E t S i M k tE t S i M k tEcosystem Service Markets: Potential and Pitfalls
Ecosystem Service Markets: Potential and PitfallsPotential and PitfallsPotential and Pitfalls
Sara Vickerman
May 5, 2010
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Ecosystem Service Markets
• Background, examples• Essential elements• Essential elements• Programs, status • Pitfalls and potential
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What are ecosystem services?
Benefits that human communities enjoy as a result of naturalenjoy as a result of natural processes and biodiversity
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Ecosystem Servicesy
• Fish and wildlife habitat• Clean water and air• Pollination• Mitigation of environmental hazards• Control of pests and diseases• Carbon sequestration and emissions control• Soil productivity
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What is an ecosystemWhat is an ecosystem marketplace?
• System for buying, selling ecosystem services • Wetland and conservation banks • Offset, or cap-and-trade programs• Voluntary transactions
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Why ecosystem markets?
• Reserves, regulations, public funds insufficient • Need conservation on private landsNeed conservation on private lands • Need large infusions of private capital
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Payments for EcosystemPayments for Ecosystem Services
• Generally government sponsored • Compatible with outcome based programsp p g• Potential transition to markets
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Examples of Ecosystem Markets
• Wetland banking• Conservation bankingConservation banking• Water quality trading
C b t di• Carbon trading • Voluntary biodiversity marketsy y
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Regulatory Market 1: g yWetland Mitigation Banking
• Authorized under Clean Water Act• Authorized under Clean Water Act• No-net loss of wetlands requires
developers to offset impacts in watersheddevelopers to offset impacts in watershed• Formerly on-site, in-kind preference
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Wetland Mitigation Banking
• Increased emphasis on banking p g• Wetland “banker” enhances or restores
degraded wetlands and sells credits to gdevelopers
• Potential for greater ecological benefits g g
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Regulatory Market 2: egu ato y a etConservation Banking
• Endangered Species Act• Endangered Species Act • Adverse impacts to species offset by
habitat conservation elsewherehabitat conservation elsewhere
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Conservation Bankswww speciesbanking comwww.speciesbanking.com
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Regulatory Market 3: Water g yQuality Trading
• Clean Water Act• Temperature, phosphorus, nitrogen • Allows use of “green technologies” instead g g
of hard infrastructure
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Quasi Regulatory Market:Quasi-Regulatory Market: Carbon Trading• Anticipatory of regulations
F i i d ti
g
• Focus on emissions reduction• Some credits from forest, prairie• Starting point for most investors
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Voluntary Market: Biodiversity
• Biodiversity -- all habitats and species• Most biodiversity isn’t regulated • Some international companies understandp• Business and Biodiversity Offset Program
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E ti l El t fEssential Elements of a Marketplace:a etp ace
1 Ecologically effective1. Ecologically effective2. Address multiple values3 F ilit t t t i i t t t3. Facilitate strategic investments at
landscape scale4. Transparent and credible to public5. Accessible with low transaction costs
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1 Ecological effecti eness1. Ecological effectiveness…
• Concrete goals with monitoring• An accounting systemAn accounting system • Principles of conservation biology
C ti it– Connectivity– Allows ecological processes to function– Addresses species, habitat at-risk
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2 Add lti l l2. Address multiple values. . .
• Wetlands
• Endangered species
• Water qualityWater quality
• Carbon
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3. Strategic investment at glandscape scale…
• Current projects ll d di t dsmall and disconnected
• Many programs, narro l foc sednarrowly focused
Willamette Valley Synthesis Map
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4 T t d dibl4. Transparent and credible…
• Existing markets opaque• Need trading platform & credit registry
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5 A ibl ith l5. Accessible with low transaction costs…t a sact o costs
• Balance precision with practicality• Attract buyers and sellers• Provide assistance to help cover risk
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Defenders Programs re.Defenders Programs re. Ecosystem Markets:
• Conservation economics • Conferences and policy dialogues• Oregon legislation
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g g
Willamette Partnership• Non-profit group in Willamette basin• Counting on the Environmentg• Acting as regional market manager • Best example of multi-credit marketBest example of multi credit market
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Bay Banky
• Chesapeake Bay• Chesapeake Bay• Pinchot Institute
L dS l d d t i• LandServer – landowners determine eligibility for markets and incentives C di t ith Will tt
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• Coordinates with Willamette
Policy Issues
• Role of government • Integrating programs• Integrating programs• Combining credits • Consistent methodology• Strategic investmentg• Uneven regulation
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O L i l ti SB 513Oregon Legislation – SB 513
• Encourages market-based approaches• Policy to protect, restore ecosystem
services on all land uses • Authorizes adaptive management • Work groupWork group
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Habitat / Biodiversity Metric• Inability to measure inhibits marketing • Bullitt Foundation• Willamette Partnership • Reviewed existing metrics none suitable• Reviewed existing metrics, none suitable
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Habitat / Biodiversity Metric
• Evaluate baseline and lift • Tool will produce % optimum acresp p• Type, condition of vegetation and species• Ecological context size connectivityEcological context, size, connectivity • Consistency with priorities• Key ecological processes like fire and flood• Key ecological processes, like fire and flood• Management security
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www conservationregistry orgDefenders of Wildlife
www.conservationregistry.org
Status of EnvironmentalStatus of Environmental Markets
Growing, but constrained by – Lack of standard metrics– Limited information – Lack of infrastructure for transactions
Illiquid nature of financing instruments– Illiquid nature of financing instruments
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Potential Pitfalls • Won’t scale, ecologically or economically • Random projects without contextj• Imbalance -- complexity and practicality• Poor integration -- government silos• Poor integration -- government silos
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More Potential Pitfalls
• Maximize one value, damage others • Inability to mix and match funding • Too few buyers • Risk-averse gatekeepers
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More Potential Pitfalls
• Traded like commodities• Mismatch between science and marketsMismatch between science and markets • Too much or too little regulation
P bli l d k t• Public lands swamp markets• Distorted land prices• Visibly bad projects
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Potential for Ecosystem Service Markets: Reasons for Optimism• Cap and trade legislation• Federal agencies – Office of EcosystemFederal agencies Office of Ecosystem
Services• National Ecosystem Services Partnership• National Ecosystem Services Partnership • Oregon’s policy dialogue
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More Reasons for Optimism
• Emphasis on accountability outcomes• Emphasis on accountability, outcomes • Companies, shareholders want eco
f i dl ifriendly image• Infrastructure – registry, trading platforms• Willamette Partnership. Bay Bank
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C t tContact:
Sara VickermanSenior Director, Biodiversity PartnershipsDefenders of WildlifeDefenders of WildlifeE-mail: [email protected]: 503 697 3222Telephone: 503-697-3222
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