Economics – Environmental Science

Markets for ecosystems service provision

September 2 2014

Introduction

According to traditional economics theory, the market is a system through which prices are set according to how much a product costs to produce and how much consumers are willing to pay. However, in this scheme, ecosystem services are considered to be “externalities” and therefore have little or no effect on the market price of a product. This problem is exacerbated by the “public” nature of many ecosystem services (Turner et al 1994). History shows that relying on market forces to preserve biodiversity is ineffective – mainly because environmental destruction does not have an immediate economic effect (Gowdy & McDaniel 1998).

However, market based approaches can be developed which help overcome the environmental limitations of the traditional market economy. Market based incentives, such as auction contracts for conservation, have been used with some success in Australia over the last decade or so. One such program in Victoria was shown to have produced considerably more biodiversity than a fixed price scheme (Pascual & Perrings 2007). Read the rest of this entry »

Modelling potential futures for land use and ecosystem services

August 20 2014

Ecosystem services

Ecosystems provide many benefits to human society, including food, water, timber, climate control, soil formation, tourism, and recreation. Collectively these can be termed “services” and a value can be placed on them (Bryan 2014). Humans have always been dependent on services provided by ecosystems but, until recently, the main concern has been with services which provide tangible products – particularly those which can be sold for profit, such as food and timber. However, there is increasing awareness of the value of those services which, until now, could not be traded – such as clean air and water, erosion control and climate control (Close et al 2010).

Failure to understand the importance of these services has contributed to problems like climate change, soil erosion, and salinity, and a growing awareness of those problems has driven research to identify ecosystem services and quantify their value. Although such services are an important part of what can be considered as our natural capital, they have previously been considered “externalities” in economic terms and little or no account has been taken of them by businesses and governments (Close et al 2010). Rees (1998) describes the economy as a parasite on nature and a sub-system of the ecosphere. Read the rest of this entry »