A survey of entrepreneurial risk in U.S. wetland and stream compensatory mitigation markets

Internationally, ecosystem service markets are emerging as a way to reduce the negative effects of agriculture, industry and urbanization. In the USA, the compensatory mitigation industry, particularly entrepreneurial mitigation banking, accounts ∼$2.9 billion in stream and wetland restoration annua...

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Bibliographic Details
Published in:Environmental science & policy 2011-05, Vol.14 (3), p.301-314
Main Authors: BenDor, Todd K., Riggsbee, J. Adam
Format: Article
Language:English
Subjects:
Agriculture
Aquatic restoration’ environmental restoration risk
Banking
Barriers
Clean Water Act
Compensation
Compensatory mitigation
Control
ecological restoration
Ecology
ecosystem services
Ecosystems
Entrepreneurs
entrepreneurship
Environmental policy
Financial risks
Government and politics
income
industry
Internet
Investment
issues and policy
Legislation
Market analysis
Markets
Mitigation banking
professionals
qualitative analysis
Regulation
Regulators
Restoration
Revenue
risk
Science policy
Streams
surveys
U.S.A
uncertainty
United States
urbanization
Water pollution
Water resources
Wetland and stream mitigation
Wetlands
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Summary:Internationally, ecosystem service markets are emerging as a way to reduce the negative effects of agriculture, industry and urbanization. In the USA, the compensatory mitigation industry, particularly entrepreneurial mitigation banking, accounts ∼$2.9 billion in stream and wetland restoration annually. The mitigation banking industry has historically disagreed with regulators over several ecological, legal, and economic issues. In April 2008, federal regulators issued formal regulations governing compensatory mitigation in an effort to improve ecological quality and reduce uncertainty during the mitigation process. In this article, we explore how the 2008 federal regulations reduce the financial risk experienced by mitigation bankers, who speculatively restore large tracts of wetlands or stream to offset future aquatic impacts permitted under the U.S. Clean Water Act. Restoration incurs substantial up-front investments, and revenue is determined by regional and macro-economic factors, as well as regulatory decisions. Between April and May 2009, we administered a national, web-based survey of mitigation bankers and other mitigation professionals ( N = 156 responses; 47.7% response rate). Our results suggest a variety of perceived barriers to mitigation banking continue one year after the 2008 regulations took effect. In-depth qualitative analysis revealed extensive distrust of regulatory practices, as well as perceptions that regulator decisions were opaque and tainted by conflicts of interest. These barriers create an environmental paradox: in attempting to ensure high ecological quality of compensatory mitigation, regulators may also create market entry and participation barriers that dissuade the establishment of mitigation banks, the very vehicles of large-scale ecological restoration that the 2008 regulations encouraged. We discuss the implications of this problem and suggest solutions, including a more centralized system for aquatic mitigation policymaking.
ISSN:1462-9011
1873-6416
DOI:10.1016/j.envsci.2010.12.011