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Looking at Biodiversity COP10 and its Incorporation into Growth Strategy

Takafumi Ikuta
Research Fellow

November 04, 2010 (Thursday)

Looking at Biodiversity COP10 and its Incorporation into Growth Strategy

The international conference on the Convention on Biological Diversity began on October 11 in Nagoya. Beginning with a meeting regarding genetically-modified organisms (The Fifth Meeting of the Conference of Parties to the Cartagena Protocol), the main meetings of The Tenth Ordinary Meeting of the Conference of the Parties (COP10) to the Convention on Biological Diversity will be held from the 18th to the 29th of October. Heading into COP10, there are many related events being held within Japan, and there are many instances of biodiversity and other related topics being raised in the media. The fact that COP10 is being held in Japan has caused a rapid increase in corporations’ consciousness towards biodiversity. In March, 2009, the Japan Business Federation presented its Declaration of Biodiversity, but the number of companies that concurred with this declaration at the end of February, 2010 was a mere 46. Currently, as of October 5, however, that number has risen sharply to 346 companies (including 12 companies registered as one corporate group).

Primarily, biodiversity is comprised of three levels of diversity: a variety of types of nature (ecosystem diversity); a variety of species of organism that inhabit and grow in the environment (species diversity); and differences in genetic matter within the same species (genetic diversity). It is fair to say that our socio-economic activities take advantage of the blessings given us by nature’s biodiversity. However, the rapid dwindling of what can be said to be humanity’s very basis of existence, i.e. biodiversity, is the essence of the problem currently facing us, a problem that must be addressed with all haste.

Put into effect in 1993, the Convention on Biological Diversity has three purposes: (1) conserving biodiversity; (2) sustainable use of biological resources; and (3) fair sharing of benefits arising from said use. Normally, when one hears the word “biodiversity,” one imagines nature preservation movements and the like. However, COP10 is a place where the heads of each country can negotiate “access” and “benefit-sharing” as well; for this reason, as Chair of the conference, Japan’s ability to reconcile countries’ interests will be put to the test.

In the following article, while looking at the points of contention of COP10 and the international currents that will follow in its wake, I will examine strategies for tying Japan’s sustained growth in to addressing problems related to biodiversity.

Conflict of Interest over Resource Development and Benefit-sharing

At COP10, more so than with the problems of protecting rare species and ecosystem conservation, the major countries have their attention trained on problems surrounding international conflicts over resource development and access, and developed countries’ benefit-sharing with and money transfer to developing countries. The Japanese government has put forth the “SATOYAMA Initiative,” which would spread the management and use of villages, farmland, and adjacent woods and grasslands internationally, as a highlight of COP10, but the relative lack of interest is unavoidable. The main points of controversy are: (1) adoption of post-2010 goals (Aichi Target), and (2) formulating an international framework (Nagoya Protocol) related to “Access and Benefit-sharing (ABS) of Genetic Resources.” Previous negotiations have led to little in the way of agreement and it remains quite unclear as to what conclusion, if any, will be reached at COP10.

COP10 was also to serve as the venue at which to confirm the achievement of the goal set in 2002’s COP6, namely to significantly decrease the rate of loss of biodiversity by the year 2010. In May, however, the UN had already released a report revealing that the 2010 goal had not been reached. Taking this in stride, in addition to a mid-long-term goal (2050) and a short-term goal (2020), the participants of COP10 plan to set 20 individual goals in the “Aichi Target.” However, of the participating countries, the developed countries, who want to stave off the loss of biodiversity at an early stage, and the developing countries, who are concerned that strict goals will cause restricted economic growth, represent conflicting schemas. For example, for the 2020 goal, Europe and Japan proposed “stopping the loss of biodiversity by 2020,” but the developing countries responded that in order to achieve a 0% rate of loss of biodiversity, they would need 100 times the current level of financial aid. The developing countries are also rather unenthusiastic about enlarging nature sanctuaries, since doing so will restrict their ability to exploit resources. In particular, China, who is aggressively expanding its exploitation of marine resources, is a bit on edge; in response to the developed countries’ assertion that it should assign 15% of its waters as marine sanctuaries, China contested that the expansion of sanctuaries should be limited to 6%. Ultimately, how much financial aid and technical support the developed countries can provide to the developing countries could spell the difference between success and failure for the Aichi Target.

One of the points of contention of the Nagoya Protocol is how to give legal binding force to Access and Benefit-sharing (ABS), which has had no binding force in the past. ABS is a rule by which a company which makes use of the genetic resources of another country’s flora, fauna or micro-organisms (including chemical compounds extracted from those organisms) must pay a part of the profits they make developing pharmaceutical products, etc. to the country which supplied the resource. Strengthening the bindingness of ABS would certainly lead to an increase in resource procurement costs. In general, because the majority of cases consists of those in which a developed country takes and uses the genetic resources of a developing country, the interests of developing countries (resource providers) and developed countries (resource users) are clearly in conflict; the former want to increase ABS’s scope by including derivatives of genetic resources and use of resources that occurred before the convention was put into effect, while the latter want to limit ABS’s scope as much as possible and reduce the burden placed on themselves. There have been suggestions that the treatment of derivatives of genetic resources should be relegated to the agreement between the provider and user, but there are still points of dispute such as establishing domestic ABS legislation and usage supervision, and it is difficult to predict whether or not a final settlement will be reached.

In this way, problems related to biodiversity are inextricably intertwined with countries’ resource strategies, and fierce political maneuvering centered on benefit-sharing and burden of expense will be carried out at COP10. The history surrounding former colonies and former colonial powers’ resource grabbing is deep-rooted in the background of the destruction of developing countries’ natural resources. There is one opinion that states that instead of agreeing to each item in the Aichi Target and Nagoya Protocol individually, they should both be agreed to as a package deal. The worst-case scenario of nothing being settled and everything being pushed off until COP11 two years from now is entirely possible.

“Biodiversity” Is Not Just a Passing Fad

Regardless of COP10’s results, efforts towards biodiversity conservation are without a doubt growing stronger. “International Biodiversity Year” ends with 2010, but the Japanese government is suggesting that the period from 2011 to 2020 be dedicated as the “Biodiversity Decade,” and, following the debates of COP10, I expect that a resolution to that effect will be passed at the UN General Assembly in December of this year. Whatever the detailed design, the funds that developed countries will need to invest in developing countries’ biodiversity conservation efforts will certainly increase in scale. Over the next five years, the Japanese government plans to contribute \1 billion annually as a fund for biodiversity. The ties between scientific information related to biodiversity, which was relatively slow to appear when compared with climate change problems, and policy formulation are being strengthened as well, as the preparations for establishing the IPBES (Intergovernmental Science and Policy Platform on Biodiversity and Ecosystem Services) continue to move forward. It would be quite absurd to think that interest in biodiversity is nothing more than a temporary fad.

A stronger imperative for biodiversity will also have a great effect on business activities. Businesses’ operating risk factors such as rising countermeasure costs and resource procurement costs may be reflected in their product or service prices. The proposal of a new mechanism for developed countries to provide funding to developing countries by using private funds is planned for COP10, and the burden on businesses may increase more and more in the future. Conversely, we may also expect an increase in business opportunities for those companies which comply with biodiversity conservation practices. According to the report published by the TEEB Project, which acts as head office of the UN Environment Programme (UNEP), in July of this year, what was a $65 billion market according to 2008 data will increase to $280 billion dollars, more than four times that, by 2020.

In the midst of the 193 countries and territories around the world who have ratified the Convention on Biological Diversity, the US stands out as one of the few who have not. Based on the theory that avoiding regulations on genetically modified crops and the increased burden that comes with ABS serves the national interest, they are reluctant to go beyond observer participation. Even so, the US is certainly not apathetic towards problems related to biodiversity. Since the Wetlands Conservation Act of the 1970s, the US has implemented strict mandatory reparations for acts detrimental to the ecosystem against developers. Environmental NPOs and public movements are also vigorously demanding the conservation of endangered species. The country whose quantitative evaluation of ecosystem loss is most advanced and where biodiversity offset business enterprises which use market mechanisms are most widespread is also none other than the US. Even the third parties called “mitigation banks” which act as intermediaries in establishing conservation areas comprise a $2 billion-a-year market. At the Office of Environmental Markets, newly established by the American Department of Agriculture in December, 2008, in order to apply market mechanisms towards countermeasures for CO2 emissions from land use, water quality, biodiversity, and the like, developments in quantification and registration of environmental values and verification methods have been undertaken. The US’s trend towards non-ratification of the Convention speaks to the gravity of biodiversity problems and the advancement of their embedding into business.

Growth Strategy from the Perspective of Biodiversity

If we consider the destruction of nature concomitant to not only the use of organic resources but the development of energy and mineral resources as well, we realize that most cases of developing and using resources are related to biodiversity problems. Japan, which stretches far to the North and South and is girt on all sides by the sea, is considered one of the most biologically diverse countries in the world. Such diversity, however, requires a corresponding level of effort simply to retain it. Furthermore, from the standpoint of Japan, which relies on imports for the majority of its biological resources, such as food and lumber, and mineral resources, making an international contribution to biodiversity conservation is absolutely essential for the purposes of securing resources over the long term. While the promotion of biodiversity conservation will unavoidably increase the burden on citizens, it is paramount that we seriously think of a method of turning it into an opportunity for continuous growth that will strengthen Japan’s international competitive power.

Often called “A Green New Deal” or “Green Economy,” the movement towards setting environmental policy as a main pivot of growth strategy has become globally widespread. This trend can be seen in Japan as well, as the New Growth Strategy released by the government in June states that they aim to create 1.4 million new jobs and a new market worth \50 trillion by 2020. However, 90% of this new market creation will be borne by countermeasures against global warming, with almost no specific mention of biodiversity at all. Moreover, the “2010 National Biodiversity Strategy” formulated in March of this year showed hardly any clear intent to tie biodiversity efforts to the creation of these new markets and jobs.

The loss of biodiversity is an important issue that threatens the very basis of humankind’s continued existence, and when one considers the fact that biodiversity-related policy proposal and business development are advancing internationally, one must recognize the need to incorporate principles of biodiversity into Japan’s growth strategy. In August, 2009, the Ministry of the Environment created the “Guidelines for Private Sector Engagement in Biodiversity,” which describes in detail how companies are being mindful of biodiversity in their dealings. However, these guidelines leave businesses to their own efforts and provide no specific incentives for biodiversity conservation. Before anything else, Japan needs incentives that cultivate and strengthen its businesses from the perspective of biodiversity. One must realize that in the future the need for international biodiversity-related businesses will increase, and, furthermore, that a mechanism for providing funds to developing countries for biodiversity conservation will be established. When this happens, Japan should not be simply a fund provider, but must use this opportunity to seize overseas business opportunities. It is for this reason as well that a strategy for increasing the competitive power of Japanese companies that can contribute to biodiversity conservation is so important.

Cultivating and Strengthening Biodiversity-conscious Businesses and Support for Overseas Expansion

Below, I consider the industry policy necessary to increase Japanese companies’ international competitive strength from the perspective of biodiversity, and specifically the idea of strategies for cultivating and strengthening businesses and for supporting the acquisition of overseas business opportunities. In order to achieve the former, both a benefits policy for companies which conduct their business with attention to biodiversity and a benefits policy for biodiversity-conscious products and services are necessary.

One possible measure which targets business activities would be, for example, a reporting system in which companies are required to record their biodiversity-related activities in a financial report. This would result in companies being unable to obtain shareholders and investors unless they clearly describe the risks to biodiversity due to their activities and their countermeasures against the same. Another possibility would be to make releasing information on actions for biodiversity a prerequisite for participation in public procurement. On top of that, it may also be possible to provide tax incentives for companies which are making efforts to fulfill a given prerequisite. Already, buildings which have a high degree of environmental countermeasures are subject to floor space ratio easing, but it would be possible to clearly write biodiversity efforts into this prerequisite as well. From the point of view of increasing options for business activities through market mechanisms, our agenda must include implementing domestic rules relating to biodiversity offsets, of which there is currently a dearth in Japan.

For product and service benefits, first of all we must add a level of biodiversity-consciousness factor to the prerequisite of green procurement. A subsidy program to defray the increased costs of changes to materials and production methods to make them more biodiversity-conscious also bears consideration.

As a prerequisite for these measures, implementing an evaluation index and a labeling system is necessary. As opposed to global warming countermeasures, which are displayed in terms of CO2 reduction, it would be difficult to evaluate biodiversity based on a single index. More realistically, as with medical examinations and foods’ nutritional value tables, several indices would have to be compiled and displayed together, while the level of detail of the tabulation would have to be adjusted while taking into consideration the balance between the level of information and the user’s ease of understanding.

From the point of view of overseas business opportunities, some areas in which Japanese companies show business potential are, for example, biodiversity-conscious food production technology, forestry, afforestation, nature restoration technology, as well as monitoring and information management. Possible methods of supporting the development of businesses aimed at developing countries include sending out Japanese companies’ business information or setting up matching services. Moreover, in promoting business in the “eco-cities” of up-and-coming countries, which have garnered much attention of late, we must go beyond the “low carbon” and “material cycle” businesses of the past and think of adding a philosophy of biodiversity and increasing the range of service provision. Furthermore, on the international negotiations front, work has already begun on incorporating the evaluation of business’ biodiversity-conscious contributions into the design of systems such as the private-sector financial mechanism, which will undergo specific deliberations heading towards COP11.

Japan will retain its position as Chair, however, until COP11, which is to be held in India in 2012. There is no guarantee that all the debates of COP10 will be wrapped up, and the odds are that Japan will continue in its role of international negotiations coordinator for the next two years. When one considers the fact that dealing with problems related to biodiversity has gone beyond adjusting interests between countries and is in fact an essential issue for all of humanity, one finds that it would be best if an understanding of biodiversity problems permeated throughout all of Japanese society and the Japanese government identified how to balance biodiversity conservation with economic growth. I hope that industries, NPOs, and communities can use COP10 as an opportunity, through trial and error, to set a precedent for lasting social building which will become a new source of Japanese competitive power.