Australia Wants to Turn Wilderness Restoration Into an Investable Market | Kanebridge News
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Australia Wants to Turn Wilderness Restoration Into an Investable Market

Some are questioning whether there will be demand for so-called biodiversity credits

Tue, Apr 11, 2023 8:26amGrey Clock 4 min

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.”


Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’

Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual

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China’s EV Juggernaut Is a Warning for the West

Competitive pressure and creativity have made Chinese-designed and -built electric cars formidable competitors

Thu, Jun 8, 2023 4 min

China rocked the auto world twice this year. First, its electric vehicles stunned Western rivals at the Shanghai auto show with their quality, features and price. Then came reports that in the first quarter of 2023 it dethroned Japan as the world’s largest auto exporter.

How is China in contention to lead the world’s most lucrative and prestigious consumer goods market, one long dominated by American, European, Japanese and South Korean nameplates? The answer is a unique combination of industrial policy, protectionism and homegrown competitive dynamism. Western policy makers and business leaders are better prepared for the first two than the third.

Start with industrial policy—the use of government resources to help favoured sectors. China has practiced industrial policy for decades. While it’s finding increased favour even in the U.S., the concept remains controversial. Governments have a poor record of identifying winning technologies and often end up subsidising inferior and wasteful capacity, including in China.

But in the case of EVs, Chinese industrial policy had a couple of things going for it. First, governments around the world saw climate change as an enduring threat that would require decade-long interventions to transition away from fossil fuels. China bet correctly that in transportation, the transition would favour electric vehicles.

In 2009, China started handing out generous subsidies to buyers of EVs. Public procurement of taxis and buses was targeted to electric vehicles, rechargers were subsidised, and provincial governments stumped up capital for lithium mining and refining for EV batteries. In 2020 NIO, at the time an aspiring challenger to Tesla, avoided bankruptcy thanks to a government-led bailout.

While industrial policy guaranteed a demand for EVs, protectionism ensured those EVs would be made in China, by Chinese companies. To qualify for subsidies, cars had to be domestically made, although foreign brands did qualify. They also had to have batteries made by Chinese companies, giving Chinese national champions like Contemporary Amperex Technology and BYD an advantage over then-market leaders from Japan and South Korea.

To sell in China, foreign automakers had to abide by conditions intended to upgrade the local industry’s skills. State-owned Guangzhou Automobile Group developed the manufacturing know-how necessary to become a player in EVs thanks to joint ventures with Toyota and Honda, said Gregor Sebastian, an analyst at Germany’s Mercator Institute for China Studies.

Despite all that government support, sales of EVs remained weak until 2019, when China let Tesla open a wholly owned factory in Shanghai. “It took this catalyst…to boost interest and increase the level of competitiveness of the local Chinese makers,” said Tu Le, managing director of Sino Auto Insights, a research service specialising in the Chinese auto industry.

Back in 2011 Pony Ma, the founder of Tencent, explained what set Chinese capitalism apart from its American counterpart. “In America, when you bring an idea to market you usually have several months before competition pops up, allowing you to capture significant market share,” he said, according to Fast Company, a technology magazine. “In China, you can have hundreds of competitors within the first hours of going live. Ideas are not important in China—execution is.”

Thanks to that competition and focus on execution, the EV industry went from a niche industrial-policy project to a sprawling ecosystem of predominantly private companies. Much of this happened below the Western radar while China was cut off from the world because of Covid-19 restrictions.

When Western auto executives flew in for April’s Shanghai auto show, “they saw a sea of green plates, a sea of Chinese brands,” said Le, referring to the green license plates assigned to clean-energy vehicles in China. “They hear the sounds of the door closing, sit inside and look at the quality of the materials, the fabric or the plastic on the console, that’s the other holy s— moment—they’ve caught up to us.”

Manufacturers of gasoline cars are product-oriented, whereas EV manufacturers, like tech companies, are user-oriented, Le said. Chinese EVs feature at least two, often three, display screens, one suitable for watching movies from the back seat, multiple lidars (laser-based sensors) for driver assistance, and even a microphone for karaoke (quickly copied by Tesla). Meanwhile, Chinese suppliers such as CATL have gone from laggard to leader.

Chinese dominance of EVs isn’t preordained. The low barriers to entry exploited by Chinese brands also open the door to future non-Chinese competitors. Nor does China’s success in EVs necessarily translate to other sectors where industrial policy matters less and creativity, privacy and deeply woven technological capability—such as software, cloud computing and semiconductors—matter more.

Still, the threat to Western auto market share posed by Chinese EVs is one for which Western policy makers have no obvious answer. “You can shut off your own market and to a certain extent that will shield production for your domestic needs,” said Sebastian. “The question really is, what are you going to do for the global south, countries that are still very happily trading with China?”

Western companies themselves are likely to respond by deepening their presence in China—not to sell cars, but for proximity to the most sophisticated customers and suppliers. Jörg Wuttke, the past president of the European Union Chamber of Commerce in China, calls China a “fitness centre.” Even as conditions there become steadily more difficult, Western multinationals “have to be there. It keeps you fit.”


Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’

Americans now think they need at least $1.25 million for retirement, a 20% increase from a year ago, according to a survey by Northwestern Mutual

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