Regulation might drive markets, but really good ideas drive revolutions.

Common wisdom says it takes regulation to drive a market. But what if you change the focus, so that while you’re waiting for – or fighting against – the regulation, you have a bunch of other options that convert conservation dollars into action on the ground?

Take public utilities. A map of them covers the country, with few blank spots. The potential is enormous. Some have already taken critical initiatives: the stories we know about range from planting trees along streams to avoid building coolers, to keeping forested watersheds healthy to provide natural filtration. The cost avoidance theme is obvious.

Other utilities are leveraging the payments for ecosystem services (PES) concept to collaborate with landowners and ratepayers to meet their drinking water responsibilities. Imagine, for example, a public utility-led PES program that stays under the regulatory radar, rewards good stewardship with payments  derived from small rate increases and other options, works with trusted local intermediaries to manage and monitor the overall program, comes up with a fair and relatively simple valuation system, and provides opportunities for landowners with less-than-stellar land conditions to use Farm Bill or other restoration funding to work their way into good stewardship payments.

Can it work? Why might it not work? Could there be a role for corporate involvement through “landscape labeling” or certification? Should mitigation dollars, development taxes, or other private monies boost the payment fund? What’s the best role for public lands that lie within the source water catchment area?

Please chime in. Regulation might drive markets, but really good ideas drive revolutions.

Author bio: 
Karl Morgenstern is the Source Protection Coordinator at the Eugene Water & Electric Board in Oregon. You can learn more about his work at EWEB here:


Tim Gieseke

Utilities seem like a more

Utilities seem like a more favorable approach to revolutionize natural capital/ecoservice markets than the more centralized planning model of government programs or regulations.  Our path toward "smarter" governance will be built around government, rather than through it.  Government institutions do and will continue to play a significant role in our nation's resource management strategy, but these bureaucracies will function and succeed by recognizing the limitations of their abilities and structure.  For example, the USDA Natural Resources Conservation Service attempts to target conservation dollars to agriculturists through a winnowing process; start with "everyone" and end up with a stack of conservation contracts with some.  It is somewhat of a version of a conservation "plinko" game with the challenge of getting the plinko in the right spot on the bottom from atop the board.  A utility that understands the value of natural capital can put out a market signal and turn the plinko game upside down so you end up with 1000's of people on top bidding to get their plinko in the one spot (market) on the bottom.  Corporate, government, NGOs can sweeten and add to the pot.

Sara Vickerman

Karl is on to something.

Karl is on to something. Remember Arab Spring? Millions of spontaneous people taking to the streets to challenge oppressive dictators, aided by new social media tools that facilitate communication outside of official channels. Unfortunately, the conservation community has yet to stimulate that kind of enthusiasm for novel approaches to environmental challenges. The potential appeal of the Eugene Water and Electric Board's proposal is that it should benefit landowners who receive payments for ecosytem services, ratepayers who save money by avoiding the costs of expensive treatment facilities, and the environment by financing ecological restoration projects that offer a broad suite of benefits including clean water, fish and wildlife habitat. But will it be a U-Tube sensation? How do we capture the hearts and minds of ordinary people and inspire them to get involved and support novel solutions? How do we counter the negative, adversarial tone of current political discussions?   How about taking a small amount of money from thepPayment for services program  (say $5000) and offering it to the winner of a contest to make a video promoting the project? If the video includes a live beaver doing its thing to provide habitat for many other species, maybe Defenders of Wildlife will kick in some prize money.        

Becca Madsen

Are public utilities talking

Are public utilities talking about this? Is there a big public utilities conference where we could do a session on this topic? Maybe we just need a little matchmaking to help this idea along. 

Karl Morgenstern

Public utilities are starting

Public utilities are starting to think about this and EWEB is involved with a number of larger utilties around the Western U.S. via a group called Carpe Diem West . Thanks to OSU INR's project we have had conversations with a couple dozen utiltiies in OR and WA over the last month. This conversation has led to a number of Oregon utilities starting a quarterly meeting to coordinate rolling out these types of programs in other watersheds. The key is still around educating rate payers about the benefits of using rate payer funds for investing in rural landowners that are able to protect the natural capital that downstream users rely on.

Sally Duncan

All matchmaking ideas are

All matchmaking ideas are welcomed! Public utility involvement in ES issues is a rapidly growing field, with enormous potential for change. Major challenges include the small size and resource capacity of many utilities, the recalcitrance of many around institutional change, concern among board members about even the tiniest rate raise, and about possible costs of running a PES program. There is also entrenched anxiety and distrust about whether green infrastructure can do the job of built infrastructure, even despite the emerging and relatively consistent cost avoidance story.

In working with Karl and the Eugene Water and Electric Board on their marketplace design, broadly outlined and opened for review above, Oregon's Institute for Natural Resources (INR) is promoting linkages wherever possible. There will be papers at EcoSummit in Columbus and The Wildlife Society conference in Portland in the fall, ESP conference in Portland in summer, references at the NatureServe conference in Portland this month, and finally the ACES conference in Florida in December. That's just this year, and just INR's presentations.

Other entities working in this arena include Earth EconomicsEcoagricultural Partners, and Carpe Diem, and  likely many more.


I concur!  Getting utilities

I concur!  Getting utilities more involved is the only way to make this (PES/PWS) happen on a more widespread basis.  Our pilot souce water protection project ( is up against all of those challenges Sally listed:

"Major challenges include the small size and resource capacity of many utilities, the recalcitrance of many around institutional change, concern among board members about even the tiniest rate raise, and about possible costs of running a PES program. There is also entrenched anxiety and distrust about whether green infrastructure can do the job of built infrastructure, even despite the emerging and relatively consistent cost avoidance story."

It is hard for utilities to justify raising rates and/or spending part of their budget on a PES program when there is not watershed-specific data to link the costs and benefits of the green approach (thus, unclear that their investments will pay off) versus the grey approach (they know what can be achieved with technology).  While there are plenty of good examples today, it still isn't enough to convince many utilities to take that step, especially if it's a proactive step and not to comply with looming regulatory requirements.

It would be very helpful to cultivate more political champions who understand and are excited about this approach, to gain the support needed for rate increases.  In almost all cases the rate increases needed are TINY but raise large amounts of $ for source protection.  Then leverage that with government and private dollars to take it even further and accomplish other goals on top of source protection.

I haven't been logging onto here regularly (and clearly should be! good discussions!) -- is there a thread anywhere about how to get utlities and political leaders more involved?  Ideas have popped up at past meetings about sessions at conferences for mayors, governors, AWRA, AWWA, etc and it seems like there is good interest in this here.

Dan Stonington

Great discussion thread,

Great discussion thread, everyone. Per the comments about how to get broader adoption of these strategies by utilities, I think the first step is completing and compiling successful examples that can be used to show how it's done and the benefits. In the Nisqually River basin in Puget Sound, a number of partners, including potentially city and county utilities, are working to create a demonstration transaction around water quality. We'll be interested in sharing our progress and getting feedback from others on this site as we get the project off the ground...


Here at the University of

Here at the University of Arizona Water Resources Research Center, we have been working with utilities in the Colorado River Basin to advance voluntary programs that support the dual goals of water conservation by end users and natural resources conservation. The idea - we call it Conserve to Enhance - is to link water conservation to an environmental incentive. Rather than asking consumers to pay an extra fee, we provide a mechanism that allows them to donate the increment of cost savings on their water bill resulting from conservation to an environmental fund used to support projects benefiting local water resources. Because water conservation is an increasing need throughout the Colorado River Basin as a result of expected climate change impacts on water availability, we need new motivations to get people to do more if we are going to sustain our communities and the environment. The ability to give to local environmental enhancement projects is one such motivation for many rate payers. The funds can be used to support watershed protection goals, riparian enhancement or restoration, or any number of other environmental goals. This sort of program can also be used to raise awareness about water issues, why water conservation is important for the environment (not just new growth), where your water comes from, etc. Also, because it’s voluntary, it may be more palatable in more conservative Intermountain West communities where even a small fee may be labeled a tax and politically difficult to implement.


We have been promoting this approach throughout Arizona and the Colorado River Basin with some success. We have a pilot program in Tucson, AZ and are talking with utilities in several other communities. You can check out our website or contact me for more info: