The makers and profiteers of the new economy of nature

Coal mining near Garzweiler, Germany

The call for an economic valuation of nature is linked to the demand for a more flexible implementation of environmental laws and regulations. This approach particularly benefits sectors with business models that require the exploitation of nature.

The compensation approach particularly benefits sectors with business models that require the exploitation of nature: industrial agriculture, mining, sprawling infrastructure and urbanization. Compensation credits allow the industries in these sectors to continue their expansion, to destroy and pollute nature, while marketing their products as carbon-neutral and deforestation-free.

Even institutions like the World Bank, UNEP and OECD, and business lobbyists such as the World Business Council for Sustainable Development and the Consumer Goods Forum have conceded that “business as usual” threatens the very existence of humankind. They all advocate an economic valuation of nature and are increasingly proposing to set limits for nature destruction and pollution.

The World Bank and UNEP, international environmental organizations such as The Nature Conservancy, Conservation International and the WWF, and private consultancies and transnational corporations such as Rio Tinto, Unilever and Walmart are active in initiatives such as the Business and Biodiversity Offsets Programme (BBOP), the Natural Capital Coalition (formerly TEEB for Business Coalition; TEEB stands for “The Economics of Ecosystems & Biodiversity”) and conventions such as the World Forum on Nature Capital to promote the acceptance of this approach.

While this may seem surprising – industry associations calling for limits? – knowing that this demand for limits goes hand-in-hand with a call for greater flexibility in their implementation sheds a different light on this phenomenon. The idea of “compensation instead of reduction” is designed to guarantee flexibility: a company may legally exceed a limit for the destruction of biodiversity, for urban sprawl or greenhouse gas emissions, as long as it can document that the damage in excess of the limit has been offset elsewhere. For example, the German federal government could use this approach to reach its sustainability strategy goal of limiting urban sprawl from currently around 65 hectares to a maximum of 30 hectares per day by 2020 without municipalities with high demand for additional building or infrastructure areas having to restrict their actual use of land.

Exceeding the limit

In the UN’s Paris Agreement, which was adopted in December 2015, the international community also set a limit: the average global temperature increase must remain well below 2°C. At the same time, the agreement states that this does not necessarily mean an end to the release of fossil emissions. It merely seeks to “achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century”.

Trailer documentary Natur - Spekulationsobjekt mit Zukunft

Such sinks include forests, as growing trees absorb the greenhouse gas carbon dioxide from the atmosphere and store it in their wood, roots and in the humus layer of the soil. The Paris climate treaty thus opens the door to an alternative to the end of burning fossil fuels by providing the option of compensating for the release of greenhouse gases from fossil fuels rather than ending fossil fuel use.

Such a compensation approach particularly benefits corporations and investors with business models that require the exploitation of nature: industrial agriculture, mining, sprawling infrastructure and urbanization. Compensation credits allow them to continue their expansion, to destroy and pollute nature while marketing their products as carbon-neutral and rainforest-free.

Banking nature

Furthermore, investors and corporations use compensation credits to delegitimize local resistance to the destruction of nature by pointing out that it will be compensated at a different location. “We should not let things get to the point where trees become an ersatz religion – especially considering that we are providing full compensation,” said the director of an entertainment park in the German state of North Rhine-Westphalia in response to opposition to the delisting of a nature reserve for the expansion of the private park.

For providers of compensation credits, operators of “biodiversity banks”, consultancies that develop methodologies and draw up the attendant technical documents, certification companies and international conservation organizations that act as intermediaries and suppliers of offset projects, the trade with compensation credits is a new industry.

After displaying great interest initially, the financial sector has shown little interest in the trading of compensation credits to date. Banks and financial investors have largely withdrawn from emissions trading, too. Since the prices of emissions allowances and carbon offset credits collapsed in 2009, the margins have been too thin: Emissions allowances are being traded for five euros in the EU; the price of carbon credits from CDM projects is significantly less than €0.50. Missing-trader frauds and numerous cases in which small investors, particularly in the UK and Australia, were cheated out of their savings in carbon credit investment scams underscore the vulnerability of the emissions market to abuse and fraud.

This article is part of our dossier "New Economy of Nature".

Further reading:

  1. Finance & Trade Watch. Finanzialisierung der Natur. Web dossier [German].
  2. Kill, J. (2014): Economic Valuation of Nature. The Price to Pay for Conservation? A critical exploration.
  3. Banking Nature. Natur - Spekulationsobjekt mit Zukunft. Arte documentary, February 2, 2015 [German].