Photo: Chincoteague, Virginia, a Chesapeake Bay town home to about 3,000 people that shares the name of the island on which it is located on Virginia’s Eastern Shore. Chincoteague has long been popular with visitors for its nature, historic sites and the ponies that move between there and nearby Assateague. Image credit: Sara Cottle/Unsplash
Many would agree that climate change is the most prominent problem we face today, and that we probably ever faced as a species. To win this battle, more than 120 countries have committed to achieve net-zero greenhouse gas emissions by 2050. However, avoiding a systemic collapse is not enough, and states alone might not be able to solve the problem.
According to Timothy Male, Executive Director at the Environmental Policy Innovation Center, achieving a true sustainable growth means solving a diverse range of issues including the rampant biodiversity loss, increasing land and water pollution and environmental injustice.
A promising path to direct and accelerate these efforts lies in policy-building initiatives that create financial incentives for private conservation efforts, Male explained in a Private Conservation Finance report.
And there is no better place to find evidence in favor of this path than in the Chesapeake Bay.
The Chesapeake Bay case
The Chesapeake Bay, the largest estuary in the U.S., shared by Maryland, Pennsylvania, Virginia, and Washington D.C., is a holiday destination chosen by many nature lovers, hikers and campers every year. But what some people do not know is that it’s one of the most productive and biodiverse bodies of water in the world, with more than 250 fish species, 300 migratory bird and 3,600 species of animals and plants.
Given its size and biodiversity, the conservation of the Chesapeake Bay is key for both the ecology and the economy of the states that encompass it. “To successfully protect places such as this one, conservation programs must adjust to our modern understanding of human behavior and incentives,” explained Male in an interview with TriplePundit. “In other words, laws and regulations need to make conservation programs attractive to investors.”
Indeed, private capital investment has shown to have many benefits, including significantly improving the cost-effectiveness of public funding, supporting innovation to a greater degree than public funds and facilitating greater lending capacity so that restoration happens much faster.
The Chesapeake Bay case showcases the potential of boosting private conservation finance. According to a recent Private Conservation Finance report, no other region in the world supports more private finance-dependent cooperation. This is not by chance. At least within the context of water quality and related work, Chesapeake Bay states already have some of the most favorable conditions for direct investment, market-based or finance-backed approaches in the country.
Measures taken could be grouped into three categories: a well-defined regulatory framework explaining what the specific pollution reduction targets to achieve are; standardized quantification tools explaining how to estimate and translate outcomes into those targets; and strong public spending. As a result of this combination of actions, more than $4.2 billion of private investment has been deployed over the past 20 years to benefit Chesapeake conservation goals.
Chesapeake Bay states are eyeing the big prize
A combination of programs to attract private investment are getting more traction in the Chesapeake states.
The first two types of programs, and where investment has focused the most so far, are investments in transferable tax credits that reward forest and farm preservation, and green banks to help borrowers secure better loan terms and credit access.
An example of green banks is the wetland and stream mitigation banking market, considered one of the largest environmental markets in the world. This program consists of an organization protecting and restoring polluted water resources, and later selling those protected resources to companies that need a permit or want to voluntarily offset their impact.
Other programs to attract investment include state revolving funds (SRFs) that provide low-cost federal resources to help fund water infrastructure projects, and environmental impact bonds that provide investor capital as a loan to public agencies, paid back at a rate that depends on the success of projects.
Finally, there are pay-for-success contracts, where the state or agency pays for environmental outcomes as a finished product instead of paying up front for each step in the process, leaving up to the private sector to carry out the project.
This variety of programs the states surrounding the Chesapeake Bay can center their focus on different alternatives. For example, Pennsylvania has strong state revolving fund programs aimed at attracting investments for water quality and forest protection projects.
Meanwhile, Maryland has leveraged public-private collaboration and the power of technology, by partnering with The Nature Conservancy, Walmart, and water technology company OptiRTC29 to take existing stormwater ponds owned by Walmart and install sensors that allow pond water levels to be dropped based on estimated storm events and current storage capacity.
“We hope the model of public-private and interagency cooperation established here can be replicated throughout the rest of the Bay watershed and across the country to meet the growing demand for cost-effective infrastructure upgrades like these,” asserted Craig Holland, CEO of TNC/Opti Development Partners LLC.
When asked which of all the alternative programs being used right now holds more promise, Male pointed to pay-for-success programs: “Pay for success contracts can boost up to 50 percent on cost savings. They incentive parties to do things faster and more cost-efficient, creating a standard for performance and accountability.”
However, as Male recently explained in a public statement, there is still room for improvement. Investment is still held back by outdated state and federal laws, approval processes, and government procurement strategies.
Setting an example: Combining forces for conservation
“If we look at environmental problems carefully, there are actually solvable problem,” Male explained to 3p. “Conservation should be able to explain what success looks like in quantitative terms so that the private sector can understand how much time is going to take and how much is going to cost.”
“The other part is having public agencies be comfortable with the idea of risk and sharing responsibilities with the private sector,” he added. “Right now, we have a public agency responsible for design, another one for construction and another one for maintenance; each contract demanding thousands of public funds and taking months to be written. This creates a mismatch of incentives and miscommunication.”
The Chesapeake Bay Foundation has estimated the economic benefits of a restored Chesapeake Bay are more than $5 billion per year in recreation, property value, health and job creation. But there is still a funding gap of around $3 billion.
If the Chesapeake Bay region and indeed the entire planet is going to cover the gap in green funding that is greatly needed, the amount of private investment in conservation and restoration needs to increase significantly. As Joel Dunn, president and CEO of the Chesapeake Conservancy, concluded: “The future of our Chesapeake Bay, and indeed our planet, depends on it.”