Getting Started with Payments for Ecosystem Services
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Getting Started with
Payments for Ecosystem Services
October 2009
Getting Started with
Payments for Ecosystem Services
United States Forest Service 1
MODULE TWO: Existing Markets
and Payments Schemes for Ecosystem Services
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Existing Markets and Payments Schemes
• Module 2: Existing Markets and Payment Schemes for Ecosystem Services • Early Environmental Markets • Environmental Markets and Payments for Services • A Review of Existing Markets• Categories of Services/ Markets • Biodiversity Compensation and Offsets • Water Payments and Nutrient Trading • Carbon Markets Summary• US Legislative Activity• Regional Highlight: California• Multi-Market Trends
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Early Environmental Markets
Water Quality Trading (U.S.) Wetlands and Species Credits (U.S.)
Capped Issuance of Hunting and Fishing Licenses Limited, Sellable Water Use Rights Cap-and-Trade Trading in Pollutant Allowances of Sulfur
Dioxide (U.S., 1990s)
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Environmental Markets & Payments for Services
Water markets (regulation-
driven)
Water markets (public sector funding)
Water payments (B2B & public sector)
Biodiversity trading
(regulation-driven)
Biodiversity trading
(regulation-driven)Biodiversity
transactions (B2B)
Biodiversity transactions (B2B)
Carbon trading (regulatory and
voluntary)
Carbon trading (regulation-driven)
Carbon trading (regulatory and
voluntary)
Water payments (B2B)
Water payments (public sector)
Water payments (public sector
funding)
Water-related payments (public
sector)
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A Review of Existing Markets
Policy or Regulation-based Voluntary or Private
Transactions
Public Payments Payments to property-owners who agree to
adopt land management practices
associated with the maintenance of
ecosystems
Self-Organized DealsIndividual beneficiaries of
environmental services contract directly with providers of these
services.
Open-Trading Schemes Markets that require
sufficient liquidity and transferability, low
transaction costs and good access to
information
Regulatory Markets
Voluntary Markets Government
PaymentsGovernment
TaxesLandowner (or
NGO) to Landowner
Multi-Buyer Consortium
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Categories of Services/ Markets
• Biodiversity
• Water
• Carbon
• Others: Scenic beauty (eco- tourism), bundled services (land trusts, conservation easements)
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Biodiversity: The Anti Commodity
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Biodiversity Compensation Programs
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EXISTINGUnited States
Wetland & Endg Species MitigationAustralia
Biobanking (NSW)BushBroker (Victoria)Native Vegetation Offsets (South)
Canada – Wetland Mitigation Banks
INTERESTEDFranceUK South Africa New Zealand Others
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U.S. Species Banking
• Species banking started in the early ’90s & wetlands in early ‘80s
• ~115 species & 800 wetland & habitat banks in the US
• Species offset & banking - $200-300 million in 2007
• Wetlands offsets & banking $3 billion in 2007 (ELI)
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Voluntary Programs
• BBOP
• Malua BioBank
• Gopher Tortoise Habitat Credit Bank
• Climate, Community Biodiversity Standards
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Water paymentsPayments for Watershed services
(quality & quantity)
• Paying land owners (ex. Heredia, Costa Rica/ Perrier Vittel)
• Purchasing land (Water Conservation Fund in Quito)
Nutrient trading
• Nitrogen, phosphorus, sediments
• Small pilot programs across the United States (Ohio’s Miami Conservancy District)
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Nutrient trading: challenges
• Not easily commoditized (not carbon)
• But markets want to be global and this will happen on watershed scale so smaller size (watershed)
• Could become a series of large markets
Think Chesapeake, Ohio
Forest Trends “Chesapeake” Fund
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Source: EPA
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Carbon Markets
• The most global environmental market as a result of Kyoto Protocol, which drives European Emissions Trading System (EU ETS)
• Non- Kyoto carbon markets
• Voluntary carbon markets
• US carbon markets
• Markets for biological carbon sequestration
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AAU$2 Billion
CDM$2.7
Billion
RGGI$2.2 Billion
EU ETS$118 Billion
Chicago Climate
Exchange (expired)
$50 Million
NSW $117 Million
JI$354
Million
Universe of Carbon Markets in 2009
Total value, 2009: US$143,727 Billion
Source: Ecosystem Marketplace and World Bank
Voluntary OTC
$326 Million
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Role of Forests, Soil and Agriculture
• Emission source and sink
• Landowners and farmers critical political stakeholders
• Balance carbon flows
• Green carbon under-utilized in market based climate change solutions
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Active Forest Carbon Offset Projects
Source: www.forestcarbonportal.com
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US Legislative Activity
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• Federal History • Waxman – Markey • Kerry – Boxer • American Power Act • Agriculture plays a powerful role in
Senate politics• Legislation stalled, states looking to
state and regional programs
• Voluntary (“pre-compliance”) markets prevail in the US
• Patchwork of regional compliance schemes• The Regional Greenhouse Gas
Initiative (RGGI)• Assembly Bill 32, Global Warming
Solutions Act
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Regional Highlight: California
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• Global Warming Solutions Act – AB32
• CA electorate 61.3%, CA Air Resources Board 9-1 in favor cap/ trade
• Polluting industries buy/sell emission allowances
• By 2020 emissions limited to 1990 levels
• Future for REDD • Companies unable to reduce
emissions to target levels can ‘offset’ with forest conservation in tropical countries
• 74 million tons of CO2 reductions from offset credits by 2020
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Regional Highlight: California
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• California (US), Acre (Brazil), Chiapas (Mexico)
• Signal of sub-national activity in the US in absence of federal carbon trading
• CA Air Resourced Board (ARB) to allow offsets from avoided deforestation in Chiapas and Acre
• REDD credits sold as offsets to CA industrial emitters in 2nd and 3rd compliance periods
• Forestry projects in the 1st period: reforestation, improved forest management, avoided conversion
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Multi-market trends• Difficult to track
• Demand for real benefits
(honing requirements)
• Growth in Infrastructure
(TZ1 pilot registry for CA
species banking; Bay
Bank)
• Carbon as entry point for
many investors
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Blazing Trails…
• Voluntary market mental
model
• Innovation across the globe
• Multi market systems
• Stacking, bundling
questions
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