Valuing Ecological Goods and Services:

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Valuing Ecological Goods and Services:
An Ontario Perspective
Workshop Proceedings


March 1, 2007
Peterborough, Ontario

O
NE

OF

A

SERIES

OF

REGIONAL

WORKSHOPS

ON

THE

VALUATION

OF

ECOLOGICAL

GOODS

AND

SERVICES

FROM
C
ANADA

S

FORESTS

Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007)

i
Table of Contents


Table of Contents …………….................................................................................................................... i
Acknowledgements ………………………………………………………………………………………………………………... ii

1. Introduction ……………………………………………………………………………………………….. 1


2. Highlights of the Presentations ……………………………..……………………………………….. 1
2.1 The Fundamentals ………………………………………………………………………………………………. 1
2.2 Roles of Different Agencies …………………………………………………………………………………. 2
2.3 Application of the Concept of VEGS ……………………………………………………………………. 2


3. Presentation Abstracts and Summaries ……………………………………………………………. 3
3.1 Opening Remarks ……………………………………………………………………………………………….. 3
3.2 Valuing Ecosystem Services and Resources (Dr. Robert Babe) ……………………………………. 5
3.3 Economic Instruments for Sustaining Supplies of EG&S (Ed Hanna) ………………………. 10
3.4 National Survey on Ecological Goods and Services (Lynn McIntyre) ………………………….. 16
3.5 A Decision-Support Process for the Development of Habitat-Based Biodiversity
Standards for Agriculture in Canada – Integrating Ecological Goods and Services
(Cathy Nielsen) …………………………………………………………………………………………………………… 19
3.6 Agroforestry Systems: Providing Ecological Goods and Services (Dr. Andy Gordon) …….. 27
3.7 Employing Science to Value Ecological Goods and Services Programs in Canada
(Erling Armson) …………………………………………………………………………………………………………… 29
3.8 Ecological Goods and Services: Perspectives for Agricultural Policy and Programs
(Darryl Finnigan) …………………………………………………………………………………………………………. 31
3.9 Ontario’s Conservation Authorities, Ecological Goods and Services and Watershed
Stewardship (Mike Puddister) ……………………………………………………………………………………….. 34
3.10 Valuing Ecological Goods and Services: Policies and Experiences from the U.S.
(Laura Haynes) …………………………………………………………………………………………………………… 38
3.11 Payment for Ecological Goods and Services Schemes: Experiences from Costa Rica
(Michael Kennedy) ……………………………………………………………………………………………………….. 45
3.12 Developing Local Markets for Sustaining and Enhancing EG&S from Private Land
(Ed Hanna) ……………………………………………………………………………………………………………….. 50
3.13 Healthy Ecosystems = Healthy Communities: Natural Areas Restoration to Benefit
Water Quality and Quantity in the Agricultural Landscape (Dave Richards) ……………………… 55
3.14 Alternative Land Use Services (ALUS): Valuing Ecological Goods and Services on
Farmland (Dr. Bob Bailey) …………………………………………………………………………………………… 58
3.15 Alternative Land Use Services: Norfolk County Pilot Proposal and Actions to
Date (Dave Reid) ………………………………………………………………………………………………………. 62


Appendices
Appendix A: Speaker Biographies & Contact Information ……………………………………………………… 66
Appendix B: Ecological Goods & Services and Related Topics: Selected Web Links …………………… 71

Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007)

ii

Acknowledgements


The Valuing Ecological Goods and Services: An Ontario Perspective workshop could not have happened
without the support of many individuals and agencies. The foundation of any successful workshop
is built around interesting and knowledgeable presenters, and this workshop was no exception. To
this end, we would like to thank all of the speakers (Appendix A) who traveled from across the
country, and even from abroad to share their experiences and give of their time. Their contribution
to the effort was demonstrated not just through their presentations, but also through the many
reflective questions that came from the 60-plus participants.

It took a lot of people to organize and deliver the workshop. We would like to thank the members
of the National Steering Committee for the many hours they spent on conference calls and in
meetings helping to design the overall structure for each of the five regional workshops. In
particular, we need to recognize the effort of Karen Mousseau who coordinated the group and
helped with the Ontario workshop. The Ontario Steering Committee also helped tremendously in
developing the content of the Peterborough workshop – thanks to each and every member.

Our facilitators, Peter Mabee and Andy Margetson did an excellent job – thanks guys! And to
Gord Rodgers, a card of thanks for a fine job of capturing the essence of the day’s proceedings, no
easy feat given the volume of information shared.

A special note of thanks needs to go out to Mary Humphries of the Eastern Ontario Model Forest
who coordinated the registration. Elizabeth Holmes, also with the Eastern Ontario Model Forest,
deserves an award or at least an extra week of holidays for all the effort (and stress!) she went
through helping with the workshop and developing these proceedings.

Workshops like this are not inexpensive to put on – many thanks to the Canadian Model Forest
Network and the Canadian Federation of Woodlot Owners for making it happen.

And, finally, we don’t want to forget the audience who came to hear about this important topic
and braved the worst weather of the winter: it is hoped that the workshop was useful and
interesting. Thank you all.



Mark Richardson
Project Forester
Eastern Ontario Model Forest




Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 1
Valuing Ecological Goods and Services:
An Ontario Perspective
One in a Series of Regional Workshops on
Valuing Ecological Goods and Services (VEGS) from Canada’s Forests

March 1, 2007
Peterborough, Ontario
Workshop Proceedings


1. Introduction

Hosted by the Eastern Ontario Model Forest (EOMF), this workshop was one of a series of five
regional events held across Canada. The nation-wide initiative was sponsored by the Canadian
Model Forest Network (CMFN) in partnership with the Canadian Federation of Woodlot Owners
(CFWO), with the objective of bringing together interested participants to discuss potential ways to
recognize ecological goods and services (EG&S) produced by forests in Canada. More than sixty
people attended the session in Peterborough, Ontario. Participants represented rural landowners
(including farmers, woodlot owners, landowner and farm organizations), environmental
organizations, academia, and government agencies at the municipal, regional, provincial, and
federal levels.


2. Highlights of the Presentations

2.1 The Fundamentals

Several speakers highlighted the fundamentals – definitions, the science, techniques, and
arguments (pro and con) for using the valuation of ecological goods and services (VEGS).

The first speaker of the day, Dr. Robert Babe of the University of Western Ontario, opened the
session with some reservations about the application of “environmental economics” (see Section
3.2). While Dr. Babe made it clear that he had no objections to using prices, taxes, subsidies or
markets as tools to cut back on pollution or preserve resources, he did have reservations: “Prices are
but one tool in a panoply of techniques that must be deployed to assure a sustainable future.... and
that... little stock should be placed in money-based expressions of value of ecosystem resources or
services
; indeed, expressions in money terms may well do more harm than good because of the
‘bias’ of money as a medium of communication.”

A very different opinion came with the second speaker, Ed Hanna, of DSS Management
Consultants, and a Research Fellow at York University. Mr. Hanna offered a very positive outlook
on the valuing of ecological goods and services, with a presentation stressing the benefits of
applying fundamental economic theory to this subject of VEGS (see Section 3.3). In his morning
presentation, he described various economic instruments and how they could be used to value
ecological goods and services, with some emphasis on how one can build a private market system.
He gave a second presentation in the evening, which expanded on this aspect of how to develop
and encourage local markets (see Section 3.12).
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 2

Another important fundamental is the building block of the underlying science. Cathy Nielsen of
Environment Canada provided insight into how her department is working with Agriculture and
Agri-Food Canada to develop habitat-based biodiversity standards and an associated decision-
support process (see Section 3.5). The products of this work may offer one of the building blocks in
valuing EG&S.

The specific example of agroforestry was defined and explained by Dr. Andy Gordon of the
University of Guelph (see Section 3.6). He specifically focused on riparian systems and
intercropping, explaining the science behind the application of these techniques.

Lynn McIntyre, of Wildlife Habitat Canada, provided a snapshot of what Canada’s farmers and
ranchers are thinking in his presentation of highlights from the 2006 National Survey of Farmers
and Ranchers on Ecological Goods and Services (see Section 3.4).


2.2 Roles of Different Agencies

A number of the speakers offered an explanation into the role of their agencies in dealing with
VEGS or some aspect of VEGS.

Mike Puddister of Credit Valley Conservation described the conservation authorities of the
Province of Ontario, including their mandate and their roles (see Section 3.9).

Laura Haynes of the USDA’s Natural Resource Conservation Service provided the group with an
explanation of the myriad of programs offered by her service, and insight into the multi-billion
dollar conservation component of the US Farm Bill (see Section 3.10).


2.3 Application of the Concept of VEGS

Although the application of the concept of VEGS is still generally in its early iteration in Canada,
there were many examples provided by speakers at the workshop – from Ontario and from abroad.

Erling Armson pointed out, by referring to specific projects of Ducks Unlimited Canada, that this
organization is practicing the concept routinely (see Section 3.7). In fact, Mr. Armson suggested
that they have 70 years of experience delivering “EG&S projects.”

The Costa Rican example, an application of VEGS on a country-wide basis, was presented by
Mike Kennedy (see Section 3.11). He explained how Costa Rica adopted a “payment for
environmental services” scheme in 1996 to address increasing deforestation and to promote
economic development.

Laura Haynes demonstrated the degree to which the United States has endorsed this concept in
describing the various programs of the National Resource Conservation Service (see Section 3.10).
Her prediction that financing through the US Farm Bill will increase substantially as the Farm
Bill shifts some of its emphasis (i.e., money) from commodity subsidies toward conservation
demonstrated a strong commitment at the federal government level of the US to VEGS.
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 3
There were a number of projects in Canada described by various speakers.

Dr. Bob Bailey of Delta Waterfowl Foundation and Dave Reid of the Ontario Ministry of Natural
Resources described the ALUS (Alternative Land Use Services) program in their two presentations.
Bob spoke about the program in general, including goals, principles, and how it works through
partnerships and through empowering farmers (see Section 3.14). Then Dave Reid ran through a
pilot ALUS project in Norfolk County, in southwestern Ontario, which is currently getting
underway (see Section 3.15).

Dave Richards, a Water Resource Coordinator with the Ontario Ministry of Natural Resources,
described two projects he is involved with in southwestern Ontario – the Wetland Drain
Restoration Project and the Subwatershed Riparian Buffer Restoration Project (see Section 3.13).

And Darryl Finnigan, of the Ontario Ministry of Agriculture, Food and Rural Affairs, provided an
explanation of Environmental Farm Plan – Ontario’s flagship agri-environmental program that has
been in place since 1992. He pointed out there may be opportunities to build on the successes of
the Environmental Farm Plan to increase the supply of ecological goods and services (see Section
3.8).


3. Presentation Abstracts and Summaries

3.1 Opening Remarks (Peter deMarsh)

Peter deMarsh, of the Canadian Federation of Woodlot Owners (CFWO), kicked the conference
off with his opening remarks, briefly addressing:
• What are Ecological Goods and Services (EG&S); and
• Why is the CFWO interested in it?

The first thing we have to do in approaching these questions is to be prepared to broaden our
imaginations, to begin to see things we don’t see, or things we take for granted. If we want to value
something, we first have to see it and see it clearly. EG&S is a new way of looking at the forest for
all of us.

It is an especially big challenge for the city folks. They see private family woodlots every time they
drive outside of town. They see them without much awareness of what it is they are seeing. They
are, in fact, seeing forests owned by families for a range of purposes, all faced with a common and
more or less urgent challenge of how to balance good stewardship with financial viability of their
ownership and any small business that depends on it. The most the city folks see is nice scenery.

This kind of generalization, and a somewhat bigoted one at that, is a bit unfair to some city people.
But the truth is that the forests between our cities and towns are largely owned by families and are a
Where does clean water come from? “The tap, of course.”
Where does wildlife come from?
“Well, it comes from…Mother Nature, the wilderness.”
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 4
significant part of the economic and social fabric of our rural communities, and this reality is
beyond the imagination of most city folks. First, all of this must be seen and recognized.

Second, we need to begin to understand that clean water, wildlife and other EG&S aren’t free.
They involve costs for the landowner. Three types of costs can be described:
• “passive costs” are the costs associated simply with ownership. Property taxes are an
obvious example. Not so obvious, but extremely important are “opportunity costs”.
Woodlots have a real estate value. If translated into, say, mutual funds, that financial value
would provide a certain rate of return. As a working woodlot, the return is quite a lot less.
The difference is the opportunity cost. This is especially prominent in areas where there is
strong development pressure.
• “active costs” are the costs of carrying out specific activities, e.g., to improve deer
wintering habitat, or taking extra care during road construction, putting in better culverts,
etc.
• there is also a type of cost that falls in between “active” and “passive”, forest practices
that generate less revenue than common alternatives. The difference between clearcut and
careful selection logging in New Brunswick is clear and fairly easy to measure.

This leads us to a third question: So it costs woodlot owners something and the folks who benefit,
the consumers, get it for free. How could this be different? How could the costs be shared between
producers and consumers? Surely this would be very complicated, both practically and politically.

In fact, there are many examples from around the world where methods to do this are working
quite well:
• New York City Watershed
• Costa Rica
• many examples from the European Union
• the US Farm Bill
• the new Chicago Climate exchange
• China’s compensation program for logging restrictions for flood control
• now, in Canada, the ALUS pilot project for farmers in Manitoba

We will be hearing about some of these examples during this workshop.

For woodlot owners, this topic is of critical importance. We want to develop something like a
woodlot version of the ALUS project in Manitoba as quickly as possible. We are more and more
aware that our economic situation as woodlot owners is increasingly a struggle for survival. On the
one side, society’s demand for water and other EG&S is increasing. On the other side, our capacity
to cover the increasing costs of meeting these demands is under severe pressure. In New Brunswick,
timber sales are down 50% over the past 3 years, and, in general, woodlot owners across the
country are trying to deal with vanishing markets due to major disruptions in the forest industry.
Our imaginations are beginning to accept the fact that as far as the traditional forest industry is
concerned, we are entering a new era, and that the current crisis is not just another downturn in
the normal cycle for pulp and paper and lumber we saw throughout the 20
th
century. The forest
industry of the future will likely be very different and a lot smaller. So compensation for EG&S has
strategic importance for woodlot owners.

Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 5
We’re hoping this workshop will help identify the best models for sharing the cost of EG&S
between producers and consumers. We hope it will begin to set a course for introducing an EG&S
program into the political process in the most effective way and as quickly as possible. Thank you
for being here and for being prepared to participate in this very important imagination-stretching
exercise with us.


3.2 Valuing Ecosystem Services and Resources (Dr. Robert Babe)

Following Peter deMarsh’s introduction of the subject, Dr. Robert Babe, holder of the Jean
Monty/BCE Chair in Media Studies at the University of Western Ontario, argued for caution
when applying monetary values to ecological goods.

Abstract:

The United Nations’ World Commission on Environment and Development (Brundtland
Commission) 1987 report, Our Common Future, insisted that economics and ecology must be fully
integrated in our thinking and planning, as economies and ecosystems in the material world
assuredly are fully integrated and interdependent. Continuing the bifurcation in our thinking,
Brundtland insisted, will perpetuate misunderstanding and thereby global and local environmental
stresses and strains.

At present there are two major economics initiatives for such integration: (i) environmental economics,
which essentially enfolds ecology into the standard (neoclassical) economics paradigm, thereby
treating ecosystems as subsets of economies, and (2) ecological economics, which maintains that
economics needs to be fundamentally transformed in light of ecological principles; this latter
approach recognizes that economies are subsets of ecosystems.

The endeavour to place money value on ecosystem services and resources is part and parcel of the
first (environmental economics) approach, and this paper argues attempts at pecuniary valuations
are not only insufficient from an ecological point of view, but that they may ultimately be harmful.
The paper explores the “biases” of money indicators of value and the dubious practice of treating
ecosystem services and resources as “commodities”. The paper explores environmentally-related
aspects of money as a medium of communication, since like all media money is “biased” in the
Innisian sense. The anti-environmental biases of money include: (i) the doctrine of consumer
sovereignty, (ii) the bias toward perfect, bi-directional substitutions, (iii) the trivialization of past
and future, (iv) the expectation of exponential growth, (v) the bias toward quid pro quo, and (vi)
the insistence on quantification.

Dr. Babe set the stage by referring to the work of Harold Innis, and his “medium theory,” with
the following points:

• Money mediates human interactions;
• Money is a medium of exchange;
• Money provides a “store of value”;
• Prices are messages denoting value; and
• As a medium, money and its messages are “biased”.

Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 6
First, a qualification: Nothing in my talk should be regarded as objecting
to using prices, taxes, subsidies or markets as tools to cut back on
pollution or preserve resources. On the other hand, prices are but one
tool in a panoply of techniques that must be deployed to assure a
sustainable future. Further, I will argue, little stock should be placed in
money-based expressions of value of ecosystem resources or services
;
indeed, expressions in money terms may well do more harm than good
because of the “bias” of money as a medium of communication.

Dr. Babe provided an intuitive explanation for what he was saying:
• It is only a century and a half since slavery was abolished in the United States, but we now
cringe at the thought of humans being owned and traded;
• The sale of body parts, too, in our day is objectionable;
• We protest also when political favours are bought and sold;
• The exchange of cash between the accused and the judge or the police officer ought to have
no place in our judicial system, we believe.


In an oft-cited piece, Robert Costanza and associates estimated the annual dollar value, not just of a
forest, but of all of “nature’s services”, and they came up with the figure of US $33 trillion, about
twice the world’s GDP.

While Costanza’s approach is certainly of interest in calling attention to a range of usually disregarded
ecosystem “services”, the study is misleading and flawed. In using money to indicate the value of nature’s
“services”, Costanza implied that ecosystem interactions can/should be conceptualized as subsets of the
economy, and that nature’s “services” are substitutes or can/should be exchanged for all other commodities
and services in the economy. Indeed, the authors declare:

Ecosystem services provide an important portion of the total contribution to
human welfare on this planet; we must begin to give the natural capital
stock that produces these services adequate weight in the decision-making
process.

Dr. Babe characterized the Costanza model as flawed, and suggested a different model shown graphically
below:







Evidently, then, we recognize value other than pecuniary value and
believe that the affording of a money price to certain things debases
its non pecuniary value.
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 7












Costanza’s Implicit Model A More Ecologically Sane
Understanding

Costanza’s study represents one of two general approaches to pursuing a key recommendation of
the 1987 Brundtland report, that, “Economics and ecology must be completely integrated.”

The dominant approach to this integration is known as environmental economics
. It enfolds
ecology into mainstream economics, thereby treating ecosystems as subsets of the economy. A
major contention of mainstream economics is that prices normally are adequate to indicate value,
and when they are not the major task of public policy should be to ensure that altered or shadow
prices become adequate indicators of value. Most of my talk today explains the logic behind, and
the limitations of, this approach.

The second position is known as ecological economics
. It claims that price adjustments are
insufficient, and calls instead for a fundamental transformation of economics — to make it more
consistent with ecological principles.

In discussing prices and valuation, Babe notes that most of nature’s “services” never pass
through markets, and hence they command a zero price. This is suicidal for cultures wedded to
the practice of equating prices with value.

• Often services unvalued or undervalued in money terms are called “public goods
”,
meaning that one person’s benefit does not decrease the benefit of others;
• Also, there are “externalities
” or third party effects, where some but not all costs and
benefits of the resource pass through markets;
• Hence, the prices generated are deemed by environmental economists as being inadequate
as signals for economic decision making.

“Value” can be expressed as either:
• Willingness to pay; or
• Willingness to accept compensation
But there must be some way of measuring or estimating value, and Babe provides a critique of
the “monetizing of ecosystem services and resources”:
• First, since people normally do not have to pay for nature’s “services”, these services never enter
consumer’s cost calculations.
• A second serious flaw concerns just how much credence should be paid to consumer preferences in
any event. Should the momentary, and easily-manipulated, subjective valuations of “consumers”
economy
ecosystem
ecosystem
economy
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 8
constitute the sole, or even a primary basis whereby questions like species survival/extinction are
decided? Would it not make much more sense to try to convince consumers that environmental
“services” are of great value? But to do so would contradict the very logic of estimating the money
values of nature’s assets and services!
• Individual preferences, the core “justification” of price solutions, are based at least in part on
knowledge, and in terms of ecosystem interactions, human knowledge is overwhelmed by
ignorance.
• The discounting of future costs and benefits is also problematic. Future generations — those who
will actually experience the consequences of today’s decisions — remain voiceless by the procedure.
• There are the “biases” of money as a medium of communication.

Money and prices, whether adjusted or unadjusted, in and of themselves are “biased” transmitters of
information, and this bias is profoundly anti-environmental, in the following manner:
• Prices critically misrepresent ecological reality by suggesting that things are infinitely substitutable.
Most economists argue that resources (aka “factors of production”) are largely substitutable one for
another, that an effectively operating price system will raise the relative cost of scarce resources and
induce firms and consumers to shift into lower cost substitutes. This doctrine of infinite
substitutabilities flies in the face of ecological thinking, and common sense. There is no substitute
for potable water or for oxygen in the atmosphere.


• There is the inherent bias of time. The price system trivializes the future. Assuming a 10 percent
rate of interest (or discount rate), $1,000 payable thirty years from now are worth only $57.32
today! Note that the time period, considered in ecological terms, is extremely short— merely thirty
years. The more remote the benefit (or the cost!), the more trivial it is to present-day economic
actors making decisions on the basis of price information. Unfortunately, environmental “trade-
offs” are mostly between consumption today (which receives a non-discounted value) vs. a sounder
ecosystem in the future.
• Since the Industrial Revolution, exponential growth has been realized in many sectors of
the real economy. By living within the logic or mindset of money, by continually viewing
the material world in money terms, one can easily construe (or, rather, misconstrue) the
natural world whereby it seems to take on the infinite expansibility properties of the money
system. Or equally as bad, one can lose sight altogether of the natural environment, so
riveted is the mind on money.
• Quid pro quo means an exchange of equivalences: “What I give to you must be worth at
least what you give to me.” A society functioning exclusively by quid pro quo will engage
solely in commodity exchange/barter relations. The emphasis on quid pro quo implies also a
linear understanding of relations — a series of production nodes from resources extraction,
to various stages of manufacture, to distribution, and finally to purchase and consumption,
each node being characterized by a commodity exchange. This logic of linearity supported
by flows of money lies at the heart of neoclassical economists’ faith that prices are/can be
adequate guides to technological change and habitat preservation, and hence of
environmental economists’ recommendation that market prices be adjusted to induce or
constrain as appropriate activities affecting ecological well-being. The presumption of
linearity, however, is a major distortion of ecosystem reality.
“.....Only in economic models, science fiction and video games can extinct
species be revivified, and rain forests reinstated after clear cutting.”
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 9
• Quantification of economics is made possible by the commodity of money. Those
elements that cannot be quantified, or “named” will disappear from the present forms of
economic science.

Dr. Babe concluded his presentation with these thoughts:

Mainstream or neoclassical economics is, in large measure, a theory of prices and of the price
system. A large part of the problem with neoclassical economics is that it theorizes uncritically or
apologetically a technology, namely money, that is inherently anti-environmental.

As a general principle, an economy should conform to ecological principles, for at least two
reasons:
• First, it is the economy, not ecological principles, that humans can control;
• Second, the economy is contingent on the environment, not the reverse.

Questions and Answers:

1. Dave Reid, speaking as a private landowner: One thing you said bothered me – you made the
point that, as a private landowner, one might look at a mountain, and all you see is a mine.
A. I was quoting a native leader. The point is that if land is looked at as a commodity,
then we see it in terms of profitability
RESPONSE: We don’t look at our land in that way.

2. Q. Woodlot owners are being biased as a result of regulation and the tax regime. In some cases,
landowners are being forced to sell parts of their land because of high taxes. If there were positive
changes (e.g., to the tax regime), it may be possible to maintain or enhance the total ecological
goods and services.
A. Yes – I did not mean to suggest that you should not apply the tools of taxes, subsidized
prices, and markets. However, I was offering a critique of the environmental economists
who claim that you don’t need intervention – that the “invisible hand” will rule – if you
have the correct system of prices. And I dispute this proposition.

3. Q. Wildlife biologist, MNR. How do you go about changing the fundamental economic system?
A. Dr. Babe brought out a number of slides to argue that there needs to be a change in
culture – a change in mainstream economics discourse, and in technological discourse.
These changes need to address:
• Holistic nature of ecology vs. individualism of economics
• Balance of nature
• Thinking in terms of systems and sets of relationships rather than individual
objects
• Bio-centrism – centering elsewhere than on humans
• Adapting to changing circumstances
• Looking at time – the long term future, rather than immediate time frames
• Thresholds, limits, and imperfect solutions
• Entropy should be considered – “we’re using high grade energy to create waste”
• Scale – traditional economic models have no concept of scale, but ecologists look
at carrying capacity

Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 10
4. Q. Local landowner. Urban dwellers are having an “ecological footprint” by putting pressure on
rural landowners – don’t cut those trees, don’t allow your cattle in the steam . . .
A. We need to remove nature from the commodity exchange – areas like parks and
greenbelts should be outside the economy.
RESPONSE – I disagree – we are a part of the ecosystem, and this needs to be taken into
account – not to just let things sit there without humans.
As this discussion was starting to take off, Andy Margetson had to break things up in the
interest of time...


3.3 Economic Instruments for Sustaining Supplies of EG&S (Ed Hanna)

Ed Hanna, of DSS Management, provided an overview of the application of economic
instruments for sustaining and enhancing EG&S.

Abstract

The focus of this presentation is not on global environmental issues (e.g., global sustainability) but
on local decisions that affect local supplies of EG&S. These local decisions involve incremental
(i.e., marginal) change that collectively when taken together result in system-level change. Basic
economic principles and methods are well suited for influencing these decisions and managing
overall system behaviour, in this specific case, in inducing individual decisions that will enhance
local supplies of EG&S.

Various economic instruments can be used to enhance and sustain local supplies of EG&S. The
requirements for an economic instrument to be effective are outlined. This presentation provides a
comparative evaluation of economic instruments, ranging from command and control regulations,
cost-share capital improvement programs, taxes, direct payment for EG&S and various forms of
EG&S markets.

The practical application of these methods is examined in the context of public land management
decisions. The decision-making information needs of public land managers, the role of economics
in satisfying these needs, potential economic instruments and their use within the public land
decision-making process are examined.

Finally, the decision-making environment of private landowners is examined. To successfully
influence supplies of EG&S produced on private land, some significant barriers need to be
overcome. Many EG&S are public goods that yield little or no direct economic return to the
private landowner. These EG&S are called externalities (i.e., the value of these EG&S is outside or
external to the financial and other decision criteria of the private landowner). A well established
literature exists that discusses the economic problems created by externalities and possible
solutions. The bottom line is that private markets will not result in optimal land management
decisions where externalities are present. A common strategy is to “internalize” externalities so that
private land management decisions will take these values better into account. Economic
instruments can be effective tools for overcoming these deficiencies (i.e., market failures). The
potential of various economic instruments for improving private land management decisions is
critically examined.

Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 11
Ed’s presentation offered an overview of the application of economic instruments when valuing
Ecological Goods and Services:

First, he pointed out that there are some problems for which economics has little to offer.
• These issues tend to be large-scale changes that can result in catastrophic change (i.e., non-
marginal changes).
• The ability to trade is key. Competitive markets involve trade: I will trade something I have
in return for something you have if doing so makes me better off. Otherwise, no trade.
• Externalities, in the economic sense, are an important consideration: Where externalities
are present, market prices will not reflect these costs/opportunities. Many EG&S are
external to conventional economic markets. The result is that EG&S are undervalued
when private land management decisions are being made; the result is supplies of EG&S
on private land are less than optimal from an overall social welfare (i.e., benefit)
perspective.






Next, Ed made the point that, when applying economic principles to EG&S, there are 5 key
questions to ask:
1. How much EG&S is required/optimal?
2. Is the best quality EG&S being supplied in the best location?
3. Are EG&S being supplied most efficiently (least cost)?
4. Are EG&S supply costs fairly distributed (equity)?
5. Are long-term supplies of EG&S secure (stability)?

Further, that there are five generic types which cover the majority of the economic instruments
used to sustain EG&S:

1. Privatization involves modifying existing property rights to encompass more EG&S
within our system of private property rights.
o In concept if private property rights existed for all EG&S, economic
instruments would not be required. The market would produce an optimal
balance of EG&S relative to other needs and preferences.
o This approach is attractive in that it is consistent with our existing system of
private rights associated with private land.
o Example: Hunting, fishing, camping, etc. Private property owners can
capitalize on these EG&S by charging an entrance/user fee and hence these
values are already captured at least partly by real estate prices.
o Weaknesses: It’s impossible to define fully and clearly private rights to for
some EG&S (e.g., clean air, clean water, migratory and free-ranging animals).
o A key part of our Canadian identity is tied to our public lands and resources.
Shifting these EG&S to private ownership would have major social and
cultural ramifications.

A private landowner who improves runoff water quality cannot
sell this benefit. Producing this benefit does not affect the
farmer’s bottom line.
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 12
2. Command and control (C&C) involves conventional laws and regulations that restrict
what individuals can legally do (e.g., Environmental Protection Act, Nutrient
Management Act).
o Examples include: Water and air pollution regulations; Fish habitat and
endangered species regulations; Tree cutting regulations and bylaws
o C&C provides negative economic incentives (e.g., fines and penalties) for
doing something prohibited.
o C&C does not prescribe desired outcomes; only what is undesirable and
punishable.
o To make C&C effective, large administrative costs are incurred (e.g., laws and
regulations, policing, courts and jails). These are extremely expensive to
operate.
o C&C restricts the behaviour of the market and does not accord with the
principles of supply and demand. C&C does not result in the optimum
balance between demand and supply.

3. Purchasing or renting private land by the public allows the public to manage the land
to enhance supplies of EG&S.
o Examples include: Nature Conservancy lands; Expropriation; ALUS
o Private land purchasing/rental is a familiar activity.
o Purchase/rental of private land rights has limited flexibility to target specific
EG&S. EG&S tend to be supplied over extensive areas making large-scale
acquisition and management economically and socially infeasible.
o When the public rents land to enhance supplies of EG&S, getting the price
right is essential. Under-pricing or over-pricing will result in an imbalance of
supply and demand and will not result in optimal social benefits (i.e., the best
return to the public on their investment).
o Land purchase and rental prices are driven by the private market (i.e., they
reflect the opportunity cost of the land for the production of conventional
private goods and services).
o Prevailing market prices are not appropriate for pricing the value of land to
produce EG&S (i.e., the value of EG&S is external to the private market).
o As a result, using prevailing land purchase or rental prices to purchase rights to
produce EG&S is fundamentally wrong and will not yield the optimal social
benefit.
o Purchase/rental shifts property rights to the new owner/renter. This can
alienate the current landowner and can result in significant public
management costs.
o Purchase/rental of private land rights results in the public being forced to
purchase the economic potential for producing private goods and services.

4. Subsidies and Cost Share are payments to land owners for meeting certain
requirements (i.e., for doing something that will enhance supplies of EG&S).
o Examples: Farm best management practices (nutrient management, riparian
protection); Reforestation assistance
o Assistance is usually given for capital works. Operating costs fall on the
landowner.
o Cost-share programs are largely tied to capital works/equipment. Not well
suited for encouraging ongoing land management practices.
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 13
o There is no ongoing incentive to operate and maintain capital works after they
are installed at the best possible level.
o Prioritization of funding for cost-share programs tends to favour the worst
cases (i.e., unfairly rewards bad actors).
o If a landowner has already improved the management of their land, they are
not rewarded (no need).
o Limited application due to international trade restrictions.

5. Tax Relief is another form of subsidy.
o Examples: Managed Forest Tax Incentive Program (MFTIP); Farm tax credits
o There is no reward for doing more than is necessary to qualify for the tax relief
program.
o Usually assistance programs favour those who can LEAST afford to pay but tax
relief favours those most able to pay (i.e., those who pay the most taxes and
who tend to have the greatest assets).
o Tax rates are tied to assessed (i.e., market value) value of land but market value
does not capture the value of many EG&S. Therefore the amount of tax relief
is poorly correlated with supplies of EG&S.
o Tax relief provides imprecise economic signals to landowners leading to less
than optimal land management decisions with respect to supplies of EG&S.

6. Markets involve buying and selling EG&S
o Examples: Carbon credit exchanges; Hunting and fishing rights
o Economists have defined the requirements for a perfect market and they are
quite demanding. Indeed, no market fully satisfies these requirements.
o When a perfect market does not exist, market imperfections (i.e., some loss of
efficiency) will be present.
o The degree of inefficiency depends on the nature of the imperfection.
o Markets do not suddenly emerge. Markets have evolved over many millennia
of human civilization.
o Preparing the groundwork for a market requires time; in particular, markets
require an organizational framework within which to operate.
o The advantage of markets is once they are established and functioning
smoothly, they result in efficient outcomes and are largely self sustaining.
o Markets for the supply of EG&S on private land have considerable untapped
potential.

Following this general discussion of economic principles and EG&S, Ed got more specific in
discussing the potential for applying economic instruments to public and private land
management. First, in the case of public land management, the example of forest management
was used:

• The multiple benefits of forests have been long recognized. The challenge has been
developing a management system that results the maximum size of the “benefits pie” (i.e.,
“It’s not easy to get a well functioning market, and not easy to establish
one but once a well-functioning market is in place, the benefits to the
public and private citizens can be significant.”
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 14
the greatest supply of forest benefits at the least cost) and ensuring that the pieces of the
pie are fairly distributed.
• Because Canadian forests are largely publicly owned, conventional economics have not
played as much a role as is the case with private land, but should economics have played a
greater role?
• Forest management is largely a “do this, do not do this” management system (i.e., largely
command and control). Forest management is highly regulated and little opportunity
exists for more efficient economic instruments to be used.
• The major barriers to economic instruments are the licence agreements that do not provide
positive economic incentives for industrial forest managers to produce anything other than
timber.
• The forest management planning process is not based on economic principles, indeed,
economics hardly appear in the process other than with respect to private forest industry
costs.
• Unfortunately, efforts to move forest management in Ontario toward a management
system based on optimizing supplies of economic and ecological goods and services have
largely failed.
• Forest management is based largely on maximizing timber yield while meeting certain
ecological constraints.

So what is the potential for using economic instruments?
• EG&S are public goods and public forest management is intended to optimize social
welfare. By definition, EG&S should be part of the decision-making process.
• Because EG&S are part of the decision making process, no externalities should be present,
at least in theory.
• Forest management does involve a certain amount of cost share (e.g., road building,
reforestation, forest protection); some claim outright subsidy (US countervailing duties).
• These cost-share schemes have induced some outcomes that some segments of society
strongly oppose (i.e., advocates of roadless areas) and diminish the importance of some
EG&S. But these problems are best addressed through the formal forest management
planning process, not through economic instruments per se.

Accurate valuation of Forest Ecological Goods and Services (FEGS) could:
• Achieve a better balance of economic and ecological FGS.
• Communicate to the public the benefit of optimizing economic and ecological FGS.
• Provide incentive to change the planning paradigm.



The management of private lands differs substantially from public land management:
• Examples of EG&S from private farms include: Wildlife habitat; water regulation; climate
regulation
• The farm community has played a major role in environmental stewardship for many years.
So why are economic instruments needed now?
If economic instruments have no role in public forest management,
is there any reason to value forest ecological goods and services?
The answer is YES.
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 15
o Economic forces are driving farmers to use their land as efficiently as possible,
efficiency here meaning to obtain the greatest revenue for the lowest cost.
o These forces are driving the push to convert “vacant” land to productive uses (i.e.,
to revenue yielding uses).
o Within this context, EG&S that formerly were viewed as neutral or slightly
positive benefits are now viewed as barriers or negatives. They are impediments to
using farmland more efficiently.
• There is a continuous scale of improvement that is possible with stewardship. How much
stewardship is reasonable to expect from private landowners?

• The farm is a private business, and the landowner independently determines the best
management practices for the land. A key objective of the owner is to optimize private
welfare or what is more commonly referred to as profit.
o However, profit is not the only private land management consideration. Other
private values and social obligations affect private land management decisions.
o The profit equation is quite simple. When land management decisions are being
made, different combinations of products are analyzed to see what combination
will yield the greatest profit.
o If EG&S can make a positive contribution to the profit equation, land managers
will evaluate whether managing part or all of their land to produce certain EG&S
is profitable.


In concluding this discussion of EG&S and private land, Hanna provides these points regarding
the potential for using economic instruments:
• Given the nature of farm enterprises and past experience with various types of economic
instruments, we can confidently conclude that economic instruments will stimulate
positive land management responses if they are well designed and delivered.
• It is essential to get the price right.
• Prices for EG&S must be determined locally and must reflect local supply and demand.
• The value of the supply for many EG&S is highly sensitive to geographic location, much
more so than for conventional economic goods and services (e.g., agricultural
commodities).
• If the price is too high, the public will get too much of the wrong type of EG&S in the
wrong place. Likewise, if the price is too low, we will get too little of the right type in
desirable locations.
• The accurate valuation of EG&S on private land involves balancing :
o The maximum willingness to pay of the public for local supplies of EG&S;
o The minimum willingness to accept of private landowners to produce local
supplies of EG&S;
• The effective future application of economic instruments will require:
If increased stewardship is desirable, how much of the costs of
increased stewardship is it fair for the private landowner to bear?
“It’s not just an issue of the bottom line, but whatever else happens
we still have to
p
a
y
the taxes...”
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 16
o Developing reliable and enduring financing mechanisms so that adequate budget
allocations for EG&S management will be assured over the long term similar to
the stability provided by our property tax system; and
o Demonstrating the economic performance of EG&S programs in terms of yielding
the greatest public benefit for the least cost.

Ed left us with these concluding comments:

• Economics is NOT an elixir for all EG&S ailments.
• Prudent public policy including public policies designed to sustain and enhance future
supplies of EG&S must satisfy some critical requirements but these requirements are
commonly overlooked or poorly addressed.
• Valuation of EG&S is useful for both public and private land management; but for
different reasons.
• Externalities create the primary need for economic instruments.
• Private land offers the greatest potential for economic instruments.
• Choosing the best economic instrument must be done carefully, one size does not fit all.

Questions and Answers:

1. Q. Jim Coles, a Bruce County landowner, made the point that an important criterion that
must be included is that, whatever system is put in place should be there for a long period
of time. He noted problems with the continual changes to the Environmental Farm Plan
program.
A. Yes – For economic instruments to work effectively in sustaining future supplies of
EG&S, there must be long term stability in the market.
2. Q. Frank Hoftyzer, President of the Ontario Soil and Crop Association, noted that if you
want to cut costs, cut out some of the regulations.
A. Yes. Where you have positive incentives, people will respond better. The high
administrative costs associated with conventional command and control approaches to
environmental management are a primary force driving the move toward using economic
instruments to secure future supplies of EG&S.


3.4 National Survey on Ecological Goods and Services (Lynn McIntyre)

Lynn McIntyre, of Wildlife Habitat Canada (WHC), presented the results of a “National Survey
on Ecological Goods and Services”

In 2005, with support from Agriculture and Agri-Food Canada’s Advancing Canadian Agriculture and
Agri-Food Program, WHC initiated a leading edge survey on the topic of ecological goods and
services. The National Survey on Ecological Goods and Services is the fourth in WHC’s series of
National Rural Landowner Surveys, which began in 2000 in an effort to better understand rural
landowners’ attitudes and behaviours towards stewardship and conservation. Collectively, these
surveys represent some of the most comprehensive work of their kind ever undertaken in Canada.

WHC recognized the potential for production of EG&S in the working landscapes of Canada and
sought out the opportunity to further explore this potential on agricultural lands.
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 17


1794 farmers, ranchers, and other rural landowners were surveyed in an effort to:

Benchmark their attitudes and behaviours towards EG&S;

Gain a better understanding of their willingness and capacity to provide EG&S;

Highlight opportunities to for offsetting landowner costs; and

To spread information on the development of EG&S policy to farms and ranchlands in
Canada.


The National Survey on Ecological Goods and Services was developed by WHC with input
from an advisory committee comprised of individuals from Agriculture and Agri-Food Canada,
the Canadian Federation of Agriculture, Delta Waterfowl, Ducks Unlimited Canada, Keystone
Agricultural Producers, and the Prairie Habitat Joint Venture.

Some of the key findings of the survey were:
• Of 12 possible concerns about agricultural operations, the 5 that were mentioned most
related to “making a living” or some element of farm costs or prices;

ENVIRONICS
5742 Rural Landowners 2006
11
Greatest concern regarding agricultural operation
Farmers Top mentions April 2006
Q.1
4Cattle/livestock/lamb/pork prices
4Disease/BSE/avian flu
4Fuel/gas/electricity/machinery costs
4Weather
3Marketing issues
8Commodity prices
5Grain/cereal prices
5Government restrictions/lack of farmer control
3Environmental issues (gen)
9Expenses/input costs
14Prices (unspec.)
26Making a living/profitability/sustainability


• Increased participation in “environmentally sound land management” is highest where a
landowner can see a direct benefit;
• Only 2 in 10 farmers are averse to adopting new practices;
“Respondents also reflected a high degree of interest in the issues
explored in this study, as evidenced by the significantly greater than
average compliance rate of 91%. In other words, almost everyone that
qualified for the survey completed the entire survey; virtually no one
“bailed out” mid-interview. A compliance rate of about 40% is
considered good for any survey – in this case, 91% of the respondents
hun
g
throu
g
h the entire surve
y
.”
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 18
• The main reason stated for participating in environmental programs is “environment;” and
the main reason for non participation is “financial.”

• There is only a limited knowledge of the phrase “ecological goods and services” across the
country (25% “unaided” familiarity), with a decidedly smaller percentage being familiar in
the province of Quebec (9% familiarity);


• The vast majority of farmers recognize their responsibility for practicing environmentally
sound land use practices without compensation, but find two impediments:
1. Financially things are already very stressed, and if it means additional costs to the
farmer, this is not easy to do;
2. There are gaps in the knowledge of how to apply some of the environmentally sound
practices.

ENVIRONICS
5742 Rural Landowners 2006
36
The major information gaps appear to be in the following areas:

Specific environmentally-sound practices and how these can be applied
to agricultural operations;

The economic benefits of specific environmentally-sound practices;

The importance of taking into account the impact of land use practices
on neighbouring lands and more broadly, the impact on the watershed;

The ripple-out effects of environmentally-sound land management
practices;

The existence of environmental programs offered in both the public and
private sectors; and

The meaning and implications of the term “ecological goods and
services.”
Addressing information gaps



Questions and Answers:

1. Q. A self-identified hunter asked whether the effect of “command and control”, or regulations,
was included in the survey.
“Promotion of ecological goods and services must include
financial incentives”
“We’ve got to think of something else to call this thing – “ecological
goods and services” just doesn’t do it.”
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 19
A. Yes – it was included in the list of reasons, and was about half way down – regulations
was one of the reasons why farmers and ranchers would participate.

2. Q. Joe Banbury of the Northumberland Stewardship Council noted that farmers are well ahead
of the curve. Urbanites lecture him on the use of pesticides, when they themselves are taking “7
prescription drugs a day and I’m not applying any pesticides.”


3.5 A Decision-Support Process for the Development of Habitat-Based Biodiversity
Standards for Agriculture in Canada – Integrating Ecological Goods and Services
(Cathy Nielsen)

Cathy Nielsen, of Environment Canada, discussed the work being jointly undertaken by
Environment Canada and Agriculture and Agri-Food Canada in the development of biodiversity
standards for agriculture in Canada.

Abstract:

The goal of the Environment Chapter, under the Agricultural Policy Framework, is to decrease risk
and increase benefits of agriculture to air, water, biodiversity and soil (four environmental themes).
Environment Canada (EC) has signed a Memorandum of Understanding with Agriculture and
Agri-Food Canada (AAFC) to develop agri-environmental standards within a four-year time period.
The National Agri-environmental Standards Initiative (NAESI) is the EC program to set
environmental performance standards, for agriculture, that address each of the four environmental
themes.

Cathy began her presentation with a number of broad definitions, including the definition in
the MOU of “Standards”:

1. Performance Standards:
• Establish the degree of desired environmental quality of air, biodiversity, water, and
pesticides in agricultural areas;
• Can be quantitative or qualitative measures (descriptive benchmarks) or a “degree of
desired environmental quality”;
• Are voluntary;
• Are defined in terms of:
– ideal maximum concentration of harmful or dangerous substances;
– a specified condition of the environment; or
– habitat standards (biodiversity).

2. Priority Standards:
• They answer the question: “What are the critical characteristics of land cover/ land use
pattern to conserve biodiversity at a level that will ensure the continued supply of
ecological/ecosystem goods and services (broadly defined) and the conservation of
ecosystem, species and genetic diversity typical for the region?”
o Standards – quantitative and qualitative descriptors of the land cover amount,
pattern and quality required to meet biodiversity goals;
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 20
o Biodiversity (habitat conservation- wetlands, riparian areas, woodlands, grasslands
and connective corridors)


The Millennium Ecosystem Assessment project has identified the types of benefits people obtain
from ecosystems:



Cathy then listed the myriad of premises that guide us when considering EG&S:
• Ecological goods and services are provided by healthy functioning ecosystems, and
populations of species that are part of those ecosystems;
• Services provided by ecosystems (such as water quality and quantity, flood control) are
dependent on the amount, distribution and condition of ecosystems that provide these
services;
• Ecosystems are composed of interdependent networks of species – interacting with each
other – and the abiotic components of an ecosystem;
• Representation of species across functional groups is important to maintain ecosystem
function;
• Diversity of species present in an ecosystem is important for the stability, resilience and
functioning of ecosystems (insurance policy);
• Landscape patterns affect species populations – therefore the amount, distribution and
condition of ecosystems affect the provision of services;
• Some species currently provide a greater portion of ecosystem goods; however, all species
have potential to contribute goods;
“Biodiversity is much more than simply the number of species. It’s more
like an operating bus – all the pieces need to fit together properly to
make it work.”
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 21
• Some species may provide a greater portion of ecosystem services but empirical studies are
rare and our knowledge of this aspect is rudimentary;
• Goods and services provided directly by species are dependent on the distribution and
abundance of populations of the species and, in turn, the distribution, abundance and
condition of the habitat that supports the species;
• There is an existing but limited body of science that can be incorporated in a decision
support process to guide the landcover/landuse design to conserve biodiversity and
maintain ecological goods and services.

An important consideration is that in striving for national consistency in the biodiversity goals,
one must be sensitive to regional variation. The NAESI Generic Biodiversity Goals are to:
• Conserve regional ecosystem services (regulating, provisioning supporting) that are
dependent on biota that inhabit wetlands, forests, grasslands, riparian areas;
• Conserve ecosystem services in a pattern that continues to be of direct benefit to
agriculture;
• Conserve ecosystem diversity – representation of full array of ecosystems in proportions
indicative of pre-settlement or potential natural vegetation (PNV) landscape;
• Conserve unique landscape features;
• Conserve habitat quality of natural areas;
• Conserve species composition typical for region;
• Reverse negative trends in species populations;
• Conserve contribution of agricultural areas as habitat;
• Conserve habitat for species at risk;
• Be consistent with legislation.

The NAESI project has used this approach:
• Use multiple lines of evidence to develop landcover standards to conserve biodiversity:
o Representation of ecosystems relative to PNV and NCC -30% threshold;
o Landscape pattern (patch size, connectivity, patch shape, adjacency of
complimentary habitats) relative to published landscape metric thresholds
applicable to the area;
o Habitat supply for list of surrogate species relative to PNV and published targets;
o Modeled population trends for sub-set of surrogate species relative to viable, stable,
and ecologically functional targets;
• Develop a decision support process to determine if current landscape will provide habitat
quantity and quality required to conserve ecologically functional levels of surrogates
measured over time using a combination of existing tools;
• Use the decision support process to assess scenarios and facilitate trade-off analyses.

Models are being developed and used to paint a picture of the ecosystems that might be on the
landscape if there had been only natural processes and changes at work, in order to:
• Investigate the range of variation in plant community types expected considering historical
disturbances;
• Provide a baseline to analyze representation of current land cover types; and
• Provide a baseline to analyze the natural range of variation in habitat supply

Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 22




A case study from the Eastern Ontario Model Forest (EOMF) was described:

In this example, the Habitat Guidelines for the Mixedwood Plains Ecotone were used:
• Thirty percent forest cover (blocks of >10,000 ha);
• At least one 200-hectare forest patch that is a minimum of 500 metres wide;
• Ten percent of the watershed - forest cover 100 metres or further from the forest edge;
Five percent - forest cover 200 metres or further from the forest edge;
• Forest patches - circular or square in shape and within two kilometres of one another;
• Corridors designed to facilitate species movement - minimum of 50 to 100 metres wide;
• Corridors to accommodate breeding habitat must consider target species requirements;
• Watershed forest cover - representative of the full diversity of forest types found at that
latitude;
• Seventy-five percent of stream length naturally vegetated;
• Thirty-metre wide stream buffers;

“As a coarse rule of thumb, if we are able to protect 30% of an
ecosystem, we have a possibility of protecting 80% of the species.”
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 23


Cathy then described 4 examples of the application of the criteria:

1. Total Forest Cover
• How much habitat is enough:
o Percent forest cover: At least 30% of the AOC watershed should be in forest cover
• Species-based thresholds:
o Consider areas of forest cover at 40, 50 and 60%;
– White throated sparrow 40% forest cover for probability of occurrence;
– White-breasted nuthatch rapid decrease in pairing success at 40-60%
remaining forest cover;
– Ovenbird populations breeding in moderately fragmented landscapes with
<60% forest cover within a 100 km radius are generally not viable in the
long term.

2. Forest Patch Size
• How much habitat is enough:
o A watershed or other land unit should have at least one 200 ha forest patch which
is a minimum 500 m in width
• Other broad habitat targets:
o blocks greater than 30 ha likely to support a range of area-sensitive species (OMNR
2001 - SWHTG)
• Species-based thresholds:
o Wood Thrush: manage forests to maintain supply of upland deciduous or mixed
forest with dense understory preferably in patches of 100 ha or greater;
o Red Shouldered Hawk: protect extensive tracts (>100 ha) of mature forest with
wetland or riparian features;
Habitat Based Standards Decision Support Process- Case Study
Eastern Ontario Model Forest
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 24
o Canada Warbler: protect mature mixed swamp forest with dense understory
within extensive forest tracts (>400 ha)

(BCR 13 Habitat Objective 2005)

3. Riparian and Wetland Buffers
• How much habitat is enough:
o Minimum guidelines for Critical Function Zone / Protection Zone:
⇒ bog = the total catchment area;
⇒ Fen = 100 m or as determined by hydrogeological study, which ever is
greater;
⇒ marsh and swamp = 100 m
o Percent of stream naturally vegetated:
⇒ 75% of stream length should be naturally vegetated;
⇒ 30 m minimum buffer on both sides
• Other habitat and species-based thresholds:
o Buffer widths for habitat values are generally greater than those listed for water
quality concerns:
⇒ Approximately 150-300m from edge of aquatic site for amphibians
and reptiles
⇒ 150-175 m total width for corridor to include 90-95% of bird species
⇒ >50 m for mammals
⇒ 50 m for detrital input, bank stabilization
⇒ >30 m for invertebrates and fish
⇒ 25 m for nutrient and pollutants
⇒ 16 m grass or woody buffer removed 97% of sediment

4. Pollinator Services for Agriculture
• How much habitat is enough:
o There are no guidelines for habitats such as grassland, hedgerows, old field which
provide important resources for many species
• Other habitat and species-based thresholds one could consider:
o 10% natural/semi-natural habitat within 1-2.5 km of crop field to retain
pollination services to field (Kremen et al. 2004);
o similar results for predators/ parasitoids – 1-3 km (Hickman and Wratten 1996;
Tscharntke et al. 2005)

Another important piece in the work is to identify then measure the appropriate indicator
species:
• Indicators of Stressors
• Indicators of Processes







Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 25
And an example check list was provided:



As were other criteria to be considered when selecting indicator species:
• Practical:
o Data availability for habitat (quantity versus quality at a variety of scales);
o Data availability – species life history characteristics;
o Ease of interpretation (predicted outcomes, how will this transfer to
agri-environmental standards?)
o Sensitivity to agricultural stressors (will the standards be sensitive to changes in
actions at the farm level - e.g., BMPs).
• Ongoing work in the region:
o MNR/NHIC rankings of wildlife species;
o Provincially featured species;
o List of priority bird species for conservation in the EOMF;
o Identified wildlife areas (seasonal concentration areas, animal movement corridors,
significant wetlands, Areas of Natural and Scientific Interest, rare vegetation
communities);
o Species of economic significance.

She then outlined some examples of the key questions NAESI will be asking as they integrate
their analyses into a final report and recommendations. The example from the forest:
• How much habitat is enough to sustain ecologically viable populations of:
o forest obligate
species associated with a variety of cover types
and age classes;

o forest obligate
species with a range of area sensitivities
and home range sizes

(umbrella species);
o forest interior
species;
o forest species susceptible to edge
impacts.
Indicator Checklist
structural
influence
Seed
dispersal
herbivorePredator /
insectivore
Nutrient
cycling
Pollination
XX
X
XPileated WP
Wood Frog
Features (mast/
CWD/ ponds)
X
X
Ruffed Grouse
RS Hawk
Stand Age/
Composition
Specific Habitat Needs
XX
X
X
Gray Treefrog
Beaver
Wood Duck
Multiple
Habitat types
XXRB salamander- edge impact
XX
XX
Wild Turkey
L.Wood Satyr
+ edge impact
X
X
X
Barred Owl
Coyote
Large home
range
X
X
Goshawk
Cerulean
Warbler
Area sensitive/
Interior
XXS. Flying SquirrelPoor disperser
X
X
X
XL.Wood Satyr
Red Squirrel
Good disperser
Habitat loss/ fragmentation
SPECIES FUNCTIONSSpecies
examples
STRESSOR
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 26

• What types of habitats should be connected/adjacent to ensure access to a range of
resources required to ensure the long term viability of:
o species with a range of seasonal habitat requirements
;
o species using multiple habitats to access daily resource needs
;
o species requiring edge
habitats.
• How should patches of the same broad cover type be connected to ensure dispersal
between patches and long term viability of:
o species with limited dispersal ability
;
o species vulnerable to dispersal related mortality
when traveling between patches.

And in summary, Cathy offered these thoughts:
• It is important to consolidate and integrate existing science/information/tools. We should
build on what came before us – if it is appropriate;
• For the habitat-based standards decision support process, the goal is to define a realistic
and scientifically sound decision support process not necessarily a fully operational
integrated software based system – this can come later;
• We need to ensure that the approach is practical but also provides progress in terms of
integration of science;
• The decision support process is about providing a synthesis of the science, in a way that it
can be integrated with social and economic aspects to support landuse/land management
decisions;
• When we are dealing with biodiversity standards for terrestrial systems at a landscape scale,
there are many unknowns;
• Empirical studies directly relating landcover/landuse pattern to ecological services are
limited to a few specific areas:
o water quality and quantity;
o pollination; and
o pest control.
• The relationship between ecologically functional populations and viable populations is a
major area requiring investigation;
• How representative is the suite of surrogate measures/species of biodiversity?
• There is a lack of consensus in the science community around appropriate reference
conditions – at the landscape scale for habitat and for species population levels. There is
greater consensus on reference conditions for habitat quality of patch;
• Validation will need to be through longer term monitoring and trend through time
analysis. Conventional experimental design approaches are difficult for landscape scale
parameters;
• People: The social dimension of biodiversity goals and objectives for a geographic area
must also be taken into account.

Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 27




Questions: None


3.6 Agroforestry Systems: Providing Ecological Goods and Services
(Dr. Andy Gordon)

Dr. Andy Gordon, Director of the Agroforestry Research and Development Program at the
University of Guelph, provided a discussion on ecological services associated with agroforestry
systems.

Abstract:

Dr. Gordon mentioned all systems of agroforestry, but focused on riparian systems and
intercropping. He based his presentation on historical scientific studies and provided a focus on
carbon in terms of sequestering and climate change interactions.

Agroforestry is defined by Dr. Gordon as “Incorporation of trees into farming systems,” or
“farming with trees”. Further, he notes that one can consider agroforestry in terms of several
different “systems”:

Natural areas are a huge research and development
facility- providing direct products and services and a
irreplaceable reference library of systems, species and
genes
.
“Remember that we value just because it’s beautiful, too
– and we don’t want to forget that.”
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 28
1. Forest Farming Systems: Where we look at agrofestry in terms of what commodities may be
taken from the forest that is associated with the farming operation. Examples of the non-timber
forest products (NTFPs) that are included here would be:
• Maple syrup production;
• Christmas trees;
• Ginseng;
• Shiitake mushrooms; and
• Pharmaceuticals.

2. Windbreak Systems: Where we see the often used “trees around fields” approach.

3. Silvopastoral Systems: “Trees, animals and pasture” interacting are the defining elements of this
“system”. The benefits of the silvopastoral system can be:
• Control of erosion;
• Nutrient filtering;
• Shading effects /Animal welfare;

• Wood / Nut / Fruit production;
• Wildlife corridors; and
• Carbon sequestration.

Dr. Gordon offered a number of examples of where the silvopastoral system is in effect today:
• Southern US, with cattle
• New Zealand, with sheep and Radiata pine
o Tree density is around 100-400 stems per hectare.
o The trees are pruned to improve tree value, and pruned branches are left for the
sheep to graze;
o Meanwhile, the animals are better off with a shaded environment.
• France, where sheep graze under larch
• Northern Ireland, where sheep graze under ash

4. Integrated Riparian Management Systems: “Trees on streambanks” offers many well
understood benefits, and the example of Washington Creek, southwest of Kitchener, Ontario was
used to illustrate:
• The banks were planted with hybrid poplar in 1985;
• Within 5 years there had been a dramatic improvement to the environment of the stream;
• The poplar were thinned, and underplanted with ash, oak, and walnut;
• By 2005, the stream had improved significantly, to the point where it was able to support a
population of brook trout

5. Intercropping Systems: – “Trees and crops” sharing the same “fields” offers benefits such as:
• Often less pesticide is needed, as the rows of trees provide a haven for arthropods;
• A “third dimension” is added to the system, whereby one now sees raptors entering the
picture, preying on the moles and voles;
Dr. Gordon and his colleagues estimate that the value of carbon
sequestration in such a riparian “buffer” could amount to $80/ha/yr.,
based on projected estimates of carbon values in 2010.
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 29
• In contrast to monocropping, where leaching of nitrogen can be very significant,
intercropping reduces nitrogen leaching by as much as 50%; and
• Because of these factors – while output may always be less with intercropping – the yields
are often identical.

6. Bioenergy Systems: “Trees for energy” is becoming a more realistic concept, and the bottom
line for the future is: “The sky’s the limit!”

Dr. Gordon continued his presentation with an outline of some of the research he and his
colleagues at University of Guelph are conducting – research that is empirically testing and
confirming the value of all the “systems” of agroforestry, and noted:
• They have worked out carbon budgets for each of the systems discussed – something that
will be critical as Canada moves toward implementing Kyoto; and
• That there is research needed to continue the work for all the systems.

Questions: None


3.7 Employing Science to Value Ecological Goods and Services Programs in Canada
(Erling Armson)

Erling Armson, a biologist with Ducks Unlimited Canada (DUC) for 26 years, provided a
snapshot of some of the relevant work that DUC has been involved in relating to EG&S.

Erling began his presentation with an overview of Ducks Unlimited Canada:
• DUC was established in 1938
• It is a national, non-profit conservation organization;
• Its objective is to conserve, restore, and manage wetlands and associated habitats for North
American waterfowl;
• These habitats also benefit other wildlife and people.

He established the link between “natural capital” and EG&S in this way:
• Natural capital can be defined as the “stock of natural resources/ecosystems”; and
• Ecological Goods and Services (EG&S) can then be defined as the “economic and social
benefits derived from natural capital”.

The need for a science-based approach is important:
• There are still gaps in our understanding of functions and values;
• What value do you place on non-market EG&S?
• Who is paying the piper?

The fact that DUC has been valuing EG&S for almost 70 years suggests that this is not a new
process, but it still needs a number of factors for it to work effectively:
• Needs sustainable agricultural and forestry sectors;
• It needs to recognize and reward producers and owners;
• It must be science-based; and
• There must be long term programs with significant uptake.

Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 30
The science-based approach is needed in order to accomplish:
• A justification for the
valuation of the natural
capital;
• Converting the valuation
into quantifiable terms that
society will support; and
• Developing the sustainable programs with significant uptake.

He then summarized a number of examples of science-based EG&S initiatives in which DUC is
involved:

1. WEBs Project (Watershed Evaluation of BMPs)
• Assessing the water quality benefits of BMPs
• Multi-partnership initiative with AAFC, DUC and others
• 7 regional projects across Canada
• Project objectives are:
o To determine the environmental and economic benefits of selected BMPs such as
cattle exclusion, subsurface water management;
o To model the data at a watershed scale;
o To identify those BMPs and lands that will give the greatest return on investment;
and to determine the appropriate compensation to landowners.

2. Carbon Research – the Agriculture and Wetlands Greenhouse Gas Initiative, including these
2 ongoing projects:
• Finding a Natural Solution: Exploring Carbon Sequestration of Prairie Wetland
Landscapes
• Management of Agricultural Landscapes with Wetlands and Riparian Zones: Economic
and Greenhouse Gas Implications
• Initial results will be forthcoming, contact DUC IWWR for more information.

3. Research in the Boreal Forest
• DUC is involved in a comprehensive inventory in the Western Boreal Forest of:
o Wetlands
o Forest
o Waterbirds; and
• Wetland carbon research (expanded to the boreal); and
• Boreal hydrology research (to better understand water movement and role of wetlands).

4. Integrated Modeling of Isolated and Riparian Wetlands in Agricultural Watersheds
• Working with University of Guelph;
o To conduct a watershed based evaluation of the benefits of wetlands in southern
Ontario and
o Potential project in cooperation with George Morris Centre to better determine
the costs, benefits and barriers to implementation and ownership of wetland
BMPs.


“It’s worth noting that in the U.S. the
Conservation Reserve Program may start to lose
out to the production of bio-fuels”.
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 31
5. Wetland Farm Stewardship Pilot Project:
• Pilot program in Niagara, Peterborough, Prince Edward and Leeds Counties
• Has an evaluation component;
• It has been developed in association with: AAFC; OMAFRA; OSCIA; farmers; farm
associations;
• The pilot project is looking at the effect of topping-up the current 50% grants/cost share
available through the Environmental Farm Plan, and
• The project is looking at the difference in uptake at 50%, 75%, 90%, and 100% cost share.

Erling closed his presentation with a reiteration of why science is critical to the development of
EG&S:
• There must be justifiable and quantifiable costs and benefits;
• We need the science to inform the policy process;
• We need it to develop effective and sustainable programs that are:
o Economically sustainable; and have
o Significant uptake.

Some of the future directions that DUC will be pursuing include:
• Continuing to build our understanding of EG&S on a watershed scale;
• Continuing to work with governments, landowners, associations and the public; and
• Working to develop and implement real life programs to guide appropriate levels and
amounts of compensation to landowners.

Questions: None


3.8 Ecological Goods and Services: Perspectives for Agricultural Policy and Programs
(Darryl Finnigan)

The next speaker, Darryl Finnigan, a policy analyst with the Ontario Ministry of Agriculture,
Food, and Rural Affairs (OMAFRA), discussed the Canada-Ontario Environmental Farm Plan
and its connection to EG&S.

Abstract:

Since 1992, the Canada-Ontario Environmental Farm Plan (EFP) has been one of the flagship
agri-environmental programs in the province. The program aims to improve soil, water, air and
biodiversity through education and by encouraging the voluntary adoption of on-farm projects.
Eligible farmers receive one-time payments to defer some of the costs of implementing projects.
There may be opportunities to build on the successes of the Environmental Farm Plan to increase
the supply of ecological goods and services, but choosing the right policy approach is important,
and many policy questions remain.

“Uptake is very important: Who cares about a program
that only has 2 or 3 or 4 people interested in it?”
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 32
Darryl noted at the outset that the Ontario Ministry of Agriculture, Food and Rural Affairs
(OMAFRA) is part of a federal/provincial working group looking at EG&S. The Working
Group is:
• Examining the costs of different policy approaches; and
• Examining research on what is working at the farm level and how to measure progress


Putting a value on ecological goods and services is another way of thinking about the
environment:
• We already use a mix of policy tools in the province:
o Regulation (e.g., Nutrient Management Act);
o Education (e.g., Environmental Farm Plan); and
o Financial Incentive Programs (e.g., Greencover Canada)
• Much depends on clearly defining environmental objectives and adopting measurable
outcomes.

Within the farm community, awareness of EG&S is changing:
• There is a growing awareness of the environment in general;
• There is a growing recognition of agriculture’s contribution to environmental quality; and
• Suggestions are being heard that farmers should be better compensated for the ecological
goods and services that they provide through land use practices;
• There is plenty of opinion on EG&S in the media – in the general media, as well as in the
farm-specific media.

He identified four broad goals from Canada’s Agricultural Policy Framework:
• Cleaner air;
• Cleaner water;
• Healthier soil; and
• Improved biodiversity.

And then he addressed specifically agri-environmental programs in Ontario:
• To date, most programs have involved first-come/first served one-time payments;
• The key example is Ontario’s main environmental program for agriculture -
the Canada-Ontario Environmental Farm Plan

OMAFRA’s approach to dealing with EG&S is through the Environmental Farm Plan:
• This is agriculture’s main environmental program in Ontario;
• It was developed by:
o Ontario Farm Environmental Coalition;
o Agriculture and Agri-Food Canada;
o OMAFRA; and
o Ontario Soil and Crop Improvement Association.
• The EFPs are based on an on-farm risk assessment;
• The plans have a long history of success:
o The program started in 1992;
When defining EG&S, one might consider them as:
“the benefits from healthy ecosystems”.
Valuing EG&S: An Ontario Perspective (Workshop Proceedings March 1, 2007) 33
o Today, farmers are working with the 3
rd
edition of the guide, from 2005; and
o Over the period April 2005 to January 2007, there have been over 8,000 workshop
participants and over 5,500 peer-reviewed EFP Action Plans produced.
• The program operates on the philosophies of:
o Voluntary and confidential in nature;
o Self-directed, risk reduction approach; and
o Seeking continuous on-farm improvements.

The types of project “uptake” under the EFP reflect a tendency toward agriculture-related
improvements, with the highest uptake for the following categories:
• Improved cropping (1,388 projects);
• Manure storage and Handling (962);
• Water wells (744);
• Nutrient management (623);
• Pest management (596).

On the other hand, the types of projects that might fit well within the realm of EG&S policies
and programs were all “low” in uptake:
• Species at risk protection;
• Grazing management;
• Habitat enhancement;
• Increasing water supply on the land;
• Carbon sequestration.