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How the US Is Forging a National Ecosystem Marketplace

Alice Kenny

The US Department of Agriculture’s new Office of Ecosystem Markets and Services (OEMS) is just getting off the ground, but once underway it should lead to better coordination not only among agencies charged with regulating various ecosystem service markets, but also among markets for water, biodiversity, and of course carbon.

The US Department of Agriculture’s new Office of Ecosystem Markets and Services (OEMS) is just getting off the ground, but once underway it should lead to better coordination not only among agencies charged with regulating various ecosystem service markets, but also among markets for water, biodiversity, and of course carbon.

2 July 2009 | Shoehorned into temporary quarters at the Department of Agriculture Building in Washington DC, Sally Collins, the first-ever head of the newly-created Office of Ecosystem Services and Markets (OESM), juggles her job while maneuvering her department’s move to permanent offices downtown. The new job, novel business, and temporary home fit well with the unchartered challenges OESM has begun to navigate.

OESM, launched by the Bush administration and embraced by the Obama team, is tasked with developing the first-ever standardized, universal guidelines for developing procedures to measure environmental services benefits, as well as a protocol to report those benefits and “a registry to collect, record and maintain the benefits measured,” in the words of the 2008 Farm Bill that led to the office’s creation (you can download the relevant section to the right).


One Registry for All Credit Types

The new agency will rely on government and private experts to establish an overall eco-market infrastructure, Collins says. That means developing a single standard for each market, and then finding a way to see the creation of a registry where carbon, wetlands, nutrient, biodiversity and other ecocredits can be tracked to make sure the same environmental benefits aren’t being sold twice.

At this point, it’s not clear what form that “registry” would take, but it’s unlikely the office will create one from scratch.

“Given the evolutionary nature of these markets, it’s difficult to tell what the appropriate structure is for registries, let alone what our role should be,” says Mark Nechodom, the office’s deputy director. “It may turn out that the best way for us to fulfill our mandate is to provide light-touch oversight and guidance, and not necessarily a heavily-laden government structure.”

He says it’s conceivable the office would simply coordinate the activities of existing registries, as the Voluntary Carbon Standard did when it created a meta-registry of three different registries.

Rainer Musier is vice president of one of those registries, California-based APX. He says he is not concerned about overlap with OESM.

“Any new standards simply expand the environmental marketplace which is good for the marketplace, good for our clients and good for the environment,” he says.


Greater Accessibility

Whatever emerges, OESM should make it as easy for farmers to trade in the multiple benefits their land may provide – such as flood-control and carbon-sequestration – as it is for them to sell their crops.

“We’re looking at the farm of the future with multiple income strands from a single piece of land,” Collins says.

Some hail this multi-ecomarket framework as the opportunity of a lifetime.

“This is the new Earth Day,” says Richard Brekenridge of the Illinois EPA. “It’s looking at the entire world: land, water, air, carbon, and methane. The challenges and opportunities are fascinating.”

But others reeling from the financial-market meltdown question the value of formalizing this office, placing it under the auspices of the United States Department of Agriculture (USDA) and pushing the environment further under the protection of market forces.

Collins acknowledges these concerns, and says they underline the importance of ensuring OESM is run properly. With global warming increasing, wetlands decreasing, and endangered species disappearing despite regulations enacted to preserve them, she adds that it’s clear the current system isn’t getting the job done.

“We already figured out we can’t regulate our way out of the problem,” she says. “We have to come up with a system to engage the market, monitor the heck out of it, but we have to act fast.”


Pushing from Carbon to Green

Atmospheric levels of carbon dioxide, the principal heat-trapping gas, are rising at accelerating rates, according to the National Oceanic and Atmospheric Administration (NOAA). Coastal wetlands that prevent floods and trap toxins continue to disappear, reports both NOAA and the US Fish and Wildlife Service. Regulations designed to preserve essential environmental assets have clearly proven insufficient.

“Regulations are important, but they cannot achieve our goals in and of themselves,” says Annie Petsonk, international counsel for Environmental Defense, a non-profit organization whose mission links science, economics and law. “They cannot regulate private landowners into restoring habitat or sequestering carbon.”

As a response, wetlands, waterways, air and animals have been preserved, some better than others, for the past three decades through cap-and-trade mechanisms that allow polluters to purchase credits from businesses that pollute less and preserve more. But many, Collins says, “lack consistent standards and transparency, making them inefficient and difficult to access.”

OESM was constructed to change that.


Conductor Collins

With a staff that may expand to 12 this year and 25 during the next six years, the office will “be more like an orchestra leader than the orchestra itself,” Collins says. Its role will be to inform markets, while the EPA, Army Corps of Engineers and other federally-established eco-cops will maintain their roles of policing them.

The agency plans to bring together scientific experts to establish standards that are reliable enough to encourage investment but flexible enough to assure environmental protection. Standards will be open for amendment every five years.

“We have to be adaptable and humble in the way we approach this,” Collins says.


Agriculture and the Environment: Friends or Foes?

One reason Congress placed the Office under the authority of the USDA is the department’s long-established relationship with private landowners and its record of promoting the sale of the ecosystem services they possess. This USDA/OESM relationship makes sense to many, including Petsonk.

“The government does not have enough money to buy all the land needed, and the USDA has the largest reach to private landowners,” she says.

Political ecologist and University of Kentucky professor Morgan Robertson, however, isn’t so sure.

A self-described “skeptical advocate” of ecosystem markets, he worked with the USDA when he helped write the new wetlands rule. From this experience, he says that the “USDA’s role is pro-farmer and not always environmentally friendly.”

Prioritizing farmers over the environment could shortchange both in the long run, Robertson warns. Environmental assets and markets could be destroyed, leaving farmers without either income stream.

Moreover, says Robertson, environmental science may not be developed sufficiently to enable the OESM to find the correct balance with economic forces.

“I’m concerned, given my previous experience in water quality, that criteria may not be precise enough to be able to see closely enough whether ecosystem services are being provided.”

Getting it right, he added, is essential. “A poorly- run ecosystem services market looks a lot like the next subprime mortgage crises,” he said. For example, look at carbon trading. “If you open up a box of CO2 reduction and it turns out there’s nothing there, then whatever nascent market you have will collapse.”


Courage of a Convert

Collins addresses these concerns with the courage of a convert.

“I was one of the last people that could stand the idea of putting economic value on things I love like wildlife habitat,” says the 25-year veteran of the USDA Forests Services. “This is a place I’ve come to with a lot of thought, reading, internal strife and seeing what’s happening to our environment.”

Placing OESM under the auspices of the USDA, she says, allows it to take advantage of the USDA’s access to farmers and the land and ecosystems they control.

Getting this right, she adds, will take time.

While many environmental market supporters hoped that the creation of OESM could lead to immanent stacking of services on a landscape scale, Collins predicts it will take five years to complete sufficient research and build the infrastructure needed to put this type of comprehensive environmental market in place.

“What it comes down to for me,” Collins says, “is we’ll never have the science perfect; ecosystems are unbelievably complex. But we have no choice. We’re losing services we depend on, so we have to engage the economic sector.”



Alice Kenny is a prize-winning science writer and a regular contributor to Ecosystem Marketplace. She may be reached at alicekenny1@gmail.com.

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