Hi, I'm Helen Avery with the Green Finance Institute, and
you're listening to Financing Nature.
In this episode, I'm joined by Tim Mayle, founder and Executive
Director of the Environmental Policy Innovation Centre in the
US, to talk about US mitigation, banking and the broader role of
regulatory markets. What we really need is
replication and scale. And so we want people to do
things in very similar ways over and over and over again.
And that's a space that the private sector I think can
really thrive. So that was kind of my
connection to it, was realising that this is just going to be a
faster solution. It's not replacing, right?
It's not replacing government funding or government action or
all the work that Ng OS and scientists, academic scientists
still need to do to figure things out.
But when it comes to something we kind of figured out going
from 1000 hectares to 10,000 hectares to 1,000,000 hectares,
that's to me where private finance and private activity are
really necessary. Many, many Seans.
Hello, hello. So I hope you are very well and
having a good day wherever you are.
Today I am going to be joined by one of my favourite people, Tim
Male, and if you don't know him, you will absolutely want to by
the end of this episode I'm sure.
Tim founded Environmental Policy Innovation Centre, also known as
EPIC, and I'll leave it to him to share his incredible
background and what Epic does. But today we are really going to
get into the biggest regulatory market in the world and that is
the US, where billions of dollars are being moved into
nature restoration from the private sector.
So it's really exciting and we're going to be talking about
why we need these much overlooked models and markets to
get capital flowing. So without any further delay,
let's invite Tim on. Tim, thank you so much for
joining us today. It's such a pleasure to have you
with us. Firstly, just how are you?
I'm a great summertime. Yeah, I know.
It's nice, isn't it? Although it feels, actually
feels a bit like we're heading into fall here.
But I'm not complaining. So I'm excited because we're
going to be talking really about some of the importance of
regulated markets, which I think can get a bit overlooked at the
moment as we're thinking about sort of voluntary markets and
new fancy biodiversity credits and things like that.
And I'm sure we'll go into biodiversity credits as well.
But before we do get going, I think it would be really great
for people to hear more about your own background.
And then we'll also talk about Epic and the work you do there.
So I'd love to hear a bit of your history, you know, why you
know, how did you get into environmental policy in the 1st
place? And certainly sort of this, this
whole sector of nature finance and markets.
Yeah. Thanks, Helen.
Great to be here. You know, honestly, as a as a
kid, I grew up going to this island that used to be a
military base in World War 2, but was now being taken over by
birds. And so I spent my whole
childhood, like basically farming endangered birds,
studying them, you know, bringing them, finding their
nests and just seeing the population go from 1000 to 2000
to 5000, you know, over the kind of 15 years that I went there
and then ended up going to university and focusing on
getting a undergrad degree and then a PhD in in ecology.
But I always wanted to work on environmental policy.
So the goal was to get trained in science, but then bring that
perspective to a job in Washington.
And I feel like the thinking that being a scientist brings
for me is that I care less about the the weird exceptions that
happen under a law, and I care more about what happens most of
the time. So lawyers are always worried
about like, well, what if someone does ask?
And what I care about is if 80% of people do, why I'm good, if
that's a good policy. So that's that's the way I think
I've been useful sometimes. Yeah.
And so then tell us about Epic and how that came about.
Yeah, I don't know if you've ever done like those personality
tests to figure out what kind of personality where I work.
And, and, and, and one of them I did, you know, shut up that I
was deeply impatient. And I was like the only person
in my team at the organisation I worked in who was who was
impatient in that way. And I was like, I want this to
be a strength, not a weakness. So, so I was working at the in
the federal government, at the White House, what's called the
Council on Environmental Quality till 2017, the beginning of
2017. And I was, you know, leaving and
looking for a new job, had to leave political transition and
all here. And I was like, I want to find
some place to work where I could be impatient.
And so I found it epic with a mission of faster progress,
faster environment and public health progress.
So I give an excuse to ask for, you know, skipping steps, taking
risks, just moving faster. And it's funny, you don't often
think of fast-paced taking risks alongside policy making.
So I shall get into that as well.
So I'm really intrigued to hear about how you manage that.
So sort of tell us a bit more about the work of Epic and how
you are sort of working on particularly private sector
investment or private capital when it comes to supporting
nature based solutions and sort of high integrity biodiversity
outcomes. Unfortunately, that on trade
point in this was was really incentives.
So how do we create incentives for private land owners and
private actors to do more for conservation?
And often the barriers are liabilities, legal liabilities
and things that keep people from doing the right thing.
Like I would I would put endangered species back on my
property. But then, you know, I'm worried
about something happening like somebody's suing me or so it's
often about taking away, you know, risks.
But then it became clear that there was kind of more and more
opportunity to to find markets that the private sector would
actually invest them. And what I realised through the
kind of jobs I had before coming here was that the chance to
really deliver at scale and with greater and greater speed over
time and there was greater and greater efficiency over time was
really something that private sector was going to be much
better at than government or nonprofits like mine, right?
Like nonprofits, because of the funders were all, you know, net
dependent on they always want something new.
So we always have to do things in different ways to make them
happen. And at the private sector, you
can produce the same, you know, Big Mac a billion times and
that's exactly what people want. So for nature, after we kind of
get out some of the kinks, figure things out from a science
perspective, what we really need is replication and scale.
And so we want people to do things in very similar ways over
and over and over again. And that's a space that the
private sector I think can really attract.
So that was kind of my connection to it, was realising
that this is just going to be a faster solution.
It's not replacing, right? It's not replacing government
funding or government action or all the work that NGOs and
scientists, academic scientists still need to do to figure
things out. But when it comes to something
we've kind of figured out going from 1000 hectares to 10,000
hectares to 1,000,000 hectares, that's to me where where private
finance and private activity can really are really necessary.
Many, many shams. And I mean, of all the countries
that have managed to work with this ability to get private
sector investment going for an H restoration, it is the States,
isn't it? I mean, I know you and I have
talked before and it seems ridiculous when I talk about,
oh, and all the things we're doing in here in the UK and
you're like, oh, and there's a billion dollars moving in the
USI mean, it just, it's just like apples and oranges, really.
So yeah, tell us, tell us about that work.
Yeah, it's more like 4 to 5 billion a year just in, just in
our what are called mitigation banking markets.
So, so like their Habitat banking in England, there's
about four to $5 billion of of transactions per year.
The programmes have been going on mostly under a law called the
Clean Water Acts which regulates impacts to just a few types of
wetlands and streams and then the Endangered Species Act which
is our law that protects imperilled biodiversity much
more limited kind of market. There kind of 20 to one scale
difference between those those two.
But those laws led to the creation of these markets and at
least for us in the United States.
And there's we all talk about how small our markets are and
how many have never taken off, but it but we did put 20 year
head start on you and most parts of the world.
So those we've taken advantage of those 20 years really and
really gotten, you know, significant scale.
So there's there's something like 24125 hundred banks,
mitigation banks for wetlands and streams across the United
States. There's about a hundred, 150 new
banks approved every single year.
So it's there's a pretty big scale.
It's pretty hard to keep track of.
There's, you know, there's data, data national databases show
activity, show, you know, draft new projects out for public
comments. But it's it's really kind of a
national successful scale programme.
And I'm happy to talk about the ways it's working and the ways
it's not, but that's that's the kind of scale of it.
Yeah. No, I'd love that.
And you know, Adam's going to come on in a couple of weeks and
sort of get into sort of how they are an investor.
So I'm sure we'll do a bit more of a deeper dive on that that
side. But it'd be really great from
the policy side to understand like how did they manage to get
set up? You know, we often hear with
these regulated markets that there's a reluctance by
governments because they think it's going to cause challenges
with the private sector. So, you know, this isn't this
isn't the states. You know, if the private sector
is going to kick up a fuss, you think it's going to be there.
So, so tell us how it actually worked, sort of how it all came
to be. I.
Mean they connected to politics. You know, Jimmy Carter was kind
of the 1st president that talked about environmental markets and
private activity. Ronald Reagan kept it going and
it was really the first George Bush's president during the
campaign. He went to Canada, which is
weird in the 1st place. He went to a conservation
meeting about ducks and he announced his national goal for
no net loss of wetlands, which I think is certainly one of the
first major national goals to not have a net, right?
The net being really important, the net loss of some sort of
ecosystem in the future. And then followed it up as
president with a set of actions, developing markets, developing
policies under the Clean Water Act.
Again, our national kind of wetlands law previously
requirements to, you know, avoid and minimise losses, but you
just avoided and minimised on your way to still destroying
quite a bit of wetlands. And there were, you know, 10's
and 10s of thousands of hectares of wetlands losses happening
every year. And of course lots of impacts to
other type of aquatic ecosystems as well.
So the the Bush administration started this process, say, you
know, we can actually do restoration of wetlands and use
those to compensate for losses we simply can't avoid.
Like there's places where businesses or people need to
live or, you know, build something, a road, a railroad.
And so they're going to be losses, but let's net them out.
And so there were, you know, many kind of false starts, but
that was really the beginning back in the kind of early 1990s
of this private sector LED restoration of wetlands and
other ecosystems and transactional structure created
by a pretty strict regulation. And I mean, 1 of it, to me, the
most interesting thing, something I would have never
learned in school or didn't ever learn in school, is that, I
mean, just banning something doesn't work much of the time if
there's no alternative. And so the reality was that our,
our laws are being violated, you know, thousands and thousands of
times a year, because if there's no alternative under the law
that allows you to actually, you know, destroy a wetland, the
wetland still gets destroyed. It just doesn't get replaced.
So what they were doing was adding an outlook that says,
well, if you're going to get permission, we're going to, you
know, try our hardest not to give permission, but if we're
going to give it, you're also going to have to compensate for
the loss. At the end of the day, that
makes the law far more enforceable by the agency
because they have some answer, right, For those, for the
hospital, the Children's Hospital that needs to be built,
right? Like they have an answer.
They could say we can give you a permit.
I mean, it's, it's we would rather have you do it somewhere
else, but we can give you a permit, but you have to do this
thing over there that's good for the habitat.
And that meant that they can start enforcing the law more and
more strictly. So just to give an example,
originally it was just wetlands. The law also protected streams
at which we have millions of miles.
But protection of streams had never ever, ever been enforced
under the law. It's just too hard.
Like every time somebody builds something over a a road over a
stream, right? Thousands of times a year, that
would new bridges or expanded bridges would be happening.
So that was simply ignored, still is ignored in some parts
of the US, but because there's an, there's an outlet, there's
an alternative, it became easier and easier to enforce, you know,
those laws and those, those protections.
And we've, we've probably got a 1,000,000 acres, half, you know,
half a million hectares of, of fully protected land.
That is, you know, as a result of that, including things like
there's like 100,000 or 50,000 hectares of everybody's National
Park that was protected and restored through mitigation
banking. And then absorbed international
park and that's common across the country.
Like we count, I don't know if you have like the the now like
we have a 30 had a 30 by 30 goal to protect 30% of natural
ecosystems. So similar goal in the United
States 100,200 three, 100,000 hectares of the lands that are
counted toward that goal are all things that came about through
through our our mitigation banking programmes.
Wow, OK, I've got lots of questions here and the first
seems maybe the least relevant maybe to this conversation is
how do you compensate for a stream like a wetland?
OK, you can recreate A wetland, but how do you recreate a
stream? Yeah.
I don't, I don't know what it's like in the English countryside,
but if you, you know, if you walk around much of the American
landscape, you find these deeply eroded streams.
Sometimes they've been channelized in the past for
mining or agriculture. So they're just like a, you
know, a gully that runs straight through.
So the restoration often is adding rocks, boulders, fallen
trees, woody material, adding neanders to the streams.
I see. So so you, you you might damage
one stream, but you repair another stream.
OK, create a new stream, right? Exactly.
Yes, more of a physical right. It's a physical reconfiguration
of someplace that's it's damaged.
Well, that's interesting, yeah, because I know it's a hot topic
just here in the UK around river re wiggling, which is not easy
to say 10 times fast. The the so the other question I
had was, and do you remember like what the response was from
the private sector as this was all going through?
Was it, were they on board? Because you, you know, obviously
it cost them money. I mean, it really varies, right?
And that's business is often caricatured as a as a monolith,
but the social licence to operate, to not have locals pick
up with us when you do something has been important for as long
as, you know, humans have societies and cared about their
backyards, right? And it's gotten more and more
pressing as there's more and more people everywhere in
activity, everyone that's doing things.
So I think that there have been many companies for a long time
that have said we can make this work.
We can live with this. Please set and put in place
consistent rules and enforce them consistently.
If I'm thinking about another one of those kind of lessons
that's emerged for me that nobody ever taught me and people
rarely talk about, it's that people in government think that
the most important issue that businesses care about is money
is the cost of what they're going to ask them to do.
But actually, it's time, right? Because you've, you've, you've
gone out to the banks, you or the equity market, you raised,
you know, $300 million to do some massive projects.
It starts costing you money the day you borrow it.
And the longer it takes for regulatory decision, the more
you have to pay back on what you've borrowed and the longer
it takes before you actually have revenue from the project
you're building. And government consistently
underestimates that. And they think the negotiation
is all about price as opposed to, but just give us an answer.
Just give us an answer to this question so we can give us a
permit, we'll move forward. And then people would absolutely
pay more faster as opposed to cheaper, you know, regulatory
obligations. That's the, that's the number
one lesson. If you could guarantee someone,
you know, 100% increase in the time it the time that they lose
right in the process, they would pay for that.
That's that's I think the the way to get more buy in for for
policies like these. That's really interesting and
what I mean. And has that come down over
time, the length of that process or is it, you know, still quite
lengthy? I mean, the old approach in the
US was you fix it yourself, right?
So thinking of nature restoration as not a specialist
thing at all. A house builder should be just
as able to go and build a stream or wetland.
So you know, that's that's permitted responsible is what we
call it. And that's the old way of doing
it. And it turns out that's a very
bad way of doing it. It ends up putting the nature
right next to the building, which is usually not very good
for nature. The company involved is usually
doesn't know how to do the thing you're asking them to do.
So we have permittee responsible.
We have separate kind of government or NGO administered
programmes that collect a bunch of money and promise to spend it
for good things in the future. And then we have these banks and
the banks are required to document that they have fixed
something first before they they can sell any of their credits of
their environmental credits. Again, this is different than
the way the Ng is, is yet evolved in in England.
And then that whole ecosystem of all those competing models, it's
taken a long time to play out and it's still basically a
third, a third, a third. So there still is permitted
responsible mitigation where the company does it themselves.
There's still these programmes that kind of collect the money
and spend it. And then there's the banks, the
private entrepreneurial banks that operate.
So the US market is is kind of offering all those solutions and
some of them are more important sometimes than others.
And then and the sort of the 45 billion a year that you
mentioned earlier, is that money that's coming from sort of
investment by offsetters themselves or is that actual
financing that's coming? Because I know that there's also
this whole investment market that's developed from pension
funds, for example, around mitigation banks.
Yeah, I mean the the supply exceeds demand.
So investment level is greater than that 4 billion, that's 4
billion is an estimate of the, the credit, the the sales, the
sales of credits. So those are regulatory
purchases. The investment level is, is, you
know, significantly higher than. That in terms of the amount
being invested either as you mentioned those three options
into, oh, wow, OK, right. And we also have in addition to
those markets, there are also like you have a nutrient
neutrality policy under the same law, the Clean Water Act,
there's a whole different section that triggers regional
plans around improving water quality, reducing nitrogen,
phosphorus and sediment run off into important estuaries.
Like I live in the Chesaire Bay near Washington.
And so that's a massive estuary. There's pollution limits
essentially like a diet that was supposed to apply to the entire
area, the entire watershed. And everybody's responsible for
reducing the all the states, all the local governments are
responsible for reducing that load.
So there's also investment backed projects that fulfil
needs for that market as well. And then you have and the
endangered species side, you have these very significant
again, economic projects in places like California, Texas
and Florida where there's lots of endangered species that need
to do big offsets as well. And so they'll negotiate
sometimes $100 million deal with government to provide thousands
of acres of habitat enhancement or complete restoration and
creation or just preservation in order for some big government
backed project to be able to go forward.
It's, it's amazing, isn't it? As you say, it's been happening
for a couple of decades, private sector investment into nature
restoration. And yet this message I suppose
isn't translating so much outside of the States.
Why do you think that is? Yeah, I think it's got a,
there's a kind of A2 sided problem, one in the US well, not
yet regulated industries aren't particularly keen to be
regulated, right. So they don't typically want to
talk about it. And then the conservation
environmental community tends to think this work is all dirty,
right? That somehow government is.
If you give them an outlet like this, you let them, you know,
fix something in exchange for damaging something.
The government issues more permits, the government says yes
more often. And there's literally no
evidence for that anywhere in the world.
Like government says, yes, the destructive things all the time,
everywhere, as far as I know, in every government that's ever
existed in union history, that that's the norm.
So the idea that suddenly you give them an alternative that
requires something for the environment to happen and they
issue more permits, it's just a myth.
But it it feels like a safe myth where conservationists get to be
the good guys and are part of this whole economic system.
That's so, you know, suspect. Yeah.
And I think that's, that's kept it from expanding.
And that's, that's really, I mean, this the solution is and
you and you have many environmental regulations where
the outcome is a big fee. Like we have an oil pollution
act, Deepwater Horizon oil spill, you know, a decade ago
now as an example of an outcome that was regulated that, that
law, you know, massive court actions, massive payment into a
government fund for billions to fix the damage afterwards.
But government, you know, a socialised system is effectively
used to collect all the money to fix all the damage caused by the
private sector. Many people are happier with a
system like that where the government controls all the
assets, but like, we're happy to talk about how those systems
don't work out very well. Well, I'd, yeah, I, I think that
would be helpful to hear that why, but it's sort of slightly
sort of lead in a type of market that it moves far faster.
I'm going to guess is one of the one of the things.
But yeah, sort of tell us the difference between those two.
Yeah, that's right. So you asked me about the, the
speed thing and, and the, the private banks that we use in the
United States effectively result in permits being issued 50%
faster. So the government regulator is
able to say, Yep, that's a wetland of that type or that's
endangered species habitat of the appropriate type.
You've already, you know, protected it, restored it.
I can see the outcomes that we agreed to that you're supposed
to produce good to go that that is equivalent to or you know,
2X10X greater than the damage being caused over here.
You get your permit 50% faster. So it obviously definitely has a
time benefit. On the issue of to me why those
large number of those government run programmes don't work is
that I suspect this is true in England nearly everywhere, is
that people in government agencies are underfunded and
there aren't enough of them to do any job that they've ever
been given. I mean, I how many pieces of
testimony to Parliament or legislature are basically the
person starting off saying that we are, you know, struggling to
keep up, right. So you've got these people who
have already have 10 jobs that we, the public have given them.
And now you come along and say, so here's this external actor
who's building this thing over here.
We're going to have them give you some money.
And by the way, now you're responsible for fix, for
replacing something that they damaged.
This is your new 11th mission. And So what mostly happens with
that money is it sits on spent. It literally sits in an account
waiting for someone to spend it. The second part is that people
in government often spend a lot of time because they're
particularly risk averse trying to find the perfect project.
Oh my goodness, we have, you know, $50,000,000 to spend.
Like, let's make sure we spend it really well.
So we spend a long time designing things, like over
designing things. That's the other, other big part
of the massive time, the way that happens.
Yeah, I can see that because it can politically be used against
you in, you know, the next political cycle if you've, yeah,
put 50 million into a project that didn't quite work.
Yeah. Yeah, it's a really bad project
that people don't people don't like or it's easy to character
caricature is, you know, incredibly expensive.
So it's much better to have somebody else be responsible for
that. The third part is liability
transfer, right? So we're all very good at
understanding liability transfer for, you know, faulty seat belt
or something. You can sue someone and they
were responsible in this portly design.
Government's not very good at taking liability.
And so when you transfer money, when a private banker accepts
$1,000,000 to produce a wetland in the United States and they
fail, they have a bond that they sacrifice, In other words,
insurance that they pay into a government fund, they're
financially penalised. They can be held liable to fix
it. So they can have to go out and
under like an enforced settlement with observers, you
know, go and fix the thing that they were supposed to do.
So there's a lot of liability, typically when government pays
for a project and it doesn't work out.
So Oh well, give us more money and we'll fix it.
Well, we'll just wait till you give us more money.
I mean, that's the standard we expect.
We have things that don't go right, budgets, projects that go
over budget all the time. That's the way it works.
And again, it's not a criticism of the people there.
That's like that's just the way that government operates.
We don't, we don't make them take out liability insurance on
almost anything they do around the environment, at least so.
Yeah. So while we're on, I know we've
got other things we want to talk about, but just sticking with
mitigation banking for a moment. What I'm also keen to understand
is 1, you know, what are some of the things that come up a lot
are sort of permanence issues. So I'm really keen to understand
what the US model is there. And then also the big question
people are asking at the moment is about insurance, I mean, and
who's on the hook for actual delivery if things, you know, if
climate change is or as fire, etcetera, etcetera.
So I'd love if we could touch on those couple of things as well,
what we could learn from the US markets.
We cannot solve that. A long time ago, like 1950s, we
created a conservation easement that is permanent.
It's, you know, it's literally a permanent restriction on land
that says that you cannot develop this land.
Some states have limited it to 100 years, but but generally our
laws all require permanent protection.
So let's let's say it's a I'll use a simple example.
You go out and buy a damaged wetland site.
You separate out the development right from the rest of the
right. So you mitigation banker on the
title to the property, but you take all the development rights
and you hand them over to government and you hand them to
a nonprofit. They own the development rights.
You own the ability to restore the property and access the
site. And then that stays.
Those now separated property rights stay on the books forever
or for 100 years and they're enforceable.
They they do, you know, like they get every once in a while
they get violated like some other project comes along and
the state, the government can eminent domain lands and rights
like that. So they can void, but it doesn't
happen very often. So that's the permanent answer.
And then insurance is a great idea.
The place that the US market has evolved that I hope England and
Columbia and Australia and other countries get to is that we
generally require proof that the ecological restoration has
happened before you can sell it. So in that circumstance,
insurance is of less value because you can literally see
the the evidence of success before you allow them to, to do
anything with the asset. But regardless of that, in the
US, we still have duplicative insurance requirements.
So you have to bond your project, you have to, you know,
set aside money to ensure that all the things you're doing, as
you're doing them are going to play out.
So the projects are typically insured and bonded, just like
any construction project is insured and bonded.
Then there's a performance, a long term performance bond that
also stays on many mitigation properties that typically drops
over time. So as you complete activities
and sell credits effectively over time, the money sitting in
a bank account and an escrow account goes down.
There are private insurance providers that specialise in
this market. Literally this is kind of all
they do is is insurer restoration.
A number of the companies use kind of escrow accounts.
They use their own capital to park in a, you know, kind of a
legally guaranteed account that's cheaper way to set aside
money. We don't have great standards in
the United States on just how much money should be set aside.
And it's kind of a wasteful thing that sometimes there's a
lot of subjectivity in our across our government agencies,
and sometimes they require far more money for far longer, which
increases project costs, which increases, you know, credit
costs. The costs all get passed along.
So it'd be nice to have standards there.
But insurance has really been a crucial part of the market.
And that taking ecological performance risk out of the
whole process and requiring it upfront has been a really big
deal too. I mean, I suppose when I sort of
listen to you speaking, I think, I mean, it's such a different
landscape, isn't it, in England and even thinking across like
Europe compared to like, you know, US, Canada, Australia.
Well, that I mean, the to me, the best conceivable thing that
could have happened when you had a lady government come in is
that they would have said we're going to do the exact same thing
with DND as opposed to we're going to do the opposite thing
and and confuse everyone. As far as I can tell, that's
where you all are. That's the worst.
Days we might keep with it it. Might it might help?
We do, yeah. But consistency, right?
If the two governments had been consistent, that immediately
creates a signal for investment that we should scale up our
investments. Looks like this thing is a go.
And we could, instead of doing a 500 hectare bank, why don't we
invest in a 2000 hectare bank or 10 banks in, in, you know, local
development authority areas? Because it seems like it's going
to be a consistent policy and the whole supply demand thing
would be partly dissolved by government just saying we're
going to stay the course on this and we'll help adjust.
But but basically you know your investment is is not at at
extreme risk just a couple years in.
Yeah. Well, I actually, I think, you
know, to your point on some people being nervous, some
groups quite nervous about these kinds of policies.
I think what happened was there were some very loud voices about
how BNG was not perfect in terms of integrity and habitat at such
an early stage. And I, I would imagine that if
you're a new government that comes in and you're getting a
lot of letter saying it's not high integrity enough and we're,
we're complaining about BNG and it needs to have more
environmental impact as a new government, you might think,
well, screw it, what's my policy?
And if I'm going to get all this hassle from the environmental
sector, what's the point? And so I think some of that has
been now reframed and the environmental sector has now
come in and said, no, sorry, we actually really do want BNG and
it can work. So here are some things that
need to happen because otherwise, you know, it's sort
of a juggle. So I do understand why they've
been these consultations, but I am confident that we are going
to stick with what we had and this was more of a blip.
I'm just giving you a brief hard time because of course it's the,
it's the pot calling the kettle black a little bit because we've
had a few flip flops here as well.
OK. And but it was, it was more of a
point of like so on your landscapes, because they're so
big, you can find some landscapes, create an enormous
restoration project. And so that permanence is there.
It's a conservation, as you say, might become part of a National
Park and in, you know, of England.
And even if it's to be rolled out across the UK and even
Europe, you're relying on farmers.
And then it's a whole different kettle of fish because you're
thinking about their own sort of family plans on the line.
So does that work? Is it our farmer?
I mean, I'm presuming it's just a straight ownership of land and
it gets restored or? It's a, it's a mix.
I mean the, the, the underlying legal options with land are a
little different for you and in Europe than here.
So it is a bit different. But many of these properties are
farms before they're banks. So it's actually no different.
And there are in fact farmers who own litigation banks and
they'll hire a company to come in and build it for them and
they share profit on it. But effectively they remain, you
know, an owner of the bank. So that's that's been
consistent. And one of the early problems we
had, we call them service areas. So basically, how big of an area
can you buy credits in? And originally our regulators
wanted them to be extremely small, which made it extremely
hard to have relevant supply like match up the investment in
nature with the need for permits.
So that was a problem. And the industry was always like
bigger, bigger, bigger. And the government was always
like smaller, smaller, smaller, and eventually settled on
something that generally works. It's big enough that you can
find larger parcels that are really good for nature that are
next to other natural areas where the land is a little bit
cheaper. You know, it's lower, lower cost
because there's less value for humans.
So it's generally worked out that way, but that that issue
still comes up some of the time. But so you've got in England all
this, this wide variation in the size of your, your units, which
I would think is something you have to figure out how to deal
with, how to create some sort of relief for, because you are
going to have ups and downs, right, in development permits.
And so you're going to have times when there's just not a
supply in that small of an area. Yeah, totally.
Yeah, Yeah. We've got a got a lot of houses
to build and how much room to build them on.
I'm really conscious of time. My God, we could talk about
everything, but I really wanted us to sort of talk about this.
This importance of, you know, impact is only going to
increase. This is why regulated markets
are so important and your views on what we might do in order to
move forward more regulated markets globally.
And then, you know, we had TNC on with wending back last week
to sort of just touch on the EU road map.
But if you've got other views, you know, more views on EU, we'd
love to hear them too. So, yeah, just sort of moving
into this sort of final 10 minutes or so, like what's your,
yeah, what's your view and how we can move these forward
quicker in other countries and why they're so important, like
really getting that message home.
Yeah. I mean, I think especially when
I think about, you know, population growth and economic
transformation and all of Africa, big parts of Asia,
impacts on nature just aren't going away.
You know, we're eating more food and using more land than ever
before almost everywhere in the world.
And there's no way to do that without harm to biodiversity.
And the agricultural system is just kind of the biggest land
user, right? And it's just gifted getting
bigger and more intensive. So we really need outlets for
impacts that are occurring. There is no nature positive
future that doesn't involve the word net.
You know, just isn't. You're going to have lots of
negative and we have to figure out a way to create more than
balancing positive to it. There's no alternative for all.
There just isn't. Anyone who thinks otherwise is
living in a fantasy world or maybe a very small box with
people leaving it instead of showing up and asking for more
stuff. I don't know where that is.
I know, right? I don't know where that is at
all. But so we really need these
markets to work out. There's a lot of things that
government can do that are short of regulation.
And in fact, I think the regulatory broach is often
backwards, right, which is create a restriction in law and
then figure out how to help people get there.
And so, you know, for example, I think one of the most important
things that governments could and should do everywhere is,
say, anyone who has a natural asset, you know, a piece of land
with some nature in it today or water, if you make it better at
some, we guarantee that at some point in the future, as long as
you can document that it was once worse, you know, after 2025
and now better, we will let you sell that.
We'll value it, we'll buy it, we'll pay you for it in the
future. Like get started now.
Get started defining your assets, expanding your assets.
Now. We're not going to deal the
deal. We're not going to change our
minds. This is really helpful for our
broader goals. We want everyone to start
working. It's very hard to do, but it's
the most important signal to get all of the early adopters out
there, all the great, you know, people who are constantly trying
to figure out how to improve the, the thing that they own at
the moment. And it's the clearest driver for
like, well, how do we measure this stuff too, right?
That's a endless debate, especially if there's more than
one scientist involved of like, is there a standardised way we
can measure this that's cheap and scalable and, you know, and
affordable. And so it helps drive well, this
is this is it helps drive our ability to understand how we do
enhance ecosystems all around the world, dry ones and wet ones
and cold ones and warm ones. How do we just how do we agree
on, you know, measures for that? Satellite data is get making it
easier and easier and drone and other sensor equipment.
So that's the simplest thing that government can do is just,
you know, provide a guarantee and their willingness to use
public money to back some of that would be crucial.
I also think there's so many ways that governments in the US
is is quite exceptional in this, but create various tax benefits,
tax credits around investments in certain things that
government wants more of. And so why there are tax credits
and tax benefits for, you know, investments in nature, that
completely eludes me because the alternative is public spending
all the money and direct cash from taxpayers pockets.
And, you know, tax benefit structures are a really
attractive way to increase investment.
And so that's the secondary where again, it doesn't take a a
regulation first, you can simply say we're going to reward
investment that goes into, you know, with a good plan and clear
evidence that it's something that's consistent with overall
government objectives around nature or water.
In the right place, right in the right kind of activity, in the
right place, you can take advantage of the favourable
track tax treatment. Those things are very clear
things that governments can do, you know, anywhere in the world.
And then there's like some simple things.
So, you know, one of my criticisms of many people from
the carbon market is that they've sold many, many things,
but there's lots of projects that have turned out to not be
very saleable in the carbon market.
And a lot of people are like, well, great, now let's sell them
in the biodiversity market. And I just don't think it's a
good thing to start a new market with the lefters from another
market that they're not just leftovers, right?
Like they're not like the the great food you had in the
restaurant last night. They're like leftovers that
nobody wanted last night. Like that's the that's the place
you were going to leave behind. It's a really bad way to start.
So we should be starting with the easiest to restore, the
easiest to protect properties with the simplest stories behind
them where everyone can agree this is a fantastic place to try
to enhance or protect biodiversity.
New projects there. And I'm sure that in every
country in the world or just about every country in the
world, we can find places that everyone agrees we want more
nature over here. And we generally know what it
looks like. And let's try to focus our
projects there instead of trying to meet everyone everywhere at
once with a market that springs, you know, like in full form out
of nothing. And I just think there's much
easier ways to prove to the. And I have to think about, you
know, the media, like the average Guardian, average New
York Times reporter as being the template for who we're trying to
satisfy. Like, give them something that
they can see like, this is demonstrably better than it was
before. There's newts and bats and frogs
now, and they weren't there before.
We can argue about whether the person who's buying it is making
some claim that you think is is is excessive in some way.
But the nature is better, right? Like we wanted, we should be
able to prove that, you know? Yeah, yeah.
And and just it's you speak, you just think, gosh, in this the
era we're in where job markets are getting a fee, we've got AI
reducing the number of jobs. You think of the ecology jobs
that would be, you know, be created through this kind of
work. It'd just be a. 100% estimated
it 50,000 ecology jobs in the United States that are just just
in this one sector and wow. Just in mitigation banking,
yeah, yeah, I. Guess like equivalent to the
number of coal mining jobs we have in the United States right
now. That's.
Wow. Yeah, nature restoration is this
should be, should be a more powerful force than than coal
mining. Yeah.
Yes, yeah. And just touching one of one of
the points I raised earlier was about the EU.
It'd be great to sort of hear your thoughts as well before we
wrap up on that. So the new EU nature credit road
map, it's actually quite a readable and useful document at
the end of the day. You know, I was, I was really
pleased when I saw it for the first time.
It's really focused on voluntary and so still perpetuates this
kind of misunderstanding of the necessary role that compensatory
and offsetting actions are going to have to play.
And even if it's not an acceptance of that market, it's
like learning from how those markets function.
You know, part of the premise is that somehow the quality of the
credits matters in the certainty and the guarantees and the, you
know, liabilities. And somehow those matter less if
it's voluntary. I don't think that's the case.
Like a buyer who buys nature restoration on a voluntary basis
doesn't want it to burn down any more than somebody who is buying
it because they have to, you know, and so their quality
issues is really important from a long term market side.
The other area that I think that the EU is, is kind of missing.
It's talking about government finance as a necessary addition
to markets early on. But it, it really doesn't say
much at all about how to incentivize private money to
come in, how to, you know, how to guarantee that they'll be a
market for the investment that the pilot projects, the starting
work. And I think that's where, you
know, government as a kind of a backstop buyer is better than
government as a backstop financier.
So, so in other words, like one of the things that I've thought
about in the United States a lot is, is a like a guaranteed floor
price kind of agreements. And then we've only had this in
one place and actually in the city of Washington, DC, very
guaranteed floor price on our nutrient credits.
But effectively government saying, look, if you haven't
sold these credits in 10 years, we'll buy them from you at a
price that we agree on today. Whatever, you know, music
competitive process, here's the price, 10 years.
We don't want to, but we would buy these with, you know, with
future nature budgets in 10 years.
That's to me one a much better way to bring in money because
then it really forces the private sector to work this all
out. And it gives everybody a target
for the price that we're trying to get the market to hit in
order for people to make more money than they were going to
make from, you know, the government payout, including
because of inflation lowering the future value of that money
at the end of the day. Like that's those are kind of
some of the finance solutions that I wish I saw more.
I was in that in that road map. Yeah.
It remains to be seen, doesn't it, whether they're sort of just
setting the tone for this kind of regulated framework for
voluntary and then allowing every country to sort of
determine whether what's right for it.
I know we're, we're, we're looking at a couple of working
with a couple of EU countries around actually, is it worth
setting up a regulatory market or at least a national standard?
Yeah, it is. It also is kind of an irony,
right? The whole thing talks about a
deeply regulated supply of credits while missing the whole
regulation of the thing in the 1st place that we're actually
talking about. That's the problem.
That was just the loss of nature.
And we and we know the problem is the demand because the supply
will step up if there's demand. I mean, it's just, I mean, it's
the demand that needs to move first.
We know. And then just to when you're
talking about that DC project, is that stormwater retention
credits? Yeah.
Stormwater retention. With that, yeah, I mean, they're
amazing. And I just don't think we're
replicating those in a way that we absolutely could in different
countries and jurisdictions. Actually, maybe we should cover
that on, on, on here. Well, we are, I know we've gone
way over. So I'm sorry, I'm just going to
wrap up really by just sort of giving you a chance to sort of
tell us about what Epic's working on and sort of sort of
next steps for you. And, and even sort of you know
what you're optimistic about in the in the coming months as
we've got, we go into COP 30 at some point.
We've got to find like weird opportunities.
People call U.S. policy ninjas because we find like sneaky
little hidden areas of policy that other people aren't working
on and maybe aren't paying attention to that we can flip in
some way and then have a win. And I, I, I like that analogy.
And so you know we. We continue.
Exactly. We continue to look in the
United States for effectively what we look for is, is somebody
like a, a leader of a government agency, a political appointee or
just a senior person who knows their way around and they really
want to do something and they need help though to figure out
what to do. And I think of it as a rock on
top of the hill instead of a rock and bottom of the hill.
So we're going to help them roll the rock down.
So I think of some of the most interesting opportunities are
for example, bringing AI and and a lot of other innovative
technologies into environmental permitting to make environmental
permitting dramatically faster. So I just give you know, the US
issues, the federal government issues about 1.5 million permits
every four years presidential under an administration.
The governors of states issue about 100,000.
And so one of the states near us has done this kind of really
radical transformation of the software, uses managed permits
and has delivered a 70% improvement in permit timelines.
Instead of taking 8 to 12 weeks to get, for example, a licence
to open a new business same day, they get the licence in the same
day. And they're using basically
technology to make that possible by just managing decisions and
the people involved in decisions much, much better.
So we're really excited about that as a, as just kind of a
radical accelerator of environmental decision making
and all the things that come, all the benefits that come from
that in terms of reduced friction to environmental rules
in the 1st place, because it no longer hurts so much to go
through the process. So that's where I'm most excited
about the kind of global and national transformations we'll
see in a little bit of time. Yeah, I love it.
And I know that we're hoping that, you know, we'll be able to
work together on maybe taking your policy ninja skills into,
you know, other countries as as well who are trying to work
through the MB, SAP and their own environmental policies.
So well. Thank you so much, Tim.
It's been such a pleasure having you on.
I wish we had could talk for hours because there's just so
much we could cover, including, I just love your views on the US
more broadly, but I want to be respectful of your time.
So thank you again. And yeah, look forward to
hearing more about what Epic's doing over the months ahead.
Yeah, I really appreciate it, Alan.
Cheers. Well, that's it for this week.
You can find out more about Epic at www.policyinnovation.org and
we have the pleasure of working with Tim actually as part of
that Revenues for Nature programme with UNFFI and UNDP
Biofin. And you can find out more about
that by Googling Revenues for Nature and GFI including you'll
find a guide book that was actually written by Epic on US
mitigation banking. So many, many pages on how it
was set up and how it works and sort of lessons learned from
from what they're going through in the US.
And then next week, we're going to be staying in the US and with
mitigation banking as we're going to be joined by Adam
Davis, who's the Managing Partner at Ecosystems Investment
Partners as a private equity firm in the states with over a
billion dollars in assets that's working in the mitigation
banking markets in the US. And then we'll be on the home
stretch with this season with our final guests possibly we say
that and then squeeze another couple in and that's going to be
Dorothy Masika at FSD Africa and then Justin Adams at Astara.
But I hope you have a great week till next time.