In this episode, host Daniel Raimi talks with Lisa Mandle, a lead scientist at Stanford University’s Natural Capital Project who studies how to protect and enhance ecosystem services. Reflecting on key case studies from a book she co-edited, Green Growth that Works: Natural Finance Mechanisms from around the World, Mandle discusses how policy tools can ensure economic development does not come at the cost of ecosystem health. She explains how creative regulatory mechanisms and market incentives are being used globally to preserve fragile habitats, from watersheds to wetlands.
Listen to the Podcast
- Natural resources as “natural capital”: “‘Natural capital’ refers to natural resources—our forests and plants and soils and waters and animals and everything out there that, if it’s managed well, can yield a stream of benefits to people that we call ‘ecosystem services’ … One way to think about it is that the natural capital is the stocks that then provide this flow of benefits.” (3:48)
- Unrestricted development can threaten ecosystems: “The US has a long history of losing wetlands to development. Traditionally, wetlands didn’t have such a great public image. People think about swamps, but wetlands actually perform really important functions in terms of reducing flood risk by slowing waters, absorbing waters, cleaning the water … There was a realization that [disappearing wetlands] was a problem and that the benefits of filling in wetlands for development projects often went to private companies.” (13:43)
- Challenges facing green infrastructure projects: “One of the things that’s pretty common with these green infrastructure approaches is that they’re newer, and they’re seen as riskier. Governments want something that’s tried and true. They know they’re going to get what they pay for, and green infrastructure isn’t always seen that way.” (26:15)
Top of the Stack
- Green Growth That Works: Natural Capital Policy and Finance Mechanisms from around the World by Lisa Ann Mandle, Zhiyun Ouyang, James Edwin Salzman, and Gretchen Cara Daily (offer code "GROWTH" provides a discount)
- "Everyone wants to Instagram the world's most beautiful canyon. Should they?" by Rebecca Jennings
- Ice on Fire documentary
The Full Transcript
Daniel Raimi: Hello, and welcome to Resources Radio, a weekly podcast for Resources for the Future. I'm your host Daniel Raimi. This week we talked with Dr. Lisa Mandle, lead scientist at the Natural Capital Project based at The Stanford Woods Institute for the Environment. Lisa's the co-editor of a new book called Green Growth That Works: Natural Capital Policy and Finance Mechanisms from around the World. The book presents a range of fascinating cases from around the world, all centered around the tools that governments and others can use to protect and enhance ecosystem services. We'll talk about some of those cases, including New York's famously unfiltered water, preservation of wetlands, and storm water management in Washington DC. Stay with us. Okay. Lisa Mandle from the Natural Capital Project, thank you so much for joining us today on Resources Radio.
Lisa Mandle: Hi, my pleasure to be here.
Daniel Raimi: So Lisa, both of us are fighting colds at the moment, so I'll apologize in advance to our listeners who have to listen to us get through it. But it's going to be worth it because Lisa's book that she's co-edited is really fantastic, and we're going to talk about the issues that she and her co-editors cover in this book. But before we get into the substance Lisa, we always like to ask people how they got into working on environmental issues in the first place. So can you tell us about that?
Lisa Mandle: Yeah, sure. So I grew up in California, spent a lot of summers growing up camping, up and down the California and Oregon coast. And I think that's part of what contributed to my interest in nature and the environment early on. I've also always had an interest in the intersection between environment and people and got really into the idea of medicinal plants and wild foods when I was a kid, which led me to an interest in college and studying ethnobotany, or the different ways that cultures around the world make use of plants.
And as I learned about that, I realized that wild plants have benefits to local communities, but also globally in terms of sources of medicine. But the ethics around bio-prospecting were somewhat sticky. And I realized that maybe one way I could contribute to this issue was, instead of focusing on the medicinal plants themselves, focusing on conserving the whole ecosystem in which these plants are found and these ecosystems which provide many other benefits, not just medicinal plants and wild food sources. And so that led me into the field of conservation biology and ecosystem services in particular.
Daniel Raimi: That's so interesting. And that's a term I've never heard before, bio-prospecting. What does that refer to?
Lisa Mandle: So that's the idea of going out to forests or other ecosystems and looking for—prospecting, instead of for gold in the mountains—looking for biological resources that would have value. And in particular, often wild medicines or plants that make compounds that could be turned into medicines.
Daniel Raimi: Right. Okay, that makes sense. I want to ask you now a stream of questions about your youth traveling around California, hunting for plants and other things. But we're going to stick to the topic at hand and I want to ask you some questions about this new book called Green Growth that Works. So the book focuses on policies and finance mechanisms to support natural capital. So let's start there. Can you give us a working definition of natural capital, and explain to us why it matters?
Lisa Mandle: Yes, that's a great question. So natural capital is really a metaphor, but it refers to the stocks of natural resources, our forests and plants and soils and waters and animals and everything out there that, if it's managed well, can yield a stream of benefits to people that we call ecosystem services. So everything from clean water, to clean air, to places to go camping or enjoy recreationally. And one way to think about it is that the natural capital is the stocks that then provide this flow of benefits.
Daniel Raimi: Right. So, the capital would be like the principal, and the flows would be like the annual interest earned on that stock.
Lisa Mandle: Exactly.
Daniel Raimi: Interesting. So, the book describes literally dozens of cases from all over the world where governments are supporting natural capital in a variety of different ways. Can you give us some ways to think about the general types of strategies that are used to support these types of ecosystem services?
Lisa Mandle: Sure, yeah. We break out six main mechanisms in the book. One being government payments or subsidies, so when a government will pay landowners or land managers to provide an ecosystem service that they might not otherwise provide at the ideal level. The second is regulatory mechanisms, so where there's a government law in place that requires folks who—for example, developers who damage natural capital—an ecosystem service to mitigate that, those impacts, in one way or another. A third is voluntary mechanisms. And these actually might not even involve government very heavily, but where actors such as organizations or companies voluntarily decide to protect or enhance ecosystem services. And governments can play a role there, for example, in the case of conservation easements where the government doesn't require anybody to grant a conservation easement, but does provide incentives through taxation that might encourage people to make those easements, donate those easements where they wouldn't otherwise.
Fourth is market-based mechanisms. And again, this mechanism might involve governments to a lesser degree although they're often really important in terms of setting the context that allows market based mechanisms to function. And then finally, we also look at water funds, which are a mechanism for providing clean flows of water in which downstream users make investments in upstream watersheds. And then finally multilateral and bilateral mechanisms which are between different national governments.
Daniel Raimi: Great. So, there's this whole universe of options that are out there, or universe of programs that one could imagine implementing at different levels of government or maybe not involving governments so much at all. As I was reading through the book, they were a couple cases that different authors described that I thought were really fascinating. So, maybe if I can ask you about a couple of those cases and then ask you to maybe pick a third and talk a little bit about that third one that you find interesting. So, the one that caught my eye initially was a case study focused on water in New York. Anyone who's spoken with a New Yorker for more than about 20 minutes knows that New Yorkers are very proud of their water. The water is famously good and famously unfiltered, but that's not the result of some like miraculous accident of geology or hydro-geology. Can you tell us about New York's program that helps provide its great water?
Lisa Mandle: Yeah. So New York City gets his water from a couple of different watersheds that are actually at a pretty substantial distance from the city itself. And most of this water comes from the Catskills watershed further upstate. And this is the largest unfiltered source of water in the country. And a couple of decades ago, basically for safety reasons, the US Federal Government started requiring cities to either build filtration plants to ensure clean water or to show that they were otherwise managing their source watersheds in a sustainable way to maintain clean, safe drinking water. And so New York City went with the latter option, and it did this by making some investments in the land, in the communities upstate where the drinking water is sourced from. So this came in a couple of different ways. One is that the city started a program with farmers which helped the farmers there—a lot of them are dairy farmers and other kinds of farms—to implement best management practices that helped reduce pollution going into the water, and also protected vegetation in key areas. For example, vegetation along streams so that it could filter out any pollutants that might otherwise reach those sources. And then there were several other activities as well, some restrictions on where in these communities upstream and upstate where development could occur, and to compensate the communities for that. There have been some general investments in economic development and educational opportunities for those communities as well. And then New York City has also through easements and through, I think direct purchases, also acquired key strategic areas where natural ecosystems are important for protecting the water source.
Daniel Raimi: Right. So it's a real mix of strategies that the city employs, but it all sounds like it's mostly outside of its jurisdiction, and that's one of the things that struck me as most interesting, because when I imagine cities or other government entities—their ability to regulate activities, I typically think that that only applies within the physical limits of that city or that entity. So how does it work that New York City is able to regulate land use outside of its own borders? What are the legal mechanisms that are at play, and is that a common thing? Is that something that other cities could do, if they so choose?
Lisa Mandle: Yeah, so in the case of New York City, it's actually pretty unusual. The State Assembly passed a statute in the early 1900's that gave the city the ability to regulate the land, again outside the city, but where its water came from. And so that actually helped bring these communities in the source watershed in the Catskills to the table. Because if they didn't negotiate something voluntarily with the city, then the city could, in theory, just impose regulations essentially without their agreement. So that was a big forcing mechanism, in a way, to bring people to the table and get them to cooperate and [to] think what might work for everybody. But that's pretty rare, just because that mechanism doesn't exist in other cities, doesn't mean that programs like what New York City has with its source watershed in the Catskills can't be feasible in other places as well.
One of the other mechanisms and that we talk about in our book are called water funds, which are a combination of a finance mechanism, governance mechanism, and a watershed management mechanism that allows users, water users—again could be a city, could be ... we’ve seen this with beer and soda bottling companies, others who want to have a reliable source of clean water—ways for them to invest in their upstream watersheds, to invest in the natural capital and ecosystem services there to ensure clean water supplies.
Daniel Raimi: Yeah, that's so interesting. So, in those cases it would be private companies doing the negotiations with landowners rather than like say a government.
Lisa Mandle: Yeah, it could be. It could also be a coalition of private companies, and for example, municipal water sources, coming together and saying, "All right, how do we solve this problem that we have in terms of the cleanliness of our water? And who upstream is making management decisions that affects our water? And how can we invest in activities that will benefit those upstream landowners or land-holders as well as the drinking water source?"
So we've seen successful water funds in cities like Quito in Nairobi, Kenya, a huge number around Latin America in particular.
Daniel Raimi: Fascinating. We've been talking for the last couple of minutes about cities primarily, and watersheds in the context of cities. Let's maybe zoom out a little bit and think about a US Federal program, which in this case I was hoping to ask you about wetlands mitigation banking, which is something I knew very little about before reading the relevant chapter in your book. So, one example of a national scale program, as I mentioned, is wetlands mitigation banking at the US Federal level. Can you give us a little overview about the purpose of wetlands mitigation banking and just kind of how it works?
Lisa Mandle: Sure, yeah. So basically with wetlands mitigation banking, the US and many other places, the US has a long history of losing wetlands to development. I think traditionally wetlands didn't have such a great public image. People think about swamps, but wetlands actually perform really important functions both ecologically and for people, in terms of reducing flood risk by slowing waters, absorbing waters, cleaning water. They provide recreational opportunities for people and can be really important stopover places for birds and other wildlife, and so [they’re] a great place to go view them.
And so with development over time, the US has lost a lot of its wetlands and there was a realization that this was a problem and that the benefits of filling in wetlands for development projects often went to private companies, for example, building a shopping mall or whatnot. But those losses, those ecosystem service losses were actually felt by the public as a whole.
Daniel Raimi: Right.
Lisa Mandle: And so one way to try to remedy this problem was to require developers to mitigate the impacts that their developing projects had on wetlands, which could involve, for example, restoring a wetland. And initially this happened in a sort of piecemeal way. So each developer might be required to mitigate the impacts that had it on a wetland on the property that it was developing or very close by. But the problem with this is that these developers weren't experts in wetland mitigation. They were experts in developing properties. And so this little piecemeal approach led to lots of tiny little fragmented, not that high quality wetland patches.
And so to solve this problem there, the approach of mitigation banking was developed, in which developers could then instead of having to do the mitigation themselves, they could pay a mitigation bank to do the mitigation and restore that wetland or protect that wetland elsewhere.
Daniel Raimi: And then it would be up to the mitigation bank—well, my understanding is that it would be up to the mitigation bank to decide where it makes the most sense to actually do the mitigation, whether or not it's sort of near the shopping mall or far away from the shopping mall.
Lisa Mandle: Yeah. That's right. The developer basically then just has to find some mitigation bank that has already generally done that mitigation somewhere and has those credits to sell for the equivalent amount of wetland mitigation that they've undertaken or that the developer needs. And so then the developer just pays for those credits. And the whole burden of figuring out where and how to do the mitigation is handled generally by the mitigation bank. There are requirements generally within the federal rules that mitigation has to happen within a certain area or watershed. So for example, if I develop something in California, I can't mitigate that with a wetland in Texas, but yes, sort of within a certain area, it's up to the mitigation bank to decide where it makes [the] most sense.
Daniel Raimi: Yeah. And that's a great lead into the next question that I was hoping to ask because in this chapter there's a map of all of the wetlands mitigation banks around the United States. And one thing that I noticed because I live in Michigan, is that it didn't look like there were any mitigation banks in Michigan. So I was sort of thinking, well, let's say I want to build a shopping mall somewhere in Michigan. You know, what do I do if I want to mitigate my impacts to wetlands? How do I find a mitigation bank that sort of fits me geographically to accomplish what I need to do?
Lisa Mandle: Yeah, that's a great question. So the map that you're talking about is based on data from the US Army Corps of Engineers, which maintains a national database of different mitigation banks in the country. And you're right, there's one list that I just checked again last night. There's one listed as pending in Michigan, but there are no active ones listed there. I'm not an expert on this situation in Michigan, but I know in other states as well, there's the Federal Clean Water Act that requires mitigation of impacts to wetlands, but many states also have similar laws that require mitigation.
And to make things a little bit easier on developers, rather than having developers have to go through permits at both the federal and at the state level, there can be these joint groups that manage that process. And it looks like in Michigan, the Michigan Department of Environment, Great Lakes and Energy seems to be the agency that sort of spearheads that, the mitigation banking process. And so if you go to their website, they actually maintain a database of their own of mitigation banks in Michigan. And I'm not sure why they're not reflected in the US Army Corps of Engineers website. There are about 30 in Michigan. Not all of them have credits available for sale. Some of them it seems like might be pending and some of them have already sold out of credits.
But that's one place where if you were a developer in Michigan, you can go and see what's available. And it also lists the different regions that each mitigation bank is allowed to sell credits within.
Daniel Raimi: Got it. So, in essence, it sounds like no matter where you are in the country, you would have the opportunity to participate in mitigation banking even if you weren't sort of close by to Army Corps recognized mitigation bank.
Lisa Mandle: I think so. Although it's also possible... I don't know the geography of Michigan well enough to say, but I think it's possible that you could have a development project in an area where there is no existing mitigation bank, and how that gets dealt with, I think would be on a case by case basis. So mitigation banking is the preferred mechanism for mitigation, but if it's not possible often either then the developer would have to do the mitigation themselves in the kind of older original way, or many places allow what are called “in lieu” fees.
So if you can't find credits to buy, then the government will accept a payment of some amount that they calculate that would ideally be the equivalent to enable them to go do that mitigation somewhere.
Daniel Raimi: Okay. That's a lot off my mind because now I can go build that shopping mall I've always been dreaming about down the road.
Lisa Mandle: There's probably a lot of other steps that I've glossed over. So definitely check on what sort of permits are required before you get started.
Daniel Raimi: Okay, good. I will do that. Thank you. So last question about wetlands mitigation banking is, one thing that you and your coauthors make in this particular case study is that the value to society from wetlands mitigation in one place, like an urban area, might be different from the value that society receives from wetlands preservation in another area, like in a rural forest or in a swamp, let's say.
So what are some of the implications of shifting the locations of wetlands away from urban areas and towards rural areas? And I sort of take it from the case study that that would be an obvious implication of wetlands mitigation banking, where you can develop in an urban area and then essentially mitigate that development by preserving wetlands or enhancing wetlands in a more rural spot.
Lisa Mandle: Yeah. That's a great question, Daniel, about the implications of moving wetlands from one place to another. And their value doesn't just depend on how many acres of wetland you have, but really who is nearby and who is benefiting in some of the different ways that we talked about before. And so one of the implications—often what happens, we've seen with this wetland mitigation banking in the US, is that wetlands are developed in more urban areas because that's where there is demand for things like shopping malls, and the mitigation banks tend to be in more rural areas where land values, for example, are lower, so it's more cost effective. But that means that some of the benefits that wetlands provide, for example, who is getting flood protection from those wetlands? And who has easy access to go walk or ride their bike or go birding in these wetlands, changes when that wetland gets moved from an urban area, maybe with lots of people around it, to a more rural area where there are fewer people or maybe where there already more wetlands. And so the added value of an additional wetland for some of these benefits is lower. And that's something that we're just starting to pay attention to and that people running the mitigation programs are just more recently paying attention to.
Daniel Raimi: Do you know if there are any sort of promising approaches that are on the horizon to deal with that? I mean sort of the way that I would think about it would be like the distribution of benefits from banking rather than just sort of the aggregate benefits from banking.
Lisa Mandle: Yeah, absolutely. There have been proposals to measure the benefits of wetlands and to assign mitigation credits, not just based on the area of the wetland or the number of, for example, breeding animal pairs in that wetland, but in terms of the number of people who benefit and potentially even some of the sociodemographic variables associated with those people. Are they already well-to-do people who have alternatives? Or more disadvantaged communities? So I don't know if there [are] any examples yet that do that explicitly. I know there is a mitigation baking program in Washington DC for stormwater retentions, and not for wetlands specifically, where they actually anticipate that the mitigation and the increase in green space will happen in some of the areas of Washington DC that have less green space. And so there they expect to increase the benefits to more disadvantaged communities, in contrast with what we've seen elsewhere for wetlands.
Daniel Raimi: Right. Now I want to open it up and ask you to tell us about a case that you described in the book or that maybe your coauthors talk about in the book, that you think is particularly interesting or illuminating. So anything that comes to mind.
Lisa Mandle: Yes, so sticking with Washington DC, there's an example that we cover in the book called the DC Water Environmental Impact Bond, that I think has some pretty interesting dimensions. So, in this case in Washington DC, as it's become more paved and developed, the stormwater runs off really quickly. And during really bad storms it overflows the ability of the system to treat sewage and stormwater, and basically then the dirty runoff water, it gets dumped into the river, which has impacts locally as well as downstream into the Chesapeake.
And so trying to figure out how to deal with all this excess water, and in negotiating with the Federal EPA, it was originally decided that Washington DC was going to build basically these extra big tunnels that could store the water during a storm event and then release it into treatment sort of slowly afterwards. So building this new sort of gray infrastructure storage capacity. But over time actually using green infrastructure approaches, things like rain gardens and green roofs and other things became a more viable option. And so these green infrastructure elements can both filter the water to some extent themselves and slow the transport of that water during a storm into the water system. And so it seemed like maybe DC didn't need to invest in these big tunnels and pipes, but could invest in green infrastructure instead. But one of the things that's pretty common with these green infrastructure approaches is that they're newer and they're seen as riskier.
And governments don't always want to take approaches that are ... They want something that's tried and true. They know they're going to get what they pay for, and green infrastructure isn't always seen that way. So, there's been a new Environmental Impact Bond that gets around some of those challenges in that it allows DC to raise money to fund a pilot for green infrastructure. But it's a pay-for-performance bond, which basically means that if the green infrastructure doesn't perform as well as expected, the city isn't on the hook for those extra costs. The investors cover those costs. And on the other hand, if the green infrastructure exceeds its expected performance, then the investors will make some extra money, but the city will actually save money because it means it needs to build less of that green infrastructure than it originally calculated. So, I think it's a cool way to pass some of the risk onto private investors and still try these green-infrastructure-based approaches.
Daniel Raimi: Yeah, for sure. That's super interesting. Well, there are so many other fascinating cases like that in the book. I definitely encourage people to check it out because there are a wide array of strategies that are discussed in a wide array of settings. I certainly learned a ton by reading the book and I'm sure many of our listeners would as well. So now I want to ask you the last question of our conversation, which we call the Top of the Stack, to ask you what's on the top of your literal or metaphorical reading stack that you think our listeners would enjoy. And I'll start by recommending ... Well, I sort of have to half-heartedly recommend this because I didn't love this movie, but I still thought it was interesting. So, it's an HBO film, documentary called Ice on Fire, it's narrated by Leonardo DiCaprio, whose voice I find somewhat irritating.
But the documentary is interesting because it talks about climate change in a somewhat hopeful way, in that it focuses on some of the emerging technologies that are developing to address not only the impacts of climate change, but also climate change mitigation. So things like direct air capture technologies, growing kelp forests out in the ocean, and a variety of other options. And so it's not the same old doom and gloom that I feel like one often encounters in this space. And it's kind of neat just to see these technologies in the flesh. So I'm glad I watched it. And even though it's not the world's greatest movie, I think some of our listeners will enjoy it as well. But how about you, Lisa? What's on the top of your stack?
Lisa Mandle: Well, that sounds great. So on the top of my stack is an article from the website Vox by Rebecca Jennings called “Everyone wants to Instagram the world’s most beautiful canyon. Should they?” And it's an article that came out this summer. My stack has a bit of a backlog, but I found it a really interesting story. It's a story of a Canyon in Arizona that is one of the most photographed, most beautiful canyons in the world. It was featured as a background on Microsoft Windows and now is very often photographed and Instagrammed. And it goes into the history of the place. The Canyon itself is on Navajo Nation land and dives into sort of the intersection of nature and beauty and how it intersects with how we use technology. So I found it a really interesting story.
Daniel Raimi: Yeah, that sounds fascinating. Is that one of those like sort of really beautiful red and orangey kind of slot canyons that the easy pictures of?
Lisa Mandle: Exactly. Yeah. So you've probably seen a picture of it already.
Daniel Raimi: Yeah, that sounds really fascinating. Well, we'll put a link to that in the show notes so people can go check it out, and I hope people will also check out the book, Green Growth that Works. So Lisa Mandle from the Natural Capital Project, thank you so much for joining us today on Resources Radio. We really appreciate it.
Lisa Mandle: Oh, thank you, Daniel. It's been great talking to you.
Daniel Raimi: You've been listening to Resources Radio. If you have a minute, we'd really appreciate you leaving us a rating or a comment on your podcast platform of choice. Also, feel free to send us your suggestions for future episodes. Resources Radio is a podcast for resources for the future. RFF is an independent nonprofit research institution in Washington DC. Our mission is to improve environmental, energy and natural resource decisions through impartial economic research and policy engagement. Learn more about us at rff.org. The views expressed on this podcast are solely those of the participants. They do not necessarily represent the views of Resources for the Future, which does not take institutional positions on public policies. Resources Radio is produced by Elizabeth Wason with music by me, Daniel Raimi. Join us next week for another episode.