Why do we need markets for ecosystem services?

There are many important natural resource management issues facing Australia including the loss of biodiversity, declining river health, salinity and soil acidification. The social and economic pressures facing rural communities due to the decline of traditional agricultural enterprises parallel these challenges.

In the past, Governments have responded to environmental challenges by encouraging local scale community based responses, most notably through the Landcare movement. However, increasingly it is being recognised that, to be effective, larger scale changes will be required. Governments are moving to establish community-based boards at a regional/catchment scale. These Boards are being tasked with developing environmental targets and seeking to put in place effective investment pathways through which governments can invest scarce public funds.

An emerging challenge is the capacity to link catchment based targets to community based programs for on-ground works. This project will directly address this challenge by developing techniques for evaluating the relative contribution of different on-ground works to meeting catchment targets. An example would be the development of criteria with the capacity to quantify the contribution of an agroforestry investment to meeting the end of valley salinity targets set by the Murray Darling Basin Commission. The step of quantifying environmental benefits is necessary in order to be able to create a currency for ecosystem service markets.

In addition to improving the capacity of governments to target environmental programs the project will test the potential to secure private investment in the ecosystem services provided by different land-uses. Traditionally there has been an expectation that governments are solely responsible for regulating land-use and putting in place cost sharing arrangements for the provision of "public good" ecosystem services. The project will challenge and test this expectation by fostering the emerging role of non-government sector in funding and delivering the land-use and management changes.

Engaging non-government investors will require that effective investment pathways between regions, governments and non-government investors be established. The role of markets for private conservation, philanthropic donation, corporate sponsorship and environmental technologies will be investigated. The role of governments in regulating resource use and thereby creating markets for ecosystem services, as in the case of water markets, will also be investigated.

In addition, opportunistic and entrepreneurial strategies will be identified and pursued. Examples include the capacity to harness market forces for lifestyle farming in the Goulburn-Broken Catchment, and the sale of bush blocks to Perth-based buyers in the south west of Western Australia. These options relate to the potential to harness existing market forces to redesign Australian landscapes.

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