Policy for Ecological Assets

Ecological assets are created when government agencies find ways of properly incentivizing corporations and private landowners to voluntarily improve environmental quality.

These voluntary improvements typically arise from a foundation of environmental laws and regulations that reflect minimum standards protecting human health and welfare. Whenever a major new development or operation is proposed, a corporation or landowner must satisfy the minimum regulatory standard or risk penalty. Yet if they go beyond the minimum standard in terms of reducing pollution or mitigating environmental effects, they can (and should) be rewarded in the form of mitigation credits. These credits take on monetary value because they can be banked against future offset needs - which have a definitive and known capital cost - or may be sold to others who need the credits to offset impacts caused by operations of their own - meaning available credits can be sold at or close to the avoided cost of a third party's compliance liability.

How is it that mitigation credits don't just pave the way for polluting operations to continue?

For three reasons:

1) credits are only earned after detailed oversight and performance review (verification) on the part of the issuing agency

2) credits are often awarded on a greater than 1:1 ratio basis (a single wetland credit, for example, might require two or three acres' compensation for a single acre impacted)

3) once earned, credits can only be exchanged within the 'service territory' of the ecosystem service they represent (credits from one watershed can't be used to offset impacts in another watershed, for example). These safeguards help ensure the public interest is protected at every turn.

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Eco-tourism is an example of a      direct ecosystem service market.      Here, a region's countryside - its      land and biodiversity resources -      can spawn a diverse set of      products-and-services catering to      travelers. The natural resource -      for example, wildlife - may be      'consumed' in the sense that      visitors, their equipment and      accommodations, occupy the      animal and plant habitat for short      periods of time. In large numbers      this can potentially affect the      productivity of the resource. But      managed properly this ecosystem      service can be sustained,      preserving the resource and      directly benefiting local      communities.

The key to these incentive programs is policy
makers' efforts to monitize ecosystem services. Economists such as Geoff Heal remind us that
markets for ecosystem services"buy and sell
valued and consumable services," whereas in environmental markets "one trades a government
issued permit created by regulatory fiat."

This distinction may be less than critical if one
remembers that all measurable ecological and environmental value can be traced to a fundamental
set of services made possible by the 'switches,
gears and wiring' of the ecosystem factory.

In effect, creation of mitigation credits, pollution allocations, environmental certificates or similar
tangible measures of environmental improvement
works to privatize, in part, ecosystem services that
were previously 'owned' by the public at large.
Public goods resist monetary valuation because they
can't easily be exchanged in markets; one can't
typically sell what one can't own and control. But this
also means that public goods are vulnerable to loss
and degradation - what's been called
'the tragedy of the commons' - because no one looks
after the resource to maintain its integrity.

By making efforts to incrementally privatize ecosystems services - parts of an airshed here, a watershed or ecoshed there - policy makers have found a way to bring monetary value to ecosystem services. This means that newly considered natural resources establish their value according to the highest and most valued use to which those competing for their ownership may put them.

Ecosystem services - and the ecological assets they generate - show potentially great economic power.

When environmental quality improvements are linked to ecosystem services by creative policies and competitive markets, the fundamental building blocks of health, welfare and natural capital are harnessed and put to work for all. Policy makers direct private sector resources towards outcomes that benefit not only individual landowners, investors or permitees, but society as a whole, and the natural world too in the long run. This creates an important and unique 'win-win-win' scenario in the name of sustainable health and welfare.

Credits & Allocations in the U.S.

U.S. agencies have been especially creative in the use of incentive programs to leverage environmental quality and ecological health improvements. For a complete list of U.S. State Environmental and Natural Resource Management Agencies, please visit the State Agencies List.

Mitigation credits are currently available or under development under a wide range of value-based programs related to PERC of targeted ecosystem services.

Federal level programs include:

USAID, Ecolinks - Eurasian-American Partnership for Environmentally Sustainable Economies

USDA, Farm Services Agency (FSA)
- subsidy & payment programs

        - conservation reserve enhancement program (CREP)

USDA, Natural Resources Conservation Services (NRCS) - subsidy & payment programs (see link for 2002 payout summaries)

       - conservation reserve program (CRP)

       - environmental quality incentives program (EQIP)

       - farm & ranch lands protection program

       - forestry incentives program

       - rural abandoned mine program

       - soil & water conservation assistance

       - watershed protection & flood prevention (WPFP)

       - wetlands reserve program (WRP)

       - wildlife habitat incentives program (WHIP)

USDOD, Army Corps of Engineers (COE) - market incentives programs

       - wetlands mitigation banking

USDOE, Energy Information Agency (EIA)

       - voluntary greenhouse gas registration program

USDOI, Fish & Wildlife Service - market incentives programs

       - biodiversity conservation banking

       - wetlands mitigation banking

USDOI, Office of Surface Mining - market incentives programs

       - land / water / biodiversity bank-&-trade supporting reclamation

USEPA