- Ecosystem markets recognize nature's values in $ - tonynetone
The days of calling environmental pollution "externalities" are almost over. The days of accounting for the value of complex ecosystem functions - previously the sole purview of ecologists - may be dawning. By the end of 2010, three new trading platforms for the exchange of ecosystem credits will have opened in the past 16 months.
What is an ecosystem market?
For eons, ecosystems have supported human civilizations in myriad ways that, until recently, were largely unrecognized. Societies harvested timber, wild game, water and cultivated a diversity of crops. However, the abundance of the timber and game, the purity of the water, and the richness of the soil were simply considered part of the package. Now, scientists know better.
Soils won't support crops without organic inputs, earthworms, and in most cases, pollinating bees. Wildlife won't increase without sufficient habitat, movement corridors, and migration stopovers. Water cannot remain pure without wetlands and forested watersheds to hold and filter the rain that runs into the rivers. Yet these are the very processes, sometimes called ecosystem services, that are most often degraded by human activities such as chemical fertilizers, construction, and clear cuts.
Enter ecosystem markets. The founders of the Willamette Partnership, the Bay Bank, and Mission Markets Earth view ecosystem markets as a means of inspiring ecological stewardship. They intend to inspire that stewardship by recognizing its inherent value in the way that seems to count most in this world: helping people to pay for it.
Ecosystem markets will allow investors, businesses, and interested parties to make discrete and highly measured purchases of a broad variety of ecosystem services. The purchases may be in response to regulatory drivers, such as the no net loss wetland provision of the Clean Water Act, or the purchases may be voluntary, such as carbon offsets purchased by a company that wishes to zero out its carbon footprint.
From carbon credits to fisheries catch shares
Ecosystem markets have been evolving rapidly since the opening in 2005 of the EU Emissions Trading Scheme, the world's first carbon market. However, they are building on decades of work by scientists, nonprofit conservation organizations, and forward-thinking green businesses. For example, the concept of fisheries catch shares, first touted in the United States by the Environmental Defense Fund in 1990, is a concept long advocated by economists and successfully employed in other countries before the United States. As of 2010, 16 federal catch share programs regulate fisheries in the U.S., according to EDF's "U.S. Catch Shares" summary (accessed 9-24-2010).
Catch shares work in the same way that most ecosystem markets work: by setting up a program that expressly recognizes the economic value and ownership of a commodity, in this case the right to a certain portion of the catch. This gives fishers the incentive to conservatively manage their catch, since they benefit when a healthy fishery grows more productive.
Ecological functions as economic assets
The business community increasingly recognizes the value of ecosystem services that are less tangible than fish or timber. The carbon markets that have sprung up as a result of the Kyoto Accord and voluntary efforts to combat global warming are an excellent example. A tree's ability to take carbon out of the atmosphere, or sequester it, is valued as a means of offsetting carbon emissions in most markets. Although the accounting methodologies for carbon offsets are still controversial, their value is reflected in the markets.
The Willamette Partnership in Oregon is pioneering credits for water temperature. This may seem strange until considered from a cold-water salmon's point of view. The Bay Bank, established to foster improved environmental stewardship in the Chesapeake Bay region, seeks to help small landowners estimate all the kinds of ecosystem credits their property could generate through a program called Landserver.
Ecosystem service markets, particularly carbon markets, began as a response to regulations. As of 2010, in carbon at least, compliance transactions are where most of the money is. Yet voluntary transactions in carbon and other ecosystem markets will grow. These are the markets supported by individuals and businesses, which because of stakeholder, investor or consumer demands, will take the initiative to voluntarily decrease their ecological footprints by purchasing "offsets" for their impacts.
Michael Van Patten, founder of Mission Markets Earth, believes that the voluntary market component will be key to the economic valuation of viable ecosystems in the long term. "In addition to regulatory participants, we need nontraditional buyers who are not subject to purchase by regulations, the voluntary buyers," he says, because compliance markets are not currently broad enough to counter our overall impact on the planet's resources. With sufficient vision, voluntary markets just might be.
