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Ecosystem Services Markets

What markets do | How they work | Real-life examples


What ecosystem services markets do

Worldwide, there is growing interest in harnessing market forces to drive conservation and restoration. Market-based approaches do the following:

  • They provide a pivotal link between people willing to pay for actions that improve and protect our environment and those who can take those actions.
Ecosystem services are things that natural systems do for people, such as purifying and cooling water or storing carbon dioxide.
Key Market Participants
  • They identify specific environmental products and services that result from restoring and protecting our environment. In much the same way that farmers are able to describe the specific quantity and quality of things they grow, like corn and tomatoes, they can now also describe the specific quantity and quality of specific environmental products and services they can create, like fish and wildlife habitat, water storage, and purification.
  • They create economic incentives for cities, industries, and businesses that have unavoidable impacts on the environment to fund meaningful conservation and restoration actions.
  • They create opportunities for those people who can restore and maintain ecosystem services to get paid for doing so.
  • They target conservation and restoration toward strategic locations.
  • They involve the private sector in conservation and restoration and increase cooperation among diverse parties, such as business, environmental, and agricultural interests.
  • They marry the economy and the environment, creating new business opportunities while increasing the pace, scope, and effectiveness of conservation and restoration.

How markets work

The concept behind ecosystem service markets is fairly simple. Environmental regulations set standards to protect natural resources. Industries, businesses, developers, and individuals who change the land or water must either meet these regulatory standards or compensate for the impacts they cannot avoid.

A developer who cannot avoid impacts to a wetland must replace it, either on site or elsewhere. Cities and industries must clean and cool wastewater before releasing it into a river.

Where impacts cannot be avoided completely or where a resource can be better protected elsewhere, ecosystem service markets provide a way for regulated parties (buyers) to pay other land and water managers (sellers) to restore wetlands, reconnect river floodplains, preserve prairies and forests, plant trees along streams, or improve the ecosystem in other ways.

Is this for real?

Ecosystem services markets are already in place in Oregon, the United States, and elsewhere in the world. Here are some examples:

  • In Oregon, wetland mitigation banks are allowed to sell credits to offset unavoidable impacts to a natural wetland impaired by a development project.
  • In Oregon’s Tualatin River basin, a water resources agency avoided investing more than $60 million in technological upgrades by restoring 35 miles of 150-foot-wide stream buffers and paying farmers competitive rates for using their land for restoration.
  • The U.S. Fish and Wildlife Service has developed a conservation banking program that allows developers who cannot avoid causing adverse effects on endangered species to invest in banks elsewhere that restore or protect equivalent habitat. Most of these banks are in California, but the Oregon Department of Transportation is developing two banks to conserve Oregon chub, an endangered fish.
  • The Kyoto Protocol stimulated the development of a cap-and-trade system for carbon dioxide emissions in most industrialized countries, although not in the United States.

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