Guyana: Iwokrama And Climate Change

Edward Glover is Chairman of the Iwokrama Board of Trustees and former British High Commissioner to Guyana.
Hylton Murray Philipson is Managing Director, Canopy Capital.
Michael Woods is Partner and Head of Climate Change, Eversheds LLP.

In cooperation with the Government of Guyana and the Commonwealth, the Iwokrama International Centre and its partners are seeking a new means to bring the world's remaining rainforests into the world's economy without losing them in the process. It will have far-reaching repercussions for the way nations live, work, trade, govern and interact with each other.

But time is at a premium.

An Age Of Responsibility

At this defining moment in human history, world leaders need to demonstrate through new and carefully formulated policies, based on the principles of responsible free-market capitalism, that the costs of financial globalisation can be minimised and better controlled, while still allowing the generation of wealth on which all economies depend.

But an even larger problem is the future viability of life on earth. While our understanding of the intricate relationship between human wealth and wellbeing and their impact on the ecology of the planet on which we live is now greater than ever, we are still witnessing increased natural loss – rapidly worsening environments, declining species and other eco-systems under ever-increasing pressure. Current food and water shortages are graphic illustrations of how the natural balance is tipping out of control.

Just as they are committed to financial reform, world leaders must be equally imaginative and committed in their approach to reversing global eco-system degradation. A pioneering initiative at Iwokrama in Guyana, South America, to bring the remaining rainforests into the global economy represents one radical way of achieving a sustainable low carbon model for economic development within the limits of the natural world.

A Changing Global Context

The economic model inherited from our forefathers was based on two underlying assumptions – namely that natural resources were infinite and so could be treated as 'externalities' to mainstream economics; and that natural eco-systems were assumed to be able to accommodate the environmental impact of man's activities. That may have been true in 1800 (when the global population was 1 billion) and even in 1900 (when it had risen to 1.5 billion) but is certainly no longer valid in today's globalised economy with 6.7 billion people consuming at levels previously unimaginable.

Pursuit of past growth had little regard for the associated environmental costs – the degradation of eco-systems, the pollution of watercourses, the exhaustion of natural fisheries and in rising atmospheric levels of CO2. Pre-industrial emission levels at 280 parts per million (ppm) in the atmosphere had only risen to 310 ppm by 1959. Half a century later the level has risen to 387 ppm, the highest concentration in the last 650,000 years. Despite media coverage, political rhetoric, multilateral agreements arising from the Earth Summit in 1992 and the subsequent Kyoto Protocol, the problem worsens.

A strong body of scientific opinion believes that levels above 450 ppm will be dangerous to mankind. The Intergovernmental Panel on Climate Change (IPCC) model shows that such CO2 levels are "very likely" to lead to temperature increases above two degrees, at which point forest fires and retreating ice will trigger irreversible and incalculable consequences. At the current rate of emission increase, we have only 25 years (if we are lucky) before we pass the point of no return. While that does not mean that life as we know it will cease to exist, the damaging impacts of climate change will become unstoppable.

Every activity involving greenhouse gas emission has a real cost and every activity that contributes to their conservation a real value. It is extraordinary that so much attention has focused on addressing emissions from aviation, accounting for less than three percent of the global total; but so little action has been taken to curtail the unnecessary burning of tropical forests – responsible for 20 percent of all emissions. The EU is likely to spend ¤86bn per annum on achieving a 20 percent share for renewable energy (and a corresponding 20 percent reduction in carbon emissions) by 2020. That is a laudable step on the path to eventual cuts of 50 percent and even 80 percent by mid-century. But climate change is a global problem requiring truly global solutions. EU investments will be undone unless forests are factored into global policy making.

Lord Stern acknowledged this in his report and so have the IPCC, the World Bank and an increasing number of other organisations, NGOs and individuals including the UN Secretary-General. However, until there is specific action to deliver a financial value for the services of the standing forests so that developing countries and their people can continue to derive livelihoods from them rather than being forced to convert the forests for short-term value in the global marketplace, the world will continue to lose 13 million hectares of forest land per annum – or an area 1800 times that of the Beijing Bird's Nest Olympic Stadium every hour – at the very moment that it can least afford to do so.

The world is witnessing a clash between food security, energy security and environmental security, with profound financial instability now added to the mix. So long as money is made out of food and energy but no living derived from the delivery of the eco-system services provided by rainforests (such as rainfall generation and biodiversity protection), precious trees (and 1.2 billion people around the globe who directly depend on them for their existence) will continue to be lost. In a global market place dominated by quarterly earnings and five-year electoral cycles, too little attention is being paid to inter-generational time frames and our collective responsibility to the generations to come. Paying for eco-system services would be a new and welcome trend in remedying this.

The Services Of The Forest

There is more life in tropical forests than anywhere else on earth. Over 50 percent of species of living organisms live in rainforests and over half of these species are new to science. These teeming forests occupy only seven percent of the Earth's surface but account for a huge amount of the world's natural carbon capture and storage (CCS) – an estimated 1.2 billion tonnes per year. This concentrated life cycle is part of an interconnected system that pollinates plants, absorbs wastes and pollutants from the atmosphere, controls erosion; generates rainfall, moderates climate through the provision of shade and trans-evaporation, produces oxygen; maintains biodiversity and conserves and sequesters carbon.

But these eco-system services are being lost at an accelerating rate. Cut down a rainforest and soon afterwards there is desert, as poor soil is washed away, with the loss of biodiversity which, if retained, could have wider medical benefits for mankind. Another example is the biotic pump that transfers heat and water thousands of miles across the earth – especially for farmers in Brazil or coastal residents in the southern United States. The rainfall value of the Brazilian forests has been calculated at $20 per hectare per annum – just for its contribution to generating over 70 percent of the country's electricity from hydro power.

In carbon terms, it seems extraordinary that the world places so much hope and potential investment in engineered CCS, while ignoring the vital CCS function of the standing forest. By allowing the loss of an estimated 100 tonnes of carbon per hectare at a possible cost of $50 per tonne and by ignoring the value of the natural functions of the forest, the world is in effect imposing upon itself an annual bill of $234bn just to capture the emissions coming from burning forests. The overall combined value of the world's power generation capacity is worth hundreds of billions of dollars, yet the services of rainforests are currently pocketed without payment. Unless we place a financial value on the services of the natural world, mankind will reap a bitter harvest.

Valuing Rainforests

Against this background, the Iwokrama rainforest is uniquely placed to play a leading role in reversing this prospect by establishing financial mechanisms to allow the continued sustainable use of forests.

In 1989 the Government and people of Guyana donated 371,000 hectares of pristine forest to be administered by the Commonwealth on their behalf and on behalf of the international community. Under an Act of Parliament in 1996, the Iwokrama International Centre was established to manage the forest. The initial vision was to pioneer best practice in the sustainable management of tropical forests and, through extensive research programmes, to establish baselines through which the impact of climate change could be monitored on biodiversity within the Iwokrama reserve. For 12 years, with the generous support of the Commonwealth Secretariat and recent sponsorship including from KPMG International, Shell International, Stephenson Harwood, the Rumi Foundation and Caribbean Airlines, Iwokrama has been a strong example of international cooperation, good governance, community benefit sharing and scientific research.

This year a unique investment was made by Canopy Capital in the services of Iwokrama's forest in a pioneering transaction, through which private financial investors committed to the public good have recognised the vital role of the forest's ecosystem services. Their initial payments have enabled the further protection and sustainable use of the Iwokrama forest.

Guyana's Low Carbon Initiative

Iwokrama's pioneering move with Canopy Capital complements the wider initiative of President Jagdeo of Guyana in establishing a low-carbon model of economic development for his country. Securing value for the services of the forest is a key component of this initiative which would, in the words of the President:

Canopy Capital, in close cooperation with the Iwokrama International Centre and the Government of Guyana, is now formulating a further financial instrument to enable international institutions and other private investors to participate in the value which it is anticipated the international community will attribute to the services of the forest in the future. Under a capital-protected mechanism, income generated from the instrument would be shared equitably between investors, Iwokrama and the Government and people of Guyana. Investors would receive assurance of the forest's protection and the continuing delivery of the services for which they are paying; the Iwokrama Centre, working closely with the local communities, would allocate income towards its research and conservation activities; and the Government of Guyana would apply its share of the proceeds towards adaptation to climate change and sustainable development. Should nothing actually change to drive value properly to the services of the forest during the life of the instrument, capital would be returned to the investors. The launch of such an instrument, recognising the value of forest services generated in defined area of rainforest over a defined period of time, will be a path-breaking initiative.

This initiative could encourage the international community to recognise the value of all standing forests and develop mechanisms to allocate funds for their ongoing protection as the best, most immediate and cost-effective manner in which the world can tackle climate change. Markets for forest services will not develop on their own; they will need a regulatory framework or at least policy support (perhaps similar to the carbon markets which have risen from $0 to $60bn in three years). It remains to be seen whether such instruments can be developed following the outcome of the Copenhagen Conference of the UNFCCC at the end of 2009 and through new activities pursued by the World Bank and other international financial institutions. Recent volatility in financial markets has led to fundamental questions about how global financial flows are regulated, and what is truly valuable. Just as the link between currencies and gold was abandoned in 1971 when conditions no longer made it practical, changing conditions now demand that the world begins to value its natural capital as never before.

Canopy Capital and the Iwokrama Centre believe that, instead of converting finite natural capital into extractable goods, it would be to mankind's benefit to redirect capital to the maintenance of the significant eco-system services of the world on which everything else depends.

Making The Breakthrough

The Iwokrama International Centre offers the world the opportunity to convert the vision of Iwokrama's Patron, The Prince of Wales, and leaders like President Jagdeo and Prime Minister Stoltenberg of Norway into a specific model that could define the mechanisms through which tropical forests throughout the world could be at last preserved for the benefit of generations to come – whilst fulfilling core Millennium Development Goals (especially poverty alleviation and sustainability) in the immediate term.

Whether representing Governments, managing global corporations or merely acting as individuals, we are all stakeholders in the business of survival. We are in this leaky boat together and together we hope that a model of cooperation between the Government of Guyana, the Iwokrama International Centre and Canopy Capital can demonstrate that a new era of truly sustainable growth lies within our grasp.

We hope too that global leaders gathered in Davos will recognise the economic value of standing forests and the importance of putting them on the balance sheet of the world economy.

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