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Katoomba conference website is open for contributions…

June 21, 2010
By admin

This week the seventeenth Katoomba conference hits Hanoi, Vietnam – on Wednesday 23rd and Thursday 24th June.

As a word of explanation this website is dedicated to making the event available to all.  Whether you are attending or not there are a number of ways you can engage with our on-line presence:

You can view all content here -  at http://live.katoombagroup.org.  All sessions will have video, audio and written resources added live during the event and will be available to access after the event.  You can navigate the video and other content using the schedule button on the left.  Content will be uploaded throughout the event.

You can follow @KatoombaGroup on Twitter where general PES news as well as conference news is being posted.  Please use the hashtag #katoomba17 for all tweets related to the event.

You can join The Katoomba Group Facebook group here.

And you can join The Katoomba Group on LinkedIn here.

Finally we are welcoming contributions of content from anyone with an interest and expertise in the field.  Please get in touch via any of the channels above, email mail(at)benmetz(dot)org or come and find any of the Katoomba conference folk who are holding a video camera or hiding behind a computer…..

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Speaker Biography: Kerstin Canby, Director, Forest Trade and Finance, Forest Trends

June 10, 2010
By admin

Kerstin Canby is the Director of Forest Trends’ Forest Trade and Finance Program. In addition to general program management, her work focuses on policies and trade issues related to illegal logging, corruption, and associated trade, such as the role of financial institutions and investment flows in combating illegal and unsustainable harvesting practices. A significant portion of her time is spent on the China/East Asia region. Prior to joining Forest Trends, Kerstin worked at the World Bank with the Governance and Forest Law Enforcement and Governance Programs, coordinating the Africa FLEG ministerial process, and providing training to local NGOs interested in developing independent monitoring networks; she also worked with the World Bank’s CEOs ad hoc Forum on Forests.

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Can Markets Protect Nature? An Interview with Michael Jenkins

May 14, 2010
By admin

Can Markets Protect Nature? is an article on www.mongabay.com by Rhett Butler that comprises an interview with Michael Jenkins, President and CEO of Forest Trends.

The article provides a unique insight into Michael’s thinking post the Copenhagen summit and in the lead up to the next Katoomba conference in Vietnam this June.

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Insight Series: Can Insurers Lead Business into the Ecosystem Marketplace?

May 14, 2010
By admin

By Steve Zwick and Henry Teitelbaum

When the ocean degrades, everyone loses – and that includes fishermen who lose their catch, ocean-side properties that lose their protection, and tourism operators who lose their tourists. The private sector,therefore, has much at stake – and should be scrambling for ways to head off disaster. That’s not happening, however. Is the problem the message – or the messenger?

*All of the people quoted in this article spoke at the 16th Katoomba Meeting in Palo Alto, California.  Their presentations can be heard in their entirety at: http://www.ecosystemmarketplace.com/pages/dynamic/article.page.php?page_id=7439&section=home

8 May 2010 Economies grow by turning raw materials into higher-value products – but often in ways that fail to replenish those materials.  By ignoring the economic value of the ecology upon which they depend, economies thus often sow the seeds of their own destruction.

Marea Hatziolos believes we can reverse that trend by recognizing nature’s economic value and turning nature into a profit center – which, not coincidentally, is also the core premise of schemes that promote payments for ecosystem services (PES).

“We are talking about natural arrangements between a provider of a service and a recipient or beneficiary of a service,” says Hatziolos, a marine ecologist and senior coastal and marine specialist in the Environment Department of the World Bank.

“Who better to help us do that than the private sector?” she asked in February, at the Fifteenth Katoomba Meeting, which was held in the US city of Palo Alto.  “After all, most of their goals have to do with profits.”

Al Appleton agrees. The former head of New York City’s water, sewage, and environmental protection operations, he helped initiate parts of the city’s landmark watershed agreement that pays farmers in the surrounding Catskill Mountains to protect the watershed – a scheme that has saved the city billions in filtration costs over the years.
Despite its success – and despite the efficacy of demonstration projects across the United States – that scheme remains one of the few payments for watershed services projects delivering results on a large-scale. That, says Appleton, is because a successful project requires more than intelligent market models if businessmen are going to get involved.

For one, he says, successful projects need scale if they are to become interesting for businesses. For another, he adds, the public and non-profit sectors need to understand the entrepreneurial mentality by which business people operate.

“You people who are on the cutting edge of environmental economics… need to really get much more involved in creating a climate of opinion that makes ecosystem services proposals more attractive,” he said, adding that a similar awareness of the needs of elected officials must also be taken into account when designing solutions to specific ecosystem challenges.

“Politicians hate incrementalism,” he says, because of the risk that the projects either won’t solve the problem or will do so in a timeframe that won’t justify their investment of political capital. With these stakeholder considerations in mind, Appleton says that as efforts to take on the challenge of creating deep ocean ecosystem markets gather momentum in addressing issues related to acidity, temperature, nitrogen runoff, plastic waste, pirate fishing or fish farming, it’s strategically very important to think big and to “hit the first targets with care” so as to build credibility for further attempts at creating ecosystem markets.

Speaking at the same event, Forest Trends MARES Program Manager Winnie Lau said it is critical to develop a range of voluntary market-based mechanisms, notably through the Payment for Ecosystem Services model, but also through water quality services, ocean zoning, marine spatial planning, and leasing activities to attract private financing for sustainable coastline and ocean resource management. To do this effectively, she says the private sector needs to forge closer partnerships with communities, with governments, and with regulators as well as with existing terrestrial ecosystem service providers.

The Externality Quandary and the Need for Legal Drivers

Ricardo Bayon, of EKO Asset Management Partners (and co-founder of Ecosystem Marketplace), reminded MARES participants that ecosystem markets, far from being a product of free enterprise and private sector innovation, are fundamentally reliant upon governments and government-sponsored regulation for their creation. This is particularly true of wetlands, which do not produce readily identifiable products of interest to consumers or industry, but are nevertheless essential habitats for fish and the preservation of coastline.

“Nobody wakes up in the morning wanting a bowl of wetlands,” he says, citing a friend from the wetlands mitigation banking sector, so “most of these markets are in fact created by governments and by rules set up by governments” to achieve policy goals.

Albert Cho of Cisco Systems says laws don’t just provide a whip to markets’ carrot – they provide clear rules upon which all participants can rely. This regulatory certainty reduces market risk and creates consensus around how to incentivize private-sector risk-taking, and in aligning the design of the market with long-term political goals.

Science and Technology: the Sharpening Saw

Science, technology and our understanding of marine ecosystems and their connectivity to terrestrial and wetlands ecosystems have made enormous advances in recent years. This has opened up opportunities to measure with an improving degree of accuracy the inter-relationships that exist between them. Peter Mumby of the University of Exeter says this has significant implications for the creation of new ecosystem services because the increasing reliability of sonar and satellite mapping makes it easier to determine the impact of a service and to choose where it is most likely to be effective.

“Mapping can help determine the value of a particular mangrove or reef for maintaining ecosystems,” he says, making it possible to more precisely estimate the survivorship of fish that rely on the former to reach a level of maturity that is optimal for survival on the latter.

Besides the implications for fisheries, the ability to predict differences in biomass that result from the protection or restoration of particular ecosystems and coastal habitat has implications for a host of private sector stakeholders. These include those who have interests in making carbon sequestration mappable, in improving coastal defenses against storms and erosion, in selecting building materials or in promoting tourism.

Mumby noted, as an example, how the potential for coastal marine ecosystem services to shore up terrestrial coastlines should enable coordination with the insurance industry in making solutions more effective as well as in scaling them up.

Insurers Lead the Way

As more speakers took the stand, it became clear that some segments are taking action while others aren’t – and insurers are among the leaders.  That makes sense, because they deal with risk on a daily basis, says Adam Cole, who is General Counsel for the California Department of Insurance.  He said that insurers already engage in a form of PES when they offer lower premiums for environmentally responsible clients and charge higher premiums for clients whose environmental policies introduce an element of risk into the company’s bottom line.

Under California law, however, that adjustment must be offered based on risk, and not on environmental benefit alone.

“I can’t let them give a discount unless there’s a correlation to risk,” he says, adding that governments can play a role in clarifying that risk by clarifying liabilities. “If laws are passed, you create liabilities, you create risk, and you’ve then created the circumstances for the insurance company to kick in.”

Insurers are thus among the leaders in pushing for laws that clearly define liability – both so they can write policies, and so they can protect themselves.

PES Along the Coast

“Katrina alone cost the insurance agency in the United States $20 billion dollars,” said Stephen Bushnell of Fireman’s Fund Insurance Company, who also spoke at Katoomba XV. “Munich Re estimates that the amount that the insurance industry has paid out for catastrophes has risen sevenfold since the 1960s.”

German insurer Allianz, he adds, is projecting a fifteenfold increase in weather-related losses over the next 30 years – due to a double-whammy of growing coastal development and rougher weather from climate-driven storms.

That’s led Allianz to create new risk models that combine future development plans with climate projections (and their accompanying hurricane projections) to estimate the amount of damage that insurers could get stuck with if the big one hits.

“We then use that to decide if we want to write more insurance in that area and what price we should charge,” he says. “Every time these models are recast, they tell us the storms are going to be more severe, our losses are going to be larger.”

From Reactive to Proactive

Allianz responded by creating the Allianz Climate Change Center of Confidence, which is now creating new insurance products that, in part, adjust premiums based on a company’s liability – which, in  turn, is based on its environmental stewardship.

Fireman’s Fund plans to offer discounts for LEED-Certified buildings – and not because they’re being green.

“We’ve been able to justify to insurance departments that there is that reduction in risk with LEED Ceritification and the risks the losses that we’ve paid,” says Bushnell, adding that the company has also formed relationships with energy consultants to develop coverage that will replace damaged traditional buildings with leaner, greener constructions.

LEED as Green Proxy

The LEED certification system also rates buildings based on where they’re cited – giving low grades to buildings in sensitive marine and coastal environments.

“You can’t build on a flood plain, or on areas that have been designated as having endangered habitat,” says Bushnell.  “You also can’t build within 100 feet of wetlands … or within 50 feet of a body of water that is protected by the Clean Water Act.”

Selling the Win-Win

All of this adds up to massive energy savings down the road – and a massive reduction in greenhouse gas emissions.  For Bushnell, it’s a classic win-win, and that’s the pitch he believes NGOs should be making to industry.

“Can you tell private industry why it’s economically compelling for them to be involved with what you do?” he asked.  “The green building industry told us why it’s economically compelling for us and for our customers to be involved with them, and that’s why we’re doing it.

Cool Kids Club
Paul Holthus of World Ocean Council believes industry can be brought to the table by creating a sort of “cool kids’ club” of leading companies that embrace sustainable business practices – whether in shipping, fishing, offshore renewable, or even oil and gas.

“We all share one ocean ecosystem, but at this stage there is nothing that brings them together to think about and act together on that shared system,” he says.  “There is nothing that focuses them on the issues and challenges of managing the impact and achieving the proactive, constructive input into the future health and productivity of the ocean.”

He proposes the creation of a “leadership alliance” comprised only of companies that abide by certain rules.

Multiple Sectors; Multiple Services; One Ocean

He also warns against taking an approach that’s too narrow in an area as broad and deep as the ocean.

“The cross-cutting of issues – such as ocean noise, marine debris, etc – means that we need for these industries to create ‘common energy’ working together on this,” he says.  “Then we can engage with the climate-change community on blue carbon and creating a cross-sector approach that is able to work in a more coordinated fashion.”
For Jim Cannon of the Sustainable Fisheries Partnership (SFP), certification remains the most effective way to encourage industry involvement in sustainable fishing.  He points out that SFP certification now covers 65% of the seafood market in the UK, and that major restaurant chains like McDonalds are joining in as well.

“Our mission is to engage global seafood supply chains in the rebuilding of depleted fish stocks and reduction of environmental impact,” he says. “We work in ugly, bad, nasty fisheries that don’t want to make improvements, but we work in new ways now that we’ve gained some trust and credibility with the industry.”

One of those new ways involves going after buyers.

“If illegal fishermen are supplying that product into the international market, we can identify who it goes to, and we can start putting economic pressures on the bad actors to pull out,” he says, citing as an example how legal Russian fishermen benefited when Walmart, McDonald’s and Unilever broke their ties with those breaking the rules.

As the illegals dropped out, prices began to rise – and enforcement tightened even more.

“So how does this relate to payment to ecosystem services?” he asks.  “I believe the entire sustainable seafood market is a PES. What it means to buy sustainably means the target stocks is healthy, which means the underpinned environment supporting those stocks is healthy, and the bicatch is low, which means protective species are benefitting from reduced fishery methods.”

The Lesson: Hit the Buyers

“For those of you working in marine conservation and look to the fishing industry, you are looking in the wrong place,” he says. “The fishing industry isn’t usually a place where guys have a lot of money, but the global value of seafood sales is three to four times greater than the value of seafood landings.”

In a final presentation, Bettina von Hagen of the EcoTrust advised attendees at the meeting to be mindful of opportunities to “leverage funding and sympathetic players.” She cited one example in Oregon where by taking ownership of a relatively small plot of watershed property adjacent to a much larger area of publicly owned property, EcoTrust has been more effective at meeting biodiversity challenges and critical needs than if it had been working with just the isolated plot. Similarly, she said it is important to be mindful of regulatory changes, tax incentives and industry restructuring for opportunities to develop new markets.

She also called on ecosystem market designers to look for ways to assist distressed communities by showing them how to create jobs from new services to the natural resources that they have available.

“If your only currency is timber, you’re going to make certain choices that are not optimal, when you have a forest that produces this whole range of goods and services,” including carbon storage, habitat creation, salmon spawning, recreation and scenic attractions.

“You have to look for value in the most unexpected places,” von Hagen said.

Henry Teitelbaum is a London-based international financial journalist and author, most recently of The PFI Market Intelligence Report, PPP: Challenge and Opportunity After the Financial Crisis, which was published by Reuters in September 2009. He is reachable at Henry@P3Planet.com

Steve Zwick is Managing Editor of the Ecosystem Marketplace. He can be reached at SZwick@ecosystemmarketplace.com.

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Insight Series: Ecosystem Marketplace Cheat Sheet–What is a Social Impact Assessment?

May 12, 2010
By admin

No man is an island—but even if he were, it’s never that simple.  Social impact assessments provide us with a user guide to these often island-esque project sites, along with a long list of do’s and don’ts (do make as much positive impact as possible.  Don’t destroy stuff).

April 2010 When Japan’s Dojima Rice Market pioneered rice futures 300 years ago, it succeeded in part by establishing stringent standards of quality and clear guidelines of accepted behavior designed to ensure a fair and transparent market.  The Chicago Board of Trade did the same for corn, wheat, and soybeans more than 100 years later, and every successful market has done the same ever since.

Markets that fail to establish such standards and guidelines usually die a quick death – or, worse, succeed as markets but fail as deliverers of value to society at large, as we’ve seen in the unregulated markets for over-the-counter derivatives.

Environmental markets are no different, which is why participants have created scores of standards and guidelines to help policymakers and project developers estimate the environmental impact of their actions before they are implemented.

Early standards and guidelines focused on the impact that projects had on nature, but they failed to fully measure the impact of such projects on society.  That’s why the International Association for Impact Assessment (http://www.iaia.org/) created the “social impact assessment” (SIA).

Putting People First

SIAs are designed to help policymakers and environmental project developers foresee the impact that their actions will have on the people living in and around the project area.  Such projects should obviously avoid harming local communities, but ideally they will also generate positive ‘co-benefits’ for people living in and around the project area.

These co-benefits can range from the creation of jobs to the preservation of cultural values to the building of schools.  From the developer’s perspective, these additional advantages serve to strengthen the project and may even be considered to have market value if properly maintained and bundled with existing ecosystem service products.

Easier Said than Done

The challenge of SIAs can be summed up as one of how to combine credibility and economy, in view of the already high transaction costs facing land-based carbon projects. SIAs need to effectively identify not only the good that flows from a project, but – perhaps more importantly – the negative and unexpected social impacts.  They also need to define acceptable quality levels.

Without appropriate guidance and research, these projects can lack the evidence needed for approval at a verification audit stage of the game.  Properly implemented, they help ensure a project that benefits those around it.  Poorly implemented, they amount to little more than greenwash.

What and How

Credible SIA involves providing answers to two key questions –what needs to be measured and how should it be measured.

The answer to the ‘what to measure‘question is closely tied to the concept of ‘attribution’ or causality, and the selection of indicators.  New standards such as the Climate, Community, and Biodiversity CCB (http://www.climate-standards.org/) standard, for example, require that projects demonstrate ‘additional’ and ‘net positive’ community impacts.

This involves showing that a project’s social benefits outweigh the negatives – or at least outweigh the benefits that would have been achieved if the project had never been implemented.  They also have to show that those benefits have been caused by the project rather than by other external factors – or, in other words, that they would not have happened anyway.

The ‘how to measure‘question relates mainly to data collection methods, especially measurement of the indicators.  This question may be easier to answer, since there is considerable guidance on appropriate data collection methods. Cost-effectiveness can in general be improved by developing a strong project monitoring and evaluation (M&E) system at the design phase.

On the Ground

Considerable methodological guidance exists for measuring the social and environmental impacts of development projects and other land management activities, but no clear guidance currently exists for carbon project developers on how to choose and apply appropriate and cost-effective methods. Initial analysis has found that many land-based carbon projects, although they are still at the design or early implementation stage, seem to be struggling with the challenge of conducting cost-effective SIA, and would greatly benefit from this type of guidance.

The social impact assessment (SIA) manual is being developed to accompany the Climate, Community and Biodiversity (CCB) Standards, the most prominent and widely respected standards for the co-benefits of land-based carbon projects. It aims to help project developers monitor the socio-economic impacts of their projects, and meet the verification requirements of the CCB or other comparable Standards. The concepts described in this manual will be relevant to a wide range of site-level land-based carbon activities, whether designed for compliance or voluntary markets.

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