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Can Finance Save Forests?
Green Futures, 27 Oct 09

By Martin Wright

If rainforests are so valuable, why can’t we make them pay? For years, that was a rhetorical question. Not any more. Martin Wright on our last, best hope of saving forests – and the climate.

children_gf%20article%20resize_160%20x%20226.bmp It’s a gorgeous June day, 2040, deep in the Amazon rainforest. Peering through the clouds, you can see your pension plan – the vibrant greens of the canopy, reassuringly intact. Panning left, you can just make out the line of the last logging road, long swallowed up by the jungle. To the south, at the forest’s edge, the new growth springing up, high-yield plantations buffering the jewel…

As you watch, a bubble appears out of the trees: a few lines of text summarising the latest carbon / hydro cycle stats. It’s good to know that the Forest Monitors are out and about – two Kayapo elders in this case, uploading new data before retiring back to the longhouse in time for the football. Sometimes you envy their simple life – and their subsidised satellite sports.

Then you switch off the screen and head out into the London streets, secure in the knowledge that your investments are safe, that the rain will keep falling, the climate will carry on settling down…

It’s the same story across the Atlantic, in Cameroon, Congo, even Indonesia … Around much of the tropical belt, in the mid-21st century, rainforests are recovering, even expanding. Why? Because an awful lot of people are making money, serious money, from the simple fact that forests left standing are worth more, much more, than forests cut down.

Standing forests are soaking up carbon, stabilising the climate, smoothing out the water cycle. They’re providing a steady, sustainable harvest of medicines, even a little high value timber. All vital, and so all immensely valuable services. And thanks to some sophisticated financial products, these services are yielding an income to everyone from forest tribes to governments north and south to … you. It’s mammon and morality hand in hand, under one canopy.

Markets not philanthropy

It may seem a long way from today’s reality, but it’s entirely plausible. And there’s a ferment of activity under way now trying to bring it about. Ever since the 1980s, campaigners have been insisting that it’s economic madness to liquidate irreplaceable rainforest ‘capital’ in return for the relatively paltry revenue from logging or cattle ranching. The alternative – cash for conservation, or so-called ‘payments for ecological services’ – is not a new idea. It’s been tried before, on a relatively small-scale [see ‘How much do you want this forest (in millions)?’], with mixed results. But now there’s an urgency and an excitement around it, driven by everything from the looming climate negotiations, to financiers’ endless appetite for coming up with new ways to make money. And you can add to that the widespread acceptance that pretty much everything else we’ve tried – new laws, protected areas, ‘extractive reserves’, pious international declarations – has failed to even slow the pace of destruction.

The loss of tropical forests is by far the largest single source of greenhouse gas emissions after energy, contributing up to ten times as much as aviation. Indeed, burning forests – the commonest form of destruction – produces a particularly nasty double whammy of warming. As they burn, they send vast swathes of greenhouse gases into the atmosphere. And once they’re gone, they can’t soak up the carbon emitted from other sources, like industry, cars, power plants. The Stern Review, no less, warned that rainforest loss alone would, in the next four years, release more carbon into the atmosphere than every flight from the dawn of aviation until 2025.

Faced with this, many are increasingly convinced that only money will talk. Among them is Andrew Mitchell, founder of the Global Canopy Programme and now an adviser to the Prince’s Rainforest Project (PRP). “At the moment”, he says, “you can only make money out of forests when you convert them to something else – timber or beef, soy or palm oil... So in global markets, forests are worth more dead than alive. This is what we need to turn around. Philanthropy and governments won’t do it. You have to look to markets to overturn what is in fact a market failure… What we’ve got for free, we don’t pay for.”

Carbon as currency

Meanwhile, unless you pay people not to do something, they’ll carry on doing it, says Tasso Azavedo, Director General of Brazil’s Forest Service. “Say you want to close down an illegal logging site. You can do so in 15 minutes. You just send in the police or the army and lock everything down. But 50 people will lose their jobs.” And unless you create better-paid alternatives, they’ll soon be back cutting trees, there or elsewhere. “We have to put something else in place to keep the money flowing. We have to create a new economy.”

And the most obvious currency to fuel that new economy, given forests’ role as climate stabilisers, is carbon. Cutting forest destruction by half, says the Stern Review, would cost around $10 billion-$15 billion a year. “That’s about the same amount that we in Britain spend on wine, beer and champagne”, Mitchell exclaims. “We’re spending more on binge drinking than we the total amount we need to save rainforests!” Others put the bill a lot higher, but the benefits still hugely outweigh the costs. Johan Eliasch, who led a review on the subject for the UK Government, has put a number on it. Compared to taking no action at all, he says, “the mean global net benefit of halving forest emissions is estimated to be $3.7 trillion”.

It sounds like the mother of no-brainers. “In effect”, says Tony Juniper, former Director of Friends of the Earth, who now works with the PRP, “it comes down to paying countries for either reducing their rate of deforestation, or not starting it in the first place”. In practice, that means providing cash as compensation to loggers, ranchers, farmers and so on, in return for them laying off the forest; and paying others – from enforcement agencies to tribal communities – to ensure existing forest remains intact.

That principle is provided for, to an extent, in global climate agreements, and is expected to be firmed up at Copenhagen in December 2009. It’s covered under the arcane sounding REDD (‘reducing emissions from deforestation and degradation’) and REDD+ (which covers new planting and the management of existing forests). The devil is in the detail – and there is no shortage of that. To the uninitiated, it seems easier to plot a path through impenetrable jungle than pick your way through that little lot. But in very broad terms, it works like this.

Virtual tree huggers

Forests store carbon. If you’re a rich world government, you’re facing some challenging carbon reduction targets. One of the most cost-effective ways of meeting those could be to pay upfront money to keep forests in being, so soaking up ‘your’ carbon and preventing further emissions that would be caused by their destruction. And as and when the world finally has a functioning carbon market, investments made now could prove lucrative in the future. Hence the appeal of raising billions of dollars through ‘rainforest bonds’ and similar instruments.

Technological advances play their part, too. Until recently, you couldn’t be sure just what was happening in a remote corner of a rainforest. But now satellite mapping can zero in on tiny sections of forest, almost down to the scale of individual trees; radar can ‘see’ through clouds. (You can log, but you can’t hide.) Sophisticated software can calculate the carbon storage capacity of any given area. It is, as one observer put it, like having a combination of global CCTV and a high-tech sniffer dog. On the ground, meanwhile, local people wielding ruggedised icon-based touchscreen gizmos – like a sort of chunky iPhone - can map and monitor the health of their surrounding forest literally tree-by-tree. Microchips inserted into selected trunks can report instantly if they’re felled – and then track the timber as it’s transported, electronically fingering everyone involved.

But before we all get carried away with optimistic talk of shiny new technology and billion dollar bonds, perhaps we need a reality check. Simon Counsell, Executive Director of the Rainforest Foundation, is ready with one: “It’s completely unclear how the forest carbon is going to be measured or monitored, it’s not clear who owns it, what role the government would have, how funding payments would be distributed… These are deeply political and, as yet, highly intractable problems. The evidence so far has been that if you throw something as potentially lucrative and uncontrollable as these vast markets for forest carbon into the very unstable governance mix in most of these countries, it’s going to make things worse”.

Counsell has first hand experience of inflated expectations. “I witnessed this very closely with the Democratic Republic of Congo, where the Minister of Forests said (to paraphrase): ‘We are going to cut all our forests down unless you give us a billion dollars to protect the carbon in them’. Later on, after lunch with the World Bank, he said: ‘We are going to cut all our forests down unless you give us two billion dollars’. I believe it’s now gone up to three or four billion…”

Other reports speak of ‘carbon cowboys’ descending on unsuspecting tribal communities in Papua New Guinea, waving bogus carbon certificates and persuading landowners to sign away their rights. Even without corruption, a sudden surge of ‘forest carbon’ could in effect flood the market. Result? The price would collapse, making any mitigating action outside forests uneconomic, so putting the decarbonising of the industrial world’s economy back years, if not decades.

Billion dollar bonds

Maybe, but meanwhile, the world’s most effective carbon sinks are going up in smoke, and we’re throwing money at unproven alternatives which may not, to stretch a metaphor, even hold water. Like carbon capture and sequestration (CCS). Mention of which has Andrew Mitchell spitting with indignation. “Forests are an incredibly effective free machine [to absorb carbon]. And what are we doing to that machine? We are tearing it down and trying to build a new one – CCS – in 15 years with technology no-one has tried before and which will cost us at least $150 per tonne [of carbon stored]!”

Talk of carbon markets may in any case be a red herring, says Alice Chapple, who co-ordinates Forum for the Future’s work on forest investments. Under global climate agreements, governments will be committed to carbon reductions. “Say you’re a bond issuer in the London market, you can see these cash flows that are completely committed over a period of time, you know the Government is absolutely on the dotted line for doing this, so you say, ‘OK, well I’ll issue a billion dollar bond because I know that I’m going to get repaid on an annual basis by the government over a long period of time.”

And forests do more than store carbon. They have a host of other benefits, not least rainfall. Much of Latin America’s agriculture depends on rainfall generated by the Amazon forest. There’s billions of dollars in commodity earnings dependent on those trees staying put – and that means there’s potential for bond-style investment there, too.

It’s heady stuff – but meanwhile, there’s consensus we need to ensure that the essential basics of good governance and capacity building are in place, and that needs developed world funding. We need to act now, because any deal reached at Copenhagen won’t kick in till 2013, and will need time to have an effect. As Juniper says: “It may or may not involve markets, it may involve some kind of fund mechanism, it probably will be a hybrid of the two. It may or may not be linked into global carbon markets, fungible with industrial carbon markets in the North. All of that is controversial and complex and will take time to sort it out. But the money needs to be stumped up now through a very simple, straightforward arrangement, where countries are paid for the hectares of forest that they don’t cut down”.

“The one thing you have to keep in your head”, says Mitchell, “is that doing nothing is not an option. If we stand back and do nothing for another decade, we will lose half our rainforests, and we will lose the fight against climate change.”

This piece originally appeared in Green Futures. Green Futures is published by Forum for the Future, one of the leading magazines on environmental solutions and sustainable futures. Its aim is to demonstrate that a sustainable future is both practical and desirable – and can be profitable, too.

Image Credit: Daniel Beltra, The Prince’s Rainforests Project and Sony

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Comments

Reminds me of the first time I went to Texas. I asked an old timer "What kind of climate do you have here?" ... he looked me in the eye, and in Texas drawl exclaimed "Boy, I don't reckon we got any climate here, alls we got is weather" ...

That is the way climate change is going to be, not just something that happens to the other people, it is the end of climate and the beginning of weather only for all of us.


Posted by: Dredd on 27 Oct 09

when you say we should pay the loggers, etc, to stop destroying the forests what would we be paying them for? if they're not working but still getting paid what would be the justification for the payment?


Posted by: Larry on 28 Oct 09

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