Financing Mechanisms that Advance Ecosystem Service Markets and Promote Rural Sustainability

Release Date: June 2010

Project duration: April 8, 2009 - March 30, 2010

Leading organizations: Institute of Natural Resources, Ecosystem Economics LLC, Central Oregon Intergovernmental Council

Length: 87 pages

Geographic focus: Willamette Valley, Oregon and Deschutes River Basin

The Institute for Natural Resources conducted a project to investigate rural landowner financing needs for participating in the ecosystems market. The project consisted of two phases: Phase I focused on identifying the range of approaches for payments for ecosystem services (PES) projects, followed by a workshop to discuss the challenges and opportunities for financing ES projects. Phase II involved focus groups with landowners in the Willamette Valley, a case study in the Deschutes Basin in Central Oregon, and a pilot project on Gales Creek in Forest Grove, OR. Results of the project demonstrated that ecosystem service projects are complex and their specifications are unique to each site. Focus group participants from the Willamette Valley indicated varying, though overall low, levels of awareness and interest in ecosystem services and PES, and these discussions identified issues that need to be addressed in order to increase social acceptability. The study also found that the Willamette Valley ecosystem marketplace is far less evolved than commonly believed, and, to the contrary, the Deschutes Basin case study revealed an effective water transactions market that is much more robust. Additionally, the Deschutes study indicated that there is ample interest and opportunity for water transactions that support restoration of fish and wildlife habitat, but that financing presented a barrier to development of these projects in that area. Going forward, the study recommends examining the potential of institutional strategies for promoting local marketplaces, and for facilitating ecosystem management at a landscape-level in order to increase restoration efficiency. It also emphasizes the need to lessen start-up transaction costs, particularly during the development of new crediting systems, to encourage local experimentation with marketplace approaches.

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Financing Mechanisms that Advance Ecosystem Service Markets and Promote Rural Sustainability

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