Can Europe exploit the private sector to protect its environment?

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July 17, 2017 |The French municipalities of Contrexéville and Vittel are known for their healing waters and spas, and today they enjoy one of the purest waters in Europe, but this was not always the case. Until 1992, farms and light industry dumped pesticides, manure and crude oil into rivers and streams for decades.

But then communities embarked on a massive environmental overhaul: Farmers began to get rid of their cows and wean themselves off pesticides by alternating their crops in a way that left no chance for insects. Homeowners and businesses began to dig their oil reservoirs and replace them with natural gas installations. Today, more than 90 percent of the land in the two communes is in some form of environmental protection.

But this overhaul was not led by environmental regulators; it was run by a private company with a very clear motivation.

The company was the Swiss food giant Nestlé, and its motivation was the fact that its lucrative mineral waters Vittel, Contrex and Hépar were profitable only because they were certified “natural”. To maintain this certification, they had to clean the rivers that feed the aquifer which in turn feeds the springs from which the water gushes.

The stakes were high enough – and the incentive strong enough – for Nestlé to create a separate consultancy called Agrivair and spend more than € 24.5 million throughout the 1990s “to design a system to either compensate farmers for their change of practice, ie to acquire land and rent it free of charge under conditions aimed at protecting groundwater ”, according to a new report titled “State of European Markets 2017: Watershed Investments”.

The report is one of three market perspectives that the Forest Trends Ecosystem Marketplace initiative created to support a cluster of new online university courses launched by the green business accelerator ECOSTAR to help organic farmers, watershed managers and other “green entrepreneurs” better understand the business elements of their respective missions. The Ecosystem Services online course will run from October to December and the application deadline is September 30. You can find out more about ecostarhub.com/e-learning-course.

The Agrivair project still pays farmers an average of € 200 per hectare to keep things green, and this is one of more than a dozen ‘payments for ecosystem services’ (PES) programs highlighted in the three reports. Lead author Genevieve Bennett, senior partner at Ecosystem Marketplace, says the project illustrates the ability of businesses to deliver resources when the right incentives are given. She adds, however, that private and public interests rarely align so well and that such projects work best in a well-structured regulatory environment.

“You don’t really want a private company to take the lead in decisions about the management of water resources in your basin,” she says in a 45-minute long interview that will take place in episode 19 of the Bionic Planet Podcast, which is expected to be released on Monday, July 17. “It’s a matter of public interest… but where the private sector has a place at the table is the contribution of resources: if you are a beverage company and you care about clean water and that you want to contribute funds to help pay this is… it’s a positive thing.

The three reports

All three reports aim to identify the mechanisms that already exist, to track the money that flows through them, and to help people better understand how they work. They draw on interviews with dozens of policymakers, entrepreneurs and academics across Europe, and they explore existing funding mechanisms to reduce greenhouse gas, conserving biodiversity, and management the water. Although they are designed to support the program developed by ECOSTAR, they are also designed to be accessible to a wider audience, and we will collect the results for future articles on the Ecosystem Marketplace.

Each report opens with an introduction that sets out the challenges in the respective environmental areas, then moves on to a simple introduction to the mechanisms that can be used to bring finance to these challenges, followed by an overview of specific guidelines from the European Union which govern the mechanisms. in Europe, then detailed results on how individual countries use these mechanisms, and finally a deep dive into specific case studies. Whenever possible, they also track funding streams – and that gives some interesting results.

The water report, for example, opens with a clear overview of three basic mechanisms for leveraging private finance to support water management (see “Figure 1: Mechanisms tracked in this report”, below). Next, it examines drivers such as the European Union’s Water Framework Directive (WFD) and individual state laws and programs, and finally, it examines individual projects like Nestlé’s.

Where is the private sector funding?

Although built on the same principles as similar programs in the United States, European initiatives do not yet draw significant amounts of funding from polluters and users – perhaps because most European projects are ‘one-off’ initiatives. run quietly, while the US “restoration economy” relies on third-party companies that restore degraded land and compete in an open and regulated market. The Water Report, for example, tracks $ 5.7 billion in water conservation programs, but only $ 13.4 million came from users. This means that 99% of the money still came from the coffers of the general public, and not from the companies or individuals who benefit from drinking water.

“I think in Europe we’re going to start to see more and more water users themselves trying to launch these programs,” Bennett says. “We’ve seen a little glimpse of this in the UK, where… there has been a huge growth in interest from water companies in managing their watersheds because the costs of solving the problems they are facing. faced on-site simply get out of hand.

This insight came in part because WWF-UK and the Royal Society for the Protection of Birds sued the UK Department for Environment, Food and Rural Affairs (DEFRA) for failure to comply with the directive- frame on the water, according to the 2014 Ecosystem Marketplace Global Overview investments in watersheds. In response, the report says, DEFRA allocated $ 2 million to fund watershed partnerships, and 17 of the first 20 partnerships ended up developing payments for watershed service programs to promote sustainable management of watershed. land.

“It will be interesting to see if this starts to happen on a large scale in Europe as the Water Framework Directive continues to unfold,” she said. “It’s still in the early years, so it’s a bit early to tell, but this basin approach is really interesting and exciting.”

Steve Zwick was the editor of Ecosystem Marketplace and produced the Bionic Planet podcast. Prior to joining Ecosystem Marketplace, he covered European affairs for Time Magazine and Fortune Magazine and produced the award-winning Money Talks program on Deutsche Welle Radio in Bonn, Germany.


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