Regulated buyers are businesses, cities, or utilities that are required to offset environmental impacts that they cannot avoid. These regulated entities sometimes spend millions of dollars each year complying with environmental regulations. A regulated party might choose to buy credits if the environmental parameter being regulated can be addressed more effectively by restoring natural processes at some other site.

Developers, industrial manufacturers, wastewater utilities, and people who build and maintain roads and bridges could all be buyers.

Voluntary buyers can also choose to participate in the market. Voluntary buyers could be:

• Businesses that want to be seen as environmentally responsible
• Foundations or other organizations that want to ensure investment in effective, high-priority ecosystem restoration
• Individuals or organizations that want to offset their environmental impact and be “carbon neutral,” “watershed neutral,” or “ecosystem neutral”

What is the role of buyers?

Buyers drive the market by seeking out the most effective ways to comply with environmental regulations or get the environmental benefit their customers are demanding. In buying credits through the marketplace, buyers pay for land managers to restore wetlands, reconnect river floodplains, plant streamside trees, or take other actions that (1) affect the regulated parameter, (2) restore important ecological functions, and (3) provide broad-scale environmental benefits.

Case study: Clean Water Services

Clean Water Services (the District), an independent special service district located in Northwestern Oregon, provides an example of how payments for ecosystem services can effectively and efficiently meet regulatory requirements related to environmental protection—and deliver a host of other vital ecological benefits in the process.

Clean Water Services provides a variety of services to about 500,000 customers in the Tualatin River Watershed. These services run from wastewater and storm water management, to flood management and habitat protection. With around 93% of the watershed the District serves in private ownership, its options are limited when it comes to mitigating the ecological impact of its activities. This reality, combined with progressive thinking by the District, led the Oregon Department of Environmental Quality to issue an integrated, municipal watershed-based permit in 2004. This unprecedented permit includes, among other things, permission for the District to implement a water quality trading program within its watershed. Generally speaking, this trading program allows Clean Water Services to meet its regulatory obligations related to water quality by paying others, who produced relevant ecosystem services, to mitigate the District's impacts on the watershed.

Clean Water Services currently uses the program to reduce water temperature, or thermal loading, in the watershed. The District's effluent, from wastewater treatment facilities, contributes to the warming of river water. Federal and state regulations demand that this water stay cool (for aquatic species). As a result, the District is required to counter the warming affects of its activities. By paying private landowners to reduce their contributions to thermal loading, by planting native vegetation that shades and cools the water, and by securing conservation easements to maintain healthy stream corridors, Clean Water Services offsets some of its own thermal loading. And, as these private landowners "produce" cooling with less expense through natural means than the District can through unnatural ones, the District realizes a significant savings in costs. Importantly, this reliance on natural capital also produces a number of other valuable ecosystem services for the basin. The plantings and easements provide additional services that built capital cannot, like erosion prevention, carbon sequestration, runoff filtering, and habitat expansion. By taking advantage of the lower costs enjoyed by the private landowners to cool water, Clean Water Services is demonstrating that market-based policy offers a tenable alternative to more prescriptive policy approaches that is both economically efficient and ecologically effective.