Big business and the EU: painting the economy green

14.06.2012
Carbon trading

Highways cutting through protected nature areas in Europe? Privatised forests and ugly houses in what was until now a common area of natural beauty? As long as the company building it pays to 'protect' other area in a remote place. This is what biodiversity offsets are about. Just one of the things the European Commission is proposing together with business under the name of green economy.

Twenty years after the first Earth Summit in Rio de Janeiro, Brazil, governments will once again converge on Rio for the third UN Summit on Sustainable Development from the 20-22 June.

The agenda for Rio+20 is all about how to make the transition to a "green economy". The international agreements signed up to in Rio are seen as old history now - new solutions are needed to tackle the growing environmental and social crises. The battleground in Rio will pitch the rich world (Northern country governments, other countries which see economic benefits from this such as Costa Rica and Brazil, big business, finance, big conservation NGOs and international institutions such as the World Bank) against a number of Southern countries and civil society, who fear that the proposals on the table are being used to legitimise a resource grab by the rich, threatening access to land, water and natural resources for the world's poor.

“The goal is to transform environmental legislation into tradable instruments”,
Pedro Moura Costa, co-founder of carbon offset company Ecosecurities and founder of Bolsa Verde Rio de Janeiro 1

Key to the battle is what is actually meant by a "green economy" - a vague concept, which might sound good and which could perhaps be interpreted as meaning a shift away from our oil-based, growth-obsessed model to more sustainable development. But the absence of any clear definition has left the concept open to other possibilities – including the increased use of market-based mechanisms, such as offsets, in areas such as biodiversity and water regulation and the greenwashing of business as usual.

The European Union has been in the vanguard, promoting the idea of a green economy. The EU wants to work in partnership "actively engaging the private sector" both in the negotiations and going forward to develop a strategy for a green economy 2, as was shown by the leaked amendments to the Zero Draft, the key text being negotiated in Rio.

Whose green economy?

This focus on the green economy in the zero draft can be traced back to two initiatives hosted by the UN Environment Programme (UNEP), both led and developed by Pavan Sukdhev, a former investment banker at Deutsche Bank.

In a 2011 report on the Green Economy 3, Sukdhev put forward the idea that in order for nature to be protected, its functions, what he calls ecosystem services, must be given a price. If biodiversity has a price this creates a financial incentive to protect it.

The other initiative, hosted by UNEP and initiated by the German government and the G8, is a project on "The Economics of Ecosystems and Biodiversity" (TEEB) 4, which aims to develop a methodology to determine how to value and price biodiversity.

Valuing nature, and the functions it provides, from clean air and water to the cultural and recreational uses, might sound sensible. But giving it a price tag it is a form of privatisation of resources once considered as the commons. It allows for nature to be bought and sold, to be commodified, and subjected to the forces of the market.

Commodification of nature

Two of the main types of marketisation of biodiversity are Payment for Ecosystems Services (PES) and Ecosystem Trading, including habitat and species banking.

Payments for ecosystems services refers to the practice of offering incentives to farmers or landowners in exchange for managing their land to provide some sort of ecological service - as for example with set aside land in farming 5. The incentive may come from public or private money, and may be done to protect the public interest, or a private interest in protecting a natural resource - for example, Coca Cola has paid for water protection in order to increase public acceptance of its activities 6.

Trade in ecosystem services in contrast aims to create a form of compensation for a natural resource, rather than simply outlawing its use. It is a business transaction between a seller and a buyer, in which nature is transformed into quantifiable units, into tradable “goods” or “assets” 7. So a community may receive payment for the rights to a forest, which can be traded on a wider market. One of the concerns about such schemes is that previous similar experiences suggest that the local people - for example a forest-dwelling community - tend to be exploited by the trading partners, usually brokers, buyers and international institutions, creating an unequal playing field.

One way in which this can work is through biodiversity offsets, which can be used to compensate the destruction of biodiversity in one place by buying credits achieved 'protecting' biodiversity somewhere else. Like carbon offsets, however, they are at best zero sum, that is to say, they do not reduce biodiversity loss. Apart from the extreme difficulty of measuring and quantifying ecosystem functions, offsets ignore the social, cultural and spiritual functions that nature provides. Competition for land and therefore land grabbing will be exacerbated with the creation of new markets and offsets through biodiversity credits.

Some examples already exist in this new market in ecosystems functions, such as wetlands and species banking in the US, the pooling of compensation projects in Germany or the Environment Service Trading Exchange in Rio de Janeiro 8.

The Green Development Mechanism (modelled on the climate Clean Development Mechanism which allows industrial countries and corporations to buy carbon credits from projects in developing countries to offset domestic emissions) which generates biodiversity credits, has already been proposed under the Convention on Biodiversity (CBD). Some estimates suggest that a binding system for biodiversity offsets could create a market worth US$ 20 billion per year by 2050 9.

The WBCSD and forest carbon markets

Further commodification and the increased use of market-based mechanisms in biodiversity regulations have been supported by many in big business- and the World Business Council for Sustainable Development (WBCSD) - a major lobby group in the UN process, which represents big business interests including Syngenta, Rio Tinto and Holcim - has been a particularly enthusiastic advocate.

The WBCSD has also been a strong supporter of REDD+ , a “green economy” scheme which it claims is the most “cost effective option to respond to climate change” 10. REDD+ (Reduction of Emissions through Deforestation and Forest Degradation) is based on the idea that forests act as carbon stores, which are destroyed when the trees are cut down, releasing greenhouse gases. The idea is that if you can price the carbon stored in the trees (which cannot be guaranteed into the future because carbon is often naturally released from forests) an incentive is provided for forest owners to protect the forest instead of cutting down the trees. If fully implemented under the UN climate framework, it is estimated that REDD could create a market worth $US 5 billion a year 11.

REDD+ is increasingly contested because pilot projects have confirmed fears that it threatens Indigenous Peoples and forest-dependent communities by depriving them of access to forests and/or use rights over their forests. It is also contested because it is funded through offsets, and as such will not reduce emissions – but merely offset emissions elsewhere.

A business-friendly European Commission

The WBCSD is close to the European Commission, and has been particularly close to DG Environment and the Environment Commissioner Janez Potočnik in the run up to this Summit.

Documents obtained through freedom of information regulations 12 reveal that Potočnik was eager to hear from the business group which areas of 'natural capital' apart from forests and water were of interest to them and which partnerships with governments they would consider.

Commissioner Potočnik also appears to have agreed to peer review the “Changing Pace” report being prepared by WBCSD for Rio+20, which was launched on 22 May 2012 13. This report, which was also reviewed by the OECD, IUCN and WWF, proposes WBCSD's preferred policies to achieve the so-called sustainable societies which WBCSD has painted as a vision for 2050 14.

Commissioner Potočnik is known as a friend of industry. While Research Commissioner he facilitated the involvement of big business in policy making through the establishment of Technology Platforms, which allowed lobbyists to influence the EU's research agenda 15.

The environment Commissioner referred to the examples on forest and cement described by the WBCSD as good practice, saying that “Indeed the message has arrived to business before the messenger.” 16

It seems that the Commission has been able to turn a blind eye to less impressive practice. By highlighting isolated examples of initiatives on environmental or social issues, the business lobby appears to have successfully distracted attention away from the many problem areas associated with business impacts on the environment.

Potočnik added: “In the past, while the industrial branches were trying to maximise the output, the policy-makers were forced to regulate. Nowadays, one should reverse the situation by using businesses for the environment and focussing on resource productivity.”

The EU's push for market-based mechanisms

The EU in fact appears to have been pushing for a bigger role for the private sector throughout the negotiations leading up to Rio+20. At a meeting in March 2012 for example, the EU proposed adding a whole section to the text on the private sector 17.

And last year (2011), when the Commission held a public consultation on the EU position for Rio+20 they seemed to be particularly interested in the seven responses they received from industry - as opposed to the 24 views submitted by NGOs 18. Many of the NGO responses called for binding measures to limit damage to the environment, but industry associations questioned the need for this. And the Commission's input to Rio reflected their views.

One of the Commission’s aims for Rio+20 has been explicitly to expand carbon markets – despite the growing body of evidence that shows that this kind of an economic approach does not reduce emissions 19.

“Rio+20 should encourage countries, in particular industrialised and emerging economies, to develop domestic and regional carbon emissions trading schemes with a view to reducing emission at least cost, and as building blocks of a future international carbon market” 20.

The theory of carbon trading claimed the scheme would provide a cheap and efficient way of limiting greenhouse gas emissions within an ever-tightening cap. In practice carbon trading has rewarded big polluters with windfall profits and failed to significantly reduce greenhouse gas emissions.

What is more, the system has failed to make industrialised countries and corporations take responsibility for their own emissions, allowing them to offset domestic reductions by buying carbon credits from offset projects in the global South. This has had serious impacts on local communities, including cases where communities have been forced off their land by carbon credit projects 21. The reliance on the carbon market also undermines efforts to reduce emissions through other policies.

When CEO hosted a public debate on the EU's agenda for Rio+20, Hugo-Maria Schally, one of the EU negotiators in the Rio+20 Summit 22, speaking for the Commission, failed to clarify the EU’s wider ambitions on the field of biodiversity.

At domestic level however, the EU is already considering an offsetting initiative for habitat, as part of its 2020 Biodiversity Strategy 23.

The rationale behind this proposal is that this mean there is “no-net-loss of biodiversity and ecosystem services”, yet it allows the destruction of habitat in one place as long as habitat, available in a 'bank' or register, is saved in return. Such a scheme would effectively give a green light to environmentally destructive projects, as long as a bit of biodiversity elsewhere was protected.

It follows the same flawed logic of replacing environmental legislation with market-based mechanisms, which as we have already seen, have failed to stem rising carbon emissions.

Nature does not do bail outs

It seems clear that the EU has pinned its colours to the mast. When delegates sit round the table in Rio, they will be arguing the case for business interests – and disregarding the concerns raised about the risks of the green economy.

Given the experiences from the financial crisis, the EU should be not so keen to puts it faith in the markets, especially when something as crucial as the future of the planet is at stake. And yet its proposal is to expand carbon markets, and very likely to financialise biodiversity, to develop more complex ways in which to trade nature – and to hope that the markets deliver.

The Commission, in this case particularly DG Environment, needs to stop being so close to business groups such as the WBCSD. The EU is now looking at the Rio Summit and issues at stake through the corporate lens, distorting the picture.

Nature doesn’t do bail outs. We only have one planet and we cannot trade away the natural resources that we all depend on, putting them in the hands of private interests.

Thanks to Jutta Kill and Joanna Cabello for comments to earlier draft.

Related articles
13.01.2012
Rio+20 and the greenwashing of the global economy
15.04.2013
EU ETS myth busting: Why it can’t be reformed and shouldn’t be replicated
07.06.2012
The EU's agenda at Rio + 20 - what does it mean by 'Green Economy'?

This article continues after the banner

Subscribe to our newsletter