WRI Stories Feed: NutrientNet: Performance-Based Incentives for Improving Environmental Quality

A Better Way for the U.S. Government to Clean Our Water

Mindy Selman — Thu, 07 Aug 2008 11:09:45 -0400

When it comes to allocating money for conservation, reverse auctions can help governments get the biggest bang for their buck.

Reverse auctions are auctions with many sellers but only one buyer. They are often used in the private-sector to procure services inexpensively, but reverse auctions can also be used to cost-effectively allocate public conservation dollars.

In 2005, WRI, together with the Pennsylvania Environmental Council and other partners, conducted a pilot reverse auction in the agriculture-heavy Conestoga watershed of Lancaster County, Pennsylvania. The goal was to pay farmers to implement best-management practices that reduce phosphorus, a leading cause of water pollution in the watershed.

The Conestoga WatershedWe held two reverse auctions that resulted in allocations of $486,000 to farmers who showed that they reduced the most phosphorus for the least amount of money. Farmers first selected the best management practices that they wished to propose. Next, phosphorus reductions from each proposal were estimated using WRI’s NutrientNet software. Farmers then placed competitive bids indicating the payment they would accept to implement each proposal. Bids with the lowest prices per pound of phosphorus reduced were funded; those with the highest prices were not.

As a result, an estimated 92,000 pounds of phosphorus are expected to be reduced over the lifespan of the best-management practices implemented through the reverse auction. Results showed that the allocation method resulted in seven times more phosphorus reductions per program dollar spent than traditional government-subsidy allocation methods within the watershed.

The federal government even has an in-house example of this method of award allocation. In July 2006, a wetlands reserve program pilot used reverse auctions to reduce the acquisition costs of program easements in several areas across the country. It was a huge success, enrolling 3,500 acres and reducing acquisition costs by 14 percent, or $820,000.

Reverse auctions can maximize the effectiveness of federal and state dollars because they combine performance measures with cost. Many conservation programs do not currently consider cost as a factor when allocating funding. Furthermore, reverse auctions allow for competitive bidding—which encourages applicants to reveal the “true cost” of adoption—and do not rely on fixed payment schedules.

In the face of rising concerns about climate change and water quality, it is critical that governments become more effective at allocating money to achieve environmental objectives. One way for them to do it is to formally adopt reverse auctions for agricultural conservation programs, but also for programs that aim to protect and restore wetlands, species, and habitats.

Food Price Crisis Triggers Questions about Global Food Security

Zachary Sugg — Fri, 25 Apr 2008 15:00:17 -0400

Skyrocketing food prices have triggered riots across the developing world and forced the world’s largest food aid agency to confront a $500 million deficit. The media are focused on short-term consequences, but there are also concerns about the long-term forecast for global food security, poverty, and hunger.

A food line in AfricaGlobal food prices have been rising steadily since 2000, and are up almost 50 percent in the last year alone. Low-income countries that import more food than they export have been hit hardest. Thirty-seven countries—21 of which are in Africa—are in a food security crisis, according to the United Nations Food and Agriculture Organization (FAO).

The World Bank recently announced that the current food situation could push 100 million people into deeper poverty, undoing years of progress in the fight against global poverty and hunger. Poor households spend between 60 percent to 80 percent of their income on food, compared to only 10 percent to 20 percent in most industrialized countries.

FAO Food Price Index: February 2007 - January 2008

food price index

Source: FAO, 2008

What Are the Causes?

Despite several record-breaking harvests, world cereals production between 2000 and 2007 fell well short of consumption. The shortfall has forced the depletion of world grain stocks—a useful proxy for global food security—which are now at their lowest levels in 25 years.

There are several commonly acknowledged drivers behind the current food price spikes, including:

High price of oil, manifested in increased fertilizer and fuel costs
Increased demand for meat and dairy products in the developing world, which requires more grain be fed to livestock
Diversion of crops for biofuel production
Adverse weather conditions, such as the recent six-year Australian drought that decimated rice production
Commodity speculation by investors, and
Lack of access to improved inputs and markets amongst smallholder farmers in the developing world—particularly in sub-Saharan Africa—which limits their ability to react to the incentives created by increased demand, and
Domestic policy responses to higher food prices in developing countries—such as export taxes, bans, or other restrictions—which exacerbate the problem.

These factors together have created a “perfect storm” that has driven food prices up. Although adverse weather conditions and commodity speculation may nudge food prices up in the short term, the rest of these drivers appear to be longer-lasting, and their effects are likely to be felt for several years.

Short-Run vs Long-Run Measures for Global Food Security

The FAO forecasts a 2.6 percent rise in cereal production in 2008, which would result in a record harvest of over two billion metric tons. If this prediction materializes—much depends on unpredictable weather—the current food crisis should ease somewhat. Even so, experts predict that prices will remain high at least through 2015, indicating that short-term policy interventions are necessary to combat hunger over the coming decade. These actions should include targeted safety nets for vulnerable populations, such as the urban poor; increased support for food aid agencies; and short-run trade policy measures, such as reducing tariffs and taxes on key staples.

Over the long-run, ensuring global food security will require greater effort. While most experts believe that the world’s agro-ecosystems, coupled with improved technology, have the physical capacity to satisfy demand through the 21st century, this will not happen if current circumstances prevail. Agricultural trade barriers, environmental degradation, and the under-performance of African agriculture, energy efficiency, and the restoration of marginal lands must all be addressed.

Furthermore, climate change threatens to exacerbate food insecurity in the world’s poorest regions. The Intergovernmental Panel on Climate Change (IPCC) predicts that rising temperatures will decrease yields in 40 developing countries, mainly in sub-Saharan Africa, and that three degrees Celsius of warming will increase the price of food by 40 percent. Without concerted global action to help vulnerable populations adapt to a warming climate, while also addressing the other drivers of food security described above, global hunger will not be tackled this century.

*Photo by Peter Casier via Flickr

EarthTrends Links

[Crystal Davis](user/293) contributed to this article. An earlier version of this article is posted on EarthTrends.

Coastal Populations Losing Livelihoods to Polluted Waters

Paul Mackie — Wed, 02 Apr 2008 10:18:05 -0400

Coastal communities worldwide are witnessing their livelihoods choked by agricultural and industrial pollution, according to findings released today by the World Resources Institute.

Eutrophic Zones Worldwide“A significant portion of the world’s population - nearly half of which lives within 40 miles of a coast - is vulnerable to harmfully over-enriched ecosystems,” said Mindy Selman, senior associate at WRI and lead author of WRI’s findings.

Excessive nitrogen and phosphorus has emerged as one of the leading causes of degraded water quality. WRI identified 415 over-enriched - or “eutrophic” - coastal areas throughout the world. Of these, 169 are depleted of oxygen, creating “dead zones” that are unable to support marine life. Another 233 of the systems identified are experiencing one or more symptoms of eutrophication, including toxic algal blooms, loss of biodiversity, and die-off of coral reefs. Only 13 of the coastal areas identified exhibit signs of recovery.

Some of the coastal areas studied include the Chesapeake Bay, Baltic Sea, Gulf of Mexico, and Tampa Bay. Seventy-eight percent of the assessed continental U.S. coastal area and 65 percent of Europe’s Atlantic coast are eutrophic.

“There is a dramatic growth in areas receiving nitrogen and phosphorus created by agriculture, sewage, industry, and fossil fuel combustion,” said Robert Diaz, a co-author of the findings and professor of marine science at the College of William and Mary.

Over the past 50 years, human activities have caused a doubling of nitrogen pollution and a tripling of phosphorus pollution in coastal areas. By comparison, human activities have increased atmospheric concentrations of carbon dioxide - the gas primarily responsible for global warming - by 32 percent since the beginning of the Industrial Age.

The most severe form of oxygen depletion in coastal areas has escalated dramatically over the past 50 years, increasing from about 10 documented cases in 1960 to 44 in 1995 to at least 169 today.

The sources of pollution vary by region. In the United States and Europe, agricultural sources such as animal manure and commercial fertilizers are typically the main causes of eutrophication. Sewage and industrial discharges, which usually receive some treatment, are a secondary source. However, elsewhere in the world, wastewater from sewage and industry is often untreated and a primary contributor to eutrophication. Only 35 percent of wastewater in Asia is treated, 14 percent in Latin America and the Caribbean, and less than 1 percent in Africa.

The full findings appear in Eutrophication and Hypoxia in Coastal Areas: A Global Assessment of the State of Knowledge.

“The number of degraded coastal areas around the world is sure to be a much greater problem than even our study of 415 areas suggests,” Selman said. “Many countries will need to take initial steps in monitoring their water and eventually reducing pollution through smart policies.”

Leading Companies Responding to Ecosystem Degradation

Paul Mackie — Mon, 10 Mar 2008 15:35:37 -0400

Corporate Ecosystem Services Review road-tested by Akzo Nobel,

BC Hydro, Mondi, Rio Tinto, and Syngenta

Global warming may dominate headlines today. Ecosystem degradation will do so tomorrow.

To prepare businesses for this new landscape, three organizations today launched a set of guidelines designed to help companies proactively develop strategies to manage risks and opportunities arising from ecosystem degradation.

The guidelines, called the “Corporate Ecosystem Services Review,” were developed by the World Resources Institute (WRI) in collaboration with the Meridian Institute and World Business Council for Sustainable Development (WBCSD). Five WBCSD members - Akzo Nobel, BC Hydro, Mondi, Rio Tinto, and Syngenta - “road-tested” the methodology and provided input to its design.

“The world’s forests, wetlands, and other ecosystems are under tremendous pressure due to climate change, land conversion, and many other factors,” said Jonathan Lash, president, WRI. “As ecosystems degrade, companies will face operational, regulatory, and reputational risks while those that offer solutions may find new business opportunities and new sources of revenue.”

Ecosystems provide companies with a wide variety of benefits or services including freshwater, wood, pollination, climate regulation, and protection from natural hazards, to name a few.

“Ecosystem services are often unacknowledged, yet they underpin many corporate activities,” said John Ehrmann, managing partner of the Meridian Institute. “I am pleased with the feedback from company managers who are finding the guidelines helpful for developing strategies that improve both corporate performance and ecosystem stewardship.”

The road-testers found that the guidelines can provide a number of other benefits as well. They can help companies anticipate new markets and government policies that may emerge in response to ecosystem degradation. They can strengthen corporate environmental impact assessments by adding considerations traditional methods may overlook. They also can help companies better manage conflicts over resources, identifying options for better trade-offs between ecosystem services.

“The methodology helped us identify and rank emerging problems, and provided us with a framework for turning risks into opportunities,” said Peter Gardiner, natural resources manager at Mondi, a leading international paper and packaging manufacturer.

Mondi’s newfound strategies include a number of operational changes that will increase the company’s efficiency in using freshwater, a scarce ecosystem service, and lead to new markets for the company’s byproducts.

“The Corporate Ecosystem Review helped us to better understand how a number of emerging environmental changes are likely to affect our business and how our company might best position itself to respond to these changes,” said Steve Hunt, senior vice president, Asia-Pacific, Eka Chemicals, a division of chemical giant Akzo Nobel.

Some road-testers, such as Mondi and BC Hydro, used the guidelines to gain insight into the direct implications that ecosystem trends pose for them. Other road-testers, such as Akzo Nobel and Syngenta, applied the methodology to understand the risks faced by a segment of their customers due to ecosystem degradation and, in turn, discovered opportunities for new products or services that address these risks. The guidelines profile these and other road-test experiences.

“We’re going to be hearing a lot about the Corporate Ecosystem Services Review. A couple dozen more WBCSD members are already taking it up this year,” said Björn Stigson, president of the WBCSD. “Leading companies realize that they need to be prepared for the business challenges posed by ecosystem decline.”

The guidelines were launched at WBCSD’s annual conference of delegates in Switzerland. For a copy of The Corporate Ecosystem Services Review, visit www.wri.org/ecosystems/esr.

Choking Coastal Waters

Mindy Selman — Fri, 04 Jan 2008 15:39:58 -0500

My team at WRI, together with Dr. Bob Diaz at the Virginia Marine Institute, has identified and mapped 415 eutrophic and hypoxic coastal systems worldwide through an extensive literature review. Of these, 169 are documented hypoxic areas, 233 are areas of concern and 13 are systems in recovery.

World Hypoxic and Eutrophic Coastal Areas

Our findings highlight the dramatic growth of areas receiving the endflows of nitrogen and phosphorus created by agriculture, increasing industry, fossil fuel combustion, and population growth. More than 1,000 scientists estimated, in the Millennium Ecosystem Assessment, that, as a result of human activities over the past 50 years, the flux of nitrogen has doubled over natural values while the flux of phosphorus has tripled.

The effects of nutrient pollution in coastal waters may include excessive growth of algae, including harmful algae species that can cause fish kills and shellfish poisoning in humans; reduced species diversity and dominance of gelatinous organisms such as jellyfish; damage to coral reefs; and formation of oxygen-depleted “dead zones.”

The map shows three categories:

Documented hypoxic areas - Areas with scientific evidence that hypoxia was caused, at least in part, by an overabundance of nitrogen and phosphorus.
Areas of concern - Systems that exhibit effects of eutrophication, including elevated nitrogen and phosphorus levels, elevated chlorophyll a levels, harmful algal blooms, changes in the benthic community, damage to coral reefs, and fish kills. These systems are impaired by nutrients and are possibly at risk of developing hypoxia. Some of the systems may already be experiencing hypoxia, but lack conclusive scientific evidence of the condition.
Systems in recovery - Areas that once exhibited low dissolved oxygen levels and hypoxia, but are now improving. For example, the Black Sea recovery is largely due to the economic collapse of Eastern Europe in the 1990s, which greatly reduced fertilizer use. Others, like Boston Harbor in the United States and the Mersey Estuary in the United Kingdom also have improved water quality resulting from better industrial and wastewater controls.

The actual extent and prevalence of eutrophication is only beginning to be studied. Some countries, such as the United States and European Union, have undertaken comprehensive coastal surveys in the past five years, and have the most comprehensive coastal data on eutrophication. However, data do not exist or are not publicly available for areas that may be suffering from the effects of eutrophication.

Given the state of global data, the actual number of eutrophic and hypoxic areas around the world is likely to be greater than the 415 listed here. The most under-represented region is Asia. Asia has relatively few documented eutrophic and hypoxic areas despite large increases in intensive farming methods, industrial development, and population growth over the past 20 years. Africa, South America, and the Caribbean also have few reliable sources of coastal water quality data.

It is critical that we begin to close the gaps in our knowledge about where eutrophication is occurring globally.

As part of WRI’s work on this topic, we will release a policy note in March 2008 entitled Eutrophication and Hypoxia in Coastal Areas: A Global Assessment of the State of Knowledge.