Daily Summary: 2008 Global Katoomba Meeting, June 10, 2008.

Summaries, comments, and reactions from day 2 of the 2008 Global Katoomba Meeting: Developing an Infrastructure Fund for the Planet. For day 1 summaries, see post below.

Opening Keynote
Governor Blairo Maggi (Governor, Brazilian state of Mato Grosso) – 60%+ of state is preserved, but state still gets criticized for economic activity. Have program to encourage switching cattle production (req lots land) to food production – switch 10% each year. Rural Property Licensing System - interesting eye-in-the-sky online GIS-based monitoring of preservation areas with program that recognizes & checks for land use change yearly and can send automatic fines (…like a red-light ticket system?). Can require mitigation for deforestation from cattle producers. 1st state in Brazil doing this – intend to replicate in other states. Transparency: anyone can use the system. Mentioned tracking env liabilities city by city and finding env compensation using this system.

Future of Carbon Markets Panel
Carter Bales (The Wicks Group, McKinsey & Co) – forecasting a $2-3 bill C compliance mkt (excluding the US).

William Boyd (Covington & Burling LLP) – talking about recently defeated CC/C cap policy. Big issues: jobs (economic dislocation), cost control (big disconnect betw 2 sides of the debate). If can’t get Senate to pass domestic legislation, won’t pass international treaty.

Jack Gibbs (Prince’s Rainforest Project) – C mkt won’t bring a lot of $ to forests… yet. EU is negotiating phase III of trading system – forestry is excluded. Possible that phase III’s permit auction revenue may go to internat forestry activities.

Beatrice Ahimbisibwe (Ugandan farmer) – C mkts are imp to women in dev countries. Her groups’ tree planting project (vol C mkt) brings income stream and other benefits (future harvests seen as pension fund, land has gained value, helps soil erosion on steep slopes, fruit and medicinal bark, etc.). Hope that incr supply of trees will reduce illegal logging in nearby protected area.

Charlotte Streck (Climate Focus, World Bank) – EU – not a fan of forestry involvement in C mkts.

Q & A’s
Idea of a climate trust model was discussed – similar model to AK citizens receiving dividends from oil royalties.
Q: Influence of RGGI on national/internat C mkt? A: not sure what leakage might be, but it’s a “courageous and positive experiment”
Q: Imple auction to direct revenues to poor comm?
A: Jobs issue needs to be addressed.
Q: Bundling - when you commoditize one service you run the risk of ignoring other values that an ecosystem offers. How can we scale up to include multiple values?

Biodiversity Markets Breakout Session
Yusuf Ole Petenya Shani (Shompole Community Trust, Kenya) – his community (Masai) decided to set aside part of their land as preserve, charge visitors an entry fee, and started a high-end eco-lodge [comment: I looked at their website – swanky!]. Other lodge experience in Kenya can have “20 minivans around one cheetah”, but the community is able to maintain quality wildlife habitat & experience by limiting # of visitors (& charging more). Philosophy on PES – need to be benefits for the present as well as the future, or project will not take off. Challenges: gov understanding of PES; integrating women into PES projects.

Alvaro Umana (former Minister Nat Resources & Energy, Costa Rica; now IMF) – remarked on previous quote – valuing forests for their C content is like valuing computer chips for their silicon content. 2nd generation model of PES in Costa Rica is coming w/ differential payments for higher biodiversity (also challenging to implement).

Steve Morgan (Wildlands, Inc.) – drivers for their business: Clean Water Act, Endangered Species Act. Biggest challenge: limitation of market area (to a watershed, a subpopulation of species, etc.). Their demand driver is growth and encroachment on wetlands/habitat. When regulators’ budgets are stretched thin, plans for restor/mitigation aren’t reviewed quickly.

Sachin Kapila (Shell) – switching perspective towards biodiversity as opportunity. Without clear regulation, cannot analyze opportunity.

Kerry ten Kate (Forest Trends) – explained resource markets as traditional markets (ag, forestry products, etc.) and “funky markets” (bio-prospecting, regulatory and voluntary biodiversity mkts). Total trade in funky markets – $1.5 Bill/yr (mostly in US). Business & Biodiversity Offsets Program - businesses to voluntarily achieve no net loss in biodiv (by avoiding, minimizing, mitigating). Incentive for partic: building trust, getting next license more easily, see regulation coming soon. Looking to future of biodiversity mkts… marry offsets to land use planning (the avoid part of the equation), biodiv mkt dating service to match projects to investors/those who need offsets.

Q & A’s
Q: in dev countries with resource extraction & no/v. little offsets – how get companies to offset? A: one difficulty is how to quantify the offset & locate it – Need Clear Metrics for biodiversity. A#2: “No one will write a check that you don’t have to write”. A#3: need level playing field. A#4: we need to stop this race to the bottom in developing countries.

Q re: how (Masai) community decides to set aside land; are there titles; etc. A: distrust titles (“land grab-iosis”), but community agreed to boundary – if start encroaching, go back to that agreed-upon boundary.

Q: how tease out credits of bundled services? A: we have a diversity of opp of credits to sell.

Carbon Markets Breakout Session
…coming soon.

Water Markets Breakout Session
Bettina von Hagen, VP, Ecotrust: WQT markets are unique bc they exist w/out heavy regulation - local incentives for improving WQ.

Ben Grumbles, Assistant Admin for Water, EPA: "Think globally, drink locally." Greatest concern nutrients and dead zones ($4.2 billion in grants for Miss. River basin - go get 'em!) In case you weren't sure how to describe wetlands, they are "nature's kidneys."

Marta Echavirria, Founder, Ecodecision, Ecuador: "Market" hard to convey in Latin culture but WQ is being funded by user fees, aka. "Watershed Protection User Fees", which has raised over $5mil. Working on bundling project with Forest Trends.

Mark Keiser, Sr. Scientist and Principal, Keiser & Associates: TMDL driver for WQT markets. The Miss. River basin is best chance at developing intersate market; no states in the basin have developed WQT standards. Advocate for simple rules - notes less participation in areas where rules are complex, increases transaction cost. If credit isn't credible, nobody will buy.

Richard Coombe, Regional Chief, NRCS: Catskill Plan worked because small farmers were engaged; small percent of population but own 85% of land. Eco-labeling from Catskills another way to increase profits from improved land practices.

Joe Rozza, Water Risk Mgr, Coca-Cola: "Water neutrality" - return same quantity of water as used in plants. Coca-Cola is looking at WQ in products and watersheds of customers. Interesting note - use 'risk' as means to justify environmental programs to companies, instead of financial incentives.

Will Baker, President, Chesapeake Bay Foundation: Advocates regulation and market approaches must come together. "When know what needs to be done, down to the P and N limits of subbasins; we just need the funding to do it."

Q&As:
How do address different methods and interpretations?
Ben: Flexibility with accountability; provide incentives to encourage mkt; need greater
ability to measure non pt. sources; and move states to numeric P and N goals.

There seems to be two subsets/kinds of markets, financial decision (aka. Catskill) and CSR (Coca-Cola) - how do you connect the two?
Marta: No, we need to integrate all players for markets to be successful.
Richard: They will meld together b/c water is so critical.
Hypothetical - Lake Meade is dry - Where do you start?
Ben: By 2011, most west states will experience extreme shortages. Need to advocate now: sustainable ag, Smart growth and efficiency. Wetland mitigation is an important tool.

Building Bridges Session
Public lands might serve as a future insurance mechanism for ecosystem services markets.

Senator John Kerry Keynote
Senator John Kerry (D-MA) – Inconvenient Truth part III: Return of the Politicians. A rousing speech in a room full of nodding heads (as in nodding in agreement).

An Infrastructure Fund for the Planet Panel
Moderator Alvaro Umana former Minister Nat Resources & Energy, Costa Rica; now IMF) – mentioned a new article in Science [?] proposing an atmospheric trust fund from a % of revenues from auctions of permits under a global cap & trade.

Colin le Duc (Generation Investment Management) – investment in forestry attractive (inflation hedge, tax benefits, etc.). Potential in wetland and ecosystem mitigation but has scalability issues. Mapping/monitoring services will be increasing in importance. Biomass conversion also a hot area.

Larry Linden (Linden Trust for Conservation)
…coming soon.

Larry Schweiger (National Wildlife Federation)
…coming soon.

David Brand (New Forests)
…coming soon.

John Mason (Nature Conservation Research Center, Ghana) – there’s a need to communicate with local stakeholders and recognize the unique challenges they face.

Closing Keynote
Steve McCormick (Gordon and Betty Moore Foundation, former CEO of TNC) – discussed broad eras of conservation history: preservation/protection/parks, conservation recognizing the landscape (outside park boundaries), conservation in harmony with people. Suggested new trend in conservation sparked by decision on Millenium Ecosystem Services Assessment to consider the dependence of humans on ecosystem services. Now perhaps the era is on conserving nature for services with human well-being in mind. We are at the “frontier of the imagination”.

Closing Remarks
Michael Jenkins (Forest Trends) and Cristian Samper (Smithsonian Institute) – some themes revisited during the conference: monitoring, baselines & data. Take-home: stories about env markets contributing to livelihoods in developing countries should motivate us.

Daily Summary: 2008 Global Katoomba Meeting, June 9, 2008.

Today and tomorrow environmentalmarkets authors will post summaries, comments, and reactions from the 2008 Global Katoomba Meeting: Developing an Infrastructure Fund for the Planet.

Opening Keynote
John Holdren (Woods Hole, Harvard) - Inconvenient Truth part 2: return of the graphs. Climate change science rundown. Choices for dealing with it: mitigation, adaptation, and my favorite... suffering.

Q & A's
Good metaphor for importance of biodiversity: taking out the rivets on a plane b/c it's free to do so and we don't really know how many we need. Metaphor 2: library.

Re: involvement of indigenous communities... some of the key q's addressed in Bali re: REDD were: can you monitor, how do you compensate, and can you engage indigenous population?

Panel on State of Affairs
Ken Newcombe (Goldman Sachs) - insight to the history of the C market. The 1st C market is an ex of a market catalyzed by an institution, and overtaken by private investment within 1 year. Hope that REDD can start in vol mkt while figuring out baselines. Alluded to an emerging mkt for adaptation - encouraging invest in sust landuse practices like soil C and WL conservation. Ecosystem services are at the nexus between the env, social dev, ag & infra.


Katie McGinty (PA Dept of Env Protection) - Millennium Ecosystem Assessm highlighted WQ as most urgent env problem (over CC). Insight into PA WQT. Environmental imperative for the market - alternative is pouring concrete/grey infrastructure solutions and chemical treatment (aka “call the engineers”). Env skepticism of markets - healthy when a check/balance leading to better design of the mkt, not so good when get "death by discounts" – “slice & dice” of pounds of reduction from edge of field-> stream ratio, stream-> mouth of Ches Bay ratio; reserve ratio; etc. Just say no when trading is proposed when it doesn't belong.

Stuart Anstee (Rio Tinto) – Mining companies own a lot of land that they’re not working on – normally see this as a liability. When impacting biodiversity, consider this a business risk/cost. Switch perspective to opp for mitigation of impacts on their land. Create positive env results from restor/rehabilitation & potentially get income stream. Builds trust with regulators.

Odigha Odigha (NGO Coalition for the Environment) – founder of a Nigerian NGO that works at the local level challenged audience to take the discussion about PES to the community level in developing countries – to where income streams for creation of env benefits is important.

Jonathan Lash (WRI) – stressed importance of “rules of the game”. Stressed viewing markets as a means to getting desired environmental outcomes (questioned the crowd [Who’s here to make markets work?] & no hands went up). The mechanism for creating value in ecosystem services is a regulatory framework. Legitimacy, predictability, transparency important in env markets.

Q & A’s
Re: viability of markets for fisheries—yes, where possible to define & limit access & rights to access can be sold. Politically difficult to limit access.

The Coastal Zone Mngt Act needs to be updated, so why not create a regulatory mechanism to limit access & require offset responsibilities.

Re: market barriers for poor/small landowners b/c of “death by standards & consulting costs”—ex given where markets accessible for areas in extreme poverty – buying C credits [voluntary] from women tree-growers in developing countries. Works in vol market, but compliance markets still buying as commodity, so buying for lowest cost. When commoditize C, you exclude other attributes – issue of quantity vs. quality. Landowners need advanced payments to imple projects. Small parcels are a problem.

Closing Key Note
Kathy Sierra (World Bank) – gave an overview of World Bank involvement in C [& other?] env markets. Anyone have points to add re: this presentation?

Closing Dialogue
Michael Jenkins (Forest Trends) & Cristian Samper (Smithsonian Institution) - Scale, scope, and pace of change are important in development of env markets. Pace—institutions do not move quickly, but must learn to be nimble if want to affect the way markets develop. In developing countries, the institutional capacity to use/enforce standards is weak.

News Summary for 5/17-6/3

Projects
- Nonmarket Valuation – BBC World “Nature Inc.” – “a new series that reveals the true value of nature by putting a price tag on it.” 1st install – bee pollination & CA almond groves June 13th 19:30GMT.
- W Flow – new FS project looks at beavers/fens restor/reintro in Rocky Mtn region to incr w retention capacity as CC adaptation. Contact: Trey Schillie

News
- Farm Bill (USDA website)
---“Passes” (w/snafu) on 5/22 (veto overridden)
---5-yr, $307 bill - $4bill for conservation ($188mill for Ches Bay)
---Lang to help env svcs markets but no funding (“develop uniform standards for quantifying environmental services; establish credit registries; and offer credit audit and certification services”)
---New grants for buying community forests; cost share for emergency for restor; state forest assess & plans; forest “CIG”-type grant program; wood-to-NRG program
---Some, but not much reform of subsidies (see Economist slam)
---Ecosystem Marketplace summary
---Summary of forestry-related items by Northern Forest Alliance Exec Dir George Gay
---Summary of Conservation Title from American Farmland Trust

- All things Mitigation - Ecosystem Marketplace’s Mitigation Mail (5/30)
---FL bill to regulate sea grass loss/damages fine facing veto as last-min amend to allow mitigation banking angers enviros. Crit: miti = net loss
---a NJ conserve trust is putting land up for bid to dev/sell WL miti (but not own the land). Bids start at $15k. Could bring the org $3.8mill.
---TX County has HCP for review that sets up cons miti bank (birds, karst invertebrates) for roads, schools, utilities, pub or priv dev, etc. in Co.
---Charlotte County plans to buy scrub jay (TES) habitat crit: $$, would be preserved by landowner anyway (additionality), pub access concerns
---Another Co gets crit re: additionality of cons miti plan on pub land bought for conservation. Sounds like idea to create bank spurred by dev D/ lack of miti S
---Another gov gets crit re: additionality/net loss – ME DOT + partners planned to restore WL for restoration’s sake, then decided to turn it into a WL miti bank for their uses.
---Miti industry consolidation – Wildlands Inc. buys Acer Environmental (GA/NC)
---Australia’s BioBanking has RFP for landowners to dev/sell biodiv credits, sign biobanking agree

- Cons banking/ Regulatory drivers – US House Nat Res Comm/GAO investigation finds USFWS could have “trumped science with politics” on 8 ESA [de]listing decisions (of ~200 investigated). Looks like FWS jumped the gun in delisting. Pol interference could create unnaturally weak demand-driver for cons banking. House Nat Res Comm site, GAO report (70p), News article summarizing GAO official’s testimony to the House Nat Res Committee

- WQT – Ecosystem Marketplace article on Vol W Mkts reviews basics of D drivers (even if “vol”, gotta have reg driver)/players (regulated PT source, unreg ag sector) in WQT; ag prefers to stay under the radar of regulation/gov (eg – verifiers on farms); WQT price must entice - no D if ag prices high; state policies can work against D (ex – MD “flush tax” paying for PT source poll reduction).

- C – PG&E RFP asks for up to 1mill tons GHG emiss reduction via CA CCAR-verified projects to use customers’ vol offset $s. Deadline 7/2.
- C tax – SF Bay air qual mngt auth 1st in US to charge businesses fees to emit GHG. Will raise $1.1mill from 2500 businesses (ex fees: ~$1/yr for service station -> $50k+/yr for oil refinery). [Q: and do what with it?]
- REDD – New Forests continues S Asia roll (orangutan miti in Malaysia, selling biodiv credits to palm oil manu in Borneo) w/ REDD arrange w/ Indonesia regional gov for up to 1mill hectares forest.
- REDD in the USA – NPR story on N CA forest mngd by Pac For Trust –old trees capture/store > C > quickly than younger trees; variable standards of vol C offsets; CCAR

- Nonmarket valuation –U MD Center for Agroecology study on multi ecosys svcs, incl: maximizing forest mngt for C seq & timber, recre values ($96/day trip, $400/overnight trip), existence value of forests ($200-$375/person/yr). Press release, News story
- Nonmarket val – EU/Germany report: world env damage and species loss from forests costs $2.1-$4.8 trill/yr (NPV). Other world-scale val studies in draft stage: gen biodiv loss, coral reefs, Meditterr coastal WL, env bene of flood/erosion risk mngt, cost of species/hab plans.
- Nonmarket val – Tufts U/NRDC research – cost of not addressing CC (esp from hurri damages, real est loss, incr NRG costs, w costs) in US is $3.8trill/yr by 2100.
- Nonmarket val – CA Forest Assoc’s summer mag is all about link betw forest -> clean water/ consistent flow, W & CC, etc.

- Certif – FSC Fam Forest Cert mtg ID’d ways 2 reduce costs assoc w/ cert, incr landowner bene, impr communic. Mtg report soon.

- Tools – NWI maps now on Google Earth
- Tools – Forestry GIS freeware

-Misc – OSU article on forest mkt drivers - TIMOs and REITs don’t care about maximizing ecosys svcs, sustaining local econ, etc. Land goes to highest val (golf course, timber, whatever). Rise of TIMOs/REITS b/c of tax law (disadvan for timber co’s to own land).