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Beyond Carbon: Trading Regional to Global Scale Ecosystem Services

Andrew Mitchell Global Canopy Programme, UK Hylton Murray Philipson Canopy Capital Ltd.

Biodiversity and Finance Conference London 26th November 2008
London

Structure of Talk
1. 2. 3. 4. Why do forests fall Forests as Global Utilities Amazonas Initiative Canopy Capital

Acknowledgements
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science

policy

finance

Core Areas

Its Not Just About Carbon

Forests fall because they are worth more cut down than they are standing up - A Market Failure!

A Crisis of Values
• Food Security • Energy Security • Environmental Security

All on a collision course!

Demand and Poverty drive Deforestation

• Beef • Soya • Palm oil • Timber

Land Use changes are very significant
Agriculture 5.6 Gt 14% Soils and livestock Land Use changes 7.6 Gt 18% primarily deforestation Electri city & Heat Energy – 25.6 Gt 61% Consuming fossil fuels

Transport

Othe Industry r Ener gy WRI 2000 estimate all GHG CO2 equivalent

Four Market Approaches
All can help to reduce emissions from deforestation

1. PLANTATION FORESTRY 2. REDD (REDUCED EMISSIONS FROM DEFORESTATION AND DEGRADATION) 3. CONSERVED CARBON (STOCKS) 4. ENVIRONMENTAL ECOSYSTEM SERVICES

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The movie file that was used here can be found on this website:

http://www.vets.ucar.edu/vg/CCM3T170/index.shtml

The Amazon Water Pump

The Amazon Rainforest puts some 20 billion tonnes of water into the atmosphere each day. Some of this falls as rain in the Rio Plata Basin to the south. Marengo et al. 2004, Journal of Climate

RAINFALL MECHANISM IN AN UNDISTURBED RAINFOREST CLEAN ATMOSPHERE

[MODEL]

PHOTOXIDATION

+
Biogenic Cloud Condensation Nuclei (CCNs)

H2OVAPOR
N IO T A IR P S N A R T

Warm Low Level Clouds

TROPICAL ATLANTIC OCEAN

VOCs

Heavy but Gentle Rainfall

based on results of LBA: Claeys et al and Andrea et al. Science 2004; Marengo et al 2004, 2005; others

Diagram by Antonio D Nobre

Forest Ecosystem Services which could become Tradable? Untouched forest Emissions Reduction (REDD) Carbon Sequestration Carbon storage Water storage Rainfall generation Weather Moderation Biodiversity

A critical interface between the Biosphere and the Atmosphere Future markets will not just be about Carbon Paying for Services could drive billions to forest owning nations!

Forests are Global Eco-Utilities
providing services all of humanity uses but does not yet price…

The Global Context for Forests is Changing

14th May 2007

Forest Owning Nations are Gathering

Emerging Frameworks for Forests
UNFCCC - REDD/CDM EU ETS US Market Australia/Others Voluntary * CBD - PINC?

Existing and New Frameworks
Pro-active Investment in Natural Capital (PINC)

Tradable Currency = 1 hectare forest?

A Future Market Choice? ‘Living Carbon’ Rain Stored in forests + Ecosystems + Livelihood for 1.4 billion of the poor

‘Dead Carbon’ Mainly emissions from Energy Captured and stored underground

A New World Order is Emerging
Capitalism Questioned - a New Bretton Woods? • G20 Rising - G8 “irrelevant” Lula? • Middle East Money - bailed out Western Banks • Annex I Prosperity - depends on Brazil, India, China • Power has shifted • A historical opportunity • Natural Capital rising?

Losses 3 x Credit Crunch! Pavan Sukhdev - TEEB CBD COP Bonn 2008

“Are we creating wealth that’s worth having?”
Clinton Global Initiative, New York, October 2007

FEAR…. That doing nothing will add to costs …is growing
7.32 billion tonnes of CO2e released / yr…. (FAO)

One hurricane event
US $81.2 billion of losses

THE SERVICES and THE BUYERS
1. Water

Storage – 16% of global freshwater supplies - 70-80% of Brazil’s electricity depends on Hydropower 2. Rainfall Generation – 20 billion t/day; Agribusiness,
Soya, Beef and Sugarcane all depend on rain; 40% of Brazil’s cars use ethanol, bio-ethanol set to expand 3. Weather Moderation – a regional air-conditioning unit; Amazon drought in 2005 coincided with record Caribbean hurricanes US$xxxx billion in Insurance

Losses

4. Biodiversity – natural nano technology; Forest disturbance leads to a 300 fold increase in mosquito biting incidence affecting Health 5. Carbon

Storage – 150-300 tonnes/ha; 67 billion tonnes/CO2e stored = an opportunity for Carbon Markets

70% of Brazil’s electricity needs are from hydro power

Replacement of Brazil’s hydro capacity = $100 billion. Values Remaining Forest @ $260/ha.

A Different Economic Paradigm?

An Evolution in Thinking Two Brief Case Studies
•Amazonas Initiative, Brazil •Iwokrama, Guyana

Case Study 1: Amazonas Initiative
AIM: Renconcile the maintenance of 67 billion tons of CO2e with the ethical need to improve the livelihoods of its people through sustainable land uses

Virgílio Viana Amazonas State Government Brazil www.sds.am.gov.br

Amazonas State, Brazil
• • • • Amazonas Initiative Law of Climatic Changes State Parks Decree Amazonas Foundation For Sustainability • $10m Bradesco Bank • Blosa Floresta
Gov. Eduardo Braga

Improving Social Capital
• Documents • Health • Marriages

Counter Deforestation by increasing the value of forest products and services

Matrix’s Dynamics

Matrix Dimensions Desirable Condition

after
Program Action

Good Condition

Regular Condition

befor e

Critical Condition

Direction to Sustainability

Add Value to Standing Forests

Bolsa Foresta
Re50 / family/ Month Payments for Ecosystem Services Community & Dirstrict “Make no Smoke”

Case Study 2:
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Guyana Nov. 2007
• President Jagdeo’s call to the World Community

Guyana National Context
• 80% of forests intact • Major road development - Soy • Deepwater port • Oil based economy • Logging/biofuels/agriculture • Bauxite and gold mining

•McKinsey Report - Dec 2008 •A Model for the world?

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International Centre For Conservation And Development
Given to the Commonwealth in 1995 to pioneer novel ways of utilising forests and conserving biodiversity. •371,000 hectares •50% SFM; 50% Pristine •119 million tonnes of carbon •7000 strong indigenous community A key signature site for demonstrating a new financial paradigm for forest valuations.

Iwokrama Project Development
Collaborators
F C D o m m u n it y e n t u n d r a i s i n g e v e lo p m M a n a r k e t i n d g P R u b l i c n s S u B s t a i n u s in a b e s s l e

1. Iwokrama International Centre - Field Expertise 2. North Rupununi Development Board - Community Relations 3. Intitute for Environmental Security - ESS Contract model 4. Guyana Shield Inititative -UNDP (Guyana) 5. Government of Guyana

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Key Activities •Forest Research •Community Businesses •Sustainable timber harvesting •(50% only) •Eco-Toursim (lodge/walkway) •Training Courses •Equitable Benefit Sharing

Iwokrama Forest and Communities

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Investment by
• Designed to invest in Eco-System Services worldwide • High net worth investors • Secured first asset with Iwokrama • Option to value ecosystem services • Design of investment instruments • 80% upside to Iwokrama • Community business development • Only one way Standing Forest values can go!

Q u ic k T im e ª a n d a T IF F (U n c o m p re s s e d ) d e c o m p r e s s o r a re n e e d e d to s e e th is p ic tu re .

• International community must recognise the services • Minding the ‘Carbon Store’ $3c/tonne/yr wd generate $5.7m./yr or $15/ha. • Every emission will have an increasing cost • Every conservation will have a value • Time to stop talking, and start acting • World is waking up to this and will drive capital to the canopy

Creating wealth that’s worth having

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www.iwokrama.org

www.canopycapital.co.uk

www.globalcanopy.org