Fact Sheet: Stacking Payments for Ecosystem Services

Payments for ecosystem services are becoming an increasingly important part of the U.S. business and regulatory landscape. As programs that provide payments for ecosystem services grow, policy makers will need to determine how these various payments should interact with each other.

Introduction

Payments for ecosystem services are becoming an increasingly important part of the U.S. business and regulatory landscape. Used properly, these payments can efficiently mitigate greenhouse gases, filter pollution from runoff, protect wildlife habitat, and prevent soil erosion. Recognizing this, the American Clean Energy Security Act establishes a cap-and-trade program that allows firms to “offset” their greenhouse gas emissions through practices that reduce or sequester greenhouse gas emissions elsewhere. Some state governments are also expanding water quality trading programs that allow facilities that discharge water pollutants to avoid expensive facility upgrades by, for example, paying farmers to improve land management practices. There are also long-standing federal programs that pay farmers and forest landowners for providing a range of ecosystem services, such as protection of wildlife habitat and prevention of erosion.

As programs that provide payments for ecosystem services grow, policy makers will need to determine how these various payments should interact with each other. This interaction presents an opportunity to expand the suite of services for which an ecosystem is managed. However, it also creates the risk that multiple payments will be made for the same ecosystem services, possibly reducing the efficiency of payments or diminishing the environmental benefits they were intended to provide. This factsheet offers an initial review of these risks and opportunities. It is part of a larger effort by WRI to develop a comprehensive framework for stacking payments for ecosystem services.

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