Evaluating and Trading Ecological Services A Lone Star Coastal Exchange Adam Davis Partner

1. Evaluating and Trading Ecological Services A Lone Star Coastal Exchange Adam Davis Partner April 29, 2013

2. Towards a ‘Lone Star Coastal Exchange’ Environmental Markets • Fundamental elements of an Exchange • Aligning economic incentive & environmental performance • 4 universal framework elements • 2. Examples of other regional efforts • 3. Demand and Supply • 4. Key next steps • Measuring increments of desired outcomes • Landowner access and eligibility

3. From ‘Stop It’…Laws & regulations for the environment Environmental Harm Regulation Market Structure Regulation air pollution Clean Air Act Endangered Species Act species endangerment NOAA overfishing Clean Water Act wetland loss local land use regulation sprawl, imp. surface loss nitrogen runoff Clean Water Act CERCLA Ntl. Resource Damages AB32, RGGI, voluntary climate change

4. …to aligning incentives. The government innovation of incentives Environmental Harm Market Structure air pollution SO2 trading conservation banking species endangerment total allowable catch & ITQ overfishing wetland mitigation banking wetland loss TDR’s sprawl, imp. surface loss nitrogen runoff TMDL’s DSAY’s Ntl. Resource Damages CO2 trading climate change

5. Restoration Economy jobs and assets E-Sector market activity is robust & growing Market Structure Market Size $ $ $ $ $ 800 m 3.0 billion 2.2 billion 4.5 billion SO2 trading conservation banking total allowable catch, ITQ (value of landed catch) wetland mit. banking 560 m CO2 trading >300 programs TDR’s Ntl. Resource Damages 48 programs

6. Four common elements… A pattern emerges from early innovations TARGET UNIT • “flood storage capacity” • “no net loss” • “public access” • “breeding habitat” • functional acres • tons CO2e • lbs of fish landed • lbs of N reduction GEOGRAPHY TRANSFER • service area • historical range of species • fishery • watershed • mitigation bank • conservation bank • catch shares • water quality trading mitigation bank

7. Using science and verification to know what we’re buying with the money we’re spending. arkets” vs. “Payments for E-Services” private investment public spending Shared metrics and reporting coastal protection public priorities

8. Examples of Regional Exchanges • Environmental Accounting and Trading • Beyond “compliance” • Efficient and effective procurement • Key features: • Match goals of buyers with benefits provided by sellers • Scientifically verified units of measure • Monitoring and management included

9. Examples of Regional Exchanges II • Baseline, design, verification, credit tracking • Willamette Ecosystem Crediting Platform • Standardize the operations and management of credit creation • Focus on salmonid, prairie and riparian habitats • Bay Bank • Match goals of buyers with benefits provided by sellers • Focus on forest and habitat conservation, water quality, Brook Trout credits

10. Examples of Regional Exchanges III • Lake Tahoe Clarity Crediting • Accounting for sediment reduction actions • Colorado Habitat Exchange • Focus on Greater Sage Grouse • Mokelumne Watershed • Forest, meadow and streamside restoration

11. Demand and Supply on the Texas Coast • Regional goals: • Flood protection/flood storage capacity • Essential bird and fish habitat • Water quality • Outdoor recreation/coastal access • Categories of buyers: • Corporate sustainability interests • Voluntary or regulatory offset purchases • Traditional conservation finance • Flood storage beneficiaries

12. Critical elements of the LSCE Establish credible baseline (GIS) Standard Setting Supply side interactions (Landowner Eligibility) Project Development tools Verification and Certification Protocols Transparent Transaction Platform •       Connects Buyers and Sellers •       Credit Tracking

13. Baseline and Standard Setting • Baseline conditions and priority setting: • Aggregate existing INVEST, SSPEED Center and NPCA data base information with publically available data sets. • Both “green and grey infrastructure” identified along with natural features • Develop criteria for demand driven credits • Combination of ecological success criteria with legal and/or financial assurances • Ecological ‘uplift’ above a baseline • Clear rules for participation

14. Eligibility and Project Development • Physical location and property characteristics • Match with desired outcomes • Project templates simplify participation • Predict credit yield • Step by step process and technical assistance for participants

15. Verification and Transaction Platform • Consistent criteria for tracking outcomes • Tools and methods for participants • Audit and monitoring design • Online market infrastructure • Serialized credits avoid double counting

16. Next steps • The next level of clarity for both demand and supply. To that end: • Metrics and standard setting • Kevin Halsey, Ecometrix Solutions • Establishing market infrastructure • James Remuzzi, Sustainable Solutions

17. Contact: 2002 Clipper Park Rd. ~ Suite 201 Baltimore, MD 21211 (443) 921-9441 www.ecosystempartners.com adam@ecosystempartners.com