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Invest in Natural Capital

Andrew W. Mitchell
Founder and Director, Global Canopy Programme, Chairman, Forest Footprint Disclosure Project

The English playwright, Oscar Wilde, once commented that the cynic knows the price of everything but the value of nothing. Today many claim that biodiversity is 'priceless', but few seem prepared to pay for it. The value of its existence alone has not been able to stem a 20th century tsunami of economic forces that regards destruction of biodiversity as the acceptable collateral damage of prosperity. And, too often, rising population has left the poor with little option but to plunder biodiversity for survival.

A very different view of conservation is needed if the Millennium Development Goal of immediately reducing biodiversity loss is to have any hope of being achieved this century. At the leading edge of the debate - biodiversity itself should be replaced by the ecosystem services it provides to humanity. Forests offer a proxy through which to explore how natural capital underpins everyone's climate, water, food, energy, health and livelihood security.

The unknown world of the tropical rainforest canopy fascinated me as a young zoologist in Borneo. Reaching the treetops - where the tallest Dipterocarp soars over 90 metres - was a dangerous operation involving catapults and climbing ropes from below or hot air balloons from above: so I constructed precarious aerial walkways to enable scientific teams to explore at ease. What we discovered stunned us, revealing the breathtaking extent of our ignorance.

Perhaps half of all life on earth lives up there, never coming down to the ground. Some 80% of the insects that entomologists discovered in the canopy in Asia had no name, about 60% in Central America were still new to science.

Thirty years on, much more - of possibly greater significance - is understood. Atmospheric scientists and eco-physiologists at the Brazilian and NASA-funded Largescale Biosphere Atmosphere experiment built towers across Amazonia's forests and measured the fluxes of gasses like carbon and oxygen in and out of the forest canopy. This revealed that such forests remove about a tonne of carbon per hectare each year from the atmosphere, storing it in trunks and roots. Furthermore, trees release vast quantities of a rich mix of volatile organic compounds into the air - where the chemicals oxidise in sunlight to create tiny nuclei around which water droplets form. In effect, the Amazon canopy seeds its own rain. Thus biodiversity provides immense regulating services to our atmosphere.

Imagine the world's tropical forests as giant 'eco-utilities', like a power station or water treatment plant, providing ecosystem services we all use, but no one yet pays for. They are the largest existing terrestrial carbon capture and storage (CCS) system, scrubbing the atmosphere of a billion tonnes of pollutantss each year. They do it for free, while industrial CCS may cost US$300 per tonne or more to do the same job. Clearing and burning tropical forests both removes this unique system and emits smoke equivalent to the annual carbon emissions of all transport worldwide. Payment for halting the loss of forests is the inspiration for REDD, the proposed UNFCCC mechanism to reduce emissions from deforestation and degradation, and could generate billions of dollars for poor forestowning nations. The glacial pace of UN negotiations has admittedly bred cynicism in carbon markets, but Norway has provided $2.5 billion to set the pace for implementing what promises to be the largest, cheapest and quickest means of combating climate change this decade.

Forests also provide another, possibly even more valuable ecosystem service. According to the Intergovernmental Panel on Climate Change, Amazonia's tree crowns release eight trillion tonnes of water vapour a year. This is recycled many times by the forest canopy water pump before reaching the Andes. Some of it falls as snow, to feed melt water into the vast river basins of the Western Amazon and scientists speculate that a low level jet stream transports moisture to fall as rain on the beef and soy ranches of southern Brazil, and possibly on the economic breadbasket of the La Plata Basin.

What would happen if this pump should ever become unreliable? Would the lights go out in São Paulo as giant hydro dams ran dry, or would food prices in Europe rise as Amazon soy failed to arrive to feed its chickens, pigs and cows? Severe droughts are increasing in the Amazon, and those in 2005 and 2010 provided a foretaste of what could happen. Rivers dried up, grounded soy barges had to make a 2,000-kms deviation to reach markets, fish gasped on river banks as remote villages starved, hospital admissions rose and airports closed due to smoke from forest fires.

UNEP's landmark report The Economics of Ecosystems & Biodiversity estimated the ecosystem services lost by deforestation as worth between US$1.4 - 4.5 trillion a year. Investors are waking up to the fact that some companies are running increasing risks by failing to account for their use of natural capital, and its ecosystem services, in their business models. The Forest Footprint Disclosure Project calls on companies to disclose their use of commodities - such as beef and leather, soy, palm oil, paper or pulp - that drive deforestation: in just two years, 57 major investing institutions managing US$ 5.7 trillion in assets have endorsed it. On the upside, a UNDP report: Latin America and the Caribbean - A Biodiversity Superpower shows that the region has a major economic opportunity in trading in ecosystem services.

Proactive Investment in Natural Capital (PINC), as outlined in the Global Canopy Programme's Little Biodiversity Finance Book, offers a new economic vision for nature. Whilst REDD is inexorably linked to emerging markets for carbon, the PINC framework offers 17 mechanisms that could pay for biodiversity and its ecosystem services, reaching US$140 billion annually in 2020. Many are available now. Valuing natural capital and paying for its maintenance, depletion, or restoration should become as commonplace as using financial or social capital. Safeguards and equitable benefit sharing in this process are fraught with difficulties, but the risk from business as usual is greater. Tropical forest nations and their peoples are rich in natural capital, and they need to be adequately rewarded for maintaining ecosystem services. If a way can be found to do this, one day their forests really will be worth more alive, economically, than dead.

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