From: WorldWatch Institute
Published January 13, 2009 08:20 AM
Ecosystem Markets Take Off
While global financial markets crumble, a new form of markets is on the
rise.
Ecosystem markets, exchanges of nature's various services, are adding new
dimensions to conservation. In addition to using regulation to restrict
development, more countries are turning to the invisible hand of the market
to protect biodiversity, clean waterways, and fight climate change.
In a nutshell, market-based
approaches assign an economic value to ecosystem services such as
erosion control, flood buffers, and clean air. In some circumstances,
developers are allowed to pollute or transform a valuable habitat as long as
the affected ecological services are offset through separate habitat
preservation, water conservation, or greenhouse gas reductions.
Supporters praise the approach for its promotion of conservation funding
at a time when financial resources are scarce. But critics suggest the
market is a last resort that indicates governments may be neglecting their
duty to protect ecosystems as habitats come under increasing levels of
stress.
The most widely known ecosystem commodity is carbon. The global carbon
market - exchanges of mandatory or voluntary greenhouse gas reductions -
rose 84 percent in value last year, according to the research group New
Carbon Finance, which released a report on the topic last week.
The net worth of the carbon market was estimated at $118 billion in 2008,
and the report predicted its value could grow to $150 billion this year as
carbon prices rise on the European carbon exchange, known as the EU
Emission Trading Scheme.
Due in part to the success of carbon markets, more countries are
experimenting with market exchanges that seek to protect biodiversity and
clean water as well.
With biodiversity
banks, for example, landowners who cannot legally develop their property
because of the presence of an endangered species or a wetland can collect
payments or "credits" from the conservation of their land . Once the
property is preserved, the landowner sells the credits to developers who
need to offset development that occurs where similar habitats are found.
About $3.4 billion of regulated biodiversity offset transactions occur per
year, the research group Ecosystem
Marketplace estimated in a report
released last year [PDF].
"We're finally looking at the opportunity to capture much more capital
market investments to spend on conservation," said Michael Jenkins,
president of Forest
Trends, a sustainable forestry think tank that launched Ecosystem
Marketplace in 2005. "There's never enough money through private foundations
or agencies to address these issues."
The markets are most developed in the United States, where wetland offsets
first appeared in the 1970s, but more countries are showing interest. Australia launched
an active biodiversity offset program in 2006, and several countries require
some form of environmental offset to allow any impact on a protected area.
Ecosystem Marketplace predicts the biodiversity markets will grow to $4.5
billion by 2010 due to continued interest in the United States and
Australia.
Although the markets are growing, economic recessions worldwide may affect
the offset markets. "Ultimately it'll be about the bottom line, so there is
potential for some additional investments in offsets to slow down," said Joe
Kiesecker, science director for The
Nature Conservancy's Rocky Mountain region. "But once developments move
forward, the process will continue."
With water
markets, governments typically cap the level of degradation allowed in a
given area and allocate pollution permits that can then be traded among the
polluters. Similar programs are now found in North America, Europe, Africa,
and Australia. The size of actively trading water markets is expected to
reach $500 million by 2010, Ecosystem Marketplace estimates.
As a sign of the growing interest in ecosystem markets, the U.S. Department
of Agriculture is creating the first office dedicated solely to these
emerging conservation strategies. The new Office
of Ecosystem Markets and Services is tasked with creating uniform
guidelines for the numerous markets, with an initial focus on carbon
sequestration standards for agriculture and forestry.
Sally Collins, the office's first appointed director, said she was
originally skeptical of the use of markets to protect ecological services.
She eventually embraced the approach and began to implement market-based
conservation strategies in her former role as the associate chief of the
U.S. Forest Service.
"The regulatory framework that is so critical was driving people to do just
the bare minimum. It was not doing enough to protect the land," Collins said
in an interview. "Something different was needed."
Supporters of emerging ecosystem markets still acknowledge that the programs
are not
without their flaws. The offsets at times do not replace the lost
ecological services - for instance, wetland offsets do not always provide as
much habitat or flood control as the original ecosystem. For the markets to
work, and for conservation efforts to succeed, the programs rely heavily on
proper oversight and enforcement.
If successful, the shift in conservation strategy toward ecosystem services
not only redefines the rationale for protecting a habitat, but it could also
reshape the traditional role of rural areas, said Sara Scheer, president of
Ecoagriculture Partners, a conservation research group.
"Historically we considered rural America as a way we got our food, where we
found our parks," said Scheer, a contributing author to the Worldwatch
Institute publication State
of the World 2009. "Now we realize it has a really powerful role in
providing ecosystem services."
Ben Block is a staff writer with the Worldwatch
Institute. He can be reached at bblock@worldwatch.org.
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