Australia Wants to Turn Wilderness Restoration Into an Investable Market
Some are questioning whether there will be demand for so-called biodiversity credits
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.”
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Consumers are going to gravitate toward applications powered by the buzzy new technology, analyst Michael Wolf predicts
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
As geopolitical tensions rise, Taiwan is shifting its economy to rely more on the U.S. and other countries but at a cost
6 min
TAIPEI—For years, Beijing hoped to win control of Taiwan by convincing its people their economic futures were inextricably tied to China.
Instead, more Taiwanese businesses are pivoting to the U.S. and other markets, reducing the island democracy’s dependence on China and angering Beijing as it sees its economic leverage over Taiwan ebb.
In one sign of the shift, the U.S. replaced mainland China as the top buyer of Taiwanese agricultural products for the first time last year.
Electronics firms such as chip maker Taiwan Semiconductor Manufacturing Co. are also selling more goods to American and other non-Chinese buyers, thanks in part to Washington’s chip restrictions and Apple’s bets on Taiwanese chips.
Overall, Taiwanese exports to the U.S. in the first 10 months of 2023 were more than 80% higher than in the same period of 2018, Taiwanese government data shows. Taiwanese exports to the mainland were 1% lower—a major change from a decade or so ago when China’s and Taiwan’s economies were rapidly integrating.
Taiwan’s outbound investment has also shifted. After flowing mostly to mainland China in the early 2000s, it has now moved decisively toward other destinations, including Southeast Asia, India and the U.S.
Taiwanese electronics giant Foxconn, which assembles iPhones in mainland China, is expanding in India and Vietnam after Apple began pushing its suppliers to diversify.
Chinese state media recently reported that China had opened tax and land-use probes into Foxconn. Though Taiwanese officials and analysts interpreted the probes as a sign that China wants Foxconn founder Terry Gou to drop plans to run in Taiwan’s presidential election in January, some have said Beijing may also be trying to pressure Foxconn into resisting decoupling with China.
“Any attempt to ‘talk down’ the mainland’s economy or to seek ‘decoupling’ is driven by ulterior motives and will be futile,” said a spokeswoman for Beijing’s Taiwan Affairs Office in September. “The mainland is always the best choice for Taiwanese compatriots and businesses.”
Fully decoupling from mainland China’s economy likely isn’t possible, and would be disastrous for Taiwan, not to mention China, even if it were.
Foxconn and other major Taiwanese companies depend heavily on China for parts, testing and buyers. Some 25% of Taiwan’s electronic-parts imports still come from the mainland.
If China’s weakened economy returns to strong growth, it could shift the calculus back in favor of the mainland, where the Communist Party claims Taiwan despite never having ruled it. About 21% of Taiwan’s total goods trade this year has been with mainland China, versus 14% for the U.S., though the U.S. share has risen from 11% in 2018.
“My hunch is that the large manufacturing sectors will try to stay in the Chinese market, even with harsh conditions,” said Alexander Huang, director of the international affairs department of the opposition Kuomintang Party, whose supporters include business people with mainland ties. “If you talk to those business owners, they say, ‘Nah, no way will I give it to my competitors.’”
Even so, many forces are pushing Taiwan to rewire its economic relationship with China.
Trump-era tariffs and Biden administration export controls have raised the cost of sourcing from China, and in some cases prohibited it. U.S. firms are pushing their Taiwanese suppliers to diversify sourcing, and rising wages in China have made it less attractive than before.
Long-running shifts in Taiwanese sentiment toward China—and China’s own efforts to punish the island using its economic leverage—are also factors. China has banned Taiwanese agricultural products such as pineapple and, in 2022, grouper fish, and restricted outbound tourism to Taiwan.
Those restrictions to some degree have backfired, pushing Taiwanese businesses to look elsewhere.
Casting for new markets
Chang Chia-sheng, who runs a fish farming operation in Taiwan, said his main export target a decade ago was mainland China. But as geopolitical tensions climbed, he looked elsewhere. Sales to Americans have jumped fivefold since 2018, he said. “In the U.S., things just seem to work out more easily,” Chang said.
The U.S. and Taiwan reached an agreement in May on a number of trade and investment measures to deepen ties, though the deal stopped short of reducing tariffs.
In the June quarter of 2023, 63% of revenue at TSMC, which makes most of the world’s most cutting-edge logic chips, came from the U.S., up from 54% in the same period in 2018, according to S&P Global data. Just 12% of TSMC’s revenue now comes from Chinese buyers, down from 22% in the second quarter of 2018.
Taiwan’s government is also encouraging closer economic links with Southeast Asia, South Asia, Australia and New Zealand. Its “New Southbound Policy,” rolled out in 2016, has been the subject of fierce debate in Taiwan, with the Kuomintang Party saying steps to boost relations—like handing out scholarships—aren’t worth the cost.
Exports to “New Southbound” partners have risen, however, to $66 billion in the first nine months of 2023, about 50% higher than the same period in 2016.
“Frankly speaking, we’re responding reactively” to the need for more diverse trading partners, Taiwan’s Economic Minister Wang Mei-hua said. “Taiwan needs to manage the risks on its own, but we also need our allies to join us more in mitigating these risks.”
Together, the U.S. and the six largest Southeast Asian economies accounted for 36% of Taiwanese exports in the third quarter of 2023, according to data from CEIC, surpassing the percentage sent to mainland China and Hong Kong on a quarterly basis for the first time since 2002.
In September, Taiwan sent less than 21% of its exports to the mainland, the lowest percentage since the global financial crisis.
Taiwanese foreign investment into mainland China, steady at around $10 billion a year for most of the early 2010s, plummeted in late 2018 and has since been running at about half that level, according to Taiwanese government data. In 2023 so far, just 13% of Taiwan’s investment went to mainland China; 25% went to other Asian locations, and nearly half went to the U.S.
A survey of Taiwanese businesses conducted last year on behalf of the Center for Strategic and International Studies, a Washington think tank, found that nearly 60% had moved or were considering moving some production or sourcing out of China—a significantly higher rate than European or American firms.
Jay Yen, chief executive of Yen and Brothers, a Taiwanese frozen-food processing company, said his firm received a government subsidy of around $75,000 to market his products to American consumers. China now only accounts for about 3% of its revenue, he said.
That said, “if you really have to consider the risks of a war between the U.S. and China and its potential impact on Taiwan, you might want to place your bets on a third country—neither China nor the U.S.,” Yen added.
Reversing the tide
After China began to open up its economy in the late 1970s, Taiwanese businesses were among the first investors.
By the 2000s, China seemed to be succeeding in its strategy of integrating the two economies, with more than 28% of Taiwan’s exports going to the mainland in 2010, from less than 4% a decade earlier.
Direct flights between the two sides were normalised for the first time in decades. Mainland tourists were allowed to visit Taiwan on their own.
By 2014, the tide was turning as more Taiwanese grew worried about over dependence on China. Student demonstrators protested against a trade pact, later abandoned, that would have deepened ties with China. President Tsai Ing-wen, who took office in 2016, has pushed to diversify Taiwan’s economy.
China has responded by moving trade issues more into the spotlight.
In April, it opened an investigation into Taiwanese trade restrictions that it says limit exports of more than 2,400 items from the mainland to the island in violation of World Trade Organization rules. In October, China’s Ministry of Commerce announced the probe would be extended until Jan. 12—the day before Taiwan’s coming election.
Taiwan’s government has called the probe politically motivated.
Chinese officials have implied that Beijing could suspend preferential tariff rates for some Taiwanese goods in China under a 2010 deal signed when Kuomintang’s Ma Ying-jeou was president. Beijing has also reacted angrily to Taiwan’s recent trade agreement with the U.S.
For Taiwanese companies, building and operating new factories in places other than China isn’t cheap or easy. Protests have at times disrupted operations at Indian plants operated by Foxconn and Wistron, another Apple supplier. In September, a fire halted production at a Taiwanese facility in Tamil Nadu.
Still, some Taiwanese businesspeople have clearly soured on China.
“The electronics industry has already become a Chinese empire, not a Taiwanese one,” says Leo Chiu, who worked in mainland China in quality control for an electronics manufacturer for 14 years before concluding he couldn’t move up further there and returning to Taiwan in 2019. Many of his old colleagues have left, he said.
“If Xi Jinping steps down, there’s still a chance it could change,” says Chiu. “But I think it’s very hard.”
Consumers are going to gravitate toward applications powered by the buzzy new technology, analyst Michael Wolf predicts
Chris Dixon, a partner who led the charge, says he has a ‘very long-term horizon’
