The City and keeping the rainforests alive

Friday, 12 September 2008

Can the climate change agenda survive the credit crunch? One person hoping that the environment doesn't become a forgotten victim of the economic slowdown is His Royal Highness The Prince of Wales. He's been in the City this week to host a dinner at The Mansion House in aid of his Rainforests Project.
The turnout was an impressive one, but the reality behind fawning lip-service is that saving the financial system from collapse has become a more urgent priority than saving the planet. Environmental concerns, it seems, are a luxury born of more prosperous times. Both among ordinary shoppers, and at the top of corporations and financial institutions, environmental considerations are taking second place to the battle for survival.
This is unfortunate, not just in terms of the future of the planet, but, as Stanley Fink, former chief executive of Man Group and one of the speakers at Wednesday night's bash, pointed out, also because "greenery" is a huge business opportunity for Britain and the City. In time, it may even be part of Britain's economic salvation. The two things that have in recent years sustained the UK's economic boom more than anything else – financial services and the housing market – have for the time being gone. Something has to take their place, and perhaps it's the green revolution.
Prince Charles's particular contribution to the climate change agenda is rainforests. Stopping, and reversing, the process of deforestation, he rightly points out, would do more good for the cause of climate change than any amount of carbon sequestration projects, wind farms, electric cars, and so on. Like giant utilities, the rainforests provide a vital service to the world in delivering clean air and fresh water. It's time we started paying an economic rate for them, the Prince declared.
With the clinical precision of the accountant's mind, Mr Fink had some startling statistics to give to his audience. Cleared rainforest land tends to be poor in quality, worth on average $200 to $500 a hectare.
On the European markets, permits to emit a tonne of CO2 already trade at around $30. Every hectare of rainforest stores the equivalent of 500 tonnes of CO2, so logically that means every hectare of rainforest left alive is potentially a $15,000 asset. Rainforest is worth 75 times more alive than dead. Round it all up, and an $18 trillion business opportunity awaits.
Regrettably, there is as yet no mechanism by which richer countries can be made to pay for the utility of the rainforest nations. Yet to do so may in fact be a more cost-effective way of stemming climate change than to provide economic incentives for carbon reduction in our own backyards.
Actually, we may need to do both. Mr Fink's message was that, if governments can provide the framework, markets will do the rest. Then again, after what the financiers did to the mortgage markets, you have to wonder...