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A Comparative Analysis of Accountability Mechanisms for Ecosystem Services Markets in the United States and the European Union†

Published online by Cambridge University Press:  05 June 2013

Robert L. Glicksman  and
Thoko Kaime
Robert L. Glicksman
Affiliation:
The George Washington University Law School, Washington, DC (United States). Email: [email protected].
Thoko Kaime
Affiliation:
School of Law, University of Leicester, Leicester (United Kingdom). Email: [email protected].
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Abstract

Markets in ecosystem services have the potential to provide financial incentives to protect the environment either in lieu of or in addition to more traditional regulatory programmes. If these markets function properly, they can provide enhanced levels of environmental quality or more efficient mechanisms for protecting natural resources that provide vital services to humans. The theoretical benefits of ecosystem services markets may be undercut, however, if care is not taken in creating the legal infrastructure that supports trading to ensure that trades actually provide the promised environmental benefits. This article identifies five essential pillars of an ecosystem services market regime that are necessary to provide operational accountability safeguards. These include financial safeguards, verifiable performance standards, transparency and public participation standards, regulatory oversight mechanisms, and rule of law safeguards. The article assesses whether the laws of the United States (US) and European Union (EU) are well designed to provide such accountability. It concludes that despite recognition of the risk of market manipulation and outright fraud, regulators in the US and the EU to date have responded to these risks largely in an ad hoc and incomplete fashion, rather than embedding the mechanisms for operational accountability discussed in this article into the regulatory framework that governs ecosystem services trading markets.

Keywords

Markets for Ecosystem ServicesAccountabilitySafeguardsLegitimacyPayments for Ecosystem Services
Type
Symposium: Markets For Ecosystem Services
Information
Transnational Environmental Law , Volume 2 , Issue 2 , October 2013 , pp. 259 - 283
Copyright
Copyright © Cambridge University Press 2013 

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References

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35 Davis, n. 16 above, at p. 355.

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50 Ibid., at p. 277.

51 Ibid., at pp. 260–2.

52 42 USC § 7545(o).

53 National Petrochemical & Refiners Association v. EPA, 630 F.3d 145, 147 (DC Cir. 2010).

54 Notice of Violation of Renewable Fuel Standards, 7 Nov. 2011, available at: http://www.epa.gov/compliance/resources/novs/civil/caa/fuel/astraoil.pdf; 40 CFR § 80.1460(b).

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57 Peterka, n. 55 above.

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61 Ibid., at A10.

62 Ibid.

63 Ibid.

64 Ibid., at A1.

65 Wara, n. 42 above, at p. 1783.

66 Siciliano, n. 58 above, at A1.

67 Ibid., at A10; Wara, n. 42 above, at p. 1785.

68 Siciliano, n. 58 above, at A10. See also Wara, n. 42 above, at p. 1789.

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72 See Smith et al., n. 9 above, at p. 75; Achterman & Mauger, n. 45 above, at pp. 317–8. According to one account, the operation of the CDM has been hampered by unclear property rights, among other factors. Chopra et al., n. 5 above, vol. 3, at p. 7. See S. Manea, ‘Defining Emissions Entitlements in the Constitution of the EU Emissions Trading System’ (2012) 1(2) Transnational Environmental Law, pp. 303–23.

73 See Giupponi et al., n. 12 above, at pp. 114–5.

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75 Aarhus (Denmark), 25 June 1998, in force 30 Oct. 2001, 2161 UNTS 447, available at: http://www.unece.org/environmental-policy/treaties/public-participation/aarhus-convention.html.

76 See, e.g., Davis, n. 16 above, at p. 350 (describing financial assurances in a wetlands banking scheme ‘similar to a bond tied to project success’).

77 33 CFR § 332.3(n)(1).

78 33 CFR § 332.3(n)(2).

79 33 CFR § 333.3(n)(3).

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81 Ibid., at p. 673.

82 Compensatory Mitigation for Losses of Aquatic Resources, 73 Fed. Reg. 19,594 (10 Apr. 2008) (codified at 33 CFR pts. 325 & 332, and 40 CFR pt. 230).

83 33 CFR § 332.3(c)(2)(iv).

84 33 CFR § 332.3(l)(1).

85 33 CFR § 332.4(c)(2)–(14).

86 33 CFR § 332.5(b).

87 Chopra et al., n. 5 above, vol. 3, at p. 3.

88 See Salzman & Ruhl, n. 80 above, at p. 668 (‘Unlike children trading baseball cards, when trading involves the environment there are interests beyond those of the traders that must be taken into account.’

89 Salzman, J., A Policy Maker’s Guide to Designing Payments for Ecosystem Services (2009), at p. 51Google Scholar, available at: http://scholarship.law.duke.edu/faculty_scholarship/2081 (‘Public participation ensures not only that the relevant stakeholders are involved but feel they have meaningfully participated in decisions – that their concerns have been heard. Broad participation provides decisionmakers important information about the needs and concerns of relevant stakeholders and may also inject new, creative ideas into the program design. Moreover, stakeholders are more likely to support decisions in which they feel vested.’).

90 N. 75 above. The Convention has been applied through a raft of EU instruments: see Regulation (EC) No. 1367/2006 on the Application of the Provisions of the Aarhus Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters to Community Institutions and Bodies [2006] OJ L 264/13; Directive 2003/35/EC Providing for Public Participation in Respect of the Drawing Up of Certain Plans and Programmes Relating to the Environment and Amending with Regard to Public Participation and Access to Justice Council Directives 85/337/EEC and 96/61/EC [2003] OJ L 156/17; Directive 85/337/EEC on the Assessment of the Effects of Certain Public and Private Projects on the Environment [1985] OJ L 175/40.

91 Directive 2003/35/EC, ibid.

92 Salzman & Ruhl, n. 80 above, at p. 681 (arguing that the public should be allowed to comment on proposed individual mitigation sites).

93 Ruhl, J.B. & Salzman, J., ‘The Law and Policy Beginnings of Ecosystem Services’ (2007) 22(2) Journal of Land Use & Environmental Law, pp. 157–72, at 162.Google Scholar

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95 Stanton et al., n. 34 above, at pp. 53–4.

96 Available at: http://www.ecosystemmarketplace.com.

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100 5 USC § 553(b)–(c).

101 Drury et al., n. 47 above, at pp. 278–9 (noting that in California the public faces numerous difficulties finding out what companies are trading to avoid compliance with pollution control standards).

102 33 CFR § 332.4(b)(1).

103 33 CFR § 332.8(e).

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106 Commission Communication, ‘Towards an Enhanced Market Oversight Framework for the EU Emissions Trading Scheme’ COM(10)796 final, 21 Dec. 2010.

107 Chopra, n. 5 above, vol. 3, at p. 4.

108 See Achterman & Mauger, n. 45 above, at p. 329 (‘The public and environmental NGOs should expect trades to include meaningful ecosystem functions, to be subject to objective and meaningful monitoring and transparent data collection about trades, and to reassess their goals continually to assure they are being met.’); Stanton, M., ‘Payments for Freshwater Ecosystem Services: A Framework for Analysis’ (2012) 18(1) Hastings West-Northwest Journal of Environmental Law and Policy, pp. 189–290Google Scholar, at 270 (‘Monitoring also enables decisionmakers to adjust and improve the design of the program over time and enforce penalties whenever there is a breach of contract.’).

109 See Achterman & Mauger, n. 45 above, at p. 331; Driesen & Ghosh, n. 46 above, at pp. 94–6.

110 See Wilkinson, J. & Bendick, R., ‘The Next Generation of Mitigation: Advancing Conservation through Landscape-Level Mitigation Planning’ (2010) 40(1) Environmental Law Reporter, 10023–49, at 10035.Google Scholar

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113 Cf. McAllister, n. 104 above, at p. 1200 (‘Accurate monitoring is also critical to whether the program's environmental goal – the overall cap imposed on all the regulated sources – is truly attained.’).

114 Wayburn, L. & Chiono, A., ‘The Role of Federal Policy in Establishing Ecosystem Service Markets’ (2010) 20(2) Duke Environmental Law and Policy Forum, pp. 385–415, at 410.Google Scholar

115 33 CFR § 332.8(p)(1).

116 33 CFR § 332.8(q)(1).

117 33 CFR § 332.6.

118 33 CFR § 332.6(c)(1).

119 33 CFR § 332.6(c)(2).

120 33 CFR § 332.6(a)(2).

121 US Government Accountability Office, ‘Corps of Engineers Does Not Have an Effective Oversight Approach to Ensure that Compensatory Mitigation is Occurring’, GAO-05-898 (2005), available at: http://www.gao.gov/products/GAO-05-898.

122 Ibid., at pp. 14–6, 27.

123 See Walls & Riddle, n. 27 above, at pp. 9–10.

124 See Wilkinson & Bendick, n. 110 above, at p. 10034 (citing US General Accountability Office, ‘Endangered Species Act: The US Fish and Wildlife Service Has Incomplete Information about Effects on Listed Species from Section 7 Consultations’, GAO-09-550 (2009), at p.11).

125 N. 3 above.

126 Directive 2003/6/EC on Insider Dealing and Market Manipulation (Market Abuse) [2003] OJ L 96/16.

127 Directive 2004/39/EC on Markets in Financial Instruments Amending Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC and Repealing Directive 93/22/EEC [2004] OJ L 145/1.

128 Commission Regulation (EU) No. 1031/2010 on the Timing, Administration and Other Aspects of Auctioning of Greenhouse Gas Emission Allowances Pursuant to Directive 2003/87/EC Establishing a Scheme for Greenhouse Gas Emission Allowances Trading Within the Community [2010] OJ L 302/1.

129 Directive 2005/60/EC on the Prevention of the Use of the Financial System for the Purpose of Money Laundering and Terrorist Financing [2005] OJ L 309/15.

130 See McAllister, n. 104 above, at pp. 1210–1 (‘Without verification, self-reporters will become lax, and likely lean towards underreporting if that is in their self-interest.’).

131 Achterman & Mauger, n. 45 above, at p. 330.

132 Ibid.

133 McAllister, n. 104 above, at p. 1229.

134 See Achterman & Mauger, n. 45 above (‘governments should create procedures that allow NGOs and the public to challenge transactions that are fraudulent or detrimental to public interest and to hold legally responsible parties accountable’).

135 See Wilkinson & Bendick, n. 110 above, at 10036.

136 US General Accountability Office, n. 124 above, at p. 22.

137 See Smith et al., n. 9 above, at p. 82; Salzman, n. 89 above, at p. 53.

138 See Smith et al., n. 9 above, at p. 75 (‘Provision for citizen participation is important, including the right of citizens and non-governmental organizations to bring lawsuits for the purpose of enforcing the rules and contracts associated with payment schemes.’); Salzman & Ruhl, n. 80 above, at p. 683 (endorsing liberal citizen suit rights to enforce trading performance standards under strict standards of judicial review).

139 Pigou, A.C., The Economics of Welfare (Macmillan and Co., 1920).Google Scholar

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144 36 CFR § 219.1(c).

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