MARKET ANALSYS OF ENVIRONMENTAL SERVICES IN AUSTRALIA

In my last blog, Amanda and I presented our research topics in a way that seamed to be a bit boring for the readers. So in this second blog I will do my best to illustrate how entertaining and ardours is being the development of my research. I really hope I can reflect my concerns and my excitement throughout this enlightening and time-consuming journey.

For the ones that haven’t read the previous blog, my research consists in a market analysis. However, it losses its significance when it is defined just like that. The research has been required by the Forest Stewardship Council (FSC), a world-leading organisation in certification of products from sustainable managed forests. You can find more information about the FSC in this link: https://ic.fsc.org/en

Last year, FSC International released the Ecosystem Services Strategy to expand its standard into environmental services (ES). Now, FSC Australia is looking to develop a national framework and a national strategy and requires a better understanding of the existing national ES markets. Considering the constant loss of environmental services in Australia due to changes in land use, this MARKET ANALYSIS results compulsory for the development of a strategy that will help to maintain ES.

What does FSC want?

FSC Australia has requested the identification of supply and demand opportunities for the certification of the following ecosystem services: carbon sequestration and storage, biodiversity conservation and watershed protection, with a particular emphasis in the first one. In addition, it has to include the identification of the involved actors, including financial sources, and the description of the current policies and regulations that control ES markets.

Turning this into research questions…

Three main research questions have been formulated:

  1. What environmental services markets are available for certification in Australia?
  2. Can FSC access to these markets?
  3. What mechanisms can be considered to facilitate FSC access?

To start answering these questions, I started researching about market-based instruments (MBIs) in Australia to have a better understanding of the different approaches use in environmental services merkets. These include from payments for ecosystem services (PES), taxes, cap and trade and, in a small degree, certification schemes (Figure 1).

fig 1.png

Figure 1: Types of MBIs, adapted from Whitten & Shelton (2005)

This has led me to determine that the carbon market is extensively developed compared with biodiversity and watershed services. And until now, the research has only been focused in this service. However, the extension of the carbon market is mainly based in payments for ecosystem services (PES). In other words, in carbon offsetting within the voluntary market and not in certification schemes.

In order to answer the second research question, a SWOT analysis will be developed after the completion of the literature review. Until know, the elements presented in Figure 2 constitutes the most significant FSC features that will define the access to the carbon market through a certification scheme.

fig 2.png

Figure 2: Basic SWOT analysis for accessing the carbon market

More information is required to answer the third research question. But by the moment, a key mechanism is to build up a FSC certification scheme based on existing standards, such as the Climate, Community & Biodiversity Standard (CCBS), the CarbonFix Standard (CFS), Plan Vivo Systems and Standard and the AFOLU Voluntary Carbon Standard (VCS), which features are well described and compared in a study carried out by the University of Canterbury in New Zealand (Merger & Williams, 2008) and can be used as great asset for the development of the FSC scheme.

Understanding the market…

To answer the research questions properly is important to deeply understand the market of environmental services in Australia and the basics of environmental services. It can sound easy but it has turned into an arduous task. The first issue that came up was to figure out how to transform the rationality of already existing offset standards into certification.

There are some products, such as brands of paper that present FSC certification and Carbon Neutral certification (have a look to: https://au.fsc.org/en-au/buy-fsc-certified/certified-paper-in-australia). Based on this, FSC could certify carbon sequestration and storage by offsetting carbon units in the same forest plantation or by buying carbon credits from the voluntary market.

The second issue is that the Australian legislation, through the Carbon Farming Initiative Act 2011, validates the sequestration of carbon for at least 100 years. Then, how a forest plantation could by certified for carbon sequestration if it is going to be logged after? The answer was found in the study done by Cacho et al (2013), which determines that forestall uses retains more carbon than other land uses such as for agriculture or grazing.

On the other hand, the market analysis has to also consider the prices that consumers are willing to pay (Froger et al., 2015). Therefore, is important to build up from other standards, and use their market experience. However is being hard to find quantitative information of costs and prices of the certification process. A more intensity literature review is required to find out studies that compare the prices and evaluate the competition in the market.

The literature review process

The urge to find more information of ES markets has led me to expand my sources of information. I started considering only scientific papers from the Web of Science database, and now I am including grey literature from NGOs, governments and other institutes. Also, I am tracking the references used in some studies (one source of information is leading me to new ones), which seams to be effective. And I have been organising all these references (25 by the moment) in EndNote, but I am still struggling to manage it properly.

When analysing the progress of my research, I believe I will be able to answer my three research questions. However, quantitative information is limited, which will probably determine the qualitative nature of my results. They will reflect market trends, rather than numerical figures. But still, will be consistent to determine the accessibility of FSC to national ES markets and to provide recommendations for the implementation of the new certification.

I hope you have enjoyed reading this post and don’t miss the next one with the final results!


REFERENCES
  • Cacho, O. J., L. Lipper and J. Moss (2013). “Transaction costs of carbon offset projects: A comparative study.” Ecological Economics 88: 232-243.
  • Froger, G., V. Boisvert, P. Meral, J. F. Le Coq, A. Caron and O. Aznar (2015). “Market-Based Instruments for Ecosystem Services between Discourse and Reality: An Economic and Narrative Analysis.” Sustainability 7(9): 11595-11611.
  • Merger, E and Williams, A (2008). “Comparison of Carbon Offset Standards
for Climate Forestation Projects participating in the Voluntary Carbon Market.” University of Canterbury. Christchurch, New Zealand.
  • Whitten, S., Shelton, D. (2005). Markets for Ecosystem Services in Australia: Practical Design and Case Studies. Canberra, Australia, CSIRO.

 

 

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