The Iwokrama Reserve in Guyana.
While we have to be pleased at the fact that global markets are beginning to understand the value of the (free) services provided by the planet's ecosystems, we have to wonder about this one. This is not an April Fools' joke: first the first time ever, a private equity firm has signed a contract for "rights to the ecosystem services produced by a rainforest reserve."
These services are defined by London law firm Stevenson Harwood, who drew up the deal, as "the proven ability of rainforests to generate rainfall, cool the atmosphere, store carbon, moderate weather conditions and sustain biodiversity." The deal was announced late last week at a conference in New York on the "rapid-growth area of Biodiversity Finance."The deal was signed between Canopy Capital, a brand new British investment house, and the Iwokrama International Centre, an organization set up by the Commonwealth and the government of Guyana to preserve the rainforest by utilizing, among other things, economic tools.
The amount paid was not made public, but the deal gives Canopy Capital rights to future profits made from the forests' ecosystems. The deal covers approximately one million acres of mostly untouched rainforest, and the payment will benefit the forest's 7,000 indigenous inhabitants.
From the Canopy Capital website:
While carbon trading is essentially about buying and selling the right to pollute, paying for Ecosystem Services creates a positive incentive to conserve the world’s natural resources. Putting a price on these services is like taking out an insurance policy to maintain our life support system and has the potential to generate billions of dollars for forest-owning nations.
Says Hylton Murray-Philipson, director of Canopy Capital:
How can it be that Google's services are worth billions but those from all the world's rainforests amount to nothing?
Canopy Capital's website stresses that the deal will not give them any rights over the actual land and trees of the Iwokrama rainforest. However, it is not entirely clear how Canopy Capital will make their profits from the deal. Yes, massive economic interests depend on the rainforest. Agribusiness soy farms in Brazil, for example, which, ironically, contribute indirectly to the destruction of the Brazilian rainforest, will benefit from the rain produced by Canopy Capital's new asset. But will they pay for it?
Is this a high-rolling bet on the future value of the services provided by natural systems, as The Economist suggests, or the beginning of the privatization of the rainforest?
What is clear is that poor countries with rainforests are beginning to see dollar signs in the rainforest. How will this affect our global economy and ecosystem? Perhaps even Canopy Capital does not know the answer to this question for sure.