SPEECH USDA Forest Service Washington, D.C.

Putting Natural Capital to Work
Forest Service Associate Chief Sally Collins
Ecosystem Services Conference
Washington, DC—May 18, 2005

I want to start by saying how pleased I am that this conference is taking place. I believe that the issues surrounding ecosystem services are some of the most vital and pressing conservation challenges facing us in the 21st century, and we’ve only just started to scratch the surface. Time is not on our side when it comes to losing our natural areas and the services they provide.

That’s why this conference is so tremendously important. In recent months and years, the issues surrounding ecosystem services have stirred a huge amount of energy. At the Forest Service’s Centennial Congress in January, loss of ecosystem services was a top concern voiced by partners from all over the country. We followed up by hosting three focus groups, where we listened to our partners’ ideas and explored some of the opportunities we have to create markets and payments for ecosystem services. Many of our partners in the private sector are deeply engaged in this issue, including those here with me on this panel—in fact, they’re leading the way. So are states like Texas—we’re supporting Texas in developing an Ecosystem Services Pilot Program. All this energy gives me a great deal of hope that we’re beginning to make real progress.

What I’d like to do today is to position the Forest Service in relation to the issues surrounding ecosystem services. I’ll start with a historical overview of where I think we are, then say a few words about where I think we’re headed in dealing with these issues as an agency.

Tragedy of the Commons
The Forest Service has been involved in delivering ecosystem services for more than a century now, although we didn’t always understand it in quite those terms. The Millennium Assessment has nicely catalogued a range of ecosystem services from forests, all of which we have long delivered from national forest land: fresh water, flood regulation, local climate regulation, medicines, and spiritual values, just to name a few. To give you one example—one from medicinal values—Pacific yews harvested from the Gifford Pinchot National Forest in the early 1990s yielded the first taxol, which is used to treat various forms of cancer.

Traditionally, such services have been free. Whether they came from public or private land, most ecosystem services have been available to anyone who wanted or needed them. They are what economists call a “commons,” and a commons is notorious for the tragedy it can lead to. When goods or services are for the taking, they tend to be undervalued. People will exploit them, and no one has a stake in conserving them. It’s the story of what happened to the beaver, to the bison, to forests in some places, and now to ocean fisheries the world over. The logic of self-interest dictates that a common resource will be relentlessly exploited for short-term personal gain until it’s depleted, even if it means long-term collective disaster.

When that happens, our market-based system of allocating resources has failed. It was market failures at the turn of the 19th century associated with timber, rangeland, water, and big game that helped give rise to conservation, leading to creation of the National Forest System. On national forest land, you could argue that markets eventually failed again following World War II, when our management for timber and other commercial outputs came increasingly at the expense of undervalued services such as wildlife habitat and outdoor recreation—services that the public increasingly wanted.

The public was entitled to these services by law under the Multiple Use–Sustained Yield Act of 1960 and the legislation that followed in the 1960s and 1970s. To meet the intent of the law—and because it was the right thing to do—we adopted a more holistic approach to land management. Today, we take entire landscapes into account, and we manage them primarily for such values as clean air and water, wildlife habitat, and opportunities for outdoor recreation. In a sense, we have reversed our postwar approach to national forest management: Where for 30 years we managed primarily for commercial outputs such as timber, with ecosystem services as a byproduct, today we manage primarily for ecosystem services, with timber mainly as a byproduct of treatments for other purposes.

Loss of Open Space
That works on public land, so long as government has the resources to deliver ecosystem services as public goods. But it’s quite another matter on private land, where the logic of the marketplace dictates the need for financial returns. In the United States, that’s incredibly important, because some 71 percent of the nation’s timber and some 89 percent of our timber production is on private land. Sustainable forest management in the private sector depends on sustained commercial outputs of forest products such as timber.

The problem is that markets for America’s forest and rangeland products have softened at the same time that markets for urban land development have boomed. Every day, we lose more than 4,000 acres of working farms and ranches to development, and working forests, too, are being sold and fragmented. The South remains the largest timber-producing region in the world, but even the South has been affected. Some southern states have had net forest losses in every decade since 1960, including Florida, Louisiana, and Texas. North Carolina has less forest cover today than ever before in its recorded history, mostly due to urban development.

When a private forest or ranch is sold for development, the loss of ecosystem services is direct, immediate, and permanent. We all know that. But such losses also affect public land in a couple of ways:

• First, habitat loss. Wildlife species such as elk or grizzly are often associated with the national forests, but they actually use entire landscapes, including privately owned bottomlands at certain times of the year. As these private lands are developed, the wildlife disappears, no matter how good the habitat remains on adjacent public land.
• Second, loss of industrial infrastructure. Public land management is based on partnerships with private industry. Without a healthy forest products industry, including both its timber-harvesting and its wood-processing components, we can’t do the ecological restoration and maintenance that we so desperately need—for instance, on the 73 million acres of national forest land that are highest priority for treatments to reduce fire risk. And without those treatments, the public loses valuable ecosystem goods and services such as disturbance regulation, water purification, and wildlife habitat.

Finding Solutions
What’s the solution? In this age of globalization, where international markets drive so much of what happens, the answer lies in how we work with a whole variety of partners. The Tragedy of the Commons is destroying forests in some parts of the world while undermining our own forest products industry through cheap imports. The Forest Service is working with partners overseas to build capacity for sustainable forest management and to help stop the international trade in illegal forest products. That can immensely help our own forest products industry.

But I’m afraid it might not be enough. We also need to think about what we can do here at home to bolster our ability to provide ecosystem services. Let’s look at three traditional approaches:

• First, governments might acquire more land to deliver ecosystem services as public goods. However, government resources are already stretched thin, and in many areas there’s little political support for more public land.
• Second, governments might offer tax relief or tax incentives for sustainable forest management. Tax reform is well worth looking into, but the rising value of developed land might eventually motivate landowners to sell, anyway.
• Finally, governments and conservation groups might acquire more conservation easements, for example through our own Forest Legacy Program. These efforts are crucial, and we’ve made incredible strides here in the past two decades. But the scope of what we can do here is limited. It’s been estimated that some 236 million acres would be needed for a comprehensive system of habitat conservation areas in the United States, yet all easements combined currently cover less than 5 percent of that.

All of these traditional approaches are good and necessary, but none of them offers enough, either alone or in combination, to greatly reduce the loss of ecosystem services.

Market Correction
Part of the underlying problem seems to be market failure. The market sees only the value of the land for development and for forest products such as timber. It ignores the value of the land for delivering water, sequestering carbon, and supporting wildlife. The value of such ecosystem services might not completely replace the value of traditional forest products, but it can be a vital supplement. If we can assign a monetary value to such ecosystem services and add it to the value of forest products, then the sum might be greater than the value for development. The economic incentive for sustainable land management would then outweigh the incentive for development.

A market correction along these lines might go a long way toward solving problems related to loss of open space. It’s been called natural capitalism—finally recognizing nature’s contribution to the balance sheet and putting that natural capital to work. It’s already being done in a number of places in a number of ways, for example through emissions trading or by paying for crop pollination or upstream watershed protection. I’m sure you all know many examples.

So that’s the fundamental problem I think we face: how to assign a monetary value to ecosystem services and then how to put that natural capital to work. I see at least three subsets to the problem:

• First, some values associated with ecosystem services can simply never be fully measured in terms of dollars and cents, such as wilderness and roadless values or cultural and heritage values. We’ve got to identify those values and continue providing them as public goods.
• Second, for the ecosystem services that are payable or tradable, such as water quality or carbon sequestration, we’ve got to figure out how to assign property rights and regulatory roles. For example, whose right takes priority, the upstream property owner’s right to change land use or the downstream water user’s right to clean water? Or, for a cap-and-trade system, who does the banking, who does the monitoring, and how should the trading work? And what new institutions will be needed to provide governance?
• Finally, for ecosystem services to be paid for, proper prices need to be set, and that takes good information. A lot of work has already been done in this area by the World Bank and others, so we do know that proper pricing is feasible. But we’re going to need a lot more information if we want to create markets that are truly efficient and if we want to make payments that truly make sense.

Forest Service Role
That brings me to the role I see for the Forest Service in all this. Our main role will be to serve as a convener and facilitator. We can help stimulate a public dialogue on markets and payments for ecosystem services while guiding and enriching the dialogue through our research. Our Research staff and our State and Private Forestry staff will together take the lead in this.

• We already have cutting-edge research that we can draw on to address a number of questions. For example, what should our priorities be? What market schemes are appropriate, how do they evolve, and what is the role of secondary trading? How should the values from ecosystem services be priced and how should the transactions be made? Do we need a national administrative body for markets and payments? Our researchers can help us answer these questions. They can also help address evaluation and monitoring needs. In addition, I think we need to research the social dimension—the public values tied to ecosystem services.
• Applying all that research is a job for our State and Private Forestry staff in collaboration with our partners. Just getting the information out to the public and convening forums such as this are absolutely essential. We’ll also have a role to play in providing related information and technical assistance to landowners, and we’ll need to work with our partners to get pilot markets and payment schemes going. We’ll also need to work together to develop the necessary regulatory and legislative framework.
• The National Forest System will continue to play a huge role in delivering ecosystem services as public goods. For example, we now manage the nation’s largest inventory of softwoods, and by 2050 we anticipate that fully half the nation’s softwood inventory will be on national forest land. That’s a huge carbon sink. We also expect to have some of the nation’s most important biodiversity stores for species adapted to older forest habitats. Although there is no national policy in place, there is already some local banking of wetland credits and even carbon credits on national forest land. Also, we can build on the experience we’ve gained on the national forests in working across landscapes to manage whole ecosystems. Those experiences can help guide us in developing institutional frameworks for assigning property rights associated with ecosystem services.
• And let’s not forget the international dimension. Our International Programs staff will continue working with international partners to build capacity for sustainable forest management and to stop the international trade in illegal forest products. Credit markets are international, as are corporations, so we’ll need to work with partners to develop the necessary mechanisms and institutions for international trading. Ultimately, I believe that we’ll need a sound international framework for delivering ecosystem services worldwide.

A Gathering Momentum
To sum up: I believe that our nation faces a great and gathering peril. In the next hundred years, our population will more than double, and if we sit back and do nothing, our open spaces will dwindle away. As working farms, forests, and ranches disappear, so will many of the ecosystem services that we take for granted—and that our children’s children will want and need.

Traditional approaches to the problem won’t be enough. Public land, tax reform, and conservation easements will take us only so far. We have got to give private landowners more of an incentive to stay on the land and manage it sustainably, and that will take markets and payments for ecosystem services.

It won’t be easy. As I said, we’ve only begun to scratch the surface of the problem, and time is not on our side. But I do see hope through events such as this. I see a gathering momentum in every part of the country—in the private sector as well as the public sector—behind coming together to find collective solutions. Through that momentum, I believe that we can—and we will—find ways to truly make a difference.

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