Getting Started
with
Payments for Ecosystem Services
Getting Started
with
Payments for Ecosystem Services
MODULE TWO:
Existing Markets and
Payments Schemes for
Ecosystem
Services
October 2009
United States Forest Service
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Existing Markets and Payments Schemes
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Module 2: Existing Markets and Payment Schemes
for Ecosystem Services
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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
 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)
 Water Quality Trading (U.S.)
 Wetlands and Species Credits (U.S.)
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Environmental Markets & Payments for Services
Carbon trading
(regulatory and
voluntary)
Carbon trading
(regulatory and
voluntary)
Water-related
payments (public
sector)
Water markets
(regulationdriven)
Biodiversity
trading
(regulation-driven)
Water payments
(public sector
funding)
Carbon trading
(regulation-driven)
Water payments (B2B &
public sector)
Water payments
(B2B)
Biodiversity
transactions (B2B)
Biodiversity
transactions (B2B)
Water markets (public
sector funding)
Water payments
(public sector)
Biodiversity
trading
(regulation-driven)
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A Review of Existing Markets
Policy or Regulation-based
Open-Trading Schemes
Markets that require
sufficient liquidity and
transferability, low
transaction costs and
good access to
information
Regulatory
Markets
Voluntary
Markets
Voluntary
or Private
Transactions
Public Payments
Payments to propertyowners who agree to
adopt land
management practices
associated with the
maintenance of
ecosystems
Government
Payments
Government
Taxes
Self-Organized Deals
Individual beneficiaries of
environmental services contract
directly with providers of these
services.
Landowner (or
NGO) to
Landowner
Multi-Buyer
Consortium
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Categories of Services/ Markets
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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
EXISTING
United States
Wetland & Endg Species Mitigation
Australia
Biobanking (NSW)
BushBroker (Victoria)
Native Vegetation Offsets (South)
Canada – Wetland Mitigation Banks
INTERESTED
France
UK
South Africa
New Zealand
Others
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U.S. Species Banking
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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
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BBOP
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Climate, Community
Biodiversity Standards
Malua BioBank
Gopher Tortoise Habitat
Credit Bank
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Water payments
Payments for Watershed services
(quality & quantity)
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Paying land owners (ex. Heredia,
Costa Rica/ Perrier Vittel)
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Purchasing land (Water Conservation
Fund in Quito)
Nutrient trading
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Nitrogen, phosphorus, sediments
Small pilot programs across the
United States (Ohio’s Miami
Conservancy District)
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Nutrient trading: challenges
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Not easily commoditized (not carbon)
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Could become a series of large markets
But markets want to be global and this
will happen on watershed scale so
smaller size (watershed)
Think Chesapeake, Ohio
Forest Trends “Chesapeake” Fund
Source: EPA
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Carbon Markets
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The most global environmental
market as a result of Kyoto
Protocol, which drives European
Emissions Trading System (EU
ETS)
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Non- Kyoto carbon markets
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Voluntary carbon markets
US carbon markets
Markets for biological
carbon sequestration
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Universe of Carbon Markets in 2009
CDM
$2.7
Billion
EU ETS
$118 Billion
AAU
$2 Billion
Total value, 2009:
US$143,727 Billion
Voluntary
OTC
$326 Million
JI
$354
Million
RGGI
$2.2 Billion
NSW
$117 Million
Source: Ecosystem Marketplace and World Bank
Chicago
Climate
Exchange
(expired)
$50 Million
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Role of Forests, Soil and Agriculture
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Emission source and sink
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Balance carbon flows
Landowners and farmers
critical political
stakeholders
Green carbon underutilized 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)
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CA Air Resourced Board (ARB) to allow offsets from
avoided deforestation in Chiapas and Acre
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Signal of sub-national activity in the US in absence
of federal carbon trading
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
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Difficult to track
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Demand for real benefits
(honing requirements)
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Growth in Infrastructure
(TZ1 pilot registry for CA
species banking; Bay
Bank)
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Carbon as entry point for
many investors
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Blazing Trails…
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Voluntary market mental
model
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Innovation across the globe
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Multi market systems
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Stacking, bundling
questions
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