Ecosystem markets

Water-quality credits could be part of this new market.

What does it take to grow a new market—one that aims to couple environmental and economic benefits?

A lot of work, it turns out, involving people from disparate organizations coming together to answer questions, solve problems and hammer out details. And that’s exactly what’s happening across the country as public and private groups figure out the best ways to operate ecosystem markets.

Ecosystem markets provide economic incentive for conservation by placing a value on services provided by nature, such as water filtration or carbon sequestration. Landowners—farmers, for example—can earn money by conserving or restoring their property’s ecosystem services, while government and business can offset their negative environmental impacts by purchasing credits.

While 2010 may not be a year in which investors clamor to get in on ecosystem markets, it will likely see nonprofits, business and government lay significant groundwork for the ecosystem markets of the future. Players are busy putting market mechanisms in place, figuring out how to make them operate smoothly and bringing buyers and sellers to the table.

“A huge amount of infrastructure is being developed,” says Kate Hamilton, associate director of Ecosystem Marketplace, a Washington, D.C.­–based nonprofit organization focused on providing information about ecosystem markets. Increasingly, registries—such as London-based Markit Environmental Registry which serves a number of U.S. ecosystem markets pilot projects—are expanding from carbon into other ecosystem markets, which indicates that there will be a lot of market activity in coming years, says Jessica Fox, senior project manager for the Electric Power Research Institute (EPRI).

The push for ecosystem markets is being created in part by the fact that more companies than ever before are reporting on their sustainability efforts, says Michael Van Patten, CEO and founder of Mission Markets, an electronic marketplace for environmental and social capital markets.