An Oregon Ecosystem Marketplace: Opportunities and Limitations

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Oregon Ecosystem Marketplace

Over the last thirty years, landmark environmental laws have addressed some of the most visible and egregious sources of environmental degradation, but have focused primarily on specific impacts and individual species and habitats.  In particular, legal requirements have typically steered mitigation toward on-site locations because it was viewed as the most economically and ecologically appropriate means to offset development impacts. However, it has become increasingly apparent that on-site mitigation does not always present the best approach because site-by-site mitigation can be quite costly, sites are too small and near developed areas and development is often completed long before anyone can determine the success or failure of the mitigation effort.  Also, while treating isolated problems can improve specific issues, such an approach fails to consider the overall health of the natural environment.

This realization has lead to energized discussions regarding the use of market-based tools to provide a more economically and ecologically effective approach to offsetting development impacts and improving conservation efforts in Oregon.  There has been a general recognition that it would be more effective and efficient to integrate ecosystem elements (e.g., species, habitat, water quality, etc.) within a mitigation bank site rather than keep them separate. Under an ideal integrated system, mitigation work could be financed by selling credits to developers and others with regulatory responsibilities to mitigate damage caused by development or discharges. Since ecosystems provide "services," such as clean water and habitat, the notion of bundling payments for ecosystem services is often discussed as a strategy for engaging the private sector in land conservation and restoration at a scale that will be effective.  

In Oregon, the Willamette Partnership, a nonprofit organization dedicated to increasing the pace, scope, and effectiveness of conservation in the Willamette Basin, has been playing a key role in defining and implementing these concepts. In early 2006, the Partnership was awarded a grant from the U.S. Environmental Protection Agency to execute a water quality trade in the Willamette Basin within two years, and propose an institutional mechanism for a "multi-credit ecosystem marketplace" where trades for different types of ecosystem services could be centralized and financial incentives for voluntary restoration could be created.  There also have been discussions about creating a pilot project in the Willamette Basin that could illustrate and test the concept of a multi-credit bank and trade.

The pilot project could give agencies, developers, policymakers and other interested parties the opportunity to determine how a multi-credit trading system could work, and provide an opportunity for practitioners to address any outstanding issues. One element of the pilot will be a project of a significant size within the Willamette Basin, in a priority location, that includes more than one type of credit (e.g., temperature, wetland, endangered species, carbon) and potentially other revenue sources.  The pilot project can also begin to define and implement the key institutional elements in an ecosystem marketplace, including defining the rules, roles and responsibilities of the buyers and sellers, and developing mechanisms for strategic investments.  

As a result of this momentum, it is necessary to identify the opportunities that exist within the state to help further marketplace development, as well as any limitations that could hinder effective implementation. Therefore, the purpose of this paper is to identify the primary statutory and institutional limitations to the creation of an ecosystem marketplace in Oregon. It is important to keep in mind that the limitations identified in this paper are to help practitioners recognize the issues that need to be addressed in developing such a concept, not to provide an exhaustive assessment of federal and state agencies laws and policies.  Ultimately, identifying the limitations will help avoid implementation problems later.

In this section. . .

Brief Summary
In Oregon no regulations exist that prevent the development of a multi-credit ecosystem marketplace.
Analysis
Marketplace terms, background information, a synopsis of implementation opportunities, and a summary of limitations.
Options for Next Steps
Steps that could be taken now to advance the creation of a multi-credit ecosystem marketplace.
Conclusion
The opportunity exists within Oregon to make an ecosystem marketplace a reality.
Draft Executive Order
Draft Executive Order: Ecosystem Markets in Oregon
Habitat Assessment Tool
A Habitat assessment tool for multi-credit banks that calculates improvements or damage to a site through a single resource lens.