Incentivize ecosystem services and mass nutrient balance on farms.
Authors: Matt Ehrhart
Other contributors: Matt Royer, Dave Abler, and Lisa Wainger
A shift toward pay-for-performance models where farmers are financially rewarded for the measurable success of their Best Management Practices (BMPs).
The ecosystem services scenario envisions a future system in which farmers and landowners are incentivized to implement and maintain best management practices (BMPs) through diverse incentives, including receiving payments based on how well BMPs perform across multiple environmental dimensions. Such an approach would broaden and alter current incentives that provide payments for installing practices using an estimated average performance of nitrogen, phosphorus, and sediment reductions. This scenario is grounded in the assumption that there are environmental improvements valued by the local communities and residents of the entire Chesapeake Bay Watershed that can be provided by agricultural lands and operations and go beyond improving water quality in the tidal Chesapeake Bay.
Some ecosystem services have global significance and are already part of global supply chain considerations. Greenhouse gas (GHG) emissions and carbon storage and sequestration are components of global discussions and negotiations. Many agribusinesses and food companies have developed and implemented sustainability strategies to address these issues. To a lesser degree, biodiversity is also a component in global supply chains, although metrics and accounting mechanisms are not as fully developed as for GHG emissions.
Additional ecosystem services may provide significant value at the regional, state, and local levels. Services associated with the improvement of local stream ecosystems, water supply, wildlife, and recreational opportunities may drive increased community engagement and value. While soil health-focused practices such as no-till planting and winter cover crops generate significant nutrient and sediment pollution reductions toward Chesapeake Bay goals and carbon storage toward GHG goals, they also improve infiltration and groundwater recharge, bolstering the local drinking water supply. Additionally, the increased soil carbon and microbial activity associated with those practices provide an opportunity to bind and degrade chemical residues associated with herbicide and pesticide use, reducing the risk of those residues reaching local streams. Riparian forest buffers provide cooling, critical for healthy stream ecosystems, including supporting valuable habitat for stream biota, pollinators, birds, and mammals.
Quantifying changes in ecosystem services is done through a combination of field measurements and modeling. Water quality improvements, a top priority for stakeholders, can be measured using watershed hydrologic models such as the Soil & Water Assessment Tool (SWAT) and the Chesapeake Bay Modeling Suite. However, to directly measure BMP performance on local water quality, habitat and other ecosystem services requires metrics and agreed-upon modeling and/or monitoring protocols. International standards exist for some climate-related metrics, such as GHG emissions, and some forms of carbon storage and sequestration, but they currently have significant measurement costs. Metrics and assessment protocols for other ecosystem services, including stream biodiversity, habitat quality, and landscape-scale changes to infiltration and groundwater recharge, are a subject of research but are not currently in place.
Under this scenario, incentives to produce ecosystem services are created through changes in a broad array of regulatory and market-based programs. Trading and payment for ecosystem service programs can provide incentives to produce ecosystem services but have historically had mixed success. Limited demand currently exists for credits in the nutrient, and GHG markets in the United States, however, international demand exists for GHGs and systems of tracking and verification of credits could be expanded to the agricultural sector. Market-based incentives for other ecosystem services will require the establishment of incentive structures that provide certainty and transparency, while minimizing transaction costs.
Other incentives exist to meet the needs of corporate sustainability goals. Trial programs show that corporate incentives and support, often including public funds, can drive investments in ecosystem services. Examples include information technology companies, such as Google, Microsoft, and Amazon Web Services, voluntarily investing in groundwater recharge initiatives to offset consumptive cooling water use and local dairy cooperatives providing assistance to suppliers to implement practices to reduce GHG and improve animal welfare.
