REDD Ain't the New Black: 10 Concerns About Paying Countries for Forest Protection

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I was asked the other day why I think the UN's Reducing Emissions from Deforestation in Developing Countries (REDD) is a flawed, if not bad idea.

Here are 10 concerns I have about the REDD scheme:

1.) I've said it before, but will say it again: Entrusting governments to protect their forests in light of competing interests of growth, feeding hungry, and poverty reduction is very risky.

2.) We can't ensure that forest protection won't lead to shutting out the interests of local people and lining the pockets of corrupt government officials, corporations, or even NGOs. Better to trust the local community to manage their forest assets -- or at the very least, make sure they have a seat at the table.

3.) Underdeveloped monitoring and accounting could lead to unscrupulous speculation and gaming the system. How can we protect against the Bernie Madoff of the carbon market or the Enron of global forest protection? (And don't forget organized crime: Interpol, the world's leading policing agency, raised concerns in early October that chances were very high criminal gangs could take advantage of REDD schemes, according to an article in the Guardian.)

4.) We need to raise standards of living by valuing and maintaining natural capital not converting it and not, necessarily, setting it aside. And we need to ensure that the local communities have more influence and power over how their resources are managed for the multiple uses they require for access to pathways out of poverty.

5.) Right now REDD is only about reducing emissions: the money goes to those nations with high rates of deforestation. This could lead to perverse incentives or unintended consequences. If a nation has a low deforestation rate, they can't participate. What's to stop them from thinking, "Hey, if I accelerate my deforestation rate, I'll get paid to stop..."

6.) We need market mechanisms to drive protection. People won't protect it if there is no money in it, especially when cutting it down pays. We need to put a dollar value on the services forests provide: watershed protection, stabilizing soils, flood protection, as well as generating rainfall, storing carbon, and moderating the climate. What is that worth? Nicholas Stern suggested a $15B market value – that's a pittance compared to global insurance business of $3T -- a relatively cheap insurance policy.

7.) Could creating forest bonds, insurance products or user-fee water funds be tied to the ecosystem services provided by forests, ensuring that such things as agricultural productivity or water supplies linked to rainfall coming out of forests? (Some conservation groups have tried this, such as The Nature Conservancy's Water Funds in Ecuador.)

8.) We need an investment grading system for countries that participate in schemes like REDD: Those with good governance, clear land title law, and high forest protection receive AAA rating; those with high levels of corruption, conflict, and high deforestation are relegated to subprime. (This has been suggested by others, but I don't think it has been implemented.)

9.) I've said this before, too: Philanthropy and government taxes are not going to be able to protect the world's forest assets – you need viable market mechanisms and the will to unleash the entrepreneurial spirit of the people who depend upon the forests.

10.) The solutions must be market-based: If someone is getting paid $5 to cut down a tree, you're going to have to pay him $6 to leave it there; if you can pay him $10 to not cut and make some money off a related product or service, even better. We need to figure out how to make that happen and ensure there are proper financial incentives for the 1.6B people who depend upon forests for water, food, and livelihoods.

To date, rich countries have put up $52M to establish nine UN-sanctioned REDD pilot schemes in Asia, Latin America, and Africa -- and private schemes are forming through a consortia of banks, conservation groups, and other businesses.

I just don't think handing out what essentially amounts to aid to developing countries is the right solution. I do hope the Copenhagen delegates consider the unintended consequences of their bold actions. (Remember the food vs. fuel issue created by jumping on the ethanol bandwagon!)

REDD ain't the new black, at least not to this green skeptic.

Related articles by Zemanta

• Fraud menaces UN forest scheme (guardian.co.uk)
• Redd: Forests at the frontline of tackling climate change (guardian.co.uk)
• Proposal could revolutionize value of forests (cnn.com)
• Paying to save trees: Last gasp for the forest (innovationtoronto.com)
• Prepare for a Copenhagen compromise (guardian.co.uk)

Conservation: What's Ahead for Nature Conservancy with New CEO Mark Tercek?

The announcement last Friday that The Nature Conservancy (TNC) has hired Goldman Sachs' Mark Tercek as CEO came as a surprise.

Many familiar with TNC expected longtime employee and acting CEO and current COO Stephanie Meeks to get tapped for the job. Others felt it was time to look outside of the organizations ranks and bring in a global player.

But Mark Tercek, currently a managing director at Goldman Sachs and head of the Goldman Sachs Center for Environmental Markets as well as the firm’s Environmental Strategy Group, was a candidate from left field. That could be a good thing. (I speculated earlier in the year that another Goldman alum, Henry Paulson, might be considering the post, but alas, he has his hands full at present.)

Mr. Tercek, according to TNC, "combines global business experience, experience working effectively in different cultures and recognized leadership on climate change and other environmental issues."

"Building on our 57 years of conservation results, The Nature Conservancy is working with partners to expand our global reach to achieve our challenging 2015 Goal of effectively conserving 10 percent of all natural habitats on Earth," said John P. Morgridge, chairman of the Conservancy’s board of directors.

"At this important time for conservation and for our organization, Mark's knowledge of global cultures and governments, his passion for conservation and his experience as a decisive consensus builder in an intensely results-oriented organization positions him to lead the Conservancy to accelerate our work around the globe.”

"To ensure a smooth transition of leadership," according to a TNC press release. "Ms. Meeks, who has served as the Conservancy's acting president and CEO since October and as its chief operating officer since January 2007, has agreed to continue in those capacities through the beginning of Mr. Tercek's tenure."

"I have long admired The Nature Conservancy and have an enormous amount of respect for its global mission," said Mr. Tercek. "As climate change, habitat loss and other global trends continue to threaten our planet's biodiversity, the world needs the Conservancy's effective, practical solutions now more than ever."

"Mr. Tercek is currently collaborating with Resources for the Future, the World Resources Institute and the Woods Hole Research Center on projects concerning climate change.

"He serves on the Council on Foreign Relations' independent task force on climate change and the Wildlife Conservation Society's Chilean Advisory Council. He is a member of the Steering Group on the Prince of Wales' Princes' Rainforest Project.

"In addition, Mr. Tercek has worked with Nature Conservancy board member Dr. Gretchen Daily, professor of biology at Stanford University, and Conservancy chief scientist Peter Kareiva on advancing finance and policy mechanisms for valuing forest ecosystems for the vital roles they play in supporting human well-being, thereby creating alternatives to rainforest destruction."

"Mark is opening innovative possibilities for aligning economic forces with conservation," Dr. Daily said. "His vision is central to taking conservation to scale, incorporating the values of nature into real decisions and engaging leaders globally."

With his background at Goldman and focus on market-based solutions, this could be a new era for TNC as it wrestles with threats to its mission from climate change and the undervaluing of the benefits provided to people by natural capital.

It will be interesting to watch how new blood influences the organization, specifically in terms of how it plays in the carbon market-generation space, where it could have a huge role.

Some of the more immediate impacts of climate change are already being felt at Conservancy sites around the globe. Will the new CEO marshal the resources necessary to assess and address climate-based threats to its portfolio of places and risk to its land-rich asset base?

An interesting move. We'll keep an eye on how this plays out over the coming months.

(Disclosure: The author was an employee of The Nature Conservancy until August of 2007.)

World Water Day: No Drop Left Behind

Water is one of the most precious resources on Earth. Clean drinking water is essential to human life -- but only 10 percent of global water use is for human consumption.

The other 90 percent is used for a combination of direct inputs to industry, agriculture, transportation, recreation, producing hydropower and cooling nuclear power plants, and sustaining the ecosystems upon which we depend.

Over the last century, according to the United Nations, water use increased sixfold, twice as fast as the population rate.

The increase has led to water shortages around the globe. Experts from the International Water Management Institute now estimate that by 2025 over three quarters of the people on Earth will be affected by water scarcity.

Today, 40 percent of people globally (@ 2.8 billion) deal with some degree of water scarcity. Whether physical shortage or issue of access, shortages are increasing demand and competition for water. (Darfur is the poster example for what conflicts can arise from the perfect storm of water scarcity.)

March 22nd is World Water Day,a UN General Assembly designation to call attention to the issue of water scarcity and push for more sustainable management of the resource.

Clearly, global water use patterns are not sustainable. Some scientists claim that current water use rates will lead to such a shortage that there may not be enough water to produce the food needed by the world in 2050.

Not to mention the potential collapse of important ecosystems and the corresponding benefits, which may have a cascading effect on people and economies.

Integrated water resources management may help the situation, as some propose, but it is clear that we need a better method for calculating the true value of our fresh water resources.

The bottom line: No longer can we assume that past abundance of water is a guarantee for our future water returns.

Social Entrepreneurs: Global Water Challenge and Ashoka's Changemakers Announce Worldwide Search for Solutions to Water Issues

Global Water Challenge (GWC) and Ashoka's Changemakers have partnered to launch Tapping Local Innovation: Unclogging the Water and Sanitation Crisis, an online collaborative competition to discover and support entrepreneurs large and small who offer groundbreaking approaches to the most pressing water and sanitation challenges.

The Coca-Cola Company is contributing a lead grant of US$1 million to support the collaborative effort to find and fund truly innovative solutions that address the water crisis. This commitment and partnership were announced at the World Economic Forum at Davos today. The Forum has fostering Collaborative Innovation as one of its stated goals.

Most people do not think about water; they turn on a tap and clean water flows readily. But for more than 1.1 billion people around the world, access to safe water is a constant concern. Suitable sanitation facilities are in even shorter supply. A lack of basic bathroom facilities deprives 2.6 billion people of human privacy and dignity.

"We have both the resources and the will to live in a world in which everyone can drink clean water and use a safe toilet," said Paul Faeth, Executive Director of GWC. "This open source competition is unique in allowing social entrepreneurs working in the farthest corners of the world to connect with a dynamic community of experts and funders that can improve and expand the impact these entrepreneurs can have."

"Global Water Challenge seeks to make existing projects even stronger and connect local innovators with global investors who can bring solutions to scale. By partnering with Ashoka's Changemakers, Global Water Challenge has a platform to challenge the world's entrepreneurs to use their substantial talents to solve the world's water and sanitation crisis," says Charlie Brown, the executive director of Ashoka's Changemakers. Brown notes that the Changemakers Web site encourages collaboration and discussion to draw out and strengthen the most effective ideas.

Innovators can post their applications on the Ashoka's Changemakers Web site at www.changemakers.net now through March 26, 2008. During this time, applications will be available to anyone for review, comment and discussion.

Once the entry period has closed, a panel of judges, including Ian Callaghan, Director of the Microfinance Group at Morgan Stanley, and Dr. Sanjay Gupta, Chief Medical Correspondent on CNN, will select finalists and the global online community will vote for the winners. The winners will receive funds in recognition of their work.

About Global Water Challenge

Global Water Challenge (GWC) is a coalition of leading organizations, which have joined forces to catalyze transformational change in the water and sanitation sector. We believe that we have both the resources and the will to live in a world in which everyone can drink clean water, and use a safe toilet. Our mission is to generate a global movement to meet the urgent need for safe water and sanitation by spurring collective awareness and investment in innovation by corporate, public and nongovernmental actors. GWC focuses on collaborative learning, connecting leaders, and investing in sustainable, replicable, and scalable projects.

About Ashoka's Changemakers

Ashoka's Changemakers is building the world's first global online "open source" community that competes to surface the best social solutions to the world's most pressing issues. We focus on thematic, collaborative competitions, inviting innovators from around the world to profile and collaborate with a global community of investors, thought leaders and enthusiasts. To date Changemakers has launched 14 successful collaborative competitions and attracted more than 2,000 high-impact solutions from more than 125 countries. Changemakers builds on Ashoka's 26 year history identifying and selecting leading social entrepreneurs and its belief in "everyone a changemaker" global society.

Get involved by visiting Changemakers online (you must register to participate).

(Disclosure: I am an employee of Ashoka, although I do not work for the Changemakers.net initiative -- much as I admire the model. I am a shareholder in Coca-Cola through funds that I hold with Fidelity Investments.)

Philanthropy & Environmental Change: Why Gore Chose I-banking over Non-Profit

"It certainly was not for the money," writes Susan Raymond of the philanthropic consulting firm Changing Our World (see onPhilanthropy), since 100% of former Vice President Al Gore's salary will be donated to the Alliance for Climate Protection.

"Rather, Mr. Gore's new affiliation with Kleiner Perkins Caufield & Byers, announced on November 12, reflects the evolution, and even maturation, of the environment as a matter of for-profit markets rather than as a matter of nonprofit endeavor."

Readers of this blog know I have been skeptical about the ability of the philanthropic capital market to address the growing and pervasive environmental problems we face. Ms. Raymond, whose opinions I have quoted before, adds some numbers to the argument:

1.) On the nonprofit side and in the U.S., an estimated $6 billion flows to environmental causes. This represents more than a tripling of funding in the last 20 years. Still, that $6 billion represents just 2% of all philanthropic giving. An examination of the grant making of private foundations finds a similar pattern.

2.) In 1998, foundations made nearly 5000 grants to the environment totaling $455 million. By 2005, that had increased to 6500 grants for over $800 million. Yet, environment as a percentage of all grants remained at 5%, and the portion of total grant value only increased to 5% from 4.7%.

Now to the other side,

1.) The total value of the global environmental technologies market is $600 billion, 100 times the size of environmental philanthropy.

2.) Environmental technology and services companies represent over 1.4 million jobs in the U.S. in 115,000 private companies. And those markets are growing as the drive for environmental protection spurs innovation and new technologies.

But "technology is increasingly the least of the market," writes Raymond. "Pollution, water rights, and even biodiversity are themselves becoming financial markets....the market for SO2 allowances is valued at $4 billion, with swaps, puts and calls, and emissions allowances are used as collateral, being loaned or swapped for other pollutants. And pollution? In the U.S. SO2 emissions are on track to fall to half their 1980 levels by 2010."

Raymond goes on to note that "some financial observers expect the environmental commodities market to have a valuation of $1 trillion by the end of 2012."

Payments for ecosystem benefits is also making progress, albeit slowly. Raymond cites a Costa Rican example, wherein "forest owners are paid for the environmental services provided by their bio-assets, carbon, biodiversity, watershed management, and natural beauty. In the decade 1996 to 2005, the program preserved the forests and increased household income by 15%."

And, as I've reported previously, some big name players, such as David Brand, founder of New Forests Pty Limited, and Priceline.com co-founder Jessie Fink, are getting into the game.

This is not to say that the non-profit approach to environmental change is dead in the water. But I think it's important to take notice of the emerging market being created from the intersection of financial innovation and environmental private action.

If it all leads to an accelerated response to global environmental issues -- water, climate change, or biodiversity loss -- then perhaps the market herd will move to greener pastures.

Ecosystem Benefits: Brand and Fink Creating Markets for Nature's Services

Next month's Wired Magazine features a piece by David Wolman on efforts by "eco-capitalists" to create new markets for the life-sustaining services provided by Nature. That's right. Call it natural capital, ecosystem services (see my earlier post on that subject), environmental markets, ecological assets, or as my former colleague John Kinch and I coined it, ecosystem benefits. Whatever. These are the services provided by nature free of charge -- or free until now.

In an effort to create viable markets for such services as clean water, storm surge protection, and greenhouse gas build-up, people like David Brand, founder of New Forests Pty Limited, and Priceline.com cofounder Jessie Fink, among others, "are betting that successful trading of carbon will kick-start the creation of other cap-and-trade systems for ecological services like watershed protection, biodiversity, and erosion control."

Read more @ Wired: Eco-Capitalists