Country Name: United States of America
Author: Mark Rey, USDA Under Secretary

Market based conservation is an innovative way to take conservation beyond the boundaries of the farm, ranch or forest. Environmental markets preserve productivity and enhance landowner livelihoods while producing numerous environmental benefits. Market based solutions can provide flexibility to undertake actions that have the lowest cost and result in more cost-effective achievement of natural resource conservation and environmental goals compared to traditional command and control approaches.



Currently, a number of barriers limit the emergence of robust environmental credits markets including limited demand, high start-up costs and long-term risks, and a lack of information. Experience from other markets shows a solid institutional framework – currently missing in the marketplace – benefits all market participants. While a handful of environmental markets have been established in the United States, a robust mechanism to take environmental credit trading mainstream has yet to emerge.

We are in the fifth and final year of the 2002 Farm Bill; Congress will pass new legislation this year. USDA has put forth a significant proposal for the future of agriculture and conservation in this country. Our 2007 Farm Bill proposal is constructed from the ideas and information conveyed to us by landowners, the very people who are most affected by farm policy. During the summer of 2005, Secretary Johanns and I, along with other USDA officials traveled the countryside and held 52 forums in 48 states, listening to what you had to say. The message was clear: Customers want our support to be more predictable, more equitable, and better able to withstand challenge, and they want us to focus on the wise and effective use of taxpayer dollars.

Our proposal for the Conservation Title of the 2007 Farm Bill does just that. It simplifies and increases funding of our conservation programs to better serve farmers, ranchers, stakeholders and the environment. It also includes making the investment of an additional $50 million over ten years to encourage new private sector environmental markets. The additional funding will be utilized to develop uniform standards for quantifying environmental services, establishing credit registries, and evaluating audit and certification options. We also want to continue exploring new ways to supplement existing conservation and forestry programs by allowing for market-based and price discovery mechanisms, such as bidding and reverse auctions.

We know that partnerships are essential for these markets to succeed and USDA is reaching out to other Federal Agencies and conservation organizations to work together as enablers of environmental markets. Recently, the Natural Resources Conservation Service (NRCS), the Fish and Wildlife Service and the Association of Fish and Wildlife Agencies signed a partnership agreement committing to work cooperatively toward the promotion and development of habitat credit trading markets. This agreement enables the agencies to coordinate related programs and activities that consider possible habitat credit trading markets. Lands currently used for farming, ranching and timber operations may also function much like a bank does if the habitat is managed for endangered or at-risk species. By managing their land in an environmentally-friendly way, landowners will be able earn additional revenue for their stewardship efforts.

The preservation of open space provides ecosystem services that benefit us all and I believe that providing these incentives is essential for the future of sound environmental stewardship. Offering these market-based incentives will generate interest among a greater number of participants, and will expand endangered species habitat to more acres of our nations working lands.

In addition to habitat credit trading, last October NRCS and EPA's Office of Water signed a partnership agreement that formalizes their shared commitment to improving water quality by encouraging the development of water quality trading markets. Both agencies are focusing efforts toward water quality activities that encourage the development of trading markets. We are working together to establish uniform standards and metrics for quantifying water quality credits and the development of a pilot program in the Chesapeake to demonstrate the potential for water quality credit trading and to show how to bring buyers and sellers of ecosystem services together.

Market mechanisms should supplement, but not replace federal efforts to encourage conservation and environmental protection. We all know that the demand for conservation is far greater than funding that is typically available. There is almost always an unmet need. This is especially true these days when budgets are tight, and they are now. And it's likely to be this way for years to come. I believe that creating viable markets for ecosystem services such as habitat and mitigation banking will encourage more conservation without overwhelming taxpayers.

I look forward to the day when credits for clean water, lower levels of greenhouse gases, and protected wetlands can be traded as freely as corn or soybeans are today. To get there, we must work together to overcome the barriers that today still limit the development of ecosystem service markets. One barrier today is the lack of transparency. By that I mean the fog that tends to descend when we start talking about who owns what, when it comes to environmental benefits. Our position is very clear. USDA considers environmental credits from agriculture, whether for carbon, water quality, biodiversity, or wetlands preservation, the property of the farmer, the landowner, the one who applied the conservation practices on the land, regardless of the federal cost-share dollars that were invested. A key feature of a workable market is just straightforward simplicity. It is not a good use of resources to get all tied up over which piece or percentage the farmer paid for and which part a federal program paid for. My goal is to keep it simple: the farmer owns it.

The next major advance in conservation will come through market-based approaches. I plan to do all that I can to advance ecosystem service markets during my remaining time in the Administration.

First published: April 16, 2007

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