When does stacking ecosystem services payments add ecological value?

These are great questions. For me, there are two goals for stacking--1) increase landowner participation, and 2) incentivize more wholistic/better restoration and conservation.

For the first, economic goal, this seems most important where you have high-value crops or lands where ecosystem services are having a hard time competing with other land uses (e.g. urban development). I think we need to ask which landowner demographic we are after. If we want to compete with urban development, we may never win. If we want to target those 70% of landowners that want to stay in farming, forestry, or ranching and just need to break even to stay on the land, then I think we can get a lot done. When we think about stacking, we should be thinking about stacking to get the next big pulse of participation (ie 30% of landowners) rather than all landowners.

For the second goal, I'm not sure you need to stack to get here. The Willamette Partnership bet that if you give landowners options of selling multiple, but not quite stacked credits, then that additional set of options would lead to better restoration. We have to see if that plays out to be true or not. We also put eligibility requirements in place. If you want a credit for reducing temperature, then you can't just plant trees--you need to plant a healthy forest with an understory and a diversity of plant species.

So, I think we should be looking at the multiple places in program design where we can get to our goals. Stacking is one lever. We need to balance the stacking debate with the need to get high levels of certainty into these programs. We'd love to see a better approach, so I really look forward to seeing the examples. Thanks for posting this Lydia!

Great comments, folks!  I'm learning a lot.

I have been marinating on the "bundle of sticks" concept with regard to additionality. 

First, let me digress and explain how I'm understanding stacking vs additionality as Lydia has framed this question.  It seems like stacking MIGHT result in additional ecoservice preservation, and especially should in the aggregate as it makes participation in ecosystem markets a more attractive option than other land uses.  However,  for an individual land, stacking might NOT result in additional services, just more funding for the preservation of the same tract as it provides multiple ecoservices.  Am I getting this right?

Anyway, back to the bundle of sticks: The validity of additionality and paying for multiple services on the same tract rests to some extent on how the ecoservices being transferred are defined.  That is, if aservice is defined very broadly or inclusively (for example, x feet of riparian buffer), then one has to be careful not to re-sell services for those same lands that are already included in THAT buffer bundle of sticks (in our area, this would include nitrogen processing, mostly, but in other areas temperature regulation or TSS might be included in "riparian buffer" transactions). 

Unfortunately, this seems to be leading me to conclude that for the participants in the marketplace, it's better to define ecoservices narrowly, to maximize future opportunities for additional payments (ecoservices for which payments are not yet available).  As someone with a working knowledge of ecology and the uncertainties of restoration practices, however, I question whether one-off ecoservice transactions can really deliver and add up to preservation of functioning ecosystems.

I'm enjoying the opportunity to comment on topics like this and i hope to see many more discussions like this one.

First I would like to make some clarifications to the words we are using in this discussion because there-in I believe lies the majority of the confusion in regards to stacking ecosystem goods and services.  I use some selected passages from an upcoming paper by Robert J. Johnston and I to clarify what i mean about words.

Quoting from our accepted paper in Ecological Economics...(accepted 7/2/2011)

An operational structure for clarity in ecosystem service values

Robert J. Johnston , Marc Russell

George Perkins Marsh Institute and Department of Economics, Clark University, 950 Main St., Worcester, MA 01610, United States

Gulf Ecology Division, US Environmental Protection Agency, 1 Sabine Island Drive, Gulf Breeze, FL 32561, United States

Abstract:

Analyses used to value ecosystem services often confuse final ecosystem services with ecological functions that provide indirect benefit. Typologies of ecosystem services, such as that developed by the Millennium Ecosystem Assessment, do not ameliorate these challenges. Among the causes of ambiguity in classifying values associated with intermediate versus final ecosystem services are (1) the lack of simple, broadly applicable guidelines to assist natural and social scientists in deriving consistent and replicable classifications, and (2) attempts to define universal typologies of final services that apply to all beneficiaries. This paper presents an operational mechanism for determining whether a biophysical feature, quantity, or quality represents a final ecosystem service for an inclusive suite of beneficiaries. It is designed for straightforward application by those without expertise in natural or social sciences, and can be used within existing typologies. Illustrations of the structure demonstrate how the resulting classifications avert double counting and other ambiguities.

 From the body of the paper...

Valuation of ecosystem service flows, however, requires attention to often complex biophysical production functions which relate to ecosystem service outcomes (Chee, 2004), much in the way that inputs and outputs are related in traditional production models (Boyd and Banzhaf, 2007; Brown et al., 2007; Fisher et al., 2008;Wallace, 2007). Of particular emphasis, consistent estimates of ecosystem service benefits require differentiation of intermediate ecosystem functions from final ecosystem services, so that the benefit of each distinct ecosystem condition or process, to each human beneficiary, (Here, we define a “beneficiary” as a person or group operating in a particular role (e.g. recreational fisher, home owner, bird watcher, and farmer) whose welfare is improved, or who receives benefits from, a particular ecosystem service.) is counted once and only once. Lack of clarity in these relationships can lead to inconsistent and biased value estimates (Boyd and Krupnick, 2009; Brown et al., 2007; Fisher et al., 2009; Kontogianni et al., 2010).....

For concreteness,we begin with the general definition of ecosystem services provided by Fisher et al. (2009, p. 645), “the aspects of ecosystems utilized (actively or passively) to produce human well- being.” We clarify the distinction between intermediate and final ecosystem services through the standard framework described by Boyd and Krupnick (2009), Fisher et al. (2009) and Turner and Daily (2008), among others, which characterizes the provision of natural outputs (goods and services) in terms of systems of ecological production. The final outputs of these systems – final ecosystem services – are biophysical outcomes which directly enhance the welfare of at least one human beneficiary.  (Boyd and Krupnick (2009) define a closely related concept of “ecological endpoints.”) Intermediate services, in contrast, are those conditions or processes that only benefit humans through effects on other, final services. These may be viewed as inputs into the production of final services. Within this framework, the status of an ecological condition or process as a final versus intermediate service may vary across beneficiaries (Turner and Daily, 2008). That is, final ecosystem services are beneficiary dependent; this dependence is central to any effort to categorize services, and to the structure proposed here.  (For example, provision of unpolluted surface water (e.g., in a lake) may represent a final ecosystem service for those who drink the water or engage in contact recreation such as swimming. The same service, however, may represent an intermediate ecosystem service for those who fish in the lake, to the extent that catchable fish abundance depends on water quality.)

If we start to think of ecosystem goods and services as stated above then we will at least to be able to make more sense of what goods and services are produced by different ecosystems and shoudl be able to stack them without fear of double counting their value.

Marc Russell

I believe that Lydia's comment that the importance of stacking may be its role to create flexibility and innovation in management options is correct and highly desireable in emerging and mature markets.  If ecoservices are produced in proportion to types of human activities and behavior, then humans will be motivated by the potential to increase profits.  I think Boyd, et al comments are excellent discussion points, but the exercise of applying the same economic model used to value physical capital does not quite mesh with natural capital.  When a car is sold, the value/costs of the factory (physcial capital) is included in the cost of the car.  As the Boyd point would tell us, we don't need to value the conveyor belts of the factory because that is an intermediate service, we pay for that in the car price.  If we use the polluted lake for the example, the water is the final ecoservice.  But at that point there is not economic behavior that can change the production of clean water for the lake.  That behavior must occur within the context of the natural capital of the land watershed.  Ecoservice markets need to reward the upkeep of natural capital, the intermediate, because natural capital, unlike physical capital spontaneously produces goods and services.  As this relates to the stacking question, we must provide mulitple valuation streams for singular land management activities and behaviors, if applicable.  Ecosystem service markets will carry the duel role to maintain natural capital and produce directly consumed ecoservices.  How this is accomplished most effectively will be the work of the market.