Biodiversity: The E.U.'s Next Challenge

James Kanter, The New York Times 6 Jun 10;

BRUSSELS — Even as nations struggle to curb emissions of greenhouse gases, the European Union is taking on a potentially more complicated environmental challenge: preserving the world’s biodiversity.

Last week, the European Commission put biodiversity at the center of its annual Green Week conference in Brussels after E.U. environment ministers warned in March against “going beyond the limits of nature,” and after heads of state and government endorsed the ministers’ pledge to halt biodiversity loss in the Union by 2020 and step up efforts to avert such losses globally.

The conference brought together corporate executives, bankers and government ministers to discuss the benefits of healthy soils, fresh water supplies and plentiful forests, and to explore ways to create a framework to maintain them worldwide.

“There is such a thing as finite resources,” Norbert Röttgen, the German environment minister, warned delegates.

“It’s the same as in the case of climate change,” he said, noting that Europeans “need international agreements for biodiversity.”

An ambitious policy on biodiversity represents a new opportunity for the Union to renew a bid for international leadership on environmental issues before a global conference on biodiversity in Nagoya, Japan, in October.

That conference should mark the high point of what the United Nations has dubbed the International Year of Biodiversity, and the Union will be pushing hard for globally binding targets to reverse the loss of plant and animal species.

But there are important strategic considerations for Europe too.

A study called “The Economics of Ecosystems and Biodiversity,” financed mainly by the European Commission and Germany, concluded in 2008 that losses of plant life and other organisms could be equivalent to 7 percent of global consumption — representing several trillion dollars annually — by midcentury if current trends are maintained.

The potential costs of inaction are high because societies would have to pay for expensive new equipment like filtration plants to compensate for losses of fresh water. Reduced numbers of insects like bees to pollinate crops and instances of more diseases in humans would put additional strains on the agricultural and medical sectors.

Those phenomena concern Europe because the bloc relies heavily on healthy ecosystems in other parts of the world to develop supplies of new medicines and produce food and feeds.

Within Europe, large numbers of jobs would be at risk if invasive pests made it harder to maintain a successful domestic farming sector, and if tourism declined because of damage to plants and bird life or floods ruined heritage sites.

A key question is what role environmental markets should play in controlling the rush for resources and other forms of environmental damage, and whether other nations would be likely to adopt similar mechanisms if the European Union took the lead.

The Union already has adopted some of the toughest targets for reducing greenhouse gases of any major economy globally. But it remains to be seen whether its main tool to meet those targets, carbon trading, will be effective and catch on more widely.

One popular view — that carbon trading is just another kind of financial chicanery — has further dimmed the prospects for such systems.

But some financiers said the urgency of the problem meant that those concerns should not prevent Europe from spearheading development of new market-based instruments.

“We’ve got brokers comfortable with carbon credits, but they could easily shift their attention to biodiversity credits,” Peter Carter, an associate director of the European Investment Bank, told the conference.

“We’ve learned very many lessons from the carbon market, and we must make sure we build those lessons into any future bio-market,” Mr. Carter said.

Other groups at the conference promoted systems to encourage investments in projects that would restore a site or enhance its ecology in return for tradable credits.

Such systems would work in much the same way that an existing U.N. system awards globally traded carbon credits to investors in projects to cut greenhouse gases.

Another mechanism called habitat banking would create new business opportunities for landowners in Europe to undertake projects to compensate for damage done elsewhere by industries.

As with carbon trading, the inspiration for offsetting damage to nature originally came from the United States, where wetland banking emerged from the 1972 Clean Water Act.

The U.S. act established strict guidelines for projects developed in wetland areas. Those rules eventually gave way to a system that allowed limited wetland development as long as developers purchased offset credits generated by wetland restoration projects, or new projects, elsewhere.

While many of those projects were successes, others failed to attract displaced wildlife species or contribute effectively to water flow management.

The American experience underlined that, unlike greenhouse gas emissions, biodiversity often needs protection at the precise locations where it is under threat, and European officials acknowledged that biodiversity trading would be even more problematic than carbon trading.

“When we are talking about the carbon market, we know what we’re targeting,” Karl Falkenberg, the director general for the environment at the European Commission, told the conference.

But converting biodiversity “into one price, into one indicator, into one size of a tradable market, I think that still is a big challenge,” he said.

Even so, the Union still “should work in that direction,” said Mr. Falkenberg, who was referring to market-based systems.

The author of the study from 2008 on the economics of biodiversity, Pavan Sukhdev, took an even more cautious approach.

Mr. Sukhdev, a former chief operating officer for global emerging markets at Deutsche Bank and now a special adviser to the U.N. Environment Program, underlined his view that failure to take measures now to stop depletion of plants, animals and micro-organisms would create even higher costs in the future.

But he appeared to warn against relying on market-based systems or seeking solutions that would permit current behavior to continue, and he called for a fundamental shift in the way citizens and business leaders interacted with nature.

“Will it change when we create some kind of fictitious marketplace?” asked Mr. Sukhdev, referring to trading credits to combat biodiversity loss. Instead, societies needed to cease putting “private wealth above public wealth” to tackle the problem effectively, he said.