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Banking Nature. Or cashing in on the destruction of nature

2015-04-09-155647_1128x1024_scrotA new documentary film, Banking Nature looks at the Brave New World of species banking, biodiversity offsets, wetlands credits, ecosystem markets, and putting a price on nature.

The film, directed by Denis Delestrac and Sandrine Feydel, starts with a question: What if economic and financial markets could save the planet?

“Endangered species and forests are treated like financial products. Can markets succeed where politics have so far failed? But at what risk? At what price?”

The film explores this question largely through a series of interviews. On one side we hear from Pavan Sukhdev (CEO, Gist Advisory), Ricardo Bayon (EKO Asset Management Partners), Michael Jenkins (Ecosystem Marketplace), Geoffrey Heal (Earth Institute, Columbia University), and Mark Tercek (The Nature Conservancy). Counter arguments come from Pablo Solon (Focus on the Global South), Vandana Shiva, Geneviève Azam (University of Toulouse), and Jutta Kill (World Rainforest Movement).

The film is now available in English on Vimeo (for download at a cost of US$11.99, or viewing online for a 24 hour period at US$3.99 – but it is not available in the USA, France and several other countries). Some of the interviews from the documentary are available on YouTube.

Pricing Nature

Ricardo Bayon has probably done as much as anyone to promote the ideas of putting a price on nature and biodiversity offsetting. In 2003, he founded Ecosystem Marketplace, a website dedicated to promoting markets as the solution, regardless of the problem. In 2008, Bayon co-founded EKO Asset Management Partners, which describes itself as “an investment management and advisory firm that develops and implements innovative approaches to financing conservation and environmental sustainability”.

EKO Asset Management Partners recently merged with Wolfensohn Fund
Management, L.P. to form Encourage Capital. The Chairman and CEO of Wolfensohn Fund Management is James Wolfensohn, who was President of the World Bank from 1995 to 2005.

Here’s Ricardo Bayon interviewed in Banking Nature, explaining why he thinks that pricing nature is inevitable:

“What happens if there are very much less trees, if there’s not the clean water where we need it, when we need it, if there isn’t the clean air where we want it and where we need it? That becomes scarcer, that becomes more valuable. We’re going to start to put a price on it. Start to put a price on the destruction of it. And we believe there are opportunities in that transition to profit from that transition.”

Towards the end of that, he gave the game away: “Start to put a price on the destruction of it.” As environmental journalist George Monbiot pointed out in a talk last year, once nature has a price, it’s an open invitation for experts to use cost-benefit analysis to prove that destroying it is worth more than keeping it. He gives the example of a woodland, threatened by road construction:

“Say we decide that we’re going to value nature in terms of pounds or dollars or euros and that this is going to be our primary metric for deciding what should be saved and what should not be saved. This, we are told, is an empowering tool to protect the natural world from destruction and degradation. Well you go to the public enquiry and you find that, miraculously, while the wood you are trying to save has been valued at £x, the road, which they want to build through the wood, has been valued at £x+1. And let me tell you, it will always be valued at £x+1 because cost benefit analyses for such issues are always rigged.

“The barrister will then be able to say, ‘Well there you are, it is x+1 for the road and x for the wood. End of argument.’ All those knotty issues to do with values and love and desire and wonder and delight and enchantment, all the issues which are actually at the centre of democratic politics, are suddenly ruled out. They are outside the box, they are outside the envelope of discussion, they no longer count. We’ve been totally disempowered by that process.”

The case of the Delhi sand flower-loving fly

The film-makers travel to Colton, California, about 90 kilometres east of Los Angeles. It’s the habitat of the world’s most expensive fly, the Delhi sand flower-loving fly. A century ago, there were about 10,000 hectares of sand dunes in this area. Now only 2% of its habitat remains. The rest has been built on.

In 1993, the Delhi sand flower-loving fly became the first fly in the USA to be included on the Endangered Species List. Under the Endangered Species Act no one can harm an endangered species. Development around Colton stopped as a result.

A company called Vulcan Materials Company saw an opportunity for profit. Vulcan, which is the largest producer of crushed stone, sand and gravel in the USA, bought about 150 acres (60 hectares) of fly habitat, and created a “mitigation bank”.

Michael Linton of Vulcan Materials Company explains:

“The fly is a rare species with rare property. Makes a very good financial investment. We can create as much value for our stockholders as well as create a biological opportunity for conservation, by turning it into a mitigation bank. So our most recent sales have been US$250,000 an acre.

“The free market tends to find out a good balance between adequate conservation, shareholder value and allowing development to go forward.”

So thanks to Vulcan’s mitigation bank, a company that wants to build, and thus harm the endangered fly by destroying yet more of its habitat, can pay Vulcan for “fly habitat credits” and “offset” the damage.

It’s good business for Vulcan. The company has made US$20 million from a piece of land that legally cannot be developed, because it is the habitat of an endangered species.

But is this really a case of “free market” conservation? And is it really a solution?

If the Delhi sand flower-loving fly had not been placed on the Endangered Species List in 1993, it’s a pretty safe bet that the “free market” would have destroyed just about all the last remaining habitat by now. The free market didn’t declare the fly endangered, the federal government did.

Only a tiny percentage of the original habitat remains. Vulcan’s mitigation bank covers only 60 hectares, of what was originally 10,000 hectares of sand dunes. The existence of the mitigation bank guarantees that when all the credits are sold, 60 hectares of habitat (perhaps degraded but with the potential to be restored) will be built on. Is this really a model for protecting biodiversity globally?

Banking Nature

The documentary provides a fascinating insight into the world of market solutions to the environmental crisis, tracing the development back to the election of Ronald Reagan and the rolling back of environmental regulations in the USA, which opened the door to the market.

George H. W. Bush moved things along with his promotion of “no-net-loss” of wetlands, announced as a goal during his 1988 presidential campaign. Rather than protecting wetlands, the “no-net-loss” policy allowed developers to destroy wetlands as long as they paid for the reclamation, mitigation, and/or restoration of wetlands elsewhere.

The documentary looks at examples from around the world. In Malaysia, the Malua conservation bank is the largest mitigation bank in the world. In Brazil, mining company Vale claims to be replanting the Amazon, when in fact it is planting fast growing eucalyptus monocultures. In Uganda, a German company called Global Woods is planting trees on land that villagers were using to grow crops.

The documentary does not directly answer the question it raises at the beginning. Instead it raises another question. Should we leave the planet in the hands of the bankers who triggered the economic crisis in 2008? Meanwhile the documentary raises serious questions for the people hoping to profit from what’s left of the planet’s biodiversity.

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  1. Just as political parties squabble over “paying down the deficit” rather than capitalism versus socialism these days, so the sophistry surrounding environmental destruction allows the true outcomes of the processes to be ignored.

    A Carbon Extraction Levy can be coupled with a similar charge for inflicting damage to a sustainable global ecology, including reduction of demonstrable contiguous habitats. Nature has to flow, the concepts outlined above of mitigation zones are, at best, analogous to zoos and, in practice, as you note, doomed to failure.