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The writer is author of ‘Pricing the Priceless’ and is special adviser to CDP
Nature is history’s most exploited underpaid labourer, so has the time come to make good? It would seem so.
“Nature needs money,” said the president of Brazil, Luiz Inácio Lula da Silva, at the Amazon summit in early August. It’s time, he declared, for the world to “create a mechanism to fairly remunerate the environmental services that our forests provide to the world”.
There’s nothing new in that assertion. I heard a similar challenge at the landmark Earth Summit in 1992, when a Brazilian woman asked: “If the north cares so much about the rainforest, why don’t they rent it from us?”
Nature does need money and more protection, but we’ve never met the need commensurate with the value of the constant labour that it performs — such as water retention and filtration, soil retention by trees and plants, pollination, irrigation, aesthetic and spiritual enhancement, pollination and, of course, carbon sequestration.
We must now abandon the conventional approach to value and set up systems that account for nature as economically indispensable.
The economist Partha Dasgupta has written: “The view that the biosphere is a mosaic of self-regenerative assets also covers its role as a sink for pollution . . . The damage inflicted . . . should be interpreted as depreciation.” It follows that this depreciation must be halted. This was the essence of the call made at the Amazon summit to avoid “a point of no return” for the rainforest.
But how? Fortunately new financial tools have emerged to help us invest in the value of the economically measurable benefits nature provides. A fascinating potential mechanism is the “forest resilience bond”, piloted in Lake Tahoe, California, issued with capital from public and private investors.
The upfront cash generated is deployed to beef-up forest protection services that improve forest wildfire resistance. The bond is repaid by disparate beneficiaries of resilient forests who reap the quantifiable advantages over time. The first FRB was capitalised in 2018 by foundations and private investors with a face value of $4mn. Today, there is a second bond for $25mn, plus an innovation fund of an additional $25mn, and an emerging portfolio of smaller forest projects.
Another approach is direct remuneration, where nations rich in biodiversity or carbon sink potential would be paid to forgo certain forms of exploitation, including fossil fuels, based perhaps on an annual average carbon price per tonne in mandatory carbon markets.
Such direct payment to nations would compensate them for their contributions to future global climate stability, rebalancing lender-borrower dynamics. After all, if the world cannot address climate change without the ecosystem services provided by certain countries, which nation is the debtor and which the creditor?
Why not, for example, set up a special purpose consortium of big private banks and multilateral financial institutions to monitor and transfer “service payments” funds to the central banks and sovereign indigenous tribal institutions of the nations concerned? Nations could then earmark those debt-free payments not only to improved environmental protection but also expanded social safety nets and support for people who may lose livelihoods. Compared to the runaway socio-economic costs of meeting climate change and other environmental deterioration, such a payment system would be a bargain.
Mia Mottley, prime minister of Barbados and architect of the Bridgetown Initiative calling for a revamp of international financing, invoked the “pay for nature” concept when explaining why her nation remains involved in exploitation of natural gas. At September’s Climate Week in New York, she said: “I would love somebody to pay me to keep our natural gas in the ground and our oceans, but if they don’t, how can I finance my way to net zero and ensure my country has access to a credible supply of energy?”
Daily events warn us that our “line of credit” with nature is running out — suffocating heat, choking droughts and rampant floods and wildfires across the world. Are we destined only to catalogue these phenomena when the money is there to keep them in check?
As Lula said: “Mother Nature needs money because industrial development has destroyed it over the past 200 years.” Trillions of dollars roam the world looking for applications and purpose. Where that tide flows will largely determine our planetary health. The world’s economy is already being directly subsidised by nature, so why not subsidise nature back?