Area of Study: Ecosystem Service Markets

The Application of Property Rights in Ecosystem Service Markets

Overview

In recent decades, policy-makers in many countries have tried to recruit market forces to encourage resource conservation and environmental protection. This has been in part an attempt to move away from “command and control” regulation, which can be seen as heavy-handed and discouraging of initiative, innovation and economic efficiencies. Further, the turn to such “market-based instruments” (MBIs) reflects the realization that many of our environmental challenges are unintended consequences of legal norms – based in property and contract law, corporate liability, etc. – that allow or encourage producers to externalize the social and environmental costs from their private transactions, unloading such costs to nature and to the public.

This report provides a rigorous examination of the background, the potential and the regulatory limitations to using market-based tools in Alberta. It charts a positive course toward the creation of a market in ecosystem service credits. 

The paper focuses on one means of giving financial value to healthy ecosystems, namely by conceiving of ecosystems as providers of valuable services to humanity (“ecosystem services”) and conceptually breaking those services into units of environmental and financial value (“ES credits’) capable of private ownership, transfer and exchange. The use of such credits transforms the benefits of a healthy ecosystem into financially valuable assets, which can be the objects of market exchanges.