Ecocommerce: The Next Generation Ecoservice Market

 

 

Ecocommerce assigns value to agricultural conservation practices as well as land management.
 

Photo courtesy of USDA-NRCS.

 




Ecocommerce: The Next-Generation Ecoservice Market
Today’s ecoservice markets

By Tim Gieseke


Seventy-five years ago, the U.S. Department of Agriculture (USDA) placed value on soil resources with the creation of the Soil Conservation Service, now known as the USDA Natural Resources Conservation Service (NRCS), creating incentive programs to encourage producers to conserve soil.

Several decades later, the U.S. Environmental Protection Agency implemented a regulatory approach to resource conservation.

Both efforts succeeded to a point. However, their shortcomings have initiated ecoservice markets.

After a decade of progress, ecoservice markets seemed to backslide in 2009. Relatively few of the nearly 80 water quality credit markets in the United States have generated viable trades and function as true market systems.

Sequestered carbon credits are worth about a dime per ton on the Chicago Climate Exchange, and the cap-and-trade system to address climate change is losing support. U.S. House Agriculture Committee Chairman Collin Peterson, who played a major role securing rural lawmakers’ support for cap-and-trade legislation last summer, said in early January 2010 he would vote “no” if a similar bill returned to the House for final passage.

From a producer’s perspective, for the most part, these markets have not been a legitimate business opportunity, relative to the traditional commodity markets. The lack of legitimacy is not just due to fluctuating or low prices, but is related to a lack of market organization.
Elusive ecoservices
We define ecoservices as public goods generated by conservative land management: practices yielding fertile soil, clean water, wildlife habitat and carbon and nutrient sequestration. Those striving to encourage these markets find it difficult to identify buyers and sellers and place a price tag on those items.

Imagine trying to sell the corn produced in a 40-acre field without the ability to measure volume or weight. Creating a market for soil stewardship, clean water, habitats and other ecoservices faces a similar challenge. Further complicating the situation, beneficiaries are not a specific processing plant or farm operation, but society as a whole, which benefits from a healthy ecosystem. And, don’t forget agribusiness, which relies on enduring soil productivity.

After decades of developing natural resource monitoring methods that prove marginally successful, we might conclude direct measurement of non-point source pollution, and most ecoservice quantities and sources, is not only difficult, but likely impossible.

Because proponents designed most existing ecoservice markets from the perspectives of policymakers and ecoservice buyers, the markets’ frameworks tend to serve their self-interests. They describe an ecoservice demand “package” that meets their accounting and oversight needs, and trades ensue. However, the discussion of ecoservice supply and demand interaction is absent.
Organizing an ecocommerce structure
The next-generation ecoservice market must allow producers to take advantage of the multiple benefits of a singular conservation practice, recognizing the many benefits to society. And, the ecoservices must be placed within the context of the landscape.

Both market attributes can be created by using agro-ecological indices that measure the immeasurable. The USDA NRCS, universities and institutions across the nation have developed and implemented agro-ecological indices for the purpose of quantifying ecoservices. These include the soil conditioning index, habitat suitability index and various methods to score water quality.

Ecoservice portfolios and their values become the ecocommerce process as described in EcoCommerce 101: The Emergence of an Invisible Hand to Sustain the Bio-Economy.
Graphic courtesy of Gieseke.
For someone not versed in the language of indices, these measurements may seem daunting. Most or all of the agro-ecological indices have been developed independently of each other, and the language describing them today is more like the “Tower of Babel,” rather than a common language.

In the future, ecocommerce indices could be created using similar indices, but with a coordinated effort and standardized units. This language can then develop landscape intelligence as it pertains to management of watersheds and biofuel sheds, and it could provide the foundation for a sustainability index, such as what is now proposed by Walmart.

According to Walmart’s Web site, the company developed a sustainability index initiative in order to meet customers’ requests for more efficient, longer-lasting, higher-performance products. The company’s goal is to create a more transparent supply chain, driving product innovation and providing customers with information to assess products’ sustainability, the site says.

Because the value of ecosystem services is generated by resource management outcomes, rather than the cost of conservation practices, a role reversal occurs. Farmers become the conservation supplier for ecoservice demands, rather than the conservation customer for government programs.

Imagine a farmer sitting down to evaluate his production plan for the year. He considers the price of traditional agricultural commodities and how to produce these in certain quantities.

Now, add a value for soil conditioning, water quality, habitat and carbon sequestration indices.

For example, what if a water quality score of 80 meets the criteria for multiple beneficiaries? It may meet the objectives of a USDA incentive program, and/or an EPA Total Maximum Daily Load regulatory assurance requirement. It also may provide market access via Walmart’s sustainability index, generate a tax rebate from the local watershed district, or become an eligibility requirement to engage in a water quality trading program for a wastewater treatment plant.

A compilation of these resource indices becomes the farm’s ecoservice portfolio that can be recalculated yearly.

These ecoservice portfolios and their values, applied by public and private stakeholders, become the ecocommerce process as described in EcoCommerce 101: The Emergence of an Invisible Hand to Sustain the Bio-Economy.

The ecoccommerce process is significant, because it is more than a compilation or organization of ecoservice markets. It also provides the framework to build an ecological intelligence system, allowing the public arena of commerce to define sustainability.

Jerry Hatfield, Director, National Laboratory for Agriculture and the Environment, wrote in the EcoCommerce 101: The Emergence of an Invisible Hand to Sustain the Bio-Economy foreword, "… this [intellectual framework] is a unique feature because what has been lacking in the discussions of ecosystems or their monetary value has been a framework from which the value could be evaluated.”

He also says EcoCommerce 101: The Emergence of an Invisible Hand to Sustain the Bio-Economy will be a valuable tool to understanding the emergence of this ecoservice economy, especially to policymakers and traders who will serve as the driving force for the development of policies related to ecosystem services.

To learn more about this book, visit www.ecocommerce.us.com.


About the Writer: Tim Gieseke farms part-time in southern Minnesota and through Ag Resource Strategies, LLC provides agro-environmental assessment services. His book is titled, EcoCommerce 101: The Emergence of an Invisible Hand to Sustain the Bio-Economy and is scheduled for release in May 2010.