Paying to Protect the Environment

by |March 31, 2015

MuirWoods

In 2005, the Millennium Ecosystem Assessment found that over 60 percent of ecosystems around the world were being used in unsustainable ways. Today, the number is likely much higher.

Top-down policies where the polluter paid for the environmental damage his actions incurred were the main instruments used to protect ecosystems during the 1960s through the 1980s. Today, market-based strategies that take the value of ecosystems into consideration are becoming more prevalent.

Ecosystems provide numerous benefits and services essential to humankind that are difficult but important to quantify. They provide food, fuel, fiber (timber, hemp, linen, cotton), natural medicines, the bases for biochemicals and drugs; they help clean the air and water, sequester carbon, regulate climate, help control erosion and flooding, form soil, cycle nutrients, pollinate plants, regulate disease and pests, and offer opportunities for recreational, spiritual and aesthetic experiences.

One increasingly favored way to protect ecosystems and the services they provide is payment for ecosystem services (PES). As defined by the United Nations Environment Programme, this is a voluntary transaction wherein a buyer pays someone to provide a beneficial environmental service that otherwise would not have occurred. The payments can be formal arrangements such as carbon emissions trading markets established by governments, or they can be private deals set up by companies, NGOs, or environmentalists.

The buyers of ecosystem services are motivated by a variety of factors, from the desire to comply with regulations, reduce their operating or maintenance costs, or make their brand more sustainable, to the need to avert an environmental disaster, or simply be better stewards of the planet.

Photo: Mwanner

Photo: Mwanner

Providers of ecosystem services can be, for example, landowners who are paid to manage their land only for conservation purposes or to prevent deforestation, farmers paid to adopt better land use practices or to more sustainably manage waste, or upstream villagers paid not to pollute waterways for downstream users.

The ecosystem service providers benefit from a healthier environment, but also reap social benefits such as earning extra income, or learning new business or technical skills; sometimes the whole community is compensated through investments in health clinics, new schools or extension services, or granted more rights to resources.

There are likely thousands of payment for ecosystem services projects in existence around the world today, with the majority focused on protecting watersheds, conserving biodiversity or sequestering carbon to deal with climate change. However, until now there has never been any consensus on how they can best reach their objectives, and their effectiveness has often not been evaluated sufficiently for projects to be scaled up.

A new paper by a team of scientists, investors, economists and development organizations led by Shahid Naeem, director of the Earth Institute Center for Environmental Sustainability and professor of ecology at Columbia University, lays out six essential guidelines for payment for ecosystem services projects. It is the first time that there has been agreement about the scientific principles needed to ensure the success of such projects.

  1. Understand the dynamics of a system, including the natural and human influences on the ecosystem and their effects.
  2. Document baseline conditions in order to be able to measure the effectiveness of the payment.
  3. Monitor outcomes to track progress from baseline conditions and the ecosystem dynamics.
  4. Use efficient, robust and versatile methods to analyze the data.
  5. Understand the tradeoffs and interconnections between the various services provided by the ecosystem.
  6. Consider how the ecosystem and its benefits will change over time in order to ensure long-term sustainability.

One of the researchers, Alexandra Varga, deputy director for the Earth Institute Center for Environmental Sustainability, explained that five years ago, Columbia University master’s students taught by Naeem and paper co-author Jane Carter Ingram, director of ecosystem services for the Wildlife Conservation Society, studied 120 payment for ecosystem services projects to see if they were incorporating science into their design and implementation. When they found that the projects did not, they decided to develop a standardized list of the elements needed to set up a scientifically robust project, which evolved into the new paper. While there is also a realm of social dimensions that impact the success of such projects, these researchers focused on ensuring that projects deliver ecosystem services in a sustainable way from a natural science perspective.

A few projects are considered all-around successes.

In the 1980s, Vittel, now owned by Nestle, realized that the aquifer from which it drew its mineral water was at risk of being contaminated by nitrate from fertilizer leaching and pesticides due to increased agriculture in the area. The company signed contracts with farmers who agreed to reduce the number of cattle raised per hectare, give up maize feed for the animals that increased nitrates, compost animal waste, cease using chemical fertilizers and pesticides, and modernize farm buildings to improve waste management. In return, the farmers’ compensation included subsidies of 200 euros per hectare each year, funds to cover new farm equipment, free labor to compost their fields with manure and technical assistance. By 2004, all 26 farms in the area were involved and 92 percent of the region was protected. All the farmers signed long-term contracts with Vittel. “The science was done correctly,” said Varga. “Also the transactions and social aspects seemed to be all in line and it’s a very well run project.”

Ashokan Reservoir in the NYC Watershed. Photo: Peter Radocaj

Ashokan Reservoir in the NYC Watershed. Photo: Peter Radocaj

Protection of the New York City watershed is also considered an exemplary payment for ecosystem services project. In 1997, New York City, the Catskill/Delaware watershed communities, the U.S. Environmental Protection Agency, New York State and several environmental organizations signed a memorandum of understanding that allowed NYC to protect its watershed through conservation efforts rather than construction of a multi-billion-dollar filtration plant. The city purchased 355,000 acres of land for preservation and invested $250 million over ten years to protect water quality. Upstate landowners were paid to forego development to keep their land in a natural state. The forests, swamps and soils of the watershed act as natural filters and remove pollutants from the water. NYC’s drinking water supply is the largest unfiltered system in the U.S., providing what is considered to be some of the cleanest and most delicious drinking water.

Because voluntary and compliance carbon markets to reduce greenhouse gas emissions have fairly rigorous standards that require participants to meet certain targets and verify the carbon that is being saved, they have strong scientific foundations, said Varga. The U.S. has no national carbon market, but a number of states have launched their own carbon markets.

For example, the Regional Greenhouse Gas Initiative (RGGI), the first market-based carbon market in the U.S., comprises Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island and Vermont. To cap and reduce CO2 emissions from the power sector, they sell emission allowances at auction. The number of allowances a regulated power plant must hold is determined by its emissions; each CO2 allowance authorizes the plant to emit one ton of CO2. At a recent auction, allowances sold for $5.41 per allowance. The proceeds are invested in energy efficiency, renewable energy and bill assistance programs.

The Western Climate Initiative is a collaboration of seven western states and four Canadian provinces. It takes aim at emissions from power and industrial facilities, and as of 2015, covers emissions from residential, commercial and industrial fuel combustion facilities, and transportation emissions from gasoline and diesel combustion.

There are many other sizes and types of payment for ecosystem services projects and required commitments. A project to protect soils might involve an agreement to maintain forested areas to minimize erosion, use less chemical fertilizer and pesticides, and practice conservation tilling. Preserving biodiversity could entail establishing protected areas or corridors for wildlife to migrate between protected areas, replanting degraded sections with native plants, removing invasive species and protecting the soil. Safeguarding a watershed can require restoring or creating wetlands, reforesting an area, and adopting sustainable practices in farming or forestry.

According to Varga, the most difficult principles for projects to achieve are understanding ecosystem dynamics, conducting monitoring plans, and considering future threats to ecosystem services.

“Some ecosystem services, like watershed services, are very complicated, so the science required to understand the ecosystem dynamics is more complicated. This can be challenging for people who don’t have experts on the ground or the resources to pay to get that kind of science,” she said.

Continuing to collect data on a regular basis and having the right metrics to analyze whether the project is accomplishing what it’s supposed to is also expensive and can require fairly sophisticated science, especially for a small community with a limited budget.

Many projects the researchers studied did not consider future threats to ecosystem services, such as climate change. “Again, that’s a level of science that can often be beyond the expertise or the project budget to consider. It may require a lot more modeling or a greater comprehension of the ecosystem services and the threats to them,” said Varga.

The research team views the six principles as an intermediary stage. The next step is to establish projects that incorporate these scientific principles to test them in action, then to connect these principles with those from the social science and political realms, taking into consideration the political context of payments for ecosystem services, transactions, land tenure and payment issues.

“We have these six principles,” said Varga. “Now let’s see how they work on the ground, and if they’re working, how do we reach over that social science divide and really combine our knowledge to create this holistic guidance that can make projects deliver on their both social and environmental outcomes?”

The ideal vision down the line is to set up a certification or standards body. Project developers could fill out a checklist about how they considered the six principles and which ones helped, then the information could be included in a community database so that other project developers could study similar projects, and see the standards they followed and the metrics used. This information sharing could eventually help reduce the cost of adhering to the scientific principles.

A certification body similar to LEED standards for green building, which might incorporate tiered levels of compliance to the principles, would also likely increase funding for projects.

“An investor could see that this is a gold star project that has considered all the science and social equity concerns, and feel more confident about investing his money in it,” said Varga. “Right now there is no standard or rating system … so investing in projects is a little more risky when you’re not sure of the quality of them. Down the road, we think this could be a good thing.”

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