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. Why do forests fall
2. Forests as Global Utilities
3. Amazonas Initiative
4. 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
Energy –
Agriculture
25.6 Gt 61%
5.6 Gt 14%
Electri Consuming
Soils and
city & fossil fuels
livestock
Heat
Land Use
changes 7.6 Gt
Transport
18% primarily
deforestation
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
 QuickTimeª and a
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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 [MODEL]
CLEAN ATMOSPHERE

Warm
H2OVAPOR
PHOTOXIDATION
+ Low Level
Clouds
Biogenic
Cloud Condensation N
VOCs Nuclei (CCNs) IO
TROPICAL T
A
ATLANTIC IR
OCEAN P
S
N
R
A Heavy but Gentle
T Rainfall

Diagram by Antonio D Nobre

based on results of LBA: Claeys et al and Andrea et al. Science 2004; Marengo et al 2004, 2005; others
 Forest Ecosystem Services
whichUntouched
could become Tradable?
forest

Emissions Reduction (REDD)

Carbon Sequestration
Carbon storage
Water storage
Rainfall generation
Weather Moderation
Biodiversity
A critical interface
between
the Biosphere
and the Atmosphere Forests are
Future markets
Global Eco-Utilities
will not providing services all of humanity uses
just be about Carbon but does not yet price…

Paying for Services

could drive billions
to forest owning
nations!
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

Sustainability
Direction to
after Good Condition
Program Action

Regular Condition

Critical Condition
befor
e
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?
 Q uickTim eª and a
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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
D
C o m

e v e lo p m
m u n it y

e n t
F u n d r a i s i n g

1. Iwokrama International Centre

- Field Expertise
M a r k e t i n g

a n d

P u b l i c S u s t a i n a b l e

R e l a t i o n s B u s in e s s

C o n s e r v a t io n

a n d
R
F o r e s t

e s e a r c h
2. North Rupununi Development
Board - Community Relations
M o n i t o r in g

O p e r a t i o n s

3. Intitute for Environmental

a n d F i n a n c e

Key Activities Security - ESS Contract model

•Forest Research
•Community Businesses 4. Guyana Shield Inititative
•Sustainable timber harvesting
•(50% only) -UNDP (Guyana)
•Eco-Toursim (lodge/walkway)
•Training Courses 5. Government of Guyana
•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
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 .

• Design of investment instruments

• 80% upside to Iwokrama
• Community business development
• Only one way Standing Forest
values can go!
• 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
 Q uickTim eª and a
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are needed to see this picture.

www.iwokrama.org

www.canopycapital.co.uk

www.globalcanopy.org