The question is tough and so are the answers in “Conservation Capital in the Americas: Exemplary Conservation Finance Initiatives.” Editor James Levitt draws on case studies crossing economic and international borders to illustrate that while environmental solutions benefit from outside experiences, they require creativity and attention to local issues to succeed.
17 January 2011 | In a landmark four-day conference held in Valdivia, Chile in January 2009, conservationists and policy makers brainstormed their topic, conservation capital in the Americas, where to find it and how to make it work. Their solutions, illustrated through case studies presented in pairs from North and Latin America, form the basis of this survey text.
No Simple Answers
There is no single nor simple answer to the question of how to protect the environment, “Conservation Capital in the Americas” concludes. Yes, conservationists can benefit from one another’s experiences. But effectively protecting the environment for future generations requires carefully crafted solutions that are both creative and local. Case studies in “Conservation Capital in the Americas” provide a broad overview of activities that could easily be used by both professionals in the field and in graduate and undergraduate survey courses on conservation finance. The book’s bottom line is that conservation can provide economic value.
Modeling, Mimicking and Making it Work
In Massachusetts, for example, the state Community Preservation Act takes fees from recording title deeds. It applies these fees, along with city and town ballot-passed property-tax surcharges, to successfully fund locally led and supported conservation activities. Matthew Zieper, who wrote this chapter of the book, shows how Massachusetts successfully used a combination of fees and surcharges to protect 10,000 acres of environmentally valuable land. This creative, local model is now mimicked by two British Columbia municipalities, Cowichan Valley and Eat Kootenay, that passed ballot measures funding local land conservation.
Chile, meanwhile, borrowed from the US private land trust movement and adapted its example to serve Chile’s specific needs, said this chapter’s authors, Henry Tepper and Victoria Alonso. The US private land trust movement protected over 37 million acres of land during the past 40 years. Noting this achievement, a group of dedicated individuals from Chile’s private and public sector labored to establish similar financial conservation incentives in their country. These include changes to Chile’s tax laws that encourage compensation when conservation easements limit land use. Called the “derecho real de conservacií³n,” Chile’s Private Lands Conservation Initiative, based on studies and selective application of lessons learned from US land trust movement, can now lead other Latin American countries to develop their own land trust movements.
A Welcome Addition
“Conservation Capital in the Americas” should be a welcome addition to the library of all conservation finance professionals and students. Levitt provides an overview of the numerous issues that must be tackled to effectively finance environmental protection. His book considers legal avenues towards conservation, conservation finance through taxation and tax benefits, limited development approaches, and conservation finance impacts from sustainable enterprise, conservation investment banking, carbon sequestration, and ecosystem services. Through clear and concise demonstrations of financial creativity at local levels that are mimicked and adapted throughout the Americas, “Conservation Capital in the Americas” provides a roadmap for conservation finance successes.
7 January 2011 | The Nature Conservancy’s new book, “The Atlas of Global Conservation” offers an unblinking look at the current crises of biodiversity loss. Rich with graphic detail, the atlas allows readers to visually understand projects within a greater context, framing industries, nations and missions. Focused on habitats, species, and change, this atlas, edited by Jennifer L. Molnar, allows readers, particularly those working in the field of global conservation, to explore available mitigation options. It places these options into a global context within the worldwide ecosystem services crisis.
Small picture vignettes display specific conservation issues. Short personal stories by conservation leaders provide insights into specific topics. And outstanding graphics illustrate the scope of the global ecosystem services crisis.
A World of Change
In the chapter I found most useful, titled “A World of Change”, Martin Wikelski and David S. Wiclove use data to clearly display the conflict between man’s consuming nature and its repercussions on our planet’s health. The chapter juxtaposes the reality that while more than one out of every five individuals on Earth lacked safe drinking water last year, people from other nations with very different standards of living – the US, India, and China — consume the most water globally, averaging between 300-646 billion cubic meters per person per year.
The chapter also provides a strong depiction of increased global temperatures and their association with climate disruption. It documents how temperatures increased by only 0.74˚C over the past 100 years. And it illustrates how temperatures are expected to escalate by more than twice that amount, between 0.4˚C to 1.0˚C, in the next twenty years alone.
Local actions with global impacts
Interlocking themes and activities proposed for project developers link this to the next chapter, “Habitat Loss,” and mirror the book’s overall message that individual impacts on nature have interlocking and global impacts. Readers can view conservation and reforestation activities in Brazil’s Atlantic forest and the US Mississippi Alluvial Valley. They can see how mitigation strategies counteract climatic disruption. And they can make the connection between activities that mitigate climate change and their accompanying benefit for habitat gain. Pages focused on illegal wildlife trade, meanwhile, graphically illustrate how these sales cross political boundaries to sell entire species into extinction. Finally, pages devoted to disappearing glaciers offer graphic representation of snowmelt changes worldwide. Their analysis of weather patterns dating back to 1975 and weather forecasts extending to 2040 illustrate that climate disruption will cause the majority of the Northern Hemisphere to experience snowmelts one-to-three weeks earlier than they do today.
“The Atlas of Global Conservation” offers an illustrated guide that demonstrates and puts in context of the global ecosystem services crisis we now face. Through maps, analysis and insights it provides tools for regional, national and worldwide ecosystem service maintenance and strategies for improvement.
The Regional Internet Bank Information Tracking System is one of the Army Corps of Engineers’ great successes, but it can be even better. Ecosystem Marketplace has joined scores of mitigation bankers and other market practitioners in calling for expansion of the data base and increased transparency so that RIBITS can achieve its true potential as a mechanism through which mitigation markets can deliver true environmental benefits.
20 December 2010 | “Implementation is key to any proposal out there,” says Craig Denisoff, the vice-president of Westervelt Ecological Services, explaining why wetland mitigation practitioners have recently written two letters to the U.S. Army Corps of Engineers (USACE) urging them to expand the accuracy and accessibility of its mitigation credit database, “The Regional Internet Bank Information Tracking System” (RIBITS).
RIBITS allows Corps districts to “track the status of mitigation banks, monitor credits and debits incurred by permitting actions, view compliance reports and automatically email requests for information and upcoming deadlines from a single Internet-based interface.” We have constructed a video tour of RIBITS here.
While RIBITS has great potential, it still lacks the timeliness, accuracy and ease-of-access that would allow it to be fully useful tool — which is why the mitigation community decided to formally urge the USACE to take the database further.
The most recent letter, sent in September, was written by Ecosystem Marketplace, Forest Trends and their partners. We invite you to scroll down and consider signing your name alongside ours in urging the USACE to continue their development of RIBITS.
Beyond implementing RIBITS in all 38 Corps districts, the letter urges the USACE to maintain the database, ensuring accuracy and timeliness of the credit data. A transparent and robust information infrastructure, according to the letter, is an essential aspect of compensatory mitigation and can only be achieved with public-private partnerships.
The authors of the letter are not decreasing the importance of RIBITS; rather, they want to see its expansion so that it will be a useful database for every aspect of the mitigation commitment.
“It provides good data for scientists to look at trends and make analysis of how things are going,” says Dave Urban, the president of the National Mitigation Banking Association and a signatory of the September letter. “It also provides us bankers and mitigation providers a way to do market evaluation. All the way around, good data is the hallmark of any decision-making process on multiple fronts.”
Following Through
These letters reflect the past commitments of the USACE and EPA regarding RIBITS and data accessibility.
The EPA’s Final Rule on Compensatory Mitigation, released in 2008, says that the “Use of RIBITS is currently limited to several districts, but we are planning to make RIBITS the standard tool for tracking sale and production of compensatory mitigation credits by third parties.”
Subsequent Congressional reports re-emphasize these commitments, and other USACE documents describe the dedicated funding for developing this system. The March letter describes these commitments and asks the USACE to follow through.
In June, the USACE responded to this first letter, citing the difficulty in implementation and providing a link to a 2000-page report about permit statistics. The USACE letter also claimed that RIBITS was “in use across the nation.”
But only 28 of the 38 USACE districts have viewable public information, according to research included in the September letter. As it says, “RIBITS faces the possibility of being seen as an unreliable source of information,” as it does not contain information from all of the districts and is not consistently up-to-date.
RIBITS Potential
Industry leaders are hoping that this does not happen.
“I think everyone in the industry supports the idea of RIBITS because it promotes transparency and certainty in the mitigation industry,” says Denisoff. “People can go to a location and see what type of habitat and mitigation credits are available. Everyone supports that.”
“The issue of data transparency is important on many fronts,” says Urban. “It provides everybody with assurances that the information that the Corps is providing…is correct.”
For example, every year, the USACE produces reports for Congress. According to Urban, if the reports say there are twice as many mitigation credits as impacts, another individual should have the ability to go back and check for themselves. “How does anybody know—how does the Corps even know that the reports they make to Congress are even accurate if they don’t have” a quality assurance program, he says.
Denisoff emphasizes the importance of accurate information for those buying and selling the credits. For example, if the database does not include a banks recently released credits and a banker inputs the sale of these credits, the database will show negative credits. If a potential buyers checks RIBITS, they will see the negative and it could cost the seller of the credits a sale.
Moving Forward
To ensure the continued development of RIBITS, the September letter included concrete recommendations that seek to support the quality and timeliness of the data.
The first, which would include public-private partnerships, is to dedicate resources to “encouraging, training, and supporting 38 Districts in the use of RIBITS.”
“Dedicated staff updating the information is going to be key to whether or not this becomes a really useful tool that we can all point to as the definitive force for finding out about mitigation banking credits,” says Denisoff. If partnerships were embraced, the database could be more efficient and consistent. In addition, the government’s burden in the process would lessen, as outside partners would take over some of the responsibility. Public confidence is also increased, as partnerships ensure greater accountability.
In addition, Denisoff notes that Corps staff often needs to respond to a national or local crisis like a flood or earthquake. These crises require their full attention and everyday duties might be left undone. Denisoff sees partnerships as a solution, as they would be dedicated to maintaining the databases or training others to utilize the database.
The second recommendation within this September letter examines the accessibility of the database. The authors think RIBITS should include the ability to download information or link to a live ‘feed’ of information. With these tools, the database would be more useful and accessible.
“Ultimately, government data should be accessible to anybody,” says Urban. He says that currently it is difficult to access the information.
“We need to make it a tool that people can just go and find it and go right to it. Unfortunately that is not the case,” says Denisoff. He says that it takes extensive searching in some Corps districts website to find RIBITS and often, the link sends the individual to the national database, rather than the District RIBITS.
If it is not user friendly, “people aren’t going to be able to find it and if they can’t find it, they won’t use it,” says Denisoff.
These recommendations underscore the wetland mitigation communities’ support of RIBITS.
As Denisoff says “We are all so supportive of RIBITS and even though we have been hearing about it since 2003, we are still excited. We haven’t lost the faith that this could really be a great tool.”
Will you join us in asking the USACE to provide greater access of information for mitigation banking? Consider signing your name to our letter.
Dear Ms. Gaffney-Smith,
We are writing to encourage the US Army Corps of Engineers (USACE) to allocate sufficient funds to meet the promise of transparent wetland mitigation information and to recommend the use of public-private partnerships to leverage USACE efforts. There are many academic and environmental organizations as well as private businesses that are eager to see greater transparency and market infrastructure in the wetland mitigation industry, and to help achieve this goal through public-private partnerships that expand USACE data and information initiatives.
While the RIBITS (Regional Internet Bank Information Tracking System1) online information system has gone a long way towards providing transparent wetland and stream mitigation banking information, there are still several limiting factors. First, the data from all Districts are not visible to the public2 and in some cases Districts do not appear to be updating information frequently. Therefore RIBITS faces the possibility of being seen as an unreliable source of information. The system is in jeopardy of losing out on cost savings from decreased information/FOIA requests. Internal reporting time may also increase if Districts are not using this standard system for information collection. Finally, private investment in and market growth of wetland mitigation is hampered by lack of up-to-date credit release and sales information.
But RIBITS can live up to its promise of information transparency if funding is provided for: final adjustments to the system; maintenance and periodic updates to the system; and sufficient staffing to cover training, support, and updates. We recommend that USACE dedicate additional resources to the massive undertaking of encouraging, training, and supporting 38 Districts in the use of RIBITS. Information transparency can also be enhanced by public-private partnerships that safely redistribute the demands on the regulatory agency. In the carbon market, for example, public confidence in the system is boosted by the existence of third-party registries3 which ensure credits are not oversold or double-sold and provide real-time credit balances to the public.
Second, although RIBITS provides the best source of information on mitigation banking, the usefulness of RIBITS is limited by its inability to download or link to a live ‘feed’ of information. Technological solutions such as an XML ‘feed’ or password-protected data access can be created at little or no cost. We strongly urge the Corps to “take prompt steps to expand access to information by making it available online in open formats” (OMB’s December 2009 Open Government Directive4) by providing this kind of data access.
Third, as long as information is unavailable on the location of mitigation banks and in-lieu fee programs, it will continue to be a challenge to spatially link conservation efforts as is required by the ‘watershed approach’ in the Aquatic Compensatory Mitigation regulations. We urge USACE to allocate funds to collect and provide location data for all mitigation banks and in-lieu fee programs (past and present) on the RIBITS system.
The efficacy and efficiency of compensatory mitigation depends in large part on a robust information infrastructure. We believe the promise of RIBITS and other USACE transparency initiatives is only possible through the combined efforts of a diverse collection of public and private entities. We hope you will consider exploring with us the use of public-private partnerships to achieve these goals.
Thank you for your attention to this important issue.
Ecosystem Marketplace visited RIBITS on 9/3/10 and found 28 of 38 Districts with information available for public viewing. Of those 28 Districts with information, two Districts only have one bank publicly accessible (our own bank data collection effort found 45 banks in these two Districts). Nine additional Districts have no bank information available (excluding Hawaii, which has no banks).
11 November 2010 | David B. Lindenmayer, a Research Professor at The Australian National University in Canberra and Gene E. Likens, an ecologist best known for discovering acid rain in North America, provide a pungent perspective on the state of long-term monitoring programs designed to identify significant changes in the natural environment.
In their book, Effective Ecological Monitoring, case studies spotlight why some monitoring programs fail while others succeed . The book, just released in soft cover, provides an essential tool for understanding, protecting and preserving the earth’s ecosystems.
Good intentions are not enough
For a first-hand look at an environmental monitoring program that falls short, Lindenmayer and Likens point to the Program for Planned Biodiversity and Ecosystem Research. This Australia-based ecological initiative is designed to provide long-term monitoring of biodiversity indicators including those related to climate change. To assess changes over time. The monitoring program breaks a network of land and sea plots throughout major ecoregions into equally-spaced grids. The authors acknowledge the program’s good intentions and attributes. These include well-developed partnerships and limited bureaucracy. The cost of monitoring is also relatively inexpensive.
But the program’s flaws likely outweigh its positive aspects, the authors write, and will probably decrease its effectiveness and relevance. The monitoring program’s mission contains few well-defined questions. It lacks a conceptual model. This could prevent information gathered from explaining underlying mechanisms. There may be flaws in the program’s experimental design. And the program’s standardized format puts results in a “one size fits all” format that could limit the relevance of measurements.
46 years and going strong
The Hubbard Brook Ecosystem Study, in contrast, is a case study for success, say Lindenmayor and Likens. Researchers at Dartmouth College and the US Forest Service initiated this long-term monitoring program in 1963 in the Hubbard Brook Experimental Forest of New Hampshire, USA. They use it to study the ecological, hydrological and biogeochemical processes of forest and aquatic ecosystems. Many attributes contribute to the study’s success, the authors say. For example, since inception the program has included specific objectives to evaluate critical relationships between mineral cycles and hydrology. It outlined basic approaches including the need to relate scientific research to land and water-management issues. It formed strong partnerships whose focus included an on-the-ground field presence and careful calibration of field equipment for monitoring.
Lindenmayor and Likens say that although the study is beginning to suffer from increasing levels of bureaucracy it has overcame many challenges in its 46 years, including loss of key leaders and remains effective today.
Checklist for Winners
Case studies such as these provide a checklist for success – and for failure.
Good monitoring programs such as the Hubbard Brook Ecosystem Study share certain key characteristics, the authors write. They establish good and evolving questions, use a conceptual model, select appropriate entities to measure, and provide a good design, well-developed partnerships, strong and dedicated leadership, ongoing funding, frequent use of data, scientific productivity, maintenance of data integrity and calibration of field techniques.
Several small factors also contribute greatly to project success, they say. These include reliable field transport availability, motivated field staff, access to remote field sites and significant time dedicated in the field.
Recipe for failure
Failure, the authors write, can often be prevented. But at times it is out of the program designers’ control.
Programs, such as the Australian study, failed because of insufficient questions and poor experimental design that resulted, Lindenmayer and Likens write, from poor planning and a lack of focus. This often results in disagreements over what to monitor, overemphasis on infrastructure, disengagement of the scientific community, poor data management and breaches of long-term data integrity.
Even well-designed and implemented programs also fail at times because of factors outside the designers’ control. These include lack of funding, loss of a key person, unexpected problems and excess bureaucracy.
Adaptability breeds success
One of the book’s strongest assets is the authors’ Adaptive Monitoring framework. This framework starts with well-developed questions concerning what should be monitored and how it should be done. It is furthered by experimental design, data collection, data analysis and ongoing interpretation. It is adapted to individual needs And it views monitoring programs philosophically. Overall, Adaptive Monitoring aims to guide programs away from common deficiencies and toward success.
The Challenge of Integration
The authors offer powerful insights into future challenges for ecological monitoring while identifying conditions necessary for significant improvements to occur.
They claim, paradoxically, that the western cultures that often undertake long-term ecological monitoring efforts often prove ill suited for carrying them out. This, they say, is because of the cultures’ often short-term focus. Another difficulty is the challenge of integrating different monitoring approaches across different levels of implementation, such as state and national governments, academic bodies and organizational flows. Lindenmayer and Likens admit they are unsure how to rectify such deep-rooted cultural and integrational issues.
Of Books and Bias
Effective Ecological Monitoring does not touch on the particular importance of or difficulty in carrying out monitoring programs in developing countries; it includes surprisingly few examples and case studies from outside the developed world. The authors admit their bias upfront in the book’s prelude. Accordingly, the case studies focus solely on Australia, North America and the United Kingdom. The authors would have done well, however, to note their reasons for this omission.
A Call to Action
Lindenmayer and Likens’ adaptive monitoring tool will become increasingly important as we fully grasp the importance of ecological monitoring. It provides essential analyses required to understand environmental changes caused by human interactions with nature. And it provides the basis for determining how to mitigate these results. Adaptive monitoring becomes particularly relevant when assessing the long-term effects of climate change, acid rain, increased ozone levels and natural disasters. And the success, in turn, of schemes involving payments for ecosystem services including carbon sequestration and wetland preservation depend heavily on effective monitoring. They could greatly benefit from such a framework.
Effective Ecological Monitoring offers a well-written analysis of issues facing ecological monitoring programs. Its call to action for improving monitoring programs clearly outlines key issues yet to be resolved and can clearly serve as the foundation for future exploration. It is sure to resonate not only with scientists but also with policymakers, academics and ecosystem service professionals who can use its suggestions to improve existing monitoring programs and implement new ones.
The United Nations aims to halt biodiversity loss by 2020, in part by promoting financing schemes that recognize the economic value of our planet’s living ecosystems. One such scheme is the “Green Development Mechanism”, which is designed to both promote economic development and preserve biodiversity. Its backers will be presenting their ideas on Friday and Monday in Nagoya.
21 October 2010 | Since the Rio Earth Summit in 1992, funding for the Convention on Biological Diversity (CBD) has fallen far behind that of the Framework Convention on Climate Change. While climate change remediation received US$144 billion last year, official bilateral funding for CBD related objectives averages around US$2.5 billion annually. The total for biodiversity rises to around US$4 billion when the Global Environmental Facility, World Bank, and voluntary payments for environmental services are added – roughly 3% of the funding for climate change.
Given estimated financing needs for biodiversity at between US$50-$300 billion per year, the Parties to the CBD are planning to take action on this issue at this week’s COP in Nagoya, Japan. However, in the current economic climate it may be wishful thinking to expect the COP to achieve a significant increase in bi-lateral or multi-lateral funding. But the chronic shortfalls underscore the need for a new initiative capable of delivering resources on the scale of the climate change convention.
A solution may be provided when the COP deliberates on Innovative Financial Mechanisms. One of the most promising ideas is a Green Development Mechanism (GDM), an idea which has emerged from a series of consultative meetings leading up to this year’s Conference of the Parties. While opinions still vary on the GDM, recognition of the importance of engaging the private sector – a key feature of the GDM – is widespread within the COP.
Supplementing Government Financing – Not Replacing it
The GDM is intended to supplement government assistance – not to substitute for it.
Like the CDM, it is specifically designed to tap the resources of private sector companies and individuals who wish to begin the process of compensating for their ecological footprint. The CBD can – and should – have two mechanisms of funding: one for capturing government resources, and the other for private-sector participant.
Proposals for a GDM are an attempt to tap private sector financial resources, inspired in part by the success of the Clean Development Mechanism (CDM) under the Kyoto Protocol. Since its inception in 2002, the CDM has generated US$23 billion in carbon offset payments, and catalyzed well over US$100 billion in private sector investment in low carbon projects. In contrast, the CBD has done very little until now to attract the private sector, and has instead relied on bi-lateral and multi-lateral aid contributions. Much of the funding gap between the two Conventions is due to this structural difference.
As currently proposed, the GDM would be a standard setting and certification body for land use projects that conform to the three basic objectives of the CBD: conservation, sustainable use, and equitable sharing of the benefits of biodiversity. For projects in developing countries, a contribution to poverty alleviation and development would also be expected. Under the GDM, a land (or aquatic) management plan would be produced by the project proponents, and approved based on COP guidance, verified by independent auditors, then offered as a biodiversity investment to the private sector. The management plan would define the GDM-certified area, denominated in spatial units, such as hectares, with a minimum time commitment of 10 years.
The Implementation Challenge Operation of the GDM could be vested in an administrative structure set up by the Conference of the Parties to the CBD. Its functions would include approval of GDM management plans based on certification by independent auditors, maintenance of a registry of projects and transactions, arbitration of disputes, creation of a clearing house of information for market participants, publicity and outreach to potential investors and project developers, oversight and reporting to the COP on implementation of project methodologies and requirements, administration and finance.
Transactions with investors would take place through the GDM administrative structure. As an example, a project proponent could offer a commitment to manage a 1000 hectare area to GDM standards for ten years for US$1 million dollars. The pricing on the commitment would be subject to negotiation, and would reflect the underlying biodiversity values of the area as well as the level of investor interest. Beneficiaries could be in the public, private, community, or NGO sector, could involve a wide range of land uses from farming and forestry to strict protection, and could be located in any country.
Investor participation would be voluntary. There are many reasons why an investor would be interested in securing a commitment for GDM-certified managed areas. Many companies have investor requirements for no negative impact on nature, or supply chain sustainability goals, or are interested in strengthening their corporate social responsibility. Philanthropic organizations would find that the GDM provides a direct way to reach small scale land managers. Individuals conscious of their biodiversity footprint could voluntarily choose to compensate. The GDM offers investors the satisfaction of contributing to the protection of biological diversity in a specific ecosystem, through a United Nations guided and managed process.
Indicators of the potential for new funding under a GDM include the emerging market for voluntary payments for environmental services, contributions to conservation organizations, and investments by philanthropic institutions in nature, among others. The recent TEEB for Business report identifies $65 billion in expenditure in markets related to biodiversity, including certified agricultural and forest products, private land trusts, payments for watersheds and other environmental services, and offsets for biodiversity loss. This indicates that over the long term, funding under the GDM could come to rival the billions generated by the CDM.
Land managers, especially in developing countries, currently have virtually no links to such markets. Yet many already exercise considerable environmental stewardship regardless of the lack of financial incentives for doing so. For example, a company in the Brazilian Amazon, Restoration Forestry, practices an ecological form of reforestation. It rehabilitates degraded pastures by alternating rows of native tree species with natural vegetation. As a result, a permanent forest canopy forms over time with the biodiversity approximating a natural forest. Programmed harvests are light, reflecting the maturities of the diverse tree species, and none of natural vegetation is harvested.
Such a project could offer a GDM-certified contract priced to cover the additional costs of ecological reforestation. This would create an incentive to expand ecological practices by equating the financial viability of the project with conventional practices. As in the CDM, payments from the mechanism would catalyze increased local investment in sustainable practices. Both the value of the international payment and the local project developers’ investment would contribute to the flow of funds for environmental remediation.
Until this becomes a reality, however, land managers in developing countries will continue with few links to such investors. Instead, the highly sophisticated projects will try to attach their biodiversity benefits to carbon sequestration projects under the CDM. Others will seek investors through the nascent market in international payments for environmental services.
Instead of remedying the lack of a private sector mechanism, some Parties to the CBD will continue to argue for increases in official bi-lateral assistance. Others will focus on creating detailed blueprints for incentive programs, or on further refining estimates of the value of global biodiversity. Meanwhile, a market in global biodiversity is waiting to be tapped.
When the GDM comes up for discussion at the COP, opposition and indifference can be expected. Some will worry that a GDM would by-pass established institutions, such as central governments and international conservation organizations, by linking project developers directly with investors worldwide. Ironically, it is these same institutions who will decide whether to build bridges with the private sector, or continue to rely on governmental aid and NGO philanthropy.
If the inertia can be overcome, agreement to proceed with a GDM would make the CBD relevant in local land use decisions, something the climate change convention has achieved for polluters. Currently, land managers in developing countries have little knowledge of the CBD, much less feel directly influenced by any of its decisions. A GDM could change this immediately by creating financial incentives for those who comply with CBD objectives.
Alexander James is manager of Restoration Forestry, in Marituba, Parí¡, Brasil. He was a consulting economist at the Secretariat of the Convention on Biological Diversity when incentive measures and other financial issues first entered the agenda of the Conference of the Parties in 1996. Francis Vorhies is Executive Director of Earthmind, a non-profit sustainability consultancy in Geneva, Switzerland, and is heading up the GDM 2010 Initiative with support from the Government of the Netherlands. He was formerly chief economist for the IUCN-International Union for the Conservation of Nature.
Sources
Funding for climate change and Biodiversity: World Bank, State and Trends of the Carbon Market 2010 (World Bank, Washington, DC, 2010); OECD statistics on biodiversity related aid (OECD, Paris, May 2008; www.oecd.org/dataoecd/26/24/40756129.pdf); E. Stokstad, Despite Progress, Biodiversity Declines. Science, 329: 1272-1273 (10 September 2010).
Financial Shortfalls for Biodiversity: A. N. James, et al. Balancing the Earth’s Accounts. Nature, 401: 323-324 (1999); P. Gutman, S. Davidson, A Review of Innovative International Financial Mechanisms for Biodiversity Conservation (WWF-MPO: Washington, DC, 2008).
COP Agenda and GDM: Secretariat of the Convention on Biological Diversity, Organization of Work, Annotations to the Provisional Agenda (Document UNEP/CBD/COP/10/1/Add.1, 20 July 2010). See Item 4.4, Strategy for Resource Mobilization (paragraph 89); and Document UNEP/CBD/COP/10/INF/15; Innovative Financial Mechanisms – The GDM 2010 Initiative Report (available at: www.gdm.earthmind.net).
12 October 2010 | On Monday, an article attributed to the Australian Associated Press (AAP) reported that Papua New Guinea Prime Minister Michael Somare has officially denounced voluntary carbon schemes as being too risky. The article – widely replicated in blogs and news outlets – said that Somare was encouraging forest owners to wait for a formal UN REDD regime before preserving their forests to earn credits for saving rainforests. The message, however, is not posted on Somare’s web page, and the voluntary programs he’s denouncing were never verified to any recognized standard.
It’s just the latest in a series of weird signals to come out of PNG, which is under fire on both the compliance and voluntary carbon fronts.
On the compliance front, PNG’s handling of the REDD+ Partnership drew fire at UN Climate-Change talks in Tianjin, where scores of participants accused their negotiating team of stifling efforts to bring small landowners and indigenous groups into the negotiations.
Meanwhile, Somare and his new Deputy Prime Minister, Don Polye (who was appointed to the post in July of this year) have been drawing heat for continuing to deal with an Australian company called Nupan, which claims to be developing voluntary carbon offset projects in PNG under the auspices of the Voluntary Carbon Standard (VCS) and the The Climate, Community and Biodiversity Alliance (CCBA).
The projects have become a media sensation in Australia, largely because Nupan is run by a colorful character named Kirk William Roberts. He makes a great TV villain, and some have tried to equate him with the markets themselves, but the fact is that his company has never had a carbon credit verified or validated under any recognized crediting scheme. He is tangential to the carbon markets, and not of the carbon markets. That may change the day one of his projects is accredited, but that day has not come.
In fact, his projects have never gained credence in the legitimate carbon community. The VCS, for example, didn’t even have approved methodologies suiting the type of project that Nupan was proposing (namely Improved Forest Management, or IFM, that convert logged forests to protected forests). At the same time, allegations of intimidation on the part of Nupan would, if proven true, disqualify the company’s projects from approval under the CCB.
A similar point can be made about Theo Yasause who, as head of PNG’s Office of Climate Change Development, issued what appeared to be bogus credits on behalf of 40 projects across the country. The “credits” – really just a letter from Yasause, albeit on official letterhead and with an official stamp – fooled no one but generated a stir in the media when Reuters discovered them in June, 2009. The credits were dismissed as bogus by anyone who saw the letter, and Yasause was dismissed for issuing the letter.
And now, after all this, Somare is apparently telling us that voluntary carbon markets are too risky for his people?
As has been the case with much of the weirdness swirling around PNG and its foray into the carbon markets, I have not yet been able to confirm Somare’s statement with his office. If it ends up being true, however – and if the allegations against Nupan pan out as well – I will be forced to concede that, yes, voluntary carbon markets are risky.
And the risk is especially great for the get-rich-quick set, and for anyone looking to steamroll indigenous groups.
Let’s work on keeping it that way.
This article originally appeared on the eko-eco blog. It’s views are those of the author, and not of Ecosystem Marketplace or its affiliates.
That’s the take-home message in Clive Hamilton’s positively negative “Requiem For a Species: Why we Resist the truth about climate change”, which examines the hard science of climate change and the soft psychology of climate-change denial (as well as climate-change apathy and the desire for a quick and easy fix). Face reality, he says. And deal with it.
1 October 2010 | Anyone even superficially concerned about climate change would do well to read Clive Hamilton’s Requiem for a Species. This highly entertaining and excellently sourced book is part of a new genre investigating a post-global warming world. It bravely calls on us to confront a truth we don’t want to believe: humanity has failed, and catastrophic climate change is all too certain.
Hamilton sets out on a quest to help us better prepare ourselves for unavoidable climate change by analyzing the psychological tendencies of the human species. And he is well prepared for the task. A professor of public ethics at the Centre for Applied Philosophy and Public Ethics at the Australian National University, Hamilton has already authored several books on the culture and politics of climate change, including Affluenza, Growth Fetish and Scorcher.
This most recent book, “Requiem for a Species,” uncovers the roots of climate change denial and investigates why even those who believe the science continue to live with indifference. Despite humanity’s failure, however, we should not abandon our efforts, he asserts. It’s too late to prevent climate change but not too late for modern society to act to ensure the survival of the human species. Ethical action – and perhaps revolutionary action – he writes, is our only hope.
“The time has come for us to ask whether our obligations to our fellow humans and the wider natural world entitle us to break laws that protect those who continue to pollute the atmosphere in a way that threatens our survival.”
Four Degrees of Havoc
Scientists estimate climate change will likely warm the world four degrees by 2055, And this four-degree world that Hamilton describes is a scary place. Melting glaciers will be accompanied by a rise in sea level of at least 25 meters. Floods, droughts, wildfires, cyclones, epidemics and famine will occur with increasing frequency. What’s more, massive population displacement and limited availability of fresh water will conspire with other factors to spark wars between neighboring nations.
It is impossible to read this book without wondering how we arrived at this point and how we can better prepare ourselves for the future.
Hamilton reviews the science and then quickly delves into the reasons we disregard it or deny it. He attributes inaction among even those who heed climate change warnings to our society’s obsession with growth and rampant consumerism that tempt us with false hopes of social progress and happiness. This has been reinforced by fossil fuel lobbies and their financial incentives. Consumerism is successful at helping us acquire material goods and form identities. However, he writes, its promise of eventual happiness fails to deliver. The allure of consumerism is very difficult for modern societies to shake and has prevented us from responding to the impending climate crisis. Hamilton’s analysis of our growth fetish and consumer culture catalyzes the reader to take a hard look at his own life and views on happiness and the environment.
Denial and Disconnect
Denial of climate change, Hamilton writes, also grows from our disconnect from nature that has closely followed changing religious views on the environment and our understanding of the world. The luxuries of modern society instill in us a belief that technology will always save us, no matter the peril. But can it save us from our own hubris?
Hamilton examines climate deniers who seem to accept science when the solution involves further human tinkering with the planet. Think tanks such as the Marshall Institute and the Hoover Institute actively refute the claims of climate scientists but are highly supportive of using geoengineering to save us from the disaster of a changing climate. This blatant act of hypocrisy shines light on an important insight: perhaps what separates concerned citizens from climate deniers is not views on scientific validity but rather “belief about the relationship of humans to the natural world.” In the latter group’s view, reducing emissions admits a human fault and the triumph of nature.Geoengineering, on the other hand, proves our mastery over nature.
Hamilton ponders our options for mitigating climate change and shows how none of the proposed ‘easy way out’ solutions is possible without further serious risks. Specifically, he investigates carbon capture, energy efficiency, alternative energy and geoengineering. Considering there is no clear way out, how can we accept a drastically altered future and move forward?
Despair, Accept, and Act
We must first grieve before attempting to salvage our future, Hamilton writes, being careful not to be seduced by dangerous “unrealistic optimism.” Hamilton offers a method by which this can happen: despair, accept, and act. Simple, perhaps. But moving from intellectual acceptance to emotional acceptance is painful and often crushing. We built our dreams upon steadfast assumptions of our world, but what was once fundamental has been forever changed. We must come to terms with this most unfortunate reality, he writes, by relinquishing our dreams and eventually forming new ones, based on a new future and a new world. Hamilton even conjectures that we may abandon our religious consumerism for the protection of higher celestial gods, mimicking our ancestors of early cultures as we learn to cope with the frailty of our existence.
”Requiem for a Species” draws on Hamilton’s previous work so it’s no surprise that the highlight is his philosophical analysis and citizens’ call to action. The author allows his passion to shine through and offers his refreshingly honest views on how to best influence governments and effect change. He warns that history will repeat itself as it always has. Politicians will act in their own best interest, abandoning the poor and allowing the rich to buy their way out. Our modern elected governments, he claims, have failed to act in the best interest of the people, justifying a new radicalism of vigorous political engagement to democratize survivability.
Hamilton’s philosophical insights are superb but leave something to be desired. The reader would certainly benefit from a deeper and more extensive analysis. The passion evident in Hamilton’s words makes it easy to sense that he has more to say on the subjects of civil disobedience and religion but is possibly holding back. The area could even warrant its own book. Perhaps we will see this from Hamilton in the future.
In addition to encouraging critical and philosophical thinking Requiem for a Species offers an extremely powerful marketing tool. Hamilton draws on research regarding whom to target, which emotions to play on and which ones to avoid. The correct approach is pivotal in appealing to humans to change their consumption habits, lobby for the environment or pay for ecosystem services. The book may also be valuable as a political negotiating tool, helpful in both campaigning and engaging the public in proposed climate legislation.
Human dominance over nature has largely diminished its allure. Our species has mistakenly confused this lack of mystery with a lack of power and the implications are becoming frighteningly clear. After two decades of blasé attitudes toward climate change and disturbingly little action, Hamilton challenges us to ponder our indifference and accept the dire message of climate scientists. Modern society must rethink its vision for the future, and there’s no better time than now.
The average UK citizen emits around fourteen tons of carbon dioxide every year, but Chris Goodall says he can easily slash this to around two. In his new book, “How to Live a Low-Carbon Life”, he not only shows how to achieve that goal, but argues that you’ll incentivize more reductions by making it cool to cut than by promoting complex financing schemes. (We, personally, believe in both)
17 September 2010 | Many individuals are passionate about influencing governments and corporations to decrease greenhouse gas emissions but are less than enthusiastic about making voluntary changes in their own lives. Individuals who work in the environmental and climate change fields are no exception. Often we are reluctant to implement changes on the individual level because we know our impact will be microscopic in comparison to the problem we face. Indeed, many people who work in this arena may be accustomed to hearing about the dangers of placing too much hope on individual action.
But should the goal of individual, active carbon avoidance truly be to save the planet from catastrophic climate change? What if the goal were instead something much simpler, like influencing our family, friends and neighbors? Conceivably the voluntary self-restraint of a group of inspirational people could spread to entire communities. With the acceptance of such fashionable ideas now a symbol of status, it could evolve into a movement, the momentum of which could eventually overturn the social norms of consumerist society. Sound far-fetched? Perhaps it’s not. After all, isn’t this how great social movement begins?
Chris Goodall compels us to ponder this argument in How to Live a Low-Carbon Life: : The Individual’s Guide to Tackling Climate Change a fully revised and expanded edition of his 2007 book by nearly the same name (that one told you how to stop climate change, while this one tells you how to tackle it).
He does not aimlessly lecture on how to reign in our wastefulness; rather, he offers practical advice coupled with insights into why we should abide by it. If you are someone who is willing to make changes in your lifestyle to decrease your carbon footprint but are skeptical of the impact your individual actions can possibly effect, then this book is for you.
Part 1 of the book focuses on direct emissions; Part 2 on indirect emissions; and Part 3 on other areas such as renewable energy and carbon offsets.
Green Fashion Sense
The introduction provides a basic overview of current climate change science and then delves into how an individual can reduce his or her annual emissions from an average of fourteen tons to around two. This level of reduction is necessary for the UK to cut emissions down to its target of 80 percent of 1990 levels. Goodall first ponders why, without individual action, emissions will continue to grow. Specifically, he points his finger at cheap energy, greater prosperity, status tied to consumer goods, social changes that encourage automobile use, and a disappearing tradition of self-restraint. He next investigates the different strategies for emission reductions, focusing on government regulation, corporate action and individual carbon avoidance. After considering the reasons for the historical ineffectiveness of government and corporate approaches, the author offers his support for individual action. Democratic governments respond to the demands of their citizens and companies follow changing consumer tastes, so it would be most logical for climate mitigation efforts to develop bottom-up.
Goodall asserts that, “voluntary self restraint may be the most important way for responsible individuals to cut their own carbon use, combined with some personal investment in lower emissions technologies that are not necessarily financially rational.”
The magic of individual action is that low-carbon living, self-restraint and avoidance of waste may become fashionable and eventually turn into social norms. In the UK, the author cites the specific cases of organic food, free-range eggs, Fairtrade products and recycling for inspiration. He predicts that ultra-efficient house insulation, solar panels, more central heating controls and buying local and in season produce will soon also become fashionable and eventually the norm.
For the UK to meet its reductions target, Goodall asserts we must take the following actions: improve home insulation; decarbonize our electricity production; drive more fuel-efficient cars; fly only in emergencies; swap livestock farming for fresh, local, unprocessed plant-based foods; reduce clothing purchases away from cotton and wool; and substantially reduce our consumption of other goods.
Where Does it Come From?
The greater part of the book tracks the main sources of our emissions and guides the reader through the actions necessary for reductions. In the case of direct emissions, the individual may know where reductions are possible but not how to achieve them. Goodall analyzes home heating, water heating/cooking, lighting, household appliances, car travel, public transport and air travel. He provides encouraging facts, such as how most people adjust within days to a one-degree decrease in household temperature, and investigates assumptions, such as that dish washing by machine is more efficient than washing by hand. The author also does an excellent job of weighing reduction strategies against each other. For home heating, he compares installing a condensing boiler, installing cavity wall insulation, lowering internal home temperature, and improving central heating controls, then estimates the effect of taking all measures together. Goodall also navigates the confusing realm of indirect emissions, simplifying for the reader areas such as food and clothes.
The reader should note that the book is written for a UK audience, so the vast majority of numbers refer specifically to the UK’s targets for emission reductions, and calculations in areas such as energy savings are based on UK prices. Additionally, comparisons to other countries are made nearly exclusively to mainland Europe. Although domestic laws and regulations play a crucial role in the incentives individuals have and strategies they may employ to reduce emissions, the book still provides valuable insights for the non-UK reader.
Workable Solutions
The last section of the book is divided into two chapters focusing on renewable energy use and canceling out emissions. The author’s energy analysis focuses on ways that domestic households can reduce their emissions through the use of alternative energy such as solar photovoltaics, wind turbines, heat pumps, solar hot water, biomass, and fuel cells. While detailing the basics of each alternative the author offers useful comparisons between their financial costs, returns, ease of implementation and carbon dioxide savings. Goodall closes the book with a fair analysis of ways to cancel out emissions, including green electricity, zero-emissions power generation, tree planting and ‘offsetting.’ He suggests the best way to cancel out one’s own emissions is to purchase ETS permits and retire them.
“How to Live a Low-Carbon Life” may be a beneficial tool for individuals not only in their personal lives but also in their professional lives. On a personal level, the book will introduce individuals to the myriad strategies for carbon reduction. The author notes that carbon reduction and energy saving is so easy that it is nearly addictive. Perhaps the individual will in turn learn how to practice voluntary self-restraint and waste avoidance. On a professional level, the book offers recommendations for how to communicate environmental messages. Based on research findings, Goodall deducts that the key to successful communication is to emphasize the behavior of others while giving the individual a clear idea of what not to do. This concept has been widely understood for some time, but Goodall notes that the consumer advertising industry has been slow to catch on. Such an understanding of environmental messaging provides an opportunity for organizations aiming to change human behavior or reshape carbon saving and self-restraint into fashionable values. This book will help interested professionals learn which behaviors are gaining momentum and which behaviors to strongly denounce.
The roots of this great social movement have already taken hold. Don’t let your carbon emissions run unchecked; join your responsible peers in saving the environment.
Talitha Haller is a Social Carbon Associate with the Ecolí³gica Institute, a Brazilian environmental NGO. She graduated from the Ross School of Business at the University of Michigan with a Master of Accounting and a BBA. She can be reached at [email protected].
12 October 2010 | On Monday, an article attributed to the Australian Associated Press (AAP) reported that Papua New Guinea Prime Minister Michael Somare has officially denounced voluntary carbon schemes as being too risky. The article – widely replicated in blogs and news outlets – said that Somare was encouraging forest owners to wait for a formal UN REDD regime before preserving their forests to earn credits for saving rainforests. The message, however, is not posted on Somare’s web page, and the voluntary programs he’s denouncing were never verified to any recognized standard.
It’s just the latest in a series of weird signals to come out of PNG, which is under fire on both the compliance and voluntary carbon fronts.
On the compliance front, PNG’s handling of the REDD+ Partnership drew fire at UN Climate-Change talks in Tianjin, where scores of participants accused their negotiating team of stifling efforts to bring small landowners and indigenous groups into the negotiations.
Meanwhile, Somare and his new Deputy Prime Minister, Don Polye (who was appointed to the post in July of this year) have been drawing heat for continuing to deal with an Australian company called Nupan, which claims to be developing voluntary carbon offset projects in PNG under the auspices of the Voluntary Carbon Standard (VCS) and the The Climate, Community and Biodiversity Alliance (CCBA).
The projects have become a media sensation in Australia, largely because Nupan is run by a colorful character named Kirk William Roberts. He makes a great TV villain, and some have tried to equate him with the markets themselves, but the fact is that his company has never had a carbon credit verified or validated under any recognized crediting scheme. He is tangential to the carbon markets, and not of the carbon markets. That may change the day one of his projects is accredited, but that day has not come.
In fact, his projects have never gained credence in the legitimate carbon community. The VCS, for example, didn’t even have approved methodologies suiting the type of project that Nupan was proposing (namely Improved Forest Management, or IFM, that convert logged forests to protected forests). At the same time, allegations of intimidation on the part of Nupan would, if proven true, disqualify the company’s projects from approval under the CCB.
A similar point can be made about Theo Yasause who, as head of PNG’s Office of Climate Change Development, issued what appeared to be bogus credits on behalf of 40 projects across the country. The “credits” – really just a letter from Yasause, albeit on official letterhead and with an official stamp – fooled no one but generated a stir in the media when Reuters discovered them in June, 2009. The credits were dismissed as bogus by anyone who saw the letter, and Yasause was dismissed for issuing the letter.
And now, after all this, Somare is apparently telling us that voluntary carbon markets are too risky for his people?
As has been the case with much of the weirdness swirling around PNG and its foray into the carbon markets, I have not yet been able to confirm Somare’s statement with his office. If it ends up being true, however – and if the allegations against Nupan pan out as well – I will be forced to concede that, yes, voluntary carbon markets are risky.
And the risk is especially great for the get-rich-quick set, and for anyone looking to steamroll indigenous groups.
Let’s work on keeping it that way.
This article originally appeared on the eko-eco blog. It’s views are those of the author, and not of Ecosystem Marketplace or its affiliates.
As the second day of a three-day UN summit aimed at reducing poverty winds down in New York, it’s clear that many of the “Millennium Development Goals” agreed to ten years ago and set for 2015 will not be met without drastic changes to the way we do business. Janet Ranganathan of the World Resources Institute argues that Payments for Ecosystem Services offer one such change.
21 September 2010 | Over 140 heads of state gathering in New York this week to assess progress on the 2015 Millennium Development Goals (MDGs) must face a stark reality. Most developing countries will fall short of one or more of the eight goals, aimed at vanquishing extreme poverty and delivering basic services to the world’s poor.
Progress is faltering under an intensifying triple challenge: endemic poverty; the early destructive impacts of climate change; and the loss of nature-based services (water, food, fuel wood etc) on which most of the world’s two billion rural poor depend.
While encouraging progress is being made on certain MDGs outside cities – for example, in providing access to clean drinking water and ante-natal care – rural areas remain the hotbeds of entrenched poverty in most developing countries. Only four in ten rural families have improved sanitation, for example, and their children are twice as likely not to attend school as their urban counterparts. Yet these same rural regions will increasingly bear the brunt both of livelihood-threatening climate change impacts such as extended droughts and changed rainfall patterns, and the consequences of accelerating ecosystem degradation. It is not uncommon for poor households to obtain half to two-thirds of their income from the goods and services that nature provides. And for the 1.1 billion people living in extreme poverty, ecosystem services such as food and water are essential for daily survival. Yet research suggests that 60% of the ecosystem services on which humanity depends are being systematically degraded.
How can the heads of state gathered in New York change this disturbing dynamic? One answer will be forthcoming at a high level event on the margins of the MDG Summit attended by top officials from governments, UN agencies and civil society groups. Hosted by the UN Development Programme (UNDP), the event will seek to reinvigorate progress toward the MDGs by calling for a global effort to scale up local nature-based solutions to eradicating poverty and strengthening people’s resilience to climate change.
In a keynote speech, UNDP Administrator and former New Zealand Prime Minister Helen Clark will propose that projects which anchor local economies and food security in sustainable use of ecosystems should be scaled up across the developing world to help meet the MDGs. Her remarks, in which she will also call for the environment to move “from the periphery to the center of development thinking” reflect a growing recognition within aid agencies of the key role of healthy ecosystems in successful development.
Decades of field experience in Africa, Asia and Latin America have taught that community-led projects that conserve biodiversity and generate economic and other benefits can greatly improve quality of life. The 2008 World Resources Report, produced by the World Resources Institute, World Bank, UNDP and UNEP, demonstrated a clear link between scaling up nature-based income for the poor and improving rural communities’ economic, social and environmental resilience. And the latest winners of the Equator Prize, to be honored at today’s UNDP event in New York, demonstrate successful formulae for community- led initiatives on three continents that sustainably use fisheries, forests and other natural resources to improve local populations’ lives and livelihoods (See sidebar).
To scale up local solutions such as these – and regain momentum on the MDGs – will not be an easy task. A WRI analysis prepared for the MDG Summit, Ecosystems, Climate Change and the MDGS: Scaling Up Local Solutions, argues that governments and donors should adopt a five-point framework for action which would provide a roadmap forward by:
Putting in place supportive policies and incentives, such as secure land tenure;
Helping communities’ gain the skills to more fully benefit from nature on their doorstep;
Fostering the sharing of best practices across regions and continents;
Finding the financing for deployment of local nature-based initiatives across the developing world;
Monitoring and assessment of such scaled up initiatives to improve accountability and learn lessons.
Preserving nature and pursuing economic development used to be seen as mutually exclusive; one had to be sacrificed in the interests of the other. In fact, it is increasingly clear that, at least for the rural poor, sustaining nature and pursuing successful, climate-resilient development are mutually dependent. Without an approach that embraces both, any hope of achieving all the Millennium Development Goals will recede over the horizon.
Janet Ranganathan is the Vice President for Science and Research at the World Resources Institute. She oversees and takes a lead role in the planning, quality control, and evaluation of WRI’s research and publications, and can be reached at [email protected] +1 (202) 729-7656
Just a few weeks of actual negotiating time remain before the year-end summit in Cancun, and climate talks are a mess. Sure, most parties agree it’s a good idea to reduce greenhouse gas emissions by saving trees, but that’s about all they agree on. This all highlights the amount of risk that investors take when paying for something today that won’t be delivered for decades – and the role that insurers could play in spreading the risk.
19 August, 2010 |Business is about risk, and insurance is about managing that risk. Without it, no sector can grow – and the REDD sector is certainly without it. Twice in the past we have examined the challenge of engaging the insurance sector and the importance of doing so (see “related links”, right), and these efforts have sparked a tremendous number of questions. We’d like to offer a crack at answering them.
Question #1: How important is this discussion when it comes to preparing for compliance adoption and is it premature to talk about regulation in advance of compliance?
This discussion is necessary to make all participants aware of what needs to be done to make the current forest carbon market structures viable. In order to prepare for compliance mechanisms acceptance, there must be steps taken to secure the integrity of the voluntary process, and for that matter, secure the integrity of the compliance process. The current structures would not stand up if challenged in the U.S. Court of Law. Currently, there are few legal documents which hold the forest carbon provider legally obligated to adhere to the requirements set forth by the protocols. There are a number of gaps where the carbon credit purchaser has no recourse in case of involuntary or voluntary reversals, default, malfeasance, and other risks. In addition, the registries are not securely protected from potential legal exposures brought about by authoring and administering the buffer pools. Unless stricter protocols are implemented, the compliance market would be challenged to accept currently listed projects because projects generally are not secured, insured, or preferred.
Question #2: What insurance products are available to guarantee forest carbon offset project permanence and other contractual obligations associated with offset projects (adequacy of buffers, compliance with protocol, etc), and what are the typical costs of these products? Are these products cost effective?
There are solutions, which use a combination of insurance products and risk structuring to provide viable options for permanence. These have been demonstrated to the voluntary registries, for pre-approval process. The cost to project owners would be less than the value of credit contribution required by registry buffer pools. In addition, the project owners would have the ability to receive returns on their initial costs and have more control over their permanence issues. Finally, this would further provide market assurance since the role of market regulator, market insurer, and market standard would begin to function in a more independent arms-length appropriate manner, to the benefit of all market participants, registries, and standards.
Question #3: Follow on question: by “cost effective” I mean what percent of total transaction costs (for creating and selling carbon offsets) might insurance take, and how might these insurance costs compare vis-a-vis typical profit spreads on carbon offsets?
The insurance costs would be in lieu of buffer pool contributions. Because there are different factors involved, part of the cost would be the actual insurance, while some of the costs would be administration costs. Estimations would be less than the current buffer pool contributions, with potential to receive portion back, based on loss experience.
Question #4: In respect of permanence – the two major standards which currently have buffer pools in place (CAR and VCS) do not distinguish between credit type within the pool. From a financial risk management perspective – apart from the technical/biodiversity risks what do you consider are the key financial risks in having a fully fungible buffer pool (between essentially different asset classes in different location) – such as A/R, IFM, REDD?
There are a number of issues regarding the fungibility of the credits. The fact that all credits are derived from forest sequestration does not guaranty that every credit is interchangeable.
Some of the issues that need to be taken into consideration for fungibility in the context of a mechanism for permanence are:
What is the time requirement?
What are the requirements for intentional or unintentional reversals?
Have the projects gone through strict due diligence procedures to ensure viability of the project and viability of the project owner?
How is counterparty credit risk addressed?
Have the registries taken all appropriate preventative measures to secure their financial and fiduciary responsibilities?
What steps have been taken to safeguard the registries from potential defence costs and/or legal challenges?
Is the mechanism for permanence legally separated from the administering of the registries, so as not to expose the registry to conflict of interest or reversal handling issues?
How are registering and issuance fee differentials handled between registries and standards?
Are the same carbon pools with similar or same confidence intervals used when calculating mtCO2e regardless of methodologies and standards applied?
Is there annual financial audit of the project by a qualified third-party CPA?
Are all transactions of registered tons accounted for using an international transaction log?
These are some of the key components that need to be addressed in order to begin assessing the potential for fungibility.
Question #5: What are the main relevant data sources for risks to permanence in the forest sector?
Within the US, the most relevant data sources come from the forest project landowners. There are numerous data bases and resources available on public forest land. Private ownership may provide information on a voluntary basis.
It is important to understand the differences between private and public forestlands. In the United States, there are over 747,000,000 acres of forestland of which less than 340,000,000 acres are public land.
For example, in 2007 which was one of the worst fire years in recent history, the National Interagency Fire Center (NIFI) reported that total acres effected were 9,328,045 or 1.24% of all forestland in the US was impacted by fire during one of the worst fire years ever in the US with only 0.17% of private forestland impacted in the US.
# of Fires
# of Acres
% total forestland acres (747,000,000)
% of Non-Public forest land acres
Total 2007
85,705
9,328,045
1.24%
Public Land
75,732
8,610,393
1.15%
Non-Public
9,973
717,652
0.009
.017
Question #6: What is, in your opinion, the demand for re-emissions insurance in the forest carbon market? Are developers actively seeking/ pushing for direct insurance vs. the buffer pools?
Developers, landowners and investors are currently pushing for insurance alternatives. These insurance alternatives include general liability insurance, errors and omissions insurance, insurance and / or buffer pool combination, and directors and officers’ liability insurance.
Examples include:
Insurance would provide financially rated and secured reversal instruments.
Allow registries to focus on core issues of carbon certification.
3rd party administration would remove potential legal and financial exposures brought about by facilitating an internal insurance mechanism.
The use of actuarial data and insurance methods would provide a more precise measurement for credit contribution or premium costs.
Question #7: Is there any specific U.S. requirement to be considered by project developers in others countries?
There will be an expected number of requirements. One important factor that must be taken into consideration is the legal climate of the United States. If a project is to be considered as meeting compliance guidelines, there also is the potential that the same project could be subject to suits brought about in U.S. court systems.
Question #8: What are the finance and insurance standards for forestry projects currently under discussion / development?
Currently, VCS is engaging academics to write up an analysis of financial risk management regarding their buffer pool approach. ACR will entertain insurance in lieu of their buffer pool, as long as it meet’s their approval. CAR has stated they are working on reinsurance options for their buffer pool.
Question #9: Carbon projects are often dissimilar to each other such as energy and forest projects. How could the projects registries represent theses differences for the market?
Different project types meet different market needs with a multitude of project types assisting to complete part of the market. Registries need to segment their projects in a manner that effectively communicates each project types’ categories and information.
Question #10: What effect would there be on the market if, as is currently in Kerry/Lieberman in US Senate, the US looks to forest carbon purely through a national perspective, ie not sub-national?
The market, to grow effectively, needs to address the needs of projects at the sub-national level and at the national level given different projects are effective within different frameworks. For example, a national REDD+ would be effective at poverty alleviation within a carbon framework while a sub-national IFM project would be effective at improving carbon sequestration for a specific private landowner. Both types of projects – sub-national and national – are needed while both types have their own unique risk and return characteristics along with their own unique financial risk management needs.
Question #11: What happens if some international forest projects are not eligible for insurance, how can standards accommodate insurance and buffer pools in tandem?
Standards can handle buffer pools and insurance in tandem by segmenting risks appropriately and focusing on how each, whether an insurance product or a buffer pool, may most effectively address the risk mitigation needs of this specific risk – whether the risk is ecological, force majeure, financial, business, political or sovereign.
Question #12: How can insurance companies insure permanence for projects that are 40+ years?
The answer for insuring permanence is combining insurance products with risk management techniques and third party administration. We are taking existing risk transfer solutions and applying them to the forest carbon sector.
Insurance products and principles are applicable to all business sectors. The forest carbon market will be no different, as long as the structural foundation is put into place.
Following Up
At this time, those participating in the forest voluntary carbon market are dependent upon the registry design buffer pools for guaranty of permanence. Issues to be concerned with include:
The factors used in determining contribution percentages put more emphasis on social risks and less on natural hazards’ risks.
Buffer pools need to be stand alone financially viable organizations with administration of buffer pools with an arms’ length third-party relationship to determining buffer pools.
In order to adequately satisfy the credibility of forest carbon credits within existing systems, all participants must provide some form of indemnification in case of errors or omissions. This is one of the biggest potential exposures facing the current registries.
Until the forest carbon market adopts proper business principles, the structure will continue to be abstract. In order to meet compliance requirements and attract investment capital, the infrastructure must be overhauled.
Gabriel Thoumi is a consultant at Forest Carbon Offsets, LLC and a Lecturer at the Ross School of Business at the University of Michigan teaching Strategy 739: Impact Investing.
Augustus (Gus) Kent is president of CO2RS, LLC., which was formed to provide insurance solutions for the carbon offset market. Gus has 22 years of commercial insurance experience, focusing in the environmental, professional, alternative and high-risk disciplines. He has been working with insurance carriers, who will offer coverages specific to those participating in carbon credit and offset areas. He can be reached at [email protected] or (503) 794-1000.
The average UK citizen emits around fourteen tons of carbon dioxide every year, but Chris Goodall says he can easily slash this to around two. In his new book, “How to Live a Low-Carbon Life”, he not only shows how to achieve that goal, but argues that you’ll incentivize more reductions by making it cool to cut than by promoting complex financing schemes. (We, personally, believe in both)
17 September 2010 | Many individuals are passionate about influencing governments and corporations to decrease greenhouse gas emissions but are less than enthusiastic about making voluntary changes in their own lives. Individuals who work in the environmental and climate change fields are no exception. Often we are reluctant to implement changes on the individual level because we know our impact will be microscopic in comparison to the problem we face. Indeed, many people who work in this arena may be accustomed to hearing about the dangers of placing too much hope on individual action.
But should the goal of individual, active carbon avoidance truly be to save the planet from catastrophic climate change? What if the goal were instead something much simpler, like influencing our family, friends and neighbors? Conceivably the voluntary self-restraint of a group of inspirational people could spread to entire communities. With the acceptance of such fashionable ideas now a symbol of status, it could evolve into a movement, the momentum of which could eventually overturn the social norms of consumerist society. Sound far-fetched? Perhaps it’s not. After all, isn’t this how great social movement begins?
Chris Goodall compels us to ponder this argument in How to Live a Low-Carbon Life: : The Individual’s Guide to Tackling Climate Change a fully revised and expanded edition of his 2007 book by nearly the same name (that one told you how to stop climate change, while this one tells you how to tackle it).
He does not aimlessly lecture on how to reign in our wastefulness; rather, he offers practical advice coupled with insights into why we should abide by it. If you are someone who is willing to make changes in your lifestyle to decrease your carbon footprint but are skeptical of the impact your individual actions can possibly effect, then this book is for you.
Part 1 of the book focuses on direct emissions; Part 2 on indirect emissions; and Part 3 on other areas such as renewable energy and carbon offsets.
Green Fashion Sense
The introduction provides a basic overview of current climate change science and then delves into how an individual can reduce his or her annual emissions from an average of fourteen tons to around two. This level of reduction is necessary for the UK to cut emissions down to its target of 80 percent of 1990 levels. Goodall first ponders why, without individual action, emissions will continue to grow. Specifically, he points his finger at cheap energy, greater prosperity, status tied to consumer goods, social changes that encourage automobile use, and a disappearing tradition of self-restraint. He next investigates the different strategies for emission reductions, focusing on government regulation, corporate action and individual carbon avoidance. After considering the reasons for the historical ineffectiveness of government and corporate approaches, the author offers his support for individual action. Democratic governments respond to the demands of their citizens and companies follow changing consumer tastes, so it would be most logical for climate mitigation efforts to develop bottom-up.
Goodall asserts that, “voluntary self restraint may be the most important way for responsible individuals to cut their own carbon use, combined with some personal investment in lower emissions technologies that are not necessarily financially rational.”
The magic of individual action is that low-carbon living, self-restraint and avoidance of waste may become fashionable and eventually turn into social norms. In the UK, the author cites the specific cases of organic food, free-range eggs, Fairtrade products and recycling for inspiration. He predicts that ultra-efficient house insulation, solar panels, more central heating controls and buying local and in season produce will soon also become fashionable and eventually the norm.
For the UK to meet its reductions target, Goodall asserts we must take the following actions: improve home insulation; decarbonize our electricity production; drive more fuel-efficient cars; fly only in emergencies; swap livestock farming for fresh, local, unprocessed plant-based foods; reduce clothing purchases away from cotton and wool; and substantially reduce our consumption of other goods.
Where Does it Come From?
The greater part of the book tracks the main sources of our emissions and guides the reader through the actions necessary for reductions. In the case of direct emissions, the individual may know where reductions are possible but not how to achieve them. Goodall analyzes home heating, water heating/cooking, lighting, household appliances, car travel, public transport and air travel. He provides encouraging facts, such as how most people adjust within days to a one-degree decrease in household temperature, and investigates assumptions, such as that dish washing by machine is more efficient than washing by hand. The author also does an excellent job of weighing reduction strategies against each other. For home heating, he compares installing a condensing boiler, installing cavity wall insulation, lowering internal home temperature, and improving central heating controls, then estimates the effect of taking all measures together. Goodall also navigates the confusing realm of indirect emissions, simplifying for the reader areas such as food and clothes.
The reader should note that the book is written for a UK audience, so the vast majority of numbers refer specifically to the UK’s targets for emission reductions, and calculations in areas such as energy savings are based on UK prices. Additionally, comparisons to other countries are made nearly exclusively to mainland Europe. Although domestic laws and regulations play a crucial role in the incentives individuals have and strategies they may employ to reduce emissions, the book still provides valuable insights for the non-UK reader.
Workable Solutions
The last section of the book is divided into two chapters focusing on renewable energy use and canceling out emissions. The author’s energy analysis focuses on ways that domestic households can reduce their emissions through the use of alternative energy such as solar photovoltaics, wind turbines, heat pumps, solar hot water, biomass, and fuel cells. While detailing the basics of each alternative the author offers useful comparisons between their financial costs, returns, ease of implementation and carbon dioxide savings. Goodall closes the book with a fair analysis of ways to cancel out emissions, including green electricity, zero-emissions power generation, tree planting and ‘offsetting.’ He suggests the best way to cancel out one’s own emissions is to purchase ETS permits and retire them.
“How to Live a Low-Carbon Life” may be a beneficial tool for individuals not only in their personal lives but also in their professional lives. On a personal level, the book will introduce individuals to the myriad strategies for carbon reduction. The author notes that carbon reduction and energy saving is so easy that it is nearly addictive. Perhaps the individual will in turn learn how to practice voluntary self-restraint and waste avoidance. On a professional level, the book offers recommendations for how to communicate environmental messages. Based on research findings, Goodall deducts that the key to successful communication is to emphasize the behavior of others while giving the individual a clear idea of what not to do. This concept has been widely understood for some time, but Goodall notes that the consumer advertising industry has been slow to catch on. Such an understanding of environmental messaging provides an opportunity for organizations aiming to change human behavior or reshape carbon saving and self-restraint into fashionable values. This book will help interested professionals learn which behaviors are gaining momentum and which behaviors to strongly denounce.
The roots of this great social movement have already taken hold. Don’t let your carbon emissions run unchecked; join your responsible peers in saving the environment.
Talitha Haller is a Social Carbon Associate with the Ecolí³gica Institute, a Brazilian environmental NGO. She graduated from the Ross School of Business at the University of Michigan with a Master of Accounting and a BBA. She can be reached at [email protected].
The disability-adjusted life year (DALY) is a measure of overall disease burden developed by the World Health Organization. It adjusts the potential years of life lost due to premature death by adding a disability or poor health term. This combines mortality and morbidity. The formula is:DALY = YLL + YLD or “disability-adjusted life year = years of lost life + years lived with disability”
Poor countries that aim for top-notch water quality often end up with unmanageable water-quality schemes. A new book, “Wastewater Irrigation and Health: Assessing and Mitigating Risk in Low-income Countries”, aims to help policymakers balance high ideals with economic realities.
28 July 2010 | “The perfect is often the enemy of the good.”
If the appropriate technology movement had a tagline, that would probably be it. Designed specifically for low-resource settings and with appreciation for simplicity, low maintenance and ultra affordability, appropriate technology wastewater irrigation focuses on 80/20 solutions that are ‘good enough’ for the particular local ecological context to which they are applied.
The use of wastewater for the irrigation of crops is not a new technology; it has been around for millennia. In recent years, however, governments in low-income countries have tried, unsuccessfully, to control the use of wastewater for irrigation while implementing quality standards and levels of treatment that match those in developed nations. This sounds great in theory, but is wholly inappropriate for countries that typically suffer from issues such as extreme water shortage, waste management challenges, extreme population growth and limited availability of food.
The key drawback of the prevailing approach to wastewater irrigation is that it is a solution designed for environments where none of these issues are life-threatening and where the funding and political structures exist to implement comprehensive treatment solutions and planned uses of wastewater. This ignores the possibility that a greater good may be achieved in low resource settings by actively supporting treatment measures that are less than perfect, but are accessible to the majority and result in a tolerable additional disease burden.
The authors of Wastewater Irrigation and Health are described in the forward as exactly the group of pioneers that are set to change this approach, and they deliver a well-framed discussion involving both policy-makers and practitioners on how the risks presented by pathogens present in wastewater can be both managed and mitigated, creating a platform from which progress can be achieved through appropriately designed technology.
Setting the Stage
Part One of the book introduces the key drivers of wastewater irrigation as well as the core paradox to this discussion (namely, that while there are risks to using wastewater for agricultural irrigation, primarily associated with the consumption of uncooked vegetables, this is but one factor in a wider systemic problem).
Firstly, both water and nutrients are constrained resources in most low-income countries that are struggling to support ever-increasing populations. By ignoring the potential to close the water and nutrient loops, or by making it difficult for individual farmers to do so, governments are not only missing an opportunity to reclaim valuable resources from wastewater, but they are driving the practice underground and therefore failing to control it.
Secondly, the health risks presented by the practice of wastewater irrigation are difficult to ascertain exactly since poor sanitation and lack of access to clean drinking water create numerous exposures to pathogens such as E. Coli and Cryptosporidium. Rather than attempting to control the use of wastewater for irrigation, the authors recommend adopting resource reclamation practices (which could result in additional revenue streams if appropriate business models are identified) while also addressing wider educational gaps around sanitation, the food hygiene and the access to clean drinking water.
The Science Part
Part Two of the book centers on risk assessment and makes reference to the 2006 WHO Guidelines for the Safe Use of Wastewater, Excreta and Greywater, which introduces the concept of there being an increased disease burden, in terms of Disability Adjusted Life Years (see sidebar, right), that is tolerable as a result of the use of wastewater irrigation.
The authors go on to present further risk assessment tools and practices that can be used to identify packages of treatment activities that operate within this tolerance, followed in Part Three by discussion of the specific treatment measures that can be employed for the treatment of wastewater as well as non-treatment solutions such as extraction of biosolids and nutrient recovery.
Measures are well presented with data on both cost effectiveness and contribution to increased disease burden. It is also notable that throughout the presentation of these options for risk assessment and management a multiple barrier approach is suggested as preferable and that these are not end-state solutions, but serve to put communities on the path to the planned and controlled treatment and use of wastewater for irrigation along with the improvement in standards of safety that implies.
Implementation Challenges
While both the risk assessment and mitigation measures form the main body of the book, Part Four goes beyond the science and focuses on the governance and adoption challenges that arise from the implementation of these risk reduction strategies. The authors have correctly identified that there are significant behavioral and cultural issues at play with respect to this subject, and there are a large number of stakeholders that will need to be engaged if an administration is going to be successful in implementing solutions of this nature.
This holistic approach is evident in “Facilitating the Adoption of Food Safety Interventions in the Street Food Sector and on Farms”. Here the authors deal with how the success of innovations in wastewater management rely on cultural sensitivity and the understanding of ‘external behavior determinants’ when designing sanitation and hygiene interventions. For example, the authors cite a number of cases in Ghana where the public respond to messages that promote neatness, cleanliness and prestige with respect to food safety and sanitation interventions, and care less about the health benefits. Specifically in relation to street vendors, these business owners are driven not by their knowledge and education, but by the public perception of the cleanliness of the product they offer. Successful campaigns leverage these social pressures to promote the adoption of interventions rather than attempting to overcome them solely through programmatic approaches.
Closing the Loop
Overall, the editors have structured the flow of the material very logically and crucially have taken care to provide a solid foundation and taxonomy in the opening chapters that frames the remaining material. This lends an element of accessibility to what at times is very detailed coverage of epidemiology, statistical risk assessment and management methodology and some of the salient governance and behavior change challenges associated with public health and sanitation interventions. This book provides great insights into appropriate solution development for anyone interested in closed loop or cradle-to-cradle design and presents an approach for how to apply these concepts to a complex and culturally sensitive topic.
Colm Fay is a dual MBA/MS student at the University of Michigan’s Erb Institute for Global Sustainable Enterprise http://www.erb.umich.edu/ specializing in Environmental Policy and Planning, in particular market based approaches to conservation, land stewardship and poverty alleviation.
Please see our Reprint Guidelines for details on republishing our articles.
BP says it has managed to plug the runaway well that pumped untold millions of barrels of crude oil into the Gulf of Mexico, but that doesn’t help people living off the Gulf’s natural resources. WRI’s Stephen Posner and John Talberth examine the impact of oil on the Gulf’s most basic life forms.
BP’s massive oil spill jeopardizes the underpinning of economic wealth in the Gulf of Mexico region – the diverse coastal and marine ecosystems that generate a bounty of goods and services for communities from the Yucatan peninsula to Key West. Ecosystem services, or the benefits that humans receive from nature, form the backbone of the recreation, tourism, and fishing industries, enhance property values along the coast, sequester carbon dioxide and provide storm and hurricane protection. The Gulf’s ecosystems provide all of these services free of charge, but they are not without value, and the massive BP oil spill has now put many of those ecosystems in great jeopardy.
Ecosystem Services and Economic Impact
A recently-released study by Earth Economics(PDF) estimates that the Mississippi Delta’s ecological communities currently generate up to $13,000 per acre in ecosystem services each year. Over the next hundred years, this estimate, for just the Mississippi Delta region, translates into a present value of $330 billion to $1.3 trillion, the wide range owing to uncertainties about the value of ecosystem services over that time period. Exposure to residual oil over the course of decades will diminish the value of ecosystem services generated by marshes, wetlands, and coastal waters in the spill’s path.
The loss of ecosystem service values from the BP spill will be felt in both the short and long term, both onshore and offshore. In the short term, for example, the CoStar Group predicts that the spill may drive down shore-area property value in the Gulf by ten percent over at least three years – a $4.3 billion loss. The spill’s effects on other services will endure for much longer. According to the Exxon Valdez Oil Spill Trustee Council, ecosystem services affected by that disaster are still recovering twenty years later(PDF). Using Earth Economics figures, a twenty percent reduction in ecosystem service values along the Gulf coast from the Louisiana-Texas border to St. George Island, Florida would equate to $15 to $60 billion in economic damages over a similar, twenty-year period, not counting losses to those directly affected by spill related closures in the short term.
Primary Production and the Oil Spill
Perhaps the most pernicious impact of the spill, according to Dr. Thomas Shirley of Texas A&M, may occur offshore, affecting what is known as primary production. In the Gulf and other ocean basins, primary production is the very basis for the marine food chain. It is the process by which organisms turn carbon dioxide into organic compounds, mostly through photosynthesis. Coral reefs, sea grasses and algae are the most visible primary producers in coastal zones, but most oceanic primary production comes from microscopic planktonic algae, or “phytoplankton.” The Millennium Ecosystem Assessment identified primary production as one of the most important “supporting” ecosystem services.
In the Gulf, primary production—measured in milligrams carbon per square meter per day – ranges from near zero to 7,300 near the Mississippi Delta at its peak in June and July. The annual average is 417 for the Gulf marine ecosystem as a whole. Tragically, the oil spill, which currently covers over 38,000 square kilometers lies almost directly across the area of highest primary productivity at the time of its monthly maximum.
What effect could a severe decrease in primary production have on the Gulf? Newly published research indicates that each one percent increase in primary productivity corresponds to a 1.3 percent increase in the fishery catch. The dockside value of fish brought in from the Gulf is approximately $997 million per year. If we assume that this value can be distributed according to primary production levels, each square kilometer currently under the spill can be thought of as generating $3,261 in annual commercial fisheries value. A twenty percent loss of this ecosystem service value over a twenty year period would imply a present value loss on the order of $350 million, or $875 million if loss of value is closer to 50%, which is the upper end of the range considered in the Earth Economics study. This simple calculation doesn’t account for the loss of jobs, income, and tax revenues when the catch is processed inland. Nonetheless, it is suggestive of ecosystem service damages at sea that are significant and long-lived,
Including Ecosystem Services in Risk Assessments
Decision-makers considering offshore leases must be cognizant of the potential economic damages associated with low probability/high impact events such as the Deepwater Horizon spill. Risk assessment needs to be comprehensive in nature, capturing potential impacts to coastal, nearshore, and offshore marine ecosystems from both a market and non-market perspective. This requires quantification of ecosystem service values and potential damages. Presently, the expected value of these natural resource damages is not included in the various economic analyses conducted by public agencies managing offshore oil and gas programs. Until this happens, our society will continue to undervalue ecosystem services and take on an unacceptable level of risk in pursuit of energy resources.
Stephen Posner works with the People and Ecosystems Program conducting ecosystem service valuation studies for business. He is currently in a PhD program in engineering and environmental sciences at Dartmouth.
John Talberth serves as WRI Senior Economist with the People and Ecosystem Program, providing economic analysis for its Southern Forests for the Future (SFF), Mainstreaming Ecosystem Services (MES), and Chesapeake Bay projects. He can be reached at [email protected].
BP says it has managed to plug the runaway well that pumped untold millions of barrels of crude oil into the Gulf of Mexico, but that doesn’t help people living off the Gulf’s natural resources. WRI’s Stephen Posner and John Talberth examine the impact of oil on the Gulf’s most basic life forms and the challenge of assessing its economic value.
13 July 2010 | BP’s massive oil spill jeopardizes the underpinning of economic wealth in the Gulf of Mexico region – the diverse coastal and marine ecosystems that generate a bounty of goods and services for communities from the Yucatan peninsula to Key West. Ecosystem services, or the benefits that humans receive from nature, form the backbone of the recreation, tourism, and fishing industries, enhance property values along the coast, sequester carbon dioxide and provide storm and hurricane protection. The Gulf’s ecosystems provide all of these services free of charge, but they are not without value, and the massive BP oil spill has now put many of those ecosystems in great jeopardy.
Ecosystem Services and Economic Impact
A recently-released study by Earth Economics(PDF) estimates that the Mississippi Delta’s ecological communities currently generate up to $13,000 per acre in ecosystem services each year. Over the next hundred years, this estimate, for just the Mississippi Delta region, translates into a present value of $330 billion to $1.3 trillion, the wide range owing to uncertainties about the value of ecosystem services over that time period. Exposure to residual oil over the course of decades will diminish the value of ecosystem services generated by marshes, wetlands, and coastal waters in the spill’s path.
The loss of ecosystem service values from the BP spill will be felt in both the short and long term, both onshore and offshore. In the short term, for example, the CoStar Group predicts that the spill may drive down shore-area property value in the Gulf by ten percent over at least three years – a $4.3 billion loss. The spill’s effects on other services will endure for much longer. According to the Exxon Valdez Oil Spill Trustee Council, ecosystem services affected by that disaster are still recovering twenty years later(PDF). Using Earth Economics figures, a twenty percent reduction in ecosystem service values along the Gulf coast from the Louisiana-Texas border to St. George Island, Florida would equate to $15 to $60 billion in economic damages over a similar, twenty-year period, not counting losses to those directly affected by spill related closures in the short term.
Primary Production and the Oil Spill
Perhaps the most pernicious impact of the spill, according to Dr. Thomas Shirley of Texas A&M, may occur offshore, affecting what is known as primary production. In the Gulf and other ocean basins, primary production is the very basis for the marine food chain. It is the process by which organisms turn carbon dioxide into organic compounds, mostly through photosynthesis. Coral reefs, sea grasses and algae are the most visible primary producers in coastal zones, but most oceanic primary production comes from microscopic planktonic algae, or “phytoplankton.” The Millennium Ecosystem Assessment identified primary production as one of the most important “supporting” ecosystem services.
In the Gulf, primary production—measured in milligrams carbon per square meter per day – ranges from near zero to 7,300 near the Mississippi Delta at its peak in June and July. The annual average is 417 for the Gulf marine ecosystem as a whole. Tragically, the oil spill, which currently covers over 38,000 square kilometers lies almost directly across the area of highest primary productivity at the time of its monthly maximum.
What effect could a severe decrease in primary production have on the Gulf? Newly published research indicates that each one percent increase in primary productivity corresponds to a 1.3 percent increase in the fishery catch. The dockside value of fish brought in from the Gulf is approximately $997 million per year. If we assume that this value can be distributed according to primary production levels, each square kilometer currently under the spill can be thought of as generating $3,261 in annual commercial fisheries value. A twenty percent loss of this ecosystem service value over a twenty year period would imply a present value loss on the order of $350 million, or $875 million if loss of value is closer to 50%, which is the upper end of the range considered in the Earth Economics study. This simple calculation doesn’t account for the loss of jobs, income, and tax revenues when the catch is processed inland. Nonetheless, it is suggestive of ecosystem service damages at sea that are significant and long-lived,
Including Ecosystem Services in Risk Assessments
Decision-makers considering offshore leases must be cognizant of the potential economic damages associated with low probability/high impact events such as the Deepwater Horizon spill. Risk assessment needs to be comprehensive in nature, capturing potential impacts to coastal, nearshore, and offshore marine ecosystems from both a market and non-market perspective. This requires quantification of ecosystem service values and potential damages. Presently, the expected value of these natural resource damages is not included in the various economic analyses conducted by public agencies managing offshore oil and gas programs. Until this happens, our society will continue to undervalue ecosystem services and take on an unacceptable level of risk in pursuit of energy resources.
Stephen Posner works with the People and Ecosystems Program conducting ecosystem service valuation studies for business. He is currently in a PhD program in engineering and environmental sciences at Dartmouth.
John Talberth serves as WRI Senior Economist with the People and Ecosystem Program, providing economic analysis for its Southern Forests for the Future (SFF), Mainstreaming Ecosystem Services (MES), and Chesapeake Bay projects. He can be reached at [email protected].
The disability-adjusted life year (DALY) is a measure of overall disease burden developed by the World Health Organization. It adjusts the potential years of life lost due to premature death by adding a disability or poor health term. This combines mortality and morbidity. The formula is:DALY = YLL + YLD or “disability-adjusted life year = years of lost life + years lived with disability”
Poor countries that aim for top-notch water quality often end up with unmanageable water-quality schemes. A new book, “Wastewater Irrigation and Health: Assessing and Mitigating Risk in Low-income Countries”, aims to help policymakers balance high ideals with economic realities.
28 July 2010 | “The perfect is often the enemy of the good.”
If the appropriate technology movement had a tagline, that would probably be it. Designed specifically for low-resource settings and with appreciation for simplicity, low maintenance and ultra affordability, appropriate technology wastewater irrigation focuses on 80/20 solutions that are ‘good enough’ for the particular local ecological context to which they are applied.
The use of wastewater for the irrigation of crops is not a new technology; it has been around for millennia. In recent years, however, governments in low-income countries have tried, unsuccessfully, to control the use of wastewater for irrigation while implementing quality standards and levels of treatment that match those in developed nations. This sounds great in theory, but is wholly inappropriate for countries that typically suffer from issues such as extreme water shortage, waste management challenges, extreme population growth and limited availability of food.
The key drawback of the prevailing approach to wastewater irrigation is that it is a solution designed for environments where none of these issues are life-threatening and where the funding and political structures exist to implement comprehensive treatment solutions and planned uses of wastewater. This ignores the possibility that a greater good may be achieved in low resource settings by actively supporting treatment measures that are less than perfect, but are accessible to the majority and result in a tolerable additional disease burden.
The authors of Wastewater Irrigation and Health are described in the forward as exactly the group of pioneers that are set to change this approach, and they deliver a well-framed discussion involving both policy-makers and practitioners on how the risks presented by pathogens present in wastewater can be both managed and mitigated, creating a platform from which progress can be achieved through appropriately designed technology.
Setting the Stage
Part One of the book introduces the key drivers of wastewater irrigation as well as the core paradox to this discussion (namely, that while there are risks to using wastewater for agricultural irrigation, primarily associated with the consumption of uncooked vegetables, this is but one factor in a wider systemic problem).
Firstly, both water and nutrients are constrained resources in most low-income countries that are struggling to support ever-increasing populations. By ignoring the potential to close the water and nutrient loops, or by making it difficult for individual farmers to do so, governments are not only missing an opportunity to reclaim valuable resources from wastewater, but they are driving the practice underground and therefore failing to control it.
Secondly, the health risks presented by the practice of wastewater irrigation are difficult to ascertain exactly since poor sanitation and lack of access to clean drinking water create numerous exposures to pathogens such as E. Coli and Cryptosporidium. Rather than attempting to control the use of wastewater for irrigation, the authors recommend adopting resource reclamation practices (which could result in additional revenue streams if appropriate business models are identified) while also addressing wider educational gaps around sanitation, the food hygiene and the access to clean drinking water.
The Science Part
Part Two of the book centers on risk assessment and makes reference to the 2006 WHO Guidelines for the Safe Use of Wastewater, Excreta and Greywater, which introduces the concept of there being an increased disease burden, in terms of Disability Adjusted Life Years (see sidebar, right), that is tolerable as a result of the use of wastewater irrigation.
The authors go on to present further risk assessment tools and practices that can be used to identify packages of treatment activities that operate within this tolerance, followed in Part Three by discussion of the specific treatment measures that can be employed for the treatment of wastewater as well as non-treatment solutions such as extraction of biosolids and nutrient recovery.
Measures are well presented with data on both cost effectiveness and contribution to increased disease burden. It is also notable that throughout the presentation of these options for risk assessment and management a multiple barrier approach is suggested as preferable and that these are not end-state solutions, but serve to put communities on the path to the planned and controlled treatment and use of wastewater for irrigation along with the improvement in standards of safety that implies.
Implementation Challenges
While both the risk assessment and mitigation measures form the main body of the book, Part Four goes beyond the science and focuses on the governance and adoption challenges that arise from the implementation of these risk reduction strategies. The authors have correctly identified that there are significant behavioral and cultural issues at play with respect to this subject, and there are a large number of stakeholders that will need to be engaged if an administration is going to be successful in implementing solutions of this nature.
This holistic approach is evident in “Facilitating the Adoption of Food Safety Interventions in the Street Food Sector and on Farms”. Here the authors deal with how the success of innovations in wastewater management rely on cultural sensitivity and the understanding of ‘external behavior determinants’ when designing sanitation and hygiene interventions. For example, the authors cite a number of cases in Ghana where the public respond to messages that promote neatness, cleanliness and prestige with respect to food safety and sanitation interventions, and care less about the health benefits. Specifically in relation to street vendors, these business owners are driven not by their knowledge and education, but by the public perception of the cleanliness of the product they offer. Successful campaigns leverage these social pressures to promote the adoption of interventions rather than attempting to overcome them solely through programmatic approaches.
Closing the Loop
Overall, the editors have structured the flow of the material very logically and crucially have taken care to provide a solid foundation and taxonomy in the opening chapters that frames the remaining material. This lends an element of accessibility to what at times is very detailed coverage of epidemiology, statistical risk assessment and management methodology and some of the salient governance and behavior change challenges associated with public health and sanitation interventions. This book provides great insights into appropriate solution development for anyone interested in closed loop or cradle-to-cradle design and presents an approach for how to apply these concepts to a complex and culturally sensitive topic.
Colm Fay is a dual MBA/MS student at the University of Michigan’s Erb Institute for Global Sustainable Enterprise http://www.erb.umich.edu/ specializing in Environmental Policy and Planning, in particular market based approaches to conservation, land stewardship and poverty alleviation.
Please see our Reprint Guidelines for details on republishing our articles.
As international policy frameworks and pledges of billions of dollars move REDD+ forward, many observers remain concerned over how to ensure the lofty promises being made for global forest conservation will actually provide broader social and environmental benefits. The issue of safeguards took center stage this week in Washington, DC through a day-long forum of REDD+ policymakers, practitioners, and observers.
24 June 2010 | Follow the story on the eko-eco blog.
Long before the Deepwater Horizon catastrophe, the Obama Administration launched its Ocean Policy Task Force, which immediately began criticizing US ocean policy and offering an entirely new approach to federal resource planning for oceans, coasts, and the Great Lakes. Tundi Agardy says there’s no bright side to the Deepwater disaster, but the Task Force offers light at the end of the tunnel.
16 June 2010 | Much will be written about the dark side of the Deepwater Horizon oil spill: the many contributing causes and sources of failure, the curious absence of contingency planning, the wisdom (or not) of industry self-certification, the lack of transparency on the part of BP, the lack of integrity on the part of the Minerals Management Service (MMS), the possible toxicity of the dispersants, and the seemingly endless toll all this has had on marine life, and human life too. But although this is a terrible tragedy, there are reasons to think there is a flip side to this disaster — as a wake-up call that may actually pave the way toward EBM in the US, and in other countries that look to the US as an example or for guidance and support.
Searching for the silver lining in a disaster of this magnitude is more than wishful thinking that some good can come of all evils. The lack of strategic and intelligent planning that the oil spill highlights is easily remedied, and if there were ever a clearer reason for marine spatial planning (MSP), I cannot think of one. From here forward, we need to think very carefully in terms of what is appropriate where, and model the worst-case scenarios arising out of all intensive uses of the ocean, so we can make the best possible choices. MSP with ocean zoning may well be the best avenue to making those informed choices. And the foundation for MSP exists, thanks to a policy course set long before the pressure in the wellhead began its fateful rise.
Almost immediately after assuming office, the Obama Administration established an Ocean Policy Task Force to look at a suite of marine management challenges, including potentially conflicting uses such as energy and fisheries. In part this was in recognition of the highly fragmented nature of US ocean policy: the nation’s complex marine governance structure at that point involved 20 federal agencies (the MMS among them) and approximately 140 ocean-related laws.
The interim policy that was released by the Task Force late in 2009 embodied an entirely new approach to federal resource planning for oceans, coasts, and the Great Lakes: the federal government working with states, tribes, local governments, and communities to decrease conflicts among competing users. It recommended the formation of a National Ocean Council to track oceans’ condition and work with the White House to develop more effective marine management. The process was intended to improve planning and regulatory efficiencies, decrease their associated costs and delays, and preserve critical ecosystem function and services. However, implementing the policy has stalled, thanks to other complicated issues that took center stage.
There is much potential for breathing new life into the policy, to have ocean policy take center stage, and to have the Administration embrace ocean zoning as a useful tool to effectively and efficiently deal with the spate of potentially conflicting (and some highly damaging) uses of ocean space and resources.
Using zoning in an integrated approach to management will allow decision makers to understand and quantify the trade-offs to be made with coastal development, environmental degradation, and resource exploitation. Zoning plans and the permitting procedures will help avoid development that is potentially environmentally devastating.
Perhaps understandably, BP has been made the scapegoat in the Deepwater Horizon fiasco, even though it was fully permitted to do what it was doing, and like a good business should, capitalized on a seemingly insatiable demand in the American public (cheap energy at any cost). But the federal government would do well to concentrate its efforts now on preventing future disasters by using the best available science to determine what uses, and risks, are acceptable where — throughout our valuable and vulnerable ocean realm.
Tundi Spring Agardy is Director of the Forest Trends Marine Ecosystem Services (MARES) Program and an internationally renowned expert in marine conservation, with extensive field and policy experience in Africa, Asia, the Caribbean, the Mediterranean, North America, and the Pacific. Tundi specializes in coastal planning and assessment, marine protected areas, fisheries management and ocean zoning, and has published widely in these fields. She has served as Senior Scientist for WWF and began Conservation International’s Global Marine Program. She also led the coastal portion of the Millennium Ecosystem Assessment and is a contributing editor to the Marine Ecosystems and Management (MEAM) newsletter, in which this first appeared. She can be reached at tagardy(at)forest-trends.org.
Please see our Reprint Guidelines for details on republishing our articles.
The American Power Act of 2010 is out of the shadows, and some provisions make it possible to earn carbon credits for reducing greenhouse gasses by capturing carbon in trees. But that often involves paying for something today that won’t be delivered for decades. How can the insurance industry engage the forest carbon offset asset market so as to deliver an offset asset that is real, measurable and verifiable as well as secured, insured and preferred?
14 May 2010 | No participants in the forest carbon offset asset market are insured, as of today. Yet better management of forest carbon offset assets requires market participants to be properly insured, as they would be in any other renewable energy project finance deal or other project finance deal, with both property and liability insurance.
The US Forest Service defines real, measurable, verifiable, and additional, as terms commonly used to confirm the validity and legitimacy of forest-based carbon dioxide offsets.
Real indicates that a reduction in GHG emission has taken place.
Measurable indicates that a GHG emission offset can be quantified repeatedly using the same methodology.
Verifiable indicates that the GHG emission offset can be registered and tracked.
Additional indicates that GHG emission offset represents a scenario or action that is above and beyond what would have typically happened in a business as usual scenario.
Adding the words insured, secured and preferred designates the means to which the forest carbon credit project developer has taken to ensure meeting corporate due diligence expectations. Corporate due diligence methods expect market participants to be properly insured. Many participants in the industrial gas carbon markets are insured, while no participants in the forest carbon offset asset market are insured. This may disclose partly why in 2009, market transactions in the global industrial gas carbon market were US$ 136 billion in 2009, compared to transactions in the forest carbon offset asset market which were roughly US$30 million. By engaging in the insurance market, the forest carbon market can move towards financial risk management best practices.
Insured indicates adequate commercial insurance policies such as errors and omissions, directors and officers, environmental impairment, general liability, property/forest and non-delivery of carbon credits or equivalent risk transfer methods have been instituted to warranty permanence of issued forest carbon credit.
Secured indicates all reasonable methods used in proactively protecting the integrity of the certified forest carbon credit. Methods to include definitive actions required to alleviate potential frivolous or legitimate legal exposures throughout the project design, registry listing, verification, certification and potential reversal stages.
Preferred indicates that all steps have been implemented to meet the “real, measurable, verifiable, additional, insurable and secured standards as defined above. The basis of preferred is design and implement standards that would be recognized and accepted as meeting specific financial guidelines designated by an internationally recognized rating bureau such as Standard & Poor’s and others.
The forest carbon offset standards in the voluntary carbon markets, as they exist today, will require necessary safeguards currently used in traditional business methods. The safeguards include the engagement of proper due diligence including contract reviews, risk management, insurance, and forensic accounting, such as those used in renewable energy project financing. The adoption of a structure integrating stringent policies and procedures will drastically reduce the exposure to potential errors or omissions.
For example, an error or omission, which is a mistake in either the financing, the calculation of the carbon credits, or the integration of the co-benefits of maintaining or enhancing biodiversity and providing sustainable economic opportunities for local communities, which causes financial harm to another individual or organization, can occur on almost any public sector or private sector transaction in the forest carbon offset asset market. Therefore, errors and omissions insurance helps to protect a professional, an individual or a company, from bearing the full cost of defense for lawsuits relating to an error or omission in providing covered professional services while providing opportunities to remedy the impact of these risks within the local communities. This is a separate coverage from a standard general liability or property insurance policy. This structure will need to address issues related to insured, secured, and preferred.
The emergence of the forest carbon offset market, which derives carbon credits from forest related activities, has been touted as a major component in global warming mitigation. Yet, market participants in the forest carbon offset asset market do not engage in financial risk management. It is like giving the keys to your car to your 16 year-old son, while not requiring him to be insured. Is this wise? Some might suggest not.
For example, some of the questions you need to ask yourselves, when purchasing forest carbon offsets are:
How secure is the viability of the credits purchased?
Is there a lien on the title of the land that secures the permanence of the forest carbon offset asset in the case of property transfer?
How can insurance premiums be expensed?
Has there been extensive due-diligence performed, prior to selection, of these forest carbon offsets?
Would these steps taken to ensure credible offsets meet the fiduciary responsibility of your shareholders, customers, community, public sector, civil society, or vendor partnerships and relationships?
There are solutions to the above concerns, which would provide the financial and structural integrity of the forest generated carbon credit. The use of specifically designed insurance techniques and products offer the ability to withstand legal and financial scrutiny.
Potential Exposures and Recommended solutions
While the forest carbon market has gone through a number of metamorphoses throughout its growth, it is important to analyze the fundamental structuring of the registries and buffer pool solutions. The analysis must recognize and label all areas where systems need to be put in place to eliminate any potential areas, which could be construed as misinterpretation or misrepresentation in a U.S. Court of Law.
The carbon registries are dependent upon web-based programs to facilitate the mechanics of the registry administration. Because these registries are typically non-profit organizations, they do not reserve a specific fund for unforeseen expenses including, but not limited to, project dispute issues, frivolous lawsuit defense costs, and/or potential bad faith issues pertaining to administration of self insured carbon credit program (buffer pool).
In order to eliminate potential exposures, the registry should require proof of errors and omissions insurance from all participating contractors and service providers. The inclusion of this requirement will allow any project issues pertaining to an error or omission be directed to the responsible parties, thus minimizing the registries involvement.
Non-profit directors and officers liability insurance protects the board and its members against lawsuits. The board has a fiduciary responsibility to their funding, grant providers, and non-profit mission. By procuring this type of insurance, the board is protecting the organization against potential lawsuits and defense costs, which would otherwise erode their operating funds.
The inclusion of a buffer pool into the internal structure of the registry will require professionals proficient in administering all reversal (claims) processing. .Currently, the registries are relying on verifiers to provide any loss adjusting duties. The fact that registries are acting as insurance faciliator for their designated buffer pools, opens them up to exposures typically experienced by insurance companies. In order to properly protect themselves, the registries will need to procure specific insurance coverages designed for program facilitators. They will need their own errors and omissions policy, directors and officers’ liability, and some form of buffer pool reinsurance.
It is strongly recommended that the registries transfer the administration of the buffer pool to a third party financially solvent in perpetuity. This would remove potential liability issues pertaining to the duties of determining cause of loss, claim settlement, claim disputes, recourse pertaining to intentional reversals, and other related liabilities.
The buffer pool is an area where insurance plays an instrumental role in valuing the forest generated carbon credit. The initial buffer pool structures were designed to provide a mechanism to replace forest carbon credits if there was a reduction in the certified metric cubic tons caused by an unintentional act. The models are based on a shared risk approach, where all participating forest projects are required to contribute a designated percentage of certified credits at time of issuance. At the time of these designs, there were no insurance programs available that would entertain insuring the forest for the time frame required by the registries. Now, insurance mechanisms are available that allow project owners to be rewarded for their management expertise regarding their project’s risk and return profiles.
Projects currently are not required to undergo an appropriate financial audit industry on a periodic basis. Therefore, it is challenging to understand whether projects which are forward looking have the capacity to meet their forward financial cash flows.
Concerns Pertaining to Registry Administered Buffer Pools
Carbon credit project rating structure of contributions is not based on specific actuarial and historical risk data. Each specific geographic area is subject to different natural exposures. The credit rating make up of each project has a variety of complexities, which need to analyze on a location-by-location basis.
Social and environmental issues would be protected by use of specific legal documents, which would not affect the rate of contribution.
The structured policy wording of the registries leaves tremendous room for interpretation. They would not stand up in a U.S. court as a legal and binding contract. Furthermore, given that many projects engage funding and transfer of carbon tons across sovereigns, interpretation of structured policy wording across these barriers would also be challenged.
In each buffer design, the wording leaves room for moral hazards which are the ability for intentional acts to be performed for the projects owner’s personal gain without reasonable recourse.
The integrity of the carbon measurement is diminished by the registries own power of determining the project owner’s reasonable expectations in case of a reversal.
The registry administered buffer pools need to be audited by an appropriate financial audit industry representative on a periodic basis.
There are strategies which combine traditional insurance with self-insured structures to meet the required sequestration time frames. The design and implementation is based on combining insurance knowledge and experience with analysis of the current registries looking at U.S. forest projects.
How Would a Revised Permanence Strategy Differ from Current Buffer Pool Designs?
The basis of these new insurance programs could use A.M. Best Financial Strength Ratings which allows for insurance companies to be rated so as to enhance stakeholders confidence in the stability of the insurer. These programs would allow alternatives to the current buffer pool design to be integrated into the registries and standards methodologies and data systems, providing the ability for full transparency for all stakeholders.
The current web based submission and listing process could be refined to take full advantage of data supplied by each listing project. For example, mechanically, all required information will be entered into definitive fields. This data will allow the registry the ability to run various reports such as concentration of demographics, physical data per region, historical loss history and allometric measurements. Initial risk rating capabilities would be integrated in process to “pre-underwrite” each project. This structured process leaves less room for misinterpretation and misrepresentation and confusion.
This required information would require legal attestation and signature by all project owners and by all project managers. This would add in important issues such as representation, legal dispute resolutions. All information collated would provide a foundation for a historical database to be used by and for the benefit of registries, insurance facilitators, project owners, investors, civil society, and impacted communities and other stakeholders.
To move forward, risks would need to be rated, as they are in a project finance scenario. In this case, the process for determining premium or credit contribution is based on a number of factors, including but not limited to:
Geographic location;
Species – types, ages, diameter-at-breast-height (DBH), basal area, stumpage values, thousand board feet (MBF), mean annual increment, or biomass;
Natural hazard exposures such as ice, wind, fire exposure, disease, or infestation;
Human potential hazards such as community risk, arson, debris collection, debris burning, and trespass;
Previous losses due to hazards listed;
FSC / PEFC / or other certification – if warranted; and
Protective measures such as fire district information, county preventive standards, project’s land management and fire management procedures, steps to minimize human caused exposures, conservation easements, and other measures.
Separate Administration Structures
The importance of separating the administration of a permanence solution from the certifying registry is essential to providing a truly viable process. This alleviates the registry from potential conflict of interest issues. It meets Board of Director’s fiduciary responsibility regarding safeguarding integrity of registry by removing all potential liabilities connected with the administration of an insurance type structure. This includes claims handling, disputes resolution and policing project owners and managers. Finally, it provides increased confidence to both project owners and carbon credit purchasers because administration would be required to provide proof of errors and omissions coverage, for example.
Respecting particular insurance designs strategies, some of the benefits are that by providing a secure program, registries’ exposure to facilitating an insurance type program is eliminated. Furthermore, it structures the entire process of the forest carbon offset registry to minimize any potential gains for omissions or errors. Transparency in design contributes to a registry’s methodology and potential revisions. Because now there would exist a historical database, this would provide accuracy for forest carbon offset asset buyers’ and stakeholders’ due diligence requirements. A financially backed insurance program would increase investor confidence in credits decrease business risk of the registry. By providing a professional claims handling program, reversal processing and conflict resolution would be available for all stakeholders.
Finally, the focus provided by a structured forest carbon offset asset insurance program enables compliance and regulatory adoption while meeting corporate and SEC standards for governance, allowing for financially secured credits to receive financial rating by Standards and Poor’s, Moody’s, Fitch and others, resulting in increased institutional investment due to minimal risk and increased timberlands, community forests, and forest smallholder participation.
In conclusion, the forest carbon credit process has made tremendous advances in the last two years. In order to protect the integrity of the programs, there needs to be an infusion of business and insurance principles in how one conducts the business process of developing a forest carbon offset asset business, marketing program, standard setting, registry, and sales. We have identified the potential exposures and design solutions to eliminate those issues. The implementation of a proactive structure will attract the larger investment community.
Last year the global credit market was US$ 83 trillion while the global forest carbon market was roughly US$ 30 million. The global credit market engages various insurance mechanisms while the global forest carbon market, as of today, does not.
Gabriel Thoumi is a consultant at Forest Carbon Offsets, LLC and a Lecturer at the Ross School of Business at the University of Michigan teaching Strategy 739: Impact Investing.
Augustus (Gus) Kent is president of CO2RS, LLC., which was formed to provide insurance solutions for the carbon offset market. Gus has 22 years of commercial insurance experience, focusing in the environmental, professional, alternative and high-risk disciplines. He has been working with insurance carriers, who will offer coverages specific to those participating in carbon credit and offset areas. He can be reached at [email protected] or (503) 794-1000.
Last week was a big one for environmental politics. US President Barack Obama approved new offshore oil and gas drilling for the first time in decades – in part, mostly likely, as a concession to congressional opponents of a larger climate bill. Then, Obama limited car exhaust under a new tailpipe rule. Such legislation will factor in the social cost of carbon, but the current means of determining that are woefully inadequate. 2 April 2010 | The social cost of carbon (SCC) may be the most important number you’ve never heard of.
It’s important because it’s a number that many governments – including that of the United States – use to determine the true cost we all pay for every ton of carbon emitted into the atmosphere. That means it’s the foundation upon which arguments in favor of effective climate-change legislation are built.
Over the next few months, the US Environmental Protection Agency, the Department of Energy, and others are going to be assigning SCC values as part of “rulemaking” processes that are couched in very technical terminology and largely invisible to the general public.
In theory, it’s possible to derive the SCC from economic analysis, and the administration appears to have done so. In reality, it’s not so simple: Any estimate of the SCC rests on a number of value judgments and predictions about uncertain future events, and the administration has so far made choices that lead to very low SCC values.
The Definition
The SCC is defined as the estimated price of the damages caused by each additional ton of carbon dioxide (CO2) released into the atmosphere. You can look at it as the volume dial on government regulations affecting greenhouse gases: The higher the SCC is set, the more stringent the regulatory standards.
We have recently published a white paper that explains how economists estimate the social cost of carbon, and why we believe the Obama Administration’s current analyses are on a path to grossly underestimating it. We believe that relying on the SCC in the first place may be unproductive.
The Scenarios
In an interim (and then a revised) analysis, an interagency working group has presented multiple scenarios and possible values for the SCC. The interim analysis suggests (and the revised analysis explicitly endorses) a “central” estimate of $21 per ton of CO2 in 2010. This amounts to roughly 20 cents per gallon of gasoline – an extremely modest price incentive for carbon reduction.
If adopted, this obscure number will have immense practical consequences: A low SCC could result in ineffectual regulations that lead to few if any reductions in U.S. emissions until Congress passes a climate bill.
Even greater harm could result if Congress interprets the $21 SCC as an endorsement of that level for a carbon tax or permit price. This could clash with the widely-discussed, science-based goal of achieving an 80 percent reduction in US emissions by 2050 – an objective that will almost certainly require a much higher price on carbon. In the revised analysis, the central SCC estimate rises only to $45 per ton (in 2007 dollars) by 2050.
If climate economics is (mistakenly, in our view) interpreted as supporting an SCC of only $21 today and $45 by mid-century, it could also be interpreted as advocating only the emission reductions that would result from those prices.
That is, working backwards from the proposed SCC, one could infer that the appropriate cap on carbon emissions is much weaker than those found in recent legislative proposals.
The resolution to this paradox is that, as we argue in this paper, the $21 SCC is based on flimsy analyses and multiple mistakes. Sound economic analysis would show that the SCC should be much higher, and thus could be consistent with the carbon prices required to achieve science-based targets for emission reduction.
Calculating the SCC is a new undertaking for the administration, and these initial estimates may represent work in progress rather than a final answer. In its first attempts, however, the administration’s interagency working group has left itself plenty of room for improvement.
Frank Ackerman is a senior economist and director of the Climate Economics Group at the Stockholm Environment Institute US Center, an independent research affiliate of Tufts University in Medford, Mass. He is former director of research and public policy at the Global Development and Environment Institute, Tufts University.
Elizabeth Stanton is also an economist with the Stockholm Environment Institute US Center and a research fellow focusing on environmental economics at the Global Development and Environment Institute.
The new edition of 2004’s Atlas of Water seeks to provide a high-level yet easily-accessible introduction to the wide variety of political, economic and environmental pressures and constraints that exist in the global management of water resources for personal, agricultural and industrial use. Colm Fay and Gabriel Thoumi say they have only partially succeeded.
29 March 2010 | The recently-updated Atlas of Water (University of California Press/Earthscan, 2009) employs a data-centric approach to describing the global water crisis. The authors cover a wide range of topics under six broad themes: specifically, water as a finite resource, environmental pressures on this resource, human pressures, economic and industrial pressures, pollution and the future of water management.
We admire the attempt to deal with such a wide swath of issues in such a small volume, but this breadth, combined with a fairly rigid and restrictive format, leaves the effort somewhere between a beginner’s introduction to these issues and a reference volume. It is, in the end, neither accessible enough to be of use to a general-interest reader, nor comprehensive enough to be the go-to reference we had hoped to find.
The Target: Simplicity
Within each of the themes, the authors break the material into sub-topics, each of which is each dealt with in a two-page format. In these two pages, they attempt to offer both an introduction to the issue being covered and a map of how the issue is distributed globally. In addition, the pages are peppered with interesting facts that give more insights and useful statistics.
This ‘template’ is designed to make the atlas a handy reference work, and we can only applaud any effort to make such a complex body of knowledge accessible. Unfortunately, but we feel that the format is too rigid to deal with diverse topics that vary from ‘Climate Change’ to the ‘Millennium Development Goals’, where the balance of introduction and data seems to do neither element justice.
The Perils of Oversimplification
For example, when presenting a global map of water shortages, the format doesn’t allow for granularity any more detailed than differentiations at national level. This obscures the reality that the distribution of water even within national borders is inequitable both in terms of socio-economic and geographic distribution. The authors do address this to some extent by pointing out specific exceptions such as Brazil, where the unpopulated Amazon receives nearly 75% of the country’s water and the coastal regions housing 20% of the population only receives 2% of the water.
While the scope of issues covered by the book is impressive, by treating each of these issues separately and in isolation, the authors fail to convey the true interconnectedness of water management and the systemic nature of these issues and their remedies.
What’s Missing: Drivers and Correlation
Water is, by its nature, a transnational resource. Consequently, the legal and political issues surrounding water sources that are shared between and indeed within countries are complex.
Again, this is somewhat a restriction of the format but it would be interesting to see maps depicting geography, resource intensity, and politics overlaid with each other to help the reader understand the links between water shortages and conflict, or pollution and water use for industry or agriculture.
Highlighting some of these correlations would have lifted the title up a level and would really have maximized the use of the atlas medium to communicate these concepts.
Missed Opportunities
The book touches on some interesting topics that specifically lend themselves to the highly visual medium that such overlays provide, such as ‘water footprint’ and the concept of ‘virtual water footprint’. The authors could have used the opportunity to help the reader visualize some of the more abstract concepts in this space – such as the virtual export of water from water-scarce regions to water rich regions. Again, this systemic approach would have yielded some interesting insights for the reader beyond the headline statistics.
While there is a lot of data presented, as one would expect from a volume describing itself as an atlas, there are points where the depth of information seems inadequate for the topic under discussion. While references are provided at the end of the book, no individual pieces of data can be directly related to a referenced publication, which limits the usefulness of this publication as a guide to data sources and research.
The Challenge of Serving Two Masters
In summary, The Atlas of Waterprovides a comprehensive overview of the water crisis and the multitude of diverse issues, but suffers from trying to balance an unfeasibly wide scope with an unfeasibly restrictive format for what the authors are trying to achieve.
In the end, it neither provides the depth of explanation to be considered a beginner’s guide nor the depth of exploration to be considered a true reference standard.
Rather, it fills a somewhat awkward gap in the middle of that spectrum.
The data presented is just detailed enough to represent the magnitude of the problem, but no more and as a result, some of the intricacies and nuances of many of these issues are lost. But, it’s a good book to have on hand that gives you the headlines stats and data for a wide range of water related issues.
Colm Fay is a dual MBA/MS student at the University of Michigan’s Erb Institute for Global Sustainable Enterprise http://www.erb.umich.edu/ specializing in Environmental Policy and Planning, in particular market based approaches to conservation, land stewardship and poverty alleviation.
Gabriel Thoumi is a consultant at Forest Carbon Offsets, LLC http://www.forestcarbonoffsets.net and a lecturer at the Ross School of Business at the University of Michigan focusing in environmental markets and forest carbon.
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The amount of Shari’ah-compliant assets grew by nearly 30% over the past year, but no one really knows how much of that has gone to green sustainability investments. Ecosystem Marketplace examines the role that Islamic finance could provide in supplying payments for ecosystems services.
23 March 2010 | Just imagine a scenario where a Islamic Indonesian investment vehicle investing in a forest carbon project in Java on land managed by the local community through the Indonesian public forestry agency, Perhutani, could invest in afforestation, reforestation, and revegetation (ARR) activities. This could promote ecosystem restoration for profit with local control on Java where according to the latest estimates only 10,000 hectares of rainforest remain.
The local Javanese community could generate equity in their own forest carbon work, realizing with their own eyes that their hard work earns them money in a culturally appropriate manner while improving the local ecosystem services that a native forest restoration project offers. What if a small percentage of the $822 billion worldwide Islamic-compliant global financial assets tracked by the Economist began investing in local ARR forest carbon projects with local equity? The impact could be tremendous, and this could easily be started working with the multitude of effective on the ground counterparties in Java for example with funding from the broader sustainability community.
Zakat: Sharing Forest Carbon Offsets
By applying the Islamic finance concept of Zakat, which refers to “sharing of wealth” and “purification and growth”, it is possible to integrate sustainable economic development with culturally appropriate finance and governance structures within the growing nascent forestry carbon offset asset markets. In this way, local communities could invest in and receive equity in locally developed forest carbon offset assets within a culturally sensitive Islamic framework.
Considering the importance of Zakat in Islamic economic and social interactions, the question of proper methods to purify income is near Muslim economists’ and investors’ consciousness alike. Many Islamic thinkers from different scientific disciplines are exploring ways of utilizing Zakat money to better serve local communities and their livelihoods.
In enterprises utilizing natural resources in Islamic communities, Zakat is usually carried out by individuals that earn revenue from their businesses utilizing natural resources.
In this case, Islamic traditions require the investor who has a timber concession (colloquially “in his garden”) to give out Zakat on the day of cultivating the “fruits of the garden” (Zakat zerooa). Two scenarios apply here.
Assuming the forest needs labor intensive maintenance, 5% of the profit from the commodity produced by this forest is due for Zakat.
Assuming the forest does not need labor intensive maintenance to keep producing such a commodity, 10% of the profit from this commodity produced is due for Zakat.
In other words, the income generated by Zakat either from both / either sustainable timber harvesting and the sale of forest carbon offsets from the same property could go into a Local Community Fund (LCF). This Local Community Fund managed by local stakeholders, in turn finances sustainable local activities. These activities could be in the small and medium green enterprises and green job training sectors, so as to support local sustainability initiatives (download xx, right, for a schematic).
So the forest carbon value chain could provide funds at the local level to fund, under a Islamic finance program, native forest restoration work and carbon sequestration small business enterprises who sell forest carbon credits.
This Local Community Fund could pay for education, public health, green enterprises, and job training all resulting in local jobs including co-management of the forest and its forest carbon offset assets. It could be a virtuous circle that could be Islamic compliant allowing Indonesian and Malaysian pension funds, corporations, banks, and local communities to invest in, receive equity in, and be employed engaging in developing local carbon offsets and climate change mitigation and adaptation activities – all locally based in Java. As the forest carbon offset market grows, local Muslim communities could gain access to the global Islamic capital markets and engage in offset project development, restoring their degraded lands with native forest species allowing for agroforestry and other income generating potential.
Sukuk: Conservation Finance Bonds
This case study comes from technical advisory work conducted in 2006 on a forest protection project in Malaysia, and explored in detail in Mahmoud El-Gamal’s book Islamic Finance: Law, Economics, and Practice. In 2007, the overall project resulted in formally gazetting and protecting over 117,000 hectares of rainforest within the Belum-Temengor Forest Complex (BTFC) as the Royal Belum State Park.
The following financial model was not used in the final forest project efforts. Rather the model developed in Malaysia with Malaysian guidance was presented to the Malaysian government by Malaysians in 2006 and was well received and used as a discussion framework from which local institutions could discuss sustainable finance within a culturally appropriate financial framework. At the time the financing model was developed, the BTFC was outside of the national protected area system within Malaysia.
The model below explains how it could be possible to develop a Sukuk conservation finance bond that would be available for Malaysian institutional investors to invest so as to support local sustainable financial activities with Islamic law.
Belum Temengor Forest Complex
The BTFC is a unique site of biodiversity because it provides wildlife corridors between high priority conservation areas within peninsular Malaysia. The forest also contains an Environmentally Sensitive Area (ESA) Rank 1 under Malaysia’s National Plan (NPP). This forest is over 130 million years old, older than the rainforests in the Congo and the Amazon, and subsequently is much more complex in its diversity of flora and fauna.
The forest contains an ecosystem which supports over 100 species of mammals, 274 species of birds and 3,000 species of flowering plants. 13 globally threatened and 14 near-threatened mammals live in the boundaries of the proposed park include the Sumatran Rhinoceros, Asian Elephant, Malayan Tiger and Malayan Tapir. The forest is also recognized as an Important Bird Area (IBA) and is home of the threatened plain-pouched Hornbill. The area is also home of the Rafflesia, the largest flower in the world, and Cyads, the one of the oldest plants on Earth. Many indigenous people including those from the Jahai and Temiar tribes, who are an important part of Malaysia’s natural heritage, live in the forest.
The forest also is a major source of electricity and water for northern peninsular Malaysia. The forest contains Temengor Lake, which is a major catchment area for major rivers in the States of Perak, Kelantan and Pahang. The Temengor Lake dam is a major generator of electricity and the Temengor Lake is a critical source of water for downstream consumers. Finally, by protecting the BTFC including the Royal Belum State Park within its boundaries, Malaysia had a unique opportunity to create a Trans-Boundary Park including the Hala-Bala Wildlife Sanctuary and the Bang Lang National Park in Thailand.
BTFC Land Tenure
Originally, the BTFC contained the existing Royal Belum State Park which was formed in 2003, production forest reserves which includes land currently under short-term contracts and long-term contracts to logging companies, previously logged land, protection forest above 1,000 meters in elevation, and the East-West Highway Corridor Land proposed for an Acacia plantation.
Land DescriptionHectares
Royal Belum State Park 117,500 Temengor Forest Reserve 68,588 Production Forest (short-term license) 10,192 Production Forest (long-term license) 14,593 Production Forests Not Under Contract 43,482 Not Specified 10,850 East-West Highway Corridor 17,000 (estimate) BTFC Total 282,205
It was realized that what the public sector needed was a method to find the transition from logged forest to protected forest. It was thought that public financing might work in this situation since the goal was to assist the Government of Malaysia with protecting their forests while replacing income streams from lost revenue and taxes. Many public financing options that could have been used to protect the BTFC were reviewed. The following public finance options were reviewed:
Debt for nature swaps.
Trust funds.
State owned corporation bond.
It was realized that the goal of using public sector finance in Malaysia at the state level to fund the creation of the BTFC was to create a win-win scenario by addressing the objectives and issues of the various stakeholders involved such as Malaysia’s citizens, federal government, the Perak State Government, the State of Perak logging industry and environmental NGOs.
An initial stakeholder survey was conducted to identify the specific objectives of individual citizens, the federal government, the Perak state government, the Perak logging industry, and domestic NGOs.
Funding protection for the BTFC through a public finance mechanism meant stakeholder issues had to be addressed in the following manner within a Islamic compliant framework:
Local Population. The park could maintain biodiversity for future generations, ensure clean downstream water resources for people in affected states, and open up additional recreational opportunities. Jobs in ecotourism could also be created in areas surrounding the park.
Federal Government. The park could conserve biodiversity including many endangered species by creating the second largest national park in Malaysia creating a major tourist attraction.
State of Perak. BTFC could provide the State of Perak with a new fund raising tool to finance its annual budget because jobs could be created in international ecotourism and its citizens could have a source of clean drinking water as well as a recreation area for future generations.
Logging Industry. The logging industry will lose the revenues, jobs and source of timber directly affected by licenses and concessions in the Temengor Forest Reserve. However these figures represent a small part, less than 4%, of the State of Perak’s logging industry.
Environmental NGOs. The BTFC could be saved for future generations of Malaysians. Infrastructure and resources to manage the park including sufficient staff to educate visitors and protect the wildlife could need to be funded. All legal logging could cease and illegal logging could be curtailed through increased enforcement from full gazettement.
State-Owned Corporation Bond Issue
The Perak State Parks Corporation, a state owned enterprise which currently manages the Royal Belum State Park (“PSPC” or “Issuer”) could access the Malaysian domestic bond market to raise funds to fund the protection of the BTFC. PSPC’s formation documents could include a reference to allow this type of funding. PSPC is controlled by the Perak State Development Corporation. Malaysia’s government could act as Guarantor of the issue which will provide a form of sovereign credit enhancement. PSPC could mandate a local Malaysian financial institution such as AmMerchant Bank Berhad to act as underwriter of a public sector. In order to maximize investor interest and liquidity, an Islamic finance instrument could be structured and sold to Malaysian institutional investors such as pension funds, unit trusts, insurance companies, asset managers, and commercial banks (Download xx, right for a schematic of the bond corporation framework).
Funds raised by bond revenue could be used for to pay off:
Short-term licensing fees and long-term logging premiums and timber royalties.
Logging company compensation for license and concession buyouts.
Job loss reimbursement.
BTFC capital improvements.
Terminating natural forest conversation to acacia plantation forests along the East-West Highway.
Primary source of bond repayment could be PES generated by:
Park entry fees and other spending in area.
Ecotourism operator and hotel fees.
Hydroelectric and watershed conservation fees.
Forestry carbon markets.
In real Islamic finance, we have two paths – one is to invest and share in the profits and losses or two make a loan and get what you put into the loan. To further analyze these themes we invite other authors who with more experience to further this concept along so as to explore the possibilities of a Sukuk conservation bond.
Summary
The Islamic public finance sector could use payments for ecosystem services including Zakat to fund sustainable economic development within current market models such as the globally developing forestry carbon markets. As this is a concept note, we invite other authors to comment on the feasibility of these two concepts.
Khaled Hassouna, Ph.D., is a research associate at Virginia Technical University, and Gabriel Thoumi is a carbon specialist with Forest Carbon Offsets, LLC, as well as a Lecturer at Ross School of Business, University of Michigan.
Special acknowledgments to Dr. Yassir Samra, Assistant Professor of Management, Manhattan College
BlueNext and NordPool halted trading in Certified Emission Reduction certificates (CERs) after “recycled” CERs found their way into the European Union Emissions Trading Scheme. It’s a bit off the EM path of voluntary and forest carbon, but it does impact the whole sector. We’d like to find out what you think this means for the carbon markets, and have an active discussion going on the Eko-Eco Blog.
The new edition of 2004’s Atlas of Water seeks to provide a high-level yet easily-accessible introduction to the wide variety of political, economic and environmental pressures and constraints that exist in the global management of water resources for personal, agricultural and industrial use. Colm Fay and Gabriel Thoumi say they have only partially succeeded.
29 March 2010 | The recently-updated Atlas of Water (University of California Press/Earthscan, 2009) employs a data-centric approach to describing the global water crisis. The authors cover a wide range of topics under six broad themes: specifically, water as a finite resource, environmental pressures on this resource, human pressures, economic and industrial pressures, pollution and the future of water management.
We admire the attempt to deal with such a wide swath of issues in such a small volume, but this breadth, combined with a fairly rigid and restrictive format, leaves the effort somewhere between a beginner’s introduction to these issues and a reference volume. It is, in the end, neither accessible enough to be of use to a general-interest reader, nor comprehensive enough to be the go-to reference we had hoped to find.
The Target: Simplicity
Within each of the themes, the authors break the material into sub-topics, each of which is each dealt with in a two-page format. In these two pages, they attempt to offer both an introduction to the issue being covered and a map of how the issue is distributed globally. In addition, the pages are peppered with interesting facts that give more insights and useful statistics.
This ‘template’ is designed to make the atlas a handy reference work, and we can only applaud any effort to make such a complex body of knowledge accessible. Unfortunately, but we feel that the format is too rigid to deal with diverse topics that vary from ‘Climate Change’ to the ‘Millennium Development Goals’, where the balance of introduction and data seems to do neither element justice.
The Perils of Oversimplification
For example, when presenting a global map of water shortages, the format doesn’t allow for granularity any more detailed than differentiations at national level. This obscures the reality that the distribution of water even within national borders is inequitable both in terms of socio-economic and geographic distribution. The authors do address this to some extent by pointing out specific exceptions such as Brazil, where the unpopulated Amazon receives nearly 75% of the country’s water and the coastal regions housing 20% of the population only receives 2% of the water.
While the scope of issues covered by the book is impressive, by treating each of these issues separately and in isolation, the authors fail to convey the true interconnectedness of water management and the systemic nature of these issues and their remedies.
What’s Missing: Drivers and Correlation
Water is, by its nature, a transnational resource. Consequently, the legal and political issues surrounding water sources that are shared between and indeed within countries are complex.
Again, this is somewhat a restriction of the format but it would be interesting to see maps depicting geography, resource intensity, and politics overlaid with each other to help the reader understand the links between water shortages and conflict, or pollution and water use for industry or agriculture.
Highlighting some of these correlations would have lifted the title up a level and would really have maximized the use of the atlas medium to communicate these concepts.
Missed Opportunities
The book touches on some interesting topics that specifically lend themselves to the highly visual medium that such overlays provide, such as ‘water footprint’ and the concept of ‘virtual water footprint’. The authors could have used the opportunity to help the reader visualize some of the more abstract concepts in this space – such as the virtual export of water from water-scarce regions to water rich regions. Again, this systemic approach would have yielded some interesting insights for the reader beyond the headline statistics.
While there is a lot of data presented, as one would expect from a volume describing itself as an atlas, there are points where the depth of information seems inadequate for the topic under discussion. While references are provided at the end of the book, no individual pieces of data can be directly related to a referenced publication, which limits the usefulness of this publication as a guide to data sources and research.
The Challenge of Serving Two Masters
In summary, The Atlas of Waterprovides a comprehensive overview of the water crisis and the multitude of diverse issues, but suffers from trying to balance an unfeasibly wide scope with an unfeasibly restrictive format for what the authors are trying to achieve.
In the end, it neither provides the depth of explanation to be considered a beginner’s guide nor the depth of exploration to be considered a true reference standard.
Rather, it fills a somewhat awkward gap in the middle of that spectrum.
The data presented is just detailed enough to represent the magnitude of the problem, but no more and as a result, some of the intricacies and nuances of many of these issues are lost. But, it’s a good book to have on hand that gives you the headlines stats and data for a wide range of water related issues.
Colm Fay is a dual MBA/MS student at the University of Michigan’s Erb Institute for Global Sustainable Enterprise http://www.erb.umich.edu/ specializing in Environmental Policy and Planning, in particular market based approaches to conservation, land stewardship and poverty alleviation.
Gabriel Thoumi is a consultant at Forest Carbon Offsets, LLC http://www.forestcarbonoffsets.net and a lecturer at the Ross School of Business at the University of Michigan focusing in environmental markets and forest carbon.
Please see our Reprint Guidelines for details on republishing our articles.
After two weeks of talks designed to reach consensus on scientific criteria for combating climate change, UN negotiators took a break on Saturday to commemorate the International Day of Biodiversity — which many are calling the Day of Biodiversity Loss. Ecosystem Marketplace takes stock of the proceedings so far and previews the week ahead.
22 May 2010 | In the podcast above, Frank Vorhies, Director at Earthmind and insider on issues related to the Green Development Mechanism, speaks with Ecosystem Marketplace about financing biodiversity conservation – and in particular one idea to develop a certification for the restoration of biodiverse landscapes.
This ‘Green Development Mechanism’ (or GDM) certification would in essence create units of managed landscapes for sale in a voluntary market, which Vorhies thinks could move billions of new dollars into biodiversity conservation through private transactions in voluntary trades. The landscape certification scheme is an idea in development but as Vorhies explains, could create something akin to a real estate market for biodiversity. Instead of selling square footage of office spaces in New York City, however, you’d be selling hectares of landscape management in a biodiversity hotspot like the Amazon rainforest.
What is the demand driver of voluntary purchases of certified landscape management? Vorhies explains that companies who recognize the global impact on biodiversity from various activities in their supply chain could ‘offset’ their impact by purchasing GDM-certified landscape management. This diverges from traditional ‘biodiversity offsets’ which (after avoidance, minimization, and restoration measures) offset the footprint of impacts on a particular ecosystem type so, for example, a mining company impacting Australian native vegetation would offset with the same type of native vegetation. A supply-chain offset would imply far-flung and difficult-to-measure global impacts, which Vorhies thinks could be supplied by GDM-certified landscapes worldwide.
7 June 2008 | The Chesapeake Bay is the largest estuary in the United States. The land mass of the watershed that feeds it covers some 64,000 square miles in parts of six states, housing 17 million people. That population is growing. Although resilient, the estuary has deteriorated to the point where its health does not allow much of its natural habitat to survive – much less repopulate.
Late in 2007, the Chesapeake Bay Foundation issued its annual State of the Bay Report, and the grades were far from impressive: none of the 13 health indicators had improved from one year earlier, and three actually fell. The overall grade of 28 leaves the bay in the category of “dangerously out of balance”, although each of the principle Bay states have passed legislation designed to bring the grade up to 40 – or “improving” – in the next few years.
The Keys to the Shed
Much of the recent legislation that has been passed in an effort to protect the Bay contains enlightened market-based tools that can promote the Bay’s revival efficiently and without cumbersome regulation, but few of the policy makers in a position to implement these tools have been given the keys to the shed – let alone the operating instructions.
Chief among these tools is mitigation banking – a recognized and accepted method of negating the adverse environmental impacts of what has occurred in the past, but a method that has been woefully underutilized – for a variety of reasons.
Lack of Coordination
The United States needs to better coordinate economic growth and environmental quality objectives at both the Federal and State levels. At present, these goals and objectives are uncoordinated – or, worse, in direct opposition to each other.
This stems from competing objectives among the Federal Government and the States, as well as among politicians, citizens, industry and planning officials.
Unfunded Mandates
But most importantly, financial resources are shrinking at all levels, including those deployed by government entities with enforcement power and stakeholders who protect their own turf. There simply is not enough public sector money to properly address the host of significant events and activities that negatively impact our most important natural resources.
A graphic example is what happened in March, 2008, when the Maryland legislature approved a budget which cut the new Chesapeake Bay 2010 Trust Fund by half – or a whopping $25 million.
Re-Thinking the Public-Private Divide
The health and welfare of the environment has long been considered a social dilemma, and social dilemmas are traditionally the financial responsibility of government, and not of individuals. However, the quality of our resources is dwindling, and time does not allow continued inaction. As a society we should adopt intelligent and relevant measures to rectify the problem rather than force government to tax, regulate, and remediate.
We are in the midst of this very dramatic transition from government to society taking responsibility for a problem and correcting it. The private sector is best suited to solve the issue with support from the government. We have tried the opposite approach and it has not worked. The fundamental reason is that the government has neither the human or capital resources to implement in the field the restoration of ecological values. They know what they want, but they cannot implement.
Current Initiatives
In 2006, Maryland Governor Robert Erhlich signed legislation mandating state participation in the Regional Greenhouse Gas Initiative (RGGI, pronounced “Reggie”), which contains a provision for obtaining mitigation credit. This initiative was an important first step towards reviving Chesapeake Bay, but it has been too long in coming and is being too slowly implemented.
The current Congress has taken steps through the US Dept. of Agriculture to further facilitate and elevate the conservation banking market. The recently-enacted 2007 Farm Bill, for example, allocates $50 million to enhance the environmental credit market by establishing broad standards for the transactions and markets referred to above – but the devil, as always, will be lurking in the implementation.
The Solution
After 12 years engaged in the development of conservation banks and brownfield projects with GreenVest and its predecessor, The Triangle Group, I have come to believe that tunnel vision on any single mechanism will fail to yield results.
What we need is an innovative solution that can serve as a model for taking care of this delicate ecology. Specifically, we need a trading system that is “multi-tiered”, one that encompasses all ecosystem resource values found within a defined area, such as soils, habitat, water and air.
Tailor-Fitting
Such a system must recognize that each acre of ground is different and presents unique opportunities to protect and restore these resource values. A concept plan that restores, enhances and protects these values in perpetuity must be adopted and implemented. It must be grounded in both the physical sciences and economics – meaning it must provide a financial incentive to undertake the restoration work as well as pay the landowner for its property.
Mitigation banking provides this reward in the form of credits tied to the type of restoration work implemented.
Where Regulation Meets Markets
This is a market-based incentive, but it cannot occur without regulations to create and promote the market. In May, 2008, the United States Environmental Protection Agency (US EPA) as well as the United States Army Corp of Engineers announced the adoption of new compensatory mitigation rules that take effect June 8, 2008.
This is the first significant Congressionally-mandated change to wetland laws in almost 30 years. It will, if properly implemented and promoted within the agencies regulating the environment, promote consistency, predictability and more long-term protection and success restored wetland and water quality values.
The solution is a balance between economic incentives and inducements to the private sector with existing environmental laws and regulations. This solution has the potential to improve water quality, enhance wetlands, re-establish habitat and expand forested systems more quickly thereby hastening the pace by which we clean up negative impacts to these critical assets. The new rules will help accelerate this process.
Step One
Environmental protection can be addressed through a multi-credit market made up of a host of credit values. Multi-credit markets can streamline many of the program-integration issues that get in the way of action and progress.
These markets also can reduce significantly the cost imposed on regulatory management and compliance helping eliminate one excuse about why things to do not get done.
Step Two
Multi-credit markets must, by definition, involve the trading of pollution credits and ecosystem values across multiple environmental media. This approach will recognize all of the ecosystem values that the Chesapeake Bay Watershed provides: its water, its wetlands, its habitats, and its riparian forests, among others.
It must, in other words, provide multiple incentives for restoration and improvement of ecosystem functions.
These in turn will financially supplement the existing government and non profit programs. The goal is to always consider the “downstream” impact.
Step Three
A successful multi-credit trading system must be well-grounded in science and be endorsed through a stakeholder-driven process. Good science will be used to assess problems, identify opportunities, and define credits associated with Total Maximum Daily Loads (TMDLs), wetlands, habitat, and carbon. This will create incentives for ecosystem restoration and allow for cost-effective economic development.
Stakeholder processes will prioritize needs, establish the incentive system, and provide the mandate for the institutions that will be needed to support trading activities. Using science, stakeholders will have identified the zones within a watershed where action is most needed, and where improvements have the highest value.
A zone along stream corridors of the watershed, for example, provides a coincidence of soils, habitat, water, forests and wetlands that provide multiple values to people. We call this zone a “value tent.”
The tent concept shows that the greatest values usually occur along the edge of the stream and decrease as one moves upland (although in some unique systems, including those with significant groundwater influence, the tent may extend farther into upland areas).
The values and shape of the tent will vary with land use, soils and slope. Many of these concepts are in place based on all of the work accomplished under the Chesapeake Bay Critical Area Relief Act. The inspection, certification and trading program can be established based on successful programs carried out in other parts of the country.
Step Four
A properly designed and implemented watershed-based environmental credit trading program will provide an incentive for businesses, utilities and municipalities to act in ways that further not only their own financial goals, but also improve environmental quality.
In addition to reducing environmental compliance costs, multi-credit trading programs may encourage pollution prevention, promote development and the installation of more efficient abatement technologies, and reduce pollutant loadings from previously unregulated sources.
By implementing projects that create multiple benefits, the watershed manager or landowner can leverage a single project into multi-credit opportunities. As discussed above, this creates incentives for watershed restoration by allowing project owners to sell credits for any and all services created for which there is market demand.
Summary
We can’t wait another five years to see if current programs and practices can fulfill the promise of helping the Chesapeake Bay achieve a sustainable balance between economic development and environmental quality. The “State of the Bay’ demands a more concerted and wide spread initiative. People tend to gain courage by watching the innovation of others particularly if success occurs. To make a change in the world and to more effectively address what has gone wrong with the Bay we must creatively employ capital as well as exercise innovation and creativity that has enjoyed some success.
We learn best by example but must translate these examples and successes to date into further action. The proposed solution above is the best way to learn from what has worked and under what circumstances, so that leaders and followers can uniformly employ initiatives that will help curtail further abuse of the Bay as well as enhance the prospects that quality will be restored.
Leading up to the meeting, Ecosystem Marketplace commissioned this series of articles to shed light on these issues.
Part One, Uncharted Waters, provides an introduction to the ocean’s ecosystem services and the evolving schemes for identifying their value and bringing this value into our modern economy.
Part Two, The “New” Ecotourism, examines the role that environmental finance can play in ensuring the viability of living ecosystems by persuading mainstream tourism providers to pay for the natural beauty these living ecosystems provide.
Part Four, What can Oceans Gain from Freshwater WQT?, examines existing schemes that provide an economic incentive for keeping lakes and streams clean, and asks whether these schemes can be expanded to include the oceans.
Part Five, Mangrove Forests as Carbon Sinks, examines the potential for using carbon finance to save and restore mangrove forests around the world.
Part Six, Marine Biodiversity Offsets, examines existing that provide an economic incentive to preserve natural habitat for endangered species on land, and provides a guide for adapting these schemes to the ocean.
Mangroves not only protect coasts and nurture young fish, but they could be one of the most potent tools in the battle to slow global warming. They’re also the center of debate this afternoon in Palo Alto, California, where social entrepreneur Ben Metz is videoblogging from the Katoomba MARES Meeting. You can follow panel discussions here, and you can keep track of Ben’s video blog below.
9 and 10 February, 2010 | Katoomba XVI has wrapped up after two days of intense discussions and workshops. To keep you up to speed on events, we’ve created two streams — this videoblog, which will include informal chats with participants, and a more formal stream that will bring you panel discussions as they become available.
Michael Jenkins sums up the Event
I caught up with Forest trends President Michael Jenkins over a beer after the end of day two. It’s been a whirlwind of a couple of days and here Michael provides a brief summary of whats been explored and the questions we’ve started to ask.
Methinks this is the beginning of a very interesting journey. Perhaps the beginning of a new movement!
Astrid Schults Contemplates New Marine Financing Facility
Astrid Scholz from Ecotrust in Portland, Oregon just presented on the potential for a new marine finance facility, at significant scale, that would bring a whole new funding stream into play for marine conservation activities: substantial long-term commercial finance at scale!
Astrid is talking sense, despite her use of my favorite term of the conference — “data free analysis” — and has a vision worth taking note of. It’s also the closest I have heard to my ideas about developing marine entrepreneurship as an asset class and therefore bringing substantial new finance in to marine conservation. Astrid )and this idea really) are ones to watch!
Richard Kenchington outlining what he’ll be talking about in this afternoons panel discussion on Blue Carbon. Richard was one of the authors of the report on Blue Carbon that fed into the Copenhagen COP15 meeting in December 2009.
Bonnie McCay: No Power Without People
Fresh from delivering this morning’s keynote address on the role of the community in providing innovative solutions for marine and coastal conservation, Bonnie McCay gave us a whistle-stop tour of the key points from her presentation.
All the Ingredients — but What Recipe?
Indu Hewawasam, just before getting on stage to moderate the panel discussion on open access issues in marine and coastal resource utilisation, wondering aloud about who the key players will be in going forward in solving issues of open access.
Paul Holthus Summarizes Day One
After nearly 12 hours of intense workshops and panel discussions — most of which are being archived as podcasts here — we asked Paul Holthus to summarize Day One. Paul founded the World Ocean Council, and he says that payments for marine ecosystem services represent a completely new field and not just a branch of existing PES schemes. As such, he says, it deserves our attention and concerted action — and by the looks on the faces of this room full of jet-lagged folks, that’s exactly what we have here.
Maybe this is the start of a new movement?
Richard Kenchinton’s 39 Steps to Insanity
Earlier today Richard Kenchinton mentioned he’d catelouged 39 acronyms in regular use in the marine conservationa nd payment ofr ecosystem services space. It’ the end of day one and Richard’s had a glass or two of wine. Here he is giving a whistle stop tour of acronym land. Richard’s 39 steps to insanity…
Rick Macpherson: How Offshore Energy Can be Good for the Environment
Mike Miller from the Electric Power Research Institute delivered a fascinating talk on the opportunities presenting themselves to marine conservation through the development of offshore energy generation. You’ll be able to hear his entire presentation and view slides on the podcast, but for now here’s a two-minute summation that shoud peak your interest.
Rick Macpherson: Why it’s Cheaper to Preserve than to Destroy
Rick Macpherson, fresh out of his panel session on eco-tourism, summarised in two minutes some of the headlines from the field. Rick’s a passionate advocate for eco-tourism but acknowledges at the same time that the scale of the solution it provides into marine conservation simply doesn’t match the scale of the problem!
Michael Jenkins: Water is the New Frontier
Forest Trends President Michael Jenkins delivered the opening address, where he traced the Katoomba Group’s genesis to an inquiry he received from the Sydney Futures Exchange nearly a decade ago, when the exchange was contemplating the launch of carbon futures. That inquiry convinced Jenkins of the need to create a conduit through which diverse and disparate groups exploring the use of markets to preserve ecosystem values could communicate — an exploration that today moves off the land, and into the sea.
Al Appleton: Go Large, or Go Home
Al Appleton, instigator of the Catskills watershed initiative in New York, also delivered a fascinating talk which will be uplaoded as a podcast overnight. We caught up to him after the presentation, and he elaborated on his warning we should be picking our targets carefully. In the early stages of this developing movement, he says, we need to make sure the right messages are carried out by our actions.
Mainly, he says, we need to focus on solutions that can be scaled up. In the podcast, you’ll hear him underline the need for us to add a number of zeros on to our current aspirations.
“Go large or go home,” is one of the residual messages from Al. Fascinating and inspiring stuff!
While you’re waiting for the presentations to be uploaded on the other side, here’s a snippet from MARES Program Manager Winnie Lau’s opening presentation.
Before the meeting, we managed to catch up to event organizers Tundi Agardy and Winnie Lau of the Forest Trends MARES Program at breakfast. They offered their expectations of the event.
And Now Winnie:
Seth Caplan is the Vice President for Climate Advocasy at the Coservation Law Foundation. He came to California to share his experiences from New England — on the opposite side of the country — where his group has been experimenting with renewable energy on the ocean:
Amber Mace, Executive Director of the California Ocean Protection Council, will shortly be opening the event and welcoming attendees on behalf of the state of California.
Mission Markets CEO Mike Van Patten is among those who see Katoomba XVI as a networking opportunity.
Ben Metz is an entrepreneur currently developing a number of new-start social finance and technical assistance facilities for global social enterprise and conservation sector development — specifically, marine entrepreneurship. You can follow him on his blog, www.benmetz.org.
BlueNext and NordPool halted trading in Certified Emission Reduction certificates (CERs) after “recycled” CERs found their way into the European Union Emissions Trading Scheme. It’s a bit off the EM path of voluntary and forest carbon, but it does impact the whole sector. We’d like to find out what you think this means for the carbon markets, and have an active discussion going on the Eko-Eco Blog.
If there is any doubt that the larger world now understands that the quickest way to halt climate change is to halt deforestation, that doubt was dissipated by the opening ceremony at the high-level segment of COP 15 Tuesday night. Prince Charles, Ban Ki Moon, Wangari Maathai – and, of course, the Danish Girls Choir – ushered in negotiations where the only thing people agree on is that we need to reduce emissions from deforestation and forest degradation.
15 December 2009 | You can tell the veterans of COPs past by the looks on their faces at the 15th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP 15), which on Tuesday entered the high-level phase of negotiations in Copenhagen, Denmark.
This “high-level” phase is when the ball that civil servants have been stitching together over the past year actually gets thrown into play – the ball being the negotiating text that forms the basis for a binding agreement that’s supposed to be produced at the end of this week (but which everyone is already expecting to see in Mexico).
Just a few COPs ago, support of REDD was something you voiced quietly and tentatively, usually bracing for a fight. This year, the Danish Girls Choir sang its praises right out in the open, in front of everyone, at the request of the UNFCCC itself, with a sweet – albeit simplistic – plea to “plant a tree.”
Then Ban Ki Moon, Prince Charles, and Wangari Maathai all raised the issue of saving the rainforest to slow global warming, and each addressed REDD specifically (albeit without the acronym).
We’ve reprinted Prince Charles’s text below, and also offer video excerpts from:
Prince Charles
And Wangari Maathai (albeit not from this event)
Full Text of Prince Charles’s Speech to COP 15
Prime minister, secretary-general, ministers, ladies and gentlemen:
I am most grateful for your kind invitation to address this crucially important international gathering.
We live in times of great consequence and, therefore, of great opportunity.
With issues of such magnitude, it is easy to focus solely on the challenges, the worst-case scenarios, the what-ifs of failure.
But take a moment to consider the opportunities if we succeed. Imagine a healthier, safer and more sustainable, economically robust world. Because if we share in that vision, we can share the will to action that is now required.
Over more than three decades, I have been privileged to talk with some of the world’s most eminent experts on climate change and environmental issues and to listen to the wisdom of some of the world’s indigenous people.
The conclusion I draw is that the future of mankind can be assured only if we rediscover ways in which to live as a part of nature, not apart from her.
For the grim reality is that our planet has reached a point of crisis and we have only seven years before we lose the levers of control.
As the President of Gabon said at a meeting I hosted last month: ‘The door to our future is closing…’
This, I fear, is not an overstatement. For climate change is a risk-multiplier. It has the potential to take all the other critical issues we face as a global community and transform their severity into a cataclysm.
Reducing poverty, increasing food production, combating terrorism and sustaining economic development are all vital priorities, but it is increasingly clear how rapid climate change will make them even more difficult to address.
Furthermore, because climate change is intimately connected with our systemic, unsustainable consumption of natural resources, any decline in the ecological resilience of one resource base or ecosystem increases the fragility of the whole.
We appear intent upon consuming the planet. It seems likely, on current patterns of use, that our global fisheries will collapse by 2050 and, already, fresh water is becoming scarcer, placing global food security at ever greater hazard.
In the last 50 years we have degraded 30% of global topsoil and destroyed 30% of the world’s rainforests.
All of these issues are linked to each other and to climate change – a truly vicious circle – and the climate crisis is the mirror in which we see reflected the combined ecological impact of our industrialised age.
However, it is these links, together with our common humanity and the unprecedented connections of today’s global community, which might, perhaps, provide us with a solution.
Moreover, in our increasingly precarious situation – on a small, unique and precious planet – this is not a problem resolvable in terms of ‘them and us’.
For when it comes to the air we breathe and the water we drink, there are no national boundaries. We all depend on each other – and, crucially, on each other’s actions – for our weather, our food, our water and our energy. These are the ‘tectonic plates’ on which the peace and stability of the international community rest.
The inescapable conclusion, therefore, is that a partial solution to climate change is no solution at all. It must be inclusive and it must be a comprehensive approach – one that strengthens the resilience of our ecosystems. Crucially, it must be embraced by the public, private and NGO sectors, as well as by local communities and indigenous people, while also encouraging individual responsibility.
One example that has been high on my agenda for the last two years is that of tropical rainforests.
These ecosystems have been described as the planet’s lifebelt, and with good reason. Not only do they harbour about half of our terrestrial biodiversity and generate much of the rainfall that is vital for farming, they also absorb and hold vast quantities of carbon that would otherwise be in the atmosphere.
Unfortunately, as you know better than I, the forests are being cleared at a terrifying rate.
The simple truth is that without a solution to tropical deforestation, there is no solution to climate change. That is why I established a Rainforests Project to try to promote a consensus on how tropical deforestation might be significantly reduced.
In early April, I was able to host a meeting of heads of state and government at which it was agreed to establish an informal working group to look at this issue.
As it turns out, it seems the quickest and most cost-effective way to buy time in the battle against catastrophic climate change is to find a way to make the trees worth more alive than dead.
The project has been exploring the drivers of deforestation and how innovative financing mechanisms could provide rainforest nations with financial rewards for positive performance.
One example of such a performance-based approach is the recent agreement between Guyana and Norway.
The project is also working with the World Bank on an emergency package to stimulate private sector finance for rainforest nations.
It is critical to find ways to prevent forests being converted to agriculture. I have been heartened by my conversations with some of the world’s largest agri-businesses, which have told me that, through more effective use of vast areas of degraded land, we could feed and fuel a growing population and keep the forests.
But, ladies and gentlemen, it must be genuinely sustainable agriculture that helps to empower local communities and small farmers.
We thereby create a truly virtuous, not a vicious, circle and one, because of its understanding of the relationship between agriculture and forestry, that can only improve the lives of many of the poorest people on the planet while simultaneously benefiting nature.
It also builds what seems to me to be the absolutely critical chain which links ecosystem resilience, adaptive capacity, poverty reduction and sustained economic development.
This is the chain that we have broken … And it is the chain that we must now re-make.
The need fully to engage the private sector reflects not only the growing determination of business to act in a sustainable way but, crucially, its determination to listen to customers.
And what customers are saying ever more loudly is that they want their investment choices to make a positive difference to climate change.
One practical result of my work with the private sector on corporate, social and environmental responsibility for the past 25 years is that growing numbers of pension funds have made a commitment to set climate solutions at the heart of their long-term investment decision-making.
To ensure a large-scale deployment of capital, these pension funds need clear long-term policies to be agreed here this week.
This request is supported by the 191 financial institutions with assets of over $13tr which signed the International Investor Statement on Climate Change.
A further practical contribution is a statement by the international Corporate Leaders Group, of which I am patron – comprising over 900 of the world’s most prominent companies drawn from more than 63 countries, including all the G20 members – on the significant business opportunities which a robust, effective and equitable global climate agreement could deliver.
In helping to facilitate these initiatives, my simple aim has been to show that we can all make a difference if we are determined to do so. Above all, I am convinced it is these kinds of global partnerships – between government, business, NGOs, civil society and even individuals – that will provide the global solutions needed to secure our future.
Subsequent inflows of private sector investment would do much to reinforce the credibility of all those, particularly in the poorest countries, who have had the courage to believe in the positive outcome of this meeting.
Several of their leaders, while being only too aware of the immediate economic benefits of monetising their countries’ natural capital, have still chosen to follow the difficult path of turning their economies towards sustainable development.
Such visionary people have a vital role to play in helping the world to find the strength needed to address its problems. But they desperately need our support, for without it they may not have a second chance.
Surely now, then, is the time to recognise that we cannot have capitalism without nature’s capital – we cannot sustain our human economy without sustaining nature’s economy?
I know that so very many of you here today have been negotiating the unbelievably complex details of a potential agreement for a very, very long time, and you must be profoundly weary.
But this is an historic moment. I can only appeal to you to listen to the cries of those who are already suffering from the impact of climate change.
Just as mankind had the power to push the world to the brink so, too, do we have the power to bring it back into balance.
You have been called to positions of responsibility at this critical time. The eyes of the world are upon you and it is no understatement to say that, with your signatures, you can write our future …
One final thought … As our planet’s life-support system begins to fail and our very survival as a species is brought into question, remember that our children and grandchildren will ask not what our generation said, but what it did. Let us give an answer, then, of which we can be proud.
Steve Zwick is Managing Editor of the Ecosystem Marketplace. He can be reached at [email protected].
Please see our Reprint Guidelines for details on republishing our articles.
The history of civilization is, in many ways, a history of water and its availability. It’s fitting, therefore, that Social Participation in Water Governance and Management examines market-based solutions to water scarcity through the prism of society, say Colm Fay and Gabriel Thoumi.
23 April 2010 | Water has a deep-rooted significance in history, religion, culture and traditional practices across the globe and consequently the management and governance of water is not only a scientific and commercial challenge, but also an anthropological, sociological and political challenge. The ecosystem services paradigm encourages us to view natural resources in terms of the services they provide, but this raises many questions about the opportunity cost of resource usage. In many cases, this opportunity cost is a human one and as a result stakeholder engagement is crucial to the sustainable and equitable management of water resources in all parts of the world.
This first edition comprises a collection of case studies, each focused on an aspect of social participation in water governance, in addition to an introduction and comprehensive conclusion by the editors. The cases are divided into five categories: Indigenous Water Governance, The Dynamics of Gender in Water Management, River Basin Governance, Implementation of Water Management and The Politics of Governance.
Clear Examples
This book’s greatest strength is the quality of the cases. Each one is expertly researched and, while a different author writes each case, they all approach their individual topics in a consistent way. Each case provides an introduction to the situation and then a deep dive on the social issue being discussed. Once the framework for discussion has been established, details of how participation with respect to each social issue has been leveraged to resolve water rights and usage disputes or challenges. As a result, this feels less like a ‘water book about social participation issues’ and more like a ‘social participation book about water issues’, which we feel is exactly the balance that adds most value.
An example that stands out in this respect is ‘Gender and Social Participation in a Rural Water Supply Organization in Rajasthan, India’ by Kate A. Berry, one of the editors. This case discusses the role of the JBF organization and its operations in the rural Marwar region of western Rajasthan. In order to fully appreciate the challenges that the organization faces when interacting with the local population, and within its own organization with respect to gender equity, one must understand the complex caste structure that dominates Indian social interactions and the traditional gender roles and culture within this specific part of Rajasthan as well as South Asia in general. In addition, it is key to understand the objectives and challenges faced by NGOs when interacting with these societal norms, especially with respect to organizations that seek to change them. The case expertly lays this groundwork before delving into the actual operations of the organization and its work in increasing access to sources of water in this, “the most densely populated, rural, arid zone in the world”.
While a lot of emphasis is placed on the creation of social participation in water governance, “Social Participation in French Water Management: Contributions to River Basin Governance and New Challenges” by Sophie Allain presents a case in which social participation itself is not the challenge. As is the political culture, French environmental politics have historically been highly participatory with 25% of local water commissions comprised of users and NGOs by law. An additional 25% is made up of state agencies with the remaining 50% being local elected officials. The central point in this case is that participation is not an end in itself, but “must be considered as a tool likely to design and improve negotiation processes regarding the political regulation of water management”. In the absence of effective relationships and an environment conducive to constructive negotiation that place appropriate weight on the views of all stakeholders, participatory institutions and structures alone do not ensure a positive impact and equitable solutions.
The editors, obviously, play a key role in the creation of a coherent collection of cases written by individual authors and in this instance Berry and Mollard have done a nice job of allowing the authors to express a wide range of opinions, while in their conclusion providing an analysis of some areas of dichotomy that inevitably emerge on related aspects of social participation, particularly the role of legislation. The cases include top down, bottom up and hybrid approaches to social participation and the editors provide some interesting insights on the role of policy in these interactions and how this correlates to success of the initiative. One suggestion is that a significant barrier to this success is the “gap between national speeches and local reality” and the tendency of the political elite to primarily operate to preserve their own legitimacy.
Future editions will benefit from the editors providing a better framing of the subject matter in both the introduction and conclusion. Rather than diving straight into the cases, a more useful opening would be a chapter describing the taxonomy of both water and social participation issues, and describing the pivotal role water has historically played in culture and tradition.
In the book’s conclusion, the editors present a vision of the future politicization and democratization of water governance. We would like to have seen more coverage of these ideas and an expansion on the governance and management framework that the editors envisage, especially with respect to the preceding cases and how these experiences can be used to shape future policy and methodology.
These omissions do not, however, significantly detract from a very well constructed and authored collection of cases that stand out for their depth of research and clarity. This is a significant contribution to the field of social participation in natural resource management and provides some key insights for those interested not only in water governance, but ecosystem services in general, the economy of nature and the transformative potential of social participation in legislation and policy setting. Colm Fay is a dual MBA/MS student at the University of Michigan’s Erb Institute for Global Sustainable Enterprise http://www.erb.umich.edu/ specializing in Environmental Policy and Planning, in particular market based approaches to conservation, land stewardship and poverty alleviation.
Gabriel Thoumi is a consultant at Forest Carbon Offsets, LLC http://www.forestcarbonoffsets.net and a lecturer at the Ross School of Business at the University of Michigan focusing in environmental markets and forest carbon.
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