How much do you want this forest

How much do you want this forest (inmillions)?

16 July 2007

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Global — You can’t measure the value of a rainforest in money. Or can you?It’s a debate which could have a huge impact on future strategies for curbingclimate change and catastrophic forest loss.

When the world’s leading science magazine, Nature, carried anarticle arguing that the new zeal for market-oriented conservation was sellingthe environment short, it caused a flap as loud as a flock of hornbills in aBorneo rainforest.

Author Douglas McCauley of Stanford University was responding to the growingtrend among groups such as the World Conservation Union and ConservationInternational of putting a price on the services that nature provides andseeking market-based solutions to preserve them.

“The underlying assumption is that if scientists can identify ecosystemservices, quantify their economic value, and ultimately bring conservation morein synchrony with market ideologies,” said McCauley, “then thedecision-makers will recognise the folly of environmental destruction and workto safeguard nature.”

That, he argued, sent a dangerous message that nature is only worthconserving where it can be shown to be profitable – and that the rest iswithout value.

The ink spilt in the next issue’s letters column ran to many times theoriginal article – a measure of the sensitivity of the nerve he had hit.

“The value of greenhouse gas storage in some forests could be as high as$2,200 per hectare.”

At the heart of the debate is a growing awareness of the vital role played byforests in the fight against climate change. Curbing deforestation, said theStern report, is a “highly cost-effective way of reducing greenhouse gasemissions”. Recent estimates from economists suggest the value of greenhousegas storage in some forests could be as high as $2,200 per hectare and theaesthetic value of intact coral reefs may be worth $2 billion to the coral-basedtourism industry.

So is McCauley right? Are the pitfalls of auctioning off the world’snatural resources too great? Or must we commodify nature in order to save her?

A service to the planet

The concept of putting a price on nature’s head has been around for a while,but burst into popularity ten years ago. That was when a group of ecologists andeconomists came up with the electrifying estimate that nature’s ‘services’to the planet – the life support system provided by wetlands, forests,grasslands and oceans – amounted to $33 trillion a year. That’s almost twicethe GDP of all the countries in the world combined.

Conservation groups, particularly in the US, began to think that the almightydollar, hitherto regarded as nature’s archrival, could instead be enlisted asa powerful ally. Rather than relying on rich world governments and individualsto bankroll efforts to save the planet, investment money could be drawn in –and the people who live in sensitive areas paid to protect them. A win-win allround, surely.

The inclusion of forestry in the global carbon-trading mechanism set up bythe Kyoto Protocol took the concept straight to the heart of global financialmarkets. It allowed companies and governments to compensate for their CO2emissions by planting trees to act as carbon ‘sinks’.

Today such ‘payments for ecological services’, or ‘PES’ as they’reknown, are made to projects as diverse as ecotourism in the Andaman Islands,mangrove planting in communities devastated by the 2004 tsunami, debt-for-natureswaps in Guatemala, wildlife protection in Namibia, and watershed conservationin New York state. The UK government is an enthusiastic participant: GordonBrown has pledged £50 million to help the inhabitants of Africa’s Congo Basinfind livelihoods that help conserve the area’s remaining rainforest.

“The trick is to make it in people’s best interest to protect theenvironment. What’s the most powerful way to do that? Make natureprofitable.”

For US academic Gretchen Daily, co-author of The New Economy of Nature:the Quest to Make Conservation Profitable, it’s an approach that makesperfect sense. “This century we’re driving probably half of the world’sspecies to extinction – the very plants and animals that control processes wedepend on, like the carbon cycle and pollination. And our conservation effortshave hardly made a dent… The trick is to somehow make it in people’s bestinterest to protect the environment. What’s the most powerful way to do that?Make nature profitable.”

Proponents of PES point to the success of the Catskill/Delaware watershedscheme. Faced with a potential bill of $6 billion in a filtration plant to keepits drinking water pristine, New York City decided instead to invest inprotecting the forest reserves in the watershed. The result was the same –clean water.

Avoiding carbon colonialism

But this is in the wealthy and sparsely populated first world, where humansare not economically dependent on natural resources. The ‘opportunity costs’,to use the economic term, of removing people from land are small.

It’s a completely different story in the third world, where access tonature is a matter of life and death for 800 million people, according to theWorld Resources Institute. It argued that, while in theory protection money forforests could give local people a route out of poverty, most PES programmes failto reach the poor. It cited the experience of Costa Rica, where landowners werepaid $45 per hectare to conserve their forests. While theoretically open to all,in practice only the wealthy landowners were able to benefit, due to thecomplexity of the process and high transaction costs. Meanwhile, the poorcontinued to lose out through land grabs.

For Alice Chapple, director of sustainable financial markets at Forum for theFuture, “it’s all about alignment of interests. In the richer countries, wewant to reduce deforestation to stabilise climate change. But this may not bethe immediate priority for local communities or governments. Payments torecognise the additional long-term economic, environmental and social benefitswe get from the forests make sense to encourage the relative value of short-termalternative land uses to be properly assessed.” 

However, she warns, “we need to understand the complexities and theinterests of people on the ground if we are to avoid so-called ‘carboncolonialism’”.

Maryanne Grieg-Gran of the International Institute for Environment andDevelopment (IIED), who conducted research for the Stern report, said paymentsto local communities can succeed in conserving threatened habitats, but not ifmoney is the overriding factor. “You have to start with what the localcommunities want. If what you are offering is part of their desired livelihoodstrategies and done in a holistic way, it might work.”

This is being tested on the ground in ten pilot PES projects for watershedconservation in Peru, Guatemala, Tanzania, Indonesia and the Philippines. Theschemes are run by IIED, Care International and WWF.

In each river basin they chose local communities of poor farmers with whomCare already had a relationship, and identified potential downstream‘buyers’ – mining companies, breweries, state-owned hydro power companies– that would be willing to compensate the communities to manage the watershedforests.

Working upstream

Involving local people at the design stage was crucial, says WWF’s KirstenSchuyt. In Dar es Salaam, where drinking water supplies are frequently cut offbecause of high levels of silt coming down from the Tanzanian mountains, themunicipal water board has agreed to pay farmers upstream of the city to carryout simple techniques, such as terracing and contouring, to reduce silt levelsin the water coming off their land. Schuyt says much of the initial work hasbeen to build the capacity of impoverished communities to negotiate with privatecompanies. “We’ve been talking to the communities, finding out what theywanted and how they wanted to be paid, either in cash, alternative livelihoods,schools or roads. We’ve acted as intermediaries because it would have beendifficult for them to contact the private sector on their own.”

But even with so much careful preparation, the chances of the projectssucceeding are not that high, admits Ivan Bond, senior researcher at IIED, whohas been working with Schuyt on the watershed project. “If we get four out often sites we’ll have done very well,” says Bond, a Zimbabwean who has spentmost of his life in the developing world.

“These are extremely complex arrangements where you must have clear-cutbenefits to both sides.” It’s still worth a shot, he adds. “Neitherconservation nor development are risk-free zones, especially if you are doingsomething right.”

All of which means there’s an increasingly urgent need to come up with newapproaches. For its part, Forum for the Future is working with Enviromarket, theDepartment for International Development and the International FinanceCorporation to develop a financial instrument which could match the long-termliabilities of pension funds with the long-term assets of sustainably managedforests. It has considerable promise, though as Alice Chapple acknowledges:“The idea is simple – but the practicalities are not.”

In his Nature article, McCauley said that morality, rather thanmoney, must be the motivating force for conservation. And he cited theinternational ban on commercial whaling, the US national parks system, and theCITES ivory trade ban as battles won on moral grounds.

“Why polarise the debate?” asks Bond. “We need a multidisciplinaryapproach, with different processes to deal with different problems. The world isa complicated place.” He’s not convinced by some of McCauley’s goodexamples, either. The proliferation of elephant populations since the CITES banhas had a “horrific” impact on biodiversity in Botswana and Zimbabwe. Andattempts in East Africa and elsewhere in the developing world to replicate theexclusion of humans from national parks and protected areas are unjust andineffective, he claims. “The conservation world should have realised that theutter exclusion and displacement of people is not a good thing.”

Value for money?

Maryanne Grieg-Gran says McCauley has got it wrong in saying PES devalues thebits of nature that bear no price tag. “It’s about trying to identify groupsor individuals who might benefit from the services and want to contribute tomaintain them,” she says. “Valuation is done, but knowing it’s only partof the picture. With regulation you may not be putting a value on anything.It’s almost a recipe for doing nothing.”

Yet questions remain over the long-term effectiveness of paying forecological services, too. Research on a widely applauded scheme in Mexico, thatpaid landowners not to cut down trees, showed that as little as 11% of the land‘secured’ was actually at high risk from deforestation. And critics havepoured doubt on claims that the recent increase in forest cover in Costa Rica isdown to PES. 

Such difficulty in proving ‘additionality’ has prevented deforestationfrom being allowed as part of the Kyoto carbon-trading process. But this couldbe changing. There is growing pressure from a coalition of countries, includingPapua New Guinea and Costa Rica, for it to be included. The Stern report arguesthat with 20% of global CO2emissions related to tropical deforestation – twice as much as from transport– the price of continuing to exclude forests from the carbon trading mechanismis too great.

And many conservationists agree. Take Indonesia, says WWF. Unless there isfinancial reward for maintaining forests, there will be little to stop thembeing chopped down for palm oil production. “The forecasts for palm oilproduction are terrifying,” says Beatrix Richards, head of forest tradingpolicy at WWF. “If it carries on expanding at this rate it will eat straightinto the pristine areas that are left. We need a whole range of tools in ourarmoury to fight this.”



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