Climate scientists' views on climate change: a survey

Hans von Storch and Dennis Bray

In 1996 and 2003 we surveyed the opinions on climate change held by climate scientists. The results of these surveys have been subject to many misuses and erroneous claims. Some have selected individual statements out of context (scroll down to number 5) to bolster their claims, while others have argued that the 2003 part of the survey would be strongly biased by skeptics misusing the online-sampling for multiple submissions.

With respect to the latter – the survey was conducted first in 1996 with a mail-out format, which nobody claimed could be biased and the results were published in the Bulletin of the American Meteorological Society. The second survey from 2003 was conducted on the internet, a procedure that in principle could have been misused by multiple submissions by those skeptical or alarmist on climate change who shared the password. However, the 2003 results are internally consistent with the 1996 results. In 2003 scientists expressed increased satisfaction and agreement with the IPCC and increased confidence in the tools of the science. In comparison to 1996, no anomalies were found in the response to questions.

On the skeptical side, the survey has often been used to create the impression that most scientists were not in support of anthropogenic causes of ongoing climate change: Specifically, it was noted that “For example more climate scientists ‘strongly disagree’ than ‘strongly agree’ that climate change is mostly the result of anthropogenic causes.” This interpretation is certainly biased.

We had requested responses on a scale from 1-7 to the question “Climate change is mostly the result of anthropogenic causes.” – with 1 representing “strong agreement” and 7 “strong disagreement”. Thus, scales 1-3 signal agreement, 4 an ambivalent position, and 5-7 disagreement. The frequency distribution for the two surveys in 1996 and 2003 are:

Thus, the statement, that more respondents strongly disagree than strongly agree is technically correct (10% vs. 9%), but highly misleading. If we pool the 1-3 positive responses to “agreement”, and 5-7 to disagreement, then the ratio in 1996 was 41:45 in favor of disagreement; in 2003, however, this ratio has become 56:30 in favor of agreement; all scales 1-3 have seen strong increases in frequency, while 5-6, with the notable exception of scale 7, have seen marked reductions.

Furthermore the question refers to “climate change” in general. We intended to ask for responses to the statement "Ongoing climate change is mostly the result of anthropogenic causes", but some respondents may have considered Holocene climate change in general. Thus, “disagreement” with the statement does not necessarily signal doubt about the perspective of a dominantly man-made climate change in the coming decades, but it mostly reveals an assessment of presently emerging climate change. The problem is that some commentators interpret our numbers as responses to "Future climate change is mostly the result of anthropogenic causes". "

One should also consider the possibility that scientists, who are naturally “plagued” or honored by doubts, may have a hard time choosing maximum confidence (i.e., category 1); therefore many may prefer a weaker “2”. (This tendency is obvious when we ask for assessment of the skill of models, and the respondents are hesitant to go for maximum confidence).

After careful quality checks, which lead to the identification of a few errors related to incorrect coding of answers, the responses of the 2003 survey have now recently been published.

We are presently preparing a new survey; this time, we will implement a more efficient barrier for manipulating response rates, even if we do not believe that this was really an issue in our 2003 survey. As the purpose of the survey is intended to be of service to the scientific community, we would openly welcome questions posed by the community to be added to the upcoming survey. However, please keep in mind that the survey poses general rather than specific questions and that the length of the survey is a major consideration.

Hans von Storch and Dennis Bray
Institute for Coastal Research
GKSS Research Center
Max Planck Str. 1
21502 Geesthacht

How private equity can profit from carbon offsets in Indonesia
Rhett Butler, mongabay.com editorial
August 29, 2007


The emerging carbon market for avoided deforestation presents unprecedented opportunities for private equity to make profitable investments that also help protect the environment. Indeed, for the first time, conservation may be associated with positive financial returns. Here's a brief look at how private equity and other investors can capitalize on this opportunity to earn attractive returns while fighting climate change, protecting ecosystem services, and safeguarding endangered species like orangutans.

Avoided deforestation is the process by which landholders sell the carbon rights to a given area to private investors. The private investor then sells the carbon credits on international markets to companies looking to offset their emissions. Avoided deforestation is currently only recognized as a voluntary emission reduction (VER) scheme, but it is expected that the concept will be embraced at the December U.N. climate (COP-13) meetings in Bali, especially if proof-of-concept projects are showing signs of success.

Indonesia, thanks to its nearly 20 million hectares of peatland swamps, is well-positioned as a source of avoided deforestation offsets. In fact, conversion, draining, and burning of these peatlands is presently estimated by Wetlands International, an NGO, to release some 2 billion tons of carbon into the atmosphere each year. This equates to 8 percent of human global carbon emissions and is why Indonesia is the world’s third largest emitter of carbon after China and the US.

Forest clearing in Kalimantan (Indonesian Borneo). Rhett A. Butler

In recent months, Investors -- ranging from wealthy individuals to banks, hedge funds, and forestry companies -- have been evaluating the potential of such credits in Indonesia but have thus far been hesitant to make deals before a binding framework is in place. Nevertheless, a ripe opportunity exists.

Financial analysts would be smart to start looking at the debt of firms that own or control rights to large tracts of undisturbed forest land in Indonesia: pulp and paper companies, mining corporations, agribusiness, and plantation firms. While commodity prices are high, there still may be bargain opportunities given the structure of loans and recent worries in the credit markets. For example, an eight-year study by the nonprofit Center for International Forestry Research (CIFOR) suggests that some companies, especially pulp and paper operatives, may have overstated their financial health by exaggerating the extent and availability of pulpwood. CIFOR's report reveals that, in some cases, financial institutions conduct only minimal due diligence to assess the sources of wood for pulp projects, with banks relying heavily on data provided by the pulp producers themselves. CIFOR says the lack of due diligence significantly increases financial risk of some projects. CIFOR specifically cites two companies in Indonesia, Asia Pulp & Paper (APP) and Asia Pacific Resources International Ltd. (APRIL), as examples where "financial institutions failed to conduct proper due diligence on fiber supply."

Old-growth tropical rainforest. Rhett A. Butler

"During the 1990s, APP and APRIL borrowed over US$ 15 billion from international capital markets by telling investors that they have sustainable supplies of very low-cost fiber. However, both companies continue to rely on the clearing of natural forests in Sumatra for 60-70% of their wood supply, and each is still years away from meeting its own plantation development targets," said Christopher Barr, CIFOR senior scientist and coordinator of the study.

Analysts should closely examine the finances of such companies, looking for distressed debt situations that could lead to large land acquisitions on the cheap. Upon acquiring such a company, its pulping and forestry equipment could be sold to provide cash to help finance the acquisition. The financial firm could then make arrangements to sell the carbon credits in international markets while at the same time earning marketing points and goodwill among its investors and customers.

The income from the acquisition wouldn't have to be limited to fixed carbon credits. The financial firm could hire local companies (providing local employment) to plant deforested and degraded areas in the concession. In so doing, the firm may be able to collect additional carbon credits for reforestation or use the newly forested land for timber plantations or agriculture. Because the land is reforested, its use would not result in net emissions.

Under the scheme, natural forests would be protected for their carbon value as well as their resident biodiversity and the other ecosystem services they afford. Not only might these ecosystem services result in payments for landowners in the future, but the presence of biodiversity -- think orangutans, gibbons, and hornbills -- may allow the firm to further diversify its income through ecotourism. The firm could establish a relationship with a tour operator to develop nature-oriented tourism that provides additional employment for locals. The social and environmental return from such an investment strategy could be immense relative to typical extractive industries. It could also be profitable.


References

• CIFOR (2006). Financing Pulp Mills: An Appraisal of Risk Assessment and Safeguard Procedures [1 MB PDF]
• Mongabay.com (2007). Is peat swamp worth more than palm oil plantations?
• Mongabay.com (2007). Could peatlands conservation be more profitable than palm oil?
• Mongabay.com (2006). Reducing tropical deforestation will help fight global warming
• Mongabay.com (2006). Why is oil palm replacing tropical rainforests
• Mongabay.com (2006). What do bikini models and banks have to do with deforestation?

Aug 31, 2007

India looks to tap carbon market
By Siddharth Srivastava

NEW DELHI - It is a market expected to grow to US$100 billion in the near future, and Indian firms want to reap some of the benefits.

The Clean Development Mechanism (CDM) under the Kyoto Protocol allows richer countries to trade their emission-reduction targets with developing countries by buying carbon credits earned by the latter for projects reducing emission of greenhouse gases, those suspected of accumulating in the Earth's atmosphere and trapping the sun's heat, contributing to global warming.

Recent estimates predict that uncontrolled carbon emissions could cost the global economy more than $200 billion annually by 2030 unless the pollution levels are controlled. Environmental group Greenpeace has said that shifting to renewable energy and reducing carbon emissions could save Southeast Asia $80 billion annually.

Indeed, with the Western world (read Europe and Canada, not the United States yet) looking at the CDM seriously, Indian firms do not want to lose out on the business opportunity due to investments in clean technology.

Recently, an Indian firm won the single largest issuance of carbon credits by the United Nations Framework Convention on Climate Change, which awarded 5.4 million carbon credits to two projects owned by India's JSW Steel. One project was issued 4 million carbon credits, the single biggest credit.

The Federation of Indian Chambers of Commerce and Industry has said that Indian companies may earn almost $4 billion through carbon-credit sales in the near future.

Institutional mechanism
Indeed, an institutional mechanism is quickly emerging in India to take advantage of CDM. This is critical. Given the vast country that is India, it is essential that an organized framework reaches the grassroots level where numerous green projects could be eligible under CDM.

This month, the country's largest lender and oldest bank, the State Bank of India (SBI), tied up with three entities to provide a comprehensive framework for industries to take advantage of CDM projects. State-owned SBI has the largest rural network in the world and exists in places where no private Indian or foreign bank will reach for some time to come. The entities that the bank has tied up with are Pune-based MITCON Consultancy Services, Ecosecurities India Pvt Ltd, and Cantor CO2E India Pvt Ltd.

"SBI proposes to provide a single-point delivery of services related to carbon credits/CDM under the Kyoto Protocol to its customers,'' SBI chairman O P Bhatt said. These would include advisory services and value-added products such as securitization of carbon-credit receivables, delivery guarantees and escrow mechanism for carbon credits, apart from finance to implement CDM projects, he said.

"With so many potential buyers and sellers in this market, counter-party risk can become a key area in carbon-credits trading, and SBI, with its wide Indian and international presence, can play a major role here," he said.

London-based EcoSecurities is a global leader in developing and trading carbon credits and has been expanding its presence in India. It structures and guides projects for reduction of greenhouse-gas emission, acting as the principal intermediary between the projects and the buyers of carbon credits.

CDM consultancy is already a big business in India, with revenues rising substantially over the past couple of years. Following in the footsteps of SBI, India's largest private-sector bank, ICICI Bank Ltd, too announced that it has signed a memorandum of understanding with MITCON to service firms engaged in the CDM business.

"With global warming becoming a concern worldwide and the industry sensing the need to move on to CDM and green projects, this memorandum will be our platform to facilitate SMEs [small and medium-sized enterprises] to make this movement toward such projects," Sanjeev Mantri, general manager of ICICI Bank, said in a statement.

Last December, the Industrial Development Bank of India Ltd (IDBI) entered a non-exclusive memorandum with Washington-headquartered International Finance Corp, the private-sector arm of the World Bank, to assist Indian companies jointly in CDM projects.

The two financial intermediaries have also been seeking to help companies realize the value of the carbon credits by selling them in global markets.

IDBI has a pool of industrial clients that can seek advice. However, it does not have the kind of exhaustive bridge SBI could be capable of extending. Last October, IDBI entered a similar non-exclusive memo with MITCON and later Germany-based KfW Bankengruppe.

Apart from the banking system, other forums are likely to emerge to help the growth of CDM projects in India.

Prime Minister Manmohan Singh has spoken about the need for India to tap the CDM potential. The federal government has constituted the National CDM Authority to evaluate, review and encourage projects. Many government projects such as the Delhi Metro are looking at the green option to earn carbon revenues.

India's federal Parliament should be looking to legislate within this year whether to permit the Multi-Commodities Exchange (MCX) to trade carbon credits, the bourse's joint managing director Lamon Rutten said in an interview recently. "We hope to get the approval," Rutten said.

The permission to trade carbon credits would enable Mumbai-based MCX to proceed with establishing a platform to buy and sell certified emission reductions (CERs). Countries such as China, Australia, Singapore and New Zealand are looking at various options related to a carbon exchange. Trade in voluntary emission-reduction credits is spreading with new exchange-based initiatives in these countries.

Expectations high
Since carbon trading took off in India two years ago, domestic companies have earned about $500 million from carbon-credit sales, according to consulting firm Ernst & Young. India has cornered nearly 43% of CERs issued so far by the CDM executive board, the highest under the Kyoto Protocol. Seventeen percent of the CERs have been issued to China.

But the expected average annual income from registered projects through 2012 has China (44%) far ahead of India (15%), although India, with 259 projects, leads China (101) in the number of registered projects.

Indian expectations continue to be high. Recently, New Delhi has asked industry to bunch up CDM projects that can be traded in the current $30 billion global carbon-credit market. Because of the small size of CDM projects, Indian companies are unable to cash in the carbon credits, because of procedural costs.

SBI has said analysts peg the global carbon-trading market at $100 billion by 2010, and the Indian carbon market has the potential to supply 30-50% of the projected global market of 700 million CERs by 2012.

According to the director of the Environment and Forest Planning Commission, S K Panigrahi, Orissa, West Bengal and Jharkhand together can earn CERs of Rs10 billion ($244 million) by 2012 if they take to CDM. Orissa alone is capable of earning Rs2.5 billion in the way of CERs, he said. A number of coal-based as well as steel and aluminum units are being set up in eastern India.

Siddharth Srivastava is a New Delhi-based journalist.

The Catholic Register: Markets enter carbon trading business, as Catholic teaching stresses common good

By Michael Swan
8/28/2007

The Catholic Register (www.catholicregister.org)

TORONTO, Canada (The Catholic Register) – If capitalism can save the planet, it’s running out of time in Canada where market-based approaches to greenhouse gas reduction have yet to be tried.

For the most part, Canada’s capitalists are anxious to enter the carbon trading business, but so far Ottawa has failed to institute regulations necessary to create a market for CO2 reductions. The Montreal, Toronto and Winnipeg stock exchanges have each proposed cap-and-trade systems which would allow big smokestack companies to sell credits for reductions they make in carbon emissions.

The Montreal derivatives exchange has gone so far as to sign a letter of intent in 2005 with the Chicago Climate Exchange to create the Montreal Climate Exchange. But the MX is still waiting on a plan from Ottawa for Canadian compliance with the Kyoto Protocol.

The absence of an exchange which prices in the cost of pollution distorts the markets, in the sense that the real cost of industry isn’t accounted for. Environmental degradation becomes what economists call a negative externality.

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CER prices rise on EU demand

Monday, 13 August 2007

[€=euros]

The prices of issued CERs on the growing secondary market have seen substantial rises from mid-July, reversing falls in June. CERs tracked the upward movement in EUA prices in Europe, and also benefited from a sudden switch by EU carbon market players from EUAs into CERs.

As confidence grows in the prospects for a freely exchangeable CER market from sometime in 2008, carbon market speculators and emitters alike in Europe jumped at the chance to swap EUAs for cheaper CERs – both acceptable for compliance under the EU ETS and each representing one tonne of CO2e emissions.

As a result, the price of CERs as a percentage of EUAs has climbed from around 68 per cent in early July to over 80 per cent by mid-August, as tracked by Tradition Financial Services. On August 16, the closing price quoted for the CER Dec 08 forward contract on the Nord Pool exchange was €16.50, up from €13.50 a month before. The forward price curve has gone into backwardation with Dec 09s at €15.90 and the Dec 08-12 strip trading around the €16 mark.

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Cap and Trade versus Carbon Tax

Published: Monday 27 August 2007

Eileen Claussen, Pew Center on Global Climate Change

The climate-change debate has shifted, claim Eileen Claussen and Judith Greenwald of the Pew Center on Global Climate Change in a July 2007 article for the Miami Herald.

Related:

LinksDossier: EU Emissions Trading Scheme

There is no longer any argument about whether or not the world is warming and whether or not this is a problem, as it "clearly is", claim the authors – calling for the focus of the debate to turn to how to address the reality of climate change.

The US Congress is "moving towards" introducing a cap-and trade-programme to limit greenhouse-gas emissions, though several commentators believe a carbon tax to be preferable, the article outlines.

Advocates of a carbon tax believe that it would be simpler and that the EU experience shows that the cap-and-trade approach has failed, but the authors insist that both of these arguments are wrong.

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Asia-Pacific carbon trade spreads

Carbon News and Info

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Climate change news

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Carbon finance & emissions trading

Monday, 27 August 2007

Trade in voluntary greenhouse emission reduction credits is spreading with new exchange-based initiatives in Singapore, Australia and New Zealand.

In Singapore, the Asia Carbon Exchange has extended its auctioning activity to Verified Emissions Reduction (VER) credits in the voluntary market after moderate success with auctions of Kyoto CERs generated in the region earlier this year. ACX-change successfully transacted 100,000 VERs at €3.76 ($US5) in an auction held in early August. The VERs came from four small-scale renewable energy projects in India and "purchased by a well-known European entity".

Carbon market observers should not confuse the Singapore-based ACX-change with the ACX, the Australian Climate Exchange, which launched in Melbourne in late July. ACX is servicing the VER market as well as NGACs, the emissions reduction certificates of the New South Wales mandatory state Greenhouse Gas Abatement Scheme. ACX is also eyeing a future mandatory national emissions trading scheme set for 2011-12.

Initial trade in the voluntary market has seen 5000 tonnes of carbon offsets, accredited under federal government’s Greenhouse Friendly programme, exchanged so far, last trading at $A8.70 ($US7) per tonne. ACX chief executive Tim Hanlin says quality offsets are in short supply with landfill gas projects producing the most voluntary and mandatory credits.

Across the Tasman Sea, the New Zealand Carbon Exchange (NZCX) remains tight-lipped over trading volumes and prices since launching in April. The NZ government is moving cautiously towards an emissions trading scheme and looking for ways to devolve some of the country’s mounting Kyoto deficit onto the private sector.

NZCX’s Stuart Frazer says this has seen an earlier focus on the voluntary market shifting towards Kyoto carbon credits as larger industrial players ready themselves for a mandatory carbon trading regime, to be internationally linked. The domestic Projects to Reduce Emissions (PRE) scheme is largely Kyoto-compliant, producing credits that can be used as ERUs under JI. Supply of credits is also said to be constrained.

Modest start to Kyoto trade on Chicago exchange

Fri Aug 24, 2007 5:27PM EDT

NEW YORK (Reuters) - One contract representing Kyoto Treaty greenhouse gas reductions traded on the Chicago Climate Futures Exchange on Friday, the first such trade to take place in the United States, a trade source said.

The CCFE launched trade on the certified emissions reductions contract on Friday. December 2008 CER futures settled 25 cents weaker at $21.60.

One contract, representing a reduction of 1,000 metric tons of carbon dioxide equivalent, changed hands, the source said.

CERs represent emissions reductions under Kyoto's clean development mechanism projects that allow companies in rich countries that ratified the protocol to meet their emissions requirements by investing in the clean projects in developing countries.

Often the projects cut emissions by destroying greenhouse gases at places like coal mines and chemical plants.

CCX is a subsidiary of Climate Exchange Plc, which also owns the European Climate Exchange, the world's largest live carbon emissions trading market.

For more information on CER prices visit http://www.reutersinteractive.com/carbonnews

BUSH CLIMATE MEETING MUST STAY WITHIN UN FOLD: OFFICIAL

By AFP

The UN's top climate change official said Thursday it was crucial for George W. Bush to keep efforts to curb global warming within a UN framework, as the US president prepared to host a meeting of the world's top carbon polluters.

"It is important that the United States is bringing together the group of major emitters to talk about the kind of reductions they can commit to," said Yvo de Boer, head of the United Nations' Framework Convention on Climate Change (UNFCCC).

"But what is even more important is the US indication that ultimately their intention is to bring this back to the UN process," he said in an interview with AFP.

Bush has invited 15 nations and the European Union -- together accounting for 80 percent of greenhouse gases pumped into the atmosphere -- to a conference in Washington next month. De Boer will lead a delegation from the UN.

When the US president announced the meeting and unveiled a surprise plan in June for tackling global warming through technology, many European nations and environmental groups expressed concern that the US initiative would conflict with the existing UN process.

Thirty-six industrial nations which ratified the UN-brokered Kyoto Protocol have pledged to reduce their global warming emissions to five percent below 1990 levels by 2012.

The treaty also created a carbon trading market, and allows rich nations to offset their carbon reduction commitments by funding initiatives in developing countries.

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Indonesian companies chase green gold mine

Adianto P. Simamora, The Jakarta Post, Jakarta

More Indonesian companies are getting involved in greening projects to tap into the massive financial potential of the emerging global carbon trading business.

As of this month, the government has approved 13 carbon trading projects, exceeding this year's target of 10 projects.

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The CER allows carbon trading with 38 industrialized nations who have committed to cutting their greenhouse gas emissions to 5.2 percent lower than 1990 levels. A ton of reduced CO2 is currently priced at between US$5 and $10.

The Word Bank has valued global carbon trades at less than $1 billion in 2004, $11 billion in 2005 and over $30 billion last year.

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A Carbon Tax Would Be Cleaner

By Nicole Gelinas

Though skeptics may still grumble that the science isn't settled, some 84% of Americans think humans are contributing to climate change, with 78% (and 60% of Republicans) saying we should do something about it "right away," according to a recent poll.

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Brazil launches carbon trade

Thursday, 23 August 2007

Brazil’s Mercantile and Futures Exchange (BM&F) will begin carbon trading in São Paulo on September 27, auctioning CER carbon offsets from projects under Kyoto’s Clean Development Mechanism (CDM).

Trading will kick off with 808,000 CERs up for sale from a landfill methane capture project run by the São Paulo city administration, with a minimum price to be announced the day before the auction. The auction rules set a minimum bid price at 60 per cent of the average of December 2008 EUA settlement prices on the European Climate Exchange over the ten days preceding auction day.

The city administration is reported to be seeking $US30 million from the auction sale but if correct this appears overly optimistic, requiring $37 per CER. Current prices for issued CERs are around $20.

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Eco-Capitalists Save Mother Nature By Charging for Her Services

By David Wolman 08.21.07 | 2:00 AM

This past spring, David Brand went on a property-scouting trip to Malaysian Borneo. Deep in the rain forest, Brand — founder and director of a forestry investment business — met locals who just couldn't grasp what this Westerner was doing there. They were mystified he did not want to build an illegal logging mill. One of them put his arm around Brand's shoulder. "No one can see what we do here, my friend," he said. "We can cut it all down for you."

Brand sighed. He wasn't there to clear-cut the rain forest. In fact, soon after scoping out that land, he hopped on a plane to London where, in a matter of weeks, he raised $200 million to buy tracts of forest like the one in Borneo — and he's not going to raze those, either. They're investments. The return will come from deals with companies shopping for pollution offsets or with NGOs and governments that will pay to protect the planet's wild places — not because they're pretty, but because they perform a service.

The eco-capitalists are coming, and they aren't wielding Thoreauvian platitudes about the sanctity of nature. Their jargon is far less lyrical: ecological assets, environmental markets, ecosystem services, natural capital. For these guys, biofuels and long-lasting lightbulbs are fine but they're nothing more than a short-term play. The real money is in nascent markets indexed to the health of Mother Nature.

People understand the economic value of nature's goods because we constantly pay for them: seafood, timber, copper, cut flowers, natural gas. But nature also provides services that stabilize spaceship Earth. Insects pollinate crops, wooded hillsides purify water, trees sequester CO₂, and wetlands buffer cities against storm surges. How much are those services worth? Who knows. They've always been free, or treated as such. Nature has never submitted an invoice.

But they're not free, of course. We can tell by the enormous price we pay when they decline or disappear. Think Hurricane Katrina, unpollinated crops, and deadly mudslides caused by deforestation. As the new age of environmental awareness dawns, people and governments are starting to put a dollar value on these services. In practice, that means paying to protect the land where services are most concentrated. And whoever owns the land can reap the profits.

It's a twist on carbon cap-and-trade systems. In Europe, governments force companies that emit too much carbon to buy credits from those with excess credits (because they've cut back their own emissions). As the economy expands, the demand for — and thus the price of — carbon credits increases. Despite its growing pains, the European Emissions Trading Scheme has created a $4 billion-a-year carbon market, and no amount of cynicism about its efficacy can change the fact that skyrocketing public interest in carbon neutrality equals big money for carbon traders.

A similar setup in the US is wetland banking. Thanks to the Clean Water Act of 1972, developers must compensate the state for wetlands they pave over. Specialized businesses from Florida to California now buy up wetland areas and sell mitigation credits to developers.

Brand and others are betting that successful trading of carbon will kick-start the creation of other cap-and-trade systems for ecological services like watershed protection, biodiversity, and erosion control. But it's more complicated than it sounds. Carbon disperses and has a global impact. A Latin American butterfly or a Myanmar riverbank? Not so much. "Those are local assets," explains Jesse Fink, a cofounder of Priceline.com and a prominent eco- capitalist. The challenge is connecting global capital markets so that a butterfly matters as much, financially, to an investor in Chicago as it does to a farmer in Costa Rica. That will require the creation of a whole new financial transaction infrastructure, combining local businesses that can authenticate commodities on the ground with international registries, remote sensing, canopy monitoring, and other mechanisms to monitor and standardize trades.

Tough? Sure. But many experts see these kinds of deals as inevitable. When carbon cap-and-trade comes online in the US, there will be no shortage of demand, because most of corporate America will be shopping for mitigation credits. Build a cap-and-trade framework for other eco-assets and firms will profit not just from the sale of carbon offsets but from quantifiable gains in soil conservation, biodiversity, and watershed protection.

Still, the world's investment institutions haven't bought in just yet. As one former Goldman Sachs strategist explains: "First there needs to be 50 or 100 funds out there like Brand's. People need to invest in it to make it real." The big banks "are on board conceptually," Fink adds, "but they're not going to be first in line to make this investment. The first people in are people like me. I'm willing to take a chance that I will get the return, but I'm also trying to get the market started." In emerging markets, the first investors reap the benefits. And in an eco-market, you reap what you don't sow