Sauk River

Executive summary: The Sauk River Watershed Ecosystem Services Market, an affiliate of the Conservation Marketplace of Minnesota, is positioning farmers to improve the environmental management of their farms by making it possible for them to accrue “environmental” credits, like water quality credits and carbon credits that can be sold to industry as verified units of improved water quality and carbon sequestration to fight climate change. Over the next three years, the project will create water quality and ecosystem service trading systems. This will lead to successful operation of the Midwest’s first real “stackable” credit market involving both water quality trading and carbon trading with point source polluters and agriculture in Minnesota. Once successfully established, this unique multiple credit market in the Sauk River watershed, will use the information gathered to create additional markets to serve the Upper Mississippi River basin. This project will benefit Minnesota’s environment as well as provide an economic boost for its farmers.

The Sauk Watershed Ecosystem Services Market is a project led by the Sauk River Watershed District (SRWD) and the Stearns County Soil and Water Conservation District (Stearns SWCD) to develop a platform to operate market based conservation incentives. Market based incentives called Ecosystem Services connect private and public sector buyers and sellers of environmentally based benefits.

The drivers behind the acquisition of credits can be rooted in new regulatory compliance requirements, such as when a wastewater treatment plant has new requirements for further phosphorus reductions when every other pollution control aspect is in compliance. Or the desire to purchase credits can be voluntary in nature as is the case with the Chicago Climate Exchange which sells carbon credits to voluntary buyers that wish to offset their carbon foot print. The project team has identified the following markets to develop and engage conservation efforts in: renewable fuels, both biomass and biofuel, Water Quality Trading (WQT), carbon credits, drinking source water protection, and habitat.

The ecosystem services are to be delivered in a manner that provides the buyer economic incentives when conservation is done off site at another location in the same ecosystem. In the case of water quality trading buying offsite credits that exceed phosphorus reduction requirements has the potential to be dramatically less expensive than the otherwise required facility upgrade would cost for enhancing treatment of that one pollutant parameter.

The intent of developing ecosystem service markets is to utilize multiple market drivers, including cash cropping to stack incentive payments to pay for the cost of the Best Management Practices (BMPs). The BMP costs would include the installation and materials of the BMP itself and the technical and administrative assistance required. The land manager generates a profit provided the environmental gains are real and the market can bear the cost. The payments generated must fall within the cost, purpose and environmental value of those desiring the conservation practices.

The Sauk River Watershed Ecosystem Services Market will be developed in conjunction with efforts in two other watersheds as part of “The Conservation Marketplace of Minnesota” project’s effort to create three local, self-sustainable infrastructure and support systems that will facilitate agricultural participation in ecosystem service markets, like Water Quality Credit Trading. The Greater Blue Earth River, Lower and Middle Minnesota River and Sauk River watersheds have been selected for their diversity in landuse, geomorphology, political settings and market interests.

These watersheds are creating independent frameworks that will provide local experts with the tools and ability to connect credit generators to multiple buyers. Framework administration will provide the necessary site assessments, credit valuation, record-keeping and reporting for buyers and sellers. Contemporaneous development or expansion of ecosystem market opportunities for water quality credit trading, carbon sequestration, habitat, source water protection and renewable fuels for biomass and biofuel production is being pursued. The overall effort will create example market structures and protocols based on implementation of on-the-ground conservation projects sponsored by credit buyers that are transferable to other watersheds.

To increase the sustainability of Best Management Practices, the project is stacking appropriate credit payments from ecosystem service buyers (acknowledging constraints and limitations placed on stacking by buyer or regulatory stipulations). Stacking credit payments creates a cost-efficient and effective method for sustaining desired landuses that provide multiple ecosystem benefits. These locally tested and implemented infrastructure and technical support systems will be transferred to other interested watersheds in Minnesota and to other states in the Upper Mississippi River Watershed. This is being accomplished through development of a handbook and creation of a National Advisory Committee with diverse representation from across the Mississippi River Basin. The committee will review materials, provide commentary and be exposed first-hand to the framework development process.

The project is also developing a website to facilitate project education and reporting. The project intends to improve public trust and comfort in market-based approaches by including transparent decision-making on credit estimation methods, site criteria and prioritization. The project logo and name (“Conservation Marketplace of Minnesota”) will provide a label and certification process that contains multiple potential benefits for team members including marketing, education, name recognition and access to pass-through grants. Operational frameworks will be functioning by 2010 with approved credit transactions and future improvements to support structures occurring through 2011 with the grant funds, working towards becoming a fully self-sustaining program.