office of environmental markets

Regulations may be needed, but are they all we need? That was the common thread weaved through presentations by natural resource experts last week at USDA’s Agricultural Outlook Forum.

Panelists included: Chris Hartley, deputy director of USDA’s Office of Environmental Markets; Jim Serfis, chief of the communications and candidate conservation branch of U.S. Fish and Wildlife Service, (FWS); and Matthew Wohlman, assistant deputy commissioner of the Minnesota Department of Agriculture.

USDA has a long history of working with partners to meet the needs of America’s farmers, ranchers and forest landowners while striving to sustain the natural resources we rely on. American farmers produce food for the U.S. and the world, and also provide benefits for air, water and habitats through the adoption of conservation practices.  In recent years, USDA has taken a more innovative approach to conservation by supporting the development of water quality trading markets.

Water quality trading can lower the costs of cleaning up waterways by allowing sources of pollutants with high costs of reducing pollution to purchase credits from others with lower costs. Often agricultural producers have relatively low costs of improving water quality, which makes farmers and ranchers prime candidates to generate water quality credits for sale. This offers the agricultural sector opportunities to improve the natural resource base and earn additional income through credit sales.

Last fall, USDA brought together a group of Natural Resources Conservation Service (NRCS) Conservation Innovation Grant (CIG) awardees, state policymakers, and other stakeholders involved in one of the most challenging nutrient management initiatives in the Chesapeake Bay Watershed: enabling water quality trading markets.

Water quality trading offers flexibility to those required to improve water quality in the Bay: power plants, wastewater treatment plants, new developments, and agricultural producers, among others. It allows those facing high costs of water quality improvement to reduce those costs, working with farmers to improve water quality on their behalf, thus providing farmers with additional income streams and the opportunity to significantly increase the scope of conservation practices on their land.

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 new Farm of the Future project profiles working farms, forests, and ranches that are participating in environmental markets or receiving payments for ecosystem services. In the five case studies just released, landowners changed their management practices to provide water quality, wetlands, wildlife habitat, and carbon benefits—generating new revenue from the sale of ecosystem services to supplement traditional income.

A new report titled Innovations in Watershed-Based Conservation in the United States: Payments for Watershed Services for Agricultural and Forest Landowners was just released by EcoAgriculture Partners with funding and support from USDA’s Office of Environmental Markets (OEM) and the U.S. Endowment for Forestry & Communities. The report surveys payments for watershed services (PWS) schemes to understand their current role in the U.S. and future potential for increasing cost-effective watershed protection on private lands.

Water is crucial for many human needs; yet water resources in the United States face serious threats from increasing pollution and overuse.  PWS can address these challenges effectively as a complement to USDA conservation programs and other existing incentives.