Natural assets such as rivers, forests, grassland and wetland provide society with environmental benefits, which are known as ecosystem services, and include water purification, air quality, protection against floods, and healthy lands. When ecosystem services can be measured and quantified, steps, solutions or new technologies can be implemented to obtain better results and solve environmental issues.
Ecosystem services are frequently left out of resource management decisions because they are not easily quantified, nor are assigned a monetary value. Because of this, society underestimates these environmental benefits, which in turn contributes to the loss and degradation of natural systems.
Ecosystem services or environmental markets offer incentives to preserve the ecosystems and their associated services. These markets are an innovative approach which favour environment conservation financing and complement traditional conservation programmes. There are environmental markets, both active and experimental, on water, carbon, wetland, habitat and endangered species quantity and quality control.
Other market tools
Other market tools which encourage the care and maintenance of natural environment are the nature conservation banks or habitat banks, the Payment for Ecosystem Services (PES), land custody, certifications, ecolabelling, environmental taxes or fees.
Nature conservation banks or habitat banks
Nature conservation banks or habitat banks, are market mechanisms created to guarantee long-term nature conservation. They are a tool which allows the involvement of the private sector in the creation and management of natural spaces, while obtaining an economic benefit at the same time.
They are a tool which compensates environmental impacts. Landowners and land users, where these banks are established, can promote actions which improve biodiversity and guarantee its long-term conservation. These actions are quantified and evaluated by accredited institutions, allocating the promotor (mainly businesses) with so called “conservation credits”. These legal titles certify the generation of nature conservation values, and as they have monetary worth, they can be bought or sold as complementary or compensatory measures which can be used in projects or facilities, such as the law may require.
The goal of the nature conservation banks is to ensure there is no biodiversity net loss; i.e: that there is always a positive balance between what is created and conserved and that which is destroyed. This goal can be achieved through the preservation of natural resources or of ecosystems services.
Payment for Ecosystem Services
Payment for Ecosystem Services (PES) was developed to promote the conservation of natural resources and ecosystems. PES are established payment systems, or alternative incentives, which farmers and land owners receive in exchange for sustainably managing their lands, by creating or maintaining the ecosystems which live in them.
The general idea is that those who benefit from the environmental services must compensate farmers and landowners. For example, a farmer with lands upriver who improves his water resources management and avoids contaminating the water source which nourishes the city below, could receive payment for it.
The administration can promote Payment for Ecosystem Services as a sustainable development measure in underdeveloped areas, or in those in which environmentally harmful activities take place, or for businesses interested in the conservation of specific environmental services. In this case, businesses which demand these environmental services, do so because they profit from the maintenance of the environmental service the pay for.
Environmental taxes are fees which aim to increase the cost of a product or service which “harms” the environment. By doing so, they try to modify some behaviours or avoid certain activities.
These taxes wish to reflect the associated costs of harming the environment. As products´ final price increases, consumers will be discouraged from buying them, which will ultimately put pressure on producers to change their production models.
More market tools
Certifications are tools which can modify a consumer´s buying decisions by certifying a product or service manufacturer´s beneficial behaviour towards the environment. Through these certifications, businesses and specific products or processes are assessed by an independent organism (certifying authority) which will confirm the criteria level of performance for the desired certification. The certifying authority will issue a written certificate verifying compliance with said criteria.
Through them, direct payment can fund the maintenance of an environmental service for its use. These tools help consumers understand the “cost” of environmental services, as the tax varies according to the service´s cost.
There are a wide variety of environmental taxes: from waste collection in the city, to entry fees charged at natural parks.
Administration wishes to encourage the development of environmental services through direct payments. In turn, this promotes the development of positive environmental activities, as authorities exercise some control over the environmental services they generate.
If they are to be successful, administrations must evaluate how the goods or environmental services affect society. Frequently, what is measured is the loss of profit, say, a farmer might suffer by generating an environmental service. From an environmental point of view, the objective is to reduce the threats to ecosystems caused by modern agriculture or the preservation of cultivated lands for their ecosystem-related benefits, or any other kind of benefit.
Other environmental markets limit the use of resources or environmental services. These limits are necessary to ensure the sustainable use of resources and control their accessibility in order to protect them.
One way to do so is by establishing a quota of usages, which are assigned based on specific personalized criteria (historic, auctions,…). Once these rights are assigned, they can be bought and sold, and in this way the market itself will redistribute these rights and -in consequence- the access to resources. Accessibility to natural resources is regulated by establishing economic and social criteria.
Products and services
Promoting environmental markets by facilitating the integration of conservation, sustainability and biodiversity aspects within business models
Development of conservation banking or habitat banking
Promoting natural capital credits or payment for environmental and ecosystem services
Natural capital, sustainability, biodiversity and climate change performance indicators
Multi-criteria analysis and input-out matrixes to produce performance factors, sustainability indexes