A Train Ride to Perris: Investing in a Sustainable Future
Imagine a train ride to Perris… Yes, Perris, California is a two-hour train ride from Union Station in downtown Los Angeles. Perris Lake will host the rowing and canoe sprint events for the 2028 Olympics in Los Angeles. What will the moving landscape look like in 10 years as the train transitions from LA’s dense inner-city to the sprawling areas of Corona, Riverside, Moreno Valley and Perris? There is hope that, with investments in sustainable urban agriculture, the ride to Perris reflects the initiatives, similarly made by cities throughout the world, toward achieving the 2030 Agenda for Sustainable Development. This article describes several emerging Payments for Ecosystem Services (PES) products that are in practice and provide additional urban farm income in exchange for metrics-driven, social-environmental benefits.
In 1893, Riverside, CA was the wealthiest city, per capita in the United States. The inland regions’ wealth resulted from the introduction of the Naval Orange in 1873. Abundant water supplied by the largest watershed in Southern California, the Santa Ana River, was canaled to lands with rich organic soils. Thriving in a Mediterranean climate, citrus drove California’s 2nd gold rush. It was said that while driving through Southern California during the 1930s and 1940s, you could smell the orange blossoms for 100 miles.
Today, Riverside County’s farm production value totals $1.2 billion, comparable to the combined value of agricultural production in Massachusetts and Vermont. Agricultural activities contributed $3.61 billion and 27,442 jobs to Riverside County’s economy in 2017. While this statistic may look impressive, the agricultural sector withers in comparison to the $4.4 billion per day in goods moved through this inland region. Riverside and San Bernardino counties (Inland Empire) combine for nearly 220,000 heavy-duty, diesel truck trips a day. Since 2000, Riverside County has experienced the loss of 79,000 acres of agricultural lands.
What does sustainable agriculture look like, given the disparity between cropland value in the West ($6,780/acre) compared to important Inland Empire farmlands offered for warehouse development ($980,000/acre)? As the aging farmer/landowner looks toward retirement, the economic incentive to sell prime farmland to developers is overwhelming. Unless the value of adverse social-environmental impact is recognized, measured, and found to exceed the economic returns for warehouse and housing development, the Inland Empire will continue to sacrifice metrics that shape healthier communities.
This economic disparity presents a potential social dilemma. While the community and the farmer/landowner would all benefit from less sprawling development (e.g. improved air quality, more local fresh fruits and vegetables, more open space, improved health outcomes, etc.), the farmer’s greatest payout is to sell to developers and retire to a different area with better quality of life outcomes. For those remaining in the community, impacted by logistics development, the health and well-being outcomes continue to decline. A concerning metric, that indicates the Inland Empire may be experiencing a social dilemma, is the high percentage of California’s most disadvantaged communities located in the inland Empire (15%) compared to Inland Empire’s general population ratio to the state’s (11.6%).
Examples of social dilemmas can be found throughout the world: rapid growth in palm oil farming and its harmful impacts on deforestation and water quality; Cape Town, South Africa’s 2018 water crisis; Africa’s population growth and food insecurity. Most often, social dilemmas involve common pool resources, rivalrous goods that are difficult to exclude from others benefiting (e.g. clean air and water, forests, fish stocks, etc.).
For many social dilemmas associated with agriculture, policy makers and practitioners are turning to payments for ecosystem services PES for structural solutions. PES offer economic incentives to farmers and landowners in exchange for managing their land to provide verifiable ecological services. In an urban setting, ecosystem services are often synonymous with such terms as: green infrastructure, low-impact development, storm water management, urban trees, working landscapes, etc.
Monetizing the value of ecosystem services can be challenging. Markets and transacting agreements are emerging, however. The California Cap & Trade market is an example where polluters pay for emissions generated above a cap (limit) that becomes more restrictive over time. Revenues collected from the Cap-and-Trade Auction are allocated, through the Greenhouse Gas Reduction Fund GGRF, to projects that reduce greenhouse gas (GHG) emissions. These projects deliver major economic, environmental, and public health benefits, with committed allocations (up to 35%) to California’s most disadvantaged communities. Over $9 billion dollars have been appropriated through the GGRF, and over 340,000 projects have been funded. For impact investors, California’s GGRF fund helps to de-risk project investments (e.g. food waste recovery, methane reduction from dairy farms, etc.).
Preventing changes in land use (e.g. farmland conversion, deforestation, wetlands, habitat, etc.) is another PES area for project development. Land preservation and conservation investments are critical to preventing land use changes. Conservation easements are property rights, controlled by a private “land trust” or a government agency that constrain specified lands held by a landowner, to achieve certain conservation purposes. Organizations, like The Nature Conservancy, receive both land donations, and financial donations to purchase lands and conservation easements. Landowners who donate private conservation easements are eligible to receive tax deductions based upon the property value lost due to restricted conservation use. This provision of the tax code can be useful in providing farmland owners with an economic alternative to selling to developers.
Mitigation markets provide another type of PES product. A mitigation bank operator (often a farmland owner) receives payment for establishing wetlands or habitat. Developers can buy credits from mitigation banks to compensate for the impact of lost wetlands or habitat. Mitigation banks for wetlands are regulated by the US Army Corp of Engineers and the Environmental Protection Agency. Conservation banks for habitat are regulated by the U.S. Fish and Wildlife Service. Voluntary markets are also available. The Bonneville Environmental Foundation supports a “water restoration certificate,” representing 1,000 gallons of water that directly contributes to restoring freshwater resources. Companies voluntarily buy these certificates to achieve their corporate sustainability goals, often from farmers practicing verifiable water stewardship.
Water quality markets are also emerging to address nutrients (e.g., phosphorus, nitrogen) and sediment runoffs into rivers. Nutrient trading is a way for farmers, and other facilities, to reduce pollution below permitted requirements, and to sell their additional reductions, as credits, to other businesses and municipalities that must meet their pollution reduction requirements. The Chesapeake Bay and Ohio River Basin Trading Project are two working examples.
The illustration highlights how these ecosystem services markets can be stacked to produce added income to the farmer.
The 2028 Olympics in Los Angeles will occur as the 2030 Agenda for Sustainable Development approaches. What might a train ride to Perris, CA look like through a lens of sustainable urban agriculture? Will passing neighborhoods display small-lot gardens, homes with grey water and rain catchment systems? Will large open spaces be organized into working landscapes, blooming with ecosystem benefits? Will communities look healthier and more vibrant? Will Southern California reflect similar sustainable urban-ag landscapes found in cities throughout the world? The time to invest in projects that produce a more sustainable future is now.
Article by Theodosia Ferguson and E. Seth Wilson
Theodosia Ferguson, Founder & CEO of Healing Living Systems, Inc. (https://www.healinglivingsystems.org), a California Social Purpose Corporation. Theo focuses on growing community food infrastructure capacity. Theo enables local direct relationship investors to invest in local food enterprises and ensures that every community member is offered dignity and the opportunity for self-fulfillment. Through community support, people can grow skills and gratitude. Collectively these communities can realize health and vitality on a sustainable basis by investing in themselves and their food and farming cooperatively owned enterprises.
E. Seth Wilson is a social entrepreneur and consultant focused on empowering sustainable communities and capturing value through the water-energy-food nexus. Over the last 30 years, he has participated in the development of North American energy markets. Seth cofounded the Riverside Food Systems Alliance and consults through Healing Living Systems, Cutting Edge Capital, and the Alliance Risk Group. Seth is cofounder of GC Solutions Inc., offering wastewater treatment solutions for municipal and industrial applications.
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Note: this article is not a solicitation or advice to invest.