FAQs
What is the nature of the deal between Canopy Capital and the Iwokrama International Centre (IIC) that has been widely reported in the media?
- This deal is not about Canopy Capital buying land.
The agreement is about:
- Measuring and then placing a value on Iwokrama's ecosystem services;
- Using income from the sale of ecosystem services to help make Iwokrama financially independent of institutional donors by 2010 in accordance with the IIC Business Plan and Iwokrama's research obligation;
- Continuing to help the local communities to enhance their economic and social opportunities as partners with Iwokrama; and
- Showing the international community that you can use a Rainforest without losing it.
Has Canopy Capital bought the land and trees of Iwokrama?
No. Canopy Capital is simply buying a licence to measure and then value the ecosystem services provided by the Iwokrama forest for a period of 5 years, by making a guaranteed yearly payment to the IIC. Canopy Capital believes that the sovereignty of the forests it invests in should remain with the forest-owning people and nations that own them.
What are ecosystem services?
The ecosystem services provided by tropical forests are vital
to maintaining life on earth.
These services include the sequestration and storage of
carbon from the atmosphere, the generation of rainfall, the supply of water,
the maintenance of biodiversity, the prevention of erosion, the formation of
soil, the fixation of nitrogen, the treatment of waste and pollution and the
support of indigenous and other forest communities' livelihoods.
Standing tropical forests absorb around one tonne of carbon
per hectare each year from our increasingly polluted atmosphere. Globally that's equivalent to a CCS (Carbon
Capture and Storage) machine taking 3.67 billion tonnes of CO2 from
the air for free. Governments are increasingly looking to pay for this service
in the future. Britain has committed $15 billion to industrial CCS already.
Forests like Iwokrama are the most important mechanism on the
planet for transporting heat from the land surface (where we live) up into the
atmosphere, cooling the surface on a vast scale. It would take the equivalent
of 50,000 times the daily energy output of the world's largest coal fired power
station to evaporate the 20 billion tonnes of water evaporating from the Amazon
each day. That's energy that would otherwise heat the land surface. Removing
forests increases the risk of extreme weather and fire events caused by higher
temperatures, costs which the insurance industry increasingly bears.
Our energy, food and climate security all depend on keeping
tropical forests alive. Entire national economies - cities, water suppliers,
agri-business and hydropower - rely to some extent on these ‘eco-utilites'. The
rainfall Iwokrama's forests draw in from the Southern Atlantic is re-cycled by
trees over vast distances into Amazonia and later, south, to fall on the
agricultural powerhouse of Brazil and eventually the La Plata Basin in
Argentina. Food produced here is exported worldwide. 70% of Brazil's
electricity depends upon hydropower driven by Amazonia's giant water pump.
Putting a value on these services is like taking out an
insurance policy to maintain the Earth's life support system. We all need to
start valuing the role rainforests play in protecting our climate and in
fostering our biodiversity, before it's too late.
If we continue not pay for this public eco-utility, its services will
simply be cut off.
How can ecosystem services be quantified?
The impact of science in
alerting the world to the value of forest ecosystem services is crucial. This
science is becoming increasingly sophisticated.
Brazil leads the world in
assessments of ecosystem services the forests of Amazonia provide. Their data
from the Large Scale Biosphere Atmosphere Assessment (LBA) has revolutionized
scientific understanding of the value of standing tropical forests. Models fed
by remote sensing data (Satellite, Lidar, Radar) can already, in conjunction
with ground truthing data, measure carbon stocks, carbon fluxes and evapo-transpiration
with increasing accuracy.
NASA's TRMM satellite data
shows that Brazil's billion dollar soya, beef and bio-fuel industries all
depend on rain recycled by the Amazon. Recent research by Russian physicists Makarieva and Gorshkov, suggests
that coastal tropical forests may also act as a ‘biotic' water pump drawing-in
moist air over the seas far inland.
For more information on forest ecosystem
services go to:
www.teebweb.org or www.globalcanopy.org
How will Iwokrama benefit financially from this deal?
Guaranteed initial income from Canopy Capital will be used by the IIC to continue the sustainable management and conservation of the Iwokrama Reserve and to provide livelihoods for the local communities who have depended on the Iwokrama forest for generations.
Canopy Capital is an investment company. How will it make money?
Canopy Capital is exploring various approaches to securing substantial investment in ecosystem services. In particular, Canopy Capital is looking at marketing ecosystem services through an ‘Ecosystem Service Certificate’ attached to a 10-year tradable bond, the interest from which will pay for the maintenance of the Iwokrama forest.
As atmospheric levels of greenhouse gases rise, emissions will carry an ever-mounting cost and the conservation of rainforests will acquire real value. In the future, countries that choose to conserve their forests are therefore likely to have global assets worth billions of dollars a year. The investment community is beginning to wake up to this opportunity.
Is there real investor appetite for this new approach to forest conservation?
Yes, and it is increasing. The Iwokrama initiative was announced at the world's first Biodiversity and Finance Conference in New York, in itself indicative of the growing interest in environmental investment.
What happens to investors' money if the forest is degraded or destroyed?
The IIC's mandate is to protect and monitor the Iwokrama forest on behalf of Guyana and the international community, under the auspices of the Commonwealth – something the IIC has successfully achieved in cooperation with the local community since its inception. Should the forests suffer significant degradation (either natural or through human activity), Canopy Capital can suspend its payments for ecosystem services. The IIC can also suspend the agreement if Canopy Capital does not fulfil its commitments.
How does this deal help in the fight against climate change?
Deforestation contributes an estimated 20% of all carbon emissions - more than the global transport sector. If we continue to cut down 13 million hectares of tropical forests a year, the odds of containing climate change are virtually nil.
This deal is a strategic step towards investment in standing forests and the increasingly scarce ecosystem services which are a vital 'life support system' on local, regional and global scales. As part of a comprehensive climate strategy, it is also critical that countries with low historic deforestation rates are compensated to avoid creating perverse incentives to deforest in the future.
There is currently timber harvesting activity in Iwokrama. Does this compromise the integrity of the forest?
50% of the Iwokrama Reserve has to remain untouched in perpetuity. Of the remaining 50%, a sustainable and highly selective timber harvesting is limited to an area of 108,000 hectares which allows for a total annual cut of 20,000 m3 - less than 1% of the entire Iwokrama forest. This operation received Forest Stewardship Council (FSC) certification earlier this year, and local communities are shareholders in the sustainable harvesting.
President Jagdeo of Guyana has asked for the UK's support to protect his country's forests. Is there a connection with this deal?
This deal is in keeping with President Jagdeo’s visionary approach to safeguarding all the forests of Guyana, but it is not related.
Can this model be applied beyond Iwokrama?
Absolutely. Many forests around the world urgently require protection. If the Iwokrama model is successful, this partnership will prove that conserving forests can be more valuable than converting them for other uses.