Documents Back Nature Conservancy Over BC Auditor General On Darkwoods

12 April 2013 | Christian Schadendorf says he was taken aback when he read “An Audit of Carbon-Neutral Government”, the provincial Auditor General‘s (AG) much-ballyhooed take-down of the Pacific Carbon Trust (PCT), a state-owned enterprise that buys carbon offsets in support of the province’s Carbon Neutral Government program.

Especially surprising was the report’s assessment of the Nature Conservancy of Canada’s (NCC) Darkwoods Forest Carbon Project, a massive conservation effort funded in part by carbon credits that NCC generated by saving trees from “liquidation logging”, a term NCC had created to describe the practice of harvesting all mature timber on a property as quickly as the market can absorb it.

“(W)e found limited support for a ‘liquidation logger’ scenario,” the AG’s report said. “No such companies bid on the property, and it was widely reported at the time of sale that the owner’s preference was to sell to a buyer who would appreciate or maintain the area’s forest and wildlife values.”

The owner was Duke Carl von Wuerttemberg, and Schadendorf was the Duke’s right-hand man in that sale. Contrary to what the report said, Schadendorf had received formal letters of interest from several bidders whose practices would have qualified as liquidation logging, but NCC swooped in with a contract at the asking price before the others could be finalized (a process we will explore in detail later in this series).

“I was surprised to read that assessment in the AG’s report,” he says. “We had calls from several timberland buyers who would qualify as ‘liquidation loggers’, but NCC got there first.”

He wondered why the AG had relied on the news media to characterize the terms of sale even though one of its auditors had interviewed him personally, and he suspected the reference to “widely reported” knowledge meant items like this:

The duke laid down a tough list of conditions for the sale. “No speculators, developers or timber cutters needed to apply,” said Schadendorf. “We wanted someone who could appreciate and maintain the unique beauty of the forest and its wildlife riches.”

Schadendorf doesn’t dispute his own quote, but says the first sentence, which is not part of the quote, overstated things a bit – an error that seemed harmless enough at the time.

“Yes, we preferred a buyer who would maintain the unique beauty of the forest,” he says. “But there was no restriction on who would be eligible to bid or not, and we wanted full fair market value.”

That reality was also “widely reported”, albeit not “at the time of sale” in Canadian Geographic (a publication with a long lead time and the ability to double-check stories without the pressure of a daily deadline):

The Duke sought a buyer who would treat the land with respect, but he also wanted fair market value for a property valued at around $100 million. The usual suspects were interested: forestry companies and land developers that would inevitably strip the timber value, then subdivide the hell out of the place.

Schadendorf says he’d have gladly clarified the point for auditors, too, if they had asked him – but they didn’t. And he’s not the only person with intimate knowledge of the transaction or expertise in the timber business whose evidence was ignored by auditors over the course of their 18-month investigation. In just the two weeks since the report came out, I’ve contacted nearly two dozen easily-identifiable sources – from respected timber economists and carbon practitioners to investors who bid on the property – and only a handful say they heard from the auditors, while so far none who’ve commented say they were taken seriously.

Rather than seek out new information, the auditors seem to have fixated on anything that supported their “findings” – be it a stray paraphrase, a sentence in a newsletter, an outlier transaction, or a very narrow definition of a word with wider meaning – and ignored the vast body of evidence in front of them.

Take, for example, their assertion that NCC didn’t consider carbon finance until after purchasing the property.

“For the NCC, offsets were not a critical factor in the decision to acquire the Darkwoods property,” they wrote. “A carbon offsets feasibility study was not completed until January 2009. The NCC did not approach the Pacific Carbon Trust about offsets until late 2009.”

The last two sentences are correct, but they don’t in any way support the first – as lead auditor Morris Sydor himself conceded during our interviews – because the question isn’t when NCC conducted their formal study or approached the potential buyer, but whether they factored carbon offsetting into their finance plan before buying the property.

“The technical requirement is that you’re looking at legal documents, board minutes, etc,” said Sydor. “If you go back to that period when they purchased the property, there’s nothing publicly available that (indicates) they were going to need offsets to go ahead with this.”

Well, yes, there was nothing “publicly available”, but there was plenty of evidence that NCC was “going to need offsets to go ahead with this.” In fact, NCC’s Director of Land Securement, Tom Swann, sent me two internal memos and one external letter that clearly showed the Conservancy was not only considering carbon credits but actively looking for partners to buy them, and this was more than a year before the purchase (see “The Additionality Paper Trail”, below). I then asked Sydor – a cordial man with an almost encyclopedic knowledge of the facts related to Darkwoods – if he had reviewed these documents.

“They had referred to these documents during our meeting,” he said, “but I was not provided copies.”

Did NCC withhold them? No. The auditors simply didn’t ask.

Then there’s the issue of “regulatory surplus”, which basically says you can’t earn carbon credits just for doing something that the law already requires. The auditors point out – rightly – that NCC used an “Ecological Gift” as part of its financing mix to purchase the property. Once NCC accepted that gift, they were obligated to preserve the land. The report alludes to the gift several times, implying that the gift means that the property was already protected when NCC bought it, when in fact the property became protected because NCC purchased it.

“We also found that the NCC’s potential harvesting activities are significantly constrained by a legal obligation to conserve the land, thereby limiting the baseline options available to the NCC,” the report states – a clear implication that the gift meant the property failed the regulatory surplus test. But when I asked Sydor why he said the report didn’t meet the regulatory surplus test, he silenced me by saying, “We don’t have anything like that in our report.”

I went back and read it again, and he was right – nowhere does the report explicitly say that Darkwoods fails the regulatory surplus test, but it certainly implies it. Page 24 has a sidebar explaining the Ecological Gifts Program, and a sentence – in bold letters – stating, “The Nature Conservancy of Canada had a legal obligation to conserve the property.” They even created an elaborate and misleading timeline that showed when when NCC carried out the property appraisal for the Ecological Gifts Program (August 2007) but makes no reference to earlier efforts to secure carbon finance.

It goes on and on about the program and the obligations that NCC assumes for using the gift to fund its purchase, but nowhere does it explicitly state that there was a pre-existing law – just as nowhere does it really explain the gift’s role in the financing package.

Who Are the Sources?

Then there is the question of sourcing. The document cites only one academic source – an agricultural economist named G Cornelis van Kooten, whose self-described mission includes supporting an effort “to refute the results of computer models that attribute anthropogenic emissions of CO2 to be the leading factor in causing catastrophic global warming.” He’d written a paper critical of the Darkwoods deal – albeit one that was neither published nor peer-reviewed – so it certainly makes sense to contact him. But to make him (or anyone for that matter) the only cited source in the whole paper?

A project like this normally brings in paid consultants who are eager to get their names on the final product, but this one is radioactive. None of the paid consultants seem to want their names on it, and the only two I know by name say they quit. The most recent is Canadian engineering consultancy Stantec, which was retained last April.

“We were not provided with the opportunity to, and we did not, review or provide any comments on the draft or final OAG Report and as such, resigned from our role as an expert advisor,” said Daniel Hegg, the Discipline Lead for Stantec Climate Services, in an e-mail.

That sounds a lot like Stewart Elgie, the associate director of the University of Ottawa’s Institute of the Environment who also resigned after being frozen out of the process.

“I will simply say that I have not been shown or reviewed any of the BCAG’s draft reports for the past 7 months,” he wrote on March 23, 2013, in a letter to PCT. “Before that time, the materials I did review indicated that the audit findings were heading in a direction that was inconsistent with the expert advice I provided in several major areas, particularly concerning the Darkwoods project.”

I urge anyone who did advise them to contact me.

The Baseline Brouhaha (Again)

Then there’s the auditor’s critique of the project baseline, which is the foundation on which all carbon projects are constructed. It represents the consensus agreement on what would probably have happened to the property if NCC hadn’t stepped in to purchase it – a question that we can only answer by looking at other potential bidders and their expected rate of return (See BC And The Baseline Brouhaha: Dissecting The Darkwoods Documents for a more detailed introduction). Sydor and NCC offered widely differing views on this, but NCC backed their views up with reams of data and scores of experts. Sydor offered nothing.

In my interviews with timberland consultants – both those referred by NCC and those I found randomly on the internet – it quickly became apparent that Sydor was basing his analysis on a different expected rate of return than the one that timber analysts I kept running into were using. This matters, as we’ll see in our next installment, because it shows what a commercial buyer would do with the land. Sydor insisted that his data came from several unnamed experts – but he refused to connect me with any of them.

Keep in mind, these are experts who earn a living providing their professional opinions, and not whistleblowers with inside information of wrong-doing. To have one or two off-the-record sources is understandable, but to have none on the record – especially for a report like this – is unheard of.

Finally, after much prodding, Sydor offered an article from 2007 entitled “Rates of Return for Investments in Timberlands – How Low Can You Go?”. It had been written by a team of analysts at Cortex Consultants, but wasn’t an overview of market behavior. Instead, it was a warning to customers that tough times may lay ahead. Indeed, while it asked the question of how low rates could go, it never really answered it. When I e-mailed Cortex, the authors of that report seemed horrified to learn that this letter might have been used to support a major audit.

“This little paper was definitely not meant as an (even pseudo-) academic paper on the issue,” said one, speaking on condition of anonymity.

Of course, Sydor never actually says he used the paper as one of his sources.

“I’ve provided one of the articles that passed our way during the audit,” he said in the e-mail accompanying the link.   “It shows that timber returns were high in the 1990s but had dropped so much that returns of 5% to 6% were not unrealistic at the time of the Darkwoods sale.” (We will explore this in more detail later in the series.)

It just passed his way? What does that mean? Did he dig any further? Did he contact the authors? Who knows? And why didn’t he talk to other people who showed an interest in the property?

Schadendorf won’t name the bidders, but I have found two through other channels. One is Jack Julseth of Three Point Properties Ltd. He says he sent a formal letter of interest to Schadendorf, only to learn that NCC had the property “under contract”.

“My group was definitely interested in pursuing the opportunity and at the time had the capacity to do so,” he wrote in an e-mail to NCC. “If my group had been the successful bidder and followed through with a purchase, our intentions at the time were to create a managed forest, to initiate an appropriate and sustainable logging operation, and to subdivide and develop the land – as appropriate – to realize its highest and best use.”

When I asked him what that highest and best use might be, he said that he would have been looking to develop cottages and vacation homes – a scenario that NCC dismissed as being too aggressive to even consider.

To be fair, Julseth also said that NCC entered its bid before he could perform due diligence on the property, so he can’t say for sure what sort of development he’d have done; and Alec Orr-Ewing, who provided the initial timber evaluation that von Württemberg used to set his asking price, says the real-estate potential was quite limited.

“If you look at a contour map of the area, and also at its minimal water frontage, the chances of real estate are minimal, from my point of view,” he wrote in an e-mail. “The lake frontage is west-facing, behind a steep mountain ridge, also there is no legal access to all of the properties.”

Schadendorf says there is legal access, but by boat. Either way, my point isn’t that this was a done deal, but it was a legitimate inquiry, and it’s one of two that I have independently verified. When I asked Sydor if he knew of Julseth’s inquiry, he simply pointed out that “real estate companies are not eligible for this type of project.”

“When you look at the protocol, it says the only scenarios that should be considered are ones where forests remain forest,” he said – meaning that if von Württemberg had sold to a real estate developer, then the Verified Carbon Standard would not have recognized it as a carbon project, which doesn’ really have anything to do with whether there were competing bids or not.

“Now, in the real world, I guess the question is: Did the vendor actually consider Three Point Properties’ bid?” Sydor added.

That is, indeed, the question, and Schadendorf says he did consider it, but NCC moved too fast. He also says Three Points Properties weren’t the only ones who approached him, but they were the only ones he would acknowledge by name, and that because Julseth had already come forward.

“We had calls from several timberland buyers who were known for liquidation logging,” he says. “And we had some industrial timberland buyers look at the property – companies that are in the business of managing timberland sustainably – but they basically concluded that they would have to liquidate it in order to meet their investment objectives because they have investors to answer to.”

So, does this mean that the baseline the auditors advocated – one based on very low harvests in the near-term – wouldn’t have been economically viable?

“They said, ‘If we manage this sustainably, our expected rate of return will not be met, so this property doesn’t work for us,’” Schadendorf answered.

So, if these other bids existed, why didn’t Schadendorf tell the auditors about them?

“They never asked those types of questions,” he says.

The Additionality Paper Trail

There seem to be plenty of questions they didn’t ask, as I learned when I asked NCC’s Tom Swann if there was a paper trail to demonstrate additionality. Without hesitation, he provided three documents that showed what Sydor said couldn’t be shown. One of them was a letter to Patty Richards, Shell Canada’s Manager, Community Investment. It was dated March 5, 2007 (See “Shell Letter”, right) and makes it clear that carbon offsets were, indeed, a very critical factor in NCC’s decision to acquire the Darkwoods property, despite the auditor’s contention to the contrary. Here is an excerpt:

NCC has entered into a conditional purchase agreement to buy the company that owns the property and we are now actively seeking the resources to complete the sale and ensure that future management of the forest contributes to the survival of the mountain caribou and other species.
It is our understanding that Shell Canada and Shell International are involved in projects at various places around the world to realize goals that combine biodiversity conservation and carbon sequestration. We would be very interested in exploring the possibility of Shell Canada or Shell International working with NCC to achieve these goals at Darkwoods.
As you know, standards for calculating carbon increase and resultant CO2 equivalent sequestration are evolving, but I enclose for your information a draft calculation that projects 114,504 volume tonnes of CO2 equivalent sequestered annually in the standing timber alone at the Darkwoods property, which is largely treed with conifers.

Another of those documents was an internal memo (See “Carbon Calculation”, right) from Bill Freedman, a professor of biology at Dalhousie University in Halifax, Nova Scotia, and the Chair of NCC’s National Board of Directors. This is dated March 2, 2007, and it offers a calculation of the carbon potential that NCC had been using to make the deal happen.

And a third (See “Issues Analysis”, right) offers an updated analysis of carbon markets in general.

Also, in a notarized affidavit dated February 5, 2013, NCC CEO John Lounds said that “NCC considered the potential value of carbon credits on the Darkwoods property from as early as September 2006, when carbon sequestration was discussed by NCC fundraising contractors as a potential source of stewardship revenue at Darkwoods.” He says formal inquiries began in December, and that his staff met with Corinne Boone, Managing Director of carbon project developer CO2e, to explore its options.

Finally, there’s a paper co-authored by Freedman (See “Carbon Credits and Biodiversity”, right) and submitted to the Environmental Review on August 27, 2008 – shortly after the property was purchased. The paper clearly shows his thinking on how carbon credits could be used to save biodiversity-rich forests like Darkwoods, and it was just a Google search away.

 

Additional resources

Preserving Prairie Potholes

28 June 2008 | Adolph Feyereisen thought he knew all the ways to farm his 1040 acres in Emmons County, North Dakota. He’d taken over a dairy operation from his father in the 1960s, ran that until 1975, and then raised beef for a decade before dropping that to become a crop adjuster. Now that he’s semi-retired, he’s back to beef, along with small grains like barley and wheat.

But his latest cash crop is novel to the agricultural economy of the plains: sequestered carbon.

Last January, conservation group Ducks Unlimited purchased both a perpetual easement on Feyereisen’s native grassland and the rights to the carbon stored under that 272 acres. DU then passed the easement along to the Fish & Wildlife Service, but is bundling Feyereisen’s carbon with the carbon from scores of other North Dakota landholders and selling it on the open market, perhaps to a corporation in search of a significant carbon offset.

The short-term plan is to invest the proceeds from the carbon market in new habitat protection in the plains states. Then, if that works out, DU could take its 11.5-million-acre track record of habitat restoration and turn it into a revenue-generating portfolio to accelerate its conservation work.

For some of the most important and threatened waterfowl habitat in North America, the plan comes just in time.

 

The Brokers

“These are some of the best credits I’ve ever seen or been a part of,” says Radha Kuppalli of New Forests, a Sydney-based company helping to broker the deal.

Better known for forest management, New Forests is working with Equator Environmental, LLC to package the DU carbon for the voluntary carbon market. Equator provides financing to help fund carbon purchases, and will sell the credits to investors looking to downsize their carbon footprint. Equator and New Forests will work together to ensure that the credits meet high standards.

“Every single element that you can think of in a carbon project — additionality, quantification protocols, leakage, permanence — everything that you need to address is here,” says Kuppalli. “There is such an enormous biodiversity component.”

 

To Farm or Not to Farm

That’s precisely DU’s interest. Feyereisen’s 272 acres is native prairie, never tilled because it’s quite rocky and hilly. It’s also pocked with glacial potholes — shallow, watery depressions left by the glaciers. He’s never planned to plow it, but that doesn’t mean it can’t be done.

“They just have to rip the rock out,” says Feyereisen. “The equipment they’ve got now, it doesn’t take much. To say land can’t be farmed in this day and age, the way technology is going, that’s probably a pretty far-fetched statement.”

 

Abundance of Birds

Before the advent of European settlers, the Prairie Pothole Region in the Dakotas was at the heart of the world’s largest grassland, the Great Plains of North America. Feyereisen’s potholes are just a few of the millions of glacial potholes that cover some 100,000 square miles, harboring rich stores of aquatic plants and animals. Pintails, mallards, gadwall, blue-winged teal, shovelers, canvasbacks—each spring millions of ducks nest in the grasslands adjoining the potholes. Many other birds—lesser scaup, wigeon, green-winged teal, Canada geese and snow geese—use the area as a staging ground in their migration to the boreal north.

These fowl riches brought DU to the region almost at its inception, beginning habitat restoration in the adjacent Canadian portion as early as 1938. Since then, the organization has done restoration work on 11.5 million acres throughout much of the United States. But the potholes remain a priority: DU considers the area the most important and threatened waterfowl habitat in North America. Agriculture has already destroyed or altered more than half of the potholes. And climate change is the new threat on the horizon; the Wildlife Society projects a loss of as much as 90% of U.S. wetlands by 2080.

 

Competing Interests

Meanwhile, agricultural pressures are building. Ironically, climate concern has helped heat up the biofuels sector, putting further pressure on food prices that were already being ratcheted up by rising petroleum prices and natural disasters. Vagaries in federal agricultural policy are also having an impact. The Conservation Reserve Program (CRP), which rewards farmers for converting highly erodible cropland to grass, has been unable to compete with the hot ag land market as the 10 to 15 year contracts have expired. Almost 420,000 acres of North Dakota CRP land — more than 12 percent of the state’s total — were lost back to cropland in 2007 alone.

Federal ability to do conservation work in North Dakota is abridged as well; a political backlash against federal lands resulted in legislative veto power over the expenditure of federal duck stamp money to purchase habitat in the state. That leaves the private sector.

“Wildlife belongs to the public, yet private property – and therefore private landowners – really have all the habitat, so you have to work with them,” explains Jim Ringelman, DU’s Director of Conservation Programs for the Dakotas and Montana. DU has been working with private landowners for decades, developing tools and credibility.

 

Underground Carbon

Its carbon work began a couple of years ago, as the voluntary carbon market was beginning to solidify. While the carbon storage potential of forests rises in plain site, grasslands hide their carbon underground. Prairie plants sink deep roots five to nine feet into the plains, stockpiling carbon away from the oxidizing forces that would release it into the atmosphere. The Agricultural Research Service already had some local data on sequestration potential. With support from the Plains CO2 Reduction (PCOR) Partnership, DU worked with soil scientist Larry Cihacek of North Dakota State University to measure carbon stores under native prairies and restored grasslands.

It was an ideal research situation: Grasslands restored under the conservation reserve program range in age from a couple of years to 20 years.

“We could sample in one or two years a huge range of vintages,” explains Ringelman.

DU research shows that the north plains grassland sequester an average of 1.485 tons* of CO2 equivalent per acre per year. And while forest types in DU’s restoration portfolio can put away three to six times that, the acreage of the grassland resource is large enough to make it a potentially major player.

 

Adding Above and Below

Enter the US Fish & Wildlife Service, whose Grassland Easement program operates in the Prairie Pothole Region with a short budget and a backlog of interested participants. DU’s plan is to buy perpetual grassland easements and carbon credits at the same time. The easements are passed on to the FWS, and the carbon credits are bundled and resold to finance more conservation.

“It keeps the land in the private landowners’ hands,” explains Tammy Fairbanks of the FWS. “It doesn’t change their use on the property. They can still graze it, hay it, and get an income off it, and they pay taxes on it. The government does not have an operation and maintenance cost on that property. So we have the habitat protection, but we don’t have the cost of managing it.”

The DU assistance also cuts down on the FWS backlog, protecting habitat in imminent danger—the pothole counties of North Dakota alone have lost 88,000 acres of native prairie since 2002.

 

Meager Resources

“We need resources in the order of many tens of millions if not hundreds of millions to do what we need to get done,” adds Ringelman. “We have no hope of getting that through the traditional sources – the duck stamp money. This is big potential for us to accelerate our work. It’s revenue of the order of magnitude that we think is necessary to really make the kind of conservation footprint that we need to have to save the critical habitats. And it comes at an ideal time because current crop prices are putting a whole new set of pressures on grasslands.”

 

All the Ingredients

A number of elements make the DU plan exciting, beginning with the federal foundation.

“Having a perpetual easement held and monitored and enforced by the US Fish and Wildlife Service is extremely valuable,” says Kuppalli. “You’ve got the federal government backing your product. It’s really enabling. If you’re investing in carbon, or you’re a carbon buyer, you have to choose between a perpetual easement helped by a lands trust versus one held by the federal government?”

But while a federal program enables the project, Kuppalli is also quick to point out that federal programs and subsidies for corn and other commodities create countervailing forces.

The private element is important too, argues Dick Kempka, who spent years developing GIS technology for DU before jumping recently to Equator as vice president of sales.

“Seventy percent of the opportunity in the ecological asset market will be on private land,” he says. “If you can’t work on private land, you’re probably not going to be a big player in this arena.”

Incorporating grassland into the voluntary carbon market is another coup.

“Whatever business you’re in, you want to have a diversified portfolio,” he says. “There is a lot of benefit to restoring grassland and having tonnage be available right away, in a market where most feel there will be an annualized accounting.”

Then there is the Ducks Unlimited brand.

“That’s the big selling point,” he argues. “The social benefits associated with offsets are much better than any type of geologic sequestration, or methane capture. The bottom line is if I’m a pre-compliant utility, or a carbon-neutral socially responsible type of investor, these types of offsets very much fit the bill because they’re going to get other benefits from it – whether they’re explicit or implicit.”

 

Rethinking Agricultural Value

Ringelman hopes to change the very definition of agricultural value in the plains.

“There is a notion here that we have to pump up the economy of the state, and that grassland – particularly native prairie – is just a land cover that’s waiting for a higher and better use to come along,” he says. “Now we have a chance through this carbon work to show them that look, there’s more to this land. It’s more than just cutting hay and running cows on it. You’re also sequestering carbon. You’re doing a lot of things that people are going to start paying for, so let’s hold on to this here and take another look at it.”

DU plans to keep pushing the ecosystem services envelope, looking at water quality and possibly biodiversity offsets as well.

 

Exploring Biodiversity Offsets

“What we do with restoring wetlands has big water quality benefits. I think that’s not very far off,” says Ringelman. “Biodiversity is a little bit funkier.”

Funky, but not far-fetched. Birds traverse North America from key breeding areas like the prairie pothole to wintering areas. And populations are often limited by what happens on the breeding grounds. The Henslow’s sparrow, for example, breeds in the plains grasslands, but winters to the south, often in populated coastal areas.

“Maybe the time’s not far off that when someone does a project that’s affecting wintering habitat and sparrows down there, they’ll be coming to us (because) we can really have a population affect working with on this end of the flyway,” says Ringelman.

Feyereisen thinks a little more down to earth.

“My kids are willing to leave it like it is, and I would hope it would be like it is,” he says. “If I want to be selfish about it, this is one way to make sure it is.”

 



Erik Ness writes about science and the environment from Madison, Wisconsin. You can reach him through his website, www.erikness.com.

Please see our Reprint Guidelines for details on republishing our articles.

* The initial posting of this story misstated the figure as 1.485 million tons. We regret the error.

Additional resources

Mexico Aims For Inclusivity With New Carbon Norm, But Does It Bring Rigor?

10 August 2015 | The Mexican Carbon Norm, set to come into force on August 14th, aims to bring most of the country’s land-based carbon projects under one umbrella – though it leaves avoided deforestation projects out in the rain. The Norm, known as NMX, will be implemented step-by-step: first through a national carbon accounting system, then by taking stock of all existing land-based projects and creating an independent regulatory body to oversee them. 

“The purpose is to generate a national procedure, a certification, that provides access to uniformed validated credits in a voluntary market,” says Jaime Severino of the Carbon Projects and Markets program within CONAFOR, Mexico’s National Forest Commission. 

Mexico is already a mosaic of struggling conservation efforts – some designed with carbon finance in mind, and others simply aimed at conserving nature. The NMX aims to include those struggling conservation efforts by creating a sort of “forest carbon lite” that say provides a way of attracting funding, but that critics say lacks the kind of environmental rigor that companies and environmental groups demand. 

Central to the NMX is RENE, the national registry of emissions, which will register all domestic carbon projects and all emitting companies with emissions above 25,000 tonnes of carbon dioxide equivalent (tCO2e). By October of this year, RENE is supposed to include all emissions data through the last quarter of 2014. 

The registry will validate Mexican projects already certified under voluntary standards, including the Gold Standard, the Verified Carbon Standard, and Plan Vivo. Forest carbon projects in Mexico have sold at least one million offsets over the years to voluntary buyers, for a total value of $9.6 million, according to Ecosystem Marketplace, which has tracked 12 active carbon projects in Mexico through an annual global market survey. 

But some prospective project developers are frustrated by the high transaction costs within the carbon market, especially when demand remains uncertain. While demand for forest carbon offsets grew 17% in 2014 over 2013, average offset prices dropped by more than $2 per tonne globally, with tree-planting and forest management projects reporting values that fell at the very low end of what is needed to sustain project activities, according to Ecosystem Marketplace’ State of the Forest Carbon Markets 2014 report. 

“People are sick of listening ‘your forest has value’ when they do not have money to support their family on daily basis with their intact forests,” says Eduardo Martínez from Investigación y Soluciones Sociambientales A.C.

National Context

Mexico was the first developing country to submit its climate pla to the United Nations Framework Convention on Climate Change, and it was also the first county to set both a conditional and unconditional goal. The country committed to cut its emissions 25% under the “business as usual” scenario by 2030 without help, or increase the cut to 40% if it receives technical and financial support within the context of the international climate agreement. 

“In order to achieve rapid and cost efficient mitigation, robust global market-based mechanism will be essential,” the climate plan states.

Several Mexican states, including Chiapas, Oaxaca, Jalisco, and the tri-state area of the Yucatan peninsula, are in the process of working on REDD readiness – setting the stage to potentially receive international payments for avoided deforestation. Along with Acre, Brazil, Chiapas signed a memorandum of understanding with the US state of California’s cap-and-trade program, though regulators have not yet set a timeframe for deciding on whether to allow international offsets within the compliance program. 

However, REDD is explicitly excluded from the NMX, which instead focuses on reforestation, forest regeneration, forest sustainable management, conservation, and agroforestry at the project level – leaving REDD under different, jurisdiction-scale processes.

“The way to reduce degradation and deforestation is through a mix of policies that allow a coordinated action with a broad vision, in a broad territorial level, not a project level,” says Severino. 

“I think the mix of initiatives launched through the Mexican Norm is interesting, and that those projects that can’t be accommodated in the Norm, will be included in REDD+,” says Elsa Esquivel-Bazán, who is a project coordinator for AMBIO, a non-profit organization based in Chiapas.

Uncertainty Reigns

The NMX was developed through a three-year stakeholder consultation process that involved NGOs, universities, the National Ecology and Climate Change Institute, and the Federal Office for Environmental Protection. 

During the consultation process, several organizations argued that communities should have the opportunity to work with voluntary markets. NMX therefore maintains the possibility that a project could be certified by CONAFOR without receiving carbon offsets through the Norm – NMX would simply help to quantify those reductions at a national level and avoid double-counting, but the project could continue selling into the voluntary market. 

While the goal of NMX is to streamline and reduce the costs of certification under a national standard and create demand among domestic buyers, experts remain hazy on the details.

“Because there’s no clarity regarding the regulations between the voluntary markets and the new markets that CONAFOR aims to build, there is no incentive for projects at the local level to certify under this Norm if they are able to certify under other voluntary markets standards whose rules are clearer,” says Martínez. The problem, he says, is that by aiming to be inclusive, the NMX may end up being irrelevant. 

NMX provides a foundation for forest carbon projects, says Esquivel-Bazán, but fails in creating demand incentives. Last year, Ecosystem Marketplace tracked just under $200,000 in forest carbon offset purchases by Mexican companies. 

Another potential complication is land rights. While NMX applies to forest owners under any property regime – whether it be ejido ownership, community ownership, private land, or federal property – the Norm specifies that the property must be legitimized according to the civil code of each state. In many cases, the only way to prove ownership is with notarial deeds, and sources estimate that roughly one-third of landowners in some states don’t have the resources needed to obtain these documents, although we have not validated that figure.

Severino explains that the proof of ownership is crucial since the application of the Norm will result in marketable goods (carbon offsets), and it must be clear who the beneficiary is. The procedures for determining land rights under NMX are not unique to the Norm but used in several procedures at the federal level, he says. 

According to CONAFOR, some of the challenges NMX faces are: raising enough interest among landowners and project developers; creating a critical mass of certified carbon offset to create a forest carbon market; and building domestic capacity for project development while still keeping certification costs low. 

This first year will be crucial for developing the infrastructure for NMX and making sure benefits are distributed. NMX seeks to complement other projects that are already underway, such as the Mexican Carbon MéxicoCO2 platform, which was launched last November, and operates within the structure of the Mexican Stock Exchange (BMV).

Door Is Open For States To Use Emissions Trading To Meet New U.S. Power Plant Regulations

4 August 2015 | For the first time ever, the U.S. Environmental Protection Agency (EPA) will regulate the amount of carbon pollution power plants funnel into the atmosphere in an effort to curb the global warming gas that plays a part in rising sea levels, super storms, longer wildfire seasons, and other climate catastrophes. It’s a massive milestone that has already led to contentious political debates since the EPA released its Clean Power Plan proposal last year. 

“We’re the first generation to feel the impact of climate change and the last generation that can do something about it,” said President Barack Obama during a speech announcing the plan. “This is the single most important step America has ever taken in the fight against climate change.” 

The final rule is more ambitious than the proposal, with a goal to reduce power plant emissions 32% under 2005 levels by 2030 – up from 23% in the initial proposal. The plan follows the approach of the Clean Air Act, which links the EPA together with states to determine how to obtain and maintain clean air. The agency then established statewide electric power plant emission reduction goals in three forms:

  • A rate-based state goal measured in pounds of carbon dioxide (CO2) per megawatt hour
  • A mass-based state goal measured in total short tons of CO2
  • A mass-based state goal with a new source complement measured in total short tons of CO2

The EPA assessed states individually giving a different rate-based and mass-based goal to each state. It falls to states then to develop and implement plans that will lower emissions from power plants within their state sufficiently based on either the rate-based or mass-based objective. The compliance system officially begins in 2022 and wraps up in 2029. The first deadline for states to submit their plans is September 2016, though there is the possibility of extension. 

The EPA says the framework is flexible, allowing for states to implement tailor-made reduction strategies, which will enable them to meet the greater expectations. 

Just how states will choose to lower their emissions levels remains an open question, although climate analysts say the plan does leave ample room for market-based approaches. 

In fact, it specifically mentions streamlined opportunities for states to use proven strategies such as emissions trading. States are able to develop “trading ready” programs, allowing them to opt in to an existing emissions trading market with other states that are using similar approaches – the Regional Greenhouse Gas Initiative in the Northeast (RGGI), for instance. 

This plan eliminates the need for a memorandum of understanding or some sort of interstate agreement, explained Kate Zyla, Deputy Director of the Georgetown Climate Center, a research organization focused on climate and energy policy. It allows states to use out-of-state instruments for compliance without the complex administrative structure typically required. 

“The Clean Power Plan is very supportive of the market-based approach should states choose to take it,” said Zyla. 

Also, the EPA’s proposed Clean Energy Incentive Program rewards those power plants that cut emissions before the regulation kicks in through energy improvements and renewables with emission reduction credits (ERCs). They can then use these credits to meet reduction targets or trade with other emitters, which will facilitate and encourage interstate trading, says Michael Tubman, the Director of Outreach at the Center for Climate and Energy Solutions (C2ES). 

“The final rule embraced carbon trading much more than the proposed plan did,” said Tom Lawler, the Washington D.C. representative for the International Emissions Trading Association (IETA). “It means a lot for trading.” 

Whereas the proposed plan mentions carbon trading programs as a possibility, there was little instruction or detail on how to set up programs, Lawler explains. The final rule, however, essentially provides the necessary guidance for interstate trading programs. The inclusion of mass-based goals clears the path for mass-based trading programs, the EPA wrote in a document explaining the plan. The EPA also noted its intent to support trading programs by tracking allowances (for rate-based) and credits (for mass-based). 

The aforementioned “trading ready” component is also new to the final rule. 

Tubman also noted that the EPA is proposing a federal plan that will be implemented in any state that does not submit a state-based plan by the initial September 2016 deadline. States could use the plan as a model to create their own emissions trading programs. 

The EPA’s proposed plan also includes model rules for state trading programs. Both the plan and rule will be finalized next summer.

However, the finalized Clean Power Plan follows the proposal in that it excludes the possibility of using carbon offsets as a compliance mechanism. This plan is strictly for reductions in the power industry, unlike past multi-sector cap-and-trade programs, Zyla said. Because of this, all emissions reductions must come from with the power sector – disallowing offsets from uncapped sectors. 

Zyla also noted that the EPA is supporting a lot of approaches for emissions reductions – including investments in low carbon energies such as natural gas and renewables and also demand-side energy efficiency and carbon capture and storage technology –so states may not choose market-based instruments. And it will take time for them to weigh (and price out) their options. 

“The states have a lot of options, which is great because they’re going to ask for that kind of flexibility,” she said. “But everybody wants to know what they’re going to do now, and we may not know for a while what they end up choosing.”

New Conservation Bank Aims
To Save The Roaming Sage-Grouse

29 June 2015 | Wyoming is a land of wide skies and open fields – of country-sized ranches, ugly energy pits, and massive wind farms. It’s also one of 11 US states and 2 Canadian provinces where the humble (and going-extinct) greater sage-grouse resides.

Like the people of Wyoming, the sage-grouse likes its space – it needs 230 square miles to thrive – and that’s the problem. While the sage grouse can live alongside cattle and other grazing animals, it perishes in the fragmented habitat left by farming, energy development, and urban expansion, according to the US Fish and Wildlife Service (FWS). These threats, combined with other perils like invasive plants and wildfires, are driving the sage grouse toward extinction.

The FWS listed the sage-grouse as a candidate species under the Endangered Species Act (ESA) with plans to announce a listing decision in September. Because an ESA listing intends to bring a species back from the brink of extinction, the regulations are rigid. Western developers worry an ESA listing on a species with such a wide range will severely deter economic growth, said Theo Stein, a Public Affairs Specialist for sage-grouse at the FWS.

In an effort to proactively conserve and restore the sage-grouse to healthy populations without ESA regulations, the Sweetwater River Conservancy (SRC) opened the first conservation bank for the greater sage-grouse in March. Although it contains just 55,000 acres of prime sagebrush, the Conservancy owns 700,000 acres, a land mass the size of Rhode Island that spans three mountain ranges. The bank has plenty of space to expand should demand for sage-grouse credits require it.

The greater sage grouse’s requirement of large amounts of contiguous prairie also makes the SRC’s bank the largest in the US. Aside from the relatively new conservation banks for another grouse – the lesser prairie chicken – species banking is typically done on smaller scales involving animals that don’t require as much space.

It’s important to conserve on the proper scale, said Brian Kelley, a wildlife biologist at the Conservancy. “Instead of an acre here and 50 acres there, this sage-grouse conservation bank could signal a paradigm shift in the way conservation is done,” he said.

Three Decades of Decline

“Greater sage-grouse is a species that doesn’t like change,” said Stein. Nevertheless, the bird has struggled with an altered landscape for over a century as its historic range has been cut by over half, according to the Bureau of Land Management (BLM). Once numbering in the millions, the Department of Interior population estimates vary from 200,000 to 500,000, which is roughly a 30% decline since 1985. The only reason the bird wasn’t listed in 2010 was because the FWS said it lacked capacity to implement the listing status.

Western interests saw this as an opportunity to thwart a listing. They launched a massive proactive conservation movement that spanned energy companies, federal and state agencies and ranching and farming operations. Wyoming was one of the leaders, Stein said. It set up a state-wide conservation strategy that includes prime habitat spots preserved for conservation known as core areas.

Building a Bank

In this pro-sage-grouse political climate, Jeff Meyer, SRC’s co-founder and Managing Partner, purchased thousands of acres in central Wyoming with the intention of building a wind farm. He was correct in thinking the region has vast potential for wind power, Stein said. But what he didn’t realize was the spot was also right in the middle of a core area for sage-grouse conservation. And renewable energy is part of the energy development that harms the bird, according to the FWS.

SRC then switched to establishing a conservation bank. Initially, the company had performed intensive high-tech data-collection on the property to determine its wind power potential and found the land had great potential to generate mitigation credits.

Also, this region of Wyoming is home to a number of historic cattle ranches. SRC soon realized that pastureland, if managed sustainably, could operate in harmony with sage-grouse populations.

“The nature of the ranch landscape really leant itself to what this species needs: big, open and un-fragmented land,” said Kelly.

This means the bank requires grazing management plans that incorporate both livestock production and sage-grouse goals with activities such as vegetation monitoring factored in. Keeping the ranches in operation is an important part of the bank’s success because it incorporates local interests, Kelly said.

“Open spaces are important to Wyoming residents but maintaining their economic base is important also. A bank fits into this nicely because it allows for open space and for economic development through mitigation,” he said.

A Market requires Demand

The sage-grouse bank is opening up for business with roughly 32,000 credits to sell. “The next step is attracting clients,” said Stein.

The question of demand for these credits is a major one. A candidate species listing drives some demand, but an ESA listing drives most of it, said Mark Sattelberg, the FWS Wyoming Field Office Supervisor. However, new incentives are springing up.

Wyoming’s sage-grouse conservation strategy follows the mitigation hierarchy, according to its summary document, where development is encouraged outside core areas and requires mitigation for all projects that must occur within habitat strongholds.

On top of the state-wide mandate, the BLM and the Forest Service recently released an updated version of its sage-grouse conservation efforts. Included in it is a mitigation component requiring developers follow the mitigation hierarchy and compensate for unavoidable impacts. This is significant because together the agencies manage two-thirds of sagebrush lands. And last year, the DOI launched a new mitigation strategy referencing the hierarchy and calling for landscape-level activity.

Environmental NGO The Nature Conservancy’s announcement to establish a sage-grouse conservation bank in Nevada in partnership with gold mining company, Barrick Gold, is further evidence of a blossoming market for sage-grouse credits.

The Environmental Defense Fund’s-another environmental NGO- habitat exchanges are also in the works in Colorado, Wyoming and Nevada. These ventures focus on land management incentives to ranchers in exchange for sage-grouse conservation.

Sattleberg said he knows of three ranchers looking into conservation banking. “They’re looking into what it would take and it takes quite a bit upfront,” he said, noting interest from some ranchers will remain as interest and nothing more.

Quality Products?

At the core of all these conservation measures must be quality and they must deliver a net-benefit for the species, said Deborah Mead, the National Conservation Banking Coordinator with the FWS.

“If these initiatives aren’t established to compensatory mitigation standards, then you have to ask if the species still warrants a listing,” she said. And while this will surely frustrate those involved in the voluntary proactive activities, the interest of the species must be put first, she said.

It’s an important point to make with the various versions of conservation offered. If the FWS decides the sage-grouse does require a listing status, the current conservation activities will be assessed or re-assessed through an ESA lens, Mead said. “It’s good that people are getting out in front and taking voluntary actions on the landscape, but it should be clear whether these actions meet regulatory standards or not,” she said.

At any rate, Eric Holst, Senior Director of Working Lands at EDF, said the momentum for conserving the sage-grouse is a positive thing. “I see this as an opportunity to assemble the federal and state agencies, energy interests and other private-sector parties together to grow sage-grouse populations,” he said.

Kelly said: “It’s a different way of thinking about conservation and a new way of applying the tools we have.”

 

This Week In Biodiversity: Greater Sage-Grouse Conservation Teeters Between Cooperation And Conflict

Greater sage-grouses living in the US West received good news with Colorado announcing new voluntary conservation measures and the Bureau of Land Management rolling out landscape-level protection strategies. However, a new funding bill in the Senate aims to block a listing decison for another year. And on a separate note, Brazil passed a law granting easier access to Amazonia’s natural resources.

This article was originally posted in the Mit Mail newsletter. Click here to read the original.

22 June 2015 | Greetings! On the US plains, the spring mating season for the Greater Sage-Grouse is winding down. Meanwhile, the humans sharing turf with the grouse can’t decide whether to make love or war over the bird.

An order by Colorado governor John Hickenlooper to establish a sage-grouse habitat exchange represents hope that cooperation will be enough to keep the bird off the Endangered Species List. Members of Congress are being a little more bellicose, with a proposed military bill that would block listing of the bird on national security grounds and a rider in the Senate Appropriations Committee’s new funding bill for the Department of the Interior and Environmental Protection Agency that blocks a decision on sage-grouse listing (currently scheduled for September) for another year.

 

Meanwhile, ten Western states have developed resource management plans (RMPs), creating high quality, science-based conservation in sagebrush ecosystems. In late May, the Bureau of Land Management (BLM) in partnership with the US Forest Service (USFS) rolled out their amendments. Following a three-month review process, the finalized plans will serve as governing guides for sagebrush ecosystems that fall on BLM and USFS lands.


“The RMPs require mitigation, which is a key piece of developing the market demand needed for conservation banking,” Theo Stein of the US Fish and Wildlife Service (FWS) tells Ecosystem Marketplace. Conservation banks for the greater sage-grouse are already starting to appear in Wyoming and Nevada, a sign that the ‘cooperation’ camp may be winning. As summer heats up, may the cooler heads (and workable solutions) prevail.

 

Last month also saw passage of a controversial law in Brazil allowing businesses easier access to Amazonia’s natural resources, even in indigenous areas, and cancelling $70 million in “bio-piracy” violations for a state-owned agriculture research firm. The government’s brushed off worries about fair compensation for indigenous people. India, meanwhile, has a law on the books requiring companies making use of biological resources for pharmaceuticals and other products to pay a biodiversity fee. But as the Hindu reports, the law is largely ignored.

 

We’re hiring! Ecosystem Marketplace’s Supply Change project, which tracks corporate commitments to reduce ecological impacts in commodity supply chains, needs a research assistant. Click the link to learn more and apply.

 

Cheers,

—The Ecosystem Marketplace Team

 

If you have comments or would like to submit news stories, write to us at mitmail@ecosystemmarketplace.com.

 

Mixed Initial Responses To Final US Clean Water Rule

The US Environmental Protection Agency and the US Army Corps of Engineers finalized their Clean Water Rule in late May. First impressions of the rule, meant to protect US waterways from various sources of pollution through clearer definitions of which wetlands and streams are covered under the Clean Water Act, are mixed.

EM has coverage.

 

Market-Based Species Conservation Gets Boost From US Gov Land Management Plans

The US Bureau of Land Management late last month released its final environmental reviews of land-use plans containing greater sage-grouse habitat. As the plans make use of compensatory mitigation, those in the mitigation space are viewing the strategy as a potential driver to increase demand for market mechanisms like habitat exchanges and conservation banks.

Keep reading here.

 

Opinion: Rivaling Gold – Ecological Assets Outperform Traditional Commodities

After completing a price trend comparison between environmental products and traditional commodities, a long-time analyst of ecosystem markets says compensatory credits for wetland and species conservation are outperforming commodities like corn and farmland and even gold – giving a more literal meaning to the term ‘green gold.’

Read it here.

 

Brazilian Ecosystem Services Matrix Brings Transparency To Environmental Finance

Brazil is not only a hotbed of ecosystem services, it’s also testing grounds for the market-like payments for ecosystem services approach to conserve and manage these natural services. And now, a new initiative launching this month provides a comprehensive way to track, understand and scale these programs using an interactive mapping and database system.

Learn more here.

 

REDD+ And Green Supply Chains: The Yin And Yang Of Saving Forests

Companies worth more than $4 trillion have promised to reduce their impact on the world’s forests, and more than one-third of the new pledges came just last year, which more than doubled 2013’s total. Now comes the hard part: keeping those promises honest, and helping smaller suppliers adjust to the new demand. Here’s how public finance for forest protection can help.

Get the full story from Ecosystem Marketplace.

Queensland’s Offset Program: Waste of Time or Valuable Mitigation?

Australia’s Department of Environment and Heritage Protection in Queensland is promoting an environmental offsets program that would generate a revenue stream for landowners willing to conserve parcels of land on their property, which will serve as mitigation for development impacts. However, the offset has to deliver a net-benefit to the environment – and ranchers remain skeptical the program will amount to anything.

ABC News has coverage.

 

US Nearing Peak Sage-Grouse Mania

Last month Colorado governor John Hickenlooper ordered the state to establish a habitat exchange to buy and sell conservation credits for the Greater Sage-Grouse, a move designed to stave off federal intervention to protect the bird through an Endangered Species Act (ESA) listing.

 

Meanwhile in Washington, an alternative strategy to keep the Greater Sage-Grouse off the ESA – a $612 billion military bill that would block listing of the bird on national security grounds – has given Congress something new to fight over.

Read more from the Pueblo Chieftain about Colorado’s habitat exchange.
The New York Times has coverage of the sage-grouse fight in Washington.

 

Wolfensohn and Eko Asset Announce Merger

Wolfensohn Fund Management, a private equity fund focusing on developing-world finance and clean energy founded by former World Bank president James Wolfensohn, recently announced a merger with environmental markets investment management and advisory firm Eko Asset Management Partners. The new firm, dubbed Encourage Capital, aims to make the most of growing interest among high-net worth individuals in impact investment. Adam Wolfensohn and Jason Scott will serve as co-managing partners and Ricardo Bayon as chief impact and innovation officer.

Bloomberg has the story.

 

A Permitting System to Keep the Land and Sky Safer for Birds

After a year of consideration, the US Fish and Wildlife Service released a notice of intent to create a permitting system for unintentional bird kills related to development. As birds are often killed when they collide with power lines or land in oil and gas operations, the FWS says a permitting system could create a regulatory mechanism that delivers meaningful compensatory mitigation after impacts have been avoided or minimized.

Read more at E&E News.

 

EU Designs Biodiversity Offset System for Continental Use

Biodiversity offsetting is considered a necessary part of the European Union’s biodiversity strategy and recently, the International Conservation Fund, in association with experts and another conservation organization, published a report highlighting proper design and implementation measures for offsets. The study noted flexibility as key while identifying the maintenance of long-term benefits as critical.

Learn more here.

 

Can Biodiversity and Mining Co-Exist in Namibia?

Because the central portion of the Namib Desert in Namibia is rich in both uranium and biodiversity, several stakeholders collaborated to form the Strategic Environmental Management Plan, a public-private initiative aimed at coexistence between the development and conservation needs of the region.

All Africa has coverage.

 

New Law Opens Brazilian Amazon… to What?

Brazil’s president passed a controversial bill into law allowing businesses easier access to Amazonia’s natural resources, even in indigenous areas, and cancelling $70 million in “bio-piracy” violations for a state-owned agriculture research firm. The government, however, claims the law simply intends to promote development and indigenous people will be compensated fairly.

The Latin American Herald-Tribune has the story.

 

Biodiversity Fees Go Unpaid in India

Few companies are complying with national Biodiversity Act requirements that companies or individuals pay a fee for use of biological resources, according to the Hindu. The state-level Telangana State Biodiversity Board has issued more than a thousand notices but signed only two agreements with companies agreeing to pay biodiversity fees. The Gujarat Board has had slightly better luck, with 47 agreements signed.

Learn more at the Hindu.

 

Asking for the Right Kind of Biodiversity Offset in Britain

Two papers out of Britain note the key role biodiversity offsets could play in reconciling natural resource development with conservation, but also emphasize the absolute necessity that they are implemented correctly in a transparent process grounded in science. One study highlights potential risks of an offsets program lacking in these qualities.

Read the papers here.

 

US Wildlife Experiences Connectivity Issues

Large public lands designated for conservation like national parks are an important part of conserving biodiversity but they aren’t enough, according to two recent studies. Current conditions are too small and fragmented, report authors say, while what is needed are large conservation corridors that link ecosystems together allowing wildlife to flourish.

Get details here.

 

Ecosystem Services: The Secret to Low-Cost Farming?

New research found enhancing ecosystem services, like natural pest control and soil health maintenance, in agriculture operations can reduce farming costs with payments for ecosystem services schemes playing a role in making this shift to sustainable agriculture systems and enabling farmers to maintain such systems.

Learn more at the Huffington Post.

 

Scaling Up Fisheries Certification

A new report from the International Institute for Environment and Development (IIED) examines barriers to scaling up Marine Stewardship Council certification in the developing world. It’s a significant challenge: only 8% of currently certified fisheries are in developing countries, and an even smaller share of small-scale fisheries are certified.

Learn more and download the report here.

 

JOBS

 

 

Supply Change Research Assistant

Forest Trends’ Ecosystem Marketplace – Washington DC, USA

Forest Trends is an international not-for-profit environmental conservation organization based in Washington, D.C. that works to achieve sustainable forest management and conservation by capturing the value for ecosystem services, and expanding the value of forests and other natural ecosystems to society. The Ecosystem Marketplace is an initiative of Forest Trends that works to link practitioners and decision-makers and advises companies, governments and other NGOs on voluntary carbon/forest carbon market developments, transparency, social and environmental co-benefits and other mechanisms.

 

We are seeking a research assistant for the Supply Change project. As companies commit to reduce the ecological impacts of their commodity supply chains, Supply Change provides transparency to their progress – and tracks commitments that count. The Supply Change project is a transformational resource for businesses, investors, governments, and the civil society organizations that support and hold them accountable; providing real-time information on the extent and value of commitment-driven commodity production and demand.

 

Initially, the work will span a 3-month period, with potential for extension for an additional three months. This is a temporary full-time assignment.

Learn more here.

 

Sustainable Investing Associate

World Resources Institute – Washington DC, USA

The Associate II will lead development of a sustainable investment research agenda for WRI and partner with WRI’s CFO to implement the WRI endowment sustainable investment strategy. While the position is a short-term position, the ambition is that the Associate will have created a robust strategy with an associated fundraising plan that would enable conversion to a full-time permanent position. WRI’s Sustainable Finance Center works with public and private financing institutions, investors, governments, civil society, businesses, and project developers to increase the volume of capital flowing to sustainable activities in developing countries by redirecting investments away from unsustainable activities. To achieve this vision both public and private actors will need to leverage each other’s capital and competencies and, more importantly, find common ground that results in financial flows moving towards sustainable activities and away from environmentally and socially harmful activities.

Learn more here.

 

Blue Carbon Intern

Massachusetts Executive Office of Energy and Environmental Affairs – Massachusetts, USA

The Massachusetts Bays National Estuary Program (MassBays) seeks an intern with strong organizational, research, and writing skills to contribute to a joint project to quantify carbon sequestration potential of eelgrass in Massachusetts near-shore habitats. The project is led by MassBays; partners include the Office of Coastal Zone Management, U.S. Environmental Protection Agency – Region 1, Massachusetts Institute of Technology’s SeaGrant Program, and the Massachusetts Division of Marine Fisheries. The intern will have the following responsibilities:

 

  • Complete a literature review on blue carbon/carbon sequestration and seagrass. This review will include the identification and compilation of peer-reviewed literature on the topic matter.
  • Complete a review of historical records of eelgrass distribution in Massachusetts Bay and Cape Cod Bay. Sources of information include nautical charts, peer-reviewed literature, gray literature, state shellfish reports, aerial photographs, local knowledge, and other sources as available and relevant.
  • Assist in field collection of samples and site visits for sea level rise analysis. Intern will visit one or more sites in Gloucester, Nahant, Cohasset, and Sandwich.

Learn more here.

 

EVENTS

 

 

ICCB-ECCB 2015

The Society for Conservation Biology (SCB) is proud to team up for the first time with Agropolis international and the French Foundation for Research on Biodiversity (FRB) to host the 27th International Congress for Conservation Biology (ICCB) and the 4th European Congress for Conservation Biology (ECCB). The joint meeting brings together our international community of conservation professionals to address conservation challenges and present new findings, initiatives, methods, tools and opportunities in conservation science and practice. It’s also a marvelous opportunity to welcome scientists and conservationists from around the world to Europe. Scientists, students, managers, decision-makers, writers, and other conservation professionals across the globe are invited to participate in this event. 2-6 August 2015. Montpellier, France.

Learn more here.

 

6th SER World Conference on Ecological Restoration

SER 2015 in Manchester aims to be the major restoration event of the year. Building on recent successful world congresses and regional meetings such as SER Europe 2013 in Finland, we hope to attract a large number of academics and practitioners who will share good practice and network successfully in one of the homes of the industrial revolution. The title: “Towards resilient ecosystems: restoring the urban, the rural and the wild” should provide something for everyone, whether working in highly urbanised, ex-agricultural, or natural wild environments. We mean this conference to be as inclusive as possible and are keen to showcase not only the important scientific developments, issues and solutions, but also the cultural, educational and artistic aspects of restoration ecology. We are hosting a wide range of different types of events during the conference period, with pre-conference training workshops, conference symposia posters, workshops, and oral presentations, as well as half day field trips to see landscapes at first hand. 23-27 August 2015. Manchester, United Kingdom.

Learn more here.

 

SOCAP 15

We are a network of heart-centered investors, entrepreneurs, and social impact leaders who believe in an inclusive and socially responsible economy to address the world’s toughest challenges. Since 2008, SOCAP has created a platform where social impact leaders can connect and present their ideas to a global audience. Our annual flagship event in San Francisco is the largest conference for impact investors and social entrepreneurs and has drawn more than 10,000 people. 6-9 October 2015. San Francisco CA, USA.

Learn more here.

 

8th ESP World Conference

The Ecosystem Services Partnership (ESP) is a worldwide network, founded in 2008, to enhance the science and practical application of ecosystem services. To facilitate the needed dialogue between scientists, policy makers and practitioners ESP organises an annual international conference in different parts of the world. The central theme is ‘Ecosystem Services for Nature, People and Prosperity’. The conference will pay special attention to the public and private sector dialogue on how the ecosystem services concept can be used to support conservation, improve livelihoods and engage the business community. 9-13 November 2015. Stellenbosch, South Africa.

Learn more here.

Additional resources

New Conservation Bank Aims To Save The Roaming Sage-Grouse

29 June 2015 | Wyoming is a land of wide skies and open fields – of country-sized ranches, ugly energy pits, and massive wind farms. It’s also one of 11 US states and 2 Canadian provinces where the humble (and going-extinct) greater sage-grouse resides.

Like the people of Wyoming, the sage-grouse likes its space – it needs 230 square miles to thrive – and that’s the problem. While the sage grouse can live alongside cattle and other grazing animals, it perishes in the fragmented habitat left by farming, energy development, and urban expansion, according to the US Fish and Wildlife Service (FWS). These threats, combined with other perils like invasive plants and wildfires, are driving the sage grouse toward extinction.

The FWS listed the sage-grouse as a candidate species under the Endangered Species Act (ESA) with plans to announce a listing decision in September. Because an ESA listing intends to bring a species back from the brink of extinction, the regulations are rigid. Western developers worry an ESA listing on a species with such a wide range will severely deter economic growth, said Theo Stein, a Public Affairs Specialist for sage-grouse at the FWS.

In an effort to proactively conserve and restore the sage-grouse to healthy populations without ESA regulations, the Sweetwater River Conservancy (SRC) opened the first conservation bank for the greater sage-grouse in March. Although it contains just 55,000 acres of prime sagebrush, the Conservancy owns 700,000 acres, a land mass the size of Rhode Island that spans three mountain ranges. The bank has plenty of space to expand should demand for sage-grouse credits require it.

The greater sage grouse’s requirement of large amounts of contiguous prairie also makes the SRC’s bank the largest in the US. Aside from the relatively new conservation banks for another grouse – the lesser prairie chicken – species banking is typically done on smaller scales involving animals that don’t require as much space.

It’s important to conserve on the proper scale, said Brian Kelley, a wildlife biologist at the Conservancy. “Instead of an acre here and 50 acres there, this sage-grouse conservation bank could signal a paradigm shift in the way conservation is done,” he said.

Three Decades of Decline

“Greater sage-grouse is a species that doesn’t like change,” said Stein. Nevertheless, the bird has struggled with an altered landscape for over a century as its historic range has been cut by over half, according to the Bureau of Land Management (BLM). Once numbering in the millions, the Department of Interior population estimates vary from 200,000 to 500,000, which is roughly a 30% decline since 1985. The only reason the bird wasn’t listed in 2010 was because the FWS said it lacked capacity to implement the listing status.

Western interests saw this as an opportunity to thwart a listing. They launched a massive proactive conservation movement that spanned energy companies, federal and state agencies and ranching and farming operations. Wyoming was one of the leaders, Stein said. It set up a state-wide conservation strategy that includes prime habitat spots preserved for conservation known as core areas.

Building a Bank

In this pro-sage-grouse political climate, Jeff Meyer, SRC’s co-founder and Managing Partner, purchased thousands of acres in central Wyoming with the intention of building a wind farm. He was correct in thinking the region has vast potential for wind power, Stein said. But what he didn’t realize was the spot was also right in the middle of a core area for sage-grouse conservation. And renewable energy is part of the energy development that harms the bird, according to the FWS.

SRC then switched to establishing a conservation bank. Initially, the company had performed intensive high-tech data-collection on the property to determine its wind power potential and found the land had great potential to generate mitigation credits.

Also, this region of Wyoming is home to a number of historic cattle ranches. SRC soon realized that pastureland, if managed sustainably, could operate in harmony with sage-grouse populations.

“The nature of the ranch landscape really leant itself to what this species needs: big, open and un-fragmented land,” said Kelly.

This means the bank requires grazing management plans that incorporate both livestock production and sage-grouse goals with activities such as vegetation monitoring factored in. Keeping the ranches in operation is an important part of the bank’s success because it incorporates local interests, Kelly said.

“Open spaces are important to Wyoming residents but maintaining their economic base is important also. A bank fits into this nicely because it allows for open space and for economic development through mitigation,” he said.

A Market requires Demand

The sage-grouse bank is opening up for business with roughly 32,000 credits to sell. “The next step is attracting clients,” said Stein.

The question of demand for these credits is a major one. A candidate species listing drives some demand, but an ESA listing drives most of it, said Mark Sattelberg, the FWS Wyoming Field Office Supervisor. However, new incentives are springing up.

Wyoming’s sage-grouse conservation strategy follows the mitigation hierarchy, according to its summary document, where development is encouraged outside core areas and requires mitigation for all projects that must occur within habitat strongholds.

On top of the state-wide mandate, the BLM and the Forest Service recently released an updated version of its sage-grouse conservation efforts. Included in it is a mitigation component requiring developers follow the mitigation hierarchy and compensate for unavoidable impacts. This is significant because together the agencies manage two-thirds of sagebrush lands. And last year, the DOI launched a new mitigation strategy referencing the hierarchy and calling for landscape-level activity.

Environmental NGO The Nature Conservancy’s announcement to establish a sage-grouse conservation bank in Nevada in partnership with gold mining company, Barrick Gold, is further evidence of a blossoming market for sage-grouse credits.

The Environmental Defense Fund’s-another environmental NGO- habitat exchanges are also in the works in Colorado, Wyoming and Nevada. These ventures focus on land management incentives to ranchers in exchange for sage-grouse conservation.

Sattleberg said he knows of three ranchers looking into conservation banking. “They’re looking into what it would take and it takes quite a bit upfront,” he said, noting interest from some ranchers will remain as interest and nothing more.

Quality Products?

At the core of all these conservation measures must be quality and they must deliver a net-benefit for the species, said Deborah Mead, the National Conservation Banking Coordinator with the FWS.

“If these initiatives aren’t established to compensatory mitigation standards, then you have to ask if the species still warrants a listing,” she said. And while this will surely frustrate those involved in the voluntary proactive activities, the interest of the species must be put first, she said.

It’s an important point to make with the various versions of conservation offered. If the FWS decides the sage-grouse does require a listing status, the current conservation activities will be assessed or re-assessed through an ESA lens, Mead said. “It’s good that people are getting out in front and taking voluntary actions on the landscape, but it should be clear whether these actions meet regulatory standards or not,” she said.

At any rate, Eric Holst, Senior Director of Working Lands at EDF, said the momentum for conserving the sage-grouse is a positive thing. “I see this as an opportunity to assemble the federal and state agencies, energy interests and other private-sector parties together to grow sage-grouse populations,” he said.

Kelly said: “It’s a different way of thinking about conservation and a new way of applying the tools we have.”

 

This Week In Water: Everybody’s Talking About The Clean Water Rule

Parties with an interest in regulations falling under the Clean Water Act are still sorting out the implications of the recently finalized Clean Water Rule. Meanwhile, green infrastructure scored several victories this month as New York City, Detroit and Xiamen contemplate using the practice to manage stormwater overflows.

This article was originally published in the Water Log newsletter. Click here to read the original.

 

29 May 2015 | After a year of controversy and debate among environmentalists, farming interests, landowners and legislators, the US Environmental Protection Agency and Army Corps of Engineers released a new rule this week which seeks to clarify which wetlands and streams are protected under the Clean Water Act. The rule has likely impacts on a number of regulatory programs – and a high likelihood of meeting future litigation as permittees, environmentalists, and others sort out its implications.

In other stories this month, interest in green infrastructure and low impact development (LID) by cities is picking up rapidly, if the volume of news is any indication. New York City published monitoring results from three demonstration projects showing a better-than-expected 20% cut in stormwater flow to sewers, while cities from Xiamen to Detroit are also getting on board.

It’s about time. As a recent white paper from Veolia and the International Food Policy Research Institute points out, even under the best case scenario, “water quality is still projected to deteriorate dramatically” globally in the coming years, and especially in Asia. Despite the bad news, the paper’s conclusions are noteworthy. The authors call for new infrastructure investment but also soft-path solutions: watershed-scale approaches, better management of rural and upstream areas, and water quality trading.

The search for solutions to water quality challenges is evident in a flurry of recent news on trading mechanisms. Progress is underway on a new trading program in Arkansas, while the city of Santa Rosa, California, will pay $330,000 to a vineyard for nutrient offset credits. Meanwhile, nutrient trading is being floated in basins from the Baltic to India’s Ganga River, as a cost-effective strategy to manage enormous water pollution challenges.

 

As always, you don’t have to wait til next month to get the latest on natural infrastructure finance and trends. Subscribe to us on Twitter, and check out our daily news feed.

— The Ecosystem Marketplace Team

For questions or comments, please contact newsletter@ecosystemmarketplace.com

 

Opinion – Rivaling Gold: Ecological Assets Outperform Traditional Commodities

After completing a price trend comparison between environmental products and traditional commodities, a long-time analyst of ecosystem markets says compensatory credits for wetland and species conservation are outperforming commodities like corn and farmland and even gold – giving a more literal meaning to the term ‘green gold.’

Read it at Ecosystem Marketplace.

 

Is Private Investment And Coastal Management A Good Or Bad Match?

Nicolas Pascal, of the BlueFinance project, a data collection initiative aimed at developing finance mechanisms for marine conservation management, says market mechanisms have potential to fill a big part of a funding gap that exists in marine conservation. But its practical experience in coastal environments is limited: more know-how is needed to spur private investment.

Learn more.

 

POLICY UPDATES

The Stormwater Challenge: China looks for Solutions in Low Impact Development

Following a report that found 81% of China’s coastal waters are polluted with nutrients and other forms of pollution, the government is launching ‘Sponge’ City pilots to take place in 16 cities. Focused on low impact development solutions for stormwater runoff, the pilots will implement certain techniques in order to use 70% of captured rainwater, providing a water source for drought-prone areas and reducing flooding.

Get the full story from WEF’s Stormwater Report.

 

EPA, Corps Release Clean Water Rule into Contentious Atmosphere

After a year of controversy and debate among environmentalists, farming interests, landowners and legislators, the US Environmental Protection Agency and Army Corps of Engineers released a new rule this week which seeks to clarify which wetlands and streams are protected under the Clean Water Act. The rule has likely implications for a number of regulatory programs including the National Pollutant Discharge Elimination System permit program and Section 404 wetlands dredge/fill permitting. The final rule will be published in the federal register in the next few weeks; analysts suggest that litigation over portions of the rule are likely in the future.

Read analysis from Barnes & Thornberg, via Lexology.

 

Work on Arkansas’ New Trading Program Begins in Earnest

Following passage of supporting legislation in the Arkansas state legislature this spring, decision-makers and environmental groups are assembling the pieces of a nutrient trading program in the Beaver Lake watershed. Legislators and the governor will select an advisory panel to regulate trades and guide program design – including whether trading will take the form of an offset system, exchange program, or compliance association. Meanwhile, the Beaver Watershed Alliance is busy identifying potential demand among utilities in the watershed.

The Northwest Arkansas Democrat-Gazette has coverage.

 

Far-flung Countries Bond Over Market Mechanisms and Water Pollution

Given similarities between northern Europe’s Baltic Sea and the Chesapeake Bay in the United States, a consortium of Baltic-area institutions and the US Department of Agriculture joined forces to analyze the two bodies of water and develop best management strategies. One finding: flexible market-based mechanisms like water-quality trading were deemed the best method to achieve cost-effective pollution control.

Learn more at the USDA blog.

 

Farmers Agree to Water Cuts as California Drought Worsens

Drought-stricken California farmers in the Sacramento-San Joaquin River Delta agreed to giving up a quarter of the water they have rights to use, in part because they fear much larger cuts down the road as the state’s historic drought shows no sign of ending. Cuts will come through continuing water conservation – farmers have been keen to remind the state of their ongoing efforts – and letting land lie fallow.

Read it at the New York Times.

 

GLOBAL MARKETS

High Marks for Green Stormwater Projects in NYC

The New York City Department of Environment released a report on progress made on three neighborhood-scale green infrastructure demonstration projects intending to curb the amount of stormwater flowing into the city’s sewer system. Results were good as the initiatives outperformed expectations, cutting flows to sewers by more than 20 percent.

Learn more via WEF’s Stormwater Report.
Read the report.

 

In Philippines, USAID Joins Forces with Coca-Cola and Sustainable Business Group

A new partnership between the United States Agency for International Development (USAID), Coca-Cola Philippines and the Philippine Business for Social Progress group will secure safe drinking water in the Philippines’ Leyte, Iloilo, Maguindanao, Misamis Oriental and Basilan provinces. The partnership focuses on green infrastructure interventions like groundwater infiltration wells, permeable pavers, rainwater harvesting and storage, flood water diversion and storage, and watershed protection and restoration.

Read more at the Manila Times.

 

Accounting for Water Risk? Never Been Easier

A new online tool developed especially for the business community enables companies to assess the true cost of their water use and account for their water impacts. Creators, EcoLab and Trucost, say the Water Risk Monetizer is an adaptable tool that can be used by large and small companies alike.

Learn more.

 

Santa Rosa Inks $330k Nutrient Offset Deal With Vineyard

The City of Santa Rosa, California recently got a regulatory stamp of approval for a nutrient offset to the tune of $330,000. The city will pay Jackson Family Wines and their partner Krasilsa Pacific Farms for phosphorus credits generated through manure removal on a former dairy recently converted to vineyard. The offset represents 23,345 lbs of avoided phosphorus pollution (at around $14 per lb). The city will bank the credits for future compliance needs: thanks to the current drought and a wastewater reuse project, it hasn’t recently made any wastewater discharges that would trigger regulatory fines.

The Press Democrat has the story.

 

Wild Lands Deliver Clean Water to Big Cities

Metropolises struggling to supply their inhabitants with a clean and steady supply of water can look to Boston and New York City. For these cities, watershed investment programs continue to deliver clean water requiring little filtration or pumping to city residents, thanks to conservation activities in surrounding rural areas.

National Geographic has coverage.

 

A Payments for Ecosystem Services Project to Save Sri Lanka’s Surviving Mangroves

Sri Lanka intends to be the first and only nation in the world with a plan to protect all its remaining mangrove forests. The country’s plan revolves around providing microloans to women for business training, and to guard the mangroves against ongoing deforestation pressures.

The Guardian has coverage.

 

A Call for Corporate Water Stewardship in Africa

In order to build proper water infrastructure in Africa and ensure water quality and quantity through resilient ecosystems, water professionals in Tanzania are pushing for public-private partnerships to finance water stewardship efforts. “We must grasp the big picture connected to water and bring together investors, bankers, economic players and public officials to tackle the infrastructure deficit in new and creative ways,” says World Water Council President Benedito Braga.

Read it at All Africa.

 

Ceres Report Helps Businesses Wake Up to Water Risk

Ceres, a nonprofit organization focused on environmental sustainability, analyzed nearly 40 companies regarding their water risk management finding that less than half evaluate risk throughout supply chains while 60% assesses water risk at their own production sites. Coca-Cola and Unilever scored some of the top marks but, overall, Ceres stressed the need for collaborative efforts that build water security and healthy watersheds to ensure sustainable water supplies.

Learn more from National Geographic.

 

Stormwater Management Goes Green in DC – Slowly

Rather than construct underground tunnels to store sewage-rainwater overflow, Washington D.C. will use green infrastructure, which will allow pollution to filter slowly back into the ground through practices like green roofs and porous pavements, to manage its stormwater overflows. The bad news however, is the plan could take up to five years to implement-meaning more raw sewage flowing into D.C. waterways.

Read more at the NRDC Switchboard blog.

 

Will the Motor City Build a Blue Stormwater System?

The US city of Detroit is investigating green infrastructure to ease the stormwater overflows that are currently overwhelming the city’s aging sewage system. Officials are backing a pilot project that would divert stormwater running off impervious surfaces into a nearby constructed wetland. The potential cost-savings associated with green infrastructure, which figures prominently in the Detroit Future City visionary framework, are a major draw for the cash-strapped city.

Learn more from the Detroit Free Press.

 

JOB LISTINGS

 

Policy Associate

The Nature Conservancy – Arlington VA, USA

The Global Affairs Policy Associate supports The Nature Conservancy’s conservation goals by working with multi-disciplinary teams, focal area teams and TNC’s field offices to develop and implement a strategy to advance policies, partnerships and agreements at the global, regional and national levels. She/he will support The Nature Conservancy’s work in providing expert advice on climate finance to the Government of Peru as COP President in the lead up to Paris and as co-chair of the Green Climate Fund’s board. She/he will also work as part of the Global Freshwater Team to advance and implement the policy and financial components of the Conservancy’s strategy around sustainable hydropower development.

Learn more here.

 

Climate Change Adaptation Intern

Conservation International – Virginia, USA

The intern will help with various outreach materials, including peer reviewed publications that need to be completed as part of the IKI EbA solutions project. This exciting project, which aims to improve the understanding and use of the ecosystem-based adaptation in three geographies (South Africa, Philippines and Brazil) is ending soon and we are in the process of combining and summarizing all the information gathered. Work will include the search for references to be included in outreach materials, manuscript editing and formatting and preparation of a brochure that will include the results of the project.

Learn more here.

 

EVENTS

River Basin Management 2015 Conference

River Basin Management 2015 is the 8th Conference in a series of conferences which marks the growing international interest in the planning, design and management of river basin systems. Changes in the landscape, use of the land and climate conditions lead to a continuous revaluation of river basin management objectives. This requires the development of better measuring tools as well as the use of increasingly accurate computer software. The objective of this series of conferences is to bring together practitioners and researchers in academia and industry in the hope that their interaction will foster mutual understanding and lead to better solutions for river basins. 17-19 June 2015. Coruna, Spain.

Learn more here.

 

World Forum on Ecosystem Governance

The World Forum on Ecosystem Governance is modeled after the World Economic Forum, but with a focus on the planet’s natural capital. The Forum will periodically bring together world specialists and leaders to promote more effective governance to respond to ecosystem threats. The first event is the High Level Consultations from 25-27 June 2015 in Guiyang City, Guizhou Province, China, followed by the Young Professionals’ Academy on 27 October 2015 in Beijing, China. The Technical Roundtable Discussions will be held 28-30 October 2015 in Beijing, China and will build around the guidance provided by the High Level Consultations. The World Forum on Ecosystem Governance is a partnership of the International Union for Conservation of Nature (IUCN), the IUCN Commission on Ecosystem Management (CEM), the Chinese State Forestry Administration (SFA), and the Beijing Municipal Government. The 1st World Forum on Ecosystem Governance will serve as a pilot for an expanded Forum in 2017. 25-27 June 2015. Guiyang City, China.

Learn more here.

 

6th SER World Conference on Ecological Restoration

SER (Society for Ecological Restoration) 2015 in Manchester aims to be the major restoration event of the year. Building on recent successful world congresses and regional meetings such as SER Europe 2013 in Finland, we hope to attract a large number of academics and practitioners who will share good practice and network successfully in one of the homes of the industrial revolution. The title: “Towards resilient ecosystems: restoring the urban, the rural and the wild” should provide something for everyone, whether working in highly urbanised, ex-agricultural, or natural wild environments. We mean this conference to be as inclusive as possible and are keen to showcase not only the important scientific developments, issues and solutions, but also the cultural, educational and artistic aspects of restoration ecology. We are hosting a wide range of different types of events during the conference period, with pre-conference training workshops, conference symposia posters, workshops, and oral presentations, as well as half day field trips to see landscapes at first hand. 23-27 August 2015. Manchester, United Kingdom.

Learn more here.

 

8th ESP World Conference: Ecosystem Services for Nature, People and Prosperity

The 8th World ESP conference’s central theme is ‘Ecosystem Services for Nature, People and Prosperity’. The conference will pay special attention to the public and private sector dialogue on how the ecosystem services concept can be used to support conservation, improve livelihoods and engage the business community. We especially encourage delegates from businesses to attend the ESP conference in order to discuss challenges and opportunities in using the concept of ecosystem services to achieve conservation and sustainable use of our ‘natural capital’ within a market-context. The conference will provide an excellent platform to engage with experts who can generate solutions to these challenges and start making a difference in practice. 9-13 November 2015. Stellenbosch, South Africa.

Learn more here.

CONTRIBUTING TO ECOSYSTEM MARKETPLACE

Ecosystem Marketplace is a project of Forest Trends a tax-exempt corporation under Section 501(c)(3).The non-profit evaluator Charity Navigator has given Forest Trends its highest rating (4 out of 4 stars) recognizing excellence in our financial management and organizational efficiency.

 


Additional resources

Mixed Initial Responses To Final US Clean Water Rule

29 May 2015 | Last spring the US Environmental Protection Agency (EPA) and the US Army Corp of Engineers released a proposed rule aimed at clarifying which waters are protected under the Clean Water Act (CWA). What followed was a contentious year with opponents hailing from the legislative, agriculture, energy and property development spaces launching a fierce campaign to prevent the proposal from becoming regulation.

Nevertheless, the two government agencies released a final version of the Clean Water Rule this past Wednesday.

“Protecting our water sources is a critical component of adapting to climate change impacts like drought, sea level rise, stronger storms, and warmer temperatures – which is why EPA and the Army have finalized the Clean Water Rule to protect these important waters, so we can strengthen our economy and provide certainty to American businesses,” said EPA Administrator Gina McCarthy in a statement.

The EPA insists the rule does not expand CWA jurisdiction and will not mandate any additional permitting requirements but precisely defines the wetlands and streams protected under the CWA, which would lead to a faster and more predictable permitting process. The rule is in part a response to ambiguous language in the CWA that has led to US Supreme Court cases that resulted in more questions than answers, according to the agencies.

“By and large, the rule is good,” said Adam Riggsbee, President and co-founder of RiverBank Ecosystems, a Texas-based ecosystem restoration and mitigation banking company. “But anytime you develop a regulatory program, there is risk.”

In the case of this new rule, Riggsbee sees increased potential risk of undermining the act. “Outside of the occasional court case, there wasn’t a whole lot of effort to challenge the CWA before this new rule,” he said. “Now we might see some more legislative zeal.”

The Clean Water Rule, which is grounded in science, is clear on its protections of smaller bodies of water that function as a system and impact downstream waters. This includes parts like shallow wetlands called prairie potholes, coastal prairie wetlands in Texas and western vernal pools in California. Vernal pools are small seasonal wetlands that provide valuable habitat. Also, navigable waterways and their tributaries are protected because of their potential impact downstream.

However, water types like groundwater and ditches not connected to streams aren’t covered. Neither are subsurface flows or tile drains.

Suzy Friedman, the Director of Sustainable Agriculture at NGO Environmental Defense Fund, pointed out the need for much further participation and cooperation-particularly from the private sector-outside of federal regulations to protect and maintain the country’s waters.

“To drive real change, we need the private sector to create strong market demand for clean water,” Friedman said.

For Riggsbee, the big question is how the rule will impact mitigation. In theory, this rule would increase demand as waters with vague regulations receive the full protection the CWA has to offer. However, Riggsbee is skeptical that this will lead to more demand within the marketplace.

“In my experience, when compliance gets more expensive you get fewer players willing to pay the price,” he said.

Developers and farmers will simply bypass the entire process of mitigating their impacts and accept the risk that comes with breaking the rules, Riggsbee said. He believes, then, that this rule will likely come down to compliance enforcement, which varies heavily geographically.

As the rule was just finalized, comments continue to filter out from affected industries and interests. The National Farmers Union, an advocacy organization for farmers and ranchers, has come out in favor of the new rule. While not perfect, a statement said, the finalized version is much improved over last year’s proposed rule and does offer certainty regarding regulation over ditches-a long-time murky issue. “The final rule puts bright-line limits on jurisdiction over neighboring waters, offering farmers increased regulatory certainty and mitigating the risk of enforcement or litigation,” the organization said.

However, a statement from the National Association of Home Builders wasn’t supportive because the organization believes the rule’s clarifying definitions are actually expansions of their traditional meanings. The result is a federal overreach adding more regulatory burdens on the building industry, according to the association. “Regrettably, as a result of these overly broad definitions, this rule will soon wind up in the courts yet again,” it said.

The rule will go into effect 60 days after publication in the Federal Register.

 

Market-Based Species Conservation Receives Boost From US Gov Land Management Plans

The US Bureau of Land Management on Thursday released its final environmental reviews of land-use plans containing greater sage-grouse habitat. As the plans make use of compensatory mitigation, those in the mitigation space are viewing the strategy as a potential driver to increase demand for market mechanisms like habitat exchanges and conservation banks.

29 May 2015 | Conserving the greater sage-grouse is a complex endeavor. The bird’s range spans 11 US Western states covering both public and private land alike with some of the bird’s most prime habitat falling on property slated for energy development. Conserving such a species has led to a multitude of approaches aimed at preserving the bird’s rapidly declining population without stunting energy growth and development in the region.

Several Western states have developed what’s called resource management plans (RMPs), creating high quality, science-based conservation in sagebrush ecosystems. Over the past four years, these plans have been submitted to the Department of Interior’s Bureau of Land Management (BLM), the nation’s largest land manager.

And today, the BLM in partnership with the US Forest Service (USFS) rolled out their amendments of these plans which came from 10 western states. The finalized plans will serve as governing guides for sagebrush ecosystems that fall on BLM and USFS lands.

The plans span a land mass the size of South Dakota; 50 million acres of sage-grouse habitat. “Conserving the greater sage-grouse must be done at a landscape-scale,” said Theo Stein of the US Fish and Wildlife Service (FWS).

The plans address primary threats, such as habitat fragmentation and invasive species, facing the sage-grouse and sagebrush ecosystems. They focus on three approaches to alleviating these threats: minimizing new or additional surface disturbances, improving habitat condition and reducing the threat of rangeland fire.

Included in these plans is a compensatory mitigation component which carries significant implications for conservation banking as well as other versions of market mechanisms for species conservation. Wayne White, the former president of the National Mitigation Banking Association, discussed the time the association spent with the BLM and other federal agencies on shaping a mitigation component of the plans.

“We focused on high standards and equivalency throughout all forms of mitigation,” White said.

The BLM will require and ensure mitigation that provides a net conservation gain to the species by avoiding, minimizing and compensating for unavoidable impacts from development, the document reads.

“The RMPs require mitigation, which is a key piece of developing the market demand needed for conservation banking” Stein said.

Conservation banks for the greater sage-grouse are already starting to appear. The Sweetwater River Conservancy Greater Sage-Grouse in Wyoming, marks the nation’s first. In Nevada, The Nature Conservancy and gold mining company, Barrick Gold, along with the BLM are collaborating on a bank .

The Environmental Defense Fund’s (EDF) Eric Holst sees mitigation in this context as an endorsement of EDF’s market-based habitat exchanges. These exchanges allow development interests to offset their unavoidable impacts by purchasing mitigation credits.

“By requiring mitigation on millions of acres of vital sagebrush habitat, these agencies are unlocking the vast untapped conservation potential of America’s working lands,” Holst, Senior Director of Working Lands, said in a statement.

The plans now enter into a review process lasting over three months.

Outside the BLM’s announcement are ongoing legislative efforts impacting the grouse’s conservation. Late last year, Congress attached a rider onto the 2015 appropriations bill prohibiting FWS funding to be used toward proposing a listing status. There is also a defense policy bill that passed in the House earlier this month, which is attempting to curb sage-grouse conservation by arguing it would put military operations at risk.

While last year’s rider didn’t prevent conservation initiatives from moving forward, Stein says the defense bill could allow governors to overturn these BLM plans.

These congressional tie-ups only result in further habitat loss and fragmentation which increases the possibility the sage-grouse will require a listing status, Stein says. “Kicking the can down the road is only going to make matters worse for this species.”

Additional resources

Opinion Rivaling Gold: Ecological Assets Outperform Traditional Commodities

26 May 2015 | The market value of compensatory mitigation credits for wetland, stream and species conservation have risen consistently over the past decade, according to a recent review of publically available mitigation credit price data undertaken by Eco-Asset Solutions Inc. (EASI) of Redwood City, California.

EASI analyzed over 500 available internet records on price information for wetlands and stream credits, California species and habitat credits, along with nutrient credits traded in the Chesapeake Bay and the Susquehanna River Basin. These records ranged from as far back as the late 1980s to this year. The outcome of this comprehensive research is the Mitigation Credit Price Report.

Mitigation credits represent the partial value of ecosystem services such as water filtration, aquifer recharge and biodiversity maintenance. When they are bought, sold or traded in the marketplace they take on the features of other monetized environmental commodities such as carbon credits or renewable energy credits. In each case these credits represent bottom line value to businesses. The value trend for these commodities suggests that mitigation credits have established themselves firmly in the economy.

 EcoAsset1

The positive trend for these wetland, stream and conservation credit values has been strong, based on market value insights made possible by U.S. Army Corps of Engineers’ (ACOE) information presented at the National Mitigation Banking Association (NMBA) annual meeting held in Orlando, Florida.

Steve Martin of the ACOE Institute for Water Resources, illustrated ‘wetland acreage debited’ for various Corps District Offices from 2005 through 2014 (Fig. 1).

 Eco_Asset

The trend line shows a gradual long term rise in credit demand despite the downturn of construction activity (and subsequent decline in mitigation demand) attributed to the recession of 2006-2011.

Acre-debits typically result in demand for mitigation credits used to compensate for development impacts in compliance with the federal Clean Water Act, ensuring no net loss of wetland ecosystem services. Acre-debits may occasionally be satisfied by payment of In Lieu fees or through permittee-responsible mitigation. But the increasing trend has been to rely on third party mitigation credits. Credits are available from approved mitigation banks across the U.S. and represent a form of ecological asset – fungible environmental products or commodities bought and sold in the environmental marketplace.

Summarizing the ACOE District information allows us to develop a trend line for wetland credit demand shown in Fig. 2. Next, combining the ACOE record of credit demand with the average market value of those credits through EASI’s price report provides a first-ever appreciation of the market power of mitigation credits. Credit market value is derived from price information but reliable, representative price data has been hard to find, making EASI’s analysis all the more significant.

EcoAsset8

Crunching the Numbers

Combining the total annual wetland credit demand (Figs. 1 and 2) with average annual credit prices (Fig. 3) illustrates the total value of the U.S. wetlands mitigation credit market between 2005 and 2015 (Fig. 4).

Studying the trend line, which averages annual market value year to year, we see a seven-fold increase (700%) – from roughly $250 M to $1.8 B – in wetland credit market value over the last decade.

Very few market commodities have performed as well over the same period of time.

We might even say that wetland credits have outperformed many traditional commodities. For example, compare the trend lines for wetland credit prices in Ohio, North Carolina and California, or the value of California habitat credits (Figs. 5-6), with value trends for farmland, corn and cattle (Figs. 7- 10).

 Figure 5 Figure 6



Farm and ranch land values have varied modestly from year to year but the decadal trend is relatively flat, averaging about $3500/acre nationally, according to AgWeb.com.
Corn prices, on the other hand have been falling sharply since late 2010, from around $7 per bushel to about $3.80 today.

Prices for live cattle grew in 2014 after plateauing from 2012- 2013. Modest increases are projected for the rest of 2015. This is good news for ranchers since the price of feed has decreased in relation to falling corn prices. Ranch profits will rise if consumers continue to buy beef.

Perhaps of equal interest, ecological asset trends suggest there are new opportunities for rangeland owners on underutilized properties they may own or manage. While mitigation credit prices are high, ranchers may want to develop ecological assets right alongside livestock, hay or other traditional agricultural commodities.

Mitigation credit ‘stacking’, developing multiple eco-asset streams from the same property base, is now an accepted practice in most areas.

 Figure 7

 Figure 8

Eco-assets have outperformed even gold over the past few years. The symbolism of this is irresistible: gold has long been at the center of the world’s international monetary system. Mitigation credits can now be increasingly seen as the focus of value representing monetized ecological health and related quality of life. This reinforces the meaning of what was once a tongue-in-cheek expression – that environmental commodities were like ‘green gold’ representing revenues earned by protecting or restoring ecosystem services.

Green gold is no longer a euphemism based on results of this price trend comparison. In fact, if trends continue, someday soon we may need to differentiate between green gold and ‘gold gold’ – so people will know for sure the kind of value being discussed.

William G. Coleman has 40 years’ experience in environmental and sustainability management, specializing in ecological asset development and market management for agri-business and energy companies. He currently teaches global change and sustainability topics at UC Berkeley Extension and manages his own consulting enterprise, Eco-Asset Solutions Inc. in the San Francisco area. He can be reached at wcoleman@ecoassetsolutionsinc.com.

WRI Report Outlines US Carbon Pricing Alternatives

The World Resources Institute (WRI) officially joined a growing consensus around the need for a price on carbon pollution through its recent release of a report intended to serve as a reference guide for policymakers on carbon pricing. Here, an environmental writer outlines WRI’s descriptive report, which presents a range of ideas on decarbonization and pricing greenhouse gas emissions.

This article was originally published in Clean Technica. Read the original here.

 

22 May 2015 | This May, the World Resources Institute, a global research organization spanning over 50 countries, released Putting a Price on Carbon: A Handbook for U.S. Policymakers, an important reference guide that addresses decarbonization and its interaction with many other policy priorities.

WRI envisions the working paper—and the detailed briefings to come—as playing “a helpful role in the coming national conversation on these issues.” The organization hopes it will lead to a proven, market-based solution that can reduce the US contribution to climate change and raise revenues that will enable communities to better adapt to its impacts. In doing so, WRI authors note, carbon pricing will also help meet other pressing national priorities.

The report echoes statements made by numerous prominent individuals–from triple Cabinet Secretary George P. Schulz to Jerry Taylor, formerly of the libertarian Cato Institute, to Pope Francis, and organizations like the World Bank, the International Monetary Fund, and the World Economic Forum–that the time for taxing carbon is now. Andrew Steer, president and CEO of WRI, states it succinctly: “It’s abundantly clear that putting a price on carbon is the right choice to deliver multiple benefits, including driving innovation, boosting economic growth and reducing emissions.”

“We cannot continue to use the atmosphere as a dumping ground for carbon pollution. It surely makes no sense to tax productive activities like labor, income, and profits, while giving a free ride to carbon emissions that degrade the environment and imperil public health.”

The working paper is not prescriptive, however. It’s descriptive. It presents a range of ideas for pricing GHG emissions throughout the economy rather than promoting a choice. Thus it should greatly help in the definition and prenegotiation stages of decisionmaking on all sides of a thorny issue.

The handbook describes fundamental choices policymakers have in putting an actual price on carbon emissions. It includes a very complete list and description of precedents, all the way from Sweden’s carbon tax of nearly 25 years ago to working schemes in the recent past (see map below). About 40 countries (nearly 25% of world governments) and numerous subnational jurisdictions already have carbon taxes or cap-and-trade policies in place, and the number of important regional pacts is also on the upswing.

It is also realistic in recognition of the critical roles of compromise and of incorporating political goals beyond emissions reductions. Here are the factors the paper suggests might have the best chance of minimizing political barriers and attaining a comprehensive carbon-pricing policy:

  • Bipartisan support for federal tax reform,
  • Stated goals for deeper reductions in GHG emissions,
  • Desire for alternative climate policies,
  • Bipartisan support for deficit reduction,
  • Experience at the state level, and
  • Increased awareness of climate-related impacts

While none of these alone will likely move Congress to put a price on carbon in the coming years, the authors suggest that “their confluence suggests a gradual mounting of pressure that could turn the tide.”

I’ll describe WRI’s cited alternatives from goal-stating, bipartisanship (a somewhat hackneyed and increasingly difficult effort), desire for complementary fiscal and environmental policy, state (and local, regional, and special-interest) actions, and the looming position of climate change itself.

WRI notes that President Obama (with his Cabinet, and many members of Congress) has followed experts in articulating known climate risks. The administration has in place an initial plan for near- and medium-term emissions reduction and limiting the largest emitting sectors in the years beyond.

While these actions clearly represent progress, WRI makes the point that its own analysis shows these administrative actions to be insufficient to meet the long-term US emissions target of roughly 83% below 2005 levels by 2050. The consultants say we will need an economy-wide climate policy to achieve the level of reductions developed nations must contribute to mitigate and adapt to climate change.

The authors present an illuminating matrix of policy goals and revenue options (above). It reveals two important aspects of our possible choices: first, addressing climate head-on can achieve numerous American goals in other areas; and second, none of the climate options exists in a vacuum.

Nearly everyone involved views the federal tax code as onerous, complicated, and full of unfair loopholes. WRI finds it encouraging that both Republican and Democratic members of the Senate Finance Committee have discussed replacing most or all energy subsidies and tax credits with a carbon tax or cap-and-dividend program.

Likewise, reducing the national long-term debt resonates with almost all lawmakers, as well as with the general public. A national carbon tax that has the potential to raise hundreds of billions of dollars could be very helpful in the fiscal long run. It might also be useful in the face of current budget stresses.

Too, WRI notes, the revenue could contribute to tax cuts, refunds, and rebates—much as ample petroleum receipts set Alaskans free from taxes decades ago—and/or it could finance innovation and forward-looking infrastructure and help the nation transition from using harmfully carbon-intensive goods and services.

A price on carbon is both a fiscal and an environmental policy. In addition to using revenues to “pay for” reductions in other taxes, as discussed above, some proponents advocate an economy-wide carbon price as an approach that is preferable to imposing sectoral emission standards. Others view such standards as important tools in their own right or as potentially complementary climate policies.

I would suggest that experience at the state level will prove to be one of the most useful strategies here. WRI points out that “in the absence of a national, economy-wide policy to reduce GHG emissions, some states have moved forward with their own carbon-pricing mechanisms.”

Nine of our northeastern states operate a regional utility sector cap-and-trade program that has saved consumers more than $2 billion in consumer savings. Massachusetts, Oregon, Vermont, Washington, and others have strong stakeholders advocating for a carbon tax to raise revenue for items like key transportation infrastructure. Also, in 2012 California initiated an economy-wide program, which it now shares with Quebec and Ontario. The most spectacular North American example is British Columbia’s successful 2008 carbon tax, which has created new revenue, lowered other tax rates, and will lower emissions to a third of 2007 levels by 2020.

This brings up a very important point: we are seeing carbon pricing work on regional, local, and international levels as well. Successful implementation of carbon pricing by other political units could lessen resistance at the US federal level.

The other factor I see as swiftly moving the debate to a decision point is the weather—not just a conversation-mover as usual, but in the way it may relate to climate impacts and personal priorities. Public opinion has already become more vocal on the need for action. Carbon pricing only makes sense in view of redirecting fiscal responsibility from the consumer/taxpayer to the generators who profit from selling emission-laden products.

Despite fierce and moneyed opposition, Congress has acknowledged the force of climate change, investors are leaving coal behind, we now have an inclusive clean power plan, and polls indicate that people are recognizing the challenge. Too, business and localities have started decarbonization projects on their own and have formed regional and international compacts to implement solutions to climate change issues.

The conservative faction ultimately frames its case in the simplistic argument that changes in energy options constitute redistribution of wealth. It expresses incredulity that Americans would take up such a socialist, if not “communistic,” cause. Loaded rhetoric cannot disguise the feebleness of this position. It’s like advertising that “you deserve” a better insurance plan, or that you have somehow “earned” it. Leaders of all stripes acknowledge that a worldwide climate response goes hand in hand with sustainable development, which will also improve the lot of disadvantaged parts of the world, and swiftly.

Those looking for confirmation of widespread American approval of a carbon tax need only look clearly at the numbers. These include the recent January 2015 Stanford University and Resources for the Future poll. This instrument showed 60% of US respondents in favor of charging a fee to those who emit pollution. The majority went up to two-thirds (67%) if the revenues from the fee were directed back to consumers.

Americans are beginning to see heavy climate impacts, not just the economic hits of typhoons leveling less developed countries or deplorable flooding in “civilized” Europe, but right here. Nothing will change the US perspective better than more runaway wildfires up and down the Rockies, droughts forcing choices between water and fuel in California and Texas, the palpable sinking of Florida, or the prospect of Hurricane Sandies ravaging the coasts on a more frequent basis.

This handbook has the potential to demystify a critical issue of our time. It offers liberals solid, constructive economics and policy, and it hands hard-liners appropriate alternatives to deliberate ignorance and unproductive chatter. Access the guide on WRI’s website.

 

Sandy Dechert covers environmental, health, renewable and conventional energy, and climate change news.

Early Action: Not So Fast In California Offsets Program

California’s offset market was the source of about nine million compliance offset transactions in 2014, according to an Ecosystem Marketplace analysis. However, that number could have been even higher if the evaluation of early action carbon offset projects by California regulators had not moved at a snail’s pace, according to stakeholders.

19 May 2015 | When California regulators announced they would give certain voluntary carbon offset projects an opportunity to transition into their compliance market, it was seen as a potential reward to the innovators and risk takers who invested in these projects early on before a clear compliance signal was sent. In reality, those actors are now being penalized because their projects are being sent to the back of the line, stakeholders said.

Ecosystem Marketplace tracked nine million compliance offsets specifically transacted for the California program in 2014 – a volume that would have been higher had it not been for the slow issuance of offsets to early action carbon projects, according to project developers and investors speaking at the Climate Action Reserve’s (CAR) Navigating the American Carbon World conference in Los Angeles last month.

To date, the California Air Resources Board (ARB) has issued about 19.5 million offsets from 120 projects. Forestry projects account for the largest volume by project type at more than 9.6 million offsets issued to 17 forestry projects – 10 of which were early action projects.

“Early action projects, particularly forestry, have been very slow to transition,” said Roger Williams, President of Blue Source, which develops forestry projects. “We have situations where we have projects that have been kind of stuck in the queue for over a year. That certainly has been frustrating for us because these are projects that have been reviewed by verifiers, by registries, by a second verifier, prior to landing on ARB’s desk. We really need that to accelerate because there are deadlines coming up after which these projects can’t transition.”

The Backstory

Early action offset projects are voluntary projects that have been issued offsets by approved voluntary registries for emissions reductions that occurred between January 1, 2005 and December 31, 2014. Projects developed under five approved ARB compliance protocols are eligible to transition to the compliance regime.

The first step in the process, according to the CAR web site, is to list the early action project with the ARB, which has approved the listing of 109 early action projects to date. They must then undergo regulatory verification, including an assessment of conflict of interest and a desk review to confirm the validity of the initial verification. After that, developers may request that ARB issue offsets to the project, which triggers a full review by the ARB of all project documents.

To transition, these projects had to be successfully listed under a compliance protocol with an Offset Project Registry (OPR) by February 28, 2015. The projects have to complete the early action conversion process by an August 31, 2016 deadline or they will lose the ability to receive ARB offsets under this pathway. However, there are no mandated deadlines for the ARB to complete its evaluation of early action projects.

“The challenge is that for the early action projects, many of which were done a long time ago, there’s no clock,” said Greg Arnold, Managing Partner of CE2 Capital Partners. “Trying to make sure those get expedited in some meaningful fashion is really the challenge of creating the offset supply.”

In contrast, there is a 45-day deadline for the evaluation of offset projects undertaking the ARB’s compliance pathway – meaning the project was developed under a compliance offset protocol established by the ARB – although the process can be extended if ARB staffers require more information.

In practice, this has resulted in developers who took an early risk on voluntary projects that may or may not have been allowed to transition into the compliance regime being forced to sit on the sidelines and wait for their projects to be evaluated. But these pioneers should be rewarded for their willingness to take risks early in the process so it should be high on the ARB’s priority list to get those projects through the approval process rather than subjecting them to a discouraging slow conversion process that could fail to result in the issuance of offsets, said Julian Richardson, CEO of Parhelion Underwriting.

“I think speed is a huge challenge for the market,” he said.

“We understand the concern, but expect to complete our review of all early action projects prior to any deadlines in the regulation,” an ARB spokesman said.

Moving at a Snail’s Pace

The slow regulatory approval of early action projects, combined with the invalidation risk that continues to plague the market (see “Invalidation Risk Still Shadows California Offsets Market”), is a primary area of needed improvement, Williams said. And there is a solution – namely for the ARB to rely on the work done by verifiers and registry officials during a verification process that has been in place for years, he said. In trying to re-verify the work already done, the ARB is unnecessarily increasing the risk and uncertainty for landowners – already subject to 100-year permanence requirements under the ARB’s forestry protocols, forestry stakeholders said.

“We feel like there is a little bit of a duplication of efforts in this overall process to getting credits issued,” Williams said. “I think it’s our hope in this next phase that will pull back a little bit.”

“Otherwise, in our minds, why are we paying $50,000 for verification if that’s going to be done over again at the level of ARB,” he added.

Stakeholders do not doubt that ARB staffers are working incredibly hard to evaluate these early action projects, but the number of employees focusing specifically on the offsets program is small. And that small team is charged with working on amendments related to the offset program, such as the planned inclusion of Alaska-based forestry projects into the program, evaluating and developing new protocols, and issuing offsets to compliance and early action projects.

“They are working hard and need more help,” Arnold said.

However, Williams believes the staffing challenge could be resolved by directing a portion of the allowance auction revenues or adding an issuance fee of about 10 cents per offset that developers would happily pay to hire staff and speed up the process. The agency is always open to input, but commenting on these suggestions would be premature, the spokesman said.

Sharing the Load

Outside of staffing up, the ARB could also enlist the voluntary registries to perform more functions to quicken the evaluation process. Standards that have been designated as OPRs – the American Carbon Registry, the Climate Action Reserve and the Verified Carbon Standard – already perform such tasks as conducting the conflict of interest evaluation of verifiers and reviewing verification reports for projects on the compliance pathway. But the OPRs have almost no role in processing early action projects even though they originally issued the offsets on the voluntary side, meaning that it is “solidly on the ARB’s plate to move those projects forward,” said Rachel Tornek, CAR’s Vice President of Programs.

“I think it’s probably difficult for ARB to allow an outside body to administer part of their program,” she said. “I think there is a reasonable level of hesitancy. Any manager knows it’s difficult to delegate, but it’s something you have to do.”

With the passing of the end of the listing deadline, there is a new sense of urgency to get these early action projects through the pipeline before they lose the opportunity to convert these projects, because if they don’t make that August deadline, they won’t be able to convert and be issued offsets under the early action pathway.

“We really do need to get moving to get those credits to market,” Tornek said. “And I think there will be opportunity for us to streamline the processes with ARB and a little more willingness to allow the work of the OPRs work to stand on its own.”

This Week In Biodiversity: A Race To The Bottom?

The annual National Mitigation and Ecosystem Banking Conference happened this month with the incoming National Mitigation Banking Association (NMBA) president citing low standards and a lack of equivalency in mitigation products as the fundamental challenges facing the industry today. Meanwhile, outside of the US, researchers explore integrating biodiversity into REDD+ in Indonesia.

This article was originally posted in the Mit Mail newsletter. Click here to read the original.

18 May 2015 | This month hundreds came to Orlando for the National Mitigation and Ecosystem Banking Conference. The conference is always an opportunity to reflect on the state of the industry: the past year’s successes, key regulatory developments, and new opportunities.

Outgoing NMBA President Wayne White chatted with Ecosystem Marketplace about his tenure, citing work with Department of Interior agencies on implementing Interior’s new, more ambitious mitigation strategy as a significant achievement this year by the NMBA. Another success was a new approach to supporting NMBA members in local efforts to push for full enforcement of the 2008 Final Compensatory Wetland Mitigation Rule.

 

Incoming NMBA president Mike Sprague says he’ll focus on opportunities for new growth and continued outreach: “There is a different tone this year and one that is much more cooperative than in the past,” he tells EM. He’ll also push for continued high standards for mitigation. “Banking sells a high quality product. So the risk to our industry is what I call the race to the bottom.” It’s the risk that the cheapest, lowest quality mitigation solution becomes the preferred mitigation alternative. Unfortunately, you can see that risk in some of the programs and offsets today in the US: a lack of standards or poor quality standards combined with a lack of equivalency for mitigation methods.”

 

High standards are also the subject of a new framework of ecological restoration principles that aim to set a global standard. We’ve also got stories on how to integrate biodiversity into REDD+ in Indonesia and biodiversity tipping points in the Amazon. And in the United States, recent decisions – on declining to list a greater sage grouse sub-population and on judicial review of Clean Water Act jurisdiction assertions by the Corps – may signal which way the wind will blow as these issues play out at a bigger scale in the coming months.

 

Read on,

—The Ecosystem Marketplace Team

 

If you have comments or would like to submit news stories, write to us at mitmail@ecosystemmarketplace.com.

 

New NMBA President Discusses Challenges, Possibilities For Mitigation Banking

Michael Sprague was officially named the new President of the National Mitigation Banking Association this month at the annual National Mitigation and Ecosystem Banking Conference. During a conversation with Ecosystem Marketplace, Sprague noted his key objectives for the coming year, which include a ramp up of activities that influence policy, as well as problems that continue to plague banking.

Read it here.

 

Outgoing NMBA President Reflects on Old and New Goals for Banking in 2015

Wayne White, outgoing President of the National Mitigation Banking Association recently gave Ecosystem Marketplace a brief rundown on highlights of the past year and what to expect from this year’s National Mitigation and Ecosystem Banking conference, which should again see a focus on Interior’s landscape-level mitigation strategy. White named implementation of this plan as the most significant point of 2014. He also chatted with EM on progress pushing the Corps on enforcement of the 2008 Rule with a new local approach, and why the voluntary-versus-regulated conservation debate isn’t going away anytime soon.

Learn more at Ecosystem Marketplace.

 

Is Private Investment And Coastal Management A Good Or Bad Match?

Nicolas Pascal, of the BlueFinance project, a data collection initiative aimed at developing finance mechanisms for marine conservation management, says market mechanisms have potential to fill a big part of a funding gap that exists in marine conservation. But its practical experience in coastal environments is limited: more know-how is needed to spur private investment.

Keep reading.

 

Equivalency, Streamlining and Stacking: Hot Topics Of This Year’s Mitigation Banking Conference

The 18th National Mitigation and Ecosystem Banking Conference saw a refreshing mix of attendees and sessions along with healthy debate regarding key issues in today’s banking industry. Lauren Hutchison, a PhD student in the wetland mitigation field at Texas A&M University-Corpus Christie provides highlights and a brief summary of the annual event, where hot topics included equivalent standards, credit stacking, streamlining the permitting process, and NRDAR (the Natural Resource Damage Assessment and Restoration Program).

Read it at Ecosystem Marketplace.

Are Sage Grouse a Security Issue?

The Armed Services Committee within the US House of Representatives has likened greater sage-grouse conservation to an “extreme environmental agenda,” saying the birds’ protection measures on federal lands are costing the Department of Defense millions. Late last month, the Committee issued the National Defense Authorization Act, which would prevent the Fish and Wildlife Service from listing the sage-grouse under the Endangered Species Act and restrict federal conservation plans. Environmental groups point out that the Defense Department has never requested such a provision despite the impacts claimed.

Lexology has analysis from Nossaman LLP.

 

Amazon Rainforest Teeters On Point of No Return

There is a species loss threshold in the Amazon rainforest where, once crossed, biodiversity loss will rapidly accelerate along with attendant damages. According to a recent study, the Brazilian Amazon is either dangerously close to passing this threshold or has already done so in some areas. The study maps the impact that deforestation has on entire regions of the Amazon, finding that habitat fragmentation is a key reason for the rapid species decline that happens with widespread forest loss. When forest cover descends to 43%, biodiversity loss quickens to between two and eight major species for every 10% of forest that is further lost. Report authors recommend landscape level management that encompasses private land to stem this loss, as opposed to the farm-by-farm approach to protecting biodiversity that is currently being used.

Read more at Mongabay.

 

NMBA Brings on its First Executive Director

The National Mitigation Banking Association have chosen an individual well-versed in national conservation policy and familiar to Washington D.C.’s inner circles to serve as the organization’s first Executive Director. “Barton James brings a wealth of experience to our membership through his work on and off Capitol Hill, within the Federal government, and at leading conservation organizations,” said then NMBA President Wayne White. The Executive Director is intended to fulfill needed day-to-day operations while acting as the NMBA’s official spokesperson and overseeing membership-related activities.

Read a press release here.

 

What the Mono Basin Sage-Grouse Listing Decision tells us about ESA Listings

Much to the dismay of some conservation organizations, the US Interior Secretary announced late last month the Fish and Wildlife Service will not recommend an Endangered Species Act (ESA) listing status for the Mono Basin sage-grouse, a unique bi-state population living along the Nevada-California border. The decision to withdraw the listing comes largely because of a furious push to conserve the bird by federal agencies, scientists, landowners and conservation organizations.

 

Environmental groups like WildEarth Guardians and the Center for Biological Diversity blasted the decision arguing that serious threats to the bi-state sage-grouse (which have an estimated population of 1800-7400 birds) remain unaddressed, leaving the species vulnerable to the threat of extinction.

 

On a broader level, the decision not to list the Mono Basin sage-grouse may foreshadow Interior’s decision on the much more consequential listing of the related greater sage-grouse, a bird numbering in the hundreds of thousands and ranging over eleven states heavily invested in oil and gas drilling, mining and renewable energy.

E&E has the story.

 

Aprí¨s le Déluge, The Money?

A federal court is still determining just how much oil company BP should be charged for the Deepwater Horizon catastrophe that killed 11 people and spilled 5 million barrels into the Gulf in 2010. Communities in the five states that saw their seafood and tourism industries decimated by the spill continue to be affected as they wait on the fine money to fund restoration projects like sea grass protection, dune restoration and stormwater improvements. When the money does eventually flow to the states, it will largely be because of the bipartisan RESTORE (Resources and Ecosystems Sustainability, Tourism Opportunities and Revived Economies) Act, passed by Congress. Whereas the Treasury usually receives fine money, the Act requires 80% of it – estimated to be as much as $13B – to go to the impacted states.

Read more at USA Today.

 

Judicial Review Case Portends a Pushback on Clean Water Act Jurisdiction Assertions

Last month the US Court of Appeals for the Eighth Circuit handed down a decision that Clean Water Act (CWA) jurisdiction assertions are subject to judicial review. The case has potential ramifications for a forthcoming final rule clarifying “waters of the US” that fall under CWA jurisdiction. The rule could mean a bigger, clearer playing field for the mitigation industry, but has proven controversial in other quarters.

 

In Hawkes v. US Army Corps of Engr’s, the court sided with the Hawkes Company’s contention that lacking an opportunity for judicial review, appellants are forced to “incur substantial compliance costs (the permitting process), forego what they assert is lawful use of their property, or risk substantial enforcement penalties” without other adequate alternative remedies.

Get analysis from Hunton Williams via Lexology.

 

A Blue Carbon Market Grows for Louisiana’s Deltaic Wetlands

Between storm protection, fisheries, tourism, wildlife habitat and the oil industry, the ecosystem services of Louisiana’s coastal wetlands are too great to be ignored. And since the 2010 Deepwater Horizon Oil spill, the region has been a hub of innovation seeking ways to protect quickly-eroding but critically valuable deltaic wetlands. One local wetland restoration company, Tierra Resources, is harnessing the blue carbon market to finance conservation work. The region’s main electricity provider, Entergy, has come out as a big supporter, funding Tierra Resources’ initial activity and now participating in a project. “We are married to our service area,” said Entergy’s Corporate Social Responsibility Director. “And with the loss of the wetlands, it has taken away one of the barriers that protects us and our customers from storm casualty loss.”

Forbes has the story.

 

Mitigation Roundup

 

 

Getting the Ball Rolling on Global Standards for Ecological Restoration

Ecological restoration is often ambiguously defined. Now, an assorted group of professionals from the fields of ecology, economics, law, geography, philosophy and political science have developed a framework outlining four principles to follow to deliver best results when implementing restoration projects. The principles are; ecological integrity, long-term sustainability, accounting for past and future variables, and engaging society. Comparing it to the New York Declaration on Forests, authors feel the framework could serve as a binding and robust international structure that – because of the diverse background of its creators – is applicable across a multitude of contexts.

Learn more here.

 

A Key Component of Biodiversity Conservation? Biodiversity

New research urges REDD+ (Reducing Emissions from Deforestation and Forest Degradation) project developers to take into account carbon-rich regions of Indonesia’s vast forestland are not necessarily biodiversity-rich. The study addresses the claim that REDD, as a rule, offers big benefits for biodiversity. But to capture those benefits, researchers say, biodiversity-specific management will need to be integrated into project planning and design. This is already happening in REDD projects in other parts of the world like Tanzania and Brazil where there is a focus on high-biodiversity areas. Researchers recommend incorporating Indonesia’s lowland forests that have high biodiversity value into REDD+ projects despite their containing below-average carbon content.

Learn more at Mongabay.

 

JOB LISTINGS

 

Conservation Manager

WWF – Antananarivo, Madagascar

Based in Madagascar, the Conservation Manager heads the Conservation Division and provides leadership, strategic direction and technical support for the development, implementation and monitoring and evaluation of WWF’s conservation strategy and programme in the Madagascar & West Indian Ocean Region, in compliance with WWF’s priorities, policies and standards and under the guidance of the Country Director. The Conservation Manager provides advice to the Country Director on pertinent conservation issues in the region.

Learn more here.

 

Fundraising and Partnership Manager

WWF – Antananarivo, Madagascar

The Fundraising and Partnership Manager is responsible for i) overall fundraising management activities of the organization, including the development and implementation of a 3 – 5 year fundraising strategy to financially support and strategically advance MWIOPO’s Madagascar and WIO’s environmental conservation activities; ii) development and maintenance of effective partnerships that are relevant to the WWF Madagascar conservation strategy. This senior position reports directly to the Country Director, is a member of the senior management team.

Learn more here.

 

EVENTS

 

2015 Conservation Finance Boot Camp

The Conservation Finance Network at Island Press is pleased to announce the 2015 Conservation Finance Boot Camp training course being held at the Yale School of Forestry and Environmental Studies in partnership with the Yale Center for Business and the Environment. Now in its ninth year, this intensive week-long course aims to help professionals utilize innovative and effective financing strategies for land resource conservation, restoration, and stewardship. The course will offer in-depth information on trends and opportunities in public funding, private investment capital, bridge financing and loans, gifts and grants, income from the land, and monetized ecosystem services. There will be a strong emphasis on practical, hands-on tools and lessons from relevant case studies. Attendees will have an opportunity to consult with conservation finance experts on projects or problems from their work. The course will also serve to convene a peer network of committed conservation professionals working on similar issues across the nation. Past attendees have included U.S. and international conservationists, foundation leaders, land trust board members, executive directors, private investors, business executives, and academics. Opportunities for networking will be built in throughout the week in order to foster long-term professional relationships and support networks among attendees and presenters. 1-5 June 2015. New Haven CT, USA.

Learn more here.

 

SOCAP 15

We are a network of heart-centered investors, entrepreneurs, and social impact leaders who believe in an inclusive and socially responsible economy to address the world’s toughest challenges. Since 2008, SOCAP has created a platform where social impact leaders can connect and present their ideas to a global audience. Our annual flagship event in San Francisco is the largest conference for impact investors and social entrepreneurs and has drawn more than 10,000 people. 6-9 October 2015. San Francisco CA, USA.

Learn more here.

 

8th ESP World Conference

The Ecosystem Services Partnership (ESP) is a worldwide network, founded in 2008, to enhance the science and practical application of ecosystem services. To facilitate the needed dialogue between scientists, policy makers and practitioners ESP organises an annual international conference in different parts of the world. The central theme is ‘Ecosystem Services for Nature, People and Prosperity’. The conference will pay special attention to the public and private sector dialogue on how the ecosystem services concept can be used to support conservation, improve livelihoods and engage the business community. 9-13 November 2015. Stellenbosch, South Africa.

 


Additional resources

Invalidation Risk Still Shadows California Offsets Market

The decision by California regulators to invalidate carbon offsets generated at an incineration facility in Arkansas last year continues to cast a dark cloud over the North American carbon markets. The invalidation risk for offsets bound for the U.S. state’s program remains a barrier in completing deals, with more invalidations potentially on the horizon, as stakeholders made clear at the Climate Action Reserve’s carbon markets conference.

18 May 2015 | Invalidation. It was a word that was mentioned early and often, almost always in a negative context, during the Climate Action Reserve’s (CAR) Navigating the American Carbon World (NACW) conference in Los Angeles last month.

The California Air Resources Board’s (ARB) review and subsequent invalidation of 88,955 ozone-depleting substances (ODS) offsets generated at the Clean Harbors Incineration Facility in El Dorado, Arkansas was for many NACW attendees the major source of disruption in the state’s offset program in 2014. After a lengthy inquiry that began in late May, the ARB proceeded in November with the invalidation of these offsets generated by a project from developer EOS Climate because the facility was out of compliance with its federal operating permit.

The invalidation inquiry was “one of the lowlights” in the California offsets program last year, said Julian Richardson, CEO of Parhelion Underwriting, which provides an insurance product that covers the invalidation risk in the California program.

“What we do know is that there will be further invalidations, but we don’t know when they will be and we don’t know which projects,” he said.

The ARB’s decision to invoke the so-called buyers’ liability provisions was blamed for a lack of liquidity in the offsets market. However, Ecosystem Marketplace research shows that ODS projects, despite the cloud cast by the inquiry, still comprised nearly 60% of the compliance offset transactions that reported a project type in 2014, with an average price of $9.7/tCO2e.

Still, project developers and financiers say the lingering uncertainty caused by the invalidation risk is scaring potential participants away from participating in California’s cap-and-trade program, which will ultimately throw the supply of offsets out of balance. The maximum offset demand during the program’s second compliance period (2015-2017) is nearly 92 million offsets – well above the roughly 19.5 million offsets issued by the ARB to date.

But only a limited number of regulated entities are expected to use the full 8% of offsets they are allowed to use to meet their compliance obligations, due largely to the invalidation risk and a lack of available offsets. For example, regulated entities could have used up to 11.6 million offsets to meet their 2013 compliance obligations by November 2014, but only 1.7 million offsets were actually surrendered.

“We’re seeing that firsthand from landowners who are truly interested and want to participate and are willing to take that long-term commitment, but are really nervous about that liability,” said Roger Williams, President of Blue Source, which develops forestry projects.

Where’s the Risk?

For participants in the California offsets market, the key issue was not the volume of offsets ultimately invalidated by the ARB, which represented a miniscule percentage of the offsets issued by the regulators.

“The invalidation risk in practice to date has really been very, very small,” said Greg Arnold, Managing Partner of CE2 Capital Partners. “The difficulty is with the construct of the buyers’ liability itself. I understand some of the reasoning behind why it’s been done, but it’s probably a market construct that, hopefully as the ARB gets more comfortable, can be relaxed.”

The main cause for concern is the lack of clarity over where the ARB staff will draw the line on what truly constitutes a violation rising to the level of invalidation. The ARB attempted to provide some clarity in a February guidance document, including by defining the scope of the invalidation with regard to each eligible project type. For forestry projects, for example, the ARB specified that the invalidation provisions would come into play if there were any violations of environmental, health and safety requirements associated with activities within the project area that directly affect carbon stocks. The ARB specified that these activities included planting and harvesting, among others, but not external activities such as transportation of logs to mills. However, the document raised many more questions than it answered for some stakeholders.

“We’re supportive of the invalidation rule,” said Brian Shillinglaw, Associate Director, Investments and Operations, Carbon Investments & Policy for developer New Forests. “We think ARB did the right thing. However, there is an extreme lack of clarity as to the scope of that risk.”

Under the ARB’s current guidelines, for example, an entire reporting period worth of offsets can be invalidated due to a violation lasting only a single day. This creates particular challenges for forestry projects as the majority of the value of offsets derived from those offsets could be generated during the first reporting period, putting the entire project in jeopardy, Williams said.

“We think that’s not necessary and a bit of an overreach and should be corrected,” he said.

While not able to address the specific issues raised by Williams and others, the ARB has committed to providing additional clarity in Frequently Asked Questions documents on this topic as warranted, an ARB spokesman said.

“We are not considering any changes to buyer liability,” he said.

Stakeholders cited the length of the invalidation inquiry as another inherent risk in the process. The Clean Harbors investigation began in late May, with a preliminary decision issued in October and a final decision released the following month.

“It was long and drawn out,” Richardson said. “It didn’t necessarily create the certainty that we wanted. We were all looking forward to seeing what an invalidation event would actually look like. And it provided some clarity, but it also created some additional questions.”

The length of the investigation can be blamed partly on the competing priorities of the ARB staff, which is also tasked with reviewing and issuing offsets for submitted projects, a process that can be excruciatingly slow for developers of early action projects (see story).

Managing Invalidation Risk

Multiple contract structures have developed in response to the buyers’ liability provisions featured in California’s program, including Golden California Carbon Offsets (CCOs) in which the seller bears the risk of replacing an offset with an allowance or replacement offset if the original offset is invalidated. Ecosystem Marketplace’s research shows that Golden CCOs generated a premium price 12-13% higher than the other contract structures, albeit in a small sample size of responses.

Another option is to purchase an insurance policy that indemnifies the owner of the offset for the replacement cost of an invalidated offset, a policy first offered by Parhelion in partnership with CAR.

“We’ve had a very good uptake on this, particularly since Clean Harbors,” Richardson said.

The Canadian province of Quebec – California’s partner in the Western Climate Initiative (WCI) cap-and-trade program – has developed its own method of managing the risk of invalidations for the offsets submitted for compliance in its program. The province sets aside 4% of offsets to cover reversals or invalidations.

“It’s effectively a buffer pool that’s been created, which is a perfectly legitimate way to manage that risk,” Richardson said. “What it does is take some liquidity out of the market by having those offsets tied up in a buffer pool. That is an asset the Quebec government is effectively sitting on. It’s fine, but it’s not the most efficient way to go. I don’t think it would actually draw any more players into the California market.”

In contrast, California’s buffer pool only covers the unintentional reversal of offsets generated by forestry projects in limited circumstances where it is clear that the reversal occurred due to no fault of the developer or landowner, for example, in situations where there is a beetle infestation or forest fire.

Causing Friction

The invalidation risk continues to create friction in the development and sales process despite the best efforts to manage it, Arnold said.

“Investing in these projects is a difficult business,” he said. “Those regulatory guidelines give investors pause. It makes it harder to sign up project sponsors. It makes it harder to want to invest because at the end of the day, you really don’t have a clear perception of how many credits you might receive once you’ve made your investment. Until that happens, we’re going to have an offset market that functions like this: it makes progress, but it never fully reaches its potential.”

And there are regulated entities that consider and ultimately reject the opportunity to purchase offsets for compliance due to the invalidation risk, as farming firm JG Boswell decided, because the price differential between Golden CCOs and allowances offered at auction by the ARB is not wide enough to encourage them to take on the invalidation risk.

“We won’t participate in buying offsets until that risk is eliminated,” a company official said at the NACW conference.

“It doesn’t surprise me to hear you say that,” Richardson responded. “We’ve talked to some compliance entities with some pretty substantial obligations and they are saying it’s pretty difficult to get into the offset market.”

As California keeps the door open to additional WCI partners – Ontario recently announced its intention to join California and Quebec’s carbon trading program – stakeholders expressed concern the buyers’ liability provisions could be a barrier to such linkages.

“As other jurisdictions think about joining this program or creating other programs, there’s clearly a point of view that there should be no invalidation risk,” Arnold said. “No buyer liability is really the term and that will help the free flow of capital into the markets and provide more liquidity and really make it easier for this to be a more functional market than it is today.”

Additional resources

Opinion Rivaling Gold: Ecological Assets Outperform Traditional Commodities

26 May 2015 | The market value of compensatory mitigation credits for wetland, stream and species conservation have risen consistently over the past decade, according to a recent review of publically available mitigation credit price data undertaken by Eco-Asset Solutions Inc. (EASI) of Redwood City, California.

EASI analyzed over 500 available internet records on price information for wetlands and stream credits, California species and habitat credits, along with nutrient credits traded in the Chesapeake Bay and the Susquehanna River Basin. These records ranged from as far back as the late 1980s to this year. The outcome of this comprehensive research is the Mitigation Credit Price Report.

Mitigation credits represent the partial value of ecosystem services such as water filtration, aquifer recharge and biodiversity maintenance. When they are bought, sold or traded in the marketplace they take on the features of other monetized environmental commodities such as carbon credits or renewable energy credits. In each case these credits represent bottom line value to businesses. The value trend for these commodities suggests that mitigation credits have established themselves firmly in the economy.

 EcoAsset1

The positive trend for these wetland, stream and conservation credit values has been strong, based on market value insights made possible by U.S. Army Corps of Engineers’ (ACOE) information presented at the National Mitigation Banking Association (NMBA) annual meeting held in Orlando, Florida.

Steve Martin of the ACOE Institute for Water Resources, illustrated ‘wetland acreage debited’ for various Corps District Offices from 2005 through 2014 (Fig. 1).

 Eco_Asset

The trend line shows a gradual long term rise in credit demand despite the downturn of construction activity (and subsequent decline in mitigation demand) attributed to the recession of 2006-2011.

Acre-debits typically result in demand for mitigation credits used to compensate for development impacts in compliance with the federal Clean Water Act, ensuring no net loss of wetland ecosystem services. Acre-debits may occasionally be satisfied by payment of In Lieu fees or through permittee-responsible mitigation. But the increasing trend has been to rely on third party mitigation credits. Credits are available from approved mitigation banks across the U.S. and represent a form of ecological asset – fungible environmental products or commodities bought and sold in the environmental marketplace.

Summarizing the ACOE District information allows us to develop a trend line for wetland credit demand shown in Fig. 2. Next, combining the ACOE record of credit demand with the average market value of those credits through EASI’s price report provides a first-ever appreciation of the market power of mitigation credits. Credit market value is derived from price information but reliable, representative price data has been hard to find, making EASI’s analysis all the more significant.

EcoAsset8

Crunching the Numbers

Combining the total annual wetland credit demand (Figs. 1 and 2) with average annual credit prices (Fig. 3) illustrates the total value of the U.S. wetlands mitigation credit market between 2005 and 2015 (Fig. 4).

Studying the trend line, which averages annual market value year to year, we see a seven-fold increase (700%) – from roughly $250 M to $1.8 B – in wetland credit market value over the last decade.

Very few market commodities have performed as well over the same period of time.

We might even say that wetland credits have outperformed many traditional commodities. For example, compare the trend lines for wetland credit prices in Ohio, North Carolina and California, or the value of California habitat credits (Figs. 5-6), with value trends for farmland, corn and cattle (Figs. 7- 10).

 Figure 5 Figure 6



Farm and ranch land values have varied modestly from year to year but the decadal trend is relatively flat, averaging about $3500/acre nationally, according to AgWeb.com.
Corn prices, on the other hand have been falling sharply since late 2010, from around $7 per bushel to about $3.80 today.

Prices for live cattle grew in 2014 after plateauing from 2012- 2013. Modest increases are projected for the rest of 2015. This is good news for ranchers since the price of feed has decreased in relation to falling corn prices. Ranch profits will rise if consumers continue to buy beef.

Perhaps of equal interest, ecological asset trends suggest there are new opportunities for rangeland owners on underutilized properties they may own or manage. While mitigation credit prices are high, ranchers may want to develop ecological assets right alongside livestock, hay or other traditional agricultural commodities.

Mitigation credit ‘stacking’, developing multiple eco-asset streams from the same property base, is now an accepted practice in most areas.

 Figure 7

 Figure 8

Eco-assets have outperformed even gold over the past few years. The symbolism of this is irresistible: gold has long been at the center of the world’s international monetary system. Mitigation credits can now be increasingly seen as the focus of value representing monetized ecological health and related quality of life. This reinforces the meaning of what was once a tongue-in-cheek expression – that environmental commodities were like ‘green gold’ representing revenues earned by protecting or restoring ecosystem services.

Green gold is no longer a euphemism based on results of this price trend comparison. In fact, if trends continue, someday soon we may need to differentiate between green gold and ‘gold gold’ – so people will know for sure the kind of value being discussed.

William G. Coleman has 40 years’ experience in environmental and sustainability management, specializing in ecological asset development and market management for agri-business and energy companies. He currently teaches global change and sustainability topics at UC Berkeley Extension and manages his own consulting enterprise, Eco-Asset Solutions Inc. in the San Francisco area. He can be reached at wcoleman@ecoassetsolutionsinc.com.

Equivalency, Streamlining and Stacking: Hot Topics Of This Year’s Mitigation Banking Conference

The 18th National Mitigation and Ecosystem Banking Conference saw a refreshing mix of attendees and sessions along with healthy debate regarding key issues in today’s banking industry. Lauren Hutchison, a PhD student in the wetland mitigation field at Texas A&M University-Corpus Christie provides highlights and a brief summary of the annual event.

13 May 2015 | Over 400 people from six countries gathered in Orlando, Florida last week for the 2015 National Mitigation and Ecosystem Banking Conference (NMEBC). This uniquely independent conference drew a wide mix of wetland and conservation bankers, bank investors and consultants as well as regulators and bank stakeholders.

Attendees came for a plethora of reasons. The new kids on the block came to learn how to develop mitigation banks and in lieu fee programs, while individuals knee deep in mitigation banking came to catch up with old friends and talk business. Seasoned attendees expressed an interest in innovative solutions for streamlining the permitting process, credit stacking, joint mitigation and developing incentives for private landowners.

“As always, the conference is the best place to find out what is really going on. No national survey of “stacking” (or whatever else) would turn up any of the stories or examples I heard about just by talking with folks”, said Morgan Robertson, Associate Professor, University of Wisconsin-Madison.

Those who arrived early went on field excursions to mitigation and conservation banks in the Orlando area or participated in workshops that provided the history and nuts and bolts of banking and introduced tracking tools of mitigation banking in the U.S. such as RIBITs and Mitigation Analyst.

Informal forums were held to allow regulators, users and bankers to exchange ideas within these groups – allowing those with similar interests to identify each other and follow-up with one another at a later time – and further gave a flavor for the hot topics surrounding mitigation banking.

Those “hot” topics included among others equivalent standards, credit stacking, streamlining the permitting process, NRDAR (Natural Resource Damage Assessment and Restoration program), the need to take a landscape scale approach, and the issues surrounding the differing use of ratios and conditional and functional assessments.

There were sessions designed to meet the demand of a whole range of attendees. The “Long-term Stewardship Workshop,” session outlined how to develop a mitigation bank from scratch. Facilitators provided attendees with handouts and tools to help navigate the three-step process to develop a mitigation bank: develop a long-term management plan, secure endowment funding and create a site protection instrument such as a conservation easement.

“Performance Guidelines,” was comprised mostly of USACE (US Army Corp of Engineers) employees who focus solely on mitigation related issues. This session allowed the attendees to get inside the head of the USACE and better understand the USACE perspective at the local level.

“Analysis of National Mitigation and Conservation Banking Status and Trends,” included talks on the administrative performance of the USACE since the 2008 Mitigation Rule, regional and national trends in mitigation, and an analysis on the state of the national mitigation market. Not only was this session a great overview of the status of mitigation banking, it also stimulated lots of conversation and questions.

Other sessions provided tools and guidance related to the incorporation of science-based decision-making into mitigation, insight into the roles and strategies of various agencies, and effective communication strategies for use throughout the permitting process.

“If an attendee didn’t know the importance of the 2008 Mitigation Rule prior to the conference, they certainly left the conference with an idea of what is included and just how important the rule is in every day decision-making related to mitigation and mitigation banking”, noted a prominent mitigation banker.

There is no doubt this conference is of great value to individuals working in or interested in the mitigation and conservation banking field. The broad range of participation is refreshing and allows for a symbiosis that is necessary if mitigation banking is going to continue to expand its range and grow in effectiveness.

Access to audio and conference materials are available online. And registration for next year’s conference in Fort Worth, Texas is offered on the NMEBC website as well.

 

Lauren Hutchison is a Graduate Research Assistant at the Harte Research Institute for Gulf of Mexico Studies, Texas A&M University, Corpus Christi.  Her dissertation involves linking wetland structure and functions to ecosystem services for enhanced decision-making related to wetland mitigation policy in Texas. She can be reached at Lauren.Hutchison@tamucc.edu.

Subnational Climate Leaders Will Get Their Day In The Paris Sun

11 May, 2015 | Christiana Figueres has made a promise.

Figueres, Executive Secretary of the United Nations Framework Convention on Climate Change (UNFCCC), has promised officials from the US state of California, the Canadian province of Québec and other subnational jurisdictions that they will not be shunted off to a side event during the upcoming UNFCCC negotiations in Paris in December. Instead, they will have a place on the main agenda – a reflection of the leadership that officials in these subnational jurisdictions have shown in addressing climate change while the international talks have progressed at a snail’s pace.

“Two years ago when we were talking about carbon markets, people were talking about the eventual end of the carbon market,” David Heurtel, Minster of Sustainable Development, Environment and the Fight against Climate Change in Québec, said at the Navigating the American Carbon World conference in Los Angeles last week.

But “the noise that we made [during the Lima climate talks in 2014] was so overwhelmingly heard that now there is absolutely no choice but to hear what we have to say and take into consideration what we’re doing,” he added.

Though subnational, these jurisdictions can have a disproportionally large effect on the global climate: California constitutes the 7th largest economy of the world and the provinces of Québec and Ontario – which recently announced it would join the California-Québec carbon market–collectively cover 62% of Canada’s entire population.

The participation of the provinces is especially noteworthy considering the Canadian federal government’s climate policy. Canada pulled out of the Kyoto Protocol in 2011 after increasing emissions rather than meeting its reduction targets. More recently, the country failed to submit its Intended Nationally Determined Contribution (INDC) ahead of the United Nations’ March 31st deadline.

In light of this inaction by the federal government, the Premiers of Ontario and Québec issued a joint statement on climate change addressed to Canadian Prime Minister Stephen Harper’s government late last month: “We strongly believe that good environmental policy is good economic policy. But so far, almost all of the progress Canada has made on climate change is the result of provincial action. Once Ontario’s new system is implemented, more than 75% of Canada’s population will be covered by carbon pricing.”

The provincial leaders invited the federal government to participate in developing an ambitious contribution from Canada ahead of the Paris talks, with the country’s INDC now expected in June.

Earning a Seat at the Table

Leadership isn’t the only reason for the inclusion of subnationals on the Paris agenda. Central to their visibility has also been the success of their programs. The California and Québec cap-and-trade programs, which have been in place since 2013, have reported both economic gains and emissions reductions through the first two years of compliance.

California’s program, a result of the state’s 2006 Global Warming Solutions Act, came online with a goal of reducing greenhouse gas (GHG) emissions to 1990 levels by 2020. In the two years since the compliance market was implemented, California’s Gross Domestic Product (GDP) grew by 2% while emissions of capped sectors dropped by 3.8%, according to a report by the Environmental Defense Fund. The success spurred California Governor Jerry Brown last week to issue a new executive order to lower the state’s GHG emissions 40% below 1990 levels by 2030.

“We’re demonstrating in California that we can take the steps to reduce carbon emissions while advancing our economy at the same time,” he said. “We know where we have to go and we look to (carbon market participants) to help us get there.”

More than 92% of compliance offset transactions in North America in 2014 were directed toward California’s cap-and-trade market, which allows compliance entities to use carbon offsets from five eligible project types – forestry, urban forestry, livestock methane, coal mine methane and ozone-depleting substances – to satisfy up to 8% of their compliance obligations. The average price of California-compliant offsets was $9/tonnes of carbon dioxide equivalent (tCO2e), making offsetting a cost-effective compliance option compared to California allowances, which cleared at auction at prices in the range of $11.3/tCO2e to $11.9/tCO2e in 2014, according to a recent analysis by Ecosystem Marketplace.

Meanwhile Québec’s program, which linked to California’s market through the Western Climate Initiative (WCI), will raise an expected C$3 billion between 2013-2020 to be channeled into a green fund to support public transit, research and innovation, among other initaitives.

While Heurtel acknowledged the program been successful, “I think we need to put more emphasis on communicating that. We’ve been collectively talking to each other about this but we’re preaching to the choir. We need to do much more to explain and have real examples.”

Those real examples are something he thinks subnational jurisdictions can bring to Paris later this year. The conversation won’t be just about polar bears and small islands – he can speak to the St. Lawrence River Basin’s decline in water levels, which is predicted to continue to fall over this century due to climate change. He can also highlight success stories in the province, including a company called Biothermica that developed an offset project under California’s coal mine methane protocol and earned $900,000 by selling the offsets.

Joining Forces

The WCI cap-and-trade market’s success has been a bright spot in North America and has attracted interest from other jurisdictions working on their own climate plans. Most notably, Ontario announced its intention to join the cap-and-trade program. Though details of the market mechanism are expected in another six months, the long-term goal is to join the region’s bilateral carbon market.

Glen Murray, Minister of the Environment and Climate Change in Ontario, stressed the role of those “infra-nationals” in influencing Ontario’s recent announcement, highlighting the work done by Governor Brown, former California Governor Arnold Schwarzenegger and Québec Premier Philippe Couillard.

“Ontario would not be here if there wasn’t someone else who had actually stood up,” Murray said.

The province has experienced job and GDP growth despite shutting down all its coal plants (which previously contributed 1/3rd to its energy mix).

“If you want to understand why [carbon pricing] is a good idea, just try to shut down your coal plans without a carbon price – very expensive,” he said.

Minister Murray is optimistic that the new cap-and-trade plan will only bolster the economy. With emissions more than double that of Québec, the Ontario government is estimating C$1.5-C$2 billion annually generated by a similar cap-and-trade program to facilitate the transition to a low-carbon economy.

Outside of Canada, California has also pursued linkages with Mexico and China in the form of Memorandum of Understandings (MOUs). Formalized in late 2013, the MOU between the California Air Resource Board (ARB) and Chinese equivalent called the National Development and Form Commission (NDRC) lays out cooperation between the two agencies on key issues, including: mitigating carbon emissions, strengthening performance standards to control greenhouse gas emissions, designing and implementing carbon emissions trading systems, sharing information on policies and programs to strengthen low-carbon development, and researching clean and efficient energy technologies. Meanwhile, the California-Mexico MOU, signed in 2014, agreed to work together on a range of actions to address climate change, including pricing carbon pollution.

The state has most recently worked with the German state of Baden-Wí¼rttemberg to advance the “Under 2 MOU.” This MOU is designed for subnational states and regions to make commitments prior to Paris to either agree to reduce their GHG emissions 80-95% (a goal for developed countries) or limit to emissions to two metric tons CO2e per capita by 2050 (the target for developing regions) – with the first round of signatories announced later this month.

“Each of these is really aimed at Paris and beyond,” said Ken Alex, Senior Policy Advisor to Governor Brown. “Our hope is to represent a significant chunk of world GDP by the time we get to Paris. Regardless of what happens in Paris, there will be a very significant set of subnationals around the world committed to doing aggressive action.”

While not all 3,000+ subnationals will be able to sit at the table in Paris, officials in California and Québec hope collective initiatives such as their linked programs and MOUs will capture the attention of the international negotiators.

“We need to see Paris as a beginning, not an end,” Heurtel said. “Especially to recognize that the infra-national governments not only have a role to play but actually are the key players.”

New NMBA President Discusses Challenges, Possibilities For Mitigation Banking

6 May 2015 | Not all versions of mitigation are created equal. In fact, equivalency and standards are the fundamental challenges facing the mitigation banking industry today, according to Michael Sprague, founder of the ecological restoration firm, Trout Headwaters Inc, operating out of Montana.

“As disparate as the issues in the industry are, it comes down to those two issues,” he says.

Mitigation banking, which is the restoration and creation of a stream, wetland or wildlife habitat as a compensation for environmental loss elsewhere, delivers a high-quality product in terms of ecological and regulatory benefits, Sprague says. Banking provides conservation in perpetuity, ensuring full compliance with regulatory requirements. But Sprague says there is a lack of high standards in mitigation today and it’s leading to “a race to the cheapest and most expedient form of offsets,” thus creating the biggest risk to mitigation banking.

It’s one of many issues that Sprague will have a chance to address this year. At this week’s National Mitigation and Ecosystem Banking Conference (NMEBC), he will become the new National Mitigation Banking Association (NMBA) president.

This year’s NMEBC, which takes place in Orlando and runs from May 5th to the 8th, has a data-focused element to it. Sprague will play a part in this by hosting a workshop on the latest version of Mitigation Analyst 2.0, a data and analytics system for mitigation and conservation banking.

“It’s a down-and-dirty user workshop that enables folks to really leverage all of this data when they leave the conference,” Sprague says.

After the conference, Sprague is looking forward to a dynamic year building on what he considers to be the success of his predecessor Wayne White. He recently talked with Ecosystem Marketplace about the aforementioned issues as well as on other topics related to his new position and mitigation banking.

Ecosystem Marketplace (EM): What key issues are shaping this year’s conference and the coming year?

Michael Sprague (MS): There is a different tone this year and one that is much more cooperative than in the past. We’re going to expand markets and look for opportunities for advanced compensatory mitigation. The NMBA has also been a huge provider of support for conservation banking so we’re now seeing opportunities in that area. We’re also seeing opportunities for banking in other markets like nutrient credit trading. The Emerging Markets session at the conference will be focused on these types of issues.

For me, over the year, I’m looking to build a five year strategic plan with the help of the (all volunteer) Board of Directors. The plan will dovetail with the Association’s newly hired Executive Director but basically, it will ensure that all the various assets we have, like volunteer time, staff and so on, is leveraged in a way that serves membership in the end.

EM: Can you talk a little more about what you view as the biggest challenges facing mitigation banking today?

MS: Banking sells a high quality product. It’s not a promise, not a prospect but a product. There’s no temporal risk or regulatory risk, which means that we’re not only able to save permittees and agencies time but we’re also able to deliver the highest possible environmental outcome. So the risk to our industry is what I call the race to the bottom. It’s the risk that the cheapest, lowest quality mitigation solution becomes the preferred mitigation alternative. Unfortunately, you can see that risk in some of the programs and offsets today in the US. The broad risks are reasonably consistent: a lack of standards or poor quality standards combined with a lack of equivalency for mitigation methods.

A lot of the problems I encounter could have been solved by simply choosing advanced mitigation with consistent high standards that ensures equivalency in its offsets.

EM: What are your key objectives as president?

MS: This is going to sound dull and boring but we need to put together a strategic plan and create a board member manual among other similar tasks. But I see my key objective as to help the Association grow membership and to work with the Board to deliver benefits to the members. We’ve seen a 12% growth over last year so if we continue to do these two things well, then our future remains bright. Because when we increase our membership, we gain intellectual capacity, the quality of our work improves and our ability to carry out initiatives becomes more efficient. A lot of hands make a lighter lift.

EM: The NMBA recently hired its first Executive Director, Barton James. What does this mean for the Association?

MS: It’s a great step forward to have 24/7 representation to add to our administrative, lobbying and volunteer efforts. We now have someone who is able to guide the ship day-to-day. And specifically, Bart brings us a real depth and expertise in Washington D.C. and I’m excited for what that means for membership.

 

Mitigation Bankers Seek Fulfillment Of Long-Term And New Goals At Annual Conference

The outgoing president of the National Mitigation Banking Association recently gave Ecosystem Marketplace a brief rundown on highlights of the past year and what to expect from this year’s National Mitigation and Ecosystem Banking conference, which should again see a focus on Interior’s landscape-level mitigation strategy. However, this year the strategy’s focus won’t be on its release but rather its implementation.

5 May 2015 | This week, mitigation and conservation bankers from around the US are convening in Orlando, Florida for the annual National Mitigation and Ecosystem Banking Conference (NMEBC), arguably the most important gathering for the mitigation industry. It’s been a progressive year for the sector, says Wayne White, the President of the event’s organizer, the National Mitigation Banking Association (NMBA) with several noteworthy changes.

White recently chatted with Ecosystem Marketplace about the NMBA’s achievements of the last year and significant happenings for the industry. The NMEBC started today and runs through the 8th.

Movement on New Mitigation Strategy

Last year, the Department of Interior (DOI) released a new more inclusive mitigation strategy that encompassed its many agencies: the Fish and Wildlife Service and the Bureau of Land Management to name a couple. As the DOI’s new strategy follows the mitigation hierarchy, which takes full advantage of compensatory mitigation mechanisms such as conservation banking, the strategy has many implications for the banking sector. The NMBA has been heavily involved in working with DOI agencies to implement this new strategy. White named implementation of this plan as the most significant point of 2014.

In fact, Letty Belin, Senior Counsel to the Deputy Secretary in the DOI, and a person closely watching the adoption process play out, is the NMEBC’s keynote speaker this year.

The NMBA’s Forever Goal: Full Implementation of the 2008 Rule

Moving forward on the Final Compensatory Wetland Mitigation Rule, issued in 2008, is what White calls the NMBA’s “forever goal.” The Army Corps of Engineers (USACE) and the Environmental Protection Agency (EPA) passed this rule which says wetland banking is the most effective form of mitigation and should be used above others. But ever since it became a regulation, the Rule has had issues with bankers claiming the USACE fails to enforce it.

This past year, however, White feels they made real progress in part because of the NMBA’s involvement in local activities for the first time. In the past, the NMBA didn’t assist individual Association members having trouble with implementation of the Rule. We thought it was beyond our control, White says.

But this year, the Association tried something new. The NMBA provided national support for local challenges through draft letters the Board of Directors signed. A copy of this letter not only went to the district where the implementation problem originated but also to the USACE and the EPA.

“We’re giving our members support and also displaying to the federal agencies challenges with the 2008 Rule,” White says.

Controversy Continues with Voluntary vs. Compliance

Similar to last year, there has been much talk on the voluntary approaches to conservation-particularly species conservation. While last year, it was the lesser prairie-chicken, this year talk is focused on another wild bird with a western range: the greater sage-grouse. The bird is at-risk after its population plummeted these last decades. Federal agencies are encouraging innovative voluntary conservation to keep the bird off the Endangered Species List.

But White, like many others, is skeptical of this voluntary approach. He notes that one of the first areas to lose funding when money for a development project gets tight is the mitigation. Without compliance, there isn’t a guarantee the mitigation is being implemented, White says.

At any rate, this argument between voluntary and regulated conservation is a debate that shows no signs of going away.

Hiring the NMBA’s First Executive Director

For the first time in its history, the NMBA has hired an Executive Director to work full-time on NMBA policy and implementation objectives. The association’s board of directors chose Barton James, a familiar face on Capitol Hill because of his longtime involvement in conservation policies.

“With Bart up on the Hill making contacts, we really see ourselves making major strides at meeting some of our goals and objectives,” White says.

He notes James’ hiring as one of his key accomplishments. Near the end of last year’s NMEBC, White compared the NMBA to volunteer firefighters where the association’s volunteer board is at a standstill until there is a fire or, in the case of the NMBA, a serious situation regarding the banking industry.

“We need someone working 24/7 and in contact with the relevant agencies consistently to move the policy action forward,” White said last year.

James feels policy action will be his greatest strength as well. As Director of Public Policy at Ducks Unlimited, a nonprofit focused on wetland and waterfowl conservation, James became heavily involved in the policy side of mitigation banking.

“Because of my background, I bring a different dynamic to working with elected officials than many other NMBA members,” James says.

Growing membership and advancing NMBA goals in D.C. are James’ main objectives. He also sees great potential in schooling decision-makers on mitigation banking and all it entails. “Many Capitol Hill staffers and members of Congress know the term but they don’t have a good understanding of the financial benefits it offers.”

On the Agenda

At the conference, Michael Sprague will take over as president of the NMBA officially ending White’s presidency. White says Sprague will continue the Association’s recent endeavors such as expanding member services and participating at a local level. He will also continue to keep the dialogue going between the industry and policymakers, White says, which are efforts rooted in several past NMBA presidents.

Engagement between lawmakers and bankers is evident at the conference with sessions discussing communication between the two spaces as well as the relationship with bank users.

This interaction is much needed, White says. Outside of the DOI’s mitigation strategy, he mentions proposed water policy-currently working its way through the legislature-which seeks to clarify water protected under the Clean Water Act. It carries implications for the banking world with many in the space saying clearer definitions could streamline banking procedures. One session explores water quality credit trading banks while another looks at wetland functions at a watershed scale.

Water policy is something to watch at the conference and throughout the year. As is the mitigation strategy and several other ongoing efforts, White says. But overall, it’s been a good year for the industry, according to White. And while much more needs to be done in order to continue to grow the market and fulfill long-term objectives, White is ready to celebrate his year as president and reflect on what he has learned.

Opinion Rebooting America’s Voluntary Offset Market

The voluntary carbon market arguably delivers benefits to larger society, but only a narrow slice of us are buying. Sheldon Zakreski of The Climate Trust says it’s time for the US federal government to step in with more loan guarantees and outright purchases that would give the market support until private-sector buying materializes.

This article was originally posted on The Climate Trust website. Click here to read the original.

1 May 2015 | Depending who you talk to, the offset market is either alive and well, or dormant.

Consider two recent Ecosystem Marketplace reports. The Taking Stock of the role of Offsets in Corporate Carbon Strategies report notes that in 2013, 14% of companies that disclose their carbon emissions purchased a volume of offsets equivalent to avoiding the emissions associated with using 117 million barrels of oil. Meanwhile, the State of the Voluntary Carbon Markets 2014 report described a stagnant market in 2013 where three of every four offsets were sold to pre-existing clients.

These two truths underscore a huge opportunity, as well as presenting some peril for the future of the voluntary offset market. Although there is clearly a strong foundation of corporate voluntary buyers, the lack of diverse offset supply is a huge impediment to attracting new buyers to the market. Worse yet, if left unchecked, it will likely result in notable departures from the market as companies look for innovative ways to address greenhouse gas emissions.

The Good

The use of offsets as part of a company’s corporate social responsibility (CSR) strategy gained traction as a widespread practice in the early to mid-2000s. Despite the economic recession that began in late 2008, and the failure of federal cap and trade legislation, many companies that began buying offsets in the mid-2000s are still committed to offsets.

Additionally, although federal carbon legislation has failed to re-emerge, corporations are continuing to lead the way towards putting a price on carbon. The CDP (formerly the Carbon Disclosure Project) compiled a database last year that showed 150 companies globally, 29 of which are U.S.-based, use an internal carbon price ranging from $6 to $60 per metric ton of carbon dioxide equivalent emissions.

This near ten year track record of unwavering commitments to addressing corporate carbon footprints, points to the fact that concern and action on greenhouse gas emissions is here to stay; the issue transcends political cycles. It’s been 9 years since An Inconvenient Truth was released, and seven since Congress defeated federal cap and trade legislation.

Even more promising is the cutting-edge corporate trend towards greening their supply chains. Although this is part of a larger initiative, a role for offsets exists here, as last year’s State of the Voluntary Carbon Market research found that 2% of 2013 corporate offset purchases were practice change/supply chain motivated.

The Bad

The offset market is stagnant. Don’t get me wrong. There are notable initiatives from active voluntary buyers such as Microsoft, Interface, Chevy, Coke, Seattle City Light, and Google. These are companies that are truly to be commended for their ongoing commitments, but when was the last time a new entrant has embarked on a significant offset purchase commitment? Meaningful expansion of notable commitments are few and far between.

It could be that most companies are still focusing largely on direct reduction activities. Many offset leaders are well aware that in order to walk the talk, it is wise to strive for substantial internal progress prior to making a noteworthy commitment to offsets. If this is the case, and a rise in offset purchases is inevitable, what kinds of projects and supply will these new entrants find if they decide to buy? Unfortunately this is where the ugly comes into play.

The Ugly

If a company that is interested in entering the market were to assess current supply options, it would find a market long on dated vintages from established sectors such as landfill gas, and a dearth of new project types. For comparison sake, imagine a mobile device market where your choices are various several year old Blackberries, and iPhones or Galaxies are largely a pipe dream. That is basically the state voluntary buyers are encountering in today’s offset market. The result is that there is pent up demand that goes unfilled due to a lack of choice.

Like every other nascent sector, diversity is key for the offset market to grow and stabilize. The promising news is that a lot of groundwork has been done to introduce those iPhone and Galaxy type offsets into the marketplace, especially in the agriculture sector. The challenge lies in what can be done to advance those sectors and provide safeguards that will foment the generation of meaningful volumes of supply.

The Showdown—What Needs to be Done?

There are three key areas that could kick-start the implementation of projects and the generation of new sources of supply.

  1. Don’t just build it—test it

Voluntary market certification standards such as the American Carbon Registry, Climate Action Reserve and Verified Carbon Standard are doing their part to diversify supply by launching new project standards, also known as protocols. In the last few years alone, several new protocols have been introduced in the agriculture sector that offer a pathway for generating offsets through grasslands conservation, rice cultivation and nutrient management practices on farms and in fields.

Such efforts are necessary to diversify supply, but simply releasing a new protocol doesn’t mean that the market will rush to adopt it.

While protocols help in providing a useful guide, they do not eliminate the risks of actually monitoring, verifying and issuing new offsets. This is important because third-party verification is essential for generating real and credible offsets that can be traded. Verification is also generally the largest cost offset suppliers will face. Additionally, there have been several instances were verified volume for new offset project types are generated at a fraction of the anticipated rate.

The implication here is that there is a huge “first mover disadvantage” and worse yet, some promising offset sectors could de dead on arrival following the first verification of the first project.

Mitigating verification risk by subsidizing the initial verification is one way to overcome this uncertainty. This is something standards setting organizations could consider. Otherwise, they face the risk of investing substantial time and effort developing and releasing protocols that are not adopted by offset project developers.

  1. Plant the seed and watch it grow

Given this chicken-egg scenario where buyers are staying out of the market due to lack of supply and suppliers aren’t diversifying the market due to uncertain demand, if ever there was a need for a large new buyer to enter the market, now is the time. Such a buyer exists in the federal government—where a recent executive order increased their prior reduction commitment (28% below 2008 levels by 2020) for federal agencies to 40% below 2008 levels by 2025. The Council on Environmental Quality estimated that the original executive order would result in 101 million mtCO2e reductions by 2020. If federal agencies were allowed to use greenhouse gas offsets as 8% of the reductions they must achieve under the executive order, The Climate Trust estimates they could demand up to 1.35 million offsets per year, creating 15% growth in the voluntary carbon market.

Currently, federal agencies are allowed to purchase renewable energy certificates to meet this target, while offset purchases are prohibited. Removing this constraint could add millions of tons of demand to the market, while saving taxpayer dollars to the extent offsets cost less than other emission reduction options available to federal agencies.

Federal government support of offsets in general—and agriculture specifically—could have the exponential effect of drawing corporate buyers, especially food and beverage companies that are motivated by greening their supply chain.

  1. If it falls—catch it

The third impactful area that could expand supply offerings are financial models that mitigate price risk. Here exists a significant role for impact investors, program related investments from foundations, and government agencies that could invest in, and provide guarantees for nascent agriculture offset projects. Upfront funding is crucial to bridge the many months (sometimes years) it takes to develop a project, as well as launch and verify offsets. However, securing such funding on viable terms has proven elusive; perhaps a barrier that could be bridged is if a guarantee is provided that the funding will be repaid. One way to do this is to apply federal loan guarantee programs to certain offset project types. Full disclosure, The Trust occupies the role of providing early stage capital to carbon reduction projects.

The voluntary carbon offset market has shown resiliency, but it is still a young market that requires nurturing in order for it to grow and flourish. This market will never compare in size and scope to regulated markets, but further investment in building the capacity in the voluntary market is needed. An investment will not only diffuse further knowledge on how to design, implement and operate successful offset projects and deepen the engagement level of corporations, it will also provide a useful roadmap as the policy debate on subnational, national and global emission reduction initiatives proceeds.

Sheldon Zakreski is the Director of Risk Management at the Climate Trust. He can be reached at szakreski@climatetrust.org.

Climate Negotiators Want Emissions Trading Rules Even If They Don’t Plan To Play The Game

The United States and the European Union both excluded market-based mechanisms to reduce emissions in the national climate plans they submitted to the United Nations. But negotiators say a framework for international emissions trading is needed, even if many countries won’t use it (yet).

30 April 2015 | Implementation, balance, inclusiveness. Those are the three words Gao Feng, China’s Foreign Ministry’s Special Representative for Climate Negotiations uses to describe his hope for an international climate agreement to be negotiated this December in Paris. Speaking on a Center for Climate and Energy Solutions’ (C2ES) panel last week, officials from China, the European Union, Gambia and New Zealand grappled with the question of how market-based mechanisms for emissions reductions might be included in the Paris agreement – among other issues.

Gao is doubtful that emissions trading will be a significant part of an international climate deal under the United Nations Framework Convention on Climate Change (UNFCCC), at least in the short term.

“I don’t see sufficient demand to drive the so-called global carbon market right now,” he said, citing the fact that both the United States and the European Union (EU) – two of the largest potential government buyers – excluded market-based emissions reductions from the first drafts of their Intended Nationally Determined Contributions (INDCs). “If a contribution is to be determined nationally, then in theory you may not have the demand at home because every country may calculate the exact amount that it can do,” he said.

Of the eight INDCs submitted so far, only Switzerland’s and Liechtenstein’s mention market-based instruments that would allow investments in emissions reductions abroad to be counted against a national target. Norway plans to use international carbon offsets only if it cannot secure a collective agreement with the EU. The United States and the EU both took a pass on using international offsets to meet their targets, though their climate plans do not preclude the use of domestic carbon markets to lower emissions.

View the Video, or Scroll Down to Continue Reading

Leaving an Open Door

The EU plans to cut emissions 40% under 1990 without purchasing offsets from outside the region. Nevertheless, the Paris agreement should ensure that those countries that want to use carbon markets to reduce emissions can do so in an accountable way, said Jake Werksman, Principal Adviser for DG Climate Action of the European Commission. This would include some kind of regulatory framework to prevent double counting of emissions reductions, he said. (For instance, if Switzerland finances a wind power project in Mexico and then counts those emissions reductions against its total, Mexico could not also count those reductions domestically.)

The European Union launched the EU Emissions Trading Scheme (EU ETS) in 2005 to reduce emissions in the bloc, also providing a mechanism for handling offsets – mostly anticipating the Kyoto Protocol’s Clean Development Mechanism (CDM), which came into effect in 2008, but also to handle offsets from other cap-and-trade initiatives. Entities covered by the EU ETS have historically been the major source of compliance demand for carbon offsets, but oversupply of allowances in the EU ETS has caused CDM prices to plummet below the $1 mark, and a plan to link the EU ETS with Australia’s fell through after Australia repealed its carbon tax.

“We’ve had great experience in terms of running a carbon market domestically, but we’ve had difficulty managing the relationship between that domestic carbon market and international carbon markets in a way that ensures environmental integrity and a good carbon price at home,” said Werksman. “So we’re really focusing on getting our domestic house in order at the moment.”

New Zealand enacted emissions trading in 2008 under its Permanent Forests Sink Initiative, but the market has been so flooded by lower-priced CDM offsets that domestic forest project developers have been hard-pressed to find buyers for their tonnes. Nevertheless, the country is very interested in an international carbon market and would welcome a framework establishing minimum standards and guidelines, said Jo Tyndall, Climate Change Ambassador for New Zealand’s Ministry of Foreign Affairs and Trade.

“In New Zealand’s case we have got some challenges around how much we can reduce our emissions domestically and the ability to purchase emissions reductions elsewhere allows us to be much more ambitious than we would otherwise be able to be,” she said, emphasizing that emissions trading should be a voluntary tool available to governments.

Reality Check

Developing countries that would likely be on the receiving end of carbon offset investments have mixed views on market-based mechanisms. In its INDC, Mexico actually proposes two different targets, committing to a 25% reduction in emissions by 2030 without international assistance, and raising the ante to a 40% cut conditional on “fully functional bilateral, regional and international market mechanisms.”

Other countries, such as Bolivia, oppose market-based mechanisms that allow developed countries to meet targets through offsetting.

The question remains as to how the UNFCCC’s Green Climate Fund (GCF), to which industrialized countries are supposed to provide $100 billion per year by 2020, will distribute its money for mitigation and adaptation. Some funder countries are advocating for “payments for performance” for avoided deforestation and other carbon-cutting initiatives – meaning that the money only flows if the emissions reductions are achieved. (This concept is also central to carbon markets.)

The GCF was capitalized at $10 billion during last year’s negotiating session in Lima, Peru, but it will only be able to start spending if additional contributors meet an April 30th deadline to sign their contracts. The U.S., for instance, said it would not meet the end-of-month GCF deadline due to its budget cycle.

Pa Ousman Jarju, who has the wide-ranging title of being Gambia’s Minister of Environment, Climate Change, Water Resources, Parks and Wildlife, criticized the U.S. for dragging its feet on financial disbursements.

“It’s beyond imagination that the United States of America [would have] people in Congress and some so-called scientists denying what is happening in the world,” he said. “This is money that is going towards really supporting those who are in dire need.”

Paris or Bust?

While the upcoming Conference of the Parties of the UNFCCC has the same objective as before – to limit global temperature rise to no more than two degrees Celsius – the bottom-up approach currently underway is starkly different from the top-down Kyoto Protocol that aimed to limit emissions from developed countries.

“One of the big challenges that negotiators have had in this process is how to describe the agreement that is beginning to emerge in terms of an existing legal format,” said Valli Moosa, South Africa’s former Minister for Environment and the co-chair of C2ES’s ‘Toward 2015’ dialogues. “They’ve found it really difficult to do so.”

“The main difference between Kyoto and what we will see in Paris is that the numbers will not necessarily be in the printed protocol,” said Harald Dovland, the former co-chair of the UNFCCC’s Ad Hoc Working Group on the Durban Platform, and the other Toward 2015 co-chair. “I foresee that what negotiators and parties can agree on is that there will be a core agreement of a legally binding nature but there will be a lot of important material in the supporting decisions, declarations, or whatever [they’re] called.”

Another key difference? After more than twenty years at the table, many negotiators see Paris as their last chance.

“The current generation of chief negotiators – and I know a number of them – they seem to have a sense of mission,” said Moosa. “They know that if we fail in Paris, it will be a big blow in a number of ways. One is that the global climate agreement could then possibly happen outside of the UNFCCC framework.”

A scenario in which a global climate deal was left up to heads of state rather than hammered out under the UNFCCC process “would not necessarily make it easier,” he added. “I am on tenterhooks and extremely worried that this process might not succeed, notwithstanding the fact that all the ingredients are in place for success.”

Opinion Rebooting America’s Voluntary Offset Market

The voluntary carbon market arguably delivers benefits to larger society, but only a narrow slice of us are buying. Sheldon Zakreski of The Climate Trust says it’s time for the US federal government to step in with more loan guarantees and outright purchases that would give the market support until private-sector buying materializes.

This article was originally posted on The Climate Trust website. Click here to read the original.

1 May 2015 | Depending who you talk to, the offset market is either alive and well, or dormant.

Consider two recent Ecosystem Marketplace reports. The Taking Stock of the role of Offsets in Corporate Carbon Strategies report notes that in 2013, 14% of companies that disclose their carbon emissions purchased a volume of offsets equivalent to avoiding the emissions associated with using 117 million barrels of oil. Meanwhile, the State of the Voluntary Carbon Markets 2014 report described a stagnant market in 2013 where three of every four offsets were sold to pre-existing clients.

These two truths underscore a huge opportunity, as well as presenting some peril for the future of the voluntary offset market. Although there is clearly a strong foundation of corporate voluntary buyers, the lack of diverse offset supply is a huge impediment to attracting new buyers to the market. Worse yet, if left unchecked, it will likely result in notable departures from the market as companies look for innovative ways to address greenhouse gas emissions.

The Good

The use of offsets as part of a company’s corporate social responsibility (CSR) strategy gained traction as a widespread practice in the early to mid-2000s. Despite the economic recession that began in late 2008, and the failure of federal cap and trade legislation, many companies that began buying offsets in the mid-2000s are still committed to offsets.

Additionally, although federal carbon legislation has failed to re-emerge, corporations are continuing to lead the way towards putting a price on carbon. The CDP (formerly the Carbon Disclosure Project) compiled a database last year that showed 150 companies globally, 29 of which are U.S.-based, use an internal carbon price ranging from $6 to $60 per metric ton of carbon dioxide equivalent emissions.

This near ten year track record of unwavering commitments to addressing corporate carbon footprints, points to the fact that concern and action on greenhouse gas emissions is here to stay; the issue transcends political cycles. It’s been 9 years since An Inconvenient Truth was released, and seven since Congress defeated federal cap and trade legislation.

Even more promising is the cutting-edge corporate trend towards greening their supply chains. Although this is part of a larger initiative, a role for offsets exists here, as last year’s State of the Voluntary Carbon Market research found that 2% of 2013 corporate offset purchases were practice change/supply chain motivated.

The Bad

The offset market is stagnant. Don’t get me wrong. There are notable initiatives from active voluntary buyers such as Microsoft, Interface, Chevy, Coke, Seattle City Light, and Google. These are companies that are truly to be commended for their ongoing commitments, but when was the last time a new entrant has embarked on a significant offset purchase commitment? Meaningful expansion of notable commitments are few and far between.

It could be that most companies are still focusing largely on direct reduction activities. Many offset leaders are well aware that in order to walk the talk, it is wise to strive for substantial internal progress prior to making a noteworthy commitment to offsets. If this is the case, and a rise in offset purchases is inevitable, what kinds of projects and supply will these new entrants find if they decide to buy? Unfortunately this is where the ugly comes into play.

The Ugly

If a company that is interested in entering the market were to assess current supply options, it would find a market long on dated vintages from established sectors such as landfill gas, and a dearth of new project types. For comparison sake, imagine a mobile device market where your choices are various several year old Blackberries, and iPhones or Galaxies are largely a pipe dream. That is basically the state voluntary buyers are encountering in today’s offset market. The result is that there is pent up demand that goes unfilled due to a lack of choice.

Like every other nascent sector, diversity is key for the offset market to grow and stabilize. The promising news is that a lot of groundwork has been done to introduce those iPhone and Galaxy type offsets into the marketplace, especially in the agriculture sector. The challenge lies in what can be done to advance those sectors and provide safeguards that will foment the generation of meaningful volumes of supply.

The Showdown—What Needs to be Done?

There are three key areas that could kick-start the implementation of projects and the generation of new sources of supply.

  1. Don’t just build it—test it

Voluntary market certification standards such as the American Carbon Registry, Climate Action Reserve and Verified Carbon Standard are doing their part to diversify supply by launching new project standards, also known as protocols. In the last few years alone, several new protocols have been introduced in the agriculture sector that offer a pathway for generating offsets through grasslands conservation, rice cultivation and nutrient management practices on farms and in fields.

Such efforts are necessary to diversify supply, but simply releasing a new protocol doesn’t mean that the market will rush to adopt it.

While protocols help in providing a useful guide, they do not eliminate the risks of actually monitoring, verifying and issuing new offsets. This is important because third-party verification is essential for generating real and credible offsets that can be traded. Verification is also generally the largest cost offset suppliers will face. Additionally, there have been several instances were verified volume for new offset project types are generated at a fraction of the anticipated rate.

The implication here is that there is a huge “first mover disadvantage” and worse yet, some promising offset sectors could de dead on arrival following the first verification of the first project.

Mitigating verification risk by subsidizing the initial verification is one way to overcome this uncertainty. This is something standards setting organizations could consider. Otherwise, they face the risk of investing substantial time and effort developing and releasing protocols that are not adopted by offset project developers.

  1. Plant the seed and watch it grow

Given this chicken-egg scenario where buyers are staying out of the market due to lack of supply and suppliers aren’t diversifying the market due to uncertain demand, if ever there was a need for a large new buyer to enter the market, now is the time. Such a buyer exists in the federal government—where a recent executive order increased their prior reduction commitment (28% below 2008 levels by 2020) for federal agencies to 40% below 2008 levels by 2025. The Council on Environmental Quality estimated that the original executive order would result in 101 million mtCO2e reductions by 2020. If federal agencies were allowed to use greenhouse gas offsets as 8% of the reductions they must achieve under the executive order, The Climate Trust estimates they could demand up to 1.35 million offsets per year, creating 15% growth in the voluntary carbon market.

Currently, federal agencies are allowed to purchase renewable energy certificates to meet this target, while offset purchases are prohibited. Removing this constraint could add millions of tons of demand to the market, while saving taxpayer dollars to the extent offsets cost less than other emission reduction options available to federal agencies.

Federal government support of offsets in general—and agriculture specifically—could have the exponential effect of drawing corporate buyers, especially food and beverage companies that are motivated by greening their supply chain.

  1. If it falls—catch it

The third impactful area that could expand supply offerings are financial models that mitigate price risk. Here exists a significant role for impact investors, program related investments from foundations, and government agencies that could invest in, and provide guarantees for nascent agriculture offset projects. Upfront funding is crucial to bridge the many months (sometimes years) it takes to develop a project, as well as launch and verify offsets. However, securing such funding on viable terms has proven elusive; perhaps a barrier that could be bridged is if a guarantee is provided that the funding will be repaid. One way to do this is to apply federal loan guarantee programs to certain offset project types. Full disclosure, The Trust occupies the role of providing early stage capital to carbon reduction projects.

The voluntary carbon offset market has shown resiliency, but it is still a young market that requires nurturing in order for it to grow and flourish. This market will never compare in size and scope to regulated markets, but further investment in building the capacity in the voluntary market is needed. An investment will not only diffuse further knowledge on how to design, implement and operate successful offset projects and deepen the engagement level of corporations, it will also provide a useful roadmap as the policy debate on subnational, national and global emission reduction initiatives proceeds.

Sheldon Zakreski is the Director of Risk Management at the Climate Trust. He can be reached at szakreski@climatetrust.org.

NGOs, Cities Use Economic Argument To Win Industry Support For Stormwater Regs

Water brings life, but torrential downpours bring sludge and sewage overflow – contributing pollution around the world. In the United States, the Environmental Protection Agency is under pressure to regulate more aggressively, but, increasingly, NGOs and local authorities are moving ahead with cost-effective stormwater management plans of their own.

20 April 2015 | Stormwater, the dirty water that flows off pavement, rooftops and other impervious surfaces, is one of the biggest sources of water pollution in the United States. The U.S. Environmental Protection Agency (EPA) is charged with managing this pollution, but the agency is failing to enforce its own rules, according to many environmental groups.

The Conservation Law Foundation (CLF) and the Natural Resources Defense Council (NRDC) are suing the EPA – in separate lawsuits – in relation to the agency’s enforcement of stormwater regulation and the effectiveness of those rules.

Such legal actions have traditionally been the main recourse for environmentalists looking to promote better management of stormwater runoff, but legal action alone often creates a situation where the party with the best lawyer wins – or at least the lawyers do. And the actual cost of compliance is seen as a fraction of the cost of litigation. For that reason, several environmental organizations have been bringing carrots to accompany their sticks.

The Voices of Opposition

“EPA’s hearing very loudly from polluters in the development industry that oppose stronger stormwater requirements,” said NRDC attorney Rebecca Hammer.

Companies often equate the cost of compliance with the cost of construction or they view procedures to account for stormwater runoff flowing into waterways as an unknown – and frightening – liability. However, compliance costs make up a fraction of the overall cost of a development project, and Hammer argues that building things like permeable pavement, green roofs, and rain gardens – now called “green infrastructure” – saves companies money in the long run.

The stormwater rushing off impermeable surfaces dumps far more pollution into waterways than porous pavements that absorb and filter toxins. The result of these impervious areas is a contaminated pool of dirty water draining into rivers and streams, the CLF said in a statement speaking specifically about the Charles River watershed in Massachusetts. Gray infrastructure, then, equals a greater stormwater discharge cost for a property owner.

There is growing evidence supporting this concept that green infrastructure is in the business owners’ best interest. American Rivers, a conservation organization restoring US rivers, published a report in 2012 which found that these nature-based solutions can lower capital costs and operational expenses while increasing energy efficiency so energy costs are reduced. It also leads to an increase in property value and reduced costs associated with flooding.

And last year, the EPA projected a green infrastructure plan to manage stormwater for Lancaster, Pennsylvania could save the city $660,000 per year by lessening the treatment of wastewater. It also has the potential to deliver $4 million worth of energy, air quality and climate-related benefits.

But despite this mounting evidence on the benefits of green infrastructure, it isn’t typically incorporated into core business practices or investment strategies, a study by The Nature Conservancy, an environmental nonprofit, found. And as it stands, the key drivers for implementing green solutions are regulations. Brian Van Wye of the District of Columbia Department of the Environment (DDOE), notes how much farther along green programs with regulatory drivers are over the DDOE’s voluntary programs. “The regulated area is 10 times the size of the area that we’re able to touch with our voluntary programs,” he said.

Cities Leading the Way

But while the majority of businesses and places aren’t particularly supportive of nature-based solutions, there are a few areas where developers and local decision-makers are. A good example is Philadelphia, where the city’s water department has linked stormwater fees to the amount of impervious pavement on a property. More concrete means a higher bill.

The pricing structure incentivizes businesses to green their property and even includes a provision that allows property owners to write off their upgrade costs against future stormwater fees. However, that write-off could take years to materialize and doesn’t eliminate the upfront costs for companies.

Nonetheless, Philadelphia’s program spreads awareness on the importance of stormwater management, the lack of which Hammer called part of the problem. Developers aren’t aware of the benefits and don’t take advantage of the opportunities, she said.

Washington, D.C. is one city taking advantage of the opportunities. The city created the Stormwater Retention Credit (SRCs) trading program to provide flexibility in complying with new stormwater standards issued to D.C. through the EPA’s MS4 (Municipal Separate Storm Sewer System) permit. The program, which is the first stormwater retention trading program in the U.S., allows property owners to generate SRCs for voluntarily implementing green infrastructure that reduces stormwater runoff. They can then trade their SRCs with others needing to meet regulatory requirements.

Van Wye credits the “progressive-minded development community” as one of several reasons D.C.’s program has met with success thus far. The MS4 permit is also unique to D.C. in that the city receives clean water rules directly from the federal government while most U.S. cities typically receive these rules from their states. The DDOE was looking for the best methods to meet these new standards that dealt with stormwater retention in a way that was both effective and fair to the regulated group, Van Wye said.

“In terms of trading, we realized we could allow a lot of flexibility to development while at the same time generating as good or better benefits for the water bodies,” he said.

Like in Philadelphia, the D.C. program incentivizes property owners to upgrade gray infrastructure to green. And these property owners are eligible to receive discounts on their stormwater fees down the line. The trading aspect of D.C.’s program also creates a revenue stream that can lead to installing more green stormwater controls.

Last fall, the SRC program transacted its first trade – 11,013 SRCs worth $25,000. The seller of these credits was a property manager, Ann Benefield for condominiums in Northwest D.C. As the city’s first group of development projects becomes subject to the stricter stormwater regulations, program developers are expecting demand to emerge.

More Innovation on the Horizon

Ecosystem Marketplace’s latest State of Watershed Investments report also highlighted the potential of another innovative approach: public-private partnerships to harness finance for green infrastructure. The private partner provides upfront capital and assumes implementation and financial risks while the public participant funds the project over the long term and manages maintenance.

In the Chesapeake Bay, where regulation regarding stormwater controls is tightening, project developers expect these types of partnerships to leverage hundreds of millions of dollars in the coming decades. That money is much needed in a place where implementing necessary stormwater controls is estimated to be as high as $15 billion.

Projects like the Re.invest Initiative, partially funded by the Rockefeller Foundation, are encouraging these public-private partnerships as a means to build more sustainable stormwater systems. The project is a collaboration among eight U.S. cities – Honolulu, Milwaukee, New Orleans, El Paso, Hoboken, Miami Beach, Norfolk and Virginia Beach – and engineering, law and finance firms to create public-private partnerships that will build resilient infrastructure.

Innovative projects such as the Re.invest Initiative, along with what is being done in Philadelphia and Washington, D.C., are moving forward despite the legal entanglements and slowdowns at the federal level. Hammer emphasizes this progress in saying local governments can step up and enforce the type of standards NRDC would like to see at the national level.

Additional resources

Tight Federal Deadlines May Keep U.S. States Out Of Existing Cap-And-Trade Programs

Several U.S. states are considering joining existing cap-and-trade programs such as the Regional Greenhouse Gas Initiative to comply with pending carbon rules from the federal government. However, a major obstacle in doing so is the tight deadlines that federal officials have set for states to submit compliance plans.  

17 April 2015| Want to join an existing cap-and-trade program in the United States? The nine Northeastern states participating in the Regional Greenhouse Gas Initiative (RGGI) are ready to welcome with open arms any of their counterparts who want to use the carbon trading program to comply with upcoming regulations from the United States Environmental Protection Agency (EPA).

“The waters are warm – dive on in,” Janet Coit, Director of RGGI member Rhode Island’s Department of Environmental Management, said at an event hosted by nonprofit think tank Center for Climate and Energy Solutions (C2ES).

Not so fast.

Literally, time is a major obstacle for states wanting to join existing carbon trading programs such as RGGI or California’s cap-and-trade program as a compliance mechanism, according to state regulators speaking at the C2ES event.

The EPA announced its proposed Clean Power Plan to limit carbon pollution from existing power plants last June, with a final rule scheduled to be released this summer. The rule will mainly affect coal-fired power plants, with the goal of cutting emissions from electricity generation 30% below 2005 levels by 2030. States must submit compliance plans to the EPA in the summer of 2016 – either complete plans or initial plans with requests for 1-year or 2-year extensions. States would be eligible for a two-year extension to June 2018 – with a progress report due in June 2017 – if their compliance plan is part of a multi-state plan.

For the RGGI states, those deadlines are “completely doable because we have already been through that process and we have a system that works,” Coit said. “If people wanted to join RGGI, depending on what the rule says, they might be able to declare their intentions in time. But would we be able to work through how to bring in a state within the timeframe is the question.”

It took the RGGI states five years to develop and launch the program, followed by another few years of public consultations and analysis that underpinned the 2014 revamp of the program. So there might not be enough time for new states to join RGGI as a compliance option if the EPA remains strict about the summer 2016 deadline. Even a June 2018 extended deadline could be tough to meet given RGGI’s rule-making process.

The EPA outlined several potential compliance options for states, including market-based programs to reduce carbon, investments in existing or new energy efficiency programs or expansion of renewable energy initiatives – or a combination of these strategies. Market-based programs would allow regulated entities to trade emissions reductions units to reduce the cost of compliance, as long as the state met an overall cap. The agency explicitly mentioned that the emissions reductions generated by RGGI and California’s cap-and-trade programs would be approved under EPA’s guidelines – a concrete recognition of regional market-based programs.

The emissions of capped sectors in California have dropped 3.8% in the first two years of the compliance program. RGGI states have achieved 40% cuts in emissions in the power sector since 2005.

“EPA has given the states a gift by giving us all this flexibility,” said Martha Rudolph, Director of Environmental Programs for the Colorado Department of Public Health & Environment. “Yet, there’s so much flexibility that trying to figure out what we’re going do in a short timeframe is very difficult.”

The tight deadlines, if left unaltered, could even have the “unintended consequence of discouraging people from exploring regional solutions, and I think that would be a shame,” she said.

The Trail Leads Northeast

There has been a movement in the Virginia state legislature and among NGOs for the state to join RGGI as an “off-the-shelf solution” to complying with the EPA’s regulation. So joining RGGI is one of the options, said David Paylor, Director of the Virginia Department of Environmental Quality.

“But we don’t know what RGGI is going to look like in the context of the Clean Power Plan yet,” he said. “It’s our view that RGGI is going to have to be reformed a little bit and that is something that we would look at, along with all of the other options, to see what makes the most sense. Market-based solutions are likely to make a lot of sense.”

Joining a regional carbon trading program could gain momentum in the state if companies support this compliance approach, Paylor said.

“When it comes to carbon pricing, I would say in Virginia that’s going to have more legs the more the business community gets behind it,” he said. “And we’re finding that much of the business community is still in the ‘we’re not quite sure’ stage.”

Businesses and individuals are reticent about policies such as carbon pricing that could increase energy costs for consumers, particularly in states that currently have low costs, even if implementing a carbon pricing program would be more cost effective in the long term, the regulators observed.

“Even though it’s the least cost, it doesn’t feel that way to them,” Paylor said.

But the Trail Goes Cold out West

Rudolph sees a different hurdle for Colorado in joining a regional cap-and-trade program such as RGGI or California’s program – which is currently linked to the Canadian province of Quebec and could eventually be linked to Ontario – to comply with the pending EPA rules. Her state has a diverse energy mix, more than half of which comes from coal-fired power plants, and gets its energy from two investor-owned utilities, several municipal utilities and rural electric associations, which creates significant challenges in developing a carbon pricing program in the state.

“Frankly, I think it’s going to be difficult for us to pursue that, although if it comes to us we certainly won’t say no,” she said. “The amount of time the rule gives to set up any kind of plan is very short and the type of plans, like RGGI or the California plan, would be frankly in the timeframe nearly impossible for us to set up.”

But there are “smaller, less complex trading programs that caught my eye” such as a state-only plan that allows regulated entities to trade credits with each other, Rudolph said.

“That is a more modest type of trading proposal that I think may have legs in states like Colorado,” she said. “We have not talked about that as an option, but that is something I’d be putting on the table for consideration.”

Paylor suggested a solution could be to start with an intrastate carbon trading program that transitions into an interstate approach. “And we’re having discussions with other states now to try to keep the maximum number of options open as we go forward and see what the rule looks like,” he said.

 

The Climate Trust: Blazing The Oregon Carbon Trail

When Oregon-based The Climate Trust (TCT) was tasked with identifying and securing offsets back in 1997, there were precious few to find. This challenge shaped the organization as it stands today: TCT continues to trailblaze with new methodologies and innovative financing solutions, including a potential green bond to fund carbon offset projects.

2 April 2015 | With all eyes turned to California, it’s easy to forget that the state’s northern neighbor actually passed the first state-level legislation to curb carbon dioxide (CO2) emissions in the United States (US).

The Oregon Carbon Dioxide Standard, passed in 1997, requires new energy facilities in the state to meet an emissions standard 17% below the best-existing plants in the US. Effectively, this means that power plants have to either adopt mitigation technologies on-site or purchase offsets generated from off-site projects.

As might be expected, the new power plants were hardly pleased about venturing outside their expertise and into the nascent carbon market of that time. In response, the state offered a third option: a “monetary path”, where plants could provide funding to a state-recognized non-profit that would select and manage carbon reduction projects on their behalf.

To date, every regulated entity has chosen this path, which marked the beginnings of The Climate Trust (TCT).

Starting from Scratch

TCT has been the only non-profit to take up Oregon’s offer to work as a recognized carbon offset manager. Yet even without competition, trust officials had their work cut out for them, as carbon projects were more of an idea than actuality back in the 1990’s.

When the organization received its first contract from a new power plant back in 2001, it had only two years to commit $600,000 to projects. There was only one problem: “When we first started getting money, there wasn’t a lot [of projects] out there,” said Sheldon Zakreski, Director of Programs.

TCT’s unique funding structure meant that the organization “sees part of our role as improving capacity building. Through the Oregon program, we are in a position where we can afford to look at new standards.” This unusual combination of guaranteed funding, but quick turnaround demands resulted in an organizational culture that embraces trailblazing to this day.

Yet while the monetary pathway offers a windfall of cash, there’s a catch: the funding only appears with the construction of a new power plant. “It’s a boom-and-bust cycle,” said Dick Kempka, Vice-President of Business Development. “We went two to three years without money; then two facilities were announced, and we were flush with money again.”

Given this particular challenge, TCT decided to start consulting and looking into other revenue sources about four years ago. Those sources were easy enough to find: corporate buyers had expressed interest in offsets, believing that if they were good enough for a regulated market, they were good enough for voluntary purchases. But it was California’s announcement of an offset market that sealed the deal for TCT’s expansion. It created demand outside of Oregon, and, starting back in 2008, the organization began to actively invest in projects located beyond the state’s boundaries.

Now, the organization has invested in over 40 projects and delivered more than two million tonnes of emissions reductions. A number of these projects have introduced new methodologies into the marketplace, including a wetlands methodology in the US Gulf Coast and biochar methodology now recognized by the American Carbon Registry (ACR).

However, the trust doesn’t work on the ground on these projects. Rather, the organization enters into a contract with the project developer and provides upfront, early stage, or pay on delivery financing. That early-stage financing carries a risk – especially with untested methodologies – but the organization’s 15 years of experience has come in handy in picking successful projects.

So far, TCT has a 3.9% default rate for all of its Oregon program contractual commitments. In these cases, a “default” was defined as instances where the upfront funding provided wasn’t recouped in cash paid back and/or offsets supplied. The Blue Heron Energy Efficiency Project is one of six such projects, with TCT providing $500,000 in upfront financing and receiving only 70% of the contracted offsets once the mill filed for bankruptcy.

Seeing the Grasslands for the Ducks

TCT’s latest collaboration typifies recent projects as it involves a new methodology and collaboration across organizations. In this case, TCT partnered with Ducks Unlimited, Bonneville Environmental Foundation and Chevrolet.

Ducks Unlimited, the non-profit organization dedicated to preserving waterfowl and their habitat, had dabbled in carbon finance in the early 2000s. But it wasn’t until 2008 that the organization really started looking into scaling up its Prairie Pothole Avoided Conversion of Grasslands and Shrublands project. Officials engaged with local livestock landowners to increase the area of the project and then looked into developing a protocol.

Partnering with TCT made sense, said Billy Gascoigne, Economist/Environmental Markets Specialist at Ducks Unlimited, because the organization was waddling into unfamiliar territory. Ducks Unlimited’s primary expertise is, well, ducks. Not carbon pricing or marketing. And the organization made too much of a substantial investment into the project for it to fail because the offsets couldn’t be sold.

TCT knew how to work with a project from start to finish. The finish was especially important for the voluntary market, given that project developers often need to do a lot of legwork to find a buyer. Those were key components, Gascoigne said, especially since The Climate Trust knew how to market offsets and talk with the registries.

The connection was made through Dick Kempka, Vice-President of Business Development at TCT, who previously worked at Ducks Unlimited. He believed in the project’s potential to scale up, and its marketability for corporate buyers. Kempka’s belief in the project paid off when nearby Bonneville Environmental Foundation approached with an interest in securing offsets on behalf of Chevrolet.

Chevrolet didn’t provide money upfront, but the early expression of interest helped Ducks Unlimited with other financing. The methodology still took three more years before it was approved by ACR.

Officials at the automotive company weren’t surprised by the length of time required. Though primarily a buyer, Chevrolet had also ventured into methodology development with its Campus Clean Energy Campaign (spawning the similarly named Verified Carbon Standard-approved Campus Clean Energy and Energy Efficiency methodology), which took two years to gain approval. David Tulauskas, director of sustainability for General Motors, Chevrolet’s parent company, said the automaker prefers to buy from first-of-its-kind projects and those with an impact on local communities – boxes that the Ducks Unlimited project checked.

The Next Frontier: Green Bonds

Despite the success of this and other new projects, Kempka said, “I think we’ve transitioned our philosophy where it’s not as likely we would get as involved with this early-stage methodology development anymore.”

The organization wants to lessen its vulnerability to boom-and-bust financing cycles. When Executive Director Sean Penrith joined back in 2013, he was tasked with determining a new path for The Climate Trust. After two years of introspection, he decided that TCT had three exceptional skills: scoping investable projects, stewarding projects to completion, and commercializing projects.

“In short, I realized that we are very good carbon fund managers,” he said. So instead of investing in new projects as usual, Penrith has his eye on funding something more novel: green bonds.

With $25 million ready to invest, The Climate Trust would be able to attract investors to create a larger pool of money. The organization would then channel the proceeds into the forestry, grassland conversion and other landscape carbon offset projects that TCT excels at via bonds, which typically last for 5-10 years. The organization would sell carbon offsets into the compliance and voluntary carbon markets and thus repay its purchasers.

The Climate Trust is now actively exploring the possibility of a green bond as Penrith believes that the timing is ideal. Bond rates are low, and green bonds are predicted to balloon to $100 billion this year (compared to $35 billion last year, according to Bonds and Climate Change: The State of the Market in 2014). Existing green bonds are typically oversubscribed and sell out within a few hours.

“The reason we ended up with a climate bond is we see it as a large, fairly untapped reservoir of willing and interested capital,” Penrith said. “It’s an amazing intersection between the environment and institutional capital demand. It’s low interest, and it’s pretty timely given the current bond market rates.”

For next steps, the organization plans to use 2015 as a pilot year. TCT plans to invest some of its own capital in addition to partners’ capital, with the hope of demonstrating a successful proof of concept. “If that’s successful, we would look at tripling or quadrupling that size in the subsequent year and thereon. We want to get to the point where we’re managing issuances of $250 million per issuance.” Penrith said.

“We’re really taking a bet – we are not cavalier, very prudent, but what we’re saying is that the currency of carbon is going to increase in its value, it’s going to become increasingly common, widespread, used, managed, monitored and exchanged. We really believe that in the next five years, the time for carbon currency has come.”

 

Additional resources

US Climate Action Plan Steers Clear of Global Market Mechanisms

The United States published its eagerly anticipated national climate action plan to the United Nations web site on Tuesday, highlighting an economy-wide target of reducing greenhouse gases by 26-28% below 2005 levels by 2025 – a target that will not be reached through the use of international carbon market mechanisms. The plan, known as its Intended Nationally Determined Contribution (INDC), also lays out the country’s carbon accounting approach for the land sector.

31 March 2015 – The United States has set an “ambitious” goal to reduce its greenhouse gas (GHG) emissions as part of a new international climate agreement aimed at stemming the rise of global temperatures – a goal that does not rely on the use of international carbon market mechanisms.

Nearly 200 governments are planning to reach a new climate deal in Paris in late 2015. The anticipated agreement will take effect in 2020 and seeks to prevent global warming rising 2 degrees Celsius above pre-industrial levels and to adapt societies to existing and future climate change.

The U.S., one of the largest emitters in the world, has committed to an economy-wide target of reducing GHGs by 26-28% below 2005 levels by 2025 as part of this international effort, according to its Intended Nationally Determined Contribution (INDC), submitted to the United Nations Framework Convention on Climate Change (UNFCCC) on Tuesday. The emissions reduction target is not a surprise given the bilateral climate deal that the U.S. reached with China in November 2014, which uses the same numbers.

“The target is fair and ambitious,” the United States said in its INDC. “The United States has already undertaken substantial policy action to reduce its emissions, taking the necessary steps to place us on a path to achieve the [interim] 2020 target of reducing emissions in the range of 17% below the 2005 level in 2020.”

The U.S. highlighted several regulatory actions already implemented, including the adoption of fuel economy standards and energy conservation standards for building emissions. The country also observed that several federal agencies are engaged in additional regulatory actions designed to further drive down GHG emissions, including the Environmental Protection Agency’s proposed regulations to cut carbon pollution from new and existing power plants and to address methane emissions from landfills and the oil and gas sector.

Achieving the target set out in its INDC will require a further emission reduction of 9-11% beyond its 2020 target compared to the 2025 baseline and a substantial acceleration of the 2005-2020 annual pace of reduction to 2.3-2.8% per year, approximately double the current pace, according to the INDC.

“The U.S. proposal demonstrates real leadership, and should encourage other countries to put forward solid offers in the run-up to Paris,” said Alden Meyer, Director of Strategy and Policy for the Union of Concerned Scientists (UCS). “While the United States can and should do even more to reduce its emissions over the next decade, the U.S. offer is quite ambitious, given Congress’ unwillingness to take any action to deal with climate change. It underscores President Obama’s continued commitment to making full use of his existing authority to address the climate crisis.”

“This is a serious and achievable commitment,” said Jennifer Morgan, Global Director, Climate Change Program for the World Resources Institute.

The organization’s research has determined that the United States can reach its proposed target to cut emissions 26-28% from 2005 levels by 2025 under its existing federal authority, she added.

While the U.S. has pledged its best efforts to achieve a 28% reduction, the country does not intend to utilize international market mechanisms to implement its 2025 target at this time, according to the INDC. That would appear to exclude mechanisms such as REDD+ (Reduced Emissions from Deforestation and forest Degradation).

However, several observers highlighted the positive role of state-level market mechanisms in reducing carbon pollution in the United States.

“Carbon pricing programs in nine Northeast states and California have reduced emissions and generated investments in clean energy and energy efficiency, which are helping save consumers money,” said UCS President Ken Kimmell said, referring to the Regional Greenhouse Gas Initiative and California’s cap-and-trade program.

Considering the land sector

The U.S. also laid out its accounting approach for the land sector in its INDC. The country intends to include all categories of emissions by sources and removals by sinks, as reported in the Inventory of United States Greenhouse Gas Emissions and Sinks. This includes everything from cropland to forest land to wetlands to rice cultivation.

The INDC also specifies that the U.S. will account for the land sector using a “net-net” approach, which in UNFCCC-speak means subtracting the net emissions in the accounting period from the net emissions in 1990, the base year for most countries. This is in contrast to the “gross-net” approach, which considers net emissions from the land sector without comparing them to a baseline year.

Consistent with Intergovernmental Panel on Climate Change (IPCC) guidance, the U.S. will use a “production approach” to account for emissions from harvested wood products. This means accounting for emissions from wood product exports but not those from imports, as the “stock change approach” does.

The U.S. may also exclude emissions from natural disturbances, consistent with the IPCC guidance, according to its INDC. These may include wildfires, insect and disease infestations, and extreme weather events that are “beyond the control of, and not materially influenced by” the country in question.

“There are material data collection and methodological challenges to estimating emissions and removals in the land sector,” the U.S. stated in its INDC. “Consistent with IPCC Good Practice, the United States has continued to improve its land sector GHG reporting, which involves updating its methodologies. The base year and target for the U.S. INDC were established on the basis of the methodologies used for the land sector in the 2014 Inventory of United States Greenhouse Gas Emissions and Sinks and the United States 2014 Biennial Report.”

The big picture

Two thirds of industrialized countries covering 65% of GHG emissions from the industrialized world have now established their climate plans for the new agreement, with many of these contributions also reflecting plans to increase the ambition of emissions reduction over time, observed Christiana Figueres, UNFCCC Executive Secretary.

“Over the coming months we expect many more nations to come forward to make their submissions public,” she said. “The pace at which these contributions are coming forward bodes well for Paris and beyond.”

The European Union, Switzerland, Norway, Mexico and the U.S. – the first five jurisdictions out of the gate with their INDCs – account for nearly one third of global emissions.

More industrialized countries are expected to come forward with their INDCs over the next few months, followed by many developing countries. An effort is underway to assist developing countries to prepare their INDCs for submissions, with governments including Australia, Germany, France, the United Kingdom and the U.S. providing financial, technical and other assistance to about 100 developing countries. The French government, for example, has committed around three million Euros to support the preparation of INDCs of about 20 Least Developed Countries, including Small Island Developing States.

Other major players include the Global Environment Facility and the UN Environment Programme; the European Union through programmes such as Clima South, Clima East or ClimDev; Germany through the GIZ; and the U.S. through various channels including the Low Emission Development Strategies partnership.

“It is most encouraging to witness this government to government cooperation and how bilateral and multilateral organizations have stepped up and coordinated support to developing countries to ensure they get maximum benefit in preparing INDCs,” said Don Cooper, head of the UNFCCC’s Mitigation and Data Analysis programme.

In October, the UNFCCC will produce a synthesis report aggregating the impact of all the submitted INDCs, Figueres said.

“The initial INDCs will clearly not add up to the emissions reductions needed to keep the global temperature rise under 2 degrees C, which is one reason why the Paris agreement must factor in a long-term emission trajectory based on science,” she said.

In addition, the Paris talks will need to outline how finance will be mobilized and scaled up to support the action and ambition of developing countries now and over the decades to come, Figueres said.

Additional resources

Why Denver Spends Water Fees On Trees

21 March 2014 | The Colorado utility Denver Water delivers clean drinking water to 1.3 million people spread across more than 335 square miles, and most of that water comes from rivers and reservoirs that capture run-off from forest-covered hills in clearly-delineated watersheds. The forests both protect the steep slopes from erosion and regulate the flows of water by mopping it up and then releasing it slowly over time.

But climate change has extended summers in Colorado just enough to give the northern pine beetle the comfort it needs to multiply like never before. The bug has taken full advantage – devouring bark at a rate ten times higher than ever recorded, killing trees and leaving them scattered like kindling for wildfires.

And those fires now take hold with increasing frequency, reducing the forest to lumps of silt and sludge. Lush slopes degenerate into unstable masses of goo. The water upon which the city depends becomes muddy and irregular, which makes it more difficult – and expensive – to assure people they can turn on their faucets and trust the drinking water that comes out.

Enter the US Forest Service (USFS), which is charged, in part, with ensuring clean headwaters by maintaining healthy forests.

Both the USFS and Denver Water are struggling to meet their budgets in the face of these challenges, so in August of 2010 the Forest Service’s Rocky Mountain office cut a $33 million deal with the Denver utility to proactively manage 38,000 critical acres in five key watersheds – if Denver Water comes up with half the money.

Denver Water took the offer, despite – or perhaps because of – its own struggles with a slew of disaster-related expenses, including a $26 million bill to remove silt and mud from a reservoir in just one wildfire-damaged watershed.

Convinced that spending money now will save money in the long run, the utility agreed to finance the removal of dead trees in sensitive areas among other activities that will halt the beetle’s massive tree-eating ventures by implementing water fees that will amount to about $27 dollars per household over the next five years.

Five years on, the project is operating under budget, and it’s expanded in both scope and ambition, says program manager Don Kennedy.

More Coverage, Less Cost, and a New Partner

The initial objective of 38,000 acres has since risen to 46,000, but the program only spent $14.5 million – versus the allocated $16.5 million – on the necessary fuel treatments (mechanical underbrush removal to lessen the intensity of fire), restoration and prescribed burning.

With the extra funds, the program was able to partner with the Colorado State Forest Service, a longtime partner of Denver Water, along with the Coalition for the Upper South Platte, a nonprofit conservation organization. The extra partnership meant additional treatment in sensitive areas that further protect the region’s water supply.

And for the most part, it appears residents understand that protecting this water supply means a slight increase in their water bill. Out of 1.3 million people Denver Water serves, Kennedy says he only got one call from a customer. And he was just asking for more information regarding the costs. “We’ve been actively informing our customers about our relationship with the USFS and the work that we’ve been doing,” Kennedy says.

Payments for Ecosystem Services

This type of targeted spending is typical of Payment for Ecosystem Services (PES) programs, which aim to finance the preservation of nature by recognizing the economic value of nature’s services, and then convincing beneficiaries of those services to pay those who deliver them. Such mechanisms offer more transparency and accountability than do normal governmental structures – a key selling point in any economic climate.

In this case, the ecosystems are the watersheds being protected, and the ecosystem service is the provision of water. More specifically, Denver Water’s program is an investments in watershed services (IWS) scheme or investments in nature-based solutions.

The city of New York runs one of the best-knows IWS programs, which involves payments to rural landowners in the Catskill Mountains. This program has saved the city an estimated $10 billion since its inception in the 1990s.

Opportunity for Rural Poor

Water utilities in developing-world cities like Dar es Salaam, Tanzania, have investigated the use of IWS schemes to preserve their water flow, while Latin American cities like Heredia in Costa Rica and Saltillo in Mexico have implemented successful programs that pay small-scale farmers to maintain the watershed. The result is clean, reliable water at a fraction of what it would cost to develop modern filtration facilities.

Embracing the Natural Way

In 2010, when the From Forests to Faucets partnership was launching, Ecosystem Marketplace published a report documenting nearly 300 of these types of programs occurring all over the world that amounted to $10 billion in transactions in 2008 alone. Three years later, investments in nature-based solutions such as the From Forests to Faucets program has amounted to over $12 billion globally.

Spreading the Word

These programs have attracted interest from other places struggling with similar water challenges. The From Forests to Faucets program has influenced several other such partnerships with the USFS in Colorado. These include a program with Aurora Water – a major provider in Colorado’s Front Range region – and one for the Big Thompson reservoir that encompasses not only forest and watershed health but also maintaining hydropower facilities.

The From Forests to Faucet program’s reach has even extended outside the state. Kennedy mentioned other municipalities within the US West have reached out to him. Santa Ana, the densely populated California city, consulted with Kennedy and is seriously considering a partnership with the USFS along the same line as Denver’s. Kennedy also met with representatives from the Salt River Project, Phoenix’s water and electric power utility. The entity has since launched a partnership with the National Forest Foundation-the nonprofit arm of the USFS-that funds watershed-restoration activities through donations from water users.

Kennedy says the Forests to Faucets IWS model is adaptable to regions outside of the US as well although differences in ecosystems would, of course, have to be factored in.

Making IWS Work

For IWS schemes to work anywhere, buyers have to understand what they’re paying for, and sellers have to understand what they’re delivering. That’s not always easy when the area being protected – whether a forest or a wetland – is hundreds of miles away from the city receiving the water.

“The concept of a ‘protection forest’ is nothing new, really,” says University of Massachusetts Professor Paul Barten. “The first written record of a community establishing something like this dates from 1342 in Switzerland, but back then the source of the water was closer to the users, so you didn’t need these kind of financing schemes.”

Both the Mexican and Costa Rican programs employed clever marketing to raise awareness, and Denver is no different. The name “From Forests to Faucets” borrows the name of a joint USFS/University of Massachusetts research project that Barten helped spearhead in the Northeast a decade ago.

“We came up with the name to make the connection,” says Barten. “We found that the larger the municipality, the more distant the supply of water – and the greater the tendency for it to remain out of sight and out of mind.”

And that lack of awareness cannot continue – especially in light of current demographics.

“We have twice as much forest in the Northeast as we did when the Forest Service was founded,” he says. “But we have three times as many people – and they consume ten times as much water.”

Another Five Years?

As for the From Forests to Faucets Partnership, there is no end in sight. While its future-in terms of finance-lies in the hands of Denver Water’s board, Kennedy thinks the program will continue to have funding because it makes sense. There’s still much to be done; primary objectives for the next few years include addressing the zones of concern that are at high risk of catastrophic wildfire and assessing more USFS land that may be beneficial to Denver Water.

And there’s always maintenance. “It’s like mowing your lawn,” Kennedy says. “You mow the lawn and then you have to trim bushes and so on. You’re never really done.” The thinning treatments and restoration work are effective for a period but they need to be followed-up on and maintained.

So it will always be something of a work in progress. But Kennedy is more than pleased with the program’s first five years. “It’s exciting because it’s almost all been really positive,” he says. “How often can you say that?”

This Week In Biodiversity: EM Tracks the Co-Financing Unicorn to the Gulf

It was a good month for conservation finance as a study on the potential of wetland carbon offsets in Louisiana found that the state’s blue carbon could be worth between $540 million and $1.6 billion over a five year period. And in California, farmers may be able to leverage finance from both the carbon market and a habitat exchange.

This article was originally posted in the Mitigation Mail newsletter. Click here to read the original.

 

17 March 2015 | Greetings! Since the 1930s, Louisiana has lost an area of wetlands equivalent to the size of Delaware, and it continues to lose a football field of wetlands every hour. If current loss rates continue, by the year 2040 more than one million acres – or nearly another Delaware – of wetlands will be gone – and the carbon stored in these ecosystems will be released into the atmosphere.
But a new study says it’s possible to not only restore the wetlands – but generate a lot of money doing so: Wetland restoration in Louisiana could be worth between $540 million and $1.6 billion dollars over the next five decades, according to the Louisiana Blue Carbon study.

 

The study, supported by Entergy Corporation through their Environmental Initiatives Fund, and prepared in partnership by New Orleans-based Tierra Resources and Portland-based nonprofit The Climate Trust, looks at Louisiana’s potential to produce blue carbon offsets.

 

But the high costs of wetland restoration may surpass the value of carbon finance in projects – which means that project developers are looking at pooling finance from other quarters: stacking environmental credits, eligible types of conservation easements, and federal funds are all on the table.

 

Leveraging finance across ecosystem markets and funding sources is like a unicorn: often talked-about but rarely seen. But activities in the Gulf – and in California, where rice farmers this year for the first time may be able to draw finance for conservation from both a new habitat exchange and the California carbon market – suggest that we may be getting closer to a successful sighting.

 

Conservation finance got more good news with the launch of the European Investment Bank’s new Natural Capital Financing Facility, which will seek to support sustainable ventures – and attract additional investors – with an initial US$135M purse.

 

And it wouldn’t be Mitmail without some lawsuits and colorful language. This month, they’re in New South Wales, California, and Alaska.

 

Enjoy!

—The Ecosystem Marketplace Team

 

If you have comments or would like to submit news stories, write to us at mitmail@ecosystemmarketplace.com.

 

US Gulf Coast Prime For Wetlands Restoration

Since the 1930s, Louisiana has lost an area of wetlands equivalent to the size of Delaware, and it continues to lose a football field of wetlands every hour. If current loss rates continue, by the year 2040 more than one million acres of wetlands will be gone – and the carbon stored in these ecosystems will be released into the atmosphere.

 

But what if there is another way? While a large degree of wetland loss in the Gulf of Mexico is inevitable due to the dual forces of land subsidence and sea level rise, project developer Tierra Resources and utility Entergy are optimistic that wetland restoration is possible in some areas. Tierra Resources estimated that Louisiana has the potential to produce 1.8 million carbon offsets per year, or almost 92 million offsets over 50 years, according to the Louisiana Blue Carbon study. Wetland restoration in Louisiana could be worth between $540 million and $1.6 billion dollars over the next five decades, the study finds.

 

Learn more at Ecosystem Marketplace.

 

Opinion: Can Putting A Price On Environmental Risk Mainstream Corporate Sustainability?

As it stands, some companies take environmental issues and sustainability seriously but the majority don’t. In a new opinion piece, Ivo Mulder, the REDD+ Green Economy Advisor for UNEP (United Nations Environment Programme), argues how quantifying environmental risks in monetary terms may be necessary to convince the bulk of corporations to follow suit.

Read it here.

 

Researchers Say Ecotourism In Protected Areas Delivers 60:1 Annual Return On Costs

The world’s national parks and nature reserves receive around eight billion visits every year, according to the first study into the global scale of nature-based tourism in protected areas. The paper, by researchers in Cambridge, UK, Princeton, New Jersey, and Washington, DC, published in the open access journal PLOS Biology, is the first global-scale attempt to answer the question of how many visits protected areas receive, and what they might be worth in terms of tourist dollars.

 

The authors of the study say that this number of visits could generate as much as US$600 billion of tourism expenditure annually – a huge economic benefit which vastly exceeds the less than US$10 billion spent safeguarding these sites each year.

 

Scientists and conservation experts describe current global expenditure on protected areas as “grossly insufficient”, and have called for greatly increased investment in the maintenance and expansion of protected areas – a move which this study shows would yield substantial economic return – as well as saving incalculably precious natural landscapes and species from destruction.

Learn more.

EU NatCap Financing Facility Is Ready for Business

With the intention of attracting investments from a variety of public and private sources, the European Investment Bank (EIB) launched the Natural Capital Financing Facility last month, one of two pilot projects to grow investments in climate adaptation and energy conservation. The Natural Capital Financing Facility has pockets USD$135M deep for investing in – and attracting investors to – sustainability projects like forestry management.

Read more from Yahoo News.

 

Cozy Relationship Between Government and Mining Company Irks Australian Public

A controversial mine expansion in Australia grew more contentious when a media organization released information suggesting that the Office of Environment and Heritage (OEH) rubber-stamped offsets for the Warkworth expansion. The organization claimed the OEH approved the mine’s biodiversity offsets for clearing 600 acres of vegetation that contained endangered woodlands prior to actually calculating the value of the offsets. The area proposed for new mining itself was actually set aside as a biodiversity offset for prior impacts. An OEH spokesperson responded by saying that the calculation was done before certifying the mine.

 

Meanwhile, the Labor Party is promising that if elected it would scrap the Coalition’s current biodiversity policy in favor of a policy allowing only “like-for-like” offsets on land “within a reasonable geographic proximity” to the impacted area.

The Sydney Morning Herald has the story.

 

Mitigation Bankers, Locals Spar Over Recreating Wild Lands

Turning developed property back into natural habitat for mitigation purposes has become profitable in places like southern California where so many wetlands have been destroyed. As there is ample opportunity and money to be made, mitigation bankers have been busy buying agricultural land and business properties and converting them into mitigation banks. But owners of a shuttered golf course who are attempting to turn it into a bank have met with opposition from local residents concerned about the effect on local property values. Supporters counter that most opposition stems from misinformation, and that these issues can be ironed out through better community engagement.

Learn more.

 

BSI Unveils a Business Standard on Biodiversity

UK-based standards group BSI just released a new standard for business on biodiversity management. BS 8583 Biodiversity, Guidance for businesses on managing the risks and opportunities lays out a framework for setting targets on a local, national and global level, and managing biodiversity across normal operations, supply chain management, and land/premises management.

Read a press release.

 

Mitigation Roundup

Work is underway at Wildlands’ new San Luis Rey Mitigation Bank in Oceanside, San Diego County, California.

 

Cadiz Inc. saw its 7,400-acre Fenner Valley Desert Tortoise Conservation Bank in California’s San Bernardino County approved early this month.

 

A reservoir in Clitheroe in Lancashire, England, will be restored as a nature reserve, with funds coming from via the Environment Bank’s biodiversity offset pilot work.

 

 

‘Counterfeit’ Credits of Alaskan Mitigation Bank Drive Lawsuit Against the Corps

Last month, a mitigation banker operating out of Alaska sued the US Army Corps of Engineers for what he says is a violation of the Clean Water Act (CWA). The banker, Scott Walther, argues that in 2012 the Corps steered a developer in need of wetland mitigation away from his bank, which is authorized to sell credits to CWA permit holders, to a bank operated by the Matanuska-Susitna borough that Walther says has no business selling credits. Walther says the Su-Knik Mitigation bank’s credits were awarded in violation of the Final Rule. In the lawsuit, Walther is seeking an injunction blocking the Corps from directing CWA permit holders to buy bank credits fro Su-Knik until the bank comes into CWA compliance.

Read it at Law360 (registration required).

 

Can Colombia Create the World’s Biggest Ecological Corridor?

With the cooperation of its neighbors, Brazil and Venezuela, Colombia has plans to create the world’s largest ecological corridor. It would span over 135M hectares of Amazon rainforest ,helping to slow global warming by reducing deforestation and preserving the region’s biodiversity. Norway and Germany are pitching in as well: they have agreed to US$65M worth of finance for an Amazon protection program. He plans to announce the eco-corridor initiative, called ‘Triple A’, at COP21 in Paris later this year.

Learn more.

 

Cali Farmers See Opportunities in Habitat, Carbon

A farmer in California’s Central Valley will leave rice fields flooded for part of this season, to provide habitat for waterfowl, shorebirds, and Chinook salmon. John Brennan, who oversees the 1,700-acre Knaggs Ranch, says he hopes to be able to market these benefits on the Central Valley Habitat Exchange, a new mechanism channeling finance to landowners undertaking voluntary conservation. Funds are expected to come from private and public investors, including some with mitigation or restoration requirements. Brennan also has his eye on the California carbon market: this spring, the California Air Resources Board will likely approve the first standard for carbon sequestration from rice farming.

Learn more at the EDF blog.

 

Locals, Activists Protest to Save Australia’s Native Vegetation Act

The independent review board that recommended that Australia’s New South Wales government repeal the Native Vegetation Act is getting pushback from landowners and a local environmental group. Critics particularly take issue with the review’s suggestion that land conserved under voluntary conservation agreements (VCA) can be used as offsets for biodiversity loss elsewhere. “We are horrified to think that at some time in the future our VCA-protected land in this remarkable rainforest could become a tool to enable vegetation destruction in other areas,” said the secretary of the Gerroa Environmental Protection Society. But supporters of the repeal argue they are looking for fair policy that balances environmental stewardship with economic growth. And the review board claimed the Native Vegetation Act didn’t meet expectations for biodiversity conservation in the state.

The Kiama Independent has coverage.

 

Alberta Starting to Rethink Wetland Incentives

Researchers at the University of Alberta plan to pilot a reverse auction mechanism for wetland restoration in the province. The provincial government will fund the effort, which aims to test out market approaches to restoring wetlands. Offering payments to landowners from a designation restoration fund isn’t working, says U of A’s Peter Boxall: 90% of wetlands around Calgary have been lost, and 70% of wetlands in the ‘white zone’ (e.g. the developed part of Alberta).

The Edmonton Journal has coverage.

 

To Finance Green Growth, Namibia Needs A Little Green

Namibia has taken strides to protect its biodiversity: It’s one of the few countries that have a clause in the constitution targeting biodiversity management. And between 2001 and 2010, it implemented its National Biodiversity Strategy and Action Plan (NBSAP) to international recognition as one of the best first generation plans. Namibia is now undertaking implementing the second phase of its plan, which aims to promote the sustainable use of natural resources by mainstreaming biodiversity conservation across the government and private sector. But funding is a big impediment, the Minister of Environment and Tourism notes, as a conservative estimate for implementing NBSAP2 costs over US$40M. The Minister emphasized the importance of donor aid and exploring innovative finance as means to finance implementation.

All Africa has coverage.

 

Landscape Level Environment Project Saves Three Birds with One Stone in Vietnam

Vietnam is moving forward with a project integrating biodiversity, climate resilience and forestry management. The national government approved the “Integrating Biodiversity Conservation, Climate Resilience and Sustainable Forest Management in Trung Truong Son Landscapes” project, which is comprised of two parts. One is to manage biodiversity and forests in the region’s protected areas and their buffer zones. The other part is to implement landscape conservation at the community-level in the surrounding areas, which will promote sustainable livelihoods and reduce the bad environmental habits that contribute to climate change.

Learn more.

 

CEMEX and BirdLife Renew Partnership

CEMEX and BirdLife International renewed their partnership for another three years. The two groups have worked together since 2007 to improve understanding and monitoring of conservation actions at CEMEX’s quarry sites. The partnership has supported projects in Mexico, the UK, and France, and collaborated on a number of company-level initiatives.

Read a press release.

 

EVENTS

 

 

2015 National Mitigation & Ecosystem Banking Conference

The 2015 National Mitigation & Ecosystem Banking Conference, scheduled for May 5-8, 2015, in Orlando, Florida is the only national conference that brings together key players in this industry, and offers quality hands-on sessions and training as well as important regulatory updates. Proven to be “the” place to gain insights, explore new markets and learn from sessions, the 2015 Conference will continue its focus on educational content – both advanced and basic sessions as well as moderated exchanges and a variety of mini workshops that help to connect bankers, regulators, users and others involved in this industry. Pre and post- event workshops include Primer 101, Stream Banking, Long-Term Stewardship, Financing & Valuation and more. Hear perspectives from bankers, regulators and users, get updated on regulations, legislation and legal challenges, participate in field trips and benefit from the many opportunities to network! With a high attendance this past year, we anticipate a record attendance in Orlando and encourage you to make plans to submit to present, attend, even sponsor or exhibit! Orlando FL, USA. 5-8 May 2015.

Learn more here.

 

SOCAP 15

We are a network of heart-centered investors, entrepreneurs, and social impact leaders who believe in an inclusive and socially responsible economy to address the world’s toughest challenges. Since 2008, SOCAP has created a platform where social impact leaders can connect and present their ideas to a global audience. Our annual flagship event in San Francisco is the largest conference for impact investors and social entrepreneurs and has drawn more than 10,000 people.

6-9 October 2015. San Francisco CA, USA.

Learn more here.

 

2015 Conservation Finance Boot Camp

The Conservation Finance Network at Island Press is pleased to announce the 2015 Conservation Finance Boot Camp training course being held at the Yale School of Forestry and Environmental Studies in partnership with the Yale Center for Business and the Environment. Now in its ninth year, this intensive week-long course aims to help professionals utilize innovative and effective financing strategies for land resource conservation, restoration, and stewardship. The course will offer in-depth information on trends and opportunities in public funding, private investment capital, bridge financing and loans, gifts and grants, income from the land, and monetized ecosystem services. There will be a strong emphasis on practical, hands-on tools and lessons from relevant case studies. Attendees will have an opportunity to consult with conservation finance experts on projects or problems from their work. The course will also serve to convene a peer network of committed conservation professionals working on similar issues across the nation. Past attendees have included U.S. and international conservationists, foundation leaders, land trust board members, executive directors, private investors, business executives, and academics. Opportunities for networking will be built in throughout the week in order to foster long-term professional relationships and support networks among attendees and presenters. 1-5 June 2015. New Haven CT, USA.

Learn more here.

 

JOB LISTINGS

 

Program Manager of Marine Ecosystem Services

European Institute of Marine Studies – Plouzané, France

The candidate(s) will work with Linwood Pendleton, the International Chair of Excellence at the European Institute of Marine Studies/Laboratory of Excellence of the Sea/Center for Marine Law and Economics/University of West Brittany to build an international program on policy, management, and science regarding human uses of the sea and coast. The program already has attracted over a million euros of research investment in just the last 6 months. The work of the International Chair focuses particularly on new and innovative science and policies to help better manage the ecosystem services provided by marine and coastal areas and to better coordinate development, conservation, and management to balance the use of living and non-living resources. The International Chair is a fundamental contributor to a proposed United Nations University for the Ocean. Research areas pursued by the International Chair and his team currently include the a Global Environmental Facility project on Blue Forests (i.e. blue carbon), a new European Commission study (ECOPOTENTIAL) that uses Earth Observation and Ecosystem Services data to monitor the effectiveness of protected areas, as well as projects that focus on the impacts of ocean acidification, mapping and visualizing ecosystem services, and managing resources in the high seas and deep sea. The successful candidate(s) will assist the Chair in all aspects of his work including (but not limited to) research, scholarly and popular writing and presentations, seminar and workshop planning, grant proposal writing, and project and grant management.

Learn more here.

 

Land Conservation Manager

The Nature Conservancy – South central Pennsylvania, USA

The Pennsylvania Chapter of The Nature Conservancy seeks a knowledgeable, energetic conservationist for the position of Land Conservation Manager. The position, based in south central Pennsylvania, offers the opportunity to join the staff of one of the largest, most successful conservation organizations in the world. The Nature Conservancy’s global success can be measured by the protection of 117 million acres in over 30 countries. The Pennsylvania Chapter is known in the Conservancy and beyond as a leader in innovative, effective strategies that benefit both people and nature at a scale that matters. The Land Conservation Manager will lead the Chapter’s efforts to protect and restore high priority areas in Pennsylvania, including lands along one of Pennsylvania’s most spectacular and scenic natural features, the Kittatinny Ridge, and lands within the Chesapeake Bay Watershed.

Learn more here.

 

Environmental Finance Officer

International Union for Conservation of Nature – Vaud, Switzerland

The Environmental Finance Officer will undertake research and analytical work at the interface of economics, development, business and the environment. Contributions will be in the form of applied research (data collection and analysis), drafting of policy papers and reports for knowledge uptake, and providing environmental finance insights throughout IUCN programmes and projects. Broad thematic areas of work include:

 

  • Apply finance analytical tools and financing lenses to issues affecting biodiversity and ecosystems and their management and decision support;
  • Explore and develop innovative public and private sector financial mechanisms to support conservation and sustainable development initiatives;
  • Assess the role and contributions of financial mechanisms in equitable benefit-sharing for vulnerable natural resource dependent communities;
  • Follow the debates and developments on resource mobilization and sustainable finance in global policy fora such as UNFCCC, CBD, SDG, etc.;
  • Promote uptake of existing knowledge and generate new knowledge on environmental finance.

Learn more here.

 

Senior Program Associate, Ecosystem Services

Winrock International – Arlington VA, USA

The Senior Program Associate will be responsible for assisting in the implementation of projects related to ecosystem services including climate change mitigation and adaptation in the agriculture, forestry, and other land uses (AFOLU) sector. Responsibilities will include: performing field data compilation and collection, especially in relation to forest carbon and ecosystem services valuation; analysis and synthesis of data and information on land use and forests; tracking national and international activities in related fields; document and report writing; and assisting in holding capacity building training sessions on subjects related to climate change and ecosystem services.

Learn more here.

 

Program Associate, Ecosystem Services

Winrock International – Arlington VA, USA

The Program Associate will be responsible for assisting in the implementation of projects related to ecosystem services including climate change mitigation and adaptation in the agriculture, forestry, and other land uses (AFOLU) sector. Responsibilities will include: performing field data compilation and collection, especially in relation to forest carbon and ecosystem services valuation; analysis and synthesis of data and information on land use and forests; tracking national and international activities in related fields; document and report writing; and assisting in holding capacity building training sessions on subjects related to climate change and ecosystem services.

Learn more here.

Additional resources

Opinion: Yes, The US EPA Can And Should Allow Offsets Under The Clean Power Plan

16 March 2015 | The US Environmental Protection Agency’s (EPA) proposed Clean Power Plan, the agency’s attempt to regulate existing sources of greenhouse gases (GHGs) in the electricity-generating sector under its Clean Air Act authority, may be the most controversial rule proposed by the agency. Weighing in at around 670 pages (with a 750-page technical support document,) it is certainly one of the most complex regulations ever attempted by the agency.

It should also be interpreted as offering the states maximum flexibility in how states handle their emission reductions, as we can see by zeroing in on just two sections of the Clean Air Act: Section 110 and Section 111.

Section 110 governs the State Implementation Plans (SIPs), which are the way in which ambient levels of criteria pollutants (like ozone), are to be enforced. Section 110 allows states to meet these goals in any way they wish as long as they do not interfere with another state’s compliance. Section 111, on the other hand, purportedly deals with reductions from source categories (such as electricity generating units).

Here, we’ll be looking at just two sub-sections of Section 111: Section 111 (b), which deals with new or recently upgraded sources of pollution; and Section 111 (d), which deals with older or existing sources of pollution not regulated by states under Section 110 (or as a hazardous air pollutant) . Since greenhouse gases are the only pollutants that exist in this category, and they have yet to be regulated, section 111(d) is as yet untested. The Clean Power Plan is the EPA’s attempt to do so.

Section 111(d) says the EPA may establish guidelines for how states meet reductions required, and it also says that the procedure governing approval of these state systems should be a “procedure similar to that provided by section 7410[Section 110].”

And guess what? Section 110 clearly leaves room for offsetting, as well as any measure that would reach the target required.

How Does the Clean Power Plan Work?

The Clean Power Plan sets individual targets for GHG emissions rates for each state through a formula the EPA developed, examining how various GHG reduction strategies could be implemented given each state’s own unique circumstances. In determining the state’s targets, the EPA critically made a decision that the Best System of Emissions Reduction (BSER) referenced by the Clean Air Act authority under its Section 111(d) provisions could include reductions in GHG emissions from end-user efficiency gains, electricity dispatch decisions, and new non- or low-carbon sources.

Because these reductions would not technically be from a regulated plant itself, they are characterized as “beyond the fenceline” reductions. It is this decision that is responsible for much of the rule’s complexity as well as the ability of the EPA to propose a more aggressive reduction target than could be achieved by changes at the electricity generating plant itself. This approach, the EPA says, allows the states maximum flexibility in meeting ion targets.

Unfortunately, the EPA has shied away from allowing states maximum flexibility for reductions by refusing to endorse (at this time) the use of GHG offsets, (such as biological offsets or reductions from other unregulated sources) even though the use of offsets is generally recognized as a more efficient way to reach tighter GHG reductions targets.

Lying at the heart of this decision, according to the EPA, is “legal uncertainty.” Because of the controversy in the United States surrounding any regulation of GHGs, the regulations are being, and will continue to be, challenged in court. One of these challenges suggests that in setting up the guidelines for the states, that the EPA (and presumably the states) cannot do any “outside of the fenceline” regulation, asserting that this differs from prior regulation of electricity generating units under other pollutants.

In response, the EPA correctly reasons that its authority under section 111(d) is different from its authority to regulate criteria pollutants under 111(b), and that the BSER can include the “outside the fenceline” reductions suggested, as well as emissions trading between sources. I believe the agency is absolutely correct in this interpretation, but this reasoning would suggest that offsets would also be legally allowed under Section 111(d).

To see why, we have to return to the relationship between Sections 110 and 111(d) that I alluded to at the start – namely, that Section 111(d) specifies that the Best System of Emissions Reduction adopted by a state be modeled on Section 110, which governs the State Implementation Plans . While the EPA has not had cause to consider the full meaning and implications of this statutory phrase before, I believe that it means that 111(d) provides that the “system” of emissions reduction can be anything that meets the target required by the EPA. Section 110 allows the states such autonomy in constructing how they will meet the ambient air quality standards for criteria pollutants. In Union Electric Co. v. EPA, 427 U.S. 246, 96 S.Ct. 2518, 49 L/Ed/ 2d 474 (1976), the Supreme Court upheld the EPA’s position that if a state proposes a strategy that is effective in meeting the ambient air quality standards, the EPA must approve that SIP. This follows statutory language in Section 110(a) and also supports the cooperative federalism at the heart of the Clean Air Act.

Though the EPA seems to distinguish between the reductions itproposes in the Clean Power Plan rulemaking and the use of offsets, if “outside the fenceline” reductions are allowed at all if the states so choose, which I believe they are because of the reference to Section 110, then they can be allowed in other arenas such as offsetting.

What it boils down to is this: Unless the EPA is willing to grant the same sort of flexibility to the states under Section 111(d) that it does under section 110, it reads the reference to section 110 out of the statute, which was not the intent of the drafters.

The EPA seems to be afraid that the use of offsets might be a step too far, and other commentators have suggested that the agency’s power under Section 111(d) becomes more precarious the further it moves from the fenceline. But the applicable law suggests otherwise. While the EPA may be trying to paint a smaller target for legal challenge or simply avoid the politics of proposing something that looks very much like a cap-and-trade system, these distinctions are not based on the law. As such, the EPA should clarify that the states could choose to keep or utilize verifiable offset emissions reductions and be compliant with the Clean Power Plan.

Because some of the states, such as California and the Northeastern states participating in the Regional Greenhouse Gas Initiative already have carbon trading programs allowing for GHG reductions from sources such as verified GHG offsets or other industries (such as the petroleum industry), this clarification would allow these states to keep or utilize such reductions and be compliant with the BSER rulemaking. Additionally, clarifying the allowance of verified offsets and reductions from other industrial sectors (if proposed by a state or states) would facilitate the creation of a GHG trading market, which the agency has correctly determined would allow for more reductions at lower costs.

Victor B. Flatt is the Taft Distinguished Professor of Environmental Law at UNC Chapel Hill School of Law.