Banking on biodiversity

Conservation efforts gain value in the ecosystem marketplace.

A decade ago, if you asked someone what a carbon offset was, you probably would have been greeted with a blank stare. That’s when Portland-based Bonneville Environmental Foundation (BEF) launched the country’s first voluntary carbon offset market by selling Renewable Energy Certificates (RECs) to fund renewable energy projects such as wind farms and solar installations. In 2000, BEF sold 611 certificates, mostly to the U.S. Environmental Protection Agency and engineering and construction firm CH2M Hill. In 2008, the Portland-based nonprofit sold close to  1 million RECs to its customers including businesses, government bodies and individuals. 

As the market for carbon offsets balloons in the United States and in Europe, observers say other ecosystem markets may follow suit. A rapid loss of biodiversity, habitats and other natural resources coupled with tight funding for conservation efforts is leading environmental groups, businesses and governments to increasingly look for market-based mechanisms to conserve resources.

Ecosystem markets, or payments for ecosystem services, place a value on services provided by nature, such as water filtration or carbon sequestration, and offer a means to provide economic incentive for conservation. Landowners, for example, can earn money for maintaining or restoring ecosystem services on their property, while businesses and government, whose actions may have negative environmental effects, can offset their own impacts.

Beginning with the creation of the first wetland banks in the early 1980s under the guidance of the U.S. Fish and Wildlife Service, ecosystem markets have been around for decades. But in recent years, interest in ecosystem markets has increased dramatically, participants say, as more and more businesses develop comprehensive sustainability plans.

Yet the markets themselves—as well as the some of the services and mechanisms that will facilitate them—are still in their early stages.
Biodiversity markets, representing about $3.4 billion in annual transactions as of 2008, are poised to grow to $4.5 billion by 2010. By 2010, the value of water markets alone is expected to near $500 million, according to Ecosystem Marketplace, a nonprofit organization focused on providing information about ecosystem markets.

“We think these markets have tremendous potential,” says Sara Vickerman, senior director of biodiversity partnerships for Washington, D.C.–based Defenders of Wildlife, whose Marketplace for Nature program aims to support the development of ecosystem markets, and improve their ecological integrity by ensuring that credits provide the intended ecosystem services, resulting in real environmental benefit.