Markets for Ecosystem Services: New Challenges Opportunities for Business and the Environment

The publication states that conserving ecosystems and sustaining the services they provide is a pre-requisite for prosperity. Environmentalists have long argued this. Business, governments and society at large are catching up.

The report seeks to demonstrate that market mechanisms are a powerful complement to existing strategies for conserving ecosystems. Market-based instruments can achieve some environmental objectives at lower economic cost than conventional approaches, such as uniform pollution standards or technology mandates. Three categories of market mechanisms – that can be voluntary or mandatory – are described: direct payments, tradable permits and certification.

Direct payments include buying and selling the delivery of specific ecosystem services or, more commonly, payments for maintaining or adopting land uses that are thought to provide such ecosystem services.

Tradable permits create new rights or liabilities for the use of natural resources, and then allow business to trade (i.e., buy and sell) these rights or liabilities. A well-known example is the growing trade in carbon credits, based on government-allocated emission allowances and/or the purchase of voluntary carbon offsets by both organizations and individuals. The global carbon trade was worth over US$ 30 billion in 2006.

Certification and eco-labeling schemes distinguish products and services by their social and environmental performance (consumers will prefer to buy or even pay more for certified goods and services) and are increasingly common around the world.

But knowing which mechanisms exist does not automatically make you a good trader. To become a good trader, you need to (a) know that you are selling and buying ecosystem services at full cost; (b) ensure clear ownership and accountability of the ecosystems services that are to be traded; and (c) create competition among buyers