Technical Report

Local Ecosystem Services Marketplaces: Public Utilities as Development Drivers

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  • Executive Summary The Institute for Natural Resources (INR) received funding from the Bullitt Foundation in 2009 for Financing Mechanisms that Advance Ecosystem Services Markets and Promote Rural Sustainability. 1 That research strongly suggested that, at least for the short- and possibly medium-term, payment for ecosystem services (PES) may best be framed at the local and regional levels. INR therefore proposed examining policy and program options that could facilitate and support local and regional marketplaces, pertaining to all forms of PES, rather than more narrowly conceived credit markets. To pursue this approach, INR proposed expanding its work with the Eugene Water and Electric Board (EWEB). EWEB is the chief supplier of water for the city of Eugene, Oregon, and its source water protection program coordinator is in the process of developing an innovative voluntary incentive program (VIP) to maintain and restore healthy riparian forests along the McKenzie River. EWEB’s envisioned VIP is a distinct departure from typical restoration and PES models in that it gives highest payment—or dividend—priority to those properties with intact, healthy riparian forests. In other words, it pays for good stewardship, not for restoration. It can be a model for other utilities, which could duplicate or adapt the program in part or in full depending on variables such as watershed ownership patterns, authorizing authorities for such programs, potential partners, and other features. INR’s Bullitt Foundation funding has used the EWEB program to examine institutional aspects that act as both opportunities and constraints to greater public utility PES program development and administration. Also in 2011, INR was awarded a National Institute of Food and Agriculture (NIFA) grant to examine public utilities as local PES marketplace drivers. The research includes a case study of the EWEB program, examining funding and structural aspects, testing PES buyers’ and sellers’ preferences and developing a corporate engagement model. Concurrent work on the two projects has enabled INR to leverage information from each to mutually enrich the knowledge and context for both projects. Few, if any, legislative or legal barriers surfaced during our research. However, a number of pivotal institutional issues have emerged; most are administrative and funding related. While there was consistent interest in the concept of PES, there was fairly consistent lack of knowledge and support regarding the use of PES and green or living infrastructure as a cost avoidance strategy and lack of knowledge regarding how to create and fund such programs. (Note that this report uses the terms “green infrastructure” and “living infrastructure” interchangeably. Both refer in this case to the targeted riparian forests doing the job of supporting the utility’s clean drinking water requirements.) Interviews and focus groups provided information for the following recommendations. Greater details can be found in the body of the report. • Knowledge regarding how to design a PES program is a resource. Although many utilities may have heard about PES and living infrastructure, staff may not know where to turn for help and information. • Education for inreach (internal management communications) as well as public outreach will be critical to building support for funding and implementing EWEB-like programs. • Utilities might benefit from expanding the partnership concept to other organizations and agencies that might not be part of the watershed investment district or partnership. This could include larger landowners, other utilities, or additional investors. • All utilities potentially face different resource constraints such as technical support or funding. Larger utilities working with and mentoring the smaller systems can provide comprehensive program ownership and subsequent source protection awareness and actions, to help them face staff, ratepayer base and budget constraints. Regardless of partnership opportunities, utilities and other organizations should think about how PES might be integrated strategically with or into other programs. • Program design should proceed whether or not funding is immediately available, but always with funding options in mind. An effective approach may be to design the program first in concert with landowners and potential partners and follow that with stakeholder education. • Finding the right price point as well as other potential non-monetary incentives to encourage participation is a variable that will be area specific and will differ among landowner types and available alternatives. • Interested utilities will need to acquire realistic valuation of the ecosystem services the program will use. • Creating a watershed investment partnership or similar interorganizational collaborative arrangements will help all partners add capacities and increase efficiencies through sharing program funding for infrastructure, aligning goals, and utilizing existing competencies.
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  • Bullitt Foundation
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