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
Feb 25, 2016
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
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
777
Biodiversity Compensation Programs
888
EXISTINGUnited States
Wetland & Endg Species MitigationAustralia
Biobanking (NSW)BushBroker (Victoria)Native Vegetation Offsets (South)
Canada – Wetland Mitigation Banks
INTERESTEDFranceUK South Africa New Zealand Others
888
99
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)
9999
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Voluntary Programs
• BBOP
• Malua BioBank
• Gopher Tortoise Habitat Credit Bank
• Climate, Community Biodiversity Standards
10101010
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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)
11111111
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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
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
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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