Problem: Market mechanisms are emerging as means of offsetting the environmental effects of growth. Unfortunately, formal regulation of ecosystem markets is often separated from broader planning for urban development, resulting in offsets that are unsustainable in the face of future urban growth. Purpose: We aimed to assess how 2008 federal regulations that actively promote aquatic resource markets and encourage watershed planning to restore wetlands and streams damaged during development will affect reputedly efficient existing wetland and stream ecosystem markets in North Carolina. We explore how coordination between regulators and planners can improve long-term viability of market-created resource offsets and improve the ability of markets to respond to rapid urban growth. Methods: We analyzed new state and federal regulations and watershed planning efforts and convened a stakeholder forum including representatives of state and federal agencies, land developers, environmental groups, aquatic restoration companies, and academia. Results and conclusions: Problems with aquatic ecosystem markets in North Carolina stem from poor communication among local and regional planners, federal regulators, and state agencies. Institutional barriers and poor coordination cause federal regulatory decisions made without knowledge of land use plans or urban development patterns, faulty projections of market demand for aquatic offsets, and local land use plans that do not provide long-term protection for the offsets. Although regulators consider current surrounding land uses, they do not consider future land uses. We conclude that local land use projections should be required components of ecosystem restoration site plans and that state environmental management agencies' watershed plans should reflect urban development patterns. Takeaway for practice: Local planners should have input into the design of restoration sites providing environmental offsets as well as into state and regional ecosystem service market implementation plans. Federal, state, regional, and local agencies should facilitate and require information sharing, making planning and regulating ecosystem service markets part of the development process. Research support: This research was supported by the University of North Carolina's Institute for the Environment.
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