Environmental Market Credits: who’s buying?
Interest is growing among federal agencies in using ecosystem markets to achieve environmental goals. The elevator speech: “Markets and payments for ecosystem services offer opportunities to leverage new private investment in conservation, diversify sources of revenue for landowners, lower costs of regulatory compliance and environmental restoration, and shift emphasis and accountability in conservation from participation rates to environmental outcomes.” Some even say successful environmental markets will support job creation and rural prosperity, newsworthy topics today.
Much commendable work has been done to further these ideas-- metrics, online tools, guidance, protocols… all useful and necessary elements of building markets. Most efforts focus on generating credit supply or establishing the infrastructure for defining, verifying, or tracking credits.
However, demand remains universally anemic. Even where the infrastructure for voluntary or regulatory markets exists, there is no clear demand signal, suggesting a lack of confidence in the ability of markets to deliver environmental outcomes, and frustrating any testing or expansion of market ideas.
Notably, most of the groundwork for these enterprises has been laid through federal grants and assistance. Now there is clamor for more federal investment on the demand side! For example: USDA should purchase credits from farm and forest landowners using the same market rules and infrastructure as others instead of using traditional Farm Bill cost-share incentive approaches. Or the federal government should provide loan guarantees or risk insurance.
Are these really effective strategies? Would this just create a false market that would complicate things? Are there better ways to stimulate demand? What’s wrong with just using the incentive approach?