Long skewed heavily in favor of “provisioning” ecosystem services like timber, fuel, food crops, and irrigation water, markets are beginning to change. In recent decades, they have begun focusing on what the Millennium Ecosystem Assessment (MA) calls “supporting” and “regulating” services, which are not as tangible but support ecosystem health.
Two Examples of Markets that Value Supporting and Regulating Ecosystem Services
Federal regulations have recognized the value of some ecosystems and their services for at least the past 40 years, resulting in a number of different modes of establishing their market value. Wetland mitigation banks established in response to federal "no net loss" of wetlands policies are one such example. The pollution permitting system established by the Environmental Protection Agency (EPA) to reduce acid rain is another.
Under Section 404 of the Clean Water Act, the EPA and U.S. Army Corps of Engineers currently require that "unavoidable" loss of wetland acreage and function be mitigated by protecting, restoring, or even creating wetlands. The market has responded by creating nonprofit and commercial mitigation banks with the sole purpose of selling credits in wetlands that will be protected and managed in perpetuity.
EPA data on the Status of Mitigation (accessed Jan. 17, 2010) show that the number of mitigation banks has grown exponentially since 1992. In 2005, the year for which latest data are available, a total of 450 banks had been approved, most of which sell their credits to third parties.
As a result of 1990 Clean Air Act amendments to stop acid rain, EPA established a system for trading pollution allowance permits to reduce sulfur dioxide (SO2) and nitrogen oxides. Both are primary pollutants that cause acid deposition. The system makes it expensive to pollute by assigning monetary value to the ability to emit waste into the air.
The system has been highly successful. According to EPA Data on Clean Air Markets (accessed Jan. 17, 2010) from 1990 to 2008, SO2 emissions decreased from 15.7 million tons annually to 7.6 million tons, a reduction of more than half. The goal of the program is to decrease acid rain while providing flexibility to pollution sources in selecting the most cost-effective approach to reducing their emissions. This is the model that has, in large part, given rise to the push for carbon trading markets.
Markets Work, But They Must Be Well-Designed
The implications of turning ecosystem services into "tranches" with recognized dollar and cents values are many and controversial. Some conservationists support this approach, which appears to have more traction among voters and businesses, while simultaneously worrying about its efficacy. In light of recent market excesses, questions about the vulnerability of markets to manipulation and the ability of markets to reflect true ecological values are common.
A number of voluntary carbon markets have sprung up during the 00‘s decade, organized along the lines of EPA’s acid rain pollution allowance trading scheme. Mandatory carbon reductions have been established by the European Union, with an Emission Trading System in place since 2005. Results have been lackluster, however, many blaming the low price of carbon permits on initial free allocations of permits to polluting industries.
In a February 23, 2009 article in the UK’s Guardian entitled, “A collapsing carbon market makes mega-pollution cheap,” author Julian Glover writes “The lesson of the carbon slump, like the credit crunch, is that markets can be a conduit, but not a substitute, for political will. They only work when properly primed and regulated.”
Some organizations have pointed out the perverse incentives that may result from poorly designed systems. For example, Friends of the Earth critiques the program known as Reducing Deforestation in Developing Countries (REDD). REDD is meant to allow developing countries to receive funds for preserving their forests by selling carbon credits that will offset emissions elsewhere. A Friends of the Earth case study (accessed Jan. 17, 2010) states that “written into the small print of REDD is a clause allowing monoculture plantations to be counted the same as pristine rainforest.”
What About Ecosystem Functions to Support Animals and Plants?
The ultimate hesitation that some concerned individuals feel about the monetization of ecosystem services is its very focus on services (of benefit to people), rather than functions (of benefit to all life). Such a focus implicitly assumes that only ecosystem elements important to humanity have value, leaving out the array of elements that are essential to the rich diversity of species on planet Earth.
A valid question is whether there is really any workable way to draw lines between what in the natural world is and is not of benefit to people. And how will markets, which are so good at focusing on narrowly defined economic trades, incorporate the true value of ecologically complex elements like biodiversity or the water cycle?
Certainly ecosystem services are likely to continue gaining in value and prominence. On the other hand, the need for conservationists dedicated to protecting the natural world for its own sake will doubtless also remain high.
Join the Conversation