Inflection Point


Written by Enrique Lendo, Business Development Mexico Advisor.


The World Environment Day sets a landmark for the international community. On June  5 of 1972, the Stockholm Conference on the Human Environment triggered a process that has produced over 500 international environmental cooperation instruments to date. Mexico has subscribed about a 100 of these agreements, strengthening our environmental management capacity and positioning our country as a player committed with global challenges.

Currently, most of the countries around the world have enacted environmental laws and established institutions for their implementation. However, they have not been capable to halt global environmental degradation. Greenhouse gas emissions have doubled since the adoption of the United Nations Framework Convention on Climate Change in 1992.  We have also lost 80% of wildlife species biomass and half of the natural ecosystem’s original areas due to massive deforestation, urbanization and pollution. Over one million species around the world are in danger of extinction.

But in the last years, the methodologies to monetize climate change impacts and the contribution of natural capital to the economy have also been improved. For instance, we know that services provided by biodiversity to productive systems are worth at least 1.5 times the value of global GDP. We also know that natural disasters cost over $100 billion dollars a year in damages and that the cost of climate change inaction could reach over 15% of global GDP by 2050.

Therefore, capital markets around the world are currently tuning their risk models to account for environmental and climate change impact of investment projects. On one the hand, physical infrastructure is more vulnerable to hydrometeorological impacts, on the other, the new generations of consumers and investors demand responsibly produced goods and services. Mexico´s Central Bank (Banco de México) and the UN have recently released the “Climate and Environmental Risks and Opportunities in Mexico’s Financial System, setting this sector in a path that will reward sustainability and punish pollution through risk assessment.

The post-covid19 crisis provides a point of inflection in which governments and companies are able to choose between updating their strategies towards sustainability patterns or perpetuate inefficient and shortsighted growth models. In the last weeks, countries, regional blocks, and subnational governments around the world have announced green recovery strategies. The European Union just released its € 750 billion economic recovery package to finance low carbon infrastructure. In the US, Democrats are positioning a “Green Deal” in the face of the upcoming national elections, while South Korea and Indonesia already implement green recovery plans.

In contrast, sustainability has been absent in the language of decision-makers in the Latin American region despite its potential to scaleup investment, create jobs, and foster welfare in the long term. A recent UN report concluded that the transition towards renewable energy and transport electrification in the region could create 35 million jobs by 2050. In Mexico, millions of people living in rural areas could benefit from investment packages to foster sustainable practices in the agriculture and forest sectors. But in order to harness these opportunities, governments need to start designing their economic recovery strategies with a comprehensive and long term perspective. Never in history had we been presented with such an attractive and feasible chance to redefine our development model.

** Article originally published in Reforma news paper:

Reforestation of the Amazon as a key climate change solution


Written by Mercedes García, Climate Change and Sustainability Manager


Between January 1st and August 18th, 2019, forest fires have increased 83% compared to the same period of 2018, according to the National Space Research Institute of Brazil (INPE). According to the INPE satellite images, more than 70,000 spotlights were produced, of which more than half were located in the Amazon region. However, fires are not the only elements that are devastating the Amazon rainforest, the country’s deforestation has reached its highest level in the last 10 years.

 According to a new study in the journal Science, “planting billions of trees around the world would be the cheapest and most effective way to tackle the climate crisis”. The same study confirms “a program at this scale could remove about two-thirds of the carbon dioxide (CO2) emissions caused by human activities since the start of the industrial revolution”. Taking into account that up to 20% of annual GHG emissions come from deforestation activities, the impact of properly managing these activities could imply a reduction of more than one million tons of CO2e (study published in Global Change Biology, carried out jointly with scientists from the Global Forest Watch of the World Resources Institute (WRI).

However, for many small landowners in developing countries, it is not profitable to maintain a small tree plantation. Without aid, financing or awareness policies, these small owners will choose to continue cutting down trees to allow livestock to enter their property rather than conserving the forest in its natural state or reforesting the degraded. This is the key point to work on, and that is why REDD projects that generate carbon credits are so beneficial for society and the fight against the climate crisis.

But, what exactly is the REDD mechanism? To understand the mechanism, it is necessary to go back to 2005 when a group of countries, led by Papua New Guinea, managed to talk about avoided deforestation at the Conference of the Parties, held in Montreal (COP 11). From that moment the discussion on the role of forests in the fight against climate change returned to the international debate and it was two years later, in Bali, when the UNFCCC recognized the reduction of emissions from deforestation and forest degradation (REDD) as a valid mechanism in the fight against climate change.

According to the Bali Action Plan signed by the Parties at that conference, REDD + refers to the reduction of emissions from deforestation and forest degradation; in addition to conservation, sustainable management and improvement of the carbon stock of forests in developing countries. It is a more complex mechanism than a GHG emission mitigation project of the CDM type since it is necessary to work on forest governance ensuring the rights of local communities and forest-dependent indigenous peoples.

However, the result is that the REDD mechanism allows conserving forests immediately and profitably. The REDD mechanism is based on calculating (using internationally accepted methodologies) the amount of carbon that is no longer emitted, and converting it into a carbon-offset carbon credit. These credits are sold to large companies that require offsetting GHG emissions from their activities, and part of the income obtained is reinvested in local communities to contribute to local economic development. There are examples of successful initiatives in many countries, and the reinvestment of those benefits has allowed activities as beneficial to society, for example, the creation of cooperatives for local trade, conversion of “illegal loggers” into forest protection agents, infrastructure reinforcement such as schools and hospitals, distribution of water purification systems or efficient kitchens that reduce biomass consumption.

The fight against the climate crisis is not easy or cheap, but it will be more difficult and expensive to face the consequences of not doing so, and the REDD mechanism can be configured as one of the most sustainable, profitable and beneficial engines in the short and medium-term of the fight.

 

Study: Global warming has increased economic inequality since the 1960s

A new Stanford University study shows global warming has increased economic inequality since the 1960s. Temperature changes caused by growing concentrations of greenhouse gases in Earth’s atmosphere have enriched cool countries like Norway and Sweden, while dragging down economic growth in warm countries such as India and Nigeria.

“Our results show that most of the poorest countries on Earth are considerably poorer than they would have been without global warming,” said climate scientist Noah Diffenbaugh, lead author of the study published April 22 in the peer-reviewed Proceedings of the National Academy of Sciences. “At the same time, the majority of rich countries are richer than they would have been.”

Although economic inequality between countries has decreased in recent decades, the research suggests the gap would have narrowed faster without global warming.

While the impacts of temperature may seem small from year to year, they can yield dramatic gains or losses over time. For example, after accumulating decades of small effects from warming, India’s economy is now 31 percent smaller than it would have been in the absence of global warming.

At a time when climate policy negotiations often stall over questions of how to equitably divide responsibility for curbing future warming, this analysis offers a new measure of the price many countries have already paid. “Our study makes the first accounting of exactly how much each country has been impacted economically by global warming, relative to its historical greenhouse gas contributions,” said the authors.

While the biggest emitters enjoy on average about 10 percent higher per capita GDP today than they would have in a world without warming, the lowest emitters have been dragged down by about 25 percent. The researchers emphasize the importance of increasing sustainable energy access for economic development in poorer countries.

More information about the study here