Carbon (and other) Markets to

Conserve Ecosystems

Richard PaceEcoAsset Markets, Inc. (EAM)

Presentation Overview

• Brief Overview of Markets• Early Development of Ecoservice

Funds• Market Related Pilots• Business Models/Summary

Major threats to global ecosystems

• Climate Change/Instability • Land Clearing for Agriculture

and Development• Water Quality and Quantity

Degradation from Industrial and Agricultural Pollution

• Inadequate Planning and Management of Human Settlements

Institutional Structures to Address

Environmental Threats

• Non-profit environmental organizations– Policy advocacy– Land purchase and easement creation

• Government public policy– Environmental regulation– Environmental enhancement subsidies

• Environmental market creation– Increased capital through conservation-

based securities

Market Examples

• Air Pollution Market (The First EcoMarket)

• Carbon Market• Community Based

Markets/Exchanges– Nature Services Exchange– TNC Forest Bank

Air Pollution Markets…a regulated cap and trade

market• In 2010, SO2 emissions will

be at one-half of 1980 emissions

• “Allowances” are the currency used to comply with emissions requirements

• “Allowances” are fully marketable commodities

• Monitoring and reporting ensure accountability

• Rhode Island Reporting

U.S. Carbon Market…a voluntary cap and trade

market • Chicago Climate Exchange• RGGI• West coast regional market

• Carbon as a surrogate of a larger aggregate of ecosystem service values/services

Regional Greenhouse Gas Initiative (RGGI)

• Nine (?) participating northeastern states• Primarily for utilities and large industrial

greenhouse gas emitters• Rhode Island draft rules provide for two

potential farm related carbon offsets– Afforestation (tree planting on land where there

are no trees or trees have not existed for a long period))

– Methane Gas Capture from livestock operations

Ecosystem Service Payments

0

20

40

60

80

100

A B C D E F

2006

2020

2050

• A Land Trusts and Conservation Easements

• B Water Quality Trading• C Private Watershed

Management• D Water Trading• E Compliant Carbon Trading• F Certified Agriculture and

Fisheries

• Source: Forest Trends 2006• In billions of dollars

Nature Services Exchange

JAMESTOWN FARMERS

Delay hay harvesting to save bobolink nests

“SELLERS”

EAM and URI

Find buyers and sellers

Advertising/ marketing

Collect money from residents and pay to farmers

“MEDIATOR”

JAMESTOWN, RI RESIDENTS

Buy contract shares

“BUYERS”

$$

TNC Indiana Forest Bank

• Business Proposition

– Landowner “deposits” their timber rights in the bank by signing a recordable document.

– Receive annual payments based on the value of the deposit.

– The bank generates income by conducting ecologically sustainable harvests on the timber deposited in the bank as well as selling ecosystem service credits.

• How forest landowners think– High standards of forest

management and an honest valuation of their timber were very important.

– 74% wanted their land to remain wooded beyond their lifetimes.

– Losing control of the land was a great concern..

– 35% expressed interest in making deposit.

Early Ecoservice Funds

• New Forests ($100M)Acquiring “EcoProducts”

• MuniMae Sustainable Land Fund ($100M+)Mitigation BankingCarbon Credits

• Greenvest ($25M)Acquiring Properties

• Ecosystem Investment Partners/Lyme Timber ($30M)

Acquiring Properties through relationships with TNC and conservation NGOs

MarketsBiodiversity

• Australian Biodiversity • U.S Conservation Banking• Voluntary Deals

Carbon• Kyoto Deals• Non-Kyoto Deals• Chicago Climate Exchange (Voluntary)• EU Emissions Trading• New South Wales GHG Abatement

Water • Costa Rica Water Market• US TMDL Trading (Very early stage)• US Wetland Banking

Examples of Market Pilots

• Red Barn Trading (Pennsylvania)• Nutrient Net (Chesapeake Bay)• Delta Institute Crop Insurance (Upper Midwest)• Bobolink Project (New England)

Business Models

Funds New ForestsGreenvestMuniMae Sustainable Land Fund

Broker/Dealers NatsourceCO2E CCXEBX

Knowledge Businesses CH2MHillNatural Capital ProjectNatureServe

Summary

• Ecosystem service markets are rapidly evolving

• Carbon market is significant

• Numerous market pilots in water and biodiversity

USDA will provide $50-100M in Grants

• Early eco-product funds are expandingParticularly forest related

• Assessment and valuation information will spur growth