4 Indirect drivers of biodiversity loss and general framework

4.1 Introduction

The loss of biodiversity must be considered from both a global and a national perspective. Pressures on some of the world’s ecosystems are having such serious negative impacts that they are no longer able to deliver the goods and services or maintain the natural processes on which people depend.

At the same time, living conditions for people across the world are improving. According to the UN,1 the world population is projected to rise to 9.6 billion in 2050, while at the same time large population groups will need to be lifted out of poverty. Globally, the number of people in the middle class is projected to rise from about 1.8 billion in 2008 to 4.9 billion by 2030.2 World energy demand is expected to rise by about 50 % up to 2050.3 In themselves, these trends will improve people’s welfare, but they will also intensify pressure on the natural environment at both national and international level, through processes such as land-use change and climate change. The World Economic Forum report Global Risks 2015 identifies climate-related risks and biodiversity loss and ecosystem collapse among the top risks that may have an impact on macroeconomic developments in the years ahead.

The European environment – state and outlook 2015, published by the European Environment Agency,4 lists three characteristics that are common to many of the environmental challenges facing Europe today. Firstly, they directly and indirectly affect human health and well-being, as well as prosperity and standards of living. Secondly, people are responsible for their existence, since these environmental challenges are intrinsically linked to our consumption and resource use patterns. And thirdly, they are closely interwoven, so that the existence of one environmental problem may exacerbate the effects of others. Their evolution also depends on European and global trends, including those related to demographics, economic growth, trade patterns, technological progress and international cooperation. International cooperation is therefore vital if we are to resolve global and European environmental problems.

Implementation of the Strategic Plan for Biodiversity 2011–2020 adopted by the Convention on Biological Diversity is the world community’s most important tool for safeguarding biodiversity. In 2014, a mid-term evaluation of progress so far was published in Global Biodiversity Outlook 4. This report describes some significant progress but finds that a great deal still remains to be done to achieve the plan’s targets.

The complex nature of the environmental challenges facing us means that a wide range of policy instruments and processes of change will be needed to address them. In the short term, tackling biodiversity-related problems will require policy instruments and action that can give results rapidly where the threats are most serious, for example if species or habitats are at risk of extinction or destruction. In addition, it is vital to stimulate processes of social change that address the underlying causes of biodiversity loss and will have long-term effects.

The European environment – state and outlook 2015 and other reports5 indicate that neither environmental policies alone nor economic and technology-driven efficiency gains are likely to be sufficient to achieve the vision set out in the EU’s 7th Environment Action Programme: ‘In 2050, we live well, within the planet’s ecological limits.’ Achieving this will require fundamental changes in production and consumption systems, which are the main drivers of the growing pressure on the environment. And this in turn will necessitate profound changes in dominant institutions, practices, technologies, policies, lifestyles and thinking.

Unless we devise more resource-efficient production and consumption systems, in other words systems that reduce greenhouse gas emissions, material use and environmental pressures, the cumulative environmental effects will become more and more serious, and will hinder growth and improvements in welfare. A transition to a greener society, often called the ‘green shift’, denotes a transformation process to create a society where production and consumption have far less negative environmental and climate impact than today. This is both part of sustainable development and an essential basis for it, and ecological sustainability is an essential concern here.

The Aichi targets are global in nature but require action at national level. Norway’s contributions in this field will focus primarily on national action, but we are part of a globalised economy and must take responsibility for the environmental pressure Norwegian activities cause outside the country’s borders through trade and investment. Aichi targets 1, 2, 3 and 4 (under strategic goal A) are important in this context. They include raising people’s awareness of the value of biodiversity, sustainable production and consumption, and developing and reporting on systems to ensure that the whole range of biodiversity values is incorporated into planning and national accounting systems. According to the targets, ‘by 2020, at the latest, governments, business and stakeholders at all levels have taken steps to achieve or have implemented plans for sustainable production and consumption and have kept the impacts of use of natural resources well within safe ecological limits.’ This means that authorities, the business sector and other stakeholders in Norway too must take steps to ensure that production and consumption are sustainable and within safe ecological limits – both within Norway and abroad.

It is an important principle that states have a responsibility for the environmental impacts their activities have in other countries. This follows from international law, and is specifically mentioned in the Convention on Biological Diversity. Article 3 establishes that states have ‘the sovereign right to exploit their own resources pursuant to their own environmental policies’, but also that they have the ‘responsibility to ensure that activities within their jurisdiction or control do not cause damage to the environment of other States or of areas beyond the limits of national jurisdiction.’ Moreover, the Convention states that, subject to the rights of other states, its provisions apply to processes and activities carried out under the jurisdiction or control of a party to the Convention, regardless of where their effects occur (Article 4(b)).

Businesses can help to reduce environmental pressure by improving their environmental performance and making efficient use of resources. Companies can develop processes and technologies to make more efficient use of scarce resources and reduce greenhouse gas emissions. Ensuring that suppliers and the entire value chain meet high environmental standards is an important element of corporate environmental responsibility. This applies to all companies, regardless of their ownership structure.6

4.2 The value of ecosystem goods and services

The value of nature, and thus the cost to society of environmental degradation, is often not readily apparent. Countries’ national accounts and calculations of the national wealth do not include environmental resources. The prices of goods and services will not reflect the environmental costs associated with their production and consumption unless policy instruments are used to change this. The true value of nature thus tends to be underestimated in private and public decision-making processes, particularly if it takes a long time before any damage becomes apparent or if the damage is caused in a distant part of the world.

International initiatives have therefore been taken to develop methods for demonstrating and raising awareness of the value of ecosystem services (both those with a market price and those without) in various types of decision-making processes and documents. The Government will continue Norway’s active participation in this work, for example in the UN system (UNEP and the UN Statistics Division), the World Bank, the OECD, the EU and the Nordic Council of Ministers.

Even though many people in Norway are knowledgeable about biodiversity and its value, knowledge about nature, the state of ecosystems and pressures on them nationally and internationally can still be improved among both decision makers and the general public. Knowledge needs and related action are discussed in Chapter 8.

The Government will:

• Promote the development of methods, indicators and models to demonstrate the values associated with biodiversity and ecosystem services from a macroeconomic perspective.

• Raise the awareness of the general public, decision makers and the business sector about the possible implications for society of changes in ecosystems at national and global level.

• Contribute to international efforts under the UN Statistics Division to continue to develop and test the system of environmental-economic accounting, and consider whether to incorporate this into Norway’s reporting and accounting systems.

• Develop better methods for integrating the whole range of values associated with biodiversity and ecosystem services (both those with a market value and those without) into economic analyses and decision-making processes at different levels.

• Continue international cooperation to highlight and value ecosystem services; this includes continuing the development of qualitative, quantitative and monetary approaches to valuation.

4.3 The EEA Agreement, trade and investment

4.3.1 The EEA Agreement and broader cooperation with the EU on biodiversity

The EU plays a leading role as regards environmental policy, and much of the EU’s environmental legislation is incorporated into Norwegian law through the Agreement on the European Economic Area (EEA Agreement). Legislation on nature management, including the Birds and Habitats Directives, is not part of the EEA Agreement. However, some EU legislation with important implications for biodiversity has been incorporated into the Agreement, including the Water Framework Directive and the Directive on the deliberate release into the environment of genetically modified organisms. The EEA Agreement also includes a range of legal acts relating to the climate and environment, and these play a part in reducing pressure on the environment. They include legislation on waste, chemicals and air pollution. Norway’s participation in EU processes, its cooperation with the EU and its influence on EU environmental policy through the EEA Agreement are thus important as regards biodiversity too. A large body of harmonised food law (including food safety, animal health and intermediate inputs) has also been established through the EEA Agreement. Norway’s animal health legislation is fully harmonised with EU law. It includes legislation on disease control and on trade in live animals and animal products within the EEA and with non-EEA countries.

Norway and the EU also cooperate closely in global and regional biodiversity initiatives, for example through the system of EEA and Norway Grants. This includes projects relating to implementation of the Convention on Biological Diversity and to mapping and assessing the economic value of ecosystem services.

Improving resource efficiency is one element of the EU’s efforts to develop a circular economy. Greater resource efficiency is also vital to the success of efforts to reduce pressure on species and ecosystems to a sustainable level. The aim of a circular economy is to maintain the value of materials and energy along the value chain, thus minimising waste and resource use. By avoiding a loss of value along material flows, it is possible to create sustainable economic opportunities and competitive advantages.

The European Commission has announced that an EU action plan for the circular economy will be presented towards the end of 2015. The EU has indicated that specific, binding proposals for revision of the waste legislation will be put forward. These will include requirements for more recycling and re-use to improve resource efficiency and reduce environmental pressure and at the same time promote economic growth and employment. The proposals will also be designed to contribute to the achievement of the EU’s climate targets and to reduce its dependence on imports of raw materials from outside the Union.

In summer 2015, Norway submitted its contribution to the consultation on the Commission’s action plan for the circular economy, and among other things highlighted consumer and product policy, waste and chemicals policy and green public procurement.

Norway also pointed out that developing a non-toxic circular economy requires coherence between the legislation on chemicals, waste and products. We consider it important to ensure satisfactory consumer rights and legal guarantees, particularly as regards the durability of products. It is important to develop good indicators and methods that cover the entire life cycle of products in order to reduce their environmental and carbon footprint. Effective national waste management is a key instrument for preventing marine litter. Norway also gives high priority to action to reduce food waste, including cooperation with the food industry.

Strategic use of public procurement to drive progress towards overall policy goals was an important reason for developing the new EU procurement legislation. With the new legislation, member states have a better instrument for achieving the goals of the Europe 2020 strategy for ‘smart, sustainable and inclusive growth’. The new legislation encourages wider use of green procurement than before. It is a new development that the EU is promoting strategic use of procurement and clearly defining procurement as an instrument for achieving overall social goals. Norway plans to implement the new legislation in Norwegian law during the first six months of 2016.

One of the goals of the EU’s 7th Environment Action Programme is to protect nature and strengthen ecological resilience. The programme is a common strategy that provides an overall framework for EU policy and priorities. It sets out common objectives that are to underpin the development of new policy and the implementation of existing legislation. The 7^th Environment Action Programme was adopted by the EU in 2014 and is being incorporated into Protocol 31 of the EEA Agreement.

The first thematic priority of the programme deals with ‘natural capital’, which includes vital services such as pollination of plants, natural protection against flooding, and climate regulation.

Through the EEA and Norway Grants, Norway is contributing to the reduction of social and economic disparities in the EEA. Under these schemes, grants can be awarded to funds and programmes that have clear goals and use results-based management. In the period 2009–2014, Norway allocated a total of EUR 550 million to the programme areas environmental protection and management, climate change and renewable energy, and green industry innovation. Funding has for example been granted for projects to step up work on climate change mitigation and adaptation, improve the management of marine and inland waters, biodiversity and ecosystems, safeguard the cultural heritage, strengthen environmental monitoring and improve the management of chemicals and hazardous waste. About EUR 65 million was allocated to projects on biodiversity management and ecosystem services. Adaptation to climate change is also a key funding area. Climate, energy and environment will also be among the top priorities in the next funding period, which runs from 2014 to 2021.

The European Environment Agency describes its mission as ‘to support sustainable development and to help achieve significant and measurable improvement in Europe’s environment through the provision of timely, targeted, relevant and reliable information to policymaking agents and the public.’ Norway and 32 other European countries are members of the Agency, which is an important information source for those involved in developing, adopting, implementing and evaluating environmental policy.

The Government will:

• Through continued cooperation with the EU and the European Environment Agency, supply data and report on indicators in such a way that the information on status and trends for Norwegian biodiversity in relevant European compilations of environmental information is comparable to that available from other sources.

• Contribute to the EU’s work on development of the circular economy where relevant, particularly as regards waste, chemicals and product policy.

4.3.2 Trade and environment

Introduction

In accordance with its political platform, the Norwegian Government is promoting freer trade and pursuing an active trade policy that emphasises Norway’s national interests. Trade agreements provide an opportunity to shape the course of globalisation through international cooperation. The Government’s objective is to maintain and develop a trade framework that maximises Norwegian value creation while at the same time contributing to global growth and sustainable development.

In recent decades, Norway’s ties to other countries have become even closer, through trade, labour migration and capital flows. Production and consumption are increasingly taking place in a global market with global supply chains. The international trade in goods and services makes it possible to specialise and thus contribute to better use of resources and greater productivity.

Norway has an open economy and a considerable volume of trade with other countries. About 30 % of domestic demand is met through imports. Norwegian production and consumption therefore have an influence on the exploitation of nature in other parts of the world.

Source Photo: Svein Magne Fredriksen

The multilateral trading system includes various provisions allowing countries to take steps to implement a sound environmental and climate policy. For example, it is possible to introduce subsidies, prohibitions, restrictions and labelling systems, provided that such measures are in accordance with trade rules. Measures may be introduced at national, regional or international level.

Sustainable fisheries

Norway is one of the countries that has been advocating the development of effective rules under the World Trade Organization (WTO) to prohibit fisheries subsidies that contribute to overfishing, excess capacity and illegal, unreported and unregulated fishing (IUU fishing). Norway also played an active role in work under the Food and Agriculture Organization of the UN (FAO) resulting in the conclusion of the global agreement on port state measures. The EU has adopted a Regulation to prevent, deter and eliminate illegal, unreported and unregulated fishing, and Norway has entered into a bilateral agreement with the EU to implement the same rules. Fisheries management is not part of the EEA Agreement, but Norway has close, broad cooperation with the EU on the management of pelagic fish stocks and shared stocks in the North Sea. Considerable progress has been made in this field in recent years.

Trade in threatened species

The Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) is intended to ensure that trade in species to which it applies is sustainable. Trade in these species is organised through a licensing system, with licences issued by national authorities. CITES species are placed on one of three lists, depending on how seriously threatened they are by international trade. In all, about 35 000 species are currently listed, about 1000 of them in Appendix I, which puts the strictest restrictions on trade.

The Convention was implemented in Norwegian law by the Regulations of 15 November 2002 No. 1276. New regulations are being drawn up which in some respects will go beyond the minimum requirements of the convention. The regulations will also implement decisions made by the Conference of the Parties after the adoption of the current regulations, and will widen their scope to include keeping or possession and trade within Norway.

Globalisation and trade

By trading with and investing in other countries, Norway is contributing to a global division of labour in the production of goods and services. Norwegian companies are increasingly turning towards and becoming established in new growth markets, which may be in countries where governance is weak and the environmental legislation is poorly developed. This trend is bringing about economic growth and improvements in welfare, but is also causing growth in production, consumption and transport. The latter may increase pressure on the environment, for example through heavier use of scarce natural resources, releases of greenhouse gases and pollutants and the spread of alien species. However, international trade and investment can also promote more climate friendly and environmentally sound development, for instance by deploying more effective and greener technology and encouraging the location of different forms of production in areas where they will put least pressure on the environment. In principle, there is thus no contradiction between an open world trading system and a sound climate and environmental policy.

Like EU treaties and law, the EEA Agreement includes a wide range of provisions designed to promote conservation and sustainable use of nature. Trade agreements are increasingly incorporating environmental provisions, for example in the form of separate chapters on trade and sustainable development. Norway and the European Free Trade Association (EFTA) have decided that a trade and sustainable development chapter should be part of the standard model for free trade agreements. Norway is also playing an active part in the negotiations on the Environmental Goods Agreement, which is intended to promote trade in environmental goods and if possible also related services.

A white paper on globalisation and trade published in 2015 (Meld. St. 29 (2014–2015)) discusses the interactions between trade policy and climate and environment. It is crucial that both the international trade regime and Norway’s free trade agreements promote green growth and take climate change and environmental considerations into account. The international trade regime can play a role in facilitating more environmentally sound and climate-friendly development. It can also advance the ‘green shift’ by promoting increased trade in environmental goods and services and by reducing unnecessary barriers to such trade. Trade commitments must be designed to take into account countries’ need to implement effective environmental and climate policies, and must facilitate green growth. Policy instruments that can be used in this connection include necessary climate and environmental standards, environmental taxes on goods and services, information and labelling requirements, environmental subsidies and facilitation of increased trade in climate and environmentally friendly goods and services. At the same time, it is important that countries are not permitted to unilaterally implement discriminatory or protectionist measures that unnecessarily obstruct trade.

The Government will:

• Continue to include a separate chapter on trade and sustainable development in the free trade agreements Norway enters into, as a contribution to achieving international biodiversity targets.

• Support efforts to combat environmental crime, including fisheries-related crime, among other things through relevant international processes and programmes.

4.3.3 Investments and green markets

Introduction

Norway has substantial financial investments abroad, held both by the Government and by private investors. Most of these investments are in Europe and North America (about 80 % of the Government Pension Fund Global and 70 % of foreign direct investments).

There is no clear definition of the term ‘green investments’. According to the OECD, green growth means fostering economic growth and development while at the same time ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies.7 Green investments can therefore be understood as investments that promote green growth, including investments that are made taking into consideration environmental issues in the broad sense (including greenhouse gas emissions, air pollution, chemicals, biodiversity and waste management).

Actors in the financial sector, both in Norway and abroad, have shown growing interest in green and sustainable investments in recent years. At the UN Climate Summit in New York in September 2014, a new coalition of institutional investors was launched. Their goal is to substantially reduce the carbon footprint of their portfolios by December 2015. In the past year, several pension funds have been reducing their allocation to coal and petroleum and shifting their assets towards green investments. Several of the funds have highlighted the fact that manging environmental risk and making use of opportunities for green investment are vital considerations in their investment decisions.8

Private-sector investments

Environmental risk in the financial sector includes the risk that environmental problems themselves, or restructuring of environmental policy involving stricter regulation or substantially higher carbon prices, will influence economic developments and financial variables in the future.

Actors in the financial sector have been paying growing attention to climate and environmental issues in recent years. For example, institutional investors are to a greater degree assessing and disclosing the environmental risk associated with their portfolios. One system they can use is developed by CDP (formerly the Carbon Disclosure Project), an independent, not-for-profit organisation that collects and publishes environmental information on companies, including their greenhouse gas emissions, contribution to deforestation and water consumption. Identifying the environmental pressure caused by different parts of the supply chain can help companies to manage environmental risk better.

The white paper Diverse and value-creating ownership (Meld. St. 27 (2013–2014)) describes what the Norwegian Government expects in terms of responsible corporate governance, including environmental responsibility, from companies in which the state has an ownership interest. All Norwegian companies, regardless of whether they are privately or publicly owned and of whether they operate in Norway or abroad, are expected to apply good corporate governance practices. The white paper emphasises that the Government expects companies in which the state has an ownership interest to work systematically on corporate governance and seek to be at the forefront in their respective fields. The corporate environmental responsibility of the business sector involves ensuring that environmental and resource use considerations, including the pressure a company puts on the environment, are integrated into financial decision making. In addition to complying with national and international environmental standards, companies should take a proactive approach in order to reduce the adverse environmental impacts of their operations beyond what is stipulated in such standards.

According to the white paper on private sector development in Norwegian development cooperation (Meld. St. 35 (2014–2015)), the Government wishes to provide strong support to Norwegian companies abroad, and is stepping up the efforts to assist companies in new, demanding markets. As part of this support, guidance, dialogue and practical cooperation on challenges posed by local framework conditions and governance issues are being strengthened.

A number of cooperation forums have been established by and for the private sector with the aim of building knowledge and developing systems to address challenges related to biodiversity. Within the EU, this work is being organised under the European Business and Biodiversity Platform. The Natural Capital Coalition (formerly the TEEB for Business Coalition) is a global cooperation forum where the business sector can cooperate to safeguard natural capital, for example by raising awareness of the impacts on business of loss of natural capital. The coalition is seeking to bring about a shift in corporate behaviour and thus avoid unsustainable use of natural resources. The coalition is developing a Natural Capital Protocol and systems for natural capital disclosure and risk assessments.

The Government Pension Fund Global

The overriding goal for investments by the Government Pension Fund Global is to obtain the highest possible returns at moderate risk. The Fund’s position as a long-term investor with a broad global portfolio of equities, bonds and real estate means that climate change and climate policy measures may have implications for portfolio return in future. Climate change has therefore been a key area in the management of the Fund for a long time. Climate change can also be included as one element of a broader risk assessment of business models and the long-term sustainability of companies in which the Fund has invested.

About 6 % of the value of the Fund’s benchmark index for equity investments, which at the end of the first six months of 2015 corresponded to about NOK 260 billion, is in companies that obtain more than 20 % of their return from environment-related activities, including renewable energy. In principle, the Fund’s equity investments in environment-related companies will increase if their share of the world’s equity market rises.

In 2009, it was decided to establish environment-related mandates for the Fund. They have the same risk and return requirements as the Fund’s other investments. In the white paper The Management of the Government Pension Fund in 2014 (Meld. St. 21 (2014–2015)), the Government proposed that the upper limit for such investments should be raised to NOK 30–60 billion. The Storting (Norwegian parliament) endorsed this when it considered the white paper.

In the same white paper, the Government proposed a new conduct-based criterion for observation and exclusion from the Fund’s portfolio. This is an ethical criterion, and applies if there is an unacceptable risk that companies contribute to or are responsible for ‘acts or omissions that on an aggregate company level lead to unacceptable greenhouse gas emissions’. This proposal was also endorsed by the Storting when it considered the white paper. In the 2016 Norwegian budget, the Government followed up a recommendation to the Storting (Innst. 290 S (2014–2015)) on the white paper, in which the standing committee asked the Government to propose a new product-based criterion for observation and exclusion from the Fund’s portfolio for mining companies and power producers that base a substantial proportion of their operations on thermal coal (coal that is used for energy production). In the 2016 budget, this criterion was worded as follows: ‘Observation or exclusion may be decided for mining companies and power producers which themselves or through entities they control derive 30 % or more of their income from thermal coal or base 30 % or more of their operations on thermal coal’.

A white paper giving an account of the management of the Government Pension Fund Global is published each year during the spring parliamentary session.

Green bonds

The green bond concept was developed in 2008 by the World Bank and the Swedish bank SEB. These bonds are intended specifically to raise capital to fund environmentally sound investments. The market for green bonds is growing rapidly9, but is still a very small proportion of the total world market for bonds. In 2014, USD 36.6 billion was issued in green bonds, three times as much as in 2013.

Several different analysts have pointed out that it may be an attractive proposition for institutional investors to make long-term investments in infrastructure, including in environment-related sectors.10 Green bonds are a type of financial instrument that to a large extent targets institutional investors, and can therefore be an important way of expanding environmentally sound investments. However, the environmental profile of the green bonds that have been issued is disputed, since there is as yet no specific standard or clear definition of what is meant by ‘green bonds’. It is up to the issuer to label bonds as ‘green’ and to provide information on how funds are used. Several independent bodies currently provide evaluations of green bonds, and Norwegian bodies include CICERO and DNV GL. In addition, the Green Bond Principles provide guidelines clarifying which bonds can be called ‘green bonds’. It has been questioned whether issuing green bonds results in more investment in environmentally sound projects than would have been the case if they were not labelled as ‘green’. In January 2015, the Oslo Stock Exchange published separate lists of green bonds, and was the first stock exchange in the world to do so.

Green equity indices

A number of equity indices focus on climate- and environment-related sectors, but because ‘green’ is not a clearly defined term, they use a number of different approaches. However, one common feature has been that the composition of these indices has changed considerably over time, which is partly a reflection of the dynamic nature of this market segment and the high level of risk.

The Government will:

• Encourage and provide opportunities for the Norwegian business sector to take part in European and international cooperation to safeguard biodiversity.

4.4 Development cooperation

Aichi target 2 is for biodiversity values to be integrated into development and poverty reduction strategies and planning processes. It also applies to Norwegian development cooperation.

Norwegian aid contributes to the conservation of biodiversity in a number of ways, both through specific programmes and through the integration of biodiversity considerations into development cooperation as a whole. This topic is discussed in the annual budget proposal from the Ministry of Foreign Affairs. The Government’s objective is for Norway to play a leading role in role in integrating environmental issues into development cooperation and to play a part in the green shift internationally.

Norway is a key supporter of programmes that involve systematic competence building in developing countries in the fields of green economy, knowledge-based nature management and tools for green industrial development.

Norway’s International Climate and Forest Initiative is seeking to reduce greenhouse gas emissions from deforestation and forest degradation in developing countries. Important rainforest countries are therefore key partners, and Brazil, Guyana and Indonesia have received most funding so far. The main approach used by the Climate and Forest Initiative is to pay for emission reductions in countries that succeed in reducing deforestation and forest degradation. Given the huge value of biodiversity in forests in developing countries, and particularly rainforests, the Climate and Forest Initiative is also considered to be a very important instrument for safeguarding biodiversity.

Source Photo: Thomas Martens, Rainforest Foundation Norway