Abstract
Ecosystem markets are proliferating around the world in response to increasing demand for climate change mitigation and provision of other public goods. However, this may lead to perverse outcomes, for example where public funding crowds out private investment or different schemes create trade-offs between the ecosystem services they each target. The integration of ecosystem markets could address some of these issues but to date there have been few attempts to do this, and there is limited understanding of either the opportunities or barriers to such integration. This paper reports on a comparative analysis of eleven ecosystem markets in operation or close to market in Europe, based on qualitative analysis of 25 interviews, scheme documentation and two focus groups. Our results indicate three distinct types of markets operating from the regional to national scale, with different modes of operation, funding and outcomes: regional ecosystem markets, national carbon markets and green finance. The typology provides new insights into the operation of ecosystem markets in practice, which may challenge traditionally held notions of Payment for Ecosystem Services. Regional ecosystem markets, in particular, represent a departure from traditional models, by using a risk-based funding model and aggregating both supply and demand to overcome issues of free-riding, ecosystem service trade-offs and land manager engagement. Central to all types of market were trusted intermediaries, brokers and platforms to aggregate supply and demand, build trust and lower transaction costs. The paper outlines six options for blending public and private funding for the provision of ecosystem services and proposes a framework for integrating national carbon markets and green finance with regional ecosystem markets. Such integration may significantly increase funding for regenerative agriculture and conservation across multiple habitats and services, whilst addressing issues of additionality and ecosystem service trade-offs between multiple schemes.
Highlights
Worldwide, benefits from nature to society have been estimated to be worth more than the global gross domestic product [1]
Neoclassical economics suggests that if property rights are clear and well defined, a social optimum can be attained via bargaining amongst ecosystem service providers and beneficiaries [3]
There is a well-known and significant gap between the public funding currently available and the funds that are needed to address the twin challenges of climate change and biodiversity decline [32]
Summary
Benefits from nature to society have been estimated to be worth more than the global gross domestic product [1]. There are significant challenges in delivering emission reductions in the land use sector, where it is estimated that it may cost £247 million to deliver net zero targets from peatlands, woodland and agriculture [34, 35]. This gap is likely to increase as Governments around the world respond to the economic impacts of the COVID pandemic of 2019–20. The upfront costs of many nature-based solutions are prohibitive for owners and managers in the land use and marine sector, and it can be many years before monetizable benefits accrue, further exacerbating the funding gap
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