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.

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The Green Skeptic on Fox Business: Paying for Green Demands

Here's a link and video from my appearance on Fox Business today with Eric Bolling:

Red Ink Watch: Paying for Green Demands

"What Keeps You Up at Night?"

Lou Rappaport of Blank Rome asked me a disturbing question the other day at the MAC Alliance Conference in Philadelphia.

On the face of it, Lou's question was a simple one:

"What keeps you up at night?"

We were interrupted before I could answer, but Lou's question lingered with me.

In fact, it kept me up the past couple of nights.

By way of an answer now, here are seven things that keep me up at night:

1.) We will fail to embrace change and tackle the new green economy.

2.) We are so deeply entrenched in partisan politics that we will blow this opportunity to lead in a sector (alternative energy) that we invented.

3.) The Dems have made climate and energy a "left" issue and the right has ceded it to them. Where is the GOP leadership stepping up to fill the McCain void on these issues?*

4.) Enviros and NIMBYs will kill the energy economy transformation by blocking efforts on clean coal, nuclear, natural gas exploration, and the new electric grid just as they did with wind farms and offshore drilling.

5.) We don't have time to dither, yet we are a nation of inveterate ditherers.

6.) While we dither and dawdle, China is ready to seize the day.

7.) I don't know Mandarin.

____________________________________________
*(Note: This is deeply disappointing for the party of Teddy Roosevelt and Richard Nixon, which once led on issues now considered clean and green – and that now seems blind to this incredible opportunity for wealth generation.)

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MAC Alliance: Promise of Clean Tech in Region

Day Two of the 2009 Mid-Atlantic Capital Alliance Conference this week featured the first clean tech track in the history of the conference, an indication that the sector is emerging in this region.

The clean tech track opened with a "financing panel," a good mix of investors, analysts, and utility service companies, including the publicly traded demand-response play Comverge and PJM, which operates the largest regional electricity transmission grid in the country.

Rob Day, a partner at the venture capital firm Black Coral Capital, came down from Boston, and Tucker Twitmyer of local heroes EnerTech Capital offered the investor perspective, along with John Roy, an energy analyst from Janney Montgomery Scott.

Day opened the session with a humorous take on the myths of clean tech in the US.

"If you read national media or the New York Times," Day opined. "You know that the only good clean tech is happening in Silicon Valley -- and it's only solar, wind, and cars. You also know that it is a capital-intensive business that is only for whiz-bang PhDs, and has nothing to do with service providers or implementers."

After letting the audience in on the joke, Day countered that, in fact, "What we're seeing is a growing awareness of clean tech innovation around the country. Real value chains are emerging here in the Mid-Atlantic region and up and down the east coast, not just the left coast."

Twitmyer agreed, suggesting that the "trend is positive for clean tech: there will be fundamental changes in our energy infrastructure; some chosen, some forced. Carbon will be priced in."

With Comverge and PJM at the table, the talk turned to demand-response and systems that will monitor and control energy assets. The panel could not come to agreement about who will benefit more: central generators and the utility industry or distributed generation resources.

But all agreed that subsidizing the advanced metering infrastructure (AMI) and smart grid, will enable a range of ancillary energy assets: transportation, reserves, storage; indeed, the entire enabling infrastructure stands to benefit.

As with everything in this sector, however, it will come down to price. (What isn't about price?)

How is the Mid-Atlantic region positioned for clean tech development? The panelists agreed it is well positioned.

"But it isn't really about one region or state over another, " John Ray of Janney reminded the audience. "It is really the US against the rest of the world -- and we have some catching up to do."

My three take-aways from the 2009 MAC Alliance Conference, especially the clean tech track:

1.) The Mid-Atlantic region has great potential, but is competing globally;
2.) We need to keep up the momentum presented by events like this and the REBN events we've held over the past year;
3.) We need more clean tech investors in the region and need to build on existing assets to attract more investors and companies.


(Eleven companies also presented at the conference. I'll write about a few of them in a future post.)

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Mark Zandi to MAC Conference: "The Great Recession is Over"

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"The Great Recession is over," Mark Zandi, founder and chief economist of Moody's Economy.com, told a crowd of investors, entrepreneurs, and others gathered at the 2009 Mid-Atlantic Capital Alliance Conference in its opening keynote Tuesday.

"In fact, it ended on August 23rd," Zandi quipped. "If you want to know the precise time, you have to buy my book."

Zandi was referring to Financial Shock, his new book about the subprime crisis.

"It was no accident that the recession ended just as the stimulus kicked in," Zandi related. "The maximum impact was felt just when the maximum contribution was made: 3Q of this year."

And that's not a bad thing, Zandi said. In fact, this former economic advisor to GOP presidential candidate John McCain said he hopes that policymakers will be more aggressive in trying to rise the tide.

"The policy response was aggressive, but it needed to be," said Zandi. "Now they need to do more."

He cautioned that "recovery will be a bit of a slaw." (I first thought he said "slog," but then he repeated "slaw," by which I think he meant a salad of mixed bag.)

The foreclosure crisis will continue and we'll start to see it hit the commercial real estate market soon, according to Zandi, perhaps by the second quarter of next year.

Zandi wasn't all doom-and-gloom and tried to reassure the crowd gathered in the grand ballroom at the Pennsylvania Convention Center in Philadelphia.

This year's conference location was significant, in Zandi's opinion, because the region weathered the recession better than other parts of the country.

In part, this is due to the fact that it didn't have very far to fall, and partly due to relatively stable real estate prices -- especially outside of New York City and Washington, DC -- but also because the region boasts healthy components that are critical to getting out of the recession and building beyond it: health care and education.

"50 year olds are the single largest age group in the US," Zandi remarked. "And they will be sucking up a lot of health care."

The second largest age group? The 20-year-old firstborns of that top group, most of whom are setting out on their secondary and tertiary educational paths. Both education and health care will be engines of growth in the future -- and the future is here.

The MAC Conference is the annual venture capital gathering for the Mid-Atlantic region, which comprises the area between New England and the South, and can include states such as Delaware, Maryland, New Jersey, New York, Pennsylvania, Washington D.C., and sometimes Virginia and West Virginia.

The Conference runs through 4 November, with company presentations and other speakers and panels. (I'll be covering the clean tech track and reporting on it here later.)

For more information, visit the MAC Alliance website.

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• 2009 MAC 2009 Conference to Include Cleantech Track, Zandi, and Godin too (greenskeptic.blogspot.com)

The Green Skeptic on Fox Business: Is Burlington Northern a Coal Play for Buffett?

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Today, I appeared on Fox Business reacting to the Warren Buffett and Berkshire Hathaway $44B acquisition of Burlington Northern. Brian Sullivan was working under the premise that the railway acquisition may have been a coal play on the part of the Master from Omaha.

My views on coal and the need for investments in R&D related to carbon capture and storage are known to readers of this blog.
Here is a link to the broadcast (will try to embed later): Fox Business

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• Berkshire Hathaway Buys Burlington Northern Santa Fe for $44 billion (businesspundit.com)
• Buffett in railroad buy-out deal (news.bbc.co.uk)
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• "Warren Buffett Buys A RAILROAD? Berkshire Hathaway Acquires Burlington Northern Railroad" and related posts (huffingtonpost.com)

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