The corona crisis is compelling us to ask fundamental questions: how can we make our world sustainable so that we don’t stumble from crisis to crisis? Brenda Kramer on the EU taxonomy.
Forests as building blocks for a climate neutral economy
Consider the following question: What technology can store CO2, produce oxygen, purify water, improve our welfare and provide us with food and/or building material? It doesn’t exist. Only nature can do this. And yet, we are investing more in technology than in trees.
Don’t get me wrong. Technology is necessary for CO2 reduction in the economy. But we need nature for CO2 storage, to preserve biodiversity and for our health. The European Commission’s scenarios for a carbon neutral economy by 2050, rely almost exclusively on CO2 storage in nature (forests and agriculture), until 2030. Technology for “Carbon Capture and Storage” will only come into play after 2030.1 That is why forestry is part of the European taxonomy.
The taxonomy includes five economic activities within the forestry sector: 1) Forestation - creating forests where there were initially no forests 2) Reforestation: recreating forests 3) Restoration of forests 4) Management of existing forests and 5) Nature conservation.
To be eligible these activities must be implemented in line with Sustainable Forest Management Principles and the above-ground storage of CO2 must increase in the longer term. Harvesting may take place in forests that have a commercial function, as long as the storage of CO2 remains equal or increases over time. The progress on these two criteria must be reported and verified every 10 years.
The taxonomy eventually aims to contribute to more “green” capital flows, with a focus on investments. For forestry, these investments are limited for the time being. According to New Forests, the size of the investible universe lies between USD 200 and 400 billion worldwide, of which USD 50 billion is in Europe.2 Moreover, the management of many of the investible forests does not yet meet the above taxonomy requirements.
Institutional capital can, in theory, help improve the quantity as well as the quality of forests. And yet, this proves challenging in practice. For this blog I asked various experts what would be needed to increase investments in forestry. The answers were consistent on three points. First, investing in nature requires long-term moral and financial commitment. Second, improved business cases are needed in which, for example, timber production is combined with nature conservation and in which the price of land destined for nature can compete with that of agricultural or other land. Third, an international focus is needed. In Europe, land is relatively scarce, often resulting in lower priority for nature Therefore it is worth looking beyond the European borders. After all, CO2 storage by nature can take place anywhere in the world.
If forests and natureare our best allies in addressing the climate and biodiversity crisis, wouldn’t n’t they deserve a place in the climate efforts of every organisation and (investment company)? Eventually I think technology helps us to stay alive, but we need nature to live. Isn’t that ultimately what it’s all about?
Brenda Kramer is member of the EU Technical Expert Group that develops the EU taxonomy on sustainable finance. She has written this blog in a personal capacity.
1 EU 2050 strategic vision: “A clean planet for all”
2 Transforming the Forest Asset Class – David Brand – March 2019.
The new European definition of sustainable activities will prove to be a real game changer in the long term, says Brenda Kramer, member of the working group that issued the advice to the European Commission.
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