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Financing the World’s Forests: Integrating Markets and Stakeholders
Imperial College - 3 Aug 2009
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Stepping up to CopenhagenOptions for Forests
Financing the World’s Forests: Integrating Markets and Stakeholders - Imperial College - 3 Aug 2009
Andrew W. MitchellFounder & Director
Global Canopy ProgrammeResearch Associate
Zoology Dept University of Oxford
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Core Areas
science
financepolicy
A Crisis of Values
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“There will be no solution to climate change, without a solution to deforestation” (Nobel Laureates Symposium, 2009)
Aircraft Emissions = 2%Energy Emissions = 25 %Forest Emissions = 18%
Forest emissions are equivalent to flying 12.5 million people from London to New York
every day!
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SOURCE: Pathways to a Low Carbon Economy, McKinsey report, Feb 2009
20% of the Problem - 40% of the Solution
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Emerging Frameworks for Forests
UNFCCC - CDM > REDD > 2012EU ETS > 2013
US Market - Waxman-Markey BillAustralia/Others
Voluntary Markets - CCX
CBD - PINC?CBD - Green Development Mechanism
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CDM > REDD > REDD+ > PINC?(Pro-active Investment in Natural Capital)
Tradable Currency = 1t/CO2 > 1 ha/forest?
Figure 2: Three complementary and reinforcing mechanisms for conserving and restoring forest and mitigating and
adapting to climate change
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Sources of $US$ 17-33 Billion /yr
International Auctioning (AAUs) National Auctioning of Allowances
REDD MarketsODA
Interim Financing Mechanism
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Interim Funding for REDD HRH Prince of Wales
hosted historic meeting of world leaders in London alongside April’09 G20
35 Countries G8 Statement Norway Wking Gp Report mid Sept’09
Meeting at St James’s Palace, 1 April’09
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Timing of payments (IWGIFR)
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Fund flows
Tropical ForestsFacility
Rainforest
Bond
RainforestNations
DirectFunding
Private
Investors Payments
OECDGovts
Guarantees/Repayments
Carbon Permit
Auctions
Special Levies
(e.g. fuel)
Earmarking
Taxes
WorldBank Technical
SupportIssuer/Advisor
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Business Drives Deforestation 60% of globally traded beef is from Brazil 40% of exports are to Europe 80% of the growth in Brazilian beef production is in the Amazon EU is also the world’s largest import market for soybeans Palm oil plantations are driving deforestation in Malaysia and
Indonesia 84% of UK companies importing palm oil have done little to
ensure it is not from a destructive source
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Beyond
Copenhagen?
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EmergingEarnings Risks
- Reputational- Regulatory- Environmental
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“Are we creating wealth that’s worth having?”
Clinton Global Initiative, New York, October 2007
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Natural Capital &Financial Capital
A Tale of Two Economies?
Could Water become the new Oil?
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Valuing Forest as Global Eco-Utilities?
+ 80%
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Utility to Business
The Amazon
• 3 trillion tonnes of water stored • 20 billion tonnes of water vapour
transferred daily• $1 trillion of industry share this
eco-dependency• Deforestation means declining
service provision • Rising temperatures will compound
the effects
The Amazon’s
Rainfall Service
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Natural Capital - A New Asset Class?
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Don’t Bank on Copenhagen
Forests - Natural CCS we can’t afford to do without….
GDP > Gross Destructive Potential!
TEEB - will drive recognition of Natural Capital values.
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www.globalcanopy.org
www.littlereddbook.org
www.forestdisclosure.org
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Why should Forests matter to Investors?
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Forests are ‘Eco-utilities’ of immense value
Opportunity 45% of terrestrial carbon is stored in the world’s forests 1.2 billion tonnes of carbon sequestered worth $35-89 billion per
year. Underpin Food, Energy and Health security globally.
Risk 18-25% of total global carbon emissions from deforestation $1.7-4 trillion annual cost of forest ecosystem service loss Poltical and Regulatory famework likely to change fast
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“Are we creating wealth that’s worth having?”
Clinton Global Initiative, New York, October 2007
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Forest Footprint Disclosure
A ‘Toolkit’ to enable business to report on operational and consumption related impacts on deforestation
Direct and indirect Available to the financial community to inform investor
decision making Promoting transparency and awareness Preparing for future risks and opportunities Ministerial launch 15th June 1st Report - January 2010
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We can’t do this without you!
We cant’ afford to wait!