Ecosystem Services Payments

They are a global initiative where a supplier agrees to carry out certain new activities on their land in exchange for a payment. The new activity is highly likely to result in an environmental improvement.

One of the best known examples is the planting or regeneration of forests to draw down carbon from the atmosphere. There are many others, for example sequestering carbon in the soil.

Common among them all is the requirement to do something that has not been done previously on the project site, or in some cases, to do a lot more of an activity. The activities are defined in legislation.

Carbon credits are one form of ecosystem services payments. There is an increasing range of payments on offer and under discussion and research. As we note below, payments might be offered for alterations to paddock design and grazing management in catchments. There may be payments for enhancing habitat, or restoration of coastal vegetation like mangroves. This is an expanding opportunity. It may provide us with sufficient resources to do large scale landscape repair to restore those very valuable ecosystem services and provide other benefits.

Many of the purchasers now in the market are under regulated requirements to purchase offsets or reduce net carbon emissions. Increasingly companies are making voluntary investments in environmental repair projects related to their core business. The market for these credits is expected to increase 13 fold by 2030.

Some of the factors prompting these changes will affect farm managers directly soon, if they are not already. The Taskforce on Climate-Related Financial Disclosure is leading the initiative by the very largest funding bodies to ensure that climate-related risks are reported by financial organisations so that funds providers can make better-informed decisions on where and when to allocate their capital, and to better evaluate risks and exposures over the short, medium, and long term. This will is already reaching farming enterprises through their banks and stakeholders.

It's worth setting out some terms that you will hear, and providing plain definitions:

• Natural Capital is the world's stock of natural resources, which includes geology, soils, air, water and all living organisms. Some natural capital assets provide people with free goods and services, often called ecosystem services. All of these underpin our economy and society, and thus make human life possible.
• Ecosystems service payments The thing to notice is that natural capital accounting measures stocks of assets and flows of benefits to humans. The payments are for the flow of services delivered to society. Only in rare cases are stocks of assets going to attract payments. Just as with carbon credits, the project owner is paid to carry out additional activitiies to restore or improve the services. For example farmers in a catchment may be offered incentives to modify their pasture management or farm layout in order to slow the flow of water off the catchment, thereby reducing flood risk and enhancing water supplies.
• Co-benefits when carbon sequestration projects are planned, it is often possible to deliver multiple benefits: environmental, or social, or human. Increasingly purchasers of carbon credits want a package with co-benefits. There is a premium paid for quantified co-benefits.
• Natural capital accounts Since natural capital underpins financial and other capital, many countries have already or are in the process of developing sets of accounts of natural capital, to link to economic accounts.
• Natural capital business planning Businesses find benefit from using the capitals approach. This asks the business to assess its dependencies and impacts on natural, social, human and produced capital.

  This is not a meandering exercise in political correctness; its a professional recognition that while the business planning focus may be on one particular capital, the impact on or benefit to the other capitals affects their operations and brand.

  The capitals – natural capital, social capital, human capital and produced capital – form the foundation of human wellbeing and economic success. By understanding how they impact and depend on the capitals, organizations can make holistic decisions that create value for nature, people and society alongside businesses and the economy.

  The Capitals Coalition

• Transparency and integrity Microsoft stated their position about documentation, transparency and integrity in their Microsoft carbon removal: Lessons from an early corporate purchase including in their top five things learned: For Microsoft and other companies to do this work efficiently in the future, we will need the market to adopt scientifically sound, common, and transparent standards for carbon removal. Projects with inadequate documentation and poor validation of progress in sequestration will struggle to find customers.

There is an increasing range of ecosystems services options for land holders

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