March 01, 2016

A New Federal Policy for Ecosystem Services

J.B. Ruhl

Eighteen years ago in an Insights column, I predicted that the “ecosystem services movement in ecology and economics will not easily be turned around” and that it would profoundly shape “the future of environmental law.” J.B. Ruhl, Valuing Nature’s Services: The Future of Environmental Law?, Nat. Resources & Env’t, Summer 1998, at 359. I outlined the emerging theory of ecosystem services and its focus on the economic values humans derive from functioning ecosystems in the form of services rather than commodities, such as water filtration, pollination, flood control, and groundwater recharge. Although indisputably of value, many of these services exhibit public-good qualities, in that there is no market in which owners of the “natural capital” supplying the services can charge the beneficiaries, who basically see the services as free. For example, the owner of riparian wetlands cannot as a practical matter charge for the flood protection benefits property owners enjoy twenty miles downstream. Rising ecological degradation, however, impedes the flow of these services to human populations, at which point people begin to care more about them as the costs of damage to other economic assets mount. The depletion of coastal wetland and dune systems, for example, exposes the coastal built environment to greater flooding risks, and the reduction of groundwater recharge threatens drinking water and agricultural irrigation supplies. Ecologists and economists forging the concept of ecosystem services valuation thus projected it as a way of improving land use and resource development decision making by ensuring that all relevant economic values were being taken into account. It seemed only logical and uncontroversial to me at the time, therefore, that environmental law would fully embrace the ecosystem services concept.

Fortunately for me, I did not predict how long it would take for the ecosystem services framework to permeate environmental law. I confess I thought it would be swift—maybe a decade. Coming up now on two decades, it is fair to say that the ecosystem services concept, while a familiar policy theme, has made few inroads into “law to apply” status through legislation and agency regulations. But that is about to change. On October 7, 2015, the Office of Management and Budget (OMB), Council on Environmental Quality (CEQ), and Office of Science and Technology issued their Memorandum for Executive Departments and Agencies on Incorporating Ecosystem Services into Federal Decision Making (the Memorandum) (Oct. 7, 2015), available at www.whitehouse.gov/sites/default/files/omb/memoranda/2016/m-16-01.pdf. If fully implemented, the Memorandum has game-changer potential to move the ecosystem services concept to the next level in the fabric of environmental law. Below, I briefly outline how the ecosystem services concept got to this point and then explain how the Memorandum sets up ecosystem services to become a driver of federal planning and decision making.

The ecosystem services concept made its splash in the policy world in 1997 with two high-profile publications. The first, an article in the prestigious journal Nature, attempted to place a global economic value on the planet’s ecosystem services. See Robert Costanza et al., The Value of the World’s Ecosystem Services and Natural Capital, 387 Nature 253 (1997). The other publication, an Island Press book, unpacked the concept to provide a more descriptive survey of the suites of ecosystem services supplied by various ecosystem types. See Nature’s Services: Societal Dependence on Natural Ecosystems (Gretchen Daily ed., Island Press 1997). Picking up on the theme, law professor Jim Salzman translated the ecosystem services concept for lawyers and outlined both its promise and challenges, not the least of which was the lack of adequate data and reliable methods to value the flow of ecosystem services at local scales relevant to decision makers. See James Salzman, Valuing Ecosystem Services, 24 Ecology L.Q. 887 (1997).

Although the ecosystem services concept exploded from there in ecology, economics, and other disciplines bearing on environmental and natural resources management, transferring the idea into legal frameworks proved even more challenging than Salzman predicted. To be sure, the policy world was quickly abuzz with the ecosystem services framework. For example, in 1998 the President’s Council of Advisors on Science and Technology (PCAST) issued a report emphasizing the importance of the nation’s natural capital. See Biodiversity and Ecosystems Panel, PCAST, Teaming with Life: Investing in Science to Understand and Use America’s Living Capital (March 1998). The United Nations embraced the concept as well, mainstreaming it into global policy dialogue with a 2005 report assessing the status of ecosystem services throughout the world and explicitly tying ecosystem services to human prosperity. See Millennium Ecosystem Assessment, Ecosystems and Human Well-Being: Synthesis (Jose Sarukhán & Anne Whyte et al., eds., World Resources Institute 2005). But uptake in law was slow to come.

The ecosystem service framework did not make its first significant forays into environmental law until 2008. In overhauling their policies on compensatory mitigation under section 404 of the Clean Water Act, in 2008 the U.S. Army Corps of Engineers and the Environmental Protection Agency issued a joint regulation adopting a watershed-scale focus and declaring that compensatory mitigation decisions would take compensating losses to ecosystem services into account. See 33 C.F.R. 332.3(d)(1). Perhaps more significantly, Congress added a provision to the 2008 Farm Bill directing the U.S. Department of Agriculture to “facilitate the participation of farmers, ranchers, and forest landowners in emerging environmental services markets.” Food, Conservation, and Energy Act of 2008, Pub. L. No. 110-246, § 2709, 122 Stat. 1651 (codified at 16 U.S.C. § 3845(a)). More recently, in 2012, the Forest Service issued new land planning regulations for national forests requiring plans to identify and evaluate ecosystem service benefits people obtain from national forests, see 36 C.F.R. § 219.6(b)(7), and, in response to the Water Resources Development Act of 2007, the White House in 2013 released updated principles and guidelines for federal water resources planning requiring that all projects “apply an ecosystem services approach in order to appropriately capture all effects . . . associated with a potential Federal water resources investment.” CEQ, Principles and Requirements for Federal Investment in Water Resources (March 2013).

Although these initiatives suggest the ecosystem services framework has recently been enjoying an upward trend as it is mainstreamed in federal environmental programs, the initiatives have been ad hoc and uncoordinated. In July 2011, however, the PCAST issued a second report on ecosystem services advocating a more coordinated, government-wide policy initiative for ecosystem services. See PCAST, Sustaining Environmental Capital: Protecting Society and the Economy (July 2011). Four years later, the Memorandum has delivered on that recommendation.

There is nothing timid about the Memorandum. It “directs agencies to develop and institutionalize policies to promote consideration of ecosystem services, where appropriate and practicable, in planning, investments, and regulatory contexts.” Memorandum at 1. The goal of doing so is “to better integrate in Federal decision making due consideration of the full range of benefits and tradeoffs among ecosystem services associated with potential Federal Actions.” Id. at 2. The scope of the policy goal is broadly stated to embrace all federal programmatic and planning activities including “natural-resource management and land-use planning, climate-adaptation planning and risk-reduction efforts, and, where appropriate, environmental reviews under the National Environmental Policy Act (NEPA) and other analyses of Federally-assisted programs, policies, projects, and regulatory proposals.” Id. at 2.

To facilitate agencies’ achievement of its policy goals, the Memorandum announced a forthcoming guidance document outlining best practices for: (1) describing the action; (2) identifying and classifying key ecosystem services in the action area; (3) assessing the impact of the action on ecosystem services relative to the action area baseline; (4) assessing the effect of the changes in ecosystem services associated with the action; and (5) integrating ecosystem services analyses into decision making. Id. at 3. In the interim, the Memorandum directed agencies to submit, by March 30, 2016, documentation describing their current incorporation of ecosystem services in decision making and establishing a work plan for moving toward the goals of the policy directive. Id. at 4. Concurently, CEQ was to assemble a task force of experts from relevant agencies to craft the best practices implementation guidance, which will be subject to interagency review, public comment, and external peer review consistent with OMB’s information quality procedures and standards. Once the guidance is released, agencies will adjust their work plans as needed. The Memorandum also acknowledged that “ultimately, successful implementation of the concepts in this directive may require Federal agencies to modify certain practices, policies, or existing regulations to address evolving understanding of the value of ecosystem services.” Id. at 4–5.

SEER members thus should watch the Memorandum’s implementation over the next year closely, for if agencies follow its directives faithfully and fully, the ecosystem services framework will be teed up for infusion into the policies and regulations of a broad range of federal programs that touch our scope of practice. In particular, incorporation of best practices for ecosystem services impact assessments under NEPA would project the ecosystem services framework into state, local, and private actions receiving federal agency funding or approval. Yet simply by declaring the incorporation of ecosystem services into federal agency decision making as an executive policy and laying out the tasks and timelines for doing so, the Memorandum has already done more to advance the ecosystem services framework as a legal concept than has any previous initiative.

To be sure, there is plenty of work to be done and deliverables to be acted upon before one can evaluate the Memorandum’s full impact on the mainstreaming of the ecosystem services framework into environmental law. The time line of the Memorandum directives was designed to deliver the best practices implementation guidance in the final days of the Obama administration, leaving it to the incoming executive to determine where to take it. But by then, the momentum behind the policy is likely to be significant, and as evidenced by adoption of ecosystem services concepts by both Democratic and Republican administrations, that trajectory will stand a good chance of staying on course regardless of which party is running the White House. In the long run, the reality is that the ecosystem services framework is by now so deeply ingrained in ecology, economics, and other disciplines of environmental and natural resources management, it will become increasingly difficult for agencies not to incorporate it. Hence, although it has taken longer than I expected, with the issuance of the Memorandum I believe I can now safely amend my original prediction from 1998 to read that the ecosystem services movement in ecology, economics, and environmental law will not easily be turned around. Stay tuned!

J.B. Ruhl

Mr. Ruhl is the David Daniels Allen Distinguished Chair in Law at Vanderbilt Law School and a member of the editorial board of Natural Resources & Environment . He may be reached at jb.ruhl@vanderbilt.edu.