What Could Possibly Be Worse Than Carbon Credit Markets? Water Credit Markets. And They Could Be On Their Way | naked capitalism

The goal, says Singapore’s president, is to develop “a reliable (sic) carbon credit system with a stapling on of water and biodiversity credits.”

At this year’s annual meeting in Davos, there was a panel discussion on the future of global water management that, perhaps rather surprisingly (or not) given the potential impact on our lives of the ideas discussed, garnered scant attention in the mainstream press.

The discussion’s speakers included Tharman Shanmugaratnam, the president of Singapore who is also a big mover in global finance and business fora, and he shared a rather interesting — and dangerous — idea with his co-panellists. To confront the myriad environmental challenges it faces, what the world needs, he said, is a market for water credits and biodiversity credits based on the current one for carbon credits:

We are dealing with something which science is very clear on, but it must then be reflected in out governance approaches, policies and financing strategies, including one of the very important areas of potential which is developing the market for credits. Just like we have carbon credits, we need to develop the market for water credits and biodiversity credits…

Nature-based solutions are a big thing. They’re an extremely important part of global warning mitigation, climate change mitigation. You can argue about exactly what percentage of mitigation should come down to nature-based solutions but we know that there’s so much good that arises from nature-based solutions.*

That is not just about reducing carbon emissions or capturing more carbon but also about all the other core benefits of nature-based solutions: reduced pollution, reduced heat, improved disease management — a whole set of other benefits. Think of nature-based solutions not just in terms of carbon. Think of nature-based solutions as a way of managing, carbon emissions and preserving biodiversity, because if you think of them together the ripple effect is much larger.

Singapore President Tharman Shanmugaratnam tells the WEF he wants to put a price on everything in nature: “Just like we’ve got carbon credits, WE NEED TO DEVELOP THE MARKET FOR WATER CREDITS & BIODIVERSITY CREDITS” #wef25 https://t.co/wv04rzht3K pic.twitter.com/UuSiDBSuu3

— Tim Hinchliffe (@TimHinchliffe) January 21, 2025

“Nature-based solutions” is a relatively newly coined (pun intended) term. In 2023, we cross-posted an interview of Devlin Kuyek, a researcher in the global program at the NGO GRAIN, by Lynn Paramore about the real meanings behind much of the jargon spouted by corporate environmentalists and conservation NGOs, including “nature-based solutions”:

[T]his is a somewhat new word. It comes from the big conservation NGOs. But it is being increasingly used by the fossil fuel industry and by Big Food and Ag as a way to describe carbon offsets that come from forests and land. It’s not just for the climate crisis but it can also be for biodiversity loss and those things.

Again, it’s just a way for them to say: Okay, let’s look at how we can use nature to resolve the quandary that we’re in, in which our profit model is to blame for the climate crisis. So how can we get around that? Well, let’s look to these remaining forests. Let’s look to the farmlands and see how that they can provide an offset for us so we can keep on, we can keep on polluting.

It is vaguely reminiscent of the “indulgences” that rich Catholics paid to the Church during the Middle Ages in order to wipe their sins clean, which were initially used to support charities for the public good but fell into misuse and abuse, with one key difference: in the case of carbon credits and offsets, the burden of payment falls not solely on the sinner but also on poor, often indigenous communities half a world away from the polluting company.

Our ever-irreverent Rev Kev, responding to a 2022 post, offered a more graphic analogy:

If you are going to cut carbon, you have to do it at its source, not someplace else on the other side of the planet. The way that I would argue it is that it is like taking a massive dump in your desk draw and then going outside to plant a whole bunch of roses in the belief that one action will cancel the other. But we all know how that would work out and I am calling out this whole idea of carbon offsets being in the same category.

Unfettered Financialisation of Nature

The problem with carbon credits is not just that they are essentially a scam, as I will explain later, but rather that they end up imposing restrictive conditions on the populations of the Global South, who are least responsible for today’s climate and environmental crises. Back to the interview:

FRIES: So briefly comment on GRAIN’s position that nature based solutions are rightfully described as nature based dispossessions.

KUYEK: Yes, because they involve such large areas of land. So again, the emissions that we’re talking about are huge. And just again from the food system alone. A third of all global greenhouse gas emissions come from the industrial food system.

So if you think about trying to offset even just a fraction of that it is a huge amount of land and forest that would be required. I gave the example of Nestle of 4 million hectares per year that they would need to be taking over.

Almost all of these projects are happening in the Global South. And it will involve the dispossession of people who lose control of their lands and territories.

Ironically, Singapore provided a perfect example of this a few years ago. As John Bellamy Foster recounts in his article for Monthly Review, “The Defense of Nature: Resisting the Financializaton of the Earth“, in late 2021 the Singapore shell company Hoch Standard signed an agreement with political leaders in the Malaysian state of Sabah on the island of Borneo, without the knowledge of the region’s indigenous communities, essentially granting the company title to the management and marketing of “natural capital/ecosystem services” on two million hectares of a forest ecosystem for one hundred to two hundred years:

Although the full nature of the agreement has not been disclosed, journalistic investigations and a lawsuit filed by Adrian Lasimbang, an Indigenous leader in Malaysian Borneo, have revealed that the Nature Conservation Agreement allowed Hoch Standard—a holding company with two officers and a paid-up capital provided by shareholders of a mere $1,000 U.S. dollars, but backed by undisclosed multibillion dollar private-equity investors—to acquire commercial rights to the natural capital in Sabah’s forest ecosystem. The revenue from the rights to ecosystem services, such as water provisioning, carbon sequestration, sustainable forestry, and biodiversity conservation, over the next century was estimated at some $80 billion, with 30 percent, or $24 billion, to go to Hoch Standard. It was stipulated that the Sabah government could not withdraw from the agreement, while Hoch Standard could sell its rights to the natural capital in the Sabah Forest to other investors without government consent…

The Natural Conservation Agreement between the Sabah government and Hoch Standard was brokered by the Australian consulting firm Tierra Australia, specializing in the financialization of natural capital. Peter Burgess, CEO of Tierra Australia, has defended the exclusion of Indigenous peoples from the agreement on the neocolonial, racist basis that if it were necessary to “sit around every campfire” talking to Indigenous peoples about the “jungles” they happen to live in, nothing at all would be accomplished. According to Burgess, the Indigenous communities—there are thirty-nine Indigenous ethnic groups in the forest reserves in Sabah, making up a population of more than twenty-five thousand—“actually don’t know that their jungles…are going to be conserved for 200 years” by the agreement, which is aimed at “restoring [their] jungles,” providing benefits so as to “uplift” them, “bringing them back into normal society.” Tierra Australia is closely connected to major multinational banks in the capitalist core, such as Credit Suisse and HSBC, along with major Singapore Banks, all of which have been heavily involved in investments in natural capital. It has partnered with Hoch Standard, along with Harvard, the Massachusetts Institute of Technology, and Cornell, in devising natural capital platforms for private investment.²

Scandals and Scams

When the concept of “nature-based solutions” was first floated at the 2022 UN climate conference in Glasgow, Scotland, 257 organisations, networks and movements from 61 countries, almost all from the Global South, roundly rejected the concept, arguing that the “climate damage caused when corporations keep releasing greenhouse gases into the atmosphere cannot be offset through planting trees, protecting forests, restoring soils or tweaking industrial farming practices”:

“Forests, soils, eco-systems and biodiversity must be restored and protected for sure. But to meaningfully address the havoc wreaked by industrial agriculture, globalized industrial food systems and global trade, we need systemic transformation such as agroecology, local sustainable food systems, short supply chains and territorial markets.”

The most common form of nature-based solution, carbon credits and carbon offsets, have been mired in controversy as the market itself has plunged in value. As the Guardian reported in 2024, “two years [after a surge in corporate demand for carbon credits] many carbon markets organisations are clinging on for survival, with several firms losing millions of dollars a year and cutting jobs. Scandals about environmentally worthless credits, an FBI charge against a leading project developer for a $100m fraud, and a lack of clarity about where money from offsets went has caused their market value to plunge by more than half.”

Also in 2024, Deutsche Well exposed a Chinese firm that had run a “billion-euro carbon credit scam”. In 2023, it was revealed that more than 90% of rainforest carbon offsets by biggest certifier are essentially worthless. In 2021, researchers found that credits were being granted for projects that would have happened anyway in a UN-run clean development mechanism. In 2022, Bloomberg reported that many of the world’s biggest companies are making offsetting claims with old renewable energy projects.

The list goes on… Last year, the Australian Institute, a public policy think tank that carries out research on economic, social, and environmental issues, helpfully compiled a list of 23 times carbon offsets were found to be “dodgy”.

They include a study published in Science that found that “many deforestation projects have not significantly reduced deforestation” and that “for projects that did, reductions were substantially lower than claimed”. Another study, published in Nature Communications: Earth & Environment, revealed that Californian forest offsets may have increased emissions. It’s a similar story in the Amazon. As ProPublica reported in 2019, half of the Amazonian rainforests that were issued carbon offsets to prevent deforestation have been cleared.

Despite all of these scandals, Singapore’s President Tharman Shanmugaratnam wants to apply the same model not only on to the world’s water reserves but also biodiversity:

The carbon credits market has an infrastructure, it has an ecosystem. They were integrity issues (NC: apparently they’ve all been solved), there are greenwashing issues. The significant improvement happening now, the ICVM, the Integrity Council for the Voluntary Council Markets*, the SBTI, the Science-Based Targets Initiative, there’s a lot of good work taking place to improve integrity and improve trust in the markets. And I believe this is going to be a very significant source of financing for nature-based solutions.

And here comes the kicker (emphasis my own):

Now, I think it will be very difficult to create a whole ecosystem for water credits, sustainable water credits and biodiversity credits side by side with carbon credits. It can be done in  theory, but it’s going to exhaust the private sector and it’s going to exhaust negotiators. Much better that we work on a reliable carbon credit system with a stapling on of water and biodiversity credits.

It’s still at its infancy. There are biodiversity credits that are currently being stapled on, and it’s being done rather qualitatively because we don’t yet have precise, quantitative ways of assessing biodiversity benefits in a way that can be compared across different projects and different regions and geographies.

But rest assured, the bankers, fund managers and tech companies that are leading this gargantuan effort not only to financialise just about everything in nature but also to tokenise it will find a way. If a full-fledged water credits market does become a reality, it will further intensify the commodification of the world’s most precious resource which has already seen the launch in 2021 of a water trade market on the Chicago Mercantile Exchange with contracts tied to California water prices.

A Man of Influence

The influence of Shanmugaratnam himself spreads far beyond the shores of Singapore, where over the past two decades he has served in multiple overlapping, if not conflicting roles, including as president (2023- ), senior minister (2019-2023), chairman of the Monetary Authority of Singapore, the country’s central bank (2011-2023), deputy prime minister (2011 and 2019) and minister of finance (2007-15). For four years (2011-15) he was not only the chairman of Singapore’s central bank but also its minister of finance.

But it is Shanmugaratnam’s influence at the global level that should be of most interest to us here. For a start, he is a member of the Board of Trustees of the World Economic Forum (WEF), an advisory board that helps shape the strategic directions of the WEF, which in turn, as we’ve reported before, helps to shape the strategic direction of the United Nations.

He also currently chairs the Board of Trustees (BoT) of the Group of Thirty (G30), a shady grouping of 30 largely Western bankers, central bankers, policymakers and academics that rather cheekily adopted the “G”30 label to lend itself, a private sector institution, the veneer of official legitimacy.

Its members include Mark Carney, the former governor of the Bank of England and the Bank of Canada, ex-UN special envoy for climate and finance and one of four candidates running to replace Justin Trudeau as leader of Canada’s Liberal Party; Andrew Bailey, governor of the Bank of England; Agustín Carstens, general manager of the Bank for International Settlements, often dubbed the “central of central banks”; former US Treasury Sec Larry Summers; and Pan Gongsheng, the governor of the People’s Bank of China.

While the group prides itself on being a well-intentioned forum for “deepen(ing) understanding of international economic and financial issues,” gatherings like this, as Yves has noted previously, “exist to promote collusion and influence peddling cooperation and information sharing.”

Shanmugaratnam’s list of appointments does not end there. He also co-chairs the Global Commission on the Economics of Water (GCEW), which puts him in a favourable position to promote his idea of “stapling” water and biodiversity credits onto the current carbon credit system. The Commission was established in 2022 to “redefine the way we value and govern water” and its initial recommendations for global water management policies helped shape the outcomes of the UN Water Conference in March 2023.

Water credit initiatives modelled on carbon credits are already sprouting up in disparate corners of the world. In June last year, India’s biggest bottled water company proposed a framework to establish water credits to make the country’s beverage industry more “accountable” for its water use. From Livemint: