought to incorporate a five-state plan advanced by the Western Association of Fish & Wildlife Agencies, energy companies, and NGOs into a 4(d) special rule proposal for the lesser prairie chicken (LPC). The plan relies heavily on short-term mitigation – 75% of conservation efforts would take the form of 5-10 year contracts – and a large in-lieu fee program.
Advocates of conservation banking say the approach is untested and inappropriate for the LPC. During an open commenting period earlier this year, banker Common Ground Capital (CGC) submitted a letter arguing that the FWS’ strategy should be based around proven mitigation results like conservation banking.
CGC aims to create a cluster of prairie chicken banks across five states in the Great Plains. So far, CGC has secured 86,000 acres of land spread across three states, and each bank will provide at least 10,000 acres of uninterrupted prairieland. “Chicken banks are arguably the first real effort to port the conservation banking model into a landscape-scale mitigation model,” CGC Principal Wayne Walker tells Ecosystem Marketplace.
Major corporations continue to support voluntary carbon offset projects – especially those with good stories behind them – and 2013 ended with the encouraging news that dozens of companies are establishing an internal carbon price for use in their business planning. But will that be enough to prevent the current projects from backsliding?
20 December 2013 | Perhaps it is fitting that 2013 was the Year of the Snake, as the carbon markets certainly endured plenty of twists and turns over the past 12 months. For carbon market advocates, the year got off to a troublesome start as the grandfather of compliance trading programs, the European Union Emissions Trading Scheme (EU ETS), dropped to a record low. But by the end of 2013, positive developments on the compliance front in certain jurisdictions, namely California and China, as well as the continuing commitment of voluntary buyers to invest in attractive projects, sustains hope for expansion in 2014 and beyond.
EU ETS prices slumped to $2.81 euros per tonne in January and set a new record low of $2.63 euros per tonne in April after the European Parliament rejected an emergency fix for the beleaguered compliance market. After months of intense negotiations, however, EU countries finally agreed to the so-called “backloading” proposal, in which the sale of up to 900 million allowances will be postponed, a move that participants hope will prop up the market until a more permanent solution is reached.
The Clean Development Mechanism (CDM), however, received no such life preserver as negotiators at the Conference of Parties (COP19) in Warsaw in November failed to lock in a concrete solution for the CDM market. Proposals to set a price floor and to have financial institutions such as the Green Climate Fund bail out the oversupplied market by buying up the very cheap credits both fell through. But key players such as United Nations Framework Convention on Climate Change Executive Secretary Christiana Figueres still see a role for market-based mechanisms such as the CDM in a future climate agreement, particularly since African countries strongly support keeping alive a program that they feel they haven’t yet had a chance to fully engage in.
Maneuvering the Mosaic
In June, Forests Trends’ Ecosystem Marketplace (EM) released its 2013 State of the Voluntary Carbon Markets report, which found that purchases of voluntary carbon offsets rose 4% in 2012 to 101 million tonnes of carbon offsets (MtCO2e), but market value decreased 11% to $523 million as offset prices fell slightly for several popular project types. Renewable energy projects were once again the most popular project type among voluntary buyers, not surprising given their relative affordability. Nipping closely at the sector’s heels, however, were forestry and land use projects, with afforestation/reforestation and avoided deforestation (REDD) projects the most highly sought after.
REDD in particular made great strides in 2013, despite lingering questions about where future demand for the credits will come from. The Brazilian state of Acre is preparing for possible participation in California’s cap-and-trade program by leveraging a Verified Carbon Standard (VCS) framework to account for REDD from statewide activities, with CarbonCo validating and selling carbon credits from its pilot project in the jurisdiction back in January. Carbon market history was made in September when the Paiter Suruí people of the Amazon sold the first indigenous REDD credits to Brazilian cosmetics giant Natura Cosméticos from a project using the VCS REDD methodology. In Warsaw, agreement on the so-called “REDD Rulebook” established guidelines for determining national deforestation baselines, a key step for allowing compliance-based REDD finance to flow.
Another project type that seemed to come of age in 2013 was clean cookstoves, with a surge of project activity in Africa and Latin America. Carbon offsets contributed funding to half of the eight million clean or efficient stoves distributed in 2012, as high offset prices and corporate demand for the projects drove $167.3 million into the sector, according to a new report by EM on behalf of the Global Alliance for Clean Cookstoves.
California, China March Ahead, Australia Retreats
Big news happened on the compliance front in 2013, with California officially launching its cap-and-trade program for greenhouse gas (GHG) emissions reductions in January, spurring project development and offset purchases state-side. California regulators finally started to issue ozone-depleting substances offsets in September and forestry offsets in November, paving the way for more development activity in 2014. California’s future trading partner Quebec finally held its first auction of carbon allowances last month, though it was deemed a bit of a snooze-fest as buyers only snapped up about a third of the available allowances.
Meanwhile, across the world, China spent 2013 launching three of its seven planned subnational carbon markets. Trading in Shenzhen started in June, Shanghai and Beijing’s markets launched last month, and Guangdong commenced trading in mid-December. China could offer a lifeline to CDM project developers by allowing them to re-register their credits as China Certified Emission Reductions, which would fetch higher prices on the domestic markets.
While China took a major step forward, Australia took an equally major one back. Political opposition may have doomed Australia’s carbon pricing program, which was responsible for a flurry of pre-compliance activity – nearly 3 MtCO2e forest and land use carbon offsets transacted last year, according to Ecosystem Marketplace’s 2013 State of the Forest Carbon Markets report released in early November.
Carbon Pricing All the Rage
While the national and subnational-level developments were mostly welcome news for the carbon markets, the lack of progress toward an international climate agreement in Warsaw remains a source of frustration for many COP veterans. However, carbon pricing advocates can take comfort in the fact that establishing an internal carbon price is becoming standard operating practice for dozens of global corporations, despite the absence of a global regulatory regime for GHG emissions.
So are the carbon markets in store for another roller coaster year in 2014? That could be the case, as major questions remain unanswered. How will efforts to establish jurisdictional REDD programs fare, and will California accept them as part of its compliance market? Will the anti-carbon pricing camp in Australia succeed in its mission to repeal the country’s carbon tax? Will enough progress be made at COP20 in Lima, Peru next year to allow negotiators to reach a new international climate agreement in Paris in 2015?
Stay tuned.
Gloria Gonzalez is the Senior Associate in Ecosystem Marketplace’s Carbon Program. She can be reached at [email protected].
Establishing an internal carbon price is becoming standard operating practice, with 29 of the top global corporations disclosing a price on carbon pollution in the latest reports to the CDP. If more companies actually want to implement an internal carbon fee, technology giant Microsoft has some sound advice on exactly how to do it.
16 December 2013 | Even in the absence of global regulation of greenhouse gas (GHG) emissions, dozens of international corporations are seeing the wisdom in setting an internal carbon price to help guide their business decisions, according to a new white paper by the CDP (formerly known as the Carbon Disclosure Project). Technology giant Microsoft, which charges its business units a carbon fee as part of its efforts to reduce its GHG emissions, has published a helpful how-to-guide for companies that want to follow in its footsteps.
In 2013, 29 companies based in or operating in the US disclosed that they use an internal price of carbon in their business planning, with a range of pricing between $6-60 per metric ton of carbon dioxide equivalent, according to the CDP.
Utility and energy companies were the most likely to use internal carbon prices in making long-term plans to meet energy and electricity needs, according to the report. Oil major ExxonMobil set the highest price at $60/tCO2e, while competitors BP and Royal Dutch Shell use a $40/tCO2e price.
A common characteristic for many of these companies is that they have international operations, where the European Union’s Emissions Trading Scheme or Australia’s carbon tax have made them keenly aware of mandatory GHG emissions reduction programs, the CDP noted. In addition, many of these companies also set internal targets for GHG emissions reductions either in absolute tons or carbon intensity and use an internal carbon price or gauge to evaluate return on related investments, or to incentivize employees.
“Many companies across the U.S. have come to recognize that there is a price associated with the carbon they emit and an economic opportunity in factoring a carbon price into their business model,” said Tom Carnac, President of CDP North America. “Companies view the establishment of an internal carbon price as both an evaluation of risk and a business opportunity if they take steps to limit carbon pollution before others do.”
Microsoft Weighs in
Microsoft, one of the early movers in imposing an internal carbon fee on its business units, has decided to help other corporations by explaining exactly how to go about such an undertaking.
The Seattle, Washington-based technology firm implemented its carbon fee in July 2012 as part of its commitment to become carbon neutral, in recognition of the fact that the information and communications technology sector emits 2% of global emissions. The company set an initial price of $6-7t/CO2e.
A white paper published by Microsoft last week makes the case for internal carbon fees, including the ability to drive changes in behavior that increase efficiency and reduce an organization’s cost and carbon footprint, as well as make responsible business decisions that help mitigate potential risks associated with an organization’s environmental footprint.
“A carbon fee model helps provide leadership in mitigating climate change,” said Tamara “T.J.” DiCaprio, senior director of carbon and energy, environmental sustainability for Microsoft and author of the white paper. “It can help drive innovation in the products and services that an organization develops.”
DiCaprio outlines the three critical components of the company’s carbon fee model: the organization’s carbon reduction policy, the price on carbon and the strategy for investing the funds generated by the carbon fee. Microsoft, for example, has invested in more than 20 carbon offset projects in countries such as Brazil, Cambodia, Ghana, Guatemala, India, Indonesia, Kenya, Madagascar, Mexico, Peru and Turkey.
The paper describes a five-step process for establishing an internal carbon fee: calculate carbon impact; establish a carbon reduction policy and develop an investment strategy; determine the internal carbon price; gain approval and establish governance and feedback loops; and administer the fee, communicate results, and evolve to increase its impact.
Microsoft’s carbon fee model is making the costs and consequences of climate risks and opportunities tangible to the broader company, said Mindy Lubber, president and CEO of investor and business coalition Ceres. While carbon neutrality is not a novel concept, Microsoft has gone beyond many companies by using a carbon fee to get there, she said.
“Microsoft’s model is based purely on consumption—there’s nothing complicated to manage, no credits to track or trade,” Lubber said. “This simplicity is what makes the model transferable. It can be adapted easily to fit other corporations, nonprofit groups and government agencies.”
Cost: the cost of shipping a parcel carbon neutral differs by country, either as a fixed fee or a small percentage of the overall shipping cost; in Germany, for instance, it’s up to 10 euro cents (~USD$0.13) extra to ship a parcel carbon neutral
Volume: 180,000 tCO2e in 2012 (representing offsets associated with 2.4 billion shipments), up from 1,000 tCO2e when the program started in 2006
Deutsche Post DHL is a major player in the logistics industry which means it’s also a big contributor to global carbon emissions. To account for its environmental impact, the business has initiated an emissions reductions program based on carbon offsets and efficiency that will cover the company’s large indirect sources of emissions.
17 December 2013 | When you think of globalization, you might think of a South African using an iPad; an Italian drinking Guatemalan coffee; a Canadian eating a mango in February. All of these things are made possible by the logistics industry, and Deutsche Post DHL is one of the sector’s biggest players. Headquartered in Germany, DHL ships to 220 countries and delivers 65 million letters and 3 million parcels every day. The company’s emissions amounted to 28 million tonnes of carbon dioxide (tCO2) in 2012 – roughly equivalent to the emissions of Puerto Rico. The bulk of these were so-called “Scope 3” or indirect emissions from the subcontractors that actually transport DHL’s shipments. (Scope 1 refers to direct emissions from any fuel DHL combusts and Scope 2 refers to emissions from the energy DHL uses in their buildings.)
Globalization is indeed taking its toll on the atmosphere: the logistics industry overall contributes a fifth of man-made greenhouse gas emissions, according to the UN Framework Convention on Climate Change. “Carbon emissions are the main environmental impact of our business,” says Daniela Spießmann of DHL’s GoGreen program. GoGreen was created in 2006 to address a difficult question: How do you reduce carbon emissions when burning fossil fuels to move goods from here to there is the essence of your business model?
Some transportation sector companies are using offset purchases as part of their answer to this question, which is why transportation buyers held 11% of market share for forest carbon offsets in 2012, according to our State of the Forest Carbon Markets report.
Because so many of its emissions are from “Scope 3” activities, DHL has approached emissions reductions through a kind of burden-sharing model: The company has committed to reducing its emissions, but its employees are also engaging customers around internalizing the environmental costs of their shipments. On the company side, DHL has a binding target for all business divisions and across all three scopes to improve carbon efficiency 30% by 2020, using 2007 emissions as the baseline. As of last year, it was already more than halfway there.
On the customer side, DHL’s GoGreen program offers businesses several levels of CO2 reporting, from simple data to a customized ‘carbon dashboard’ that uses ‘what-if’ scenarios to show customers how to optimize their supply chains – by packing in more parcels per vehicle, taking more direct routes, etc. For those customers that want to go to the next level, DHL offers a carbon neutral option that uses offset purchases to cancel out the emissions of a shipped parcel entirely – the bulk of which are scope 3 emissions from transporting the good from sender to receiver. The GoGreen campaign is additional to the carbon intensity target, meaning that the offset purchases are not included in the 30% emissions reduction goal, but rather go beyond it.
The opt-in model of customer offsetting is common in the transportation sector, and it has some distinct advantages. From the customer perspective, offsetting is simple: DHL vets high-quality offset projects through a tender process, handles the contracts, and provides GoGreen branding materials. From DHL’s perspective, the offset program engages customers around the company’s sustainability goals while passing off the majority of the cost of the actual offset purchases to them. It’s a win-win.
The cost of sending a parcel carbon-neutral differs by country – in some it’s a set fee while in others it’s a small percentage of the overall cost of the shipment – but in Germany, cancelling out the emissions of shipment costs customers under 10 euro cents (about USD$0.13) extra for a parcel. A critical question in any opt-in program is how many customers are going to ‘check the box’ to pay that premium. At first, the GoGreen carbon neutral program saw almost exponential growth. In 2006, DHL offset about 1,000 tonnes on behalf of its customers. By 2010, that number had jumped to 80,000 tonnes, and reached 180,000 tonnes in 2012. Now, the growth seems to be plateauing, to around 200,000 tonnes in 2013. The shape of the opt-in curve over time may be indicative of whether there is a ‘glass ceiling’ on interest in voluntary carbon offsetting – perhaps only a certain subset of customers will ever be interested.
The opt-in model also reveals customer preferences around the varying ‘charisma’ of different carbon project types. In part because its program is customer-facing, DHL looks for both diversity and human connections in choosing offset projects: “We’re pushing for projects that are linked to local populations and local families,” Spießmann says. “We try to bring in different technologies and different regions as well.”
As a result, the GoGreen offset projects are spread across the globe, from wind power projects in China and Nicaragua to a landfill gas project in Turkey to efficient stoves in Lesotho and water purifiers in Cambodia. DHL has a single forestry project in their portfolio – a reforestation project in Uganda that incentivizes small groups of subsistence farmers to plant trees.
Spießmann says that DHL for a while regarded forestry projects with skepticism since public acceptance has been low. All of its other projects were certified as Gold Standard in addition to verification as Verified Emissions Reductions (or Certified Emissions Reductions under the Clean Development Mechanism). But Gold Standard certification was not available for forestry projects until this year, so DHL avoided forestry projects altogether for a while.
However, the progression of standards such as the Climate, Community and Biodiversity (CCB) Standard that can be “stacked” onto carbon verification to certify co-benefits gave the shipping company more confidence in forestry. Two years ago DHL added the Uganda reforestation project to their portfolio. They joined many other buyers in demanding certification of co-benefits: In 2012, 12.2 million of the forest carbon offsets transacted – nearly half of the market – achieved both Verified Carbon Standard and CCB certification.
DHL also surveyed its customers about what project types they preferred, and forest projects rated well. “When you’re promoting carbon offsets to customers, often you simply don’t have much time,” Spießmann says. Marketers explaining the GoGreen offset products frequently find that forestry projects are among the simplest to explain: “A tree is planted and you bring down the emissions” is a straightforward pitch.
DHL’s preference for Gold Standard projects (which overall sold at an average of $9/tonne in 2012) demonstrates its willingness to pay a little more for high-quality offsets. The company makes a Goldilocks-like decision when looking for offset prices: they want to keep the projects affordable for customers, but too-low prices make them skeptical that a project may be overselling its impact. Generally, though, high standards and well-selected projects are linked to higher costs. “Customers expect us to find the balance,” Spießmann says.
Process: purchase offsets from about eight different brokers, sometimes buying all of the offsets from a single project
Offset project types: various
Cost: about $2 million per year, with offset prices ranging from $2 to $12 per tonne
Volume: approximately 400,000 tCO2e per year
9 December 2013 | Interface, one of the largest carpet manufacturers in the world, has long found inspiration in forests. Its designers literally took to the woods in search of ways of doing carpet more sustainably, but instead of looking up to the canopy or into the leafy understory, they kept their eyes cast towards their feet.
That’s when they realized that nature’s carpet is infinitely unique, with no two sticks or stones alike. Therein lies its beauty, and there they found the inspiration for their “5th wall”: a carpeted floor made up of unique patches that can be laid down in any order and easily replaced, just like nature’s carpet.
That led to Interface’s ‘Mission Zero’ campaign, which aims for zero emissions, zero waste, and zero oil by 2020. The company set up an infrastructure for recycling carpet, including that from other companies, and put itself on the path to a “closed loop” manufacturing process that uses no virgin material.
But when it came to reducing greenhouse gas emissions, they had a serious problem.
Emissions Don’t End with the Sale
If you really want to make a carbon-neutral carpet, Interface reasoned, you should be able to vacuum it without generating emissions. That, the company concluded, was impossible as long as vacuum cleaners are run on fossil fuels. A carpet typically lasts seven years, and that much vacuuming and cleaning leads to about three times the carbon emissions that were generated during its manufacture. What’s more, even if Interface limited its carbon-neutral ambitions to the manufacturing process, the cost of squeezing the last bits of greenhouse gas out of the process would drive the cost of their carpets through the roof.
The Offsetting Option
In the end, Interface decided to use carbon offsets to reduce its carbon footprint. Through the “Cool Carpets” program, the company calculates the emissions of its carpets from ‘cradle to grave’ -from source material to customer use to recycling-and then purchases offsets to cancel those emissions out.
It’s a decision they made more than a decade ago, and now they are one of the largest purchasers of voluntary carbon offsets in the United States.
Buddy Hay has been in charge of voluntary carbon purchases since 2002, and he has seen the voluntary market transform from a do-it-yourself experiment a decade ago to an established marketplace with differentiated products, third-party certifiers, and plenty of broker ‘storefronts’ that facilitate transactions.
Growing with the Market
When the company began offsetting, there was no established carbon market. Interface convened its own panel of advisors to help navigate what was then a “Wild West” of offsets. The company purchased its first tons from a Blue Source carbon capture and storage project and went from there. Today, Interface invests in projects from the US to Guatemala to Kenya to Brazil to India to Thailand. Hay more or less manages the offset-buying single-handedly, a task that he calls “the third half of my job.” He estimates that the company now spends about $2 million on offsets a year.
Interface works with several different companies, including First Climate, the Carbon Neutral Company, Native Energy, South Pole Carbon, and Social Carbon, to negotiate two- to four-year contracts with project developers all over the world. Interface’s good reputation in the marketplace and the fact that it often purchases all the offsets generated by a particular project over the contract period often gets the company a good price, Hay said. Interface’s contracts are structured to mitigate against risk by specifying the number of offsets that must be delivered by a certain date – whether from the originally contracted project, or another one.
Types of Offsets
The company essentially buys two categories of offsets: the less expensive, higher volume ‘commodity’ offsets and the pricier ‘boutique’ offsets for projects with benefits beyond carbon. Hay’s strategy is necessarily a hybrid one: given the volume of offsets the company buys, Interface cannot afford to spend $10 per ton across the board, and yet Hay likes to support ‘boutique’ projects such as forestry. Interface has invested in offsets from a REDD project in Kenya and from reforestation projects in Guatemala and Tanzania. Most recently, they’re supporting carbon management of 12,000 acres of Forest Stewardship Council certified land in North Carolina and Virginia.
Connecting with Consumers
Though Interface’s sustainability goals are guided by an internal compass rather than consumer pressure, the company makes a point of letting its customers know that they are purchasing not just carpet, but carbon. Though the company absorbs the cost of the offsets without ‘re-billing’ customers, Interface’s salespeople present all carpet-buyers with a certificate specifying the number of offsets that were retired on their behalf. Hay admits that only a subset of customers initially care about carbon neutrality, but he also believes that doing right by the climate gives Interface a marketing advantage. Even if buyers remain unmoved by the idea, the offset certificates “give our salespeople a new reason to get in front of their customers.”
Its habitat fragmented and shrinking, the Lesser Prairie Chicken has seen its numbers plunge from more than 34,000 at the beginning of last year to less than 18,000 in August. Here’s how a massive mitigation banking effort aims to save the bird by preserving and re-creating large swaths of contiguous prairie to achieve a sustainable, landscape level outcome for the species.
4 December 2013 | Wayne Walker wasn’t exactly surprised when he read the report, but the numbers still hit him hard.
Entitled “Range-Wide Population Size of the Lesser Prairie Chicken: 2012 and 2013” and written by environmental consultancy Western EcoSystems Technology, the report showed there were less than 18,000 of these small grouses this year – down from more than 34,000 last year and from numbers in the millions just a half-century ago. The birds are disappearing because their habitat is shrinking and fragmenting, which is a severe threat for a species that needs thousands of acres to thrive. Those that remain are confined to a rangeland that is between 7 and 9 million acres – about 15% of their original habitat.
Their numbers are plunging despite voluntary efforts to keep the bird off the endangered species list, and Walker believes it’s time to seek new solutions and is launching a massive conservation banking effort – one that will more than triple prairie chicken rangeland as it also consolidates habitat into a few sites of more than 10,000 acres each.
From Energy to Environment
Walker first learned of the prairie chicken’s plight nearly 15 years ago, while developing wind energy projects across Texas, Oklahoma, Kansas, New Mexico and Colorado. These “green” projects, he found, weren’t exactly a boon to prairie chicken habitat.
That prompted him to gradually switch careers – from being an energy developer to a conservation bank developer. He already had the background for it with a master’s in Environmental Studies (where his thesis was called “Rejuvenating Rangeland: An evaluation of Juniper Management techniques on the Edwards Plateau in Southwest Texas”).
Last year, he created Common Ground Capital (CGC), a conservation banking company that aims to create several prairie chicken species banks across five US Great Plain states. So far, CGC has secured 86,000 acres of land spread across three states, and each bank will provide at least 10,000 acres of uninterrupted prairieland – a drastic improvement over the fragmented state of affairs today.
To achieve that size, however, he had to develop a new landscape approach to conservation banking.
Little Bird with a Big Problem
The lesser prairie chicken is a North American bird species living in the grassland, sagebrush and shinnery oak ecosystems within the US states of Kansas, Oklahoma, Texas, Colorado and New Mexico. Famous for elaborate mating performances, prairie chickens used to be widespread. But habitat loss from agricultural land conversion and fragmentation has reduced that large population to small pockets living in particular areas of the states.
Drivers of this decline primarily come from the agriculture and energy sectors. Farming and ranching as well as oil, gas and renewable energy projects, which are expected to increase, continue to disrupt chicken habitat.
This year’s deep decline has increased the probability of the chicken being listed as threatened or endangered under the Endangered Species Act (ESA). The bird has been a candidate for listing since 1998. An ESA listing would mean federal protection for the species and would enforce regulations to conserve the chicken’s habitat even if it fell on private property.
Rather than wait for the species to be listed, Walker has decided to start his conservation bank portfolio approach – where several banks for the bird is created – proactively. It’s a risk, because if the bird doesn’t get listed, demand for “chicken credits” would be marginal at best.
If it is listed, however, companies will need special permission to impact the habitat, and even if they get that permission, they will have to mitigate their damage by supporting the offset of habitat impacts of equal or greater value than what they’ve damaged. By establishing banks based on ecological principles, Walker will be able to create several contiguous habitat areas where now only scattered fragments exist.
The US Fish and Wildlife Service (FWS), which administers the ESA, will make a listing decision on the prairie chicken in March. No matter what the decision is Walker says conservation banks are necessary.
“Obviously we believe the market opportunities will vary dramatically if there is a non-listing outcome versus a listing outcome,” Walker says. “But we do concur that there should be some opportunities for voluntary credits to be sold to some of the more forward looking and responsible development minded folks in the energy space.”
The oil and gas and wind sectors of the energy space would be key buyers as they are a main threat and their activities, like pipelines, well sites, wind turbines and other infrastructure, are targeted for development on top of remaining chicken country in many cases, Walker says.
The Bank
“Chicken banks are arguably the first real effort to port the conservation banking model into a landscape-scale mitigation model,” says Walker.
To date, conservation banking is an approved method under the FWS to preserve species and is usually used on an area of 100s of acres or occasionally over 1,000s of acres. The chicken banks are designed to conserve an area of 10,000 acres at minimum. That’s the lowest estimated level of land needed to support a viable population. Over time, Walker says, they expect the banks to grow. While Walker would be interested in a multiple species bank, he hasn’t found a need or market opportunity in chicken habitat that overlaps with other species.
The first step in the process is to work with the FWS on their “strongholds,” which are areas of between 25,000-50,000 acres of permanently protected chicken habitat. The FWS has advocated that protecting strongholds in each of the ecosystems the bird lives in is fundamental to the remaining population. Walker and company then move into restoring habitat and continuing to re-connect the landscape through habitat corridors over time.
A steady supply of multiple buyers will be needed in order to sustain this landscape-level arrangement. “Not many single customers will be able to purchase all of the credits of a 10,000 acre minimum bank,” says Walker.
A steady supply of support from partnering state agencies through the Western Association of Fish & Wildlife Agencies (WAFWA), NGOs, companies, and private landowners is also critical for a new initiative like this to succeed. The past July, Walker’s company, CGC, partnered with one of the largest environmental restoration and mitigation banking firms in the country, Restoration Systems (RS). RS brings to the table both financial and institutional/market knowledge, capital and a lot of human resources to assist in executing on the prairie chicken banking strategy, Walker says.
Engaging the Landowner
The private landowner is especially important to the banks because these banks allow for the landowners to remain on their land while it’s being used for conservation. This requires good relations between the bankers and landowners. Traditionally in conservation banking, the land is bought for the sole use of the species.
CGC meets with landowners and explains their approach to conservation banking. They perform onsite development activities like the vegetative analysis and “lek” (the chicken’s mating area) surveys. They then go through the regulatory process for approval under the FWS to sell credits.
Walker acquired good working relationships with landowners while covering the same geography in wind development learning how the ranching and farming economy works and what drives these landowners’ decisions.
He realized that in order for these ranchers and farmers to consider prairie chicken conservation equally with their land operations, compensation for change must equal or surpass their traditional income. Walker doesn’t foresee real change if there is only a small increase in earnings.
“You have to pay a premium for culture change so the people on the landscape see that it will make a big difference in their livelihoods, both for the present and future generations,” he says. Landowners in this region of the country are independent, Walker says, so they would be more inclined to practice conservation if they are able to stay on the land and be in control of decisions. For the banks, landowners receive a large portion of the revenue share from the credit sales. Their existing operations are also likely to have indirect benefits, according to Walker, because of a non-wasting endowment the FWS requires banks to have. The endowment is a perpetual fund for bank management.
“It makes a difference in their life,” says Walker. They decide what to do with that money and it empowers them to make good choices for conservation versus becoming or continuing to be dependent on government type annual payments.”
It’s actually critical that banks form partnerships with landowners because of the amount of land the bird requires. CGC can’t afford to buy the total acreage needed with prices ranging from $500-$1,000 an acre across the five state range of the prairie chicken, Walker says.
Delivering Real Results
With less than 20,000 prairie chickens left, it’s critical to create a robust framework that ensures their preservation, and Walker believes this framework will affect the entire conservation banking industry, and CGC has plans to use the lesser prairie chicken model for other species like the Greater Sage Grouse in the future.
Why Conservation Banking?
The Lesser Prairie Chicken Range Wide Conservation Plan was created by the WAFWA in collaboration with several NGOs, the energy industry and other stakeholders to preserve the species and mitigate harmful impacts with the goal of avoiding an ESA listing. Walker admits that this effort is arguably the largest collaboration among multiple states to chart a regional course of conserving the species. But unfortunately, Walker says, instead of basing the mitigation strategy around proven tools like conservation banking, the plan relies on un-proven models that aren’t long term solutions.
He says, “We pursued the banking model because it is the only proven model that delivers results and is in the best interest of the species.”
Walker says the models the Conservation Plan is using are based on government payment programs that have a poor record of conservation success despite the millions of dollars invested in them. These alternative or voluntary mitigation strategies to compliance are also performed at a lower standard than what would be required under a listing status.
Walker has been involved with voluntary mitigation and would argue outside of a few industry leaders, most companies are not going to voluntarily change their behavior. It requires them to incur a cost which their competitors don’t have to incur, thus creating an unlevel playing field between competitors, he says.
“This species and the industry need certainty all around, and you just aren’t going to achieve that with an over reliance on un-tested mitigation programs that have both a high probability of not working and being litigated,” Walker believes.
Realistically, the only way you are going to get a better outcome for the species and have true behavior change among the different interests is to list it under the ESA, says Walker. Even with this listing, the stakeholders will still have a voice in the mitigation process.
2 December 2013 | It might not be immediately apparent why insurance giant Allianz, retailer Marks & Spencer, energy company Eneco, airline Qantas or Brazilian cosmetics producer Natura Cosméticos would invest their money in forest carbon offsets – sometimes from projects on the other side of the world – but they do.
Our most recent State of the Forest Carbon Markets Report tracked 19.7 million tonnes of forest carbon offsets that companies had purchased voluntarily. These companies are not required by law to reduce carbon emissions, yet they purchase enough offsets to cancel out the annual emissions of a small country like Honduras or Niger.
Their motivations are myriad, but the common denominator, according to the report, is that on some level these companies connect with the idea that forest ecosystems are some of the last remaining large-scale carbon sinks, and investing in those sinks is essential to efforts to mitigate climate change.
“People have a lot of faith that forests are a viable part of the solution,” says Jena Thompson Meredith, Director of Corporate Partnerships at The Conservation Fund. “It’s a holistic vision when we’re starting to think about all of climate change.”
That vision may be holistic, but it’s not universal: the same report found that tens of millions of forest carbon offsets went unsold last year, and it warned that scores of projects underway now may be forced to scale back if demand doesn’t materialize. To solve this problem, we must understand demand.
Introducing the case studies
In an attempt to pull back the curtain on what inspires private companies to invest in forest carbon projects, we caught up with four companies that have taken a leadership role in their respective sectors. Here’s a taste of what’s to come:
Macmillan: Low-Carbon Courage How a publisher rejects greenwashing and goes on to slash emissions along its entire supply chain, and then offset only the ‘last tonne.
Interface: Making Carpets Cool How an early-mover in the carbon marketplace has used offsetting on the way toward a ‘closed loop’ carpet manufacturing process, and how sustainability gives them a marketing edge.
National Geographic: Investing in Critical Canopies How a conservation-focused non-profit uses offsetting to reinvest in critical landscapes, tying carbon sequestration with protection of habitat for threatened flora and fauna.
DHL: Shipping Neutral How an international logistics company engages customers around valuing emissions-free shipping – and why they’ve come around to forestry.
While not a scientifically representative sample of forest carbon buyers, these four case studies tell stories of corporate offsetting that resonate with boardrooms and sustainability teams all over the world. They are stories about grappling with big questions – questions like what are our annual emissions? that appear innocuous but are iceberg-like in their hidden complexity. And they are stories about connections – unlikely links between carpets and trees, CEOs and smallholders – that are being forged for the first time.
Why Forests?
Voluntary buyers paid an average price of $7.7/tonne for forest carbon offsets last year – a $1.8/tonne price premium on average transaction prices across all project types. Why are companies willing to pay more for emissions reductions that come from forests versus, for instance, landfill methane capture or destruction of ozone-depleting substances?
There are as many answers to this question as there are offset transactions, but oftentimes it has to do with the many benefits forest projects offer beyond carbon sequestration – from providing new or alternative livelihoods to a local community to maintaining water quality for downstream drinkers to conserving habitat for spider monkeys. Those co-benefits have both inherent and market value. In 2012, offsets certified as both Verified Carbon Standard (VCS) and Climate, Community, and Biodiversity Standards transacted at 30 cents more per tonne than those that earned only VCS. A full 61% of transacted forest carbon offsets were certified not just for carbon sequestration, but also other environmental and social gains.
The price premium may also have to do with the fact that forestry projects are relatively easy to explain to the un-indoctrinated. For retailers that want to communicate climate benefits to companies, and for companies that want to relay the importance of offset purchases to customers, tangibility is key. People like to be able to imagine their dollars making a difference on a specific landscape, and forest projects are ‘photogenic’ in that way.
“Forestry is the most intuitive of all offset categories: you plant a tree and you sequester carbon. [Conceptually], it’s pretty straightforward,” explains Mark LaCroix, a Senior Sustainability Officer at The Carbon Neutral Company. “But there’s a lot of complexity with ensuring that. Lots of corporate entities are making very specific claims regarding carbon reductions based on these offsets, so we need to make sure an offset we sell today is still an offset tomorrow.”
For many companies, forest carbon offsets are part of a ‘portfolio’ approach to offsetting that includes both lower-priced ‘commodity’ offsets – such as those from wind energy projects – as well as ‘boutique’ offsets from forestry. This gives companies the ability to support some higher-impact (and therefore higher-priced) projects while still purchasing the volume of offsets they need to meet their emissions reduction target, and staying within budget.
But another important reason companies invest in forests over other offset types is because though offset purchases are voluntary, they are not necessarily altruistic. As climate change impacts hit companies’ supply chains and operations, investments in natural infrastructure and carbon sequestration begin to make business sense. The top buyer sectors other than the carbon market itself – energy, agriculture & forestry, transportation, and food & beverages – have something in common: these sectors in particular depend on place-specific natural resources and forest-based ecosystem services (e.g. clean water) to do what they do.
Offsetting in Context
Our State of reports survey the project developers and retailers that transact offsets to buyers. These sellers are constantly taking the pulse of buyers, so they have a good sense of their motivations – and reservations – about investing in forest projects. But talking to the buyers themselves offers a higher-res picture. For most corporations offsetting their emissions voluntarily, the offsets they purchase are just one piece of a larger sustainability strategy.
In most cases, a forest offset transaction is the result of a complex decision-making process that involves quantifying emissions, setting reduction targets, and then figuring out how to meet those goals – through energy efficiency measures; switches to renewable energy or less carbon-intensive fuel; streamlining production processes or supply chains; rethinking product design; engaging employees around energy use and travel; and/or offset purchases. Even the offset purchase itself is the final chapter of a choose-your-own-adventure story full of decision points about standards, project types, contract terms, volume and value. For many companies, creating a sustainability strategy requires a hard look in the mirror for the first time.
“The real challenge for industry is to radically change how they perceive the environment and climate change and then to take courageous action to correct what they can about their processes that improves their situation,” said Bill Barry, a sustainability consultant for publisher Macmillan, which has a goal of reducing its emissions 65% by 2019.
The rise in deforestation in the Amazon over the past year threatens to reverse progress made in the region that has been the largest single contribution to curbing climate change. The news and information source, Mongabay, offers some solutions saying the recent increase has to do with a lack of incentives flowing to farmers.
This article was originally published on Mongabay.com. Click here to read the original.
2 December 2013 | The 28 percent increase in deforestation in the Brazilian Amazon over last year that was reported this week is bad news, but it is not surprising. It is bad news because the decline in deforestation since 2005 has given us the single largest contribution to climate change mitigation on the planet, far surpassing the reductions in emissions achieved by any Annex 1 country under the Kyoto Protocol. Brazil’s achievement is particularly noteworthy because it did not come at the expense of agricultural production; beef and soybean production continued to grow. The increase in deforestation is not surprising because there are still no positive incentives flowing to the farmers and livestock growers whose collective land-use decision-making determines how much forest falls each year. There is time to correct this.
We review here some hypotheses for why deforestation increased and some thoughts on which hypotheses are the most plausible. Most are hypotheses that have been presented in the media and in the literature. Rigorous testing of these hypotheses will require further analysis.
Hypothesis 1: The new Forest Code in Brazil has given license to landholders to clear more forest
Response: Unlikely.
First, the new Forest Code does not reduce the amount of forests that landholders must keep on their properties. They still must keep at least 80 percent of their landholdings in forest if they are located in the Amazon region.
Second, there is a surprising lack of hard evidence that the Forest Code has inhibited deforestation in the past. Compliance has been very low, in part because the government did little to implement the Code. In Mato Grosso, less than 1/5th of landholders were in compliance with the Forest Code as of 2012.
Could the amnesty afforded to landholders in the new Forest Code, reducing the area of land that they are required to reforest, have instilled in landholders a sense of impunity, encouraging them to clear more forest? Perhaps, but if that were the case, why didn’t they begin to assert their impunity last year, after the New Forest Code was approved?
Hypothesis 2: Rising commodity prices have increased the profitability of forest conversion to crops and livestock, increasing deforestation rates.
Response: Likely a significant factor, when combined with Hypothesis 3 below
First, soy prices were close to their all-time high in late 2012 and early 2013 and a somewhat weaker Real has favored exports. (Beef prices, corrected for inflation, have been flat.) Soybeans are not the biggest proximate driver of deforestation, but they are the most profitable large-scale Amazon land use. Of particular importance, high soybean prices drive up land values, capitalizing and displacing cattle ranchers who can then move deeper into the forest frontier.
Second, most of the Amazon is not suitable for soy. Only 3 percent of the Amazon is forested, suitable for soy and outside of protected areas. Most of the potential for soy conversion is found in Mato Grosso, where deforestation rose 390 km2 (out of a total increase of 1,270 km2). Parí¡, where the biggest increase in forest clearing took place (640 km2, half of the total), has only limited potential for soy expansion.
Third, cattle intensification may be slowing down, making it more difficult to increase beef and crop production without forest clearing. (Cattle intensification—greater beef production per area of pasture—has been an important element of the decline in deforestation in the Brazilian Amazon region because it has allowed the cattle herd and soy production to grow with less clearing of new crop- and grazing-land, 2].)
Hypothesis 3: The “command-and-control” measures that have been implemented in the Amazon to reduce deforestation are reaching their limits. Farmers have yet to receive positive incentives for their roles in lowering deforestation.
Response: Probably quite important.
Although one would think that Brazil’s deep reduction in deforestation involved both positive and negative incentives to keep farmers and livestock producers from cutting down trees, this is actually not true. The incentives are virtually all negative (see Table below). Some programs designed to deliver positive incentives, such as REDD+, have not yet been implemented in a way that would send positive signals to responsible producers, beyond a few scattered projects mostly using non-market funds for payments (e.g., the Amazon Fund). (Review of this topic will be published in December 2013. With this lack of positive incentives for keeping forests standing, and perhaps a perception that law enforcement has declined, forest clearing associated with land speculation may have increased.
Law/Initiative
Forest metric
Negative incentive
Positive incentive
Forest Code
80% of property with forest cover
Fines, access to credit
None
Critical Municipalities
Municipality-wide deforestation
Access to credit and markets
None
Soy Moratorium (voluntary)
Cut-off date for forest clearing
Access to soy buyers
None
Beef Moratorium (voluntary)
Cut-off date for forest clearing
Access to beef buyers
None
Roundtable for Responsible Soy (RTRS), Voluntary; few farms certified
Restrictions on clearing native habitat
Uncertified producers may be shut out of some markets
Price premiums (although they have been very low)
REDD+
State-wide, historical deforestation
None
Not yet implemented for farmers at scale
Consumer Goods Forum commitment
Zero net deforestation by 2020
Exclusion from CGF buyers
None designed.
Low-Carbon Credit (ABC) Program
Legal compliance
Low interest (5.5%) credit; but uptake has been low
Chart: Eight of the laws, programs and voluntary initiatives designed to slow deforestation that are operating in Mato Grosso, where most of the decline in deforestation has taken place. Virtually all of the incentives for farmers to keep forests standing have been negative.
Hypothesis 4: Agrarian reform farm settlements (“assentamentos”) are still without an effective alternative to deforestation
Response: Probably not a significant factor
The decline in deforestation has taken place primarily on medium and large-scale land holdings, which have been the focus of law enforcement activities and other negative incentives Smallholders tend to clear the same amount each year. Their capacity to clear land is limited by labor constraints. Their ability to respond to perceived national or international market opportunities is also low, since most of their production is for subsistence or local markets. Smallholder deforestation as a proportion of total deforestation in the Brazilian Amazon has increased, but we still don’t know if there have been substantial increases in the absolute area cleared by smallholders.
Another possible cause:
Infrastructure: Dam construction (Belo Monte) and improvements (both current and planned) in soy transport along the Tapajos River corridor may have increased forest clearing in Parí¡ state. The second factor may be driving land speculation and forest clearing in northern Mato Grosso and western Parí¡. A hydro-electric complex on the Madeira River may have contributed to the rise in deforestation in Rondonia state.
Overall Response
The rise in deforestation is probably the result of several factors. There is no evidence that the New Forest Code is one of them. It is important to remember, as well, that the increase is small. Deforestation in 2012 was 77 percent lower than the ten year average ending in 2005; in 2013, it is 70 percent lower. The amount of deforestation recently reported is still the 2nd lowest since official monitoring began.
Keeping deforestation from rising further (reviewed in
Negotiate a shared definition of success in reducing deforestation among agricultural, livestock and finance sectors. The average historical rate of deforestation is already used as a performance baseline by REDD+ programs, Brazil’s National Climate Change Policy and the “Municipios Criticos” program, and is recommended here as a simple, robust metric.
Align the Consumer Goods Forum 2020 “zero net deforestation” commitment, domestic agricultural credit programs, other financial instruments (such as the ICMS Verde recently implemented in Parí¡ State), REDD finance (the Amazon Fund has been sitting on a proposal from Mato Grosso for two years), and other benefits, to favor the producers and local governments who are lowering deforestation across municipalities and entire states below its historical average. The volume of funding to finance deforestation is far greater than that targeted toward reducing deforestation. This ratio needs to be reduced or even inverted.
Develop economic alternatives for smallholder families in agrarian reform settlements that do not depend upon further forest clearing. Provide smallholders with the extension services and infrastructure they need to invest in more intensive production systems that reduce pressure on forests.
Ramp up support for indigenous peoples livelihoods. Their territories act as strong barriers to deforestation.
Daniel Nepstad is the Executive Director and Senior Scientist at the Earth Innovation Institute. He can be reached at [email protected]. Joao Shimada is the Agricultural Commodities Lead. Claudia Stickler is a scientist. David McGrath is a Senior Scientist.
The Carbon Disclosure Project’s Global Water Report 2013 reports more disclosure from companies than ever but also warns businesses are still not accounting for risks at the watershed level. Meanwhile the Ecosystem Marketplace water team is putting together a briefing for business on watershed investments.
This article was originally published in the Water Log newsletter. Click here to read the original.
24 November 2013 | Greetings! We’re in the home stretch of the Skoll Foundation’s Social Entrepreneurs Challenge – just two days to go! Right now, if you donate $30 or more, Skoll will match it. We’re asking you to consider contributing: any funds that the Ecosystem Marketplace team raises through the Skoll Challenge will be dedicated to special projects, like in-depth reporting on the stories that matter to you.
If you’ve been thinking about supporting us, now is a great time to do so. Click here to help out – remember, right now, your donations are leveraged. (And as a 501(c)(3), contributions to us are tax-deductible.)
We’re also excited about a new special briefing for business on watershed investments that we’ve been working on, to be released very soon. It’s a deep dive into our data, benchmarking companies that are looking “beyond the fence” and their direct operations, to manage risk at a watershed scale. Stay tuned.
The Carbon Disclosure Project is also thinking at a landscape level: their new Global Water Report 2013 warns that most businesses still aren’t using a “water stewardship” lens. Some of CDP’s findings are encouraging: more businesses than ever disclosed for the report this year, and awareness of water risk exposure continues to grow. But action remains largely constrained to direct operations and a focus on efficiency: just three percent of companies are addressing risk at the watershed level, and only four percent within the supply chain.
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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!
Forest, Ag Projects Can Combine Adaptation And Mitigation: CIFOR Study
Tree planting in Uganda. Mangrove restorations along the coast of Indonesia and Vietnam. REDD in the Congo Basin and Indonesia. Proponents of projects like these have long argued that they can address both adaptation and mitigation. Now they have the data to back it up, thanks to a new study by the Center for International Forestry Research (CIFOR).
CIFOR decided to examine the growing interest in how adaptation and mitigation issues can be addressed in combination and look for win-win options, while also investigating concerns about the feasibility of this approach and the possible drawbacks, Bruno Locatelli, a scientist with CIRAD (Agricultural Research and Development)-CIFOR and lead author of this study, said at a side event at the COP19 UN climate negotiations in Warsaw last week.
Case Studies: Developing Watershed Investments in Peru
A new series of case studies details the Peru Ecosystem Services Incubator’s progress in developing investments in watershed services (IWS) projects. The Incubator, a project led by the Ministry of Environment of Peru with Forest Trends as a partner, aims to enhance investments in nature by society through providing technical, financial, and economic expertise; building capacity; and contributing to the development of national policy. It’s identified IWS as its first focus, and is supporting projects in the Jequetepeque, Rimac, Alto Mayo, and Caí±ete watersheds. The case studies offer updates on work so far, and a glimpse into the diverse contexts, challenges, and financing solutions advanced in each catchment.
The United States faces an infrastructure crisis that will only get worse as climate change takes hold. Last month, the World Resources Institute, together with Earth Economics and the Manomet Center for Conservation Sciences, published a detailed examination of the science, the finance, and the business case for meeting the challenge with new investments in forests and green infrastructure.
The guide is intended to be a foothold for those who can champion natural infrastructure in water utilities, local conservation groups, and private businesses, and who need a persuasive case, a road map of next steps, and overarching guidance to do so. It attempts to provide the resources, science and economics, illustrations, and guidance needed to foster meaningful dialogue with watershed decision makers and stakeholders around natural infrastructure options, to secure adoption and commitment, and to begin early design and implementation steps on solid footing.
Communicating Marine Ecosystem Services Values: An “Office Hour” Highlights Reel
Linwood Pendleton, the Director of Ocean and Coastal Policy at Duke University and manager of the Marine Ecosystem Services Partnership, recently answered questions on marine and coastal ecosystem services during an interactive ‘Office Hour’ online chat. Pendleton offered his insights into the science, the politics, and the economics of developing results-based financing for oceans. Conversation was wide-ranging and touched on whether valuation is always the right strategy, tools and models, and just why marine ecosystem services are so tough to protect. If you missed the chat, Ecosystem Marketplace has coverage of highlights.
In the aftermath of Hurricane Sandy, evacuated residents of Cape May, NJ returned home to find that neighborhoods near a wetland preserve showed little damage – a stark contrast to devastation elsewhere on the New Jersey coastline. Experiences like that have driven a surge of support for green infrastructure among city officials, planners, and environmental groups.
But don’t count everyone a supporter: a debate between the pro-green infrastructure camp and engineers is far from settled, according to a new post over at Grist. “The Nature Conservancy people believe that wetlands are the answer to everything,” says Douglas Hill, a retired consulting engineer and lecturer at Stonybrook University. “But a storm surge is not a big wave. It’s a sudden rise in the tide. It’s like saying that wetlands can hold back the tide. It’s just not the case.” On the other side, Nicholas K. Coch, a professor of coastal geology at Queens College, has some choice words for engineers who want to build huge storm surge gates to protect New York City. “I call it our good neighbor policy,” says Coch. “We close those gates and we wipe out New Jersey, Coney Island, and the Rockaways.”
A new study from The Nature Conservancy and CH2M Hill takes the middle ground: examining storm-defense scenarios for the Howard Beach neighborhood in Queens, both environmentalists and engineers concluded that a mix of green and grey is the most cost-effective solution. It’s the first full analysis of green-grey blends to date.
Locals, NGOs Want Their Say in EU Green Infrastructure Strategy
Local government and civil society want to be more involved in the European Commission’s plans to scale up green infrastructure across the EU, judging from recent remarks at a conference on green infrastructure in Brussels earlier this month. “Local and regional authorities are fully behind the proposals but local actors must be supported to enable them to integrate [green infrastructure] plans into planning procedures and development programs locally,” explained Annabelle Jaeger (FR/PES), Committee of the Regions (CoR) rapporteur on Green Infrastructure and member of the Provence-Alpes-Cí´te d’Azur Regional Council, in her opening address. Other key issues include early engagement with civil society stakeholders and financing: a proposed EU green infrastructure financing facility is well-received, but CoR has also suggested redirecting some percentage of traditional ‘grey’ infrastructure investment into a biodiversity fund dedicated to green infrastructure.
Levee Board Suit Against Oil & Gas Gets No Love From the Governor
Oof. Water Loggers may recall that this summer, the Board of Commissioners of the Southeast Louisiana Flood Protection Authority – East, a public entity responsible for governing the levee districts of Orleans, sued 97 oil and gas companies for damages caused by degraded coastal lands. The authority’s position is that Louisiana wetlands are subject to more frequent and severe storms and rising sea levels than in the past, and that the oil and gas companies have a duty under their permits to remedy the damage done to the state’s extremely fragile wetlands.
An update to the Natural Resources Defense Council (NRDC’s) Rooftops to Rivers II report takes a look at how twenty cities profiled in 2011 have made progress recently on using green infrastructure to manage stormwater. The report finds signs of improvement: three cities even picked up a few points on NRDC’s “Emerald City” rating system. But municipal performance hasn’t been matched by federal support, the authors say. The US Environmental Protection Agency has repeatedly missed deadlines for new stormwater rules, and updated guidance on green infrastructure approaches is still sorely needed.
Proposed dams and other infrastructure projects rarely consider ecological resilience in their evaluation. But as John Matthews of Conservation Internationalhas written, “Ecologically poorly designed water infrastructure is likely to reduce the inherent resilience and adaptive capacity of [developing] nations’ ecosystems, permanently altering lakes, rivers, soils, and fisheries. Climate-infrastructure mismatches may actually make poor nations even poorer.” Matthews is an advisor on a new report from International Rivers taking aim at this problem. “Healthy rivers are critical for helping vulnerable communities adapt to a changing climate,” write the authors. “Protecting them now is a community’s health insurance policy for the future.”
CDP Calls for Water Stewardship, Not Just Efficiency
The Carbon Disclosure Project (CDP)’s latest effort in the water space, CDP Global Water Report 2013 is out. CDP asked hundreds of major companies to disclose on their water use, impacts, and management strategy. The good news? Business awareness of water risk has grown exponentially in recent years, with reporting rates more than tripling since the first report four years ago. Two-thirds of respondents say they’re exposed to water-related detrimental impacts in the next five years – not in itself a good thing, but a sign that business is paying attention. The bad news is that too many are still focusing on cutting use at the level of direct operations. CDP calls for a step change in private sector action on water, towards a ‘water stewardship’ approach that better engages other stakeholders and manages risk at the level of the watershed and supply chain too.
Wetland Bankers EBX Dip Their Toes in the Water Quality Markets
Wetland and conservation banking firm EBX has gotten into the nutrient trading game. EBX recently announced it’s adding a Virginia nutrient mitigation bank to its 41-bank portfolio. The Elk Run Nutrient Bank will restore converted cropland to forest on a 708-acre farm in Fauquier County to generate an estimated 1479.83 lbs of nitrogen and 110 lbs of phosphorus credits. The bank will serve the Potomac River Basin market, which is driven by the Chesapeake Bay Total Maximum Daily Load pollution cap.
Drought Mitigation Project Brings The Water Back to Pakistani Farmers
Rainfall in the Chakwal district of Pakistan, some 56 miles southeast of Islamabad, has fallen by as much as 50% in the last decade, according to villagers living there. Many have found it impossible to survive on rain-fed agriculture and left the land for nearby urban areas. But a reservoir and mini-dam to capture rainwater and recharge aquifers may be turning things around. “Many farming families which had migrated to nearby urban areas in search of an alternative livelihood are returning to the area because of the dam,” said Aslam Bibi, a villager. The dam is part of a larger ‘Drought Mitigation and Preparedness Project’ supporting local farmers by building rainwater harvesting ponds, mini and check dams, wells, and pipelines in the area. Communities themselves have helped pay for about 20% of the initiative (or $134,000), with the remainder ($543,000) coming from the World Bank.
Water Fund Announced in North Carolina’s Cape Fear Basin
The Nature Conservancy (TNC) launched a new water fund in North Carolina earlier this month. Water funds channel contributions from multiple water users in a basin into a dedicated fund, which invests in restoration projects across the landscape. TNC has been involved in the development of more than twenty similar water funds in Latin American countries already. The fund in North Carolina’s Lower Cape Fear River Basin will initially focus on limiting stormwater runoff to control algal blooms in the river. TNC is currently carrying out a scientific study of the basin to inform investment decisions, and engaging with utilities and soil & water conservation districts in the area.
Norway’s Sovereign Wealth Fund Warning on Water Risk
The world’s largest sovereign wealth fund says it’s concerned about water risk exposure in the companies in which it invests. Norway’s $808 billion fund, Norges Bank Investment Management, said in a statement that its long term returns may be impacted both via company-specific risk and systemic risk. NBIM is a lead sponsor of CDP’s Water Program. It has investments in about 7,500 companies in the food & beverage, oil, gas, and chemicals sectors, all of which face significant operational and supply chain water risk.
“Energy production, food production and water supply account for 94 percent of withdrawal from the nation’s groundwater, streams, rivers and lakes,” wrote US Environmental Protection Agency (EPA) acting Assistant Administrator Nancy Stoner in a blog post in early November. “All parts of the economy are directly or indirectly dependent on energy, food and water supply, so changes in one part of the energy-food-water nexus can impact the others and have a ripple effect through the whole economy.” Her post draws on a recent synthesis report from the EPA on the value of water to the US economy. Yet as the report itself admits, “Reliable information on the economic importance of water is, in many ways, elusive.” Water is clearly valuable – and currently undervalued – but precise dollar figures are elusive. That fuzziness means that management is probably not as efficient as it could be. The report also highlights the US economy’s sensitivity to water supply shocks, especially within the water-energy-food nexus.
Fort Collins, CO-based brewery New Belgium Brewing has put up $10,000 to support a water footprinting initiative. The Net Zero Water Planning Template, developed by the Colorado Water Innovation Cluster, will help guide businesses in assessing and managing their water footprints. New Belgium apparently made the pledge on the spot at the Net Zero Cities conference during a conference session.
Kinship Conservation Fellows is a ground-breaking environmental leadership program that emphasizes market-based solutions to environmental problems. Kinship’s dynamic global network of 191 Fellows in 47 countries and 6 continents is collaborative, entrepreneurial, and dedicated to effective conservation. Applications for the 2014 Program will be open until January 27, 2014.
The inaugural World Forum on Natural Capital will be the first major global conference devoted exclusively to turning the debate on natural capital accounting into action. It will build on the enormous private sector interest shown at the United Nations Earth Summit in Rio in June 2012 and the many developments that have taken place since. The World Forum on Natural Capital will bring together world-class speakers, cutting edge case studies and senior decision makers from different sectors, in order to turn the debate into practical action. Lively plenaries and interactive breakout sessions in four conference streams will explore the risks and opportunities for business, allow access to the very latest developments and provide an opportunity to help shape the debate through dialogue between policymakers, business leaders and prominent experts in the field. 21-22 November 2013. Edinburgh, Scotland, UK.
2014 UN-Water Annual International Zaragoza Conference
The UN-Water Annual Zaragoza Conferences serve UN-Water to prepare for World Water Day. This conference is part of the road map for World Water Day 2014 focused on the nexus of water and energy. A focused dialogue would already be initiated with the UN-Water seminar on the same topic during World Water Week in Stockholm. Water and energy (W&E) are closely interlinked and interdependent. W&E inter-linkages have an important role in the post-2015 development agenda and the conceptualization of Sustainable Development Goals (SDGs). There are indeed some main challenges, interconnections and opportunities for realizing synergies and benefits from joint responses on the water and energy nexus, including for the design of climate resilience and green economies. Partnerships amongst institutions, agencies and stakeholders can help in achieving some of these benefits. 13-16 January 2014. Zaragoza, Spain.
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.
2014 National Mitigation & Ecosystem Banking Conference
The only national conference that brings together key players in this industry, and offers quality hands-on training and education sessions and important regulatory updates. Learn from & network with the 400+ attendees the conference draws, offering perspectives from bankers, regulators, and users. 6-9 May 2014. Denver, Colorado.
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We covered the COP from beginning to end, with a narrow focus on REDD and those issues still under discussion. Here is the bulk of our coverage, with a few breaking stories omitted.
Demand For Forest Carbon Offsets Rises As Forestland Under Carbon Management Grows sets the stage for Warsaw with a deep dive into the state of forest carbon markets around the world.
REDD, CDM Likely To Find A Place In New Climate Agreement: UNFCCC Executive Secretary Christiana Figueres offers hope that the troubled CDM market and REDD projects will be included in the international climate deal expected to be finalized in 2015.
Indigenous Leaders Stand Up For Active Role In REDD relates what indigenous leaders expect from forest-carbon finance
REDD Reference Levels Share Stage With Broader Land-Use Issues In Warsaw outlines the issues on the table at the beginning of the talks.
In Warsaw As In California, Forest Carbon Carrot Needs Compliance Stick explores the need for compliance drivers to boost demand for forest carbon offsets.
The REDD Finance Roundtable: A Quick Chat With EDF, WWF, and UCS takes stock of the talks on the eve of the final REDD agreement.
For REDD Proponents, No Regrets examines the early success of REDD pilot projects despite sluggish progress made in securing policy and financial support at the national and international levels.
US, UK, Norway Launch Next-Stage REDD Finance Mechanism Under World Bank examines a financing mechanism designed to support performance-based payments down the road.
After the talks, we began digging into the decisions and themes of the two-week talk, and will be rolling these stories out as they take shape.
Further stories in this series will explore the impact of individual decisions within the rulebook, the role that the rulebook can play in helping existing projects nest in jurisdictional programs, and the impact of the rulebook on the private sector.
21 November 2013 | WARSAW | Norway, the United States, and the United Kingdom yesterday unveiled a new financing initiative designed to save endangered rainforests by promoting climate-safe agriculture in developing nations. It will be targeted to smaller forest countries and to individual states within larger nations and will operate under the World Bank’s BioCarbon Fund, with money being based on emission-reductions achieved.
Dubbed the Initiative for Sustainable Forest Landscapes (BioC ISFL), it will initially select between 4 and 6 jurisdictions – beginning with Ethiopia’s Oromia state – and funnel between $30 and $50 million into each of them once reference levels are established. While most of the funds themselves had already been committed or announced for REDD+ (Reducing Emissions from Deforestation and Degradation plus pro-forest activities), the new initiative offers a clue into how the funds will be deployed.
They could, for example, be used to promote sustainable agriculture practices that reduce pressure on forests, said Todd Stern, the US Special Envoy for Climate Change. In his scenario, REDD+ finance would be used to promote sustainable agriculture, and private companies would be expected to step up by making long-term commitments to purchase products that are harvested sustainably.
“Grants and technical assistance along with purchasing offsets will support sustainable agriculture and REDD,” he said. “The private sector will purchase sustainably-made products and then sell forest-friendly commodities. That’s a core part of this initiative.”
In another scenario, the funds could be used to provide insurance for projects that are climate-safe but economically risky.
“This combination of incentives creates a powerful dynamic, where there is both up-front support for forest stewardship and demand-side pull for forest-friendly products,” said Stern.
Edward Davey, the UK’s Secretary of State for Energy and Climate Change, said there is plenty of demand-side pull, and implied that up-front support would be targeted to 10 countries.
“We know that we can begin to address 87% of the world’s remaining deforestation with support and action in 10 countries,” he said. “And we know that consumer goods companies with over $3 trillion in annual sales are getting behind the Tropical Forest Alliance in an effort to remove deforestation from their supply chains.”
A fact sheet distributed at the launch event offered statements of support from Unilever CEO Paul Polman, Mondolēz International Vice President Christine McGrath, and Climate Change Capital CEO Alfred Evans.
Who Gets Funding?
Beyond Oromia, states and countries will be selected based on their degree of REDD readiness and political will, as well as on a case-by-case analysis of their agriculture sectors – clearly in keeping with the “landscapes” theme that has dominated side events here this year.
While no other states beyond Oromia were officially named, both Colombia and Indonesia participated in the launch, and former Guyanian President Bharrat Jagdeo made a rousing impromptu appearance.
All three countries are developing the kind of carbon accounting infrastructure that can handle performance-based funding, and all have leaders who seem committed to saving their forests.
Colombian President Juan Manuel Santos, for example, has vowed to eliminate deforestation by 2020. Indonesian President Susilo Bambang Yudhoyono risked his political future by taking on the powerful palm oil lobby. And Jagdeo – who stepped down because he reached his term limit – is a strong advocate of conservation who has never been shy about demanding performance-based conservation.
On Wednesday, Colombian Environmental Vice Minister Pablo Abba Vieira Samper outlined a program called “Amazon Vision” that’s clearly designed to funnel REDD finance to the right agents, while Indonesian Deputy Minister Heru Prasetyo outlined Yudhoyono’s impressive steps to restructure the economy along green lines, and Jagdeo made an impassioned plea to prevent the gains made to date from evaporating.
What is New and Where Does it Sit?
The BioC ISFL will run under the BioCarbon Fund (BioCF), which is part of the World Bank* and has been piloting REDD+ readiness initiatives since 2005. Davey said the new initiative differs from those pilots in two ways.
“First, it’s not acting at the project or national level but at a sub-national/jurisdictional or state level,” he said. “This is because we believe scaling up REDD will be easiest at this jurisdictional level.”
Second, he said, the BioC ISFL is explicitly aimed at promoting those activities that companies have long claimed will make it easier for them to remove deforestation from their supply chains.
“There is evidence that private-sector companies want to be involved,” he said. “We want to make it possible for them to be involved.”
The Overhaul
But “being involved” requires something to be involved in – and that something is often far from green.
“Over the last half-century, we have come to see our forests as the fuel that drives development,” said Indonesian Deputy Minister Heru Prasetyo. “Our entire economy is built on this premise, and that’s not easy to change.”
From that perspective, he says, forest conservation is a new solution, and climate change is a new problem. Both the solutions and the problems are facing push-back from what he called the “business-as-usual” paradigm.
Who’s Paying What?
Most of the money for the first tranche will come from funds already committed, but the new initiative offers clarity into how it will be spent. Harvey said that other countries have also expressed an interest in joining the initiative.
Norway said it would direct “up to” $135 million into the new initiative and extended its previous commitments through 2020 – a major boost, given the change in government there. Tine Sundtoft, the Norwegian Minister for Climate and the Environment, also announced additional grants of up to $100 million for the FCPF by year-end.
The UK earmarked £75 million ($120 million), which Davey said would come from the £3.8 billion International Climate Fund that began deploying money in 2010 and will continue to do so through 2016.
The US said it would contribute $25 million, and a source in the delegation said some and maybe all of it would be on top of previous commitments. Stern said the $25 million was just the first tranche of funds that will top $250 million. “We hope this new initiative can break down the myth that we have to choose between either development or the environment,” said Stern. “It’s a false choice.”
Germany also participated in the launch, but is not on the list of contributors to the BioC ISFL. Peter Altmaier, the country’s Environment Minister, said Germany would add another €12 million (about $16 million) to its Early Movers program, which is already making results-based payments to the Brazilian state of Acre – to the tune of 2.5 million credits at an undisclosed price.
“REDD+ needs more funding than what Germany, Norway, the United Kingdom, and the United States pledged today,” said Pipa Elias, REDD+ expert for the Union of Concerned Scientists. “But the way they are targeting it – that’s encouraging.”
Some of the funds will be performance-based, and be couched in terms of a carbon price. That price, however, has not been determined and is likely to be handled on a case-by-case basis.
Following New REDD Rules
One of the prime achievements of this year’s COP is agreement on clear rules for establishing reference levels and how to measure, report, and verify (MRV) changes in carbon stocks and attribute them to specific activities. The new initiative will aim to follow those rules where possible – but also reserves the right to develop its own methodologies. That provision will not sit well with some developing countries, many of which say they cannot afford the transaction costs that fragmented rules bring.
*We initially identified the BioCarbon Fund as being part of the Forest Carbon Partnership Facility, which it is not.
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