You Get What You Pay For: Emerging Solutions to Common Resource Problems

By Matt Harrison

Climate change and resource depletion threaten the security and vitality of communities across the nation. Many areas face dwindling water supplies and urban sprawl that consumes rural land and natural resources. The term “ecosystem services” describes the myriad environmental services that nature provides. The United Nations’ Millennium Ecosystem Assessment identifies four categories of ecosystems services: 1) provisioning services, such as food, water, and natural fibers; 2) regulating services that affect climate and the spread of disease; 3) cultural services including aesthetic and recreational opportunities; and 4) supporting services such as soil formation and nutrient cycling. The global value of these services is estimated to be approximately $33 billion annually. Growing human populations and rising standards of living around the world place more and more demand pressures on ecosystems to deliver these services. However, the same forces that drive demand for these services also threaten their survival as a result of resource exploitation, degradation, and unsustainable consumption.

Concerns about ecosystem health and vitality have given rise to the concept of payments for ecosystem services (PES), where the owner or managers of natural resources are incentivized to manage those resources in a socially or ecologically beneficial way that they may not have been otherwise willing to do. PES is a broad label that can describe many financial arrangements including public payments, private payments, tax or subsidy incentives, or credit trading as in the form of a cap-and-trade market. The consistent features of these systems are that they are voluntary and involve a defined ecosystem benefit.

Payment for watershed services (PWS) is a subset of the PES category that compensates landowners for implementing best management practices (BMPs) sufficient to ensure a supply of high quality water. Water is a critical element on which we all depend, and in turn is dependent on vibrant terrestrial and wetland ecosystems for its filtration and purification. Notably, New York City’s reputably high quality water is ensured through a PWS program. The program dates back to the 1990s when the EPA directed the City to build a filtration plant to guarantee its water supply at an approximate cost of $4-6 billion. However, the City was able to negotiate a system of payments to landowners in the Catskill-Delaware watershed to implement land management practices that would effectively provide an appropriate level of filtration and a net savings of over $1 billion. The success of this arrangement is based on the voluntary nature of the transaction that benefits both landowners and the City through payments for a continued supply of high quality water.

More recently, Denver Water established a partnership with the U.S. Forest Service (USFS) as an innovative funding arrangement to preserve watershed services in response to regional threats. Forests in the region are diminishing as a result of bark-beetle infestations and the widespread die-off of aspen groves, both of which are thought to be linked to climate change. One alarming result of these trends is increased vulnerability to and intensifying consequences of forest fires. The Hayman Fire of 2002 burned nearly 138,000 acres and resulted in the deposit of nearly 1 million cubic yards of sediment into areas critical to the supply of water to the Denver metro area, and cost Denver Water nearly $10 million in water treatment, sediment removal, and infrastructure expenditures. In 2010, Denver Water and USFS agreed to provide $16.5 million each to fund a variety of restoration projects to reduce the risk of wildfire and the water supplies vulnerability to its devastating effects on ecosystem services.

Here in the Chicagoland area, our headwaters for a good portion of our water supply are Lake Michigan itself, so there is little we can do in terms of investing in upstream conservation or BMP implementation (obviously keeping beaches and the water clean are still a good thing to do). However, there are innumerable opportunities to implement management practices that would benefit urban terrestrial and aquatic ecosystems, as well as communities downstream. Innovative solutions to the problems our shared water commons face can be implemented at all scales. At a small scale, vegetation and rain gardens are simple solutions that any homeowner can install to reduce stormwater runoff and contaminant flow to Lake Michigan or the rivers nearby.  Arguably, if a property owner is providing public benefit through enhanced ecosystem services on their land, some sort of compensation may be necessary.  The challenge here is to identify and implement appropriate incentives including direct payments, reduced tax burdens, or reduced rates for flood insurance.

Opportunities to enhance ecosystem services also exist on a larger scale. The Village of Wheeling, for example, recently entered into an agreement with MWRD to increase stormwater storage at Heritage Park in order to relieve flooding in Mount Prospect and Prospect Heights – its neighbors downstream on the Des Plaines River. Specifically, the project involves enhancing water storage areas over approximately 24 acres in the park. The Village of Wheeling was paid $2.6 million for the land, and MWRD will fund most of the $29.5 million construction costs. In this case, MWRD, acting on behalf of the downstream communities, is paying for land improvements to reduce flooding downstream while simultaneously providing public benefits to residents of Wheeling vis-à-vis upgrades to Heritage Park. We can speculate on other possibilities.  Consider the vacant land adjacent to the Chicago River and/or Cal-Sag Channel that could be converted to wetlands as part of a longer term restoration project. Or, over on the Fox River, perhaps there is some reason for large consumers of potable water – Aurora and Elgin – to consider PWS solutions upstream in order to ensure sufficient base flow in dry weather periods. The challenges inherent to these projects are identifying buyers and sellers and the scale of BMP implementation necessary to yield a desired outcome threshold. We want to hear what you think – share your ideas with us about local PWS opportunities! Leave a comment below or interact with MPC on Facebook, and Twitter.

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One Response to You Get What You Pay For: Emerging Solutions to Common Resource Problems

  1. Pingback: Green infrastructure: A cost-effective alternative to traditional water management |

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