Markets working to support sustainable development

In the News: Monday 16th February 2015

16 Feb 2015

Here you will find a round-up of all the latest news and events in mechanisms from around the world. 


Reuters reports on new forms of insurance that are emerging to protect farmers in developing countries. Moving from traditional indemnity insurance to index insurance, farmers can receive a payout if "rainfall in a given period increases or decreases below acceptable levels, or if crop yields in a certain region drop below an acceptable level ". Under this system, insurers have lower overheads, with payment systems automatically kicking in based on such disaster indicators. In some countries assessment is even moving online. Such systems are being used in countries such as Mongolia and Nigeria and are spreading worldwide.

Ecowatch recently analysed the potential of carbon farming schemes. Australia already operates a carbon credits programme for farming and forestry. And the World Bank operates a carbon trading programme for farmers in Kenya, whereby 60,000 farmers receive credits for improving the organic matter in soil. US studies show the benefit of carbon sequestration. For example, if compost was buried on just 5% of Californian grazing land this would be equivalent to sequestering a year's worth of the State’s “carbon emissions from conventional farms and forestry operations".

Soil conservation project, Australia. Source: Wikipedia

Supply chains risks and reporting

A recent survey by the Carbon Disclosure Project and Accenture found that supply chains in the US were most vulnerable to climate risks, along with suppliers in Brazil, China and India. This survey which collected data from 3,396 companies on behalf of 66 multinational purchases, scored suppliers on indicators including their climate risk and mitigation strategies, emissions reductions, target setting and carbon reporting and water risk assessment effort to create a sustainability risk/response matrix. The survey found that the suppliers were least vulnerable in France, followed by the UK, Spain and Germany.

- Meanwhile, Grace Yang asks why the majority of natural resource companies are failing to report on their supply chains, with figures showing that more than 50% of natural resource companies on the FTSE failed to disclose information about their supply chain. Yang argues there are a variety of risks that companies are ignoring when it comes to supply chains, namely reputational risks, legal penalties, customer expectations, potential disruptions to supply because of industrial relations issues, broader economic contributions, and how building a sustainable supply chain helps foster a good relationship with the local community.

Pricing and payments for ecosystem services

- In Greenbiz, Simon Roach looks at payments for ecosystem services (PES), and analyses whether they can help alleviate poverty. Examples include the REDD scheme operating to combat deforestation and forest degradation. But the REDD proposal is not to everybody’s liking. Bolivia’s proposal suggests a relatively similar underpinning, with a stronger focus on fairness and giving more to local communities. Funded by the Danish Government (USD26million) and the UN body that oversees REDD (USD1.1million), it combines punitive elements whereby often wealthy landowners are penalised for deforestation with taxes or fines and local communities are supported when they "engage in economic activities that are forest friendly". 

- Roach’s analysis also touches on the work of the IIED’s Ina Porras,  who argues for an approach to PES that does not solely revolve around property rights and land ownership, given that in many countries land ownership may be unclear particularly for remote or Indigenous communities. Payments based on property will often reward mostly wealthy landowners, failing to engage with indigenous peoples, communities and landless users of forests. Conditional transfer mechanisms like PES can help alleviate poverty, but they need to be carefully tuned to each situation and policy makers must consider that it may include trade-offs with cost-efficiency or effectiveness.

Euractiv has investigated potential reforms to the EU carbon market following calls at the recent Davos World Economic Forum from world leaders like Francois Hollande and Ban Ki-Moon, and business leaders like Paul Polman from Unilever for concerted action to grow carbon pricing schemes. Some of the focus in the European Parliament has revolved around reducing the amount of quotas on offer in the carbon trading scheme in order to help increase the price of CO2 emissions.

Solar energy plant, Morocco. Source: Wikipedia

Subsidies + investment

- Richard Brindle, from the IISD, has published a paper which investigates the deadening effect of fossil fuel subsidies on the renewable energy market. Brindle highlights the benefits of subsidies, particularly when they are employed well in burgeoning industries such as renewables, as producers of employment and reducers of energy poverty, when removing fossil fuel subsidies, Bridle argues that policymakers have to be aware of the potential impact on vulnerable groups and recommends that savings from subsidies should be redirected towards health and education programs.

As reported on these pages, at the annual World Economic Forum Davos talks, figures like the UNFCCC’s Christiana Figueres and Lord Stern argued for the elimination of fossil fuel subsidies, seizing on the opportunity of low oil prices. It was argued that subsidies could be reduced with minimal impact on consumers. Under such a scenario, if the oil price recovered, in a new market where it didn’t have strong subsidies it would find it difficult to compete with cheaper solar and wind energy