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New Issue Papers: Exploring Environmental Markets

All of us rely on nature’s benefits during our daily routines, but few stop to think about how we can sustain those benefits over time. Luckily, there are economists, resource managers, and policymakers working on tools to help manage resources—and environmental markets are one of those tools. Environmental markets allow people who use ecosystem services to pay those who provide environmental benefits. In some cases, the environmental stewards who can provide benefits (like clean water, air and habitats) are farmers. While there is promise in environmental markets, there are a lot of kinks to work out.

Two new issue papers by the World Resources Institute, take a deep dive into the mechanics of water quality trading and other environmental markets by exploring options for market development.  The papers were produced with support from the USDA Office of Environmental Markets, and were released earlier this month.

The first paper, titled “Current and Potential Roles for Government in Facilitating Water Quality Markets,” examines the different roles that government does play—and could play—in water quality markets.  Federal and state governments provide technical support and program administration to facilitate environmental markets, but the paper suggests more could be done. The researchers explore broad questions about government’s potential roles in environmental markets.  They consider possible roles for the USDA, such as serving as a credit bank, or working with the EPA to endorse certain tools and methods for calculating nonpoint source water quality credits. The paper considers several novel ideas and should generate a healthy discussion about the role of government entities in water quality markets.

The second paper, titled “How Can Conservation Programs Effectively Interact with Environmental Markets?,” takes a look at USDA conservation programs – such as the Environmental Quality Incentives Program (EQIP) and the Conservation Stewardship Program (CSP) – and discusses how they could interact with environmental markets. The paper investigates “financial stacking,” the layering of funding from Federal programs and private markets, and other types of “stacking” that are the source of frequent debates in the world of environmental markets.

These papers are meant to generate thought and discussion around some of the more complex aspects of environmental markets. They make one thing clear—there’s a lot to consider.

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