Establishing new ecosystem service markets: The status of debate in the US federal government

Background/Question/Methods

Incorporating the value of ecosystem services in our daily lives can help to preserve these values we depend upon for our basic well-being, from clean air and water, to pollination for food production.  Price signals for these “services” can help protect them by building them into the decision-making processes.  Markets for these key ecosystem services have been developing in the United States for more than a decade; thousands of acres of habitat for endangered species and wetlands have been restored through compensatory mitigation markets.  However, these markets remain relatively small and inaccessible to land owners who might otherwise be eligible to participate. Why? Investments in this sector have not matched expectations, given the current regulatory frameworks that create the markets. Why? Agencies tasked with overseeing these markets seem to be less than enamored of them.  Why?  Given this, what challenges lie ahead to fully realize the potential of markets for ecosystem services? 

Results/Conclusions

Markets for ecosystem services depend on a solid regulatory framework that sets limits or caps on a particular resource: “no net loss” for wetlands; limit on development rights in urban areas; no loss of habitat of an endangered species; etc. However, multiple agencies are responsible for implementation of these markets, and often multiple levels of government, from national to local.  Solutions fall in three areas:

1.“Rationalizing” the regulatory environment through coordinated compliance mechanisms and standardizing mitigation across agencies can encourage market development and signal to investors that transaction costs are manageable.

2. Working with potential “buyers” to understand what their needs to invest in ecosystem services might be:  to reduce their costs, for public relations, to meet compliance, for pure return on an investment. Understanding this can help regulators and others design the market to meet their interests.

3. Working with landowners to understand their desire to provide these ecosystem services:  to increase the value of their property; to provide an new income stream; for personal satisfaction. 

Whether the regulator, the “buyer” or the landowner/”provider” of ecosystem services, players in this new markets have a crying need to learn more about what success may look like.