Carbon (and other) Markets to Conserve Ecosystems Richard Pace EcoAsset Markets, Inc. (EAM)

Presentation Overview Brief Overview of Markets Early Development of Ecoservice Funds Market Related Pilots Business Models/Summary

Major threats to global ecosystems Climate Change/Instability Land Clearing for Agriculture and Development Water Quality and Quantity Degradation from Industrial and Agricultural Pollution Inadequate Planning and Management of Human Settlements

Institutional Structures to Address Environmental Threats Non-profit environmental organizations –Policy advocacy –Land purchase and easement creation Government public policy –Environmental regulation –Environmental enhancement subsidies Environmental market creation –Increased capital through conservation-based securities

Market Examples Air Pollution Market (The First EcoMarket) Carbon Market Community Based Markets/Exchanges –Nature Services Exchange –TNC Forest Bank

Air Pollution Markets …a regulated cap and trade market In 2010, SO2 emissions will be at one-half of 1980 emissions “Allowances” are the currency used to comply with emissions requirements “Allowances” are fully marketable commodities Monitoring and reporting ensure accountability Rhode Island Reporting

U.S. Carbon Market …a voluntary cap and trade market Chicago Climate Exchange RGGI West coast regional market Carbon as a surrogate of a larger aggregate of ecosystem service values/services

Regional Greenhouse Gas Initiative (RGGI) Nine (?) participating northeastern states Primarily for utilities and large industrial greenhouse gas emitters Rhode Island draft rules provide for two potential farm related carbon offsets –Afforestation (tree planting on land where there are no trees or trees have not existed for a long period)) –Methane Gas Capture from livestock operations

Ecosystem Service Payments A Land Trusts and Conservation Easements B Water Quality Trading C Private Watershed Management D Water Trading E Compliant Carbon Trading F Certified Agriculture and Fisheries Source: Forest Trends 2006 In billions of dollars

Nature Services Exchange JAMESTOWN FARMERS Delay hay harvesting to save bobolink nests “SELLERS” EAM and URI  Find buyers and sellers  Advertising/ marketing  Collect money from residents and pay to farmers “MEDIATOR” JAMESTOWN, RI RESIDENTS Buy contract shares “BUYERS” $ $

TNC Indiana Forest Bank Business Proposition –Landowner “deposits” their timber rights in the bank by signing a recordable document. –Receive annual payments based on the value of the deposit. –The bank generates income by conducting ecologically sustainable harvests on the timber deposited in the bank as well as selling ecosystem service credits. How forest landowners think –High standards of forest management and an honest valuation of their timber were very important. –74% wanted their land to remain wooded beyond their lifetimes. –Losing control of the land was a great concern.. –35% expressed interest in making deposit.

Early Ecoservice Funds New Forests ($100M) Acquiring “EcoProducts” MuniMae Sustainable Land Fund ($100M+) Mitigation Banking Carbon Credits Greenvest ($25M) Acquiring Properties Ecosystem Investment Partners/Lyme Timber ($30M) Acquiring Properties through relationships with TNC and conservation NGOs

Markets Biodiversity Australian Biodiversity U.S Conservation Banking Voluntary Deals Carbon Kyoto Deals Non-Kyoto Deals Chicago Climate Exchange (Voluntary) EU Emissions Trading New South Wales GHG Abatement Water Costa Rica Water Market US TMDL Trading (Very early stage) US Wetland Banking

Examples of Market Pilots Red Barn Trading (Pennsylvania) Nutrient Net (Chesapeake Bay) Delta Institute Crop Insurance (Upper Midwest) Bobolink Project (New England)

Business Models Funds New Forests Greenvest MuniMae Sustainable Land Fund Broker/Dealers Natsource CO2E CCX EBX Knowledge Businesses CH2MHill Natural Capital Project NatureServe

Summary Ecosystem service markets are rapidly evolving Carbon market is significant Numerous market pilots in water and biodiversity USDA will provide $50-100M in Grants Early eco-product funds are expanding Particularly forest related Assessment and valuation information will spur growth