Ecosystem Services Markets

The term “ecosystem services” refers to indirect ecosystem functions such as water purification, flood control, carbon sequestration, climate regulation, and soil and nutrient cycling, as well as recreation or aesthetics-associated tourism. Four types of ecosystem services are of particular relevance for forested ecosystems — carbon sequestration, biodiversity protection, watershed protection or hydrological services, and aesthetics. Many agencies and concerned citizens are beginning to recognize the role these services play and the need to compensate those who manage the lands that provide them. Reasonable efforts at economic valuation can allow ecosystem services to be considered on a par with marketed ecosystem goods. There are three types of markets through which ecosystem services can be traded: self-organized private deals that are negotiated business-to-business or business-to-community; trading schemes, in which industries can trade credits below an established cap; and public payment mechanisms through which public agencies purchase services. This paper reviews examples of existing markets for ecosystem services in the United States and internationally, focusing on forest-lands. It includes a discussion of opportunities for the Pacific Northwest. It also lists databases of international clearinghouses of information on ecosystem services valuation and markets. The paper includes an appendix describing the principles of conservation economics and valuation methodologies for estimating the value of environmental variables