As part of a series on ecosystem services on WorldChanging, Hassan Masum, David Zaks, and Chad Monfreda, interview people in the People & Ecosystems program at WRI (Karen Bennett, Charles Iceland, Evan Branosky, and Stephen Adam) working on the application of ecosystem services ideas. The People & Ecosystems program recently published a report Restoring Nature’s Capital: An Action Agenda to Sustain Ecosystem Services based on the finding of the Millennium Ecosystem Assessment.

In the interview – Moving Ecosystems Services from Theory to Reality – the WRI people describe some of their recent projects to establish markets for ecosystem services and the challenge of ecosystem service tradeoffs.

Evan: WRI has also worked with state governments to efficiently allocate limited funding for conservation programs. At the state level (and, indeed, the federal level too) farmers demand more money to fund conservation practices than is available. To address this funding shortfall, WRI worked with Pennsylvania to run two “reverse auctions” – scenarios where sellers compete to supply buyers with a good or service instead of the traditional auctioning approach. In Pennsylvania, their reverse auction awarded $486,000 to farmers who implemented conservation practices that reduced Phosphorous (P) run-off by 92,000 lbs. Using this approach, more farmers were enrolled and more P was reduced than would have been possible through traditional funding allocation methods.

David: Markets and payments for ecosystem services are coming into place across the globe. What do you see as the opportunities and challenges of governments, NGOs and producers and consumers of ecosystem services as these systems are put into place?

Evan: Markets present many opportunities for both the producers and consumers of ecosystem services. By their very nature, markets are efficient, meaning they provide the largest amount of a good to the largest number of consumers for the least price. In terms of ecosystem services, markets often provide a least-cost means for achieving environmental goals. Markets also provide an incentive for violating facilities or individuals to reach further than just the “low-hanging fruit.” Firms are often required to make minimal pollutant reductions, but markets can motivate them to go further.

Markets can also complement the efforts of existing government programs. US Farm Bill Conservation Programs award grants to farmers for the implementation of agricultural best management practices (BMPs), which are meant to mitigate some of the harmful effects of agriculture on the environment. Water quality trading achieves the same purpose, but offers another source of funding: purchasers of credits pay for the establishment of these conservation practices.

There are two big challenges to the establishment of these programs. One is a lack of political will. The other is a lack of information on the key decision points that must be reached when a program is developed. Since these programs are generally still in their infancy, the successes and hurdles of market development have not been widely circulated.

Karen: Another challenge of establishing markets that is particular to ecosystem services is the question of how to handle trade-offs. As the Millennium Ecosystem Assessment pointed out, historically certain services (mostly provisioning services such as food or timber) have been enhanced at the cost of other services. How do we ensure that this won’t happen with the ecosystem services featured in markets?

There is also the matter of geographic scale. The use and preservation of ecosystem services is not zero-sum. For example, the coastline protection service of a wetland in Maryland is not necessarily equal to the coastline protection service of a wetland in Louisiana. Nor does protecting one service nullify over-use of the same service in a different location.