Market Based Conservation

Market-based conservation is an evolving concept that can mean different things to different people. Market-oriented approaches to conservation can include:

  • Using economic approaches, such as auctions and trading of credits, niche marketing, and a variety of payment for ecosystem services strategies
  • Encouraging competitions, such as bidding for grants or offers to pay for a greater share of the cost
  • Providing data to inform the conservation investment decisions of others
  • Focusing on monetary and non-monetary incentives
  • Fostering knowledge-based conservation

Webcast Presentation

The LPE Learning Center hosted a webcast on Market Based Conservation: Implications for Manure Management in May, 2008.

Market Based Conservation as a Policy

At the White House Conference on Cooperative Conservation in 2005, Agriculture Secretary Johanns announced a new U.S. Department of Agriculture Policy on Market-Based Environmental Stewardship. The goal of this policy is to broaden the use of markets for environmental and ecosystem services through voluntary market mechanisms. These mechanisms may include environmental credit trading, insurance, mitigation banking, competitive offer-based auctioning, eco-labeling—and more. The intent of this new policy is to make a deliberate, determined effort to help bring producers and consumers together and to develop innovative tools to quantify environmental impacts. In December of 2008, the USDA announced the creation of the Office of Environmental Markets to catalyze the development of markets for ecosystem services.

Until the last few years, in the U.S., most of the incentives for conservation have been provided by government through sharing the cost of conservation practices on private lands because these practices also have public environmental benefits. Trading is a market approach that is gaining acceptance through the cap and trade system. The Environmental Protection Agency policy on water quality trading is an example of the market approach. With trading, regulated industries have the flexibility to find the least cost avenue to comply with emissions, or at times, to trade with others to improve environmental quality. That is, when regulated industries must reduce emissions it may be cheaper to pay other firms or farms to reduce emissions than to do it themselves. Trading has the potential to accelerate air and water quality improvement and reduce compliance costs. The key to market-based incentives is that they are voluntary, verifiable, and transparent.

Examples of Market Based Conservation or Trading Programs

The New York City Watershed Agricultural Program is a great example of market based trading with a complementary municipal and agricultural partnership. Local farmers and agribusiness worked with the city to protect drinking water quality on nearly 500,000 acres of farmland in the watershed that supplies New York with drinking water. This saved the city millions of dollars in the development of advanced treatment systems and helped the rural community maintain its character.

One of the best manure based examples that is currently available is the Environmental Credit Corporation Lagoon Cover Program. Through this program, they will design, finance, and install lagoon covers to capture methane and other emissions at no cost to the farmer. They use the results to sell the carbon credits and can provide additional income to producers in some cases. Companies that buy and sell credits like ECC are called aggregators of credits. While national carbon legislation in the US has still not passed, there are still voluntary opportunities that exist for those in the agricultural sector as outlined in this webcast on opportunities for pork producers.

A final example is Vermont’s Cow Power program. Central Vermont Public Service, a utility, created a surcharge/premium people can pay to purchase green power generated by anaerobic digesters on dairy farms. This premium goes back to the farmer, generating a marketplace incentive and reward for farmers who are generating renewable, green energy from manure.

Recommended Reading on Market Based Conservation

EPA has just issued a new publication as part of its effort to support innovative, market-based approaches to water quality trading. The Water Quality Trading Toolkit for Permit Writers: Interim Technical Guide provides National Pollutant Discharge Elimination System (NPDES) provides permitting authorities with the tools they need to incorporate trading provisions into permits. The Toolkit also serves as EPA’s first “how-to” manual on designing and implementing trading programs consistent with EPA’s 2003 National Water Quality Trading Policy and will be valuable to all stakeholders. The Toolkit is focused on trading nitrogen and phosphorus, although, based on the Trading Policy, other pollutants may be considered for trading on a case-by-case basis.

The USDA Economic Research Service published a publication on Environmental Credit Trading; Can Farming Benefit. This six page document outlines several opportunities and discusses the potential markets for agricultural credit providers. They also published a document called The Use of Markets to Increase Private Investment in Environmental Stewardship that provides an overview of some market based conservation options.

American Farmland Trust’s Center for Agriculture in the Environment helps protect America’s agricultural lands and promotes healthy farming practices. This public policy research center has some excellent materials on market based conservation such as insurance programs to pay for yield reductions do to reduced nutrient inputs and materials on ecosystem services provided by agriculture.

The Ecosystem Marketplace Website provides many links to great resources and is a good example of an established trading program.

Harnessing Farms and Forests in the Low-Carbon Economy: How to Create and Verify Greenhouse Gas Offsets, a technical guide for farmers, foresters, traders and investors. A preview of the guide is available online at the Duke University Nicholas Institute for Environmental Policy Studies

Research Summaries on Market Based Conservation

An economic analysis of nutrient trading in the Chesapeake Bay Region: A study looks into nutrient credit trading as a means to improve the quality of water in the Chesapeake Bay.

Water Quality Trading in the United States provides a great overview of water quality trading programs implemented in the U.S. The primary source of information for this overview is a detailed database, collected and compiled by a team of researchers at Dartmouth College.

Paying For Environmental Performance: Using Reverse Auctions To Allocate Funding For Conservation Since demand for funding in conservation programs usually exceeds the available funds, allocating funding in a way that achieves the greatest environmental outcomes is essential. Reverse auctions are one way to efficiently allocate funding. This paper examines two reverse auctions conducted in Pennsylvania, designed to fund best management practices that reduced phosphorus pollution. It explains how reverse auctions can be used to maximize environmentally desirable outcomes, and outlines lessons learned from the Conestoga Reverse Auction Project within Pennsylvania’s Susquehanna River Watershed.

The Florida Ranchlands Environmental Services Project: Field Testing a Pay-for-Environmental-Services Program This paper examines a project in Florida that will field test a program that pays cattle ranchers to provide environmental services that will benefit the lake. The program came about after a 2004 study conducted by World Wildlife Fund (WWF) with several cattle ranchers concluded that a program to promote changes in water management practices on 850,000 acres of improved and unimproved pasture could moderate water flows to the lake, reduce phosphorus loads, and add to wetlands habitat. The study concluded that the agencies could buy these environmental services from cattle ranchers at a lower cost than producing the services by building new public works projects.

Doug Parker at the University of Maryland has written a report on Creating Markets for Manure: Basin-wide Management in the Chesapeake Bay Region. This report summarizes various methods for creating manure based markets. Other reports and programs from Georgia and Arkansas have focused on improving markets for poultry litter.

Author: Mark Risse, University of Georgia
Reviewers: John Lawrence, Iowa State University and Suzy Friedman, Environmental Defense Fund

Agriculture Environmental Management Systems

What is an EMS?

Environmental Management Systems (EMS) are a method of improving environmental and economic performance of a firm. They are widely accepted across many industries and are increasingly common in agriculture. An EMS is a process for integrating environmental considerations and requirements into day-to-day management and long-term planning for a farm.

This management approach examines a production system from start to finish, from inputs to products. With an EMS, the owner/operator and employees develop a plan for action that fits specific needs and resources, builds upon their stewardship principles, helps comply with legal requirements, and works to continually improve the operation. Also see What is an Ag EMS?

An EMS does NOT replace regulations, but may help in attaining compliance or realizing other benefits related to reduced environmental liability and better management. The EPA encourages adoption of EMSs as a method of improve regulatory compliance, encourage environmental performance, and perhaps reduce regulatory burden.

An emerging concept that is very similar to an EMS is known as ‘adaptive management’. Check out an archived webinar on Adaptive Nutrient Management and a recorded symposium presentation on opportunities for adaptive grazing management in drought-stricken areas.

The EMS process was developed for industry and is commonplace in manufacturing world wide. The most recognized system is ISO 14001 which involves third party certification and formal auditing. As farms become larger and more complex and rely on more employees and outsource more services, the farmer needs a systematic method of managing his or her operation. While formal certification may not be necessary, the EMS process and principles can help farmers improve their environmental and economic performance. There are Ag EMS Publications tailored for agriculture that make it practical to implement on the farm.

The EMS model is a Plan, Implement, Check and Correct, and Review sequence, a proven successful management process. The planning process begins with establishing an environmental policy for the farm/ranch that describes the farmer’s commitment to environmental stewardship, to meeting regulations, and to continual improvement.

An Environmental Management System (EMS) helps to integrate environmental decisions into the overall farm management. CC2.5 LPELC

Environmental Policy Statement

An EMS policy statement describes the environmental principles that are important to you, and establishes your goals for managing them. Everyone who works on your farm should know and share a commitment to the policy statement. You can showcase this statement to the public to demonstrate your environmental commitment. An EMS policy statement should at a minimum describe your commitment to:

  • pollution prevention,
  • continual improvement, and
  • compliance with environmental regulation.

Plan

Next, the farmer assesses the current operation to identify strengths and weaknesses and identifies which if any are causing significant environmental concerns. He or she has now identified a small list of priorities to address first. Then, an action plan with defined objectives, measurable outcomes, and specific steps, timelines, and assignments is developed for each priority. Some assessments can be found at:

Implement

“Implement” involves communicating the plan to the people that are responsible for making it happen. This includes preparing operating procedures, training, and resources as needed.

Record keeping is an essential component of an effective EMS. CC2.5 LPELC

Check

“Check” is a regular review of the plan’s progress and environmental performance. If problems arise “Correct” refers to corrective actions taken. Documenting regular monitoring actions taken helps the farmer measure progress and shows a proactive approach to environmental improvement.

Review

“Review” closes the loop on the continuous improvement process. Farmers annually review their operation and their plan to determine if they are headed in the right direction, using the best methods, and making progress.

Chances are good that components of the EMS process are already being utilized on a farm. These may include management plans for manure handling, pests, or nutrients, in addition to records on soil testing, chemical applications, feeding requirements, or worker training. An EMS helps organize and document these efforts and improve the environmental and economic performance of the farm.

Examples of Environmental Management Systems for Agriculture

Resources For More Information

Author: John Lawrence, Iowa State University Reviewers: Mark Risse, University of Georgia and Tommy Bass, Montana State University