International commodification of ecosystems: in association with ‘Business As Usual’


The Kyoto Protocol was signed during the 1997 COP and established legally binding obligations for developed countries to reduce their greenhouse gas emissions. Following the COP 15 last year in Copenhagen, internationally recognised as a failure, the 2010 16th sitting of the COP began in Cancun, Mexico, on the 29th November and concludes on the 10th December. During an age of free market governance the COP is priming its latest regulatory masterpiece.

New markets don’t just develop from but thrive on crisis. The first stage of a market’s ability to find financial gain from exploiting crisis is that capital is revalued so that economic growth can be achieved. The current environmental crisis of climate change, loss of habitats, wildlife and ecosystems could, if we are not careful, become yet another frontier for markets to generate profit from, becoming part of the ever growing phenomenon of ‘Green Capitalism’. The argument goes that if the environment is valued correctly, markets, society and the environment will all win. This valuation is based on pricing the assets, goods and services of the environment in such a way that environmental degradation and risk becomes measurable, offset, traded and minimized. In creating new markets of environmental products the global finance industry becomes further entwined in the fate of nature’s ‘assets’ through speculative trade on the stock exchange. The market profiteers hold on to the notion that if correctly valued the markets will absorb these new commodities, and self regulating market behaviour will do the rest, resulting in good governance and distribution of environmental services.

Carbon credits are just one method of commodification and valuation that allows a global economy in recession to liquify ‘assets’ and inject the system with new money. Carbon markets are becoming one of the fastest growing commodity markets. Under the European Union’s Emission Trading Scheme carbon credits are allocated at levels that introduce a degree of scarcity, this helps to meet Kyoto Protocol carbon emission targets, whilst also increasing profits that can be derived from speculation within futures markets.

In the 1970s the language of Ecosystem Services (ESS) began conceptualizing ecosystems, specifically forests, as a service provider to humans. In 2005, under the UN Millennium Ecosystem Assessment (MEA), the ESS concept was used to categorize the provision, regulation, support and non-material cultural services of the environment. The MEA goes further to say that quantification by ecological sciences and economics of these categorized services, by determining a financial value, will result in increased conservation whilst generating economic growth. The explosion of carbon trading has raised the profile of ESS, promising a market potentially as valuable as the trade in CO2, but it has only been since proponents of ESS placed a monetary value on global ecosystems that the neo-liberal commoditisation of the environment has started to move with any pace.

Total and marginal value are two possible regimes of valuation. Under total economic value we need to ask what an industry would pay to substitute its absence, such a calculation aggregated over each service an ecosystem provides could result in an ESS value exceeding the industry’s services and a collapse of that value. In order to circumvent this, total economic value should only be used if the ESS is threatened with extinction. Marginal economic value is the amount an individual would pay for a subsequent unit of the service, for example one acre more of rainforest. Under marginal economic value there is an assumption of scarcity, if a commodity is plentiful its marginal value is zero, so scarcity relative to demand determines its market price. Marginal economic value assumes a “willingness-to-pay”. For example: Vittel paid farmers for changes in fertilizer usage in order to protect water quality in France. Willingness-to-pay is therefore derived from a company’s self interest in the continued market value of their product, which is then being harnessed for the good of the environment via ecosystem service exchange.

Payments for Ecosystem Services (PES) are designed to create a source of income to the individuals or companies who provide the management or protection of those most valued ecosystems. An example of a PES scheme where specific ESS are agreed to represent environmental health and investors and conservation managers share the profit from sales of biodiversity certificates can be seen in the Malua BioBank in Malyasia. Benefit to the environment is realized through the Malua Trust which receives part of the profit in order to manage the long term conservation of the region. The investment comes from international asset brokers Equator Environmental LLC, who state that they are “creating value by investing in ecosystems” and that this value is created by “the generation and management of high-quality carbon credits and environmental assets derived from reforestation, forest conservation and sustainable land management”. Equator Environmental are using carbon credit generation for offsetting, which is in essence the incentive for ESS conservation, or in other words the motivation for “willingness-to-pay”.

We now seem to be at a point where ESS have become conventional investment opportunities, where credits of some nature are interlinked with the value of the ESS, via incentive based market mechanisms. Equator Environmental’s website highlights the 2009 Reuters news story where Sierra Pacific Industries were “entering carbon markets with a deal to preserve redwoods and other trees and sell credits for soaking up greenhouse gases to power companies and investors” the article continues; “Commercial forest owners who have hesitated to embrace carbon markets now see financial potential in the developing system of creating ‘offsets’ to industrial pollution that can be sold to factories and energy companies. International climate change talks in December [2009 COP15 in Copenhagen] will include discussion of similar schemes to stop the destruction of global forests, which accounts for about a fifth of global greenhouse gas emissions. Trees which otherwise would be cut down will be allowed to keep growing, increasing the storage of carbon dioxide. It is one of the first deals under updated California rules that incorporate forest management into the most populous US state’s plan to cut greenhouse gases.”

Some elements of the private sector are investing in ESS, specifically forests, based on the value of credits. By this logic preserving ecosystems means an acceptance of the generation of new carbon credits, and therefore increased emissions. A joint report in 2008 by the Food and

Agriculture Organization of the United Nations (FAO), the United Nations Development Programme (UNDP) and the United Nations Environment Programme (UNEP) on the United Nations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries (UN-REDD) was written in the 18 month run-up to the 2009 United Nations Climate Change Conference in Copenhagen. Suggestions were given for a “Quick Start” program which should include “long-term engagement of REDD into the carbon market through payment for ecosystem services”. Essentially carbon emissions in one place are seen as equivalent with the carbon stored within forests, and thus carbon emissions can be offset by the ‘preservation’ of ecosystems. An earlier report in 2007 from UNEP and the IUCN on Developing International Payments for Ecosystem Services (IPES) states that:

“Growing interest in carbon sequestration and the conservation of natural carbon stocks could serve as an important stepping stone for IPES. With an established market for carbon emissions, there is reason to believe that carbon sequestration could become an important source of finance for ecosystem conservation. Such a belief is contingent however on the ability of the international community to reach consensus on how to reduce greenhouse gas emissions from deforestation and forest degradation (REDD).”

Of course the equivalence assumptions made between CO2 emissions and carbon stored and sequestered within ecosystems are incorrect, particularly if protecting a sink of carbon results in a further increase in CO2 emissions due to generation of new carbon credits which permit emissions. This is of upmost importance in the REDD debate.

The Clean Development Mechanism (CDM) currently allows Annex 1 countries (or the rich west) to invest in projects that reduce emissions in the global south so that cheaper alternatives to reductions in their own countries can be utilized, however the project must prove that the emission reductions would not happen if the CDM incentive was not offered, this is known as ‘additionality’. Under the existing Kyoto Protocol, which runs till 2012, the CDM does not allow carbon credits to be generated from Land Use, Land Use Change and Forestry (LULUCF) but, as highlighted, prominent UN councils, the private sector and international governments are pushing for PES schemes such as REDD. The COP15 process in Copenhagen failed to deliver on updating the soon to expire Kyoto Protocol leaving a void into which the COP process is attempting to insert REDD.

The emission credits from approved CDM projects are known as Certified Emissions Reductions (CERs), these can be bought and traded within the cap-and-trade systems of Chicago and London. There is another type of carbon credit know as the Voluntary Emissions Reductions (VERs) which are currently linked to PES schemes such as REDD. But the confusion surrounding the different credits are summarised succinctly by the UK House of Commons Environmental Audit Committee:

“The voluntary carbon offset market is not an island and is intrinsically linked to the compliance carbon market.”

“it is not always very clear to consumers exactly which type of credit they are buying.”

“an increasing proportion of CERs in the future may represent forestry savings while a decreasing proportion of VERs might do so”

“The UK Government is doing a considerable amount to help …. to integrate forestry projects into the CDM”

From these quotes it becomes increasingly obvious that VERs and CERs are almost interchangeable, meaning that schemes such as REDD are in effect already part of the CDM and undermining the rules on additionality. The proposed ‘official’ inclusion of REDD into the CDM will only serve to further undermine the CDM whilst simultaneously making the ‘cap-and-trade’ of CO2 further redundant as a mechanism to lower and stop carbon emissions.

Peter Young, Interpol Environmental Crimes Specialist recently warned that “fraud could include claiming credits for forests that do not exist or were not protected, or by land grabs. It starts with bribery or intimidation of officials, then there’s threats and violence against those people. There are forged documents too… Carbon trading transcends borders. I do not see any input from any law enforcement agency in planning REDD.”

There are 100 REDD pilot projects already in existence and in the near future they may be able to generate CERs. Many carbon traders are keen to exploit future openings in the market, whilst Peter Young’s fears seem to be becoming a reality. In Papua New Guinea carbon traders have been accused of coercing villagers “to sign over the rights to their forests’ for REDD” (Sydney Morning Herald, 2009), whilst the Confederation of Indigenous Nationalities of the Ecuadorian (CONFENIAE) state; “we reject the negotiations on our forests, such as REDD projects, because they try to take away our freedom and manage our resources and also because they are not a real solution to the climate change problem, on the contrary, they only make it worse”

The lack of government leadership, policy reforms, corporate lobbying and a lack of public pressure have resulted in a void which is currently being filled by the neo-liberal convergence between commercial interest and environmental imperative. Governments seem intent on backing markets to find solutions whilst simultaneously ignoring their role of regulation through taxes, subsidies or tariffs on environmental goods and services. Tariq Banuri and Hans Opschoor of the United Nations Department of Economic and Social Affairs state that price incentives work well for changes on the margin but are ineffective at bringing about “fundamental transformation in the economy or society”. In ‘The Economics of Welfare’, Pigou poses three solutions to market failures which result in sociological or human welfare divergences from private benefit: state imposed tax on production, state regulation on production, and state ownership and production. Currently international governments do none of these three and seem intent on leaving the regulation of environmental damage to the markets, with ‘good governance’ assumed to be a by-product.

Ecosystems are being absorbed into capital markets with the potential of making carbon trading even more ineffective, whilst supplying the markets with a scarce resource from which economic growth can be furthered. It can’t be stated too often that equivalence between carbon stored in forests and emissions from the burning of fossils fuels is fundamentally flawed. We must reject valuation and commodification of global ecosystems and put pressure on the COP process to drop the adoption of REDD into the CDM. Importantly we must highlight alternative mechanisms of systematic change that are not based on free market governance.

The Conference of the Parties (COP)16 is running from 29th November – 10th December in Cancun, Mexico.

This article was written by Daniel Quiggin. Dan is currently studying a PhD in Decentralised Energy Networks at the joint UCL/Loughborough Energy Demand Reduction Institute. Following a Physics background, environmental politics lead to climate change studies and involvement in environmental and social change activism.

Action Update Around The Conference of the Parties

Throughout the next weeks, there are many activities going on internationally around the time of the COP16 to highlight alternatives. For example, there is an International Anti-Capitalist Space being organised in Mexico and anti-capitalist mobilisations involving many organisations and individuals. On 30th November, activists, environmentalists and rural Mexicans all took part in a protest in Mexico City demanding concrete actions to help protect the environment.

The verdict in the Climate Justice Action (CJA) trial in Copenhagen was given this week. The two spokespeople for CJA, Tannie Ørum and Stine Gry Jonassen, both got a four months suspended sentence for assaulting police at the December 16th “Reclaim Power” protest during last year’s Climate Summit in Copenhagen. This is an attack on the right to protest and organise civil disobedience action. The English version of the statement is now online at: