Ecoservice Market Beginnings

The carbon market, water quality trading, ecosystem services and the USDA Office of Ecosystem Services and Markets seem like the beginnings of a new economic and political era.  And in many respects they are new, but these ecoservice market concepts and activities can be traced back to the early 1900’s.  Soil erosion ravished many farms in the United States and Hugh Bennett, an early conservationist recognized that the soils along with the nation’s economic value was washing away.  In 1934, Congressional legislation created the Soil Conservation Service and the conservation movement began in full force. 

During the next several decades, more than 3000 local conservation districts were created along with hundreds of state agencies and thousands of non-profit organizations to support and receive benefits from the “Conservation Economy”.  Thousands of farms received conservation plans and millions of dollars were invested into soil and water conservation; the natural capital of our nation’s farms. The success of this centrally-planned conservation economy waned in the 1970s to 1990s.  The nation’s rivers and lakes were being degraded and the agricultural economy was more influenced by the global economy.  A different approach was warranted.

In the early 1990s, New York City administrators were faced with the decision to upgrade their drinking water system or to rely on the upstate New York farmland to shed cleaner water.   During the same period, Vittel, a mineral water bottler in France was experiencing a similar situation.  The first reaction was to force farmers to provide the ecoservices of very clean water but they soon realized the farmers were providing them with an economic good without due compensation.  In both scenarios, a market was created so that farmers would be compensated for managing their land to produce cleaner water. 

To put this in the terms of Adam Smith, water has always had a high “value of use” in that it is imperative for human survival, but it rarely had a “value of exchange”, meaning that it can not buy much of anything.  Ecoservice markets, like the New York City and Vittel examples create “value of exchange” for clean water.

With that said, there are significant challenges for implementing ecoservice markets and the lack of success of various attempts include the Chicago Climate Exchange, the Copenhagen Climate meeting, the Congressional Climate Change bill and numerous water quality trading programs point toward the need for a new integrated structure.