How much do you want this forest (in millions)?

You can’t measure the value of a rainforest in money. Or can you? It’s a debate which could have a huge impact on future strategies for curbing climate change and catastrophic forest loss. Terry Slavin reports.

When the world’s leading science magazine, Nature, carried an article arguing that the new zeal for market-oriented conservation was selling the environment short, it caused a flap as loud as a flock of hornbills in a Borneo rainforest.

Author Douglas McCauley of Stanford University was responding to the growing trend among groups such as the World Conservation Union and Conservation International of putting a price on the services that nature provides and seeking market-based solutions to preserve them.

“The underlying assumption is that if scientists can identify ecosystem services, quantify their economic value, and ultimately bring conservation more in synchrony with market ideologies,” said McCauley, “then the decision-makers will recognise the folly of environmental destruction and work to safeguard nature.”

That, he argued, sent a dangerous message that nature is only worth conserving where it can be shown to be profitable - and that the rest is without value.

The ink spilt in the next issue’s letters column ran to many times the original article - a measure of the sensitivity of the nerve he had hit.

“The value of greenhouse gas storage in some forests could be as high as $2,200 per hectare.”

At the heart of the debate is a growing awareness of the vital role played by forests in the fight against climate change. Curbing deforestation, said the Stern report, is a “highly cost-effective way of reducing greenhouse gas emissions”. Recent estimates from economists suggest the value of greenhouse gas storage in some forests could be as high as $2,200 per hectare and the aesthetic value of intact coral reefs may be worth $2 billion to the coral-based tourism industry.

So is McCauley right? Are the pitfalls of auctioning off the world’s natural resources too great? Or must we commodify nature in order to save her?

A service to the planet

The concept of putting a price on nature’s head has been around for a while, but burst into popularity ten years ago. That was when a group of ecologists and economists came up with the electrifying estimate that nature’s ‘services’ to the planet - the life support system provided by wetlands, forests, grasslands and oceans - amounted to $33 trillion a year. That’s almost twice the GDP of all the countries in the world combined.

Conservation groups, particularly in the US, began to think that the almighty dollar, hitherto regarded as nature’s archrival, could instead be enlisted as a powerful ally. Rather than relying on rich world governments and individuals to bankroll efforts to save the planet, investment money could be drawn in - and the people who live in sensitive areas paid to protect them. A win-win all round, surely.

The inclusion of forestry in the global carbon-trading mechanism set up by the Kyoto Protocol took the concept straight to the heart of global financial markets. It allowed companies and governments to compensate for their CO2 emissions by planting trees to act as carbon ‘sinks’.

Today such ‘payments for ecological services’, or ‘PES’ as they’re known, are made to projects as diverse as ecotourism in the Andaman Islands, mangrove planting in communities devastated by the 2004 tsunami, debt-for-nature swaps in Guatemala, wildlife protection in Namibia, and watershed conservation in New York state. The UK government is an enthusiastic participant: Gordon Brown has pledged £50 million to help the inhabitants of Africa’s Congo Basin find livelihoods that help conserve the area’s remaining rainforest.

“The trick is to make it in people’s best interest to protect the environment. What’s the most powerful way to do that? Make nature profitable.”

For US academic Gretchen Daily, co-author of The New Economy of Nature: the Quest to Make Conservation Profitable, it’s an approach that makes perfect sense. “This century we’re driving probably half of the world’s species to extinction - the very plants and animals that control processes we depend on, like the carbon cycle and pollination. And our conservation efforts have hardly made a dent... The trick is to somehow make it in people’s best interest to protect the environment. What’s the most powerful way to do that? Make nature profitable.”

Proponents of PES point to the success of the Catskill/Delaware watershed scheme. Faced with a potential bill of $6 billion in a filtration plant to keep its drinking water pristine, New York City decided instead to invest in protecting the forest reserves in the watershed. The result was the same - clean water.

Avoiding carbon colonialism

But this is in the wealthy and sparsely populated first world, where humans are not economically dependent on natural resources. The ‘opportunity costs’, to use the economic term, of removing people from land are small.

It’s a completely different story in the third world, where access to nature is a matter of life and death for 800 million people, according to the World Resources Institute. It argued that, while in theory protection money for forests could give local people a route out of poverty, most PES programmes fail to reach the poor. It cited the experience of Costa Rica, where landowners were paid $45 per hectare to conserve their forests. While theoretically open to all, in practice only the wealthy landowners were able to benefit, due to the complexity of the process and high transaction costs. Meanwhile, the poor continued to lose out through land grabs.

For Alice Chapple, director of sustainable financial markets at Forum for the Future, “it’s all about alignment of interests. In the richer countries, we want to reduce deforestation to stabilise climate change. But this may not be the immediate priority for local communities or governments. Payments to recognise the additional long-term economic, environmental and social benefits we get from the forests make sense to encourage the relative value of short-term alternative land uses to be properly assessed.” 

However, she warns, “we need to understand the complexities and the interests of people on the ground if we are to avoid so-called ‘carbon colonialism’”.   

Maryanne Grieg-Gran of the International Institute for Environment and Development (IIED), who conducted research for the Stern report, said payments to local communities can succeed in conserving threatened habitats, but not if money is the overriding factor. “You have to start with what the local communities want. If what you are offering is part of their desired livelihood strategies and done in a holistic way, it might work.”

This is being tested on the ground in ten pilot PES projects for watershed conservation in Peru, Guatemala, Tanzania, Indonesia and the Philippines. The schemes are run by IIED, Care International and WWF.

In each river basin they chose local communities of poor farmers with whom Care already had a relationship, and identified potential downstream ‘buyers’ - mining companies, breweries, state-owned hydro power companies - that would be willing to compensate the communities to manage the watershed forests.

Working upstream

Involving local people at the design stage was crucial, says WWF’s Kirsten Schuyt. In Dar es Salaam, where drinking water supplies are frequently cut off because of high levels of silt coming down from the Tanzanian mountains, the municipal water board has agreed to pay farmers upstream of the city to carry out simple techniques, such as terracing and contouring, to reduce silt levels in the water coming off their land. Schuyt says much of the initial work has been to build the capacity of impoverished communities to negotiate with private companies. “We’ve been talking to the communities, finding out what they wanted and how they wanted to be paid, either in cash, alternative livelihoods, schools or roads. We’ve acted as intermediaries because it would have been difficult for them to contact the private sector on their own.”

But even with so much careful preparation, the chances of the projects succeeding are not that high, admits Ivan Bond, senior researcher at IIED, who has been working with Schuyt on the watershed project. “If we get four out of ten sites we’ll have done very well,” says Bond, a Zimbabwean who has spent most of his life in the developing world.

“These are extremely complex arrangements where you must have clear-cut benefits to both sides.” It’s still worth a shot, he adds. “Neither conservation nor development are risk-free zones, especially if you are doing something right.”

All of which means there’s an increasingly urgent need to come up with new approaches. For its part, Forum for the Future is working with Enviromarket, the Department for International Development and the International Finance Corporation to develop a financial instrument which could match the long-term liabilities of pension funds with the long-term assets of sustainably managed forests. It has considerable promise, though as Alice Chapple acknowledges: “The idea is simple - but the practicalities are not.”

“Regulation [alone] is a recipe for doing nothing.”

In his Nature article, McCauley said that morality, rather than money, must be the motivating force for conservation. And he cited the international ban on commercial whaling, the US national parks system, and the CITES ivory trade ban as battles won on moral grounds.

“Why polarise the debate?” asks Bond. “We need a multidisciplinary approach, with different processes to deal with different problems. The world is a complicated place.” He’s not convinced by some of McCauley’s good examples, either. The proliferation of elephant populations since the CITES ban has had a “horrific” impact on biodiversity in Botswana and Zimbabwe. And attempts in East Africa and elsewhere in the developing world to replicate the exclusion of humans from national parks and protected areas are unjust and ineffective, he claims. “The conservation world should have realised that the utter exclusion and displacement of people is not a good thing.”

Value for money?

Maryanne Grieg-Gran says McCauley has got it wrong in saying PES devalues the bits of nature that bear no price tag. “It’s about trying to identify groups or individuals who might benefit from the services and want to contribute to maintain them,” she says. “Valuation is done, but knowing it’s only part of the picture. With regulation you may not be putting a value on anything. It’s almost a recipe for doing nothing.”

Yet questions remain over the long-term effectiveness of paying for ecological services, too. Research on a widely applauded scheme in Mexico, that paid landowners not to cut down trees, showed that as little as 11% of the land ‘secured’ was actually at high risk from deforestation. And critics have poured doubt on claims that the recent increase in forest cover in Costa Rica is down to PES. 

Such difficulty in proving ‘additionality’ has prevented deforestation from being allowed as part of the Kyoto carbon-trading process. But this could be changing. There is growing pressure from a coalition of countries, including Papua New Guinea and Costa Rica, for it to be included. The Stern report argues that with 20% of global CO2 emissions related to tropical deforestation - twice as much as from transport - the price of continuing to exclude forests from the carbon trading mechanism is too great.

And many conservationists agree. Take Indonesia, says WWF. Unless there is financial reward for maintaining forests, there will be little to stop them being chopped down for palm oil production. “The forecasts for palm oil production are terrifying,” says Beatrix Richards, head of forest trading policy at WWF. “If it carries on expanding at this rate it will eat straight into the pristine areas that are left. We need a whole range of tools in our armoury to fight this.”

Terry Slavin is a regular writer for The Observer, specialising in environmental issues.

24 June 2007

Terry Slavin