Ecosystem Service Markets 101: Supply and Demand for Nature

Establishing markets for ecosystem services—the benefits that nature provides, such as clean air, water, and wildlife habitat—has gained traction in some circles as a way to finance the conservation of these public goods. Market influences on supply and demand work in tandem to encourageecosystem protection. Jeff Kline and Trista Patterson, scientists with the Pacific Northwest (PNW) Research Station, have identified several criteria needed for ecosystem service markets to achieve their potential. These include regulatory limits on environmental damage, ecosystem services that are amenable to trading, and manageable transaction costs related to administering market programs and the necessary measuring and monitoring of marketed resources. If these criteria are not met, other conservation methods such as conservation easements, landowner incentive programs for environmental enhancement or protection, or taxes on environmental damage may be more effective. Discussions about ecosystem services often focus on increasing supply— storing more carbon or delivering more water, for example. However, net pressures on ecosystems can also be reduced by addressing consumption. Many energy efficiencies can be achieved by promoting awareness, informed choices, and behavior change. The PNW Research Station is examining both supply and demand approaches to ecosystem protection by encouraging the development of ecosystem services markets and identifying ways to reduce its own environmental footprint.