Trading in Ecosystem Services : Carbon Sinks and the Clean Development Mechanism

This article explores ecosystem service trading. To date, most of the literature on this topic has focused on programs in which those who purchase rights to ecosystems use them to replace other, damaged ecosystems. An example would be the Wetlands Mitigation Banking Program, about which much as been written. This article will focus on a less noticed category of ecosystem service trades in which those who purchase rights to ecosystem services use these services to replace pollution reduction technology. The leading example is the Kyoto Protocol's Clean Development Mechanism (CDM). Under this program, those who expand or restore forests, and so sequester carbon, generate carbon reduction credits. They then sell these credits to regulated parties who can use them, rather than pollution reduction technology, to comply with Kyoto requirements. Here, the ecosystem service takes the place of technology-based reductions. The article will describe the CDM and will examine the heated policy debate over this young program. Drawing on the CDM example, it will show that trading systems in which ecosystems services take the place of pollution reduction technology are fundamentally different than those in which one ecosystem service simply replaces another. The article will develop a new analytical framework for evaluating the risks and benefits of this less discussed, yet highly significant, category of ecosystem service trading programs