Ecosystem Markets in EnviroAtlas
One approach to safeguarding ecosystem services is through incentive mechanisms for conservation, including markets. With ecosystem services markets, companies, communities, and other beneficiaries pay landowners and managers to protect, restore, or mitigate for impacts to ecosystems.
USDA Office of Environmental Markets, EPA, and Forest Trends’ Ecosystem Marketplace have partnered to incorporate environmental markets data into EnviroAtlas. The environmental markets data layers show where markets for wetlands and streams, watersheds, forest carbon, and imperiled species/habitats have been implemented by various organizations. The data layers also provide information about the markets and the policies or conditions that have enabled them.
By integrating these data layers with other EnviroAtlas data, the market data can be viewed in the context of ecosystem services. The integration allows users to understand trends, gaps, and opportunities, as well as make inferences about demand and enabling or limiting conditions for environmental markets.
Ecosystem Markets Data Available in EnviroAtlas
Ecosystem Markets data layers are available for the nation, showing point and polygon data for ecosystem market initiatives and enabling conditions operating at a variety of scales, from national to local. These data are organized according to the targeted asset – wetlands and streams, watersheds, forest carbon, imperiled species/habitats — or enabling conditions.
- Data are available for markets (i.e., entire region that shares market infrastructure and rules, or a larger program encompassing many smaller projects) and projects (i.e. land areas comprising project sites) addressing ecosystem services protection in the United States.
- Data are also available for enabling conditions, including enabling policy, regulatory drivers, and guidance.
- The data were collected via surveys and desk research conducted by Forest Trends’ Ecosystem Marketplace from 2008 to 2016.
- Additional wetland/stream and imperiled species/habitats data were obtained from the U.S. Army Corps of Engineers Regulatory In-lieu Fee and Bank Information Tracking System (RIBITS) database in 2015.
- The data were produced by Forest Trends’ Ecosystem Marketplace for EnviroAtlas in order to support public access to and use of information related to environmental markets.
About Ecosystem Markets Asset Types
- Globally, investments in watershed health and services compose the largest category of payments for ecosystem services in terms of annual transaction values.
- Watershed markets and payments invest in naturally water-rich ecosystems, such as wetlands, forests, and healthy river systems.
- Mechanisms for watershed markets range from simple contracts between a buyer and seller to deliver cleaner or more reliable water, to sophisticated markets for trading water quality credits or water rights to restore instream water levels.
- Buyers in these markets are willing to pay to restore or protect healthy landscapes in exchange for benefits like clean water, aquifer recharge, and reduced flooding risk.
- All investment mechanisms originate with a utility, government, business, or other party that assigns value to a watershed service or set of services and agrees to pay providers of that service accordingly.
- For example, a beverage company might be willing to pay local farmers $100,000 per year to reduce pesticide use, when treating polluted water would otherwise cost $150,000 per year. In this scenario, an individual farmer might be willing to limit their pesticide use for $3,000 per year, if this amount covered their costs to switch to other methods or compensated them for foregone income.
- Watershed markets and payments are sometimes used to comply with regulations, such as elements of the Clean Water Act. In other cases, investing in “green infrastructure” may be a voluntary strategy to save money, reward good stewardship, or demonstrate good corporate citizenship.
- Forest carbon offset transactions may be either voluntary or compliance-driven. A voluntary carbon marketplace refers to carbon offsets sales that are purchased with the intent to re-sell or retire offsets to meet “carbon neutral” or other environmental goals, rather than for compliance purposes under a regulated carbon market.
- Voluntary demand for carbon offsets is driven by companies and individuals that take responsibility for offsetting their own Greenhouse Gas emissions, as well as entities that purchase pre-compliance offsets before emissions reductions are required by regulation.
- Purely voluntary buyers may consider corporate social responsibility, ethics, and reputational or supply chain risk when purchasing offsets.
- Voluntary carbon markets co-exist with compliance offset markets, which operate at a significantly larger scale and are driven by mandated caps on GHGs. Compliance carbon markets are marketplaces through which regulated entities obtain and surrender emissions permits (allowances) or offsets to meet predetermined regulatory targets. In the case of cap-and-trade programs, participants – often including both emitters and financial intermediaries – are allowed to trade allowances to make a profit from unused allowances or to meet regulatory requirements.
- Voluntary carbon markets are often smaller than compliance offset markets and more flexible – spinning off innovations in project finance, monitoring, and methodologies that also influence regulatory market mechanisms.
Imperiled Species and Habitats
- Imperiled species and habitats markets are designed to reduce negative impacts on biodiversity. These avoidance and compensation mechanisms finance conservation and restoration projects that deliver environmental benefits comparable to or “above and beyond” any negative impacts being offset. Typically, this mitigation is driven by a policy goal of “no net loss” of species, habitat, and/or cultural and human use values.
- In the United States, the need to be compliant with an existing or anticipated future regulation drives many imperiled species and habitats markets.
- These markets are typically structured around the ‘mitigation hierarchy,’ which establishes that market-based tools should be used only after efforts have been made to (first) avoid damage, (second) minimize impact, and (third) mitigate negative impacts to species and/or habitats.
- The government can set a regulatory limit on allowable negative impacts to a species or habitat and then allow the market to resolve the cost of offsetting impacts above that limit or ‘cap.’
- Biodiversity compensation can also be voluntary rather than regulation-driven. Companies may be motivated to voluntarily mitigate their impact of biodiversity because of corporate social responsibility policies, profit motivations, consumer demand, or in advance of anticipated new regulation (known as “pre-compliance”).
Wetlands and Streams
- Wetland and stream markets are designed to reduce negative impacts on aquatic resources.
- These compensation mechanisms finance conservation and restoration projects that deliver environmental benefits comparable to or ‘above and beyond’ the mitigated adverse impact. In the United States, the need to be compliant with a regulation drives most wetland and stream markets.
- The largest market for wetland conservation in the United States is a national wetland and stream offsets program (called “compensatory mitigation”) driven by the Clean Water Act (§404) and the principle of “no net loss” of wetlands.
- Markets are typically structured around the ‘mitigation hierarchy,’ which establishes that market-based tools should be used only after efforts have been made to (first) avoid damage, (second) minimize impact, and (third) mitigate negative impacts to natural resources.
- Compensatory mitigation ranges from rigorous and measurable offsets to less direct efforts to compensate for impacts through financial donations and land protection
Ecosystem Markets Enabling Conditions
Enabling policies, regulation, and guidance facilitate the development and operation of ecosystem markets by creating the drivers, legal frameworks, or direct funding sources for ecosystem services conservation. Enabling conditions are found at multiple scales, ranging from the watershed scale to state- and national-scale policies.
Learn More about Environmental Markets:
- Forest Trends Association. 2016. Mitigation hierarchy. Business and biodiversity offsets program. Accessed March 2016.
- Forest Trends’ Ecosystem Marketplace. 2015. Ecosystem markets and finance: A global primer. Accessed March 2016.
- Salzman, J. 2005. Creating markets for ecosystem services: Notes from the field. New York University Law Review 80(6): 101–184.
- Forest Trends’ Ecosystem Marketplace. 2014. Gaining depth: State of watershed investment 2014. Forest Trends, Washington, D.C.
- Goulder, L.H., and A. Schein. 2013. Carbon taxes vs. cap and trade: A critical review. Working Paper 19338, National Bureau of Economic Research, Cambridge, Massachusetts. 38 p.
- New Forests. 2014. Conservation assets: Forest carbon and mitigation banking. New Forests Sector Overview. Accessed March 2016.
- USDA Office of the Chief Economist, Office of Environmental Markets, Accessed October 2016.