Australia Wants to Turn Wilderness Restoration Into an Investable Market
Some are questioning whether there will be demand for so-called biodiversity credits
Some are questioning whether there will be demand for so-called biodiversity credits
SYDNEY—Northern Australia’s tropical coast used to have a vast covering of lush rainforest that supported the cassowary, often called the world’s most dangerous bird. Now, one organization is developing a program they say will encourage landowners to reforest the area and create a habitat for native species.
Their plan: Cassowary Credits.
“The idea of the Cassowary Credit was about bringing in the large-scale investment that’s needed to really do that work to protect the valleys of the region from climate change,” said Sarah Hoyal, biodiversity and climate leader at nonprofit environmental group Terrain Natural Resource Management, which wants to sell credits to investors that are valued by how much land is restored to its native state over time.
Australia’s government has similar plans, albeit on a larger scale. On March 29, the government introduced legislation to create a nationwide market for so-called biodiversity credits, the first large advanced economy to undertake such an effort.
Australia is betting that businesses will be hungry to buy credits as they face pressure from shareholders and customers to be more socially responsible. If the market flourishes, Australia could be a model for harnessing money from the private sector to reverse environmental losses, but the plan is facing skepticism from investors and industry groups questioning how the credits will be valued and what will drive demand for them.
“Until there is an economic return, you will not get investors coming to nature projects except on a philanthropic basis, or some early stage voluntary action,” said Martijn Wilder, chief executive of Pollination, an advisory and investment company. The legislation is a good start, he said, but more needs to be done to show it can work.
Australia’s government argues that the plan offers a way for companies to invest in managing the environment without having to buy land. The market will also give landowners extra income, overcoming one of the roadblocks to conservation, and create jobs for indigenous communities that become involved in restoring the land, said Tanya Plibersek, the country’s environment minister.
Under Australia’s scheme, landowners would get a credit, in the form of a certificate, for conducting repair or preservation projects on their property. This credit can be sold on to businesses and individuals. To help these investors figure out how much each credit is worth, information such as how much land is being repaired or how long it will take will be disclosed. The credits would be tracked via a public register and overseen by a regulator.
How Australia tackles these issues could offer lessons for other countries considering ways to prevent nature loss. The U.N.’s environmental arm estimates that $384 billion annually—more than double current levels—needs to be invested by 2025 to protect against climate, biodiversity and land degradation.
Australia’s plan illustrates how some governments don’t think they can fill the funding gap alone and want the private sector to step up. Conservation efforts have largely focused on national parks or wildlife refuges. But with more than 60% of land in Australia owned privately, officials say that is no longer enough.
“We live in the extinction capital of the world—losing more mammals to extinction than any other continent,” said Ms. Plibersek.
The concept of using credits to achieve an environmental goal isn’t new. The European Union and several U.S. states allow trading in carbon credits as part of programs to reduce greenhouse gas emissions. A challenge for Australia’s scheme, however, is figuring out how to value nature itself.
“Biodiversity is inherently more complex than carbon and thus less divisible into interchangeable units,” said Dr. Jody Gunn, chief executive of the Australian Land Conservation Alliance, which represents organisations working to protect nature. “How many koalas is worth a hectare of protected rainforest?”
Some businesses will buy from the market voluntarily when it opens, but it remains to be seen that there will be enough to sustain the market in the short term, she said. That means the government would need to step in and become an active investor, Dr. Gunn said.
Ms. Plibersek said the government hasn’t decided whether to invest in nature projects, but the legislation allows it to do so.
As lawmakers figure out the mechanics of the market, some organisations are plowing ahead with separate plans to develop credits.
Wilderlands, an Australian company, sells credits for several projects, including the rehabilitation of privately owned land in South Australia state that was once used to graze cattle. The purpose of the project is to allow native animals and plants to thrive on the land, and not to use it for agriculture, said Wilderlands, which runs a marketplace for the credits. Buyers of its credits include Lendlease Group, a $3.38 billion Australian construction company, and Monash University, which wanted to showcase efforts to protect nature to its students.
In the northern tropics, much of the coastal lowland habitat of the cassowary has been cleared for farms and the growth of towns. The area is also threatened by cyclones, diseases such as avian tuberculosis and wild dogs. These threats have increasingly driven the bird, which can grow to two meters tall, to higher ground. The cassowary is listed by the government as endangered,
Restoring its lowland habitat will be a slow process. The value of Terrain’s proposed credit is tied to how the rainforest recovers at various points over 25 years. Terrain is developing its credits separately from the government’s effort to establish a national market and is awaiting further details before deciding if its own credits can be part of it.
“It will be 500 years before it’ll look like the rainforest that’s there now,” said Terrain’s Ms. Hoyal. “But it’ll be a substantial habitat at 25 years.”
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A sharp rebound in tourism in Europe’s sunbelt powers its economic rebound as core manufacturing centres struggle to recover
Europe’s economy has a north-south divide—and now it’s the poorer south that is powering the region’s return to growth.
Southern Europe, which for decades has had lower growth, productivity and wealth than the north, powered an upside-down recovery on the continent at the start of the year. Buoyant tourism revenue around the Mediterranean helped to offset sluggishness in Europe’s manufacturing heartlands.
The south’s transformation from laggard into growth engine reflects both a rapid rebound in visitor numbers from the collapse during the Covid-19 pandemic and a series of blows the continent’s large manufacturing sector has suffered, from surging energy prices to trade conflicts.
Now growth in the south is more than offsetting the north’s manufacturing malaise: As a whole, the eurozone economy grew at an annualised rate of 1.3% in the first quarter, ending nearly 18 months of economic stagnation in a sign that the currency area is recovering from the damage done by Russia’s invasion of Ukraine.
It was the eurozone’s strongest performance since the third quarter of 2022, and approached the U.S. economy’s 1.6% first-quarter growth rate, which was a slowdown from a racy pace of 3.4% at the end of last year.
In the 2010s, Germany helped to drag the continent out of its debt crisis thanks to strong exports of cars and capital goods. Between 2021 and 2023, Italy, Spain, Greece and Portugal contributed between a quarter and half of the European Union’s annual growth, according to a report last year by French credit insurer Coface —a trend now confirmed and amplified in the latest data.
In the first quarter, Spain was the fastest-growing of the big eurozone economies. It and Portugal recorded growth of 0.7% in the three months through the end of March from the previous quarter, while Italy’s economy grew by 0.3%. France and Germany both grew by 0.2%, the latter rebounding from a 0.5% quarter-on-quarter contraction at the end of last year.
This means Germany’s economy has grown by 0.3% in total since the end of 2019, compared with 8.7% for the U.S., 4.6% for Italy and 2.2% for France, according to UniCredit data.
In Spain, strong growth “seems to have been entirely due to strong tourism numbers,” said Jack Allen-Reynolds, an economist with Capital Economics. Tourism accounts for around 10% of the economies of Spain, Italy, Greece and Portugal.
The euro rose by about a quarter-cent against the dollar, to $1.0725, after the latest growth and inflation data were published.
The recovery comes as the European Central Bank signals it is preparing to reduce interest rates in June after a historic run of increases since mid-2022 that took it the key rate to 4%. Inflation in the eurozone remained at 2.4% in April, while underlying inflation cooled slightly, from 2.9% to 2.7%, according to separate data published Tuesday.
“The ECB hawks will point to the strong GDP number as [an] argument that ECB can take its rates lower gradually,” said Kamil Kovar, senior economist at Moody’s Analytics.
The eurozone economy has flatlined since late 2022 as Russia’s attack on its neighbor sent food and energy prices soaring in Europe and sapped business and household confidence. Gross domestic product fell in both the third and fourth quarters of last year, meeting a definition of recession widely used in Europe, but not in the U.S.
Southern Europe is one of only a handful of regions where international tourist arrivals returned to pre pandemic levels last year, according to United Nations data. Tourism revenue across the EU was one-quarter higher in the three months through the end of last June than in the same period in 2019, according to Coface data.
The recovery in international tourism was “notably driven by the arrival of many Americans who…were able to take advantage of favorable exchange rates,” Coface analysts wrote. “On the other hand, the end of the zero-Covid policy in China has initiated a gradual return of Chinese tourists, although remaining below 2019 levels.”
In Portugal, the number of foreign tourists hit a record of more than 18 million last year, up 11% compared with the prepandemic year of 2019, official data showed in January. American tourists in particular have returned to Europe in force.
Tourist numbers in Asia Pacific and the Americas continued to lag 2019 levels by 35% and 10% last year, respectively, the data show.
It is unclear how much further the tourism boom can run, but economists expect the region’s economic recovery to strengthen later this year as cooling inflation boosts household spending power and lower energy costs aid factory output.
Recent surveys point to an improved outlook for growth. Consumer confidence has risen to its highest level in two years, and a leading business-sentiment index has shown steady improvement from the start of 2024.
“We think that the combination of a robust labor market, comparatively strong wage hikes and lower inflation compared with last year will finally lead to a moderate recovery in consumer spending in the next few quarters,” said Andreas Rees , an economist with UniCredit in Frankfurt.
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