Bringing Ecosystem Markets to Scale in the Southern United States

For the most part, Ecosystem Markets still linger in the early stages of development. There is much more theoretical work to be done to set up environmental credit markets, including carbon offsets and payments for watershed services. But more pilot projects can also help these markets evolve and show how they might work in the real world.

Development pressures in the U.S. South often mean that forests are worth more cut down than left standing. In the U.S. South alone, the U.S. Forest Service estimates that suburban encroachment will convert approximately 31 million acres (approximately 14 percent of 2010 southern forest area) of southern forests to development between 1992 and 2040. Over the last three years, an initiative at the World Resources Institute (WRI) called Southern Forests for the Future has worked to identify and pilot alternative revenue streams that could change the balance sheets for private landowners, and help them keep their forest as forest. These include payments for ecosystem services, tax benefits, and conservation easement revenue. WRI has also been involved in pilot testing a number of these initiatives; this post provides an overview of these initiatives and how to find out more information about them.

The Carbon Canopy

This initiative, led by the Dogwood Alliance and office products company Staples, Inc., seeks to leverage markets for ecosystem services to increase the area of southern U.S. forests certified under sustainable management. Currently, the Carbon Canopy has projects under development that span approximately 26,000 acres in Appalachia. In order to increase the number of acres under sustainable certification, the Carbon Canopy’s initial focus has been on linking forest carbon offsets generation―that meet the requirements of the Climate Action Reserve (CAR) and Californian Air Resources Board (ARB)―and certified forest management standards (based on the Forest Stewardship Council (FSC) standard).

The issue brief discusses the Carbon Canopy’s experiences since its inception in 2009. It highlights a number of insights for other organizations seeking to build and expand markets for forest carbon offsets linked with forest certification. These insights apply to building demand, ensuring supply, and creating the transactional infrastructure for such markets. For instance, as profiled in the brief, organizations seeking to replicate the Carbon Canopy approach should:

• Actively recruit buyers with a potential business case for purchasing forest carbon offsets, certified products, or both to build demand. One set of prospective buyers is companies that have established voluntary targets for reducing their greenhouse gas emissions.

• Invest significantly in educating woodland owners about sustainable forest management certification and forest carbon offsets in order to build supply. One effective practice is to leverage existing woodland owner networks for educational outreach.

• Engage experts on both the forest certification and forest carbon project development standards early on in the process to inform the development of the pilot projects. This helps ensure that the process runs as smoothly as possible from start to finish.

Access the full webstory and issue brief on Carbon Canopy here

Gopher Tortoise habitat credit trading

This initiative, which examines a market-based approach to conserve gopher tortoise habitat, can serve as a model for wildlife habitat conservation across the country.

Hundreds of imperiled wildlife species in the U.S. are candidates for protection under the Endangered Species Act (ESA), but landowners often have very little financial incentive to protect them.

Moreover, a recent court settlement requires the U.S. Fish and Wildlife Service (USFWS) to make initial or final listing decisions on hundreds of candidate species by September 2016. As USFWS accelerates listing decisions in the next few years, landowners with candidate species on their property face considerable uncertainty in their land-use planning.

That’s why WRI and its partners, including Advanced Conservation Strategies and the American Forest Foundation, saw an opportunity to set up a candidate conservation marketplace; a scalable, voluntary, and science-based market mechanism to spur conservation for imperiled species prior to their listing under the ESA.

Under this model, private landowners who conserve, manage, or restore gopher tortoise habitat on their properties can receive “credits” that they can sell in the marketplace. This approach may allow federal and private project developers, such as solar, wind and natural gas developers, to manage their environmental risk by investing in conservation on private lands in return for regulatory certainty from the USFWS. By protecting the gopher tortoise habitat now, the goal is to keep the species from being listed under the ESA.

The issue brief details this ongoing pilot initiative in Georgia and Alabama. Initial pilot transactions are intended to take place in 2012. Pilot partners are working with the U.S. Army, which is trying to proactively manage gopher tortoise habitats before federal listing under the ESA becomes necessary and potentially leads to a loss of training grounds.

Access the full webstory on Gopher Tortoise habitat credit trading here

Payments for Watershed Services – Three Initiatives

Forested watersheds in the South provide numerous services to the region. They purify water, control flooding and erosion, and provide recreational opportunities. Yet, despite their value, many watersheds are under threat from development and poor land management.

“Payments for Watershed Services” (PWS) programs are one strategy to mitigate these threats. Though a PWS program, landowners receive financial incentives to conserve, sustainably manage, and or/restore watersheds to yield ecosystem service benefits.

For example, in Maine’s Sebago Lake Watershed, WRI conducted a preliminary economic analysis of how the city of Portland, Maine could minimize costs to meet EPA water quality requirements by investing in green infrastructure elements, rather than investing in a water filtration facility.

WRI worked with partners, including the Manomet Center for Conservation Sciences, to identify green infrastructure elements that would help maintain or improve water quality into the Sebago Lake watershed. These elements include conservation easements, forest certification, streamside forest buffers, culvert replacements, and reforestation. Our preliminary results indicate that investing in green infrastructure could represent a cost-savings of $68 - $72 million (or 51% - 76%) over a 20-year period.

We also estimated ancillary benefits that result from investing in green infrastructure including carbon sequestration and landlocked salmon habitat provision. Together, these two services have an estimated present value of $75-125 million. WRI’s methodology described in the issue brief and in other ongoing WRI research can be replicated for water utilities in other watersheds and provide the basis for scaling up demand for PWS.

WRI has also been involved, as part of the Southern Forests for the Future initiative, in two other PWS initiatives:

• A Unified Development Ordinance in Raleigh, North Carolina

• A Beneficiary Analysis of the Upper Neuse River Watershed in North Carolina

Concluding thoughts

Together, these three initiatives form the basis of an effort amongst a number of partner organizations working in the southern U.S. to scale up innovative pilot mechanisms to keep forest as forest, while also building the case for ecosystem market evolution in a broader context. Access the full webstory on Payments for Watershed Services here

These three issue briefs are part of the Southern Forests for the Future Incentives Series, about innovative financial mechanisms designed to help private landowners in the southern United States sustain their forests. To access these briefs and other issue briefs in the Southern Forests for the Future Incentives Series, and to learn more about southern U.S. forests, visit: www.SeeSouthernForests.org.

Developed by WRI with support from Toyota, this interactive site provides a wide range of information about southern forests, including current and historic satellite images that allow users to zoom in on areas of interest, overlay maps showing selected forest features and drivers of change, historic forest photos, and case studies of innovative approaches for sustaining forests in the region. To order free hard copies of this issue brief, and other briefs in the Southern Forests for the Future Incentives Series, please contact us.