Handbook of Market Creation for Biodiversity

Handbook of Market Creation for Biodiversity

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Author(s):
OECD
Publication Date :
03 Nov 2004
Pages :
182
ISBN :
9789264018624 (PDF) ; 9789264018617 (print)
DOI :
10.1787/9789264018624-en

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Striking the right balance between the conservation/sustainable use and the loss of biodiversity requires accounting for all the impacts of its destruction. Weighing the loss against any potential benefits will ensure that the social, as well as economic, well-being of everyone are at the best levels possible. Market-based economic systems have the potential to ensure that such a balancing occurs, but require that all the impacts of its loss, or use, have been fully internalised into market transactions.

This book shows how public policy in the form of market creation can be used to internalise the loss of biodiversity. It promotes the use of markets to ensure that our collective preferences for conservation and sustainable use are reflected in economic outcomes.

Also available in: French

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    Introduction
    There now exists a wide range of experiences with instruments for the conservation and sustainable use of biodiversity. As a result, policy-makers and their advisors have a broad appreciation of the flexibility and effectiveness of various instruments, both market and non-market. Of particular interest, more recently, have been examples of successful market creation that have moved biodiversity firmly into the context of economic growth and development. Entrepreneurial activity has been harnessed in a number of cases to make market outcomes consistent with social objectives. Unfortunately, a certain level of randomness still accompanies most efforts at market creation. While acknowledging that entrepreneurial endeavours are always fraught with risk, ...
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    Conceptual Framework
    Market creation is largely concerned with putting in place the frameworks that guide self-interested behaviour on the part of stakeholders toward socially (environmentally) beneficial outcomes. The essential element of a market is that prices are determined by the collective supply and collective demand of individuals willing to exchange goods and services. For biodiversity, this definition requires some refinement. Biodiversityrelated goods and services often have characteristics that are public, i.e. they do not exhibit complete rivalry and excludability in the marketplace. The various tools that governments have at their disposal can, however, mitigate some of these characteristics and thus make goods and services derived from biodiversity ...
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    Supporting Institutions – Property Rights
    The property rights regime applied to resources is usually a policy choice – its use is dependent upon circumstances. In a market creation context, however, property rights are a fundamental underpinning of successful outcomes. A property rights regimes, provides restricted access so that its "owner" is assured that today’s investments will generate tomorrow’s returns. A successful property rights institution, therefore, guarantees exclusive access to future flows of goods and services from a resource – thus providing the incentive for long-term, even inter-generational, planning. Many of the resources we have come to know as biodiversity are thought of as non-excludable, but need not be so. For example, the international agreement on the Law of the Sea provides that fisheries within 200 miles of a state’s coastline fall ...
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    Economic Value of Biodiversity
    The economic value of biodiversity is measured in the numerous benefits that are derived from it: both tangible and intangible. These range from the things that are produced and sold, which are derived both directly and indirectly from biodiversity, to the non-marketed things that contribute to both our well-being and to the economy. These benefits can be demonstrated to already be significant in the areas where they are measured in market activities. By illustrating those benefits, a case is made that market failures lead to potentially substantial loss. Moreover, by demonstrating the measurable, but not yet quantified, benefits of biodiversity, a compelling case can be made for policy intervention. This chapter provides a sampling of the many values that biodiversity has for people. Since many of those values are not marketed, and thus not directly measured, valuation ...
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    Direct Role for Policy-makers
    Establishing the essential elements such as legal frameworks and property rights regimes is a central role for government, but often it is only the first step. In many areas of public policy there are continual refinements and improvements that need to be made in the policy apparatus. Incentives for biodiversity are an important element in internalising the value of biodiversity and getting people to alter their behaviour – by changing economic choices. By influencing the (implicit or explicit) price of various activities, incentives can create markets while correcting for the discrepancy between the private and public values of biodiversity-related goods and services. Creating markets through the use of incentive ...
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    Policies Facilitating Market Creators
    The influence of non-government participants in forming and sustaining markets can be just as powerful as that exerted by government policy. Policies that take into account and harness these other participants can have a much greater impact and are more likely to be successful. Information regarding biodiversity impacts can be important since many consumers are willing to pay a premium to reduce that impact. Creating the structures for the provision of accurate information can be a pivotal step in developing markets. In many cases, non-government organisations can be encouraged or empowered to provide information. Financial markets can also play an important role in getting markets up and running, by providing the necessary funding for startup firms. Any encouragement given to financial firms would involve ensuring ...
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    Policy Mixes for Biodiversity
    Policy-makers have many approaches and numerous instruments at their disposal for creating markets for biodiversity. Given that there are many objectives to be reached, a full policy mix needs to be considered to achieve desirable outcomes. That mix will need to achieve the appropriate combination of public versus private provision of goods and services, as well as the combination and intensity of instruments that will be used. Since the part of biodiversity that is purely public cannot be easily brought into a market system, it should be dealt with through non-market means. However, many aspects of biodiversity that initially appear to be public can, in fact, be made part of the market economy – and will be best dealt with using the tools and techniques discussed in earlier chapters. The important task for government will be to ...
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    Implementation of Market Creation
    Correcting market imperfections where they exist and creating new markets for biodiversity where possible emphasises the social objective of maximising net benefits (to everyone). Markets can, by themselves, result in the right amount of use or conservation of biodiversity-related resources when they reflect the full value to society of public goods, and when all externalities associated with their use are fully reflected in management decisions. Trading in (illegal) products from endangered species, for example, highlights the potential adverse consequences of markets that do not take account of public values and externalities. Correcting such problems will ensure that the market’s use of resources will result in a net gain to society as a whole. Implementing a market creation agenda, however, must be purposeful if it is to succeed. Attempting ...
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