usda forest servicenortheastern area, state and private forestry ecosystem service market...

USDA Forest Service Northeastern Area, State and Private ForestryUSDA Forest Service Northeastern Area, State and Private Forestry

Ecosystem Service Market Opportunities & Partnerships Workshop

August 20, 2008 – Ft. Collins, Colorado

Jay Jensen, Western Forestry Leadership Coalition

Prepared by / Adapted from:Albert H. Todd, NA Watershed Program Leader

Potential Markets for Potential Markets for Watershed ServicesWatershed Services

Potential Markets for Potential Markets for Watershed ServicesWatershed Services


Nature is humanity’s landlord….and we have been getting a great

deal on rent and utilities!

R. Bruce Hull


Goals of PresentationGoals of PresentationGoals of PresentationGoals of Presentation

• Describe markets and issues• Examples


Valuing Ecosystem Valuing Ecosystem ServicesServicesValuing Ecosystem Valuing Ecosystem ServicesServices• Global Environmental Services are over US $ 33 trillion annually (Costanza, 2005)

• Chesapeake Bay – over $30 billion annually from trees alone - more than seafood industry. *does not include water or recreation benefits) (TCF & Forest Service, 2006)


Putting a value on waterPutting a value on waterPutting a value on waterPutting a value on water• Water is currently free!• Take services for granted • No consequences for loss• Undervaluing leads to overuse • Concern: commoditizing water as a

forest ecosystem service may devalue or ignore other benefits (intrinsic)


What are the What are the hydrologic hydrologic services of forest services of forest lands?lands?

What are the What are the hydrologic hydrologic services of forest services of forest lands?lands?

• slow the rate of runoff• reduce soil erosion and sedimentation in waterways• filter contaminants that influence water

chemistry• provide stable annual water flow in a

watershed• increase or decrease groundwater recharge• sustain aquatic system productivity – temp,

habitat

Forest functionsForest functions


Key influences in the Key influences in the development of markets for development of markets for watershed services?watershed services?

Key influences in the Key influences in the development of markets for development of markets for watershed services?watershed services?• Urgency/scarcity is now real (of supply or quality)

• Climate change effects first felt in the water cycle• Location matters – carbon is global, water is local• Complexity – a ton of carbon is a ton of carbon –

water services are tougher to define • Water is a property right• Many types of users • Many types of solutions


Potential watershed Potential watershed service buyers… service buyers… Potential watershed Potential watershed service buyers… service buyers… • Agriculture• Drinking water providers• Sewage treatment plants• Big box retailers • Water using industries• State and local governments• Large residential and commercial

developers• Industrial point source polluters and

energy companies


• Tree planting/forest expansion• Riparian buffers/meadow/wetland restoration• Management to enhance water or nitrogen

storage or prevent fire• Avoided deforestation (targeted)• Erosion control• Urban tree canopy• Others…

Potentially eligible practicesPotentially eligible practicesPotentially eligible practicesPotentially eligible practices


Types of Water MarketsTypes of Water MarketsTypes of Water MarketsTypes of Water Markets• 1) Self organized private deals

• 1 to 1 deals• Usually in the absence of regulation

• 2) Trading Schemes• Regulatory standards or pollution caps• Driven primarily by cost

• 3) Public Payment Schemes• Most prominent world-wide• Traditional incentives and new outcome-based

incentives


1) Self organized private 1) Self organized private dealsdeals1) Self organized private 1) Self organized private dealsdeals• Perrier- world’s largest bottler

of water.

• Coor’s Beer – Pure Water 2000

• Nutrient Net – World Resources Institute

Nutrient NetOnline marketplace for water quality tradingNutrient NetOnline marketplace for water quality trading


Sierra Nevada Meadow Sierra Nevada Meadow Restoration Restoration Sierra Nevada Meadow Sierra Nevada Meadow Restoration Restoration • Plumas National Forest• Private ranchers• Reduce sediment to

PG&E hydropower plants• Feather River - 30% of

CA drinking water supply

• Groundwater storage for downstream uses

• Non-consumptive use/change of timing

• New water rights?


Coca Cola CompanyCoca Cola CompanyCoca Cola CompanyCoca Cola Company

• 190 plants in 20 countries • Largest single consumer of water in the world.• Policy to offset production volumes through

environmental flow replenishment• Risk to future supplies is motivation• “The price of water must rise” Joe Rozza, CC Dir of Sustainability)


2) Trading Schemes2) Trading Schemes2) Trading Schemes2) Trading Schemes• Water quality • BMPs that improve WQ (quantified benefit) create

tradable credits (scarcity creates demand)• Non-point land practice vs point source structural• Aspects of the trading market

• Allocation of caps (scarcity creates demand)• Trading ratios – reflect uncertainty• Nutrient reduction calculations – science• Establishment of the baseline – regulated vs

trends• Market structure – institutional and private

intermediaries• Trading activity – experience• Credit Insurance


Chesapeake Chesapeake BayBayChesapeake Chesapeake BayBay

• Voluntary cap (TMDL) for nutrients

• Point sources exceed or are projected to exceed Tributary limits

• EPA Model efficiencies for BMPs

• Cheaper compliance

Forest buffers Forest buffers PA:PA: 40-70% of edge of field N 40-70% of edge of field N and P load based on and P load based on physiographic provinces + physiographic provinces + conversion of land use.conversion of land use. VA:VA: buffer width X ave. buffer width X ave. perimeter of buffer in perimeter of buffer in feet/43,560 ft =acre for land feet/43,560 ft =acre for land conversion. N in # applied X conversion. N in # applied X acreage = credits of acreage = credits of reduction.reduction.

Forest buffers Forest buffers PA:PA: 40-70% of edge of field N 40-70% of edge of field N and P load based on and P load based on physiographic provinces + physiographic provinces + conversion of land use.conversion of land use. VA:VA: buffer width X ave. buffer width X ave. perimeter of buffer in perimeter of buffer in feet/43,560 ft =acre for land feet/43,560 ft =acre for land conversion. N in # applied X conversion. N in # applied X acreage = credits of acreage = credits of reduction.reduction.


Tualatin Watershed Tualatin Watershed (OR)(OR)Tualatin Watershed Tualatin Watershed (OR)(OR)•Sewage Treatment Plant

•Temperature TMDL•Tree planting for

riparian shading•Reconnect floodplains

to cool base flow•$6 million committed by

water utility in lieu of $35 million refrigeration cost


Australia : Australia : Murray Darling BasinMurray Darling BasinAustralia : Australia : Murray Darling BasinMurray Darling Basin• New South Wales• Coastal flooding and salinization due to

land clearing and loss of transpiration• Irrigation farmers purchase transpiration

credits from State forests or private landowners who plant trees upstream.

• Market success may lead to government establishment of forest cover targets


Issues related to WQ TradingIssues related to WQ TradingIssues related to WQ TradingIssues related to WQ Trading• Success limited to date• Time scales • Death by a thousand discounts • Reliance on cost discourages

accounting for multiple benefits• Lack of strong demand drivers• Limited experience


3) Public Payment Schemes: 3) Public Payment Schemes: NYC WatershedNYC Watershed3) Public Payment Schemes: 3) Public Payment Schemes: NYC WatershedNYC Watershed• Drinking water supply

for >6 million people• Protection and

management of forests and agricultural lands

• Invest $30-50 million per year in conservation vs. $7+ billion in capital & $300 million/year in operating costs.


Denver Water CompanyDenver Water CompanyDenver Water CompanyDenver Water Company• Over 80% of the water supply for

over 1.5 million people in the Denver metro area

• Fire and flood events degraded water quality and damaged water treatment and storage facilities

• City funds fuels treatment, road rehabilitation, prescribed burning, fire protection measures in nearby private subdivisions.

• Public education


Vermont Vermont Stormwater Stormwater OffsetsOffsets

Vermont Vermont Stormwater Stormwater OffsetsOffsets• 1264a. Interim stormwater permitting authority

• Offset trading policy• No net increase in sediments

or flow in impaired waters• Developers offset discharge

through BMPs or pay for impervious removal projects or forest protection ($30K/acre )


Equador Equador (Ecodecision)Equador Equador (Ecodecision)• Watershed Protection user fees go into a trust fund

managed by an investment company - farmers• Watershed tariff (1 cent /m3 )on goods that use

water• Drinking water consumers,• Beer/bottled water Co• Electric utilities• Farm production

• 6% of hydroelectric power generation sales returned to municipalities, environmental groups and landowners.

• Similar schemes in Columbia and Brazil.


Costa RicaCosta RicaCosta RicaCosta Rica• Forest protection subsidies - $ from

3.5% national gas tax returned to private landowners ($400 million/year) to protect forests in headwaters of water supplies and rivers of high ecological value

From: the social impacts of payments for environmental services in Costa RicaMiranda, Porras, and Moreno, 2003

From: the social impacts of payments for environmental services in Costa RicaMiranda, Porras, and Moreno, 2003


Other market techniques for Other market techniques for traditional incentives…traditional incentives…Other market techniques for Other market techniques for traditional incentives…traditional incentives…

• Reverse auctions – landowners or other benefit providers bid for public funding (NRCS)

• Watershed service payment model –“Farmers for clean water” – WV- watershed scale enrollment - monthly payments for clean water volume (CIG funding)


Developing Developing Hybrid Hybrid Markets:Markets:

the the “Bay “Bay BankBankTMTM””

Developing Developing Hybrid Hybrid Markets:Markets:

the the “Bay “Bay BankBankTMTM””

• for Chesapeake forests

• Multi-state• Multi-market• Privately led (NGO)• Spatial land registry• Matchmaker.com


Willamette Partnership Willamette Partnership (OR)(OR)Willamette Partnership Willamette Partnership (OR)(OR)

•NGO led•Salmon protection•Bundling multiple

markets, (wetlands, T&E)

•Conservation Registry

•Credit Protocols


Developing water marketsDeveloping water marketsDeveloping water marketsDeveloping water markets• Identify water-related ecosystem services• Define geographic parameters• Determine what can be measured and monitored

and how (third party certification of water)• Identify who supplies & who receives the benefit?• Determine the rights, responsibilities, and rules?• Build coalitions to link downstream and upstream • Link multiple service markets – stormwater, wq,

aquatic health, etc.• Provide political support tougher standards


Forestry Agency Role

•Convene partners and connect efforts

•Create a framework supporting credits & trading ecosystem services•Verifiers / Aggregators

•Provide technical data & information •Learn, test, pilot, & promote project examples


Contact information:Contact information:Albert H. ToddAlbert H. Todd

Watershed Program LeaderWatershed Program LeaderNortheastern Area S&PFNortheastern Area S&PF

[email protected]@fs.fed.us

Jay JensenJay JensenExecutive DirectorExecutive Director

Western Forestry Leadership CoalitionWestern Forestry Leadership Coalition303-445-4366303-445-4366

[email protected]@colostate.edu

www.wflcweb.orgwww.wflcweb.org - - wwwww.na.fs.fed.us/watershedw.na.fs.fed.us/watershed

Contact information:Contact information:Albert H. ToddAlbert H. Todd

Watershed Program LeaderWatershed Program LeaderNortheastern Area S&PFNortheastern Area S&PF

[email protected]@fs.fed.us

Jay JensenJay JensenExecutive DirectorExecutive Director

Western Forestry Leadership CoalitionWestern Forestry Leadership Coalition303-445-4366303-445-4366

[email protected]@colostate.edu

www.wflcweb.orgwww.wflcweb.org - - wwwww.na.fs.fed.us/watershedw.na.fs.fed.us/watershed

usda forest servicenortheastern area, state and private forestry ecosystem service market...

Documents