environmental financing facility, based on Special Drawing Rights (SDRs). These SDRs could be distributed not, as now, on the basis of existing credits with the IMF but on a com­bination of per capita income, population and the country's existing emissions (or non-emissions). The notion of the op­portunity cost of livelihoods foregone in computing social costs (Coase, 1960) can be combined with that of the declin­ing marginal utility of income as income increases, to argue (see Chichilnisky and Heal, 2000; Nathan, 2003) that the distribution of rights can be proportionately higher for low income countries or peoples, such as indigenous peoples.

3.6.5     Market for biofuels
The market for biofuels, while growing is still quite small when compared with the market for fossil fuel. Trade in ethanol, the major biofuel, was 3 billion liters in 2004, as against crude oil trade of 920 billion liters. But with vari­ous governments taking measures to increase use of biofuels (both China and India have policies for biofuels to account for at least 5% of total fuel consumption by 2015), the mar­ket for biofuel can only grow. The imposition of a carbon tax will, of course, give a strong boost to the market for biofuels.
     Brazil is the main exporter of biofuel, ethanol. Its main export markets are the USA and India. The other interna­tionally traded biofuel is palm oil. The palm oil consortium, headed by Malaysia, has a policy of subsidizing the use of palm oil as biofuel, whenever the price of palm oil falls in the market (Roundtable on Sustainable Palm Oil, www .rspo.org) In the early years of this decade there has been a surge of palm oil exports for biodiesel to the EU (UNCTAD, 2006a).
     There are a number of issues that come up in this emerg­ing biofuels market. First, is that of the conversion of for­est lands into biofuel plantations. Such conversion would

reduce the carbon-reducing impact of biofuels and needs to be taken into account. It could also lead to an increase in the prices of food and thus reduce well-being of buyers of food. The second is that of the role of communities and small farmers or corporations. Forms of technical and financial assistance may be required to enable local communities, in­cluding forest-dwelling indigenous peoples and small farm­ers to benefit from the growing biofuels market. Without such safeguards the benefits of this new market could end up being monopolized by the large corporations and thus reducing its likely contribution to poverty-reduction in de­veloping Asia.

3.6.6     Options
The options discussed above (carbon trade, biofuels, com­pensation for avoided deforestation through a global fund, taxes on carbon and other environmental factors, tradable emissions and the required environmental accounting) to­gether amount to a substantial shift (even a paradigm shift) in thinking on the interaction of trade and environmental issues. The big question mark is over whether the existing sets of institutions of international trade and finance can formulate and implement the required policies, or whether a new set of institutions (supranational, national and local) will be required to manage the new economic-ecological paradigm, which brings together economic and ecological issues, rather than separate them, as has so far been the basis of international trade. With a business as usual approach, there is the very real likelihood of a worldwide depression, greater in intensity than that of the 1930s (Stern, 2007). The challenge before the global economy is whether the neces­sary measures and the likely institutional changes will be brought about only after such a crisis strikes, or whether these steps can be taken in advance of and thus mitigate or lessen the likely effects.