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The Ecosystem Marketplace

The Case for Water Quality Markets in Chesapeake Bay

Ecosystem services such as biodiversity conservation, water supplies for human consumption and hydropower, climate stabilization and storm protection are increasingly recognized to have economic value. For example, the market for carbon is a demonstration of an emerging, sizable market to address a global environmental issue. Following a similar path in the Chesapeake Bay watershed, work is under way to create a market for nitrogen in an effort to dramatically reduce the amount of harmful nitrogen emissions into the bay's watershed leading to improved water quality.

The Chesapeake Fund is a new and innovative program to establish a voluntary water quality market in the Chesapeake Bay watershed that focuses on reducing excess nitrogen. The aim is to develop an environmental marketplace, built around good science and strong policies (informed by experience and models from around the globe) that will lead to cleaner waters and a healthy, functioning ecosystem.

Not unlike greenhouse gas emissions, the emission of excess nitrogen is one of the most pressing global environmental problems of our time. According to the World Resources Institute latest research, there are more than 400 "dead zones" -- or areas in the ocean with too little oxygen to survive -- in the world. More startlingly, the number of dead zones increased by 35 percent between 1995 and 2007. Nowhere, however, is this problem of excess nitrogen more acute than in the Chesapeake Bay.

Covering more than 64,000 square miles, the Chesapeake Bay watershed includes parts of New York, Pennsylvania, Delaware, Maryland, Virginia, West Virginia, and Washington, DC, and is home for over 16.6 million people. All 16 plus million inhabitants of the bay watershed need to be made aware of and pay more attention to this problem because many of our day-to-day activities have some sort of impact on the bay's ecology. Fertilizers applied to farms, golf courses, and lawns, manure from agricultural lands, treated wastewater, and nitrogen emitted from vehicles and electric utilities flow into nearby stormwater systems or streams, eventually making their way to the bay.

Here is what the science tells us: In 1985, 337.5 million pounds of nitrogen entered the Chesapeake Bay. By 2005, actions were in place to reduce nitrogen to 266 million pounds annually. However, scientists and experts estimate that in order for the bay to thrive, the amount of nitrogen entering the Chesapeake must be reduced to 175 million pounds a year.

We already know what to do: The bay jurisdictions have developed clean-up plans that detail the list of actions that are needed to restore clean water to the Chesapeake Bay and its rivers and streams. Part of the solution will require even stronger enforcement of existing laws and possibly the adoption of additional controls on pollution sources, but another key component is a new mindset that forces everyone to value the services that the bay ecosystem provides, and incorporate that value into their everyday decision making.

The Chesapeake Fund, a partnership of Forest Trends (publisher of Ecosystem Marketplace), the Chesapeake Bay Foundation, and the World Resources Institute, is an efficient, sustainable market-based financing strategy that will catalyze the restoration process by helping the many businesses, organizations and institutions throughout the watershed to become leaders in the bay's restoration effort. Businesses and institutions of the region play a unique role in the effort to restore and protect water quality in that they have the capacity to generate significant nitrogen reductions through behavior change, purchasing offsets and educating and motivating customers to take action.

The mission of the Chesapeake Fund is to accelerate the Chesapeake Bay restoration by: 1) increasing the awareness of the contribution that businesses, institutions and citizens make to the pollution flowing into our local rivers and streams; 2) providing the opportunity to purchase "offsets" for those impacts that cannot be reduced; 3) investing these funds in on-the-ground projects that reduce pollution thus catalyzing the water quality restoration efforts; and 4) linking this approach to other market-like ecosystem service financing schemes such as for carbon and biodiversity.   

The Structure

The fund's structure is based on four basic processes:

First, the fund helps businesses, organizations and citizens, estimate their impact on water quality using nitrogen calculators and accounting processes. The goal is to develop a better understanding of our "nitrogen footprint" and to use this information to guide behavior change and investment decisions that will reduce nitrogen loads to the Chesapeake Bay watershed.

Second, the fund encourages citizens and businesses to make a real difference by reducing their nitrogen footprint through simple behavior changes, such as reducing stormwater runoff, electricity use, lawn fertilizer use, and auto emissions. Third, for those emissions that can't be reduced, citizens and businesses are encouraged to purchase nitrogen credits or "offsets" through the Chesapeake Fund.

Fourth, the Chesapeake Fund invests the offset purchases in on-the-ground, cost-effective nitrogen reduction projects and practices. These investments will result in real, quantifiable nitrogen reductions thus real improvements in water quality.

What distinguishes the Chesapeake Fund from other offset programs is the integrity of the process, the quality of the underpinning science and the reputation of the partners. The identification of credits or offsets is rooted in the best science, verified through a transparent process and implemented by a set of partners with decades of experience in natural resource conservation. Moreover, the Chesapeake Fund is not a way for polluters to avoid cleaning up their act. On the contrary; when a company, organization or individual purchases nitrogen offsets, those credits are put to work, and invested in on-the-ground restoration projects that are targeted to make a difference in the quality of the bay's water.

The goal is to jump-start the reduction of 1 million pounds of nitrogen annually in "hotspots" around the watershed. The fund will target investments from nitrogen offsets into conservation and restoration practices that are efficient, cost-effective, have the greatest ability to provide long-term reductions in nitrogen, and provide ancillary environmental benefits. By putting the power of the marketplace to work for restoration, the fund will encourage cost-effective and efficient means for implementing conservation and restoration practices, and spur others to do the same. The fund's success will set the stage for long-term success in restoring and protecting the Chesapeake Bay and the rivers and streams that feed it, and a broader appreciation of the true value of this national treasure.

Dan Nees is director of the Chesapeake Fund.

This article was first published by the Ecosystem Marketplace and is reprinted with permission. The original is available here.

Image CC licensed by Flickr user methTICALman.

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