Green Earth Africa

The idea of conservation credits is now being pushed hard by government. Can it work?

Bluebells at dawn, Micheldever Woods, near Winchester, Hampshire. Photograph: Guy Edwardes/Solent News

Accounts of the nation’s ‘natural captial’ meets key demand of the UN study of The Economics of Ecosystems and Biodiversity

India is set to become the first country to publish accounts of its ‘natural wealth’. The announcement will be made at the biodiversity summit in Nagoya, Japan.

Photograph: Nozomu Endo/AP

India is today expected to become the first country in the world to commit to publishing a new set of accounts which track the nation’s plants,animals, water and other “natural wealth” as well as financial measurements such as GDP.

The announcement is due to be made at a meeting of world governments in Japan to try to halt global destruction of biodiversity, and it is hoped that such a move by a major developing economy will prompt other countries to join the initiative.

Work on agreeing common measures, such as the value of ecosystems and their “services” for humans – from relaxation to clean air and fertile soils – will be co-ordinated by the World Bank, which hopes it can sign up 10-12 nations and publish the results by 2015 at the latest.

The move fulfils one of the key demands of a major report also being published today at the Japan meeting, a UN study of The Economics of Ecosystems and Biodiversity (Teeb) .

The report was commissioned by the G8+5 major nations in 2007 in the hope of repeating the success of Lord Stern’s report on climate changein persuading governments of the strong economic case to take action on saving the natural world.

The environment secretary, Caroline Spelman, welcomed the report: “Teeb can have the same impact for biodiversity as Stern had for climate change and will be a useful tool to help reduce the loss of species and habitats … economically, we have to take action to reduce the loss of our natural environment before the cost becomes too high.”

Pavan Sukhdev, economist and the TEEB study leader said: “Natural capital is a massive asset class, and developing nations’ biggest asset.”For it to be missing from the balance sheet of the nation, or for failures not to be counted, does not make sense.”

After India and the other countries that join it in the first ecosystem accounts, Sukhdev said he hoped another 20-30 would adopt the system over the following three to five years.

“The rest: if they are not with it, people will get left behind,” he added. “We’ll never have all 192 countries, but does that matter? The idea is to establish the direction in which national accounting must go.”

After the publication over the past two years of an interim report and specific documents about the economics and recommended actions by governments, businesses and citizens , Teeb will today publish its final “synthesis” report.

This will not contain a specific headline value for all the world’s biodiversity, although earlier versions have quoted huge values for individual ecosystems such as forests, and Sukhdev today talks of “the multi-trillion dollar importance” of the natural world.

However it argues that there is plenty of evidence for national and local governments, businesses and individuals to radically review how they make decisions to take into account the damage or preservation of biodiversity.

“Teeb’s approach can reset the economic compass,” says Sukhdev. “Do nothing, and not only do we lose trillions of dollars’ worth of current and future benefits to society, we also further impoverish the poor and put future generations at risk. The time for ignoring biodiversity and persisting with conventional thinking regarding wealth creation and development is over. We must get on to the path towards a green economy.”

Among the report’s recommendations are that countries and companies should publish accounts of their natural capital, and how much it has increased or decreased over the previous year, in parallel with traditional financial accounts. This should help address current accounting rules which, for example, measure the clean up of a pollution spill as an increase in economic activity (by the clean up companies), but take no account of the long-term damage done.

Such all-encompassing measures would be more likely to encourage other suggested changes, such as paying people to protect or restore ecosystems, refunding people who do not cut down forests or farmers who reduce chemical fertilisers and pesticides; and better certification schemes so that those who produce products and services, such as food and drink, in more environmentally friendly ways, can get recognition and charge higher prices to cover extra costs.

The report also calls for reform of subsidies for damaging industries, such as mining and intensive farming, and tougher fines for polluters to discourage the problem and pay for proper restoration.

In a written statement for the Teeb launch and his own country’s annoucement, India’s minister for environment and forests, Jairam Ramesh, said: “Teeb aims to provide strong incentives for countries to ensure decisions are not solely based on short-term gains, but build foundations for sustainable and inclusive development.”

Among the figures collected by the report team were an estimate that at present rates deforestation would cost the global economy US$2-4.5tr (£1.27-2.86tr) a year by the middle of this century; while the estimated market for certified agricultural products, such as organic, would be $210bn (£133bn) by 2020. Another quoted by Teeb, by Trucost in London, found the total environmental damage by the world’s 3,000 biggest listed companies in 2008 added up to at least US$2.2tr (£1.40tr).

“Teeb has brought to the attention of the globe that nature’s goods and services are equally if not far more central to the wealth of nations including the poor – a fact that will be increasingly the case on a planet of finite resources with a population set to rise to 9 billion people by 2050,” said Achim Steiner, UN under-secretary general and executive director of the UN Environment Programme .

Teeb IN NUMBERS

US$50bn – The annual loss of opportunity due to the current over-exploitation of global fisheries. Competition between highly subsidised industrial fishing fleets coupled with poor regulation and weak enforcement of existing rules has led to over-exploitation of most commercially valuable fish stocks, reducing the income from global marine fisheries by US$50bn annually, compared with a more sustainable fishing scenario (World Bank and FAO 2009).

€153bn – Insect pollinators are nature’s multibillion-dollar providers. For 2005 the total economic value of insect pollination was estimated at €153bn. This represents 9.5% of world agricultural output for human food in 2005 (Gallai et al 2009)

US$30bn – 172bn The annual value of human welfare benefits provided by coral reefs. Although just covering 1.2% of the world’s continent shelves, coral reefs are home to an estimated 1-3 million species including more than a quarter of all marine fish species (Allsopp et al 2009). Thirty million people in coastal and island communities are totally reliant on reef-based resources as their primary means of food production, income and livelihood (Gomez et al 1994, Wilkinson 2004). Estimates of the value of human welfare benefits provided by coral reefs range from US$30bn (Cesar et al 2003) to US$172bn annually (Martinez et al 2007)

US$ 20-67m (over four years)The benefits of tree planting in the city of Canberra. Local authorities in Canberra, Australia, have planted 400,000 trees to regulate microclimate, reduce pollution and thereby improve urban air quality, reduce energy costs for air conditioning as well as store and sequester carbon. These benefits are expected to amount to US$20-67m over the period 2008-2012, in terms of the value generated or savings realised for the City (Brack 2002).

US$6.5bn – The amount saved by New York, by investing in payments to maintain natural water purification services in the Catskills watershed (US$1-1.5bn) rather than opt for the man-made solution of a filtration plant (US$6-8bn plus US$ 300-500m a year operating costs). (Perrot-Maitre and Davis 2001).

50 – The number of (rupees) millionaires in Hiware Bazaar, Indiaas the result of regenerating 70 hectares of degraded forests. This led to the number of active wells in the surrounding area doubling, grass production increasing and income from agriculture increasing due to the enhancement of local ecosystem services (Teeb case mainly based on Neha Sakhuja).

by Christiana Ferris

It’s a dry, sunny November day with almost no breeze in the rolling grasslands of the Conservancy’s 10,000-acre Rancho Los Fresnos in the Sonoran Desert. 

Hot-shot bomberos from Mexico’s National Forestry Commission (CONAFOR)—fire chiefs from 11 different states, all bosses in their own right—take orders from the one man designated as that day’s prescribed burn chief, Baruk Maldonado, director of local partner Biodiversidad y Desarrollo Armónico (BIDA). It’s a job that will rotate over the course of the 10-day project. It’s not easy for a general to play the role of foot soldier. But when dealing with fire, heeding commands can mean the difference between survival and disaster for the entire team.

The participants are recent graduates of Mexico’s Prescribed Burn Academy, a joint project started five years ago between The Nature Conservancy and CONAFOR to train the agency’s staff and other partners as the country’s foremost experts infire as a conservation tool.

“Our challenge is finding young leaders to be tomorrow’s fire experts,” says Alfredo Nolasco, manager of CONAFOR’s forest fire protection division, “and creating a new generation of fire managers.” 

But the academy is not just benefitting conservation efforts inMexico. Among the trainees is Faustino Osavas, threat abatement specialist for the Conservancy’s work in Honduras.

“To me,” Osavas says, “this is a great opportunity to better understand that fire management is a universal issue. Mexico has taken a great step. Now state fire bosses think and apply ecological principles to fire management.

”

Regenerating grasslands

Grasslands, for example, have adapted to depend on periodic fires to clear out woody shrubs that compete with native grasses and encourage their regeneration.

“We need a really hot fire to kill the mesquite,” Maldonado says before the burn begins, “but not so hot that we sterilize the soil. It’s a balancing act.” 

Why kill mesquite? 

“Left unchecked, mesquite can overtake the increasingly rare grasslands, a habitat that is highly under-protected globally and particularly important in the Mexican desert.”

Migrating birds like the bald eagle, yellow-billed cuckoo and willow flycatcher stop over or nest here, and grassland sparrows, which are in rapid decline, too, flit among these rolling plains thanks to the abundant insects present. Every acre saved makes a difference for the prairie dogs, Huachuca tiger salamanders and up to 400 bird species and 180 butterfly species that call the area home.

Putting the plan into action

Brigade members in the ignition crew wield gas-powered drip torches, while liquidation crew members carry 40-pound backpacks of water. Others measure temperature, humidity and wind speed and direction every half-hour to make sure that the window of opportunity remains open. Everything has to be just right or the burn will have to wait or be called off.

The team burns a small test parcel on the easiest part of the property where the terrain slopes more gently and there is less fuel. They lay control lines and then burn the gaps in between.

Bright orange flames shimmy in broad daylight and crackle when they hit larger shrubs. The intense heat and black smoke singe the nostrils. After about an hour, an ebony carpet covering the rocky ground and the occasional tiny wisp of smoke rising from the earth are the only remnants of the morning’s work.

The goal is to burn from 12 to 75 acres each day, with the level of difficulty increasing as the brigades become accustomed to local conditions. By day 10, crews will have burned nearly 900 acres on the ranch.

The ranch as a model

“Thankfully, the grasslands here are in good condition,” adds Gabriel Valencia, also of BIDA. “Unlike neighboring ranches, Los Fresnos does not graze cattle or raise agricultural crops, and activities like prescribed fire also help preserve these grasslands.”

The difference is visible. The mesquite cover is denser on nearby properties, with grasses completely choked out in some arroyos outside Los Fresnos. 

“Our goal,” Valencia says, “is to use a recently established ranchers’ network to encourage neighbors to adopt fire management, invasive species control and other land stewardship practices that will renew and preserve the region’s grasslands.”

At the conclusion of the project, academy graduates not only have helped the Conservancy’s habitat restoration efforts, they also have garnered camaraderie and the expertise necessary to train the next generation of CONAFOR fire leaders. 

The Conservancy’s Osavas says, “Being on a ten-day burn with fire management professionals from CONAFOR in Mexico allowed me to share some of my knowledge and learn from them as well. I’ll pass on this knowledge to other fire managers in Central America.”

Ever since humans entered the stage, nature has been providing us with a wide-variety of essential and ‘free’ services: food production, pollination, soil health, water filtration, and carbon sequestration to name a few. Experts have come to call these ‘ecosystem services’. Such services, although vital for an inhabitable planet, have largely gone undervalued in the industrial age, at least officially. Yet as environmental crises pile one on another across the world, a growing number of scientists, economists, environmentalists, and policy-makers are beginning to consider putting a monetary value on ‘ecosystem services’. “An important reason for the alarming rate of environmental destruction across the world is that the true value of ecosystems is largely invisible to markets. When we raze forests or build on wetlands, the loss of the essential services they provide […] does not show up on any balance sheet,” writes Ricardo Bayon and Michael Jenkins in a new opinion piece in Nature which briefly outlines a number of ways how pricing ecosystem services might work and how some nations have already begun incorporating such costs.

Just how much is this unbroken rainforest in Panama worth? Photo by: Rhett A. Butler.

Bayon, co-founder of EKO Asset Management Partners, and Jenkins, president of Forest Trends, point to the Amazon rainforest as an example of how putting ecosystem services into the market would optimally work to conserve, rather than despoil, the world’s ecosystems. 

“Imagine, for example, that the Brazilian government introduces regulation that imposes a value on the environmental services of a rainforest. The regulation would make it more expensive to destroy the rainforest, thereby increasing the production costs of whatever replaces it, for example, soya beans or cattle. As these costs would be passed on to the consumer, this would push people and companies to find ways of producing without destroying the ecosystem. At the same time, it would make it more profitable to protect the rainforest, thus creating a market for conservation.” 

The authors explore a number of ways in which a price may be put on ecosystem services, including adding a surcharge on those who consume a resource to pay for preservation, or encouraging private corporations to pay for the preservation of the resources they exploit, for example drink companies paying to conserve the watersheds on which their products depend. 

“On one level, private and voluntary payment and trading schemes are more effective than government surcharges. This is because those who benefit are the ones paying, and those who pay for the use of resources are more likely to use them efficiently. However, private initiatives are generally small-scale,” the authors write. 

They argue that to really change the way companies and people value nature’s free gifts, it will be necessary to install “national or global environmental markets that are driven by governmental regulation”. The essay points to the global carbon market, as well as the US’s national mitigation scheme on preserving wetlands. 

“Under this system, a business wishing to carry out development that will damage a wetland of national importance is granted a permit only if it agrees to compensate for the damage by restoring or enhancing a wetland of similar function and value in the same watershed. Instead of taking on the restoration itself, the business can purchase ‘mitigation credits’ from an organization that has already done the work,” the authors write. 

The nascent Office of Environmental Markets has been established in the US to coordinate ecosystem services and their emerging markets. 

In the end, the authors argue, creating a sustainable world may be as simple as putting a market value on nature.

The Sierra Gorda Biosphere Reserve in Mexico shows how local people can be paid for protecting their environment, says Daniela Pastrana

“I cut down all of that section,” said Esteban Martínez as he pointed to a rectangle of land cleared of trees in the central Mexican state of Querétaro.

“I used to go after the jaguars that killed my livestock… and yes, I killed one. But now we protect them. For me, it is no longer worth it to harm the forest,” said Martínez.

From a lookout point on the hill, he explained how 16 residents of the San Juan de los Durán “ejido,” a communally owned rural estate, traded subsistence farming for an eco-tourism project in which they run a campground for visitors interested in nature.

The community is situated within the Sierra Gorda Biosphere Reserve, in the northern portion of Querétaro.

Covering 384,000 hectares, one-third of Querétaro, the reserve is home to a great variety of ecosystems, with altitudes ranging from 350 metres to 3,100 metres above sea level: semi-desert, cloud forest, temperate forest and lowland jungles, among others.

There are 360 species of birds, 130 mammals (including six felines, like the endangered jaguar), 71 reptiles, 23 amphibians and 2,308 plant species.

The zone was recovered thanks to the efforts of Martha Ruiz Corzo, a music teacher, and of Roberto Pedraza Muñoz, her husband and public accountant. Together they founded the Sierra Gorda Ecological Group, in 1987, entrusted with managing the reserve.

The work of 23 years, which included the entire family, won support from private foundations and international agencies, like the Global Environment Facility (GEF), which through the United Nations Development Programme (UNDP) provided 6.7 million dollars from 2001 to 2009.

Local efforts led to matching funds of four dollars for each dollar from GEF to implement a protected area management model involving both government and civil society — an approach that is unique in Mexico.

Thanks to the non-governmental organisation Bosque Sustentable (Sustainable Forest), an affiliate of the Sierra Gorda Ecological Group, international credits for more than 28,000 tonnes of carbon dioxide — the leading greenhouse-effect gas — were put on the international carbon market. That sum is the estimated amount of additional CO2 absorbed by reforestation of degraded forests.

The revenue is earmarked to finance Sustainable Forest projects, but the aim is to use the money to pay local communities for protecting the area.

The team led by Ruiz Corzo, director of the reserve, is developing units of Social Return on Investment (SROI), which combine economic, social and environmental indicators to estimate the economic benefits of the actions taken.

The aim is to create “stock market certificates for planetary health,” which include the protection of biodiversity and fighting against poverty, Ruiz Corzo told this reporter.

“We need the local people to receive payment for conservation,” she added, going on to explain that it requires creating an alliance with the communities living in extreme poverty. “How are we going to ask them to maintain and conserve the environment when they are among the worst off in the world?”

The shifts in recent years of rain and drought patterns led to onslaughts of plant and insect pests, affecting the encino (of the oak family), junipers and 10 species of pine across 27,000 hectares — one-third of the forest in the reserve.

“The trees are weakened by climate stress,” said Roberto Pedraza Ruiz, the reserve’s chief technician — Martha and Roberto’s son.

Pests are not the only threat in the Sierra Gorda, which the federal government declared a protected area in 1997 and UNESCO (UN Educational, Scientific and Cultural Organisation) proclaimed a World Biosphere Reserve in 2001.

For the past four years the Federal Electricity Commissions (CFE) has been trying to buy up land, including the ejidos, to erect 47.5 kilometres of transmission lines to convey electricity from San Luis Potosí to Guanajuato — both are neighbouring states of Querétaro.

“The consequences would be incalculable,” warned Pedraza. “For starters, one out of three amphibian species would be at risk.”

The law on natural protected areas prohibits electrical transmission lines in those zones. But the CFE has twice insisted with its proposal, rejected by the Sierra Gorda administration.

However, members of the Citizen Council of the Sierra Gorda report that CFE representatives continue trying to buy land, and have even paid for some lots.

In Mexico, more than half the population of 107 million lives on less than five dollars a day. Despite the fact that 80 percent of the forests is held as ejidos, or communal property, ownership is not well documented, and most lots are too small to appeal to global markets.

As a result, in Sierra Gorda, only a few of the communal properties receive payment for the environmental services they provide, and it ranges between 18 and 27 dollars annually per hectare conserved.

The overarching goal is for the residents of the Sierra to replace timber production, ranching and farming — the region’s only economic activities — with provision of environmental services.

To that end, a state fund has been proposed that would pay compensation to landowners for the ecosystem services of their forests and jungles.

“We need them to get the cattle out of the forest, to maintain water sources for the fauna, to clean up the pests and to maintain active civilian monitoring,” said Mario Pedraza Ruiz, assistant director of Sustainable Forest and expert in environmentally friendly livestock methods.

The youngest in the Pedraza Ruiz family is convinced that conservation and cattle ranching are compatible.

“You confine the animals, they produce manure, and with your feet you break up the crust of soil that has been flattened by their step, you scrape and you plough, and they don’t return to that terrain until it has recovered,” he explained.

Two communities, Landa de Matamoros and Arroyo Seco, have begun controlled pasturing using electric fences, which also allows forage plants to recover.

They are also developing hydroponic forage, which is grown in water, without soil.

“The cattle are part of the cultural mindset” of the community members, said Mario Pedraza, “even if they have only two skinny cows… It’s impossible to change the mentality,” and in those cases the project does the best it can, within those limits.

ScienceDaily (June 6, 2010) — Researchers at the University of Illinois have developed a new, more accurate method of calculating the change in greenhouse gas emissions that results from changes in land use.

Government should compel property developers and companies that degrade the ecosystem to buy conservation credits

Soy fields encroach on tropical rainforest in Brazil. Photograph: Greenpeace/Rodrigo Baleia

Ensuring that nature is worth more to us alive than dead is a simple idea. It is also one the new UK government has promised to deliver.

As the Conservative party put it in their election manifesto, they pledged to “pioneer a new system of conservation credits to protect habitats“. If the detail of this idea is successfully rendered, this could transform the way we value the natural world and finance its protection. Caroline Spelman, the new secretary of state for environment, food and rural affairs, should have the policy at the top of her in-tray.

Under the scheme proposed in the manifesto, any property development that results in biodiversity loss must compensate for that loss by an equal investment in biodiversity and habitat conservation or restoration elsewhere. That’s a good start, but if such things can be successfully priced, and if investment is at a significant scale, then conservation credits should be made available in many other parts of the global economy as well.

In addition to property developers, companies that degrade ecosystem services, such as the provision of clean water and air, could be obligated to purchase conservation credits. This would include a wide variety of different sectors, from soft drink companies to manufacturers. Governments should also participate to offset any damage they might cause. This compliance market could also be supplemented voluntarily demand by investors, companies and individuals looking to make a positive difference, secure more balanced portfolios or demonstrate corporate social responsibility. Together, these could create a significant new market for conservation credits.

Of course, these measures could never be a substitute for strict environmental regulations that minimise the direct impact of developments and business activities. Nor would credits be popular among sectors who do not compensate for the negative environmental consequences they create.

Nevertheless, these barriers can and must be overcome if we are to truly protect our natural world. Pressure from rapid population growth and industrialisation, as well as ever increasing consumerism, are placing unprecedented and unsustainable pressure on the ecosystems we depend on for our survival and continued economic progress. As a result, additional funding for conservation must be found, and found quickly. An international conservation credit market is one of the best ways of doing this.

This is not a new idea. International conservation credits already exist, but are the product of one-off deals often between countries with very high transaction costs. As a result, the market for them is illiquid and inefficient. This is exactly where the international carbon market was more than 20 years ago: small and ad hoc, but we have seen how that market can rapidly evolve and improve. At last count, the compliance part of the international carbon market had delivered about $28bn of investment in carbon mitigation projects in the developing world. This financial heavy lifting and the important lessons we’ve learnt from the international carbon market could be successfully transferred to the creation of a flourishing conservation credit market.

Britain’s role as a “pioneer” of conservation credits is more important than one might think. The standards and regulations that would make an international conservation credit market scalable don’t yet exist. The UK can play a pivotal role in creating market rules that are workable and have environmental integrity. This will be particularly important for the main barrier to a viable conservation credit market: selecting a “currency” or common unit of account.

One of the reasons why carbon markets have grown rapidly was the creation of “CO2 equivalents” by leading scientists and academics. This is based on the global warming potential over a 100-year period of greenhouse gases relative to CO2. Methane for example, has a global warming potential 23 times that of CO2. As a result, one tonne of methane is the same as 23 tonnes of CO2 equivalent. This common unit of account is simple to understand and allows all greenhouse gases to be tackled in an uncomplicated way, not just CO2.

Creating a common unit of account for biodiversity and habitats is much more complicated. How, for example, do we compare ecology in Britain with that in Brazil? The answer could lie in a function between area, diversity and scarcity. One species per km², or “1 species equivalent”, could be the common unit of account, with endangered species on the IUCN Red List given a multiplier that significantly increases their value.

This is, of course, fraught with difficulty. The underlying premise of this approach is that all non-endangered species are equal. Is that justifiable? What do we do about an as-yet undiscovered species, or the number of species changing in the same km² over time, or take account of population sizes and the scarcity of different habitats? These technical and moral questions need to be resolved in a way that can ensure environmental integrity, whilst enabling the creation of an efficient market.

One of Britain’s gifts to the world could be coming up with a sensible and enduring solution to these problems. One of the first things Caroline Spelman should do is establish a panel of leading scientists and experts to report on this issue. The design of CO2 equivalents was done in this way and we should replicate the process to create species and habitat equivalents.

An international conservation credit market is some years off. But over the medium- to long-term, it could transform the amount of finance available for biodiversity conservation and habitat restoration. In turn, this would dramatically reduce the deforestation, land degradation and falling species diversity that together threaten the health of our planet and the well-being of humanity. This is really something worth fighting for and we must begin today.

Ben Caldecott is the head of UK & EU climate change and energy policy at Climate Change Capital (CCC)