Happy Markets, Happy Forests

Political leaders have come around to saving the rainforests, now let business leaders figure out how

At a recent conference in Manaus, Brazil, several indigenous Latin American groups gathered in support of a new carbon-trading plan meant to preserve tropical rainforests in the international fight against climate change. The plan, which the United Nations has dubbed “Reducing Emissions from Deforestation and Forest Degradation” (REDD), was a main topic at December's climate change talks in Bali, Indonesia, and has resulted in the creation of the International Alliance of Forest Peoples. And it marks a significant gathering of steam for market-driven concepts aimed at connecting the dots between business, conservation and the forest-dependent native people living amidst the biodiverse land crucial to the planet’s environmental health.

Scientists widely agree that tropical deforestation from logging, agriculture and development accounts for about a fifth of the world's greenhouse gas emissions. REDD combats this deforestation by making wealthy countries pay the native people of developing countries for every hectare (about 2.5 acres) of forest that are not cut down. Brazil is seen by many environmentalists as the ideal proving ground for such a concept, as native groups there have permanent rights to 21 percent of the Amazon, in contrast to other rainforest lands around the globe, which are mainly government-controlled.

While it’s difficult to determine the amount of carbon saved, the Woods Hole Research Center in Massachusetts estimated that the amount should be ten dollars per square kilometer. They calculate that the conservation of the Amazon rainforest in this "perimeter defense" plan would amount over $530 million annually by the program's tenth year. Research has shown that reducing Amazon deforestation by just ten percent could yield up to $13.5 billion in the international carbon emission trading market.

What makes REDD so striking is its multi-pronged attack. Not only will it combat global warming by saving the immense stores of carbon in the forests, but it will also help to maintain and improve native people’s traditional way of life. (In the Amazon, for example, the clearing of forests for logging, cattle farming or agriculture negatively impacts the lives of the indigenous rubber tappers and nut gatherers.) Additionally, the maintenance of tropical rainforests will help to ensure the survival of remarkable biodiversity: The habitats of many animals and useful, indigenous plants are destroyed by deforestation.

REDD is a good plan. Surprisingly, neither the Kyoto Protocol nor the United Nations Framework Convention on Climate Change (UNFCCC) contain provisions for the limiting of tropical deforestation. In this case, REDD is a first. Naturally, the UN is taking a lead in this effort. But for all the good things that the UN is, it’s nothing if not a slow-moving, bureaucratic behemoth. Case in point: The UN’s Kyoto successor -- which is to include REDD provisions -- will not come into effect until 2012.

What can step in to fill the void left by the UN’s sluggish response? Well, for one thing, the market. While the UN has to travel through the maze of NGO’s, federal and local governments to enact policy at the street level, small- to mid-sized businesses are nimble enough to quickly move cash and make things happen on the ground. A “perimeter defense” plan that involves domestic and foreign investment capital in the long-term financial and structural gain of local businesses and residents would be much stronger, more efficient, and ultimately, more effective than having that $10 per hectare trickle down through a federal government’s treasury.

And companies should focus their efforts on Brazil, which contains one-third of the world’s rainforest land. President Luiz Inácio da Silva’s increasing willingness to defend his country’s vital biodiversity and carbon stores has been most notably demonstrated in Operation Arc of Fire, a well-funded campaign to stop illegal rainforest destruction. Since the project began in February, authorities have issued almost $26 million in fines. But the carrot must be used with the stick: Economic incentives should exist alongside financial penalties.

Companies that invest in products that don’t harm the forest -- like rubber, palm fruits, nuts and medicinal plants -- should be able to bring these products to market easily, unfettered by tariffs. The rubber extracted from the Amazon comprises a mere 1.4 percent of the country’s entire rubber market. Also, Brazil’s exports to the United States represent only about 2.5 percent of its GDP. These kinds of imbalances must be addressed. (Hopefully, US President George Bush’s year-old effort to promote two-way trade with Brazil will soon bear fruit.)

Last year, American environmental economist Matthew Kahn conducted a survey of 141 nations in an effort to find the most eco-friendly ones. Using figures from the United Nations’ 2006 Human Development Index and the 2005 Environmental Sustainability Index, he found that Finland, Iceland, Norway, Sweden and Austria were the top five. While these European nations’ geographies differ vastly from Brazil’s, Mr. da Silva would do well to provide incentives to eco-savvy companies from these countries to come to the Amazon in an effort to make conservation a profitable enterprise.

More importantly, Brazil must tap the insight of its neighbors, who have more similar physical and cultural landscapes -- and who have been successful in the maintenance of virgin lands. Costa Rica, for example, is ranked fifth in the world on Yale University’s 2008 Environmental Performance Index. Almost a quarter of the country is made up of protected reserves. And its government has made the commendable declaration to make it the first carbon-neutral nation by 2021. Peru is another neighbor with some pretty good ideas. With over 70 “eco-lodges” now in the Madre de Dios region, the country is enjoying an eco-tourism boom that actually helps to maintain the Amazon. In 1996, the region’s largest tourism operator, Rainforest Expeditions, began a 20-year joint venture with the area’s indigenous people, who receive 60 percent of the company’s profits and share in the company’s decision-making. Literacy rates and healthcare have greatly improved through this scheme, and the locals help to maintain the well-being of the forest to help keep eco-tourism alive.

Ultimately, ten dollars is a meager amount to protect an entire square kilometer. In order to maximize the monies from this compensation, it must be treated as an investment, not a payment. The investments should fuel the growth of local, sustainable businesses and also provide education to the “guardian residents” of the forest. Kahn’s study found that an “engaged, educated public” was a strong tool to combat the destruction of natural environments. But in Brazil, this must be complemented with a way for the lucrative -- and highly destructive -- cattle industry to survive. Currently, cattle farming accounts for 60 percent of the Amazon’s deforestation, the recent growth of which was spurred by a devaluation of the dollar-pegged real, which effectively doubled the price of beef in reals, gave farmers a strong incentive to clear forest for cattle-grazing. A revaluation of the currency may help maintain cattle farmer’s profit margin with fewer cows. Additionally, cattle farmers -- as well as the small-scale agricultural farmers who account for 30 percent of the deforestation -- should also be included in REDD’s carbon-trading scheme. Profit from selling credits to polluters around the world would help make up for lost cattle revenue.

Conservation must be approached as a profit-generating venture. But the United Nations is not the best leader for the implementation of such big ideas (a sentiment sadly proven by the oil-for-food scandal). But it can and should provide an international framework and some local oversight. And national governments must provide incentives for foreign investment and ease trade barriers on eco-friendly products. But ultimately, it’s the market forces that can successfully foster economies that benefit from healthy rainforests. And that would be healthy for all of us.

photo: Guarani indians Karai Decupé Miri and Pará Miri, courtesy carf

Mining for Answers in the Philippines

The Philippine mining industry is running rough-shod on indigenous people and the environment. For President Macapagal-Arroyo, it presents a great opportunity

Last month, the municipal government of Nueva Valencia in the Philippine island province of Guimaras passed a resolution opposing the proposed mining exploration by the Fil-Asian Strategic Resources and Properties Corporation. Environmental groups and Guimaras residents fear that the project will threaten the natural resources of the island, which is still recovering from a massive oil spill in 2006. Also recently, Bishop Ramon Villena, the chair of the Regional Development Council for Cagayan Valley, asked President Gloria Macapagal-Arroyo to suspend the operations of the OceanaGold mining project, following the company's alleged violations of human rights in the region.

There are many well-known negative effects of the mining industry, which uses a tenth of the world's annual energy supply and accounts for the second-largest source of greenhouse emissions. Farmland, plants, animals and humans all suffer from mining, which pollutes the groundwater, rivers and irrigation lines, leaving open sores of unusable land in its wake. The Lepanto Consolidated Mining Corporation, located in Mankayan, Benguet, dumps its mine tailings into the Abra River. The Manila Times has reported that pollution from the Lepanto operation has caused a 30% reduction in rice production in the Cervantes and Quirino areas, communities which rely on rice planting. Additionally, mining pollutants kill the marine life which many coastal residents depend on for their daily survival.

Open pit mining -- the standard method for extracting ore such as gold and copper -- also impacts the environment in a unique way: By destroying natural habitats, this mining removes a link in the ecosystem chain, adversely affecting the biodiversity of an entire region. BHP Billiton, one of the world's largest mining firms, recently secured a Mineral Production Sharing Agreement (MPSA) from the Department of Environment and Natural Resources (DENR) for the exploration of nickel deposits in Barangay Macambol. This area is located between the Pujada Bay Protected Seascape and Landscape and Mt. Hamiguitan Range, a newly-established wildlife sanctuary that is home to the endangered Philippine Eagle. Last month, protesters picketed in front of the firm's office in Mati.

But environmental damage, human rights violations and loss of food security are not the only mining industry factors affecting the country. The way in which the industry is currently operating may actually be unconstitutional. On March 3, several house representatives filed petitions before the Philippine Supreme Court seeking to scrap the Mining Act of 1995, a product of the World Bank's call to liberalize the world's mining industries. They argue that the act violates an article in the constitution which allows the state to exploit the country's natural resources in concert with corporations, provided that Philippine citizens own at least 60% of those interests. However, the Mining Act permits mining firms to be 100% foreign-owned and, most surprisingly, allows the repatriation of all profits. The only money to be made by the Philippines, according to the act, comes in the form of an excise tax. But this is a pittance. The 2005 excise tax collection of the Lafayette Mining subsidiary Rapu-Rapu Mining amounted to only 1.5% of the company's total revenue. Obviously, this is not a fair deal for the Filipino people.

As the petitions slowly make their way through Supreme Court bureaucracy, Ms. Macapagal-Arroyo seems to be in a political bind. As a senator, she was the principal author of the Mining Act under the Ramos administration. Her administration currently has over twenty priority mining projects. And, though legislation has been filed to repeal the act -- such as House Bill No. 1793, authored by Bayan Muna Representative Teodoro Casiño -- it is languishing in Congress and its Committee on Natural Resources, which is chaired by Ms. Macapagal-Arroyo's brother-in-law, Representative Iggy Arroyo.

Repealing the act in Congress is a far better solution than having the Supreme Court rule it unconstitutional. A protracted battle between the legislative and judicial branches of the government would not be good for the country. Moreover, solving the issue within the House of Representatives would give Filipinos a much needed measure of confidence in their elected officials. And this tack affords a big opportunity for Ms. Macapagal-Arroyo to pull herself out of her historical attachment to the law and the current bind she is in: She can be the one to make the call for change. As President, she can urge Congress (and specifically her brother-in-law) to seriously address Mr. Casiño's bill. Acknowledging that a law she authored is no longer effective would not only be a positive step in moving her country forward, but would help resuscitate her sagging image. Falling on the right side of the current mining issue will show that she is willing to adapt to changing times, and more importantly, willing to be wrong about a past position. Voters would more easily forgive Ms. Macapagal-Arroyo for writing a bad law over a decade ago as a senator than for holding onto it now as president.

In addition to calling upon Congress to address the problems of the current act, Ms. Macapagal-Arroyo should make sure that the DENR includes the voices of domestic mining interests, non-governmental environmental groups and the local communities directly affected by mining in a fresh, progressive and transparent discussion that crafts a sustainable future for the country's vast, untapped mineral wealth. The local communities that bear the brunt of the harmful environmental impact of mining should also be compensated more than the measly local business tax and other small fees they currently receive from mining companies. A portion of the larger piece of the tax pie, such as shares of remittances from capitals gains and dividend taxes -- all of which now go to the national government under the Mining Act -- should be reinvested in those communities.

Since 2004, $1 billion has come from overseas into the Philippine mining industry. Considering the country's proximity to resource-hungry China, the government hopes to increase that figure to $10 billion over the next three years. But if the Mining Act is repealed or ruled unconstitutional, lawmakers must find ways to keep current foreign investors from leaving in the face of major profit margin reductions, and also attract future foreign investment. Improved tax incentives, for example, could be granted when firms upgrade to more environmentally-friendly mining methods or purchase supplies from local businesses. Longer tax holidays can also sweeten investment incentives. Additionally, Congress should demand that the DENR uphold its mandate to "conserve specific terrestrial and marine areas representative of the Philippine natural and cultural heritage for present and future generations."

The Philippines may hold one of the largest caches of gold and copper in Southeast Asia. These resources should be exploited. Repealing -- or at the very least, rewriting -- the Mining Act would be a good first step in insuring that the national patrimony of the Philippines is not unfairly exploited by foreign interests. The mineral riches of the Philippines can certainly help its citizens by creating jobs and boosting the economy, but mining the land must be done in a sustainable way that limits the damage to the environment, maintains an interest in foreign investment and keeps a fair share of the profits in the hands of the Filipino people.

photo: Storm Crypt