Swamp swaps: the "second nature" of wetlands.

AuthorBosselman, Fred
  1. INTRODUCTION AND SUMMARY II. WETLAND MITIGATION BANKING A. The 2008 Regulations B. Qualifying as a Bank III. WATER QUALITY TRADING IV. SPECIES CONSERVATION BANKS V. GREENHOUSE GAS TRADING A. Carbon Markets B. Wetlands and Greenhouse Gases C. Carbon Dioxide 1. Carbon in Soil 2. Peatlands 3. Estimating Carbon Storage D. Methane 1. Oxygen Deprivation 2. Sulfates 3. Plant Varieties E. Nitrous Oxide 1. Rice Paddies 2. Treatment Wetlands 3. Upland Runoff VI. WETLAND BIOFUELS A. Peak Oil? B. Biofuel from Algae C. Paludiculture D. Transgenic Plants VII. WETLAND MANAGEMENT LAW A. The Law of Wetness B. No Net Loss VIII. MANAGING WETLANDS IN A WONDERLAND OF WINDFALLS A. Identifying Wetland Patterns B. Choosing Among Processes 1. Wetland Services 2. Wetland Disservices 3. Naturalness C. Monetization 1. Valuation Methodologies 2. Rights and Responsibilities D. Designing Management Projects 1. Entrepreneurship 2. Scientific Progress 3. Adaptive Management B. Creating Markets 1. Enron and the California Electricity Market 2. Secrecy, Leverage, and Gambling 3. Law and Economics Reevaluated 4. Voluntary Carbon Offset Market 5. Integrity v. Innovation IX. THE "FIRST NATURE" OF WETLANDS I. INTRODUCTION AND SUMMARY

    Bison and pine trees had once been members of ecosystems defined mainly by flows of energy and nutrients and by relations among neighboring organisms. Rearrayed within the second nature of the market, they became commodities: things priced, bought, and sold within a system of human exchange. (1) Until recently, the wetland preservation movement has relied primarily on public and nonprofit entities that recognized the important nonmarket functions that wetlands may perform. (2) These entities used public or donated funds to manage wetlands in ways that would further the desired functions. (3) Wetlands were generally believed to have no market value except as opportunities to be destroyed for development. (4)

    Today, we are at the early stages of wetland management for market values. These opportunities arise in a growing number of trading systems in which components of managed wetlands can be traded for rights having cash value. The first half of the Article will describe five markets, in varying stages of maturation, that offer the prospect of managing wetlands for profit.

    Mitigation banking has been employed sporadically for some years, but it has been given a big boost by 2008 federal regulations adopted by the United States Army Corps of Engineers (COE) and the United States Environmental Protection Agency (EPA). (5) These new rifles make the purchase of shares in a wetland mitigation bank the preferred option for land developers who plan to eliminate existing wetlands. The new guidelines for the creation of mitigation banks have created an outpouring of interest. (6)

    Water quality trading is also a favorite of EPA, though it has developed more slowly than its proponents have wished. (7) Municipal and industrial wastewater dischargers, who require federal permits that force them to reduce pollutant loads, may find it cheaper to reduce an equivalent amount of pollution from nonpoint sources, such as agriculture, for which permits are not required. (8) The restoration or creation of wetlands to reduce non-point source pollution is often more efficient than end-of-pipe treatment of point sources. (9) The use of wetlands to reduce toxic pollutants also offers trading possibilities. Federal legislation clarifying the rules for water quality trading could spur renewed interest in the program.

    Species conservation banking is at a relatively early stage of development, but it has aroused growing interest as the concern for biodiversity has increased. (10) California has an ongoing conservation banking program through which vernal pool wetlands have been restored as a tradeoff for take of certain declining species that rely on such pools. (11) Habitat conservation plans under the Endangered Species Act (12) have also included such tradeoffs, as have many informal state and local transactions. (13) International organizations are now promoting large-scale conservation banks. (14)

    The big gorilla in the tradeoff tent is greenhouse gas offsets. Many developed countries have adopted regulations that mandate reductions in the emission of greenhouse gases (GHGs) such as carbon dioxide, methane, and nitrous oxide. (15) These countries often allow their local sources of GHGs to reduce emissions by crediting reductions in other countries rather than at home. (16) This has spurred a rapidly growing phalanx of entrepreneurs who design projects in the developing countries that will reduce GHGs. (17) In the United States, some states and regions have adopted such legislation, and the Obama administration supports a national bill. (18) Because wetlands can serve as both sources and sinks for the three most important GHGs, these opportunities have spawned extensive research and development of ways to manage wetlands for GHG credit. (19)

    Farthest from actual development, but the object of substantial venture capital investment, is the use of wetlands to produce biofuels. (20) Potential wetland crops include algae and genetically modified varieties of wetland plants. (21) While the technology is at an early stage, investment is triggered by federal legislation that mandates steadily increased use of this type of biofuel. (22) Other countries are also exploring wetland biofuel options to produce commodities tradable on world markets. (23)

    Each of these five marketing opportunities has a similar advantage. They may modify wetlands, but they will leave them wet. Federal wetland law has been aimed primarily at the dredging and filling of wetlands, not their management. (24) The national policy of "no net loss" has made wetness the objective and acreage the standard. Concern about wetland function has been more rhetorical than prescriptive. Consequently, the management of wetlands for profit may escape some of the legal complications that now attend the destruction of wetness.

    The second half of the Article steps back to look at the broader issues raised by this potential wonderland of wetland windfalls. Managing wetlands to achieve the goals of these programs requires at least five stages, each of which poses both risks and opportunities for both the manager and the public. First, a wetland needs to be identified, selected, and defined as the locus of management. No two wetlands are exactly alike, nor is the landscape in which they are situated. How much information about the location of a project is needed before a project begins? To what extent must the area surrounding the wetland be managed as part of the project?

    Second, within every wetland, a host of biogeochemical processes are constantly emerging, changing, evolving, and disappearing, often in ways difficult to predict. Some of these processes provide utilitarian benefits to people and can be characterized as services. Others, like emission of methane, methylation of mercury, and production of disease-vectoring organisms, are disservices. Which processes will need to be managed and monitored to achieve the objectives of the applicable market?

    Third, once one or more wetland processes have been identified as objectives, the processes need to be monetized for trading. Some processes are much easier to value than others. The valuation methodology must be simple enough to encourage trading but not so unscientific that it will foster gaming the system. Additionally, if trading will produce benefits for managers, their responsibilities for maintaining baseline standards without compensation must be clearly identified.

    Fourth, a market should produce important byproducts. It should foster entrepreneurship and imagination rather than the mechanical check off of regulatory fists. It should encourage research and development of new and enhanced wetland science. It should encourage creative, adaptive management that monitors and adjusts projects throughout their lifetime. But abuse of creativity can result in demands for more restrictive controls, which in turn may reduce marketability.

    Fifth, credibility is essential for a market to achieve its goals. Recent history may make this the most difficult objective to achieve. For some time, market supervision has been generally minimized for philosophical reasons. The resulting abuse of markets has bred a growing suspicion of markets in the United States and throughout the world. Better oversight of these new markets is essential, but providing adequate supervision without increasing transaction costs to self-defeating levels is a challenge.

    Finally, in the brief concluding section of the Article, the basic question suggested by the subtitle is addressed. What do we lose by converting the components of natural wetlands into tradable commodities--that is, into a second nature? Ecosystem management is essential if we are to deal with the problems that human impacts on the planet create. Management of wetlands could be an important component of ecosystem management to achieve benefits to humanity. But neither science nor economics can recreate the psychological value of nature appreciation.

    While we undertake to manage wetlands, we should be sure that plenty of unmanaged wetlands remain available, not just to provide controls against which our management can be compared, but as opportunities for future generations to understand and wonder at the complex ways in which nature operates without human management. We should not let our descendants forget that although individual wetland components may have value as commodities, they all originated within the "first nature" of natural wetlands.

  2. WETLAND MITIGATION BANKING

    Under section 404 of the Clean Water Act (CWA), developers must obtain a permit from the United States Army Corps of Engineers (COE) to dredge or fill certain types of wetland. (25) COE's preferred alternative is for the...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT