Putting Theory into Practice: Market Failure and Market Based Instruments (MBIs)

The use of market-based instruments (MBIs) to provide and protect ecosystem services has gained significant attention in Australia. Despite their popularity, MBIs are not appropriate for the provision of all ecosystem services. Rather, MBIs must be carefully designed given the ecosystem service outcomes desired, while meeting the needs of participants. In this paper we detail the importance of a robust theoretical structure to underpin the selection and design of an MBI. In particular, we demonstrate the role of identifying and analysing the nature of the market failures present, and their implications for instrument design. Our conclusions are illustrated using several regional MBI case studies.Market Based Instruments (MBIs), ecosystem services, conservation

Adaptive Governance and Evolving Solutions to Natural Resource Conflicts

New Zealand is facing increasing challenges in managing natural resources (land, freshwater, marine space and air quality) under pressures from domestic (population growth, agricultural intensification, cultural expectations) and international (climate change) sources. These challenges can be described in terms of managing ‘wicked problems’; i.e. problems that may not be understood fully until they have been solved, where stakeholders have different world views and frames for understanding the problem, the constraints affecting the problem and the resources required to solve it change over time, and no complete solution is ever actually found. Adaptive governance addresses wicked problems through a framework to engage stakeholders in a participative process to create a long term vision. The vision must identify competing goals and a process for balancing them over time that acknowledges conflicts cannot always be resolved in a single lasting decision. Circumstances, goals and priorities can all vary over time and by region. The Resource Management Act can be seen as an adaptive governance structure where frameworks for resources such as water may take years to evolve and decades to fully implement. Adaptive management is about delivery through an incremental/experimental approach, limits on the certainty that governments can provide and stakeholders can demand, and flexibility in processes and results. In New Zealand it also requires balancing central government expertise and resources, with local authorities which can reflect local goals and knowledge, but have varying resources and can face quite distinct issues of widely differing severity. It is important to signal the incremental, overlapping, iterative and time-consuming nature of the work involved in developing and implementing adaptive governance and management frameworks. Managing the expectations of those involved as to the nature of the process and their role in it, and the scope and timing of likely outcomes, is key to sustaining participation.Adaptive capacity; governance; resilience

The economics of agrobiodiversity conservation for food security under climate change

Subsistence-based and natural resource-dependent societies are especially vulnerable to climate change. In such contexts, food security needs to be strengthened by investing in the adaptability of food systems. This paper looks into the role of agrobiodiversity conservation for food security in the face of climate change. It identifies agrobiodiversity as a key public good that delivers necessary services for human wellbeing. We argue that the public values provided by agrobiodiversity conservation need to be demonstrated and captured. We offer an economic perspective of this challenge and highlight ways of capturing at least a subset of the public values of agrobiodiversity to help adapt to and reduce the vulnerability of subsistence based economies to climate changeClimate change, adaptation, agrobiodiversity, economic incentives, resilience, Agribusiness, Agricultural and Food Policy, Environmental Economics and Policy, Q18, Q24, Q54,

Designing Payments for Ecosystem Services

This Policy Series by James Salzman brings attention to a rapidly developing phenomenon—payments for ecosystem services (PES). Salzman, the Samuel F. Mordecai Professor of Law and the Nicholas Institute Professor of Environmental Policy at Duke University, explains when and where ecosystem services can be provided by voluntary markets rather than government actions. The key to understanding how PES work is rooted in the basis of any voluntary market transaction—gains from trade. One party agrees to take action because another party offers an incentive. Both parties benefit. A beekeeper, for example, brings her hives to an orchard to provide pollination services for a fee. But Salzman explores the less obvious services such as forests at the top of a municipal watershed that act as a filter providing clean water to people below. Salzman states that we receive many environmental benefits for “free,” which provides little or no incentive for people to pay for them or for entrepreneurs to provide them. Because price signals that alert individuals about scarce resources in traditional markets are absent, ecosystem services are taken for granted—until they stop providing benefits. Then the cost of remediation or building infrastructure, such as a water treatment plant, makes their value obvious. For decades the solution to environmental protection has been government action. Today, knowledge about environmental processes combined with increased environmental sensitivity provides opportunities for entrepreneurs to find innovative ways of developing markets for ecosystem services

Designing behaviourally informed policies for land stewardship: A new paradigm

This paper argues the case for a new approach to the stewardship of land resources that uses behavioural science theory to support the design and application of policies that facilitate changes in behaviour by those who develop policy and the farmers who implement it. Current approaches have: focused on legally-based expert system; and have been devised by national and international bureaucracies with little or no knowledge of how land owners and managers are motivated, and how they think, behave and operate as stewards of their natural resources. A review of current approaches from the social scientific literature is provided, with a particular focus on principles from social psychology. This is followed by an examination of how these principles can be applied to influence behaviour related to land restoration and soil conservation. Examples of the problems with traditional approaches and the evolution of new approaches with full engagement of farmers as the delivery agents are provided from within the European Union, Iceland and Scotland. In the light of these examples and emerging thinking in other parts of the world, the paper sets out the basis for a new approach based on behavioural science theory and application, reinforcing the arguments already made in the literature for a social license for farming

Comparing accounting designs for sustainability govenance

A draft proposal for a capital-based framework of sustainable development indicators applicable to all countries, and at all levels of public administration within them, is under consideration by an expert working group convened under the auspices of the UNECE Conference of European Statisticians. Harmonising underlying accounting and information systems should facilitate widespread adoption of a small, universal set of indicators. If implemented, the proposal's communication design could contribute to the vertical and horizontal policy integration essential for effective sustainability governance. Implementing a design that shifts some distance from existing conditions of institutional diversity and autonomy throughout at least a million provincial and local government units is, however, a significant risk. This research-in-progress report identifies one recent case study, and one current, with Australian local authorities. Integrated assessments of change over time in a local community's natural, produced, and human capital stocks have been demonstrated in one case, and of change in a local community's governance capital and social capital in another. Results demonstrate that a common understanding on how assets are distributed over time and space can be achieved without the radical, top-down innovations under consideration through UNECE auspices. The combination of tools and methods used in the case studies also yields significant insights into some of the complexities of wicked policy problems. Clarifying the meaning of 'community engagement' or 'public participation' is advanced in one case study through a relatively new development in social network analysisInternational Research Society for Public Management (IRSPM); Third Sector Study Group of European Group for Public Administration (EGPA

Water Funds: Conserving Green Infrastructure

This manual is an effort by TNC to compile, analyze and synthesize its own experience, together with that of the water funds already in existence and under creation, in order to provide operational guidelines to people and organizations interested in establishing a water fund or similar mechanism. Each location has different ecological, social, economic, legal and institutional features and, therefore, each water fund will have its own characteristics, phases and projections. This manual presents general guidelines and logical steps that must be followed to boost the opportunities and benefits of a water fund and to minimize possible obstacles for its creation. It is not intended to be an in-depth look at every aspect of water funds. Although TNC participates in several other initiatives and similar approaches to watershed management, such as the water producers program in Brazil, this document will not address those initiatives and will only focus on the water funds scheme, placing greater emphasis on experiences in the Andean region

Social preferences for ecosystem services in a biodiversity hotspot in South America

Identifying which ecosystem services are relevant to different stakeholders and understanding stakeholders’ perceptions of such services is useful for making informed decisions, especially in regions of the world where the achievement of biodiversity conservation goals is threatened by economically productive activities. In this article, we assess social preferences for ecosystem services in a biodiversity hotspot in central Chile. We use a consultative case study to ask local stakeholders (n = 70) from the Campana Peñuelas Biosphere Reserve to identify the most important ecosystem services the area provides for them and inquire about the perceived vulnerability of the services to changes in the future. We also explore the association between the perceived importance of ecosystem services and the sociodemographic and cultural characteristics of the respondents, which allows us to identify contrasting stakeholder perceptions of different ecosystem services. The most important services for local actors were the drinking water, fresh air and climate change control, genetic pool of plant communities in central Chile, and educational value. From the perspective of local actors, the services that could be threatened by negative changes in the future in terms of their provision included the possibilities of developing conservation activities focused on iconic threatened animal and plant species, water regulation, food from agriculture, and drinking water. Contrasting perceptions about the importance of ecosystem services emerged among stakeholders. While small farmers and members of local organizations attributed higher importance values to provisioning services, scientists and rangers and administrators of protected areas as well as teachers, NGO members and local government employees attributed more importance to the regulating and cultural services associated with threatened species. Our results can serve as a source of information for the planning and decision-making processes related to the search for socially and ecologically sustainable solutions for land use managemen

Development offsets for ecosystem services in a rural residential development context: issues for the Murrindindi Shire application

Rural residential development could have a positive or negative effect on the supply of ecosystem services. In most cases, the effect tends to be negative. One way of managing the impact is through a market based instrument. In this paper we present a development offset MBI as a way of cost effectively managing the ecosystem service impact of development in the Murrindindi Shire, Victoria. In this paper we note that design of the instrument is critical to the success of any MBI, including development offsets. Key development offset design issues discussed in this paper include defining what is traded (the metric), facilitating trades in a thin marketplace with high transaction costs, and ensuring the offset is commensurate with the impact.Rural residential development, development offset,, market based instrument, design, Environmental Economics and Policy,