Stuart HaleAbingdon VA
Ecosystem services are “the benefits peopleobtain from ecosystems” (MEA 2005).    Examples include:       Fiber       Recr...
Human relationships with ecosystems:•      Plato (c.400 BC)           First noted human impacts on the           environme...
The UN Millennium Ecosystem Assessment was initiated in  2001 as a global assessment of ecosystem health and  human impact...
Millennium Ecosystem Assessment found:•   Human actions are depleting the Earth’s natural capital    straining the planet’...
   Demands and stresses on ecosystems are changing due    to:   Increasing scarcity    •   Population growth    •   Subu...
Source: Southern Forests for the Future
Ecosystem services :• Non-exclusive• Externalities• Dependent on privatelandowners  This rise of TIMOs and REITsplaces ap...
Increasing demand for benefits of ecosystemservices have generated ecosystem markets.•   Public policy and regulatory    s...
 Emerging ecosystem services markets are driven primarily by:  Consumer demand   • Voluntary markets   • Eco-labeling  ...
   New York City watershed protection in 1990s     • $6-8 billion facility improvements versus 1.5 billion upstream      ...
Existing primary markets:  •   Forest products  •   Recreation  •   Carbon sequestration  •   Watershed services  •   Biod...
Source: Ecosystem Marketplace, Bloomberg New Energy Finance
Source: Virginia Tech Urban Forest Assessment 2011
Compensatory mitigation     “No   Net Loss”   Options:    •   Permittee-responsible    •   In-Lieu Fee    •   Mitigation...
 These prices represent credit prices and not payments to landowners.Credit prices consists of many variables including c...
Thunderstruck Conservation Bank   Approximately 600 acre but    part of a larger 2000 acre    management area    • Cheat ...
•   Markets are emerging•   Potential benefits to landowners•   May offer opportunities to generate    income off otherwis...
•   Determine validity of ecosystem services management as part    of a comprehensive resource management strategy and    ...
•Proposed Project Area isapproximately 3,976 acres•Dumps Creek watershed insouthwest Virginia•Mixed mesophytic forest eco-...
   Identify traditional and ecosystem services markets    Examples:     • Local fiber markets     • Local recreational hu...
Traditional managementscheme:1. Fiber2. Recreation leasesEcosystem managementscheme:1.   Fiber2.   Recreation leases3.   W...
Traditional Management Scheme    Service               Area (ac)Fiber             2,873        410           3,283        ...
Traditional Management Scheme Service Prices  Service    Units         Price per unit      Sources          AssumptionsFib...
Landscape features with potential to offer marketable ecosystem services:1.    Areas suitable for fiber harvests2.    Cult...
Ecosystem Services Management Scheme   Service        Area (ac)   Linear feetFiber               2,264         NA         ...
Ecosystem Management Scheme Service Prices  Service    Unit       Price per unit          Sources              Assumptions...
Ecosystem Management Scheme Prices (continued)   Service      Unit         Price per unit             Sources             ...
Valuate marketable services as available and    projected :       5y=   Σ (a )(v )             i    i     i =1Whereas,y = ...
Comparison of Management Schemes by Pricing Scenario               1600000.00               1400000.00               12000...
Traditional Management Scheme                                                     Ecosystem Management Scheme             ...
Traditional Management Scheme                                               Ecosystem Management Scheme                  -...
Traditional Management Scheme                                                Ecosystem Management Scheme                  ...
   Problems       Market approach may not be best for        insuring long-term ecosystem health       Highly variable ...
 Positives  • Additional revenues and making acres productive that      may not have been otherwise  •   Additional manag...
   Ecosystem markets are emerging but immature   Ecosystem services management and marketing    may offer additional rev...
D. Stuart Hale Copyright © 2012 All rights reserved.
Ecosystem Services and Natural Capital Markets 2012
Ecosystem Services and Natural Capital Markets 2012
Ecosystem Services and Natural Capital Markets 2012
Ecosystem Services and Natural Capital Markets 2012
Ecosystem Services and Natural Capital Markets 2012
Ecosystem Services and Natural Capital Markets 2012
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Ecosystem Services and Natural Capital Markets 2012

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Presented at The Forestland Group's Appalachian Corporate Retreat in Pipestem, WV March 2012

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Ecosystem Services and Natural Capital Markets 2012

  1. Stuart HaleAbingdon VA
  2. Ecosystem services are “the benefits peopleobtain from ecosystems” (MEA 2005). Examples include: Fiber Recreation Air Quality Carbon Sequestration Water Quality Biodiversity The term “ecosystem services” was first introduced in the report, Study of Critical Environmental Problems in 1970.
  3. Human relationships with ecosystems:• Plato (c.400 BC) First noted human impacts on the environment• George Marsh Man and Nature, in 1864, argued that natural resources are finite• Progressive Era conservationists Pinchot and Leopold - Humans are part of ecosystems and must act as proper stewards to ensure their health• Current Academy Daily’s Nature’s Services (1997); Constanza et al. (1997); Salzman and others-  Increasing awareness of humans’ dependence on nature and accounting for the services provided
  4. The UN Millennium Ecosystem Assessment was initiated in 2001 as a global assessment of ecosystem health and human impacts comprised of 1,360 experts worldwide.General Categories of Ecosystem Services : • Provisioning Services: food, water, fuel, fiber, and other goods • Regulating Services: climate, water quality, disease regulation, pollination • Supporting Services: soil genesis, nutrient cycling • Cultural Services: educational, aesthetic, heritage, recreation
  5. Millennium Ecosystem Assessment found:• Human actions are depleting the Earth’s natural capital straining the planet’s ecosystems ability to sustain future generations.• It is possible to reverse the ecosystem degradation over the next 50 years but will require substantial changes in policy and practice, not currently underway. Major gaps in knowledge were found at the local and national levels on the status of ecosystems and their economic values.“…at the local scale there is typically insufficient information on the full economic costs and benefits of alternate uses of ecosystems to fully inform decisions.” (MEA 2001)
  6.  Demands and stresses on ecosystems are changing due to: Increasing scarcity • Population growth • Suburban encroachment • Land-use conversion • Forest fragmentation • Habitat degradation • Pests and pathogens • Invasive species Market conditions- social values  Product preferences  Available information  Bio-accumulation
  7. Source: Southern Forests for the Future
  8. Ecosystem services :• Non-exclusive• Externalities• Dependent on privatelandowners This rise of TIMOs and REITsplaces approximately 12-14% ofprivate forestlands withorganizations in the business ofmanaging natural capital.
  9. Increasing demand for benefits of ecosystemservices have generated ecosystem markets.• Public policy and regulatory shifts• Potential economic benefits to landowners and communities• Dynamic land-use and ownership patterns – TIMOs and REITs
  10.  Emerging ecosystem services markets are driven primarily by:  Consumer demand • Voluntary markets • Eco-labeling  Government regulation • Mitigation markets  Clean Water Act  Safe Water Drinking Act  Endangered Species Act
  11.  New York City watershed protection in 1990s • $6-8 billion facility improvements versus 1.5 billion upstream conservation Denver Water • Split bill of $33 million with USFS to manage watersheds in response to a current $40 million clean-up of one reservoir Wal-Mart - “Acres for America” • In US, protecting 1 acres of land for every 1 acres disturbed through 2015 • Approximately 687,000 acres so far Grey versus green
  12. Existing primary markets: • Forest products • Recreation • Carbon sequestration • Watershed services • Biodiversity
  13. Source: Ecosystem Marketplace, Bloomberg New Energy Finance
  14. Source: Virginia Tech Urban Forest Assessment 2011
  15. Compensatory mitigation  “No Net Loss” Options: • Permittee-responsible • In-Lieu Fee • Mitigation banks
  16.  These prices represent credit prices and not payments to landowners.Credit prices consists of many variables including construction costs,administrative costs, land acquisition costs, and others.
  17. Thunderstruck Conservation Bank Approximately 600 acre but part of a larger 2000 acre management area • Cheat Mountain Salamander • Northern Flying squirrel • High potential of Indiana and Virginia big-eared bats
  18. • Markets are emerging• Potential benefits to landowners• May offer opportunities to generate income off otherwise non- productive areas• Diversify natural capital portfolio to mitigate market fluctuations Could ecosystem services marketing fit into current management without substantial opportunity costs?
  19. • Determine validity of ecosystem services management as part of a comprehensive resource management strategy and compare to traditional management• Provide a demonstrative example of an ecosystem services management scheme and actual land-base as a case study• Estimate direct market present value of ecosystem services• Use open-source information as available
  20. •Proposed Project Area isapproximately 3,976 acres•Dumps Creek watershed insouthwest Virginia•Mixed mesophytic forest eco-region of predominately uplandhardwoods with some covehardwood forest types•Current and past land usesincluded timber, coal, and naturalgas extraction, human habitation,and agriculture
  21.  Identify traditional and ecosystem services markets Examples: • Local fiber markets • Local recreational hunt leasing • Ecosystem Marketplace • The Bay Bank • Mitigation banks/ ILF programs • “Over the Counter” (OTC) Find comparable prices fromreported transactions or estimates
  22. Traditional managementscheme:1. Fiber2. Recreation leasesEcosystem managementscheme:1. Fiber2. Recreation leases3. Watershed services4. Carbon sequestration5. Biodiversity
  23. Traditional Management Scheme Service Area (ac)Fiber 2,873 410 3,283 (80% BA (50% BA harvest) harvest)Recreation 3,883 NA*Non-timber 693 693 TOTALS: 3,976 *The area of recreation is considered co-use, in that it provides multiple services, and therefore will only be counted once in total area.
  24. Traditional Management Scheme Service Prices Service Units Price per unit Sources AssumptionsFiber MBF •$100 – pessimistic •Local prices •3000 BF/ac •$125 – most likely •Timber Mart- •Harvest 80% for •$150 – optimistic South suitable areas 2nd Quarter •Harvest 50% for 2010 SMZ buffers •Annual harvest rate of total area/15-year ownership periodRecreation acre •$2.00 – pessimistic •Local prices •All areas suitable are •$2.07 – most likely •VA DOF leased annually •$3.00 – optimistic based on current conditions
  25. Landscape features with potential to offer marketable ecosystem services:1. Areas suitable for fiber harvests2. Culturally significant sites3. Retention areas of recent timber harvest4. Areas unlikely for timber harvest5. Perennial streams6. Critical habitats7. Non-forest areas8. Wetlands9. High Conservation Value Forests10. Critical viewsheds11. Areas with public safety concerns
  26. Ecosystem Services Management Scheme Service Area (ac) Linear feetFiber 2,264 NA (80% BA harvest)Recreation 3,883* NACarbon 685 NAWatershed 397 94,212Services (No harvest SMZ Buffers)Biodiversity 630 NA (Non-timber) TOTALS: 3,976 *The area of recreation is considered co-use, in that it provides multiple services, and therefore will only be counted once in total area.
  27. Ecosystem Management Scheme Service Prices Service Unit Price per unit Sources AssumptionsFiber MBF •$100 – pessimistic •Local prices •3000 BF/ac •$125 – most likely •Timber Mart- •Harvest 80% for suitable •$150 – optimistic South areas 2nd Quarter 2010 •Harvest 50% for SMZ buffers •Annual harvest rate of total area/15-year ownership periodRecreation acre •$2.00 – pessimistic •Local prices All areas suitable are •$2.07 – most likely •VA DOF leased annually based on •$3.00 – optimistic current conditionsCarbon ton •$0.10 – pessimistic •Ecosystem •127 tons/ac •$1.00 – most likely Marketplace •Annual enrollment rate of •$4.00 - optimistic •Appalachian total area/15-year Carbon ownership period Partnership •Additional area from fiber retention in Year 2
  28. Ecosystem Management Scheme Prices (continued) Service Unit Price per unit Sources AssumptionsWatershed linear •$20 – pessimistic •Approximate ILF •1% of total LFt sold feet •$25 – most likely average – annually for 15-year •$30 – optimistic construction cost ownership period •Approximately 10% •Act as mitigation of ILF prices bank •Demand provided through mitigation markets (CWA)Biodiversity acre •$0.00 for all pricing •Transactions are •Act as conservation scenarios taking place but prices bank are highly variable •Demand provided by and project specific conservation markets •No local transactions (ESA)
  29. Valuate marketable services as available and projected : 5y= Σ (a )(v ) i i i =1Whereas,y = economic benefits to landowneri = landscape featurea = units of marketable ecosystem servicesv = value per unit of marketable ecosystem services
  30. Comparison of Management Schemes by Pricing Scenario 1600000.00 1400000.00 1200000.00 1000000.00Dollars (US) Ecosystem Services 800000.00 Management 600000.00 Traditional Management 400000.00 200000.00 0.00 Pessimistic Most Likely Optimistic
  31. Traditional Management Scheme Ecosystem Management Scheme - Combined Pessimistic Prices - Combined Pessimistic Prices 700,000 600,000 600,000 500,000 500,000 Biodiversity 400,000 Recreation Dollars (US) WatershedDollars (US) 400,000 Fiber Services 300,000 Carbon 300,000 Recreation 200,000 Fiber 200,000 100,000 100,000 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Year Year
  32. Traditional Management Scheme Ecosystem Management Scheme - Combined Most Likely Prices - Combined Most Likely Values 800,000 1,000,000 900,000 700,000 800,000 600,000 700,000 Biodiversity 500,000 Recreation 600,000 Dollars (US)Dollars (US) Fiber Watershed 400,000 500,000 Services 400,000 Carbon 300,000 300,000 Recreation 200,000 200,000 Fiber 100,000 100,000 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Year Year
  33. Traditional Management Scheme Ecosystem Management Scheme - Combined Optimistic Prices - Combined Optimistic Prices 1,000,000 1,600,000 900,000 1,400,000 800,000 1,200,000 700,000 Recreation Biodiversity 1,000,000 600,000 Dollars (US)Dollars (US) Fiber Watershed Services 500,000 800,000 Carbon 400,000 Recreation 600,000 Fiber 300,000 400,000 200,000 200,000 100,000 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Year Year
  34.  Problems  Market approach may not be best for insuring long-term ecosystem health  Highly variable costs and pricing  Negative impacts from perpetual deed restrictions • Future selling price • Restricting future management options
  35.  Positives • Additional revenues and making acres productive that may not have been otherwise • Additional management actions could be incorporated into current practices • Provide opportunity for management of other desirable species without market values • Could provide for significant gains if applied to a larger portfolio • Promote awareness and education of human impacts and dependence on ecosystem health
  36.  Ecosystem markets are emerging but immature Ecosystem services management and marketing may offer additional revenues to landowners now and in the future Greater recognition of ecosystem service values could influence management policies Humans and ecosystem health are dependent upon the services originating on private lands Improved ecosystem management could result in improved human and ecosystem health
  37. D. Stuart Hale Copyright © 2012 All rights reserved.

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