Ecosystem Marketplace, Marketplace eNewsletter.

Vol. 1, No. 7: June 10, 2005    

From the Editors

The Speed of Change and a Change of Speed

What a difference a year makes! At this time last year many people were worried that the Kyoto Protocol would never enter into force; that it would not be ratified by Russia and that it would die an quiet death at the hands of climate change skeptics. At around the same time, policy-makers, businesses, and environmentalists in Europe were preparing themselves for the launch of the world's most ambitious cap-and-trade scheme; one that would involve thousands of European companies and impact the investment of billions of dollars. No one knew whether the scheme would work, whether it would be up and running by its January, 2005 deadline, or how it would be received by the financial markets. As it turns out, the EU's Emission Trading Scheme (EU-ETS) has been running for more than six months and its impact (both financial and psychological) has been tremendous. Already hundreds of millions of dollars worth of carbon have changed hands via the EU-ETS, and the success of the scheme has encouraged many to think about the use of markets to address environmental problems. Sure, the scheme has had its downs, for instance when the price of carbon fell to around €7 a ton (click here for a story), but that price has now exploded and carbon in Europe is now worth around €18 a ton (click here for a story). Volatility, too, is an integral part of many markets.

But to paraphrase the old saying: a few hundred million dollars here, a few hundred million there and pretty soon you are talking about real money. And the real money floating around in the carbon markets has begun to attract many of the big financial players and speculators. To give but a few examples: recently there were reports of hedge funds talking about investing in carbon, then there was the launch of the European Climate Exchange (ECX), the world's first carbon futures market (for an article, click here), and even more recently, the London Energy Brokers Association (LEBA) launched an emissions allowance price index that some say will lead to derivatives (financial instruments whose value is determined by the value of another, underlying commodity, asset, or security; in layman’s terms, a bet) which will, in turn, begin to attract speculators and large institutional investors into the carbon markets (for an article click here). A year ago, it would have been hard to imagine that the carbon markets would, in such a short space of time, be born, become real, and generate so much financial innovation.

To be sure, not all is good news with ecosystem markets. Although carbon is now well on its way towards becoming what some people believe will be the world's largest commodity market, markets in other ecosystem services are struggling to be born. For instance, there is some talk of nutrient trading and water markets being the "next carbon", but that is far from certain and the difficulties these markets face are daunting. Just consider what is happening on the US's Chesapeake Bay (click here). If these markets can't be born in a place like the Chesapeake, how much more difficult will they be elsewhere? And that is water and water-related ecosystem services; services that are much easier to measure and market than biodiversity.

Likewise, not all are content with the fact that ecosystem markets are developing. Markets do have their critics and there are those who contend that these markets are neither good for the environment, nor good for the world’s poorest communities (for a Guest Editorial on this, click here). Everything is debatable and as the year progresses, The Ecosystem Marketplace hopes serve as a forum where such important debates can take place. Because only by openly debating the most important issues related to ecosystem markets -- by looking at the good as well as the bad -- will the speed of change truly lead to change for the better. Please join us as we help further accelerate changes in the emerging markets for ecosystem services.

Ricardo Bayon, Managing Editor
Adam Davis, Editor-in-Chief
Michael Jenkins, Publisher


TABLE OF CONTENTS
 
»  NEWS: Businesses back the climate change deal after meeting at Downing Street
 
»  NEWS: U.S. DOE advances commercialization of climate change technology for coal industry
 
»  NEWS: Papua New Guinea: Somare defends himself against carbon scandal charges
 
»  NEWS: The Nation: Protecting forests should be included in carbon market fight against climate change
 
»  NEWS: Seattle mayor pushing pro-Kyoto resolution at Chicago meeting; 161 cities sign on so far
 
 
»  NEWS: Barclays increases commitment to using green energy
 
»  NEWS: Inhofe bill would prevent utilities from passing on emissions costs to consumers
 
»  FEATURE: World Bank Survey Raises Carbon Concerns
 
»  FEATURE: Markets Get a Chance in the Chesapeake
 
»  FEATURE: London gets Carbon-neutral Cabs
 
»  FEATURE: Climate Friendly Fuels
 
»  FEATURE: Sustainable Fisheries: Can Market-Mechanisms Help Get Us There?
 
 
»  FEATURE: Japan Carbon Finance: New Efforts by Kyoto's Host
 
»  FEATURE: New Carbon Index Leads to Derivatives Transaction
 
»  OPINION: Guest Editorial: "What Do the Environmentalists Know that the Wetland Experts Do Not?"
 
»  OPINION: Guest Editorial: Environmental Markets Impoverish the Poor
 
»  PROFILE: Directing a Symphony for Sustainability: A Profile of Pati Ruiz Corzo
 
        

News

 
 
 
 
 
 
 
 

Features

by Mark Nicholls
The World Bank's recent snapshot of the state of the carbon markets found rising volumes, underpinned by greater certainty. But, as the Ecosystem Marketplace finds, it also highlighted some concerns about the current shape of the Clean Development Mechanism.
 
by Alice Kenny
Proving that necessity is indeed the mother of invention, the US states that feed water into the Chesapeake Bay -- an expanse of water twice the size of Ireland -- have begun to explore the use of market-based mechanisms to protect one of the world's largest watersheds. The Ecosystem Marketplace takes a look at how nutrient trading is being explored in Virginia and Pennsylvania.
 
by Jessica McCallin
Recently, one of London's venerable black cab companies, Radio Taxi Group, announced that it will be offsetting its carbon emissions through forestry and energy projects around the world. The company is hoping that -- as its large corporate customers come under pressure to reduce their emissions -- having a "climate-friendly" cab service will give them an edge. The Ecosystem Marketplace looks at the assumptions and thinking that underpin this decision.
 
by David Biello
The transportation sector accounts for a large -- and growing -- proportion of global warming emissions around the world. As a result, major oil companies face a large -- and growing -- problem with their products. While a hydrogen economy might prove a long-term solution, oil companies are beginning to ask themselves what can be done in the short-term? BP and the Swiss Oil Association think they have an answer: offsets. The Ecosystem Marketplace looks into whether or not they are right.
 
by Cameron Walker
As fisheries worldwide continue to collapse, governments are increasingly turning to market-based mechanisms to ensure their conservation. One such approach is the use of so-called Individual transferable quotas (ITQs). Since New Zealand has experimented with quota systems more than any other country, the Ecosystem Marketplace considers what the Kiwis have learned about the pluses and minuses of this market-based approach to fishery management.
 
by Andrew Bell
As the host country of the Kyoto Protocol, Japan celebrated the treaty's entry into force with considerable fanfare. In the early months of trading, however, Japanese businesses have been noticeably absent in the world of carbon finance. The Ecosystem Marketplace asks why Japan's private sector has been slow to invest and considers whether the early efforts of the country's first carbon fund might soon shake things up a bit.
 
by Mark Nicholls
The launch of a new emissions allowance price index from London-based energy brokers could herald the beginning of more transparent derivatives markets attached to the EU Emissions Trading Scheme (EU-ETS). This -- some think -- could pave the way for the entry of large financial actors into the carbon market. The Ecosystem Marketplace takes a closer look.
 
by Craig Denisoff
In a recent article, the Ecosystem Marketplace talked to several environmental groups who expressed concern over the effectiveness of wetland mitigation banking in the US. In this guest editorial, Craig Denisoff, the President of the National Mitigation Banking Association (NMBA), responds to those concerns.
 
by Simone Lovera
While there has been much interest in the use of markets to protect the environment of late, not everyone is convinced that markets are ultimately good for the environment or good for communities. Aware that environmental markets are still controversial, The Ecosystem Marketplace asked Simone Lovera, of Friends of the Earth International, and a prominent critic of markets, to express her views in a Guest Editorial. We see this as a first in a long list of articles discussing the pros and cons of environmental markets. In future issues we will ask other advocates and critics of markets to express their views.
 
by Amanda Hawn
Achieving sustainability in Mexico can be difficult work. Fortunately, Pati Ruiz Corzo the founder and Director of the Grupo Ecologico Sierra Gorda is up to the task. For nearly twenty years she has been weaving a tapestry of conservation in central Mexico using people and markets as the warp and woof on which all else depends. The Ecosystem Marketplace visits this indomitable force for good.
 

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UPCOMING EVENTS
- 06/21/2005 - 06/23/2005 12th Ulvön Conference on Environmental Economics  

- 06/23/2005 - 06/25/2005 11th International Interdisciplinary Conference on the Environment  

- 06/23/2005 - 06/25/2005 7th International Conference of the Russian Society for Ecological Economics  
 
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