Creating a Framework for Ecosystem Service Markets in the Lower Mississippi Valley
The Nature Conservancy
Lower Mississippi River Program/Great Rivers Partnership
April 2007
Background
Ecosystem services are the processes by which the environment produces resources that benefit humankind and the world, such as clean air and water, habitat for plants and animals, flood mitigation, groundwater recharge, and pollination of native and agricultural plants, to name a few. In the Lower Mississippi Alluvial Valley (LMAV), these services once were abundantly provided by the 24-million acres of bottomland hardwood forests, but since the turn of the century those forests has been reduced to only 4.4 million acres, limiting their ability to provide clean water, recharge the depleted aquifers, store ever-growing amounts of carbon dioxide, or provide habitat for endangered species such as the ivory-billed.
Through a partnership with the US Forest Service, U.S. Geological Survey, Duke University and others, the Conservancy has taken on the lofty goal of valuation of these different services. This diverse partnership was a direct result of the Stakeholder Workshop hosted by the USFS last year in Memphis, TN. One of the priority issues identified in this workshop was the need for a better understanding of the value of nature, specifically ecosystem services provided by bottomland hardwood systems. This group began meeting by phone and submitted proposals to the USFS to address this pressing need.
Ultimately, the goal of the Conservancy is to develop voluntary markets that will support financial incentives for practices that promote the restoration of bottomland hardwood forests. Voluntary markets exist for trading greenhouse gas offsets, such as carbon dioxide, and the Conservancy and partners are exploring similar voluntary markets for other services provided by a restored, functioning ecosystem.
The Work
The USGS is conducting an audit of ecosystem services provided by Wetlands Reserve Sites in the lower Mississippi valley. This project, being conducted under the authority of the Conservation Effects Assessment Project (CEAP), will produce quantitative estimates and predictive wetland functional condition indicator models for bottomland hardwood wetlands in the LMAV. Specifically, they will provide estimates of conservation benefits for USDA program wetlands that focus on the following bottomland hardwood ecosystem services: biological conservation and sustainability, and habitat quality; nutrient and sediment retention; carbon sequestration in soils and vegetation; soil erosion reduction; and floodwater storage and attenuation.
Duke University, through funding provided by the USFS, has taken the lead on valuations work associated with ecosystem services. Utilizing data provided by the USGS CEAP work, Duke University is conducting a benefit transfer analysis to create values for the ecosystem services being provided by USDA wetlands. Monetized estimates of market values for the services will be one of the final products of Duke’s work.
The Nature Conservancy is taking the lead on mapping sites for restoration, overall project coordination, and “market” creation that recognizes the monetary value of different ecosystem services. Specifically, the Conservancy, through funding provided by the USFS, is utilizing on-the-ground field data to create a GIS assessment tool, along with a “conservation atlas” to help prioritize areas for different ecosystem services they provide. This GIS assessment tool, along with a parallel project also funded by the USFS focused on integrated watershed management, will provide target areas with existing landowner contacts for pilot projects in the lower valley.
All of this work is scheduled to be completed by calendar year end 2007, though work on the integrated watershed management will continue through 2008.
Next Phase – Market Creation
While current trends in the lower Mississippi valley have been moving towards reforestation, many landowners are faced with limited opportunities to utilize existing government conservation programs due to county caps, enrollment restrictions, changes in the appraisal process and limited funding. By placing real world values on ecosystem services, the Conservancy will provide policy-makers with the best information about what conserving resources such as bottomland forests is worth, ultimately ensuring that federal and state legislation recognizes the true value of conservation. Through the development of ecosystem service valuations and corresponding markets, the Conservancy hopes to create new tools to help landowners manage their land in a sustainable and economically viable way.
The Lower Mississippi River Program is carrying out an ecosystem services strategy to achieve greater biodiversity conservation and improvements in human well-being. Our approach is to seek solutions that increase conservation, meet human needs for services, make economic sense, and are practical for implementation. To advance this approach, we are developing tools and conducting analyses, employing market mechanisms and business models, and pilot testing to identify options that are effective, replicable, and scalable. The central components of the strategy are:
- Tools and Analysis: Develop mapping and decision tools for integrating ecosystem services into biodiversity conservation and river basin planning. Conduct scientific, economic, and policy analyses to support the development of viable approaches.
- Pilot Testing: Implement pilot projects to test ecosystem service-based approaches. Assess the effectiveness of pilots in achieving conservation and ecosystem service benefits, and evaluate feasibility for wider implementation.
- Scaled Up Results: Synthesize lessons learned from pilot efforts and implement the best ecosystem service-based approaches at a significant scale.
In the lower valley our strategy is to harness existing ecosystem service opportunities in the region (carbon, timber, and recreation), while supporting the development of emerging markets (nutrient retention and flood storage). Rather than focus on the benefits of a single service, we seek to “stack” services in order to maximize potential returns to landowners. For instance, reforestation may allow for the selling of carbon credits, sustainable timber, and (duck hunting) recreation leases. At the same time, we are conducting scientific, economic, and policy analyses to support emerging service markets. A number of factors suggest this strategy has high potential for success in the region.
· High demand for alternatives to row-crop agriculture. Profitability is low and risks are high for agriculture on poor, flood-prone lands. Public programs aimed at taking lands out of agriculture are over-subscribed and in some cases “capped out” (i.e., no more land can be enrolled), illustrating the demand for alternatives.
· Significant values associated with ecosystem service markets.
o Carbon. Analysis indicates reforestation in some Delta areas would sequester carbon at some of the highest levels achievable through reforestation in the U.S.
o Sustainable timber. For frequently flooded agricultural lands, reforestation may provide financial returns to private landowners that are on par with returns from producing soybeans.
o Recreation. The region remains a highly popular destination for duck hunting with continuing demand for hunting and recreational areas.
o Nutrients. Future regulatory changes, such as a “cap” (total maximum daily load) for nutrients, may encourage markets for nutrient credits.
o Flood storage. Reconnection of large floodplains could reduce flooding risks in the region.
Funding
To date, the USFS has provided the majority of funding associated with this project.
Specifically, the USFS’s LMAV Initiative headed by Elizabeth Estill, has provided funding to support the following work:
Duke University – approximately $80,000 with Duke matching approximately $20,000
TNC – approximately $77,000 with TNC matching $23,000 for ecosystem services
Approximately $200,000 with TNC matching approximately $100,000 for integrated watershed management
USGS is conducting their CEAP project funded exclusively through federal dollars.
For he next phase of work, market creation detailed above, TNC has raised approximately $70,000 in private donations. This is significantly less than will be needed to complete the above tasks. Currently, the Conservancy has submitted several proposals seeking funding to support the extensive work associated with market creation.