As the Pandemic Shakes Commodity Markets, Battered Ecosystems Get an Eerie Reprieve

Ashoka Mukpo

This photo shows deforestation in Indonesian Borneo. Palm oil production is one of the biggest drivers of deforestation in Indonesia, but demand for palm oil has dropped 15% since the beginning of the year.

Edi­tor’s Note: This arti­cle was orig­i­nal­ly pub­lished by Mongabay News and is repub­lished here under a Cre­ative Com­mons license.

The images are stark. Smog­less skies over Los Ange­les. A drop in air pol­lu­tion over north­ern Italy that’s so sharp it can be seen from space. Emis­sions from vehi­cles in New York City are down near­ly 50%. For a bat­tered plan­et, the inter­na­tion­al coro­n­avirus pan­dem­ic has so far been — at least tem­porar­i­ly — an eerie reprieve.

Across the world, coun­tries are vir­tu­al­ly shut­ting down in hopes that severe restric­tions on move­ment and com­mer­cial activ­i­ty inside their bor­ders will slow the spread of the dis­ease. The eco­nom­ic impact of these mea­sures has already led some econ­o­mists to pre­dict a cri­sis to fol­low that could rival the 2008 reces­sion — or worse.

Com­mod­i­ty mar­kets are already start­ing to feel the squeeze, as pro­duc­ers antic­i­pate an eco­nom­ic down­turn that could last for months or longer. And econ­o­mists say it may only be the beginning.

It is obvi­ous­ly a lit­tle ear­ly to tell,” Sven Wun­der, prin­ci­pal sci­en­tist at the Euro­pean For­est Insti­tute, said in an email to Mongabay. Just one month ago, we were still at all-time US stock mar­kets highs. But we could well see a game-chang­ing 1929 type of water­shed moment for the world economy.”

Eco­nom­ic crises have his­tor­i­cal­ly had a major impact on the envi­ron­ment. Reduced demand for com­modi­ties like tim­ber, veg­etable oil, and beef can alle­vi­ate pres­sure on forests, and extrac­tive indus­tries are less like­ly to invest in explo­ration or new projects dur­ing a reces­sion. The pre­cip­i­tous decline in oil prices this year, for exam­ple, has already cut explo­ration bud­gets in Brazil by 20%.

So far, the effects of the coro­n­avirus pan­dem­ic on com­mod­i­ty mar­kets have been mixed. The price of tim­ber dropped by near­ly half in March on expec­ta­tions of a slow­down in con­struc­tion, and palm oil is down by near­ly 15% since the begin­ning of 2020, part­ly due to a dra­mat­ic decline in oil prices that has reduced demand for bio­fu­els. On April 2, the U.N. Food and Agri­cul­ture Orga­ni­za­tion said that food prices have dropped over­all, includ­ing a 12% decline in the veg­etable oil price index.

Even­tu­al­ly, [there will be] less com­mod­i­ty-led agri­cul­tur­al defor­esta­tion and tim­ber-led for­est degra­da­tion, as aggre­gate demand in export mar­kets is reduced,” Wun­der said.

But the price of beef, anoth­er key dri­ver of defor­esta­tion, has increased slight­ly since the start of the year, and so far agri­cul­tur­al com­modi­ties have only seen slight declines.

This phoro shows Ama­zon rain­for­est and cat­tle pas­ture. Defor­esta­tion and land use change extend­ing south from the Amazon’s south­ern lim­its influ­ences local and dis­tant cli­mate, a recent study shows. Pho­to by Rhett A. But­ler / Mongabay

We still aren’t see­ing changes in agri­cul­tur­al com­mod­i­ty prices sig­nif­i­cant enough to affect glob­al defor­esta­tion,” said David Kaimowitz, senior advis­er at the Cli­mate and Land Use Alliance.

The price of gold rebound­ed after a sharp drop mid­way through March, and is up slight­ly since the start of the year. High gold prices can increase incen­tives for destruc­tive min­ing in the Ama­zon and oth­er frag­ile ecosys­tems, but Wun­der says if the eco­nom­ic cri­sis deep­ens he expects them to fall.

In the 2008 cri­sis, gold ini­tial­ly went high, then it went down quite strong­ly because peo­ple were look­ing for liq­uid­i­ty,” he said.

The impact of an eco­nom­ic down­turn on forests could also be deter­mined by what hap­pens in cur­ren­cy exchange mar­kets. If trop­i­cal coun­tries see their nation­al cur­ren­cies crater rel­a­tive to the dol­lar, com­mod­i­ty prices list­ed in those cur­ren­cies could rise, cre­at­ing incen­tives for increased production.

What hap­pens to the envi­ron­ment in the wake of the pan­dem­ic will large­ly depend on the scale of the eco­nom­ic dam­age it caus­es. So far, food pro­duc­tion has large­ly been unin­ter­rupt­ed, but if sup­ply chains are dis­rupt­ed by out­breaks in coun­tries like Chi­na, there could be knock-on effects in export mar­kets for beef and oth­er products.

Gold mining in Borneo. Photo by Rhett A. Butler

This pho­to shows the effects of gold min­ing in Indone­sian Bor­neo. Pho­to by Rhett A. Butler

World lead­ers say they hope that stim­u­lus pack­ages will be able to stave off the worst effects of the cri­sis, but Wun­der says they should brace for a poten­tial­ly dev­as­tat­ing peri­od that could fun­da­men­tal­ly reorder the glob­al economy.

This eco­nom­ic fall­out may become much more dra­mat­ic than the 2008 finan­cial cri­sis, and the return to any kind of nor­mal­i­ty much more dis­tant than we as envi­ron­men­tal­ists and respon­si­ble nat­ur­al resource man­agers would bar­gain for,” he wrote in a blog post on March 25.

Such a col­lapse would be wreak hav­oc on soci­eties across the world, with mil­lions like­ly to slip into pover­ty. But it would also reduce pres­sure on forests as tim­ber har­vest­ing and oth­er extrac­tive activ­i­ties slow down.

Wun­der says that could be an oppor­tu­ni­ty for the world to re-eval­u­ate the scale of destruc­tion that those activ­i­ties have caused in recent decades.

I think that a cri­sis is always a chance for struc­tur­al change,” he said.

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