American Farmland Trust
American Farmland Trust
Round –Fall-Winter 2010
Project Type –Full team
Project Focus –Earned Income
Organization Type –Environment
American Farmland Trust is the nation's leading conservation organization dedicated to saving America’s farm and ranch land, promoting environmentally sound farming practices and supporting a sustainable future for farms.
ACT was engaged to help American Farmland Trust (AFT) assess the earned income potential of ecosystem service markets (ESMs). ESMs are markets in which sellers undertake actions that benefit an ecosystem in some way and are paid for the benefits by other entities, usually to mitigate an adverse impact they are creating. Farmers are potentially major sellers of ecosystem services since their actions can sequester carbon, reduce nutrient pollution, create wetlands and protect wildlife.
At the outset of the project, AFT did not have specific ideas for possible earned income opportunities it might play with respect to ESMs. Consequently, ACT’s method during the first phase of the project involved:
- meeting with Board and senior AFT staff to learn ESMs they thought could offer possible opportunities, their view of AFT's strengths as well as concerns regarding these markets, including organizational buy-in considerations and financial capacity;
- analyzing four ESMs (carbon, water pollution, wetlands mitigation and habitat protection) to estimate the scope of the markets (e.g., national, regional or local), their size and likely growth, types, numbers and market power of various players comprising the supply chain;
- identifying six hypothetical roles AFT could play in these markets, spanning a range in terms of risk and potential return;
- and assessing in qualitative terms the attractiveness of the roles in terms of earned income potential, skills fit, competition, funding, financial risk and mission fit.
After the presentation of the first phase results, AFT asked ACT to evaluate three specific roles, namely forming a farmer’s cooperative to supply wetlands mitigation services in the Pacific Northwest, facilitating the creation of a water quality trading market in the Ohio River Basin and proving information to various ESM players. Accordingly, ACT’s work in the second half of the project included:
- developing a framework for evaluating earned income opportunities such as these; the five elements of the framework included mission fit, market structure (demand, supply, competition and barriers to entry), staffing and skills requirements, financial considerations (funding requirements and earned income potential) and risk (operational, financial, political, regulatory);
- applying the framework to the three specific roles;
- and recommending next steps based on the ACT teams findings in terms of the likely AFT effort necessary to pursue the role relative to the likely payoff and downside risks.
American Farmland Trust (AFT) needs to consider the following factors before relying on membership for revenue:
- AFT should track ESM and be on the lookout for opportunities because they could develop in ways that would further AFT’s mission and could potentially be quite large.
- Though the ACT team found no compelling opportunities for AFT to pursue, there steps AFT could take immediately include:
- continuing its best management practice work and finding opportunities to advocate for farmer-friendly ESM policies;
- exploring foundations’ and/or governments’ interest in funding an assessment of the adequacy of information available to current and potential ESM players;
- and pursuing opportunities to provide information when economics warrant.
-Apply ACT’s framework for evaluating earned income opportunities as those are identified.
Final Report Outline
- Concept evaluation framework
- Review of three example concepts: Wetland Mitigation Cooperative (Washington State); Water Quality Trading (Ohio River Basin), ESM Information Provider
- Final comments
Concept evaluation framework