Glenn Barnes is a senior project director at the Environmental Finance Center at the University of North Carolina. Glenn is the project manager of the Sustainable Finance for Wetland Programs project funded by the U.S. Environmental Protection Agency.
When working in the field of environmental finance, a few things have become clear to me. First, I get overly excited when I find out that a movie is coming out entitled Arbitrage (this may explain why I am not popular at parties). And, second, whenever I see a service being offered, I always find myself asking two important questions: Who pays? And who benefits?
In many ways, these two questions form the heart of what we do at the Environmental Finance Center. As we work to establish sustainable financing mechanisms for the environmental services offered by governments, non-profits and others, it is crucial to think about who is actually paying for the service and who is benefitting from it. If those two answers are not the same, why is that the case?
This exact debate came up recently in an editorial in the student newspaper here at the University of North Carolina on whether students pledging sororities should pay fees. Currently, all students who pledge sororities pay a one-time $50 fee to cover the cost of a T-shirt, supplies, computer software and recruitment brochures among other items, regardless of whether they end up joining a sorority or not. The newspaper argued that, instead of a fee charged per student rushing, the cost of recruiting new members should be included in the semester sorority dues paid by current members. The editorial staff felt that making the rush process free and open to all would allow sororities to recruit new members more effectively, which would be to the benefit of the sorority as a whole, and therefore the cost of the recruitment should be borne by the sorority as a whole.
In essence, the newspaper is arguing it is unfair that an individual is paying (the person rushing), while the broader society is benefitting (the sorority). Right now, the Environmental Finance Center is providing direct technical assistance to the state of Kansas to address a similar problem as part of our Sustainable Finance for Wetland Programs project. Kansas has a desire to protect wetlands and other sensitive water areas, but many are on private property. Certainly, there are ecological benefits to having healthy watersheds, and EPA recently published a report on the economic benefits of healthy watersheds as well. But those are largely societal benefits, while the cost of protecting wetlands on private property falls to the individual.
There is an expense to the preservation itself, but landowners (often farmers) also have to forego the future economic value of that land, which could be used for growing crops or grazing animals. Individual landowners are unlikely to turn their lands into ecotourism destinations, and there are no tax incentives for setting aside the land for preservation. Kansas currently offers a one-time financial incentive to landowners who preserve land voluntarily, and we are helping them explore subsidized loans and other financial mechanisms to encourage additional voluntary conservation. We are looking at ways for the broader society to share in the cost of the preservation activity because they also share in its benefits.
There is no clear-cut best way to pay for sorority rush, nor is there a definitive best way to pay for many of the environmental services the Environmental Finance Center works on. By taking time to consider who is paying and who is benefitting, though, we can design environmental finance systems that are fairer for individuals and for society as a whole.