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Payment for Ecosystem Services: A Business for Resource Protection

By: Joshua Eldridge 

In an era where budget cuts and environmental resource protection seem to be at constant odds, we are challenged to find solutions that bridge the gap between financial requirements and resources. Since the 1990s some possible solutions have gained strength, including the privatization of resource management and the creation of resource markets such as carbon emissions trading.  These attempts to satisfy varying resource requirements of human society have been met with some success but also with some contention and skepticism. However, there is a collaborative and innovative approach—Payment for Ecosystem Services (PES)—that allows the providers of environmental services to be appropriately rewarded for the services they provide.

An ecosystem service is defined as the benefit that human beings derive from a healthy ecosystem. Easy examples would be the provision of oxygen, soil genesis, or water purification, all of which add value to society. The United Nations released the Millennium Ecosystem Assessment (MEA) in 2005 and identified 24 critical ecosystem services grouped into four broad classes:

General overview of the types of ecosystem services provided and grouped by the classes from MEA.
Graphic courtesy of MetroVancouver.org

 – provisioning, which includes the production of food and water;
 – regulating, which includes the control of climate and disease;
 – supporting, such as nutrient cycling and crop pollination; and
 – cultural, which includes spiritual and recreational benefits.

Not all of the 24 services identified in the MEA are easily translated into marketable services, but three have proven to be valuable commodities: climate change mitigation, watershed services, and biodiversity conservation.

The idea behind PES. Landowners are offered financial incentives to manage their land to provide an ecological benefit.  This is typically done through contracted agreements funded by the government and managed by non-governmental organizations. In general, the system works by paying landowners who provide the environmental services, while those who benefit from the environmental services pay for their provision.  Payments are conditional and participation is voluntary.

One of the earliest and longest running examples of PES is the Conservation Reserve Program (CRP) run through the United States Department of Agriculture (USDA) Farm Service Agency (FSA). This program began during the dust bowl era to discourage farmers from farming on poor quality, erodible land. Today, farmers and landowners receive benefits totaling more than $1.8 billion a year on 736,000 contracts. The program protects 29,600,000 environmentally sensitive acres by planting long-living, perennial species that improve water quality, control soil erosion, and enhance habitats for waterfowl and wildlife.

Acres enrolled in the CRP in 2000. Image courtesy of USGS.

In 2011, CRP contributed to nitrogen and phosphorus reductions of more than 623 million pounds and 124 million pounds from farm fields that reduce pollutants in waterways. In addition, the program restored more than two million acres of wetlands and associated buffers. The CRP also fosters the sequestration of carbon equal to taking approximately 10 million cars off the road through acquisition in plants and soil, as well as reductions in both fuel and fertilizer usage. This program has been very successful in providing what most would consider non-market services. The problem is that this program is vulnerable to a sequester of a different sort.

The From Forests to Faucets Program is another successful but debatable PES example. It is a partnership between Denver Water and the U.S. Forest Service (USFS), offering watershed protection to ensure cost-effective provision of water to the 1.3 million residents of the Denver metropolitan area. Denver’s water comes from snowpack and streams from USFS lands high in the Rocky Mountains, many of which have been impacted from the devastating forest fires that have become more frequent in recent years.  Post-fire effects on a watershed include increased erosion and sedimentation of river systems. This impacts reservoir storage capacity and water treatment systems that have to deal with water quality issues and clogged filtration plants.

Wildfires threaten Colorado water supplies. Smoke rising from Rampart Reservoir during the Waldo Canyon Fire near Colorado Springs in 2012.
Photograph by John Wark, Reuters

The From Forests to Faucets Program reduces the cost of water treatment by limiting the risk of forest fires by reducing fuel loads in key watersheds, such as standing dead trees left from the mountain pine beetle epidemic. It also provides funding for restoration activities on previously burnt watersheds. The goal is to create more resilient forests that will be more adaptive to the impacts of climate change while reducing impacts to water supply systems. A jointly funded program with the USFS, Denver Water is funding its portion by charging customers a little more than $5 a year ($0.45 per bill) over the next five years to cover the estimated $16.5 million needed for this project. Even if the USFS is unable to match these funds due to budget constraints, Denver Water will still have substantial funds to provide forest restoration that adds significant value to society and is still much cheaper than building new treatment plants to handle the change in water quality.

Forest to Faucets programs have sprouted up in other parts of the United States including several in the Northeast. While this program is not a perfect example of a PES program, because Denver Water’s customers cannot opt out of the payments, it is an innovative, ecosystem-driven approach that demonstrates how land managers and service providers are cooperating to try and balance the resource needs of society with the ecosystem services that we depend on.

So what’s the consensus on PES programs? Many people have argued that PES programs are just paying people to manage their land properly and that landowners shouldn’t be rewarded for doing the right thing. However, I would counter that while this is a logical argument, not all landowners have the same financial resources available or in some cases simply don’t know what they should or shouldn’t be doing.  Furthermore, there are also landowners who don’t care that their land is unhealthy and does not provide all the ecological services it could for society. PES programs offer the financial incentive to the unwilling or underfunded as well as provide a partner to offer guidance on how to manage ecosystem services that benefit society.

Most PES programs are still in the early stages and need to demonstrate that they can raise the finances to provide a measureable improvement to ecosystem services across the landscape to gain wider acceptance and more support. PES programs offer new entrepreneurial opportunities for innovative solutions to meet the next generation of environmental resource issues. As environmental professionals and stewards, we need to devise strategies and procedures that demonstrate that managing ecosystem services is worth the investment and is not solely dependent on government assistance. This is our challenge.  Are you ready?

 

References:
Millennium Ecosystem Assessment. 2005. Ecosystems and Human Well-Being: Biodiversity Synthesis. World Resources Institute, Washington, D.C.

Denver Water. From Forests to Faucets: U.S. Forest Service and Denver Water Watershed Management Partnership.

USDA-FSA. 2012. USDA Announces Results for Conservation Reserve Program General Sign-Up.

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