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Mitigation Markets Provide a New Revenue Source

Environmental Markets Trends Report published by Business for Social Responsibility is a downloadable PDF that provides compelling reasons for sustainable business practices.

Companies rely on environmental services for the most fundamental aspects of their operations, including raw materials, predictable flows of clean water and carbon sequestration. The environment also provides other less noted, free services such as pest control and protection from severe storms and disease....We expect that there will be sufficient clean water for operations, that raw materials will continue to flow in predictable patterns, that transport will not be unduly interrupted by increases extreme weather and that our workers will have healthy air to breathe. Market mechanisms programs to protect environmental services promises new business approaches to these issues. Efforts already underway are pricing environmental services, based upon the value they represent to corporations, communities and individuals.

The Carbon market is projected to be the largest commodity market in the world. There is a growing theory in scientific and environmental communities that these market mechanisms are here to stay, and a new way of doing business.

The idea of applying market mechanisms to environmental problems began in the U.S. in the early 1990s. A cap-and-trade system was set up under the U.S. Clean Air Act that allowed for trading in pollutant allowances of sulfur dioxide, one of the gases responsible for acid rain. Today, an array of policy tools has been developed to harness the power of markets and the global economy toward the conservation of environmental services. “Payments for environmental services” (PES) is an umbrella term for the entire range of economic incentive schemes. Some examples include:

- Government payments to property-owners who agree to adopt land management practices associated with the production of environmental services are currently the most widespread form of direct environmental service payment in the world. For example, the Conservation Reserve Program in the US.

- Governments tax breaks to provide incentives for the conservation of environmental services

- Philanthropic conservation programs such as The Nature Conservancy

Self-organized deals are becoming increasingly common. These transactions are between two private organizations such as a Nonprofit and a Company. These schemes provide mutual benefits without an extensive market structure.

According to International Institute for Environment and Development, the main buyers of biodiversity services are private corporations, international NGOs and research institutes, donors, governments and private individuals. And the main sellers are communities, public agencies and private individuals. This practice is more common in Latin America, Asia and the Pacific. Europe and the US lag far behind.

Voluntary markets for environmental services are often driven by philanthropic or public relations motivations, but they benefit companies by identifying inefficiencies, reaping early mover advantage and anticipating regulation.

These markets provide new opportunities for both sellers and buyers of enviromental services. Surplus services can be sold to buyers in need of high levels of the same service. Included are real estate values, supplies of raw materials, cost-effective environmental management, and compliance.

Some examples of offset alternatives include:

  • water filtration
  • climate regulation
  • pollination
  • pest control
  • disease regulation

When agriculture uses food and fiber, they need the environmetnal service of pollination.

When utilities use hydrocarbons, they need decomposition of organic matter.

When consumer product companies use waxes, oils, rubber, fragrances and latex, they need creation and maintenance of genetic diversity.

The sustainable shift in attitude for companies includes valuing nature's environmental services. Conservation.

Sources to learn more about mitigation markets are:

Chicago Climate Exchange (CCX) is a greenhouse gas emission reduction and trading pilot program for emission sources and offset projects in the United States, Canada and Mexico.

Compliance markets for environmental services are driven by regulatory requirements that often take the form of a cap on environmental degradation. The European Union Emissions Trading Scheme and the Kyoto Protocol both launched in 2005 as global compliance carbon markets. In the U.S., wetlands mitigation banking is estimated to be worth $1 billion per annum—with more than 400 established banks in 40 states.

The Society of Wetland Scientists supports "wetland mitigation banking to improve mitigation success and contribute to the goal of no net loss of wetlands." http://www.sws.org/wetlandconcerns/banking.html

CALIFORNIA RESOURCES:

California Department of Fish and Game
Habitat Conservation Planning Branch

The U.S. Army Corps of Engineers, working with the U.S. Fish and Wildlife Service, the Environmental Protection Agency, and the California Department of Fish and Game evaluates the habitats and assigns a certain number of "credits" to them. The developer sells these credits to builders or government agencies like the Corps to offset the effects of construction projects.

Wildlands, Inc., is one of the first wetland mitigation banks and conservation banks that protect wildlife habitat in perpetuity. http://www.wildlandsinc.com/

Ecosystem Marketplace

Look up "California" for a wide variety of program and organization resources available for mitigation investments.

Millenium Ecosystem Assessment

Green Facts