Andrew Mitchell, BBC Green Room 13 Oct 08;
Amid the global financial crisis, it is time to recognise the wealth we enjoy from nature's capital, says Andrew Mitchell, director of the Global Canopy Programme. In this week's Green Room, he argues that there will be no government bailout if we fail to protect the vital services provided by the world's forests.
The world's largest gathering of conservation scientists and NGOs have been meeting in Barcelona to ask: "What price do we put on nature?"
In these extraordinary times of credit crunch and climate change, the world feels hitched to an uncertain roller coaster ride where we don't know what to value any more.
What investors thought was safe as houses has turned out to be nothing more than the property of the poor disguised in a silver wrapper, enabling bankers to pocket billions.
In a curious way, all this chaos may turn out to be a good thing because it will force the world to ask: "Are we creating wealth that's worth having?"
A wine broker said to me recently: "The thing about investing in a first growth is, the more the world drinks a good vintage, the more valuable it gets."
So could disappearing forests one day be a safer investment than houses.
Balancing the books
A major new theme of this Congress of the World Conservation Union (IUCN) is about how we value natural capital, which up to now has not appeared on company balance sheets.
I believe the current financial crisis may force the global community to right that wrong, along with many others, because we all want a more stable economy.
However, in global markets today, rainforests are worth more dead than alive. Poor and often opaque governments, with little to sell, offer their rainforests to raise revenue, attracting largely risk capital with strings attached.
The only way to do this is to convert rainforests into something else, usually timber, beef, soy or palm oil that Westerners, and now prosperous Asians, have a burgeoning appetite for.
Most deforestation today is enterprise driven and funded by hedgefunds, pension funds, and other sources of liquidity from capitals often far from, and blind to, the forests they are destroying.
Billions in green dollars end up on investors' balance sheets, but there is a catch: billions of tonnes of carbon dioxide goes up in smoke from the trees burned in the process - and the risk to everyone is building up to a climate credit crisis.
The timetable on this issue is tight. In December 2006, at the UN in New York, Papua New Guinea invited rich countries to pay poor ones to stop deforestation.
In May 2007, London's Independent newspaper blew the whistle on "the hidden cause of global warming", the destruction of the world's rainforests.
And in September, political leaders, scientists, and NGOs rallied around the Global Canopy Programme's (GCP) Forests Now Declaration.
'Carbon crunch'
The global deal on climate change, due to be signed by the UN in 2012, will be inadequate if it does not include a means to curb emissions from forests.
Just one day of emissions from deforestation equates to 68 million people flying from London to New York.
Seven billion tonnes of carbon dioxide (CO2) annually places rainforests just second to energy as a source of global emissions and is more than the entire world's transport sector put together.
And it is not just about carbon. The world's rainforests are a giant "utility", providing services we all use but do not pay for.
The Amazon releases 20 billion tonnes of water into the atmosphere each day. This air-conditions the atmosphere, waters agri-business and underpins energy security from hydro to biofuels across Latin America on a gigantic scale.
Were it possible to build a machine to do this, every day it would consume the energy equivalent to the world's largest hydro dam running on full power for 135 years; and the Amazon does all this for free. Now that's natural capital and we are eroding it fast.
Pavan Sukhdevs' landmark report, The Economics of Ecosystems and Biodiversity, published by the EU earlier this year, estimated the annual losses of natural capital to be, at the low end, equivalent to the value of the Indian stock market and, at the high end, the entire London stock market.
If what biodiversity does for us is so valuable, why is this happening? The answer is in part ignorance and, in part, that the global economy may no longer be fit for purpose.
The problem is that nature is priceless. What nature does for us is not valued economically. Whilst only financial and human capital drive human endeavour, and inputs from natural capital remain unrecognised, business proceeds on a false sense of security.
The economy, I believe, is at a truly historic tipping point where the global economy will rapidly need to incorporate the risks from the collision course that energy security, food security and environmental security are all on.
By 2050, to keep global temperatures from rising more that 2C and at the same time feed nine billion people, we cannot go on as we are.
Investing in natural capital may in time indeed turn out to be as safe as any other public utility but for that to happen we need the equivalent of an ecosystem services market with an environmental regulatory body that forces us to value the common goods that we continue to plunder at our peril.
The carbon market is such an invention by governments, valuing a commodity we cannot see, smell or touch but which is poisoning our world.
The Kyoto Protocol has jump-started the global market which could soon exceed $100bn per year.
Markets are by no means perfect but they are inventive. Who would believe 30 years ago that a bottle of fashionable mineral water would sell for more than petrol. But left to itself, the global market puts a value on bottled water of 70bn euros per year but nothing on vital rain from rainforests.
A scheme to value forest ecosystem services in global markets could deliver financial flows at scale, in addition to those provided by carbon markets.
Some understandably fear turning natural capital into bonds or equities because the market can be a beast, but government funds sourced from taxation are unlikely to meet the $30-50bn annual bill for halting deforestation.
Banking on change
Some industrialised nations have called for future investments in nuclear and carbon capture power stations to reduce their own emissions entering our atmosphere at a cost of between $250-150 a tonne of CO2 saved.
Yet they are failing to invest now, to maintain the existing sequestration service ancient forests provide, which might be preserved for perhaps a tenth of the cost per tonne.
To reduce emissions by 80% of 1990 levels will require us to use every means available. Arguing about emissions from factories or forests will not get us there.
Who should be paid and how raises other awkward questions. Who owns the tropical forest "utility" is often far from clear. Governments claim some 70%, but indigenous and other communities contest their view and landowners often argue over the rest.
Defining such landrights is a central prerequisite to equitable benefit sharing. Poor Governments are not always transparent. Responsibility needs proper incentives.
We need also to ask if GDP is the right way to measure human welfare and create such incentives. Pavan Sughdev has called for a GDP of the poor. They will suffer most from climate change, yet are least responsible for it. Incentivising them to use natural capital sustainably may not show up in current GDP figures, but could significantly improve their lives.
Rich nations, which have caused climate change, may have the financial muscle to help solve it and should find a way to recognise "real capitalism" inclusive not only of financial and human capital, but also natural capital.
If the global economy can, almost overnight, find two trillion dollars to cut the risk of Freddie Mae and Bertie Mac and the global banking community from going down the pan, surely it can find a fraction of that to cut the risk of forests going up in smoke.
If one day forests could be safer than houses, now that would be wealth worth having.
Andrew Mitchell is the founder and director of the Global Canopy Programme
The Green Room is a series of opinion articles on environmental topics running weekly on the BBC News website
