Market-Based Instruments for Ecosystem Services: Institutional Innovation or Renovation?

Abstract

Recent years have seen widespread experimentation with market-based instruments (MBIs) for the provision of environmental goods and ecosystem services. However, little attention has been paid to their design or to the effects of the underlying pro-market narrative on environmental policy instruments. The purpose of this article is to analyze the emergence and dissemination of the term “market-based instruments” applied to the provision of environmental services and to assess to what extent the instruments associated are genuinely innovative. The recommendation to develop markets can lead in practice to a variety of institutional forms, as we show it based on the example of payments for environmental services (PES) and biodiversity offsets, two very different mechanisms that are both presented in the literature as MBIs. Our purpose is to highlight the gap between discourse and practice in connection with MBIs.

Keywords:

• biodiversity offsets
• economic incentives
• ecosystem services
• institutional arrangements
• market-based instruments
• payments for environmental services

Acknowledgments

This research has been carried out in the context of the SERENA project, funded by the French National Research Agency (Systerra Programme). We also acknowledge the financial support of the Biodiversa Framework Project INVALUABLE: Values, Markets, and Policies for Biodiversity and Ecosystem Services.

Notes

Actually the ecosystem services concept is one of the founding notions of ecological economics, which can certainly not be reduced to a plea for market solutions to environmental problems.

See Conservation Finance Alliance, http://www.conservationfinance.org (accessed 22 April 2013).

These typologies are based on different characteristics: the various types of ES, the stakeholders, the reference systems (product or place), the practices they promote, how they are funded, their goals, the institutional arrangements.

Wunder (2005) distinguishes between public schemes (where the state acts on behalf of ES purchasers by collecting taxes and donations to pay the producers) and private schemes (where ES users pay producers directly). The government programs are generally larger and have the legitimacy of a state project, but they can be more complex (with secondary goals), may be subject to policy changes, or may fail to achieve additionality and/or conditionality.

Engel et al. (2008) contrast government-financed schemes with user-financed ones.

This agreement was part of the negotiations for Costa Rica's entry to the WTO and negotiations between Costa Rica and the World Bank for a structural adjustment plan.

See http://www.speciesbanking.com (accessed 22 April 2013).

The U.S. Corps of Engineers, U.S. Fish and Wildlife Service, or National Marine Fisheries Service, depending on the case.

See http://www.equator-principles.com and http://www.ifc.org (accessed 22 April 2013).