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Incorporating Ecosystem Markets and Traditional Forest Management


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This presentation was delivered to Forestry 530 - Advanced Forest Resource Management at the University of Tennessee - Knoxville Fall 2013. It provides an overview of ecosystem services, ecosystem markets, and incorporating management and marketing ecosystem services with traditional forest management operations.

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Incorporating Ecosystem Markets and Traditional Forest Management

  2. 2. What are Ecosystem Services  Ecosystem services are “the benefits people obtain from ecosystems” (MEA 2005). Human relationships with ecosystems:  Man and Nature (1864)- George Perkins Marsh argued that natural resources are finite  Progressive Era conservationists Humans are part of the ecosystems and must be proper stewards to ensure health  Current Academy Daily’s Nature’s Services (1997); Constanza et al. (1997); Tercek’s Nature’s Fortune (2013) Increasing awareness of humans’ dependence on nature and accounting for the services prov
  3. 3. Introduction UN MEA • Global assessment of ecosystem health and human impacts • Initiated in 2001 and completed in 2005 • Comprised of 1,360 experts worldwide 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 2005)
  4. 4. Introduction 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:
  5. 5. Introduction Ecosystem services: • Non-exclusive • Non-rival • Externalities – positive and negative • Additionality and Leakage  The rise of TIMOs and REITs places approximately 12-14% of private forestlands with organizations in the business of managing natural capital. Dependent on private landowners (Salzman and Ruhl)
  6. 6. Ecosystem demands 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 Demands and stresses on ecosystems are changing due to:
  7. 7. Source: Southern Forests for the Future Key Drivers of Southern Forest Change
  8. 8. Southern forests of change
  9. 9. Ecosystem markets Increasing demand for benefits of ecosystem services have fostered ecosystem markets. Emerging ecosystem services markets are driven primarily by:  Government regulation Mitigation markets • Clean Water Act • Safe Water Drinking Act • Endangered Species Act  Consumer demand • Voluntary markets • Eco-labeling
  10. 10. State of ecosystem markets New York City watershed protection in 1990s (Chichilnisky and Heal1998) •$6-8 billion facility improvements versus 1.5 billion upstream conserva 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 201 Approximately 687,000 acres so far Grey versus green
  11. 11. State of ecosystem markets Existing primary markets: • Fiber • Recreation • Carbon sequestration • Watershed services • Biodiversity
  12. 12. State of ecosystem markets
  13. 13. Fiber Timber - Markets flat to slowly improving. Robust improvement s in other regions.
  14. 14. Changing fiber demands
  15. 15. Fiber Biomas s - Markets emerging but local. Strong demand for European supply.  Commercial pellets  Domestic/local  Industrial pellets  European markets  Whole-tree chips  Power generation/Co-
  16. 16. Recreation  Yearly/$2.00- 4.00 per acre  Public hunting areas on private land by permit  Specialty hunts  Game preserves  OHV/ Multi-Use Trails  Bird watching  Equestrian  Mountain biking  Hiking Hunt leases
  17. 17. Carbon  OTC/Voluntary  Frequently large corporations  Disney  Staples  Coca Cola  Google  Various protocols  CAR, VCS, ACR, …  Regulatory  AB 32  IFM  Afforestation  Avoided Conversion/REDD  RGGI  Northeast and Mid-Atlantic states  Designed to cap and reduce power sector CO2 emissions
  18. 18. Source: Ecosystem Marketplace State of Carbon Markets 2013 Carbon sequestration markets
  19. 19. Source: Ecosystem Marketplace State of Carbon Markets 2013 Carbon sequestration markets
  20. 20. Source: Virginia Tech Urban Forest Assessment 2011 Carbon sequestration markets
  21. 21. Source: Ecosystem Marketplace State of Carbon Markets 2013 Carbon sequestration markets
  22. 22. Source: Ecosystem Marketplace State of Carbon Markets 2013/ ecoPartners Carbon Carbon sequestration markets
  23. 23. Carbon sequestration markets  High project initiation costs  Approximately 1500 acres minimum for feasibility  Must be certified to qualify for IFM protocol  Does not exclude timber harvest  100 year project term  Landowner able to market credits above common practice baseline  Total project timeline may
  24. 24. Watershed services Compensatory Mitigation  “No Net Loss”  Clean Water Act Section 404  Mitigation Banks  In-Lieu Fee  Permittee Responsible
  25. 25. Source: Ecosystem Marketplace State of Markets 2011 Update Watershed markets
  26. 26. Source: Ecosystem Marketplace State of Markets 2011 Update Watershed markets
  27. 27. Source: Ecosystem Marketplace State of Markets 2011 Update Watershed markets
  28. 28.  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. Source: Ecosystem Marketplace State of Markets 2011 Update Watershed markets
  29. 29. Watershed markets  Require long-term restrictions but in some cases as short as 20 years plus 10 years monitoring period  Flexibility in conditions  Options for restrictions including conservation easement, deed restriction, or other method  Projects may be negotiated, with Corps approval, as permittee specific
  30. 30. Biodiversity  Endangered Species Act Section 10  Conservation Banks  HCPs
  31. 31. Biodiversity markets Source: Ecosystem Marketplace State of Markets 2011 Update
  32. 32. Biodiversity markets Source: Ecosystem Marketplace State of Markets 2011 Update
  33. 33. Biodiversity markets Source: Ecosystem Marketplace State of Markets 2011 Update 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
  34. 34. Biodiversity markets  Not as common due to infrequent enforcement of ESA on private lands  Increasing in occurrence (along with HCPs)  Most value is captured in general conservation values  Species specific in pricing with current examples
  35. 35. Ecosystem markets • 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  Fit ecosystem services markets into current management without substantial opportunity costs
  36. 36. Ecosystem management 1. Areas suitable for fiber harvests 2. Culturally significant sites 3. Retention areas of recent timber harvest 4. Areas unlikely for timber harvest 5. Perennial streams 6. Critical habitats 7. Non-forest areas 8. Wetlands 9. High Conservation Value Forests 10. Critical viewsheds 11. Areas with public safety concerns Landscape features with potential to offer marketable ecosystem servic
  37. 37. Ecosystem markets  Problems  Market approach may not be best for insuring long-term ecosystem health  Highly variable costs and pricing  Negative impacts from long-term/perpetual deed restrictions • Future selling price • Restricting future management options
  38. 38. Ecosystem markets  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
  39. 39. Conclusions  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
  40. 40. Questions Contact: D. Stuart Hale Copyright © 2013 All rights reserved