Monday, January 5, 2009

Carbon Trading: Can Money Grow
 On Trees?

From CNBC Europe:

There is a new wave of entrepreneurs aiming to get rich by 
saving the rainforests.

Ever wanted to get rich by doing absolutely nothing? In a bizarre way that’s what a bunch of new entrepreneurs and large corporations are trying to do. The formula is ridiculously simple: buy up or lease a tract of rainforest, prop up a deckchair and watch it grow. Put a financial price on its mere existence and sell a range of ‘products’ – called ecosystem services – to polluters. If trees could hear, they’d be setting up trade unions.

Is this the last and most crucial frontier in addressing climate change or a slightly daft get-rich-quick scam? Proponents stick one big uncomfortable fact to the pioneers of clean-tech, namely, that the most cost effective way to put the brakes on global carbon emissions would be to halt deforestation today rather than pour vast sums of money into whizzy new technologies, low emission cars and solar panels in Germany that would be 20 times more effective in the Sahara desert. They add that deforestation is accelerating, and that no government or charity has succeeded in halting it. 

Take money-man-turned-tree-hugger Hylton Murray-Philipson, whose London-based Canopy Capital recently struck a historic deal with the Iwokrama Reserve in Guyana, investing an undeclared sum of money to protect and manage a tract of 370,000 hectares of pristine rainforest. Terrified of the rapidly disappearing forest and acutely aware of the implications for his 11-year-old son, the 
ex-investment banker laments: “When conservation comes up against money, money always wins.”

Yet he wants a private sector, for-profit solution on the same basis, with one source of private capital trumping the other, turning the tide away from lucrative deforestation to even more lucrative conservation. “Unlike currencies, commodities or the share prices of banks, ecosystem services, with incalculable planet-wide significance, are presently rated at nil. The market in natural services that have an increasingly clear economic value can therefore only go up,” he says.

He and a dozen co-investors believe they will eventually reap a financial profit from ‘products’ offered by the forest, recognising that it regulates climate, stores water, sequestrates carbon dioxide, generates rainfall and preserves wildlife and biodiversity. These are the ‘ecosystem services’ that the forest provides. Now they just have to be valued monetarily, says Philipson. Historically, none of these planetary lifelines have been valued at all. Instead, the whole universe of investment and capitalism has revolved around exploitation of the natural world with none of the so-called ‘external costs’ of pollution being taken into account.