1. introduction
The concept of ecosystem services has gained ground as a useful way of ensuring that society acknowledges in a real way the essential role that ecological systems play in our way of life.Footnote 1 Although the idea was put firmly onto the policy agenda by the Millennium Ecosystem Assessment in 2003,Footnote 2 it has been the subject of groundbreaking research since the early 1970s.Footnote 3 At this stage of development, the ecosystem services concept was intended to communicate the often externalized costs borne by our natural systems and thus to increase interest in conservation.Footnote 4 The work of the Beijer Institute’s Biodiversity Program in the early 1990s served to popularize economics research into ecosystem services.Footnote 5 The themes identified by the Program were to feature in many of the leading works on the economics of ecosystem services in that decade.Footnote 6 An often cited contribution is by Costanza et al., which articulated the methodology for valuing services but, more importantly, articulated a list of monetary values for certain ecosystem services.Footnote 7 In the late 1990s and the early part of the new millennium, ecosystem services gained a substantial foothold in the policy arena with the publication of key international policy documents on conservation. Prime examples include the Global Biodiversity Assessment in 1995Footnote 8 as well as the Millennium Ecosystem Assessment in 2003. Alongside these developments was the adoption of the ‘Ecosystem Approach’, in 2000, by the United Nations Environment Programme (UNEP) and the Secretariat of the Convention on Biological Diversity (CBD).Footnote 9 Fisher, Turner and Morling note that the Millennium Ecosystem Assessment triggered a wealth of material on ecosystem services and influenced the design of major international assessments.Footnote 10 Examples of these assessments include the Stern Review on the Economics of Climate ChangeFootnote 11 and the project Economics of Ecosystems and Biodiversity.Footnote 12
Burgeoning alongside these developments in the academy has been the design and implementation of market-based instruments intended to create economic incentives for conservation. The most well-established instruments in this regard are payments for ecosystem servicesFootnote 13 and markets for ecosystem services.Footnote 14 While many of the environmental services captured by these initiatives have been bought and sold for a long time, their designation as ‘ecosystem services’ is a device of only recent origin and in many cases the relationship between the commodity and the goods or services was only indirect. Excellent examples of these measures include the market-based incentives developed as part of the common agricultural policy of the European Union (EU),Footnote 15 which were intended to improve biodiversity and environmental quality. Additionally, energy taxes have traditionally been applied to power generation operations, although not explicitly linked to carbon sequestration as is the case today.Footnote 16
2. regulating markets for ecosystem services: a statement of the issues
There is increasing recognition that using markets to protect and restore ecosystems and their capacity to provide services is crucial to preserving and maintaining biodiversity, as well as to reducing the impact of human-induced climate change.Footnote 17 The assessment and valuation of these services has received extensive analysis by ecology and economics practitioners. Rigorous assessment over a sustained period has resulted in the development of advanced and mature assessment tools that have aided the articulation of economics-ecological models that have influenced policy choice. However, different skills must be brought to bear to translate these assessments into institutional and regulatory systems that can protect and enhance ecosystem services. Unfortunately, the economic analysis of market-based instruments for ecosystem services has not been matched by a similarly robust critique from institutional and regulatory commentators. Consequently, mature methods for analyzing and establishing robust institutional and regulatory frameworks that can lead to secure market-based conservation practices are still in their early stages of development. Regulatory and institutional innovation, capable of making ecosystem protection profitable for private decision-makers and revenue generative for the guardian communities, is essential in order to realize the economic value of those systems and their services. It is also vital in order to secure the imperatives of protecting and restoring ecosystems. As the use of markets to protect and restore ecosystems – and the many services they provide – gradually gains policy and institutional legitimacy, a number of fundamental questions remain. What are the critical regulatory and institutional considerations? What approaches are being pursued to ensure success and ease of adoption? What regulatory and institutional commonalities are emerging, and what are the prospects for convergence? What are the successful institutional and regulatory design features? What obstacles stand in the path of their achievement?
It was in view of these considerations that, in May 2012, the Environment Regulatory Research Group at the School of Law, University of Surrey (United Kingdom) and the George Washington University Law School (United States) organized a conference on the law and policy for ecosystem services. The goal of the conference was to enable outcome-oriented interaction between experts, innovators and front-end users of these evolving market models to learn about recent progress. It sought to explore the strategies that can be adopted to encourage cross-learning between different models for regulatory and institutional frameworks, and how to design new institutional and regulatory mechanisms that can help to preserve ecosystem services. This symposium collection features three submissions on these themes, emanating from the conference.
3. regulatory options for ecosystem services
There is increasing acknowledgement of the value of ecosystems and the services that they provide. Conservation biologists have suggested that ecosystem service-based arguments may be potentially useful in developing support for the preservation of species and diverse ecosystems, but their knowledge of the regulatory and institutional context for the management of such ecosystems is limited. There is a growing interest in how market-based regulatory instruments can be used to capture these values. Within conservation, direct payments approaches have attracted considerable interest, reflecting the economic approach to ecosystem services within this policy sector. But the market is one among many institutions. There is, in fact, a range of institutional arrangements to realize the value of ecosystem services. Research on the commons that addresses regulatory frameworks and institutional issues that manifest when resources become valuable has much to contribute to our understanding of the institutions relevant to the management of ecosystem services. A number of the institutional challenges that emerge with the management of common pool resources (for example, non-timber forest products, water and grazing) are relevant to the new resources created by the establishment of markets for ecosystem services (such as water supply, carbon sequestration or pollination). It is critical that ongoing scholarship builds on these perspectives and brings together experts working on different regulatory and institutional approaches for commons management to further knowledge of ecosystem service-based approaches to biodiversity conservation. In particular, it is essential that academics, policy-makers and other stakeholders develop an understanding and application of the concept of ecosystem services that result in ecologically sound decisions that achieve the goal of sustainability, as opposed to profit maximization being the sole imperative.
Colin Reid’s contribution very succinctly captures the conundrum impacted upon in the commodification of nature.Footnote 18 He outlines a number of challenges posed by the design and implementation of a market for ecosystem services. One fundamental problem that Reid highlights is the difficulty in deciding what kind of unit values a market for ecosystem services should deploy.Footnote 19 The problem is acute in offset markets where the commodities being traded are not fungible and equivalence is very difficult to establish. He demonstrates this by posing the question whether loss of biodiversity in woodland can be offset by the remediation of sand dunes elsewhere. Another key concern is the effectiveness of market-based instruments. A survey of existing measures demonstrates that the success of these interventions is, at best, a mixed bag of hits and misses. The problem of ineffective markets is highlighted by the fact that interventions in nature take time to reach fruition while instruments offered by markets for ecosystem services are normally time-bound. The challenge, therefore, is to ensure that market-based strategies incorporate these time lags. A more overarching problem addressed by Reid relates to the concerns over commodification of the environment. While arguments for using the market to address the problems caused by our use of nature are certainly persuasive, it cannot be denied that there are lingering questions over the ‘moral limits of markets’.
Jerneja Penca’s contribution addresses this very issue of the morality of the markets by focusing on the ideology of market mechanisms for biodiversity conservation.Footnote 20 She eschews what she calls the ‘great enthusiasm for securing the improved effectiveness’ of market-based instruments for biodiversity conservation and the quest for ‘new tools’ for managing and financing conservation.Footnote 21 Her central argument is that this quest is not ideologically neutral, representing, as proponents claim, an obvious set of choices for tackling the problems of biodiversity degradation. Instead, the push for the market as a tool for environmental protection finds itself in a context where the market state and regulatory capitalism are established vehicles commanding exceptional legitimacy through law and policy. Yet behind this veil of legitimacy lies a set of ideological choices that favour utilization over conservation with the option of remediation. In these arrangements, the regulatory role of law is decidedly weak and strategies tend to advertise the market – or, in Penca’s words, ‘market the market’ – rather than to prescribe strong legal oversight.
Penca’s harsh indictment of market-based instruments for ecosystem services is not without foundation, as the article by Robert Glicksman and Thoko Kaime demonstrates.Footnote 22 This contribution provides a comparative analysis of accountability mechanisms for ecosystem services markets in the United States (US) and the EU. In order to set the context for the prescriptions that they propose, the authors discuss a series of past abuses of ecosystem services markets both in the US and the EU. However, despite these unedifying examples, Glicksman and Kaime argue that markets for ecosystem services do have the potential to provide financial incentives to protect the environment. The contribution does not aim to ‘market the market’, but rather seeks to acknowledge the important role that carefully designed ecosystem services markets could play in providing additional means for protecting the environment. In order to achieve this, the authors identify and prescribe five essential pillars of ecosystem services markets that are necessary to provide operational accountability safeguards. These safeguards respond to a number of the governance challenges introduced by Reid’s contribution and prescribe a set of very specific standards that could enable communities to ensure that the risk of market abuse is significantly reduced. These include financial safeguards, verifiable performance standards, transparency and public participation standards, regulatory oversight mechanisms, and rule of law safeguards. The authors select these tools on the basis of an analysis of the flaws responsible for incidents of market abuse from past cases. Additionally, they draw on the experience of market-based programmes that appear to have worked. More importantly, however, they identify the safeguards from principles of international law aimed at ensuring accountability in environmental governance.
The three contributions reveal the discomfort that regulatory analysts have with regard to market-based instruments for ecosystem services. Although there is much to be said for the opportunities offered by economic incentives to protect the environment, there remain real and critical anxieties that must be the concern of regulatory systems. The pitfalls of unbridled market solutions are clear and critiques that highlight these dangers are certainly welcome. On the other hand, it is also apparent that well-designed and well-regulated markets could afford another layer of protection against human-induced pressures on ecosystems. This brief collection of symposium articles offers such critique, and also begins to offer some of the solutions for resolving the challenges presented by these market-based approaches.
