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The writer is the author of ‘Pricing the Priceless’ and is a special advisor to CDP
Nature is the most exploited, underpaid worker in history. So is it time to make amends? It seems like.
“Nature needs money,” said Brazil’s President Luiz Inácio Lula da Silva at the Amazon Summit in early August. It is time, he declared, for the world “to create a mechanism to fairly compensate for the environmental services that our forests provide to the world.”
There is nothing new in that statement. I heard a similar challenge at the historic Earth Summit in 1992, when a Brazilian woman asked, “If the North cares so much about the rainforest, why don’t they rent it from us?”
Nature needs money and more protection, but we have never met the need commensurate with the value of the constant work it does – such as retaining and filtering water, retaining soil by trees and plants, pollination, irrigation, aesthetic and spiritual improvement. pollination and of course carbon sequestration.
We must now abandon the conventional approach to value and establish systems that view nature as economically indispensable.
The economist Partha Dasgupta has written: “The view that the biosphere is a mosaic of self-healing properties also includes its role as a sink for pollution. . . The damage that has been done. . . should be interpreted as depreciation.” It follows that this depreciation must be stopped. This was the essence of the call made at the Amazon Summit to avoid a ‘point of no return’ for the rainforest.
But how? Fortunately, new financial instruments have emerged to help us invest in the value of the economically measurable benefits that nature provides. A fascinating potential mechanism is the forest resilience bond, a pilot in Lake Tahoe, California, issued with capital from public and private investors.
The money generated in advance is used to strengthen forest protection services that improve resistance to forest fires. The bond is repaid by disparate beneficiaries of resilient forests, who reap the quantifiable benefits over time. The first FRB was capitalized in 2018 by foundations and private investors with a face value of $4 million. Today there is a second $25 million bond, plus an innovation fund of another $25 million, and an emerging portfolio of smaller forest projects.
Another approach is direct reward, where countries rich in biodiversity or carbon storage potential would be paid to refrain from certain forms of exploitation, including fossil fuels, perhaps based on an annual average carbon price per tonne in mandatory carbon markets.
Such a direct payment to countries would compensate them for their contributions to future global climate stability, rebalancing the dynamic between lenders and borrowers. If the world cannot tackle climate change without the ecosystem services provided by certain countries, which country is the debtor and which country is the creditor?
For example, why not set up a special purpose consortium of large private banks and multilateral financial institutions to monitor and transfer the ‘service payments’ to the central banks and sovereign indigenous tribal institutions of the countries involved? Nations could then direct these debt-free payments not only to better environmental protection, but also to expanding social safety nets and supporting people who may lose their livelihoods. Compared to the runaway socio-economic costs of combating climate change and other environmental degradation, such a payment system would be a bargain.
Mia Mottley, Prime Minister of Barbados and architect of the Bridgetown Initiative, who called for a review of international financing, invoked the concept of ‘paying for nature’ when explaining why her country remains involved in the exploitation of natural gas. Speaking at September’s Climate Week in New York, she said: “I would like someone to pay me to keep our natural gas in the ground and in our oceans, but if not, how can I finance net zero and ensure my energy supply remains secure? country has access to a credible energy supply?”
Daily events warn us that our ‘line of credit’ with nature is running out – stifling heat, suffocating droughts and rampant floods and forest fires around the world. Are we destined to catalog these phenomena only when there is money to control them?
As Lula said, “Mother Nature needs money because industrial development has destroyed it over the past 200 years.” Trillions of dollars roam the world in search of uses and purposes. Where that tide flows will largely determine our planetary health. The global economy is already directly subsidized by nature, so why not subsidize nature in return?
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