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The New Economy of Nature: The Quest to Make Conservation Profitable.

Abstract

The New Economy of Nature: The Quest to Make Conservation Profitable, by Gretchen C. Daily and Katherine Ellison, describes the possibility of using private markets to protect the environment. Because people care about environmental goods and services (products), they are often willing to pay to protect them. If those willing "buyers" can be brought together with those who can provide ecosystem products, then everyone wins, including the environment. This book tells ten stories of possible for-profit opportunities for environmental protection. As enthusiastic as the authors are for this new paradigm for ecosystem products, reasons exist that markets for these products have often not worked. The authors use economic theory to argue that private markets are not likely to provide adequate levels of public (environmental) goods and services because each person will hope that someone else will provide them. Market-based successes for providing environmental products deserve to be celebrated, but not as an alternative to the role of the public sector.

La Nueva Economia de la Naturaleza: La Busqueda por Hacer la Conservacion Economicamente Remunerable

Resumen

"The New Economy of Nature: The Quest to Make Conservation Profitable" (La Nueva Economia de la Naturaleza: La Busqueda por Hacer la Conservacion Economicamente Remunerable), escrito por Gretchen C. Daily y Katherine Ellison, describe la posibilidad de usar los mercados privados para proteger el medio ambiente. Ya que las personas se preocupan por los bienes ambientales, ellas estan frecuentemente dispuestas a pagar por proteger esos bienes. Si estos "compradores" dispuestos pueden ser agrupados con aquellos que pueden proveer los servicios de ecosistemas, entonces todos ganan, incluyendo el medio ambiente. Este libro relata diez historias de posibles oportunidades de remuneracion economica por brindar proteccion ambiental. A pesar del entusiasmo de los autores por este nuevo paradigma de servicios de ecosistemas, existen razones para que los mercado de estos bienes frecuentemente no funcionen. La teoria economica argumenta que los mercados privados generalmente no proveen los niveles adecuados de bienes publicos (ambientales) porque cada persona espera que alguien mas provea estos bienes. Las historias exitosas de provisionamiento de bienes ambientales basadas en el mercado merecen ser celebradas, pero no como alternativas al rol del gobierno para proveer servicios de ecosistemas.

La Nouvelle Economie de la Nature: la Recherche pour Rendre la Conservation Profitable

Resume

"The New Economy of Nature: The Quest to Make Conservation Profitable" (La Nouvelle Economie de la Nature: la Recherche pour Rendre la Conservation Profitable), par Gretchen C. Daily et Katherine Ellison, decrit la possibilite d'employer les marches prives pour proteger l'environnement. Puisque les gens se preoccupent des biens et services environnementaux, ils sont souvent disposes a payer pour les proteger. Si ces "acheteurs" disposes peuvent etre rassembles avec ceux qui peuvent fournir des produits d'ecosysteme, alors chacun gagne, y compris l'environnement. Ce livre ebauche dix possibilites de gain pour la protection de l'environnement. Aussi enthousiaste que les auteurs sont pour ce nouveau paradigme pour des produits d'ecosysteme, des raisons existent pourquoi les marches pour ces produits n'ont pas souvent fonctionne. Les auteurs utilisent la theorie economique pour expliquer que les marches prives ne sont pas susceptibles de fournir a des niveaux proportionnes des biens et services (environnementales) publiques parce que chaque personne esperera que quelqu'un d'autre les fournira. Le succes du marche pour fournir des produits environnementaux meritent d'etre celebre, mais pas comme alternative au role du secteur public.

by Gretchen C. Daily and Katherine Ellison. 2002, Island Press, Washington, DC. 260pp. Hardcover ISBN: 1-55963-945-8.

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Can the power of private markets be harnessed to protect the environment? Economic theory suggests not. Under this theory, people pollute because polluting is cheaper than being environmentally friendly; if it were profitable to be green, we would not have environmental problems. Since there clearly are environmental problems, there must be advantages from creating them. In recent years, though, both private- and public-sector enterprises have experimented with markets to see if environmental protection really has to be at the expense of other goods. "Green" goods--those produced in more earth-friendly ways--and purchases of development rights on lands to protect their ecosystem services are just two examples of using the power of economic forces to improve the planet.

The New Economy of Nature: The Quest to Make Conservation Profitable, by Gretchen C. Daily and Katherine Ellison, explores the possibilities of creating markets to protect the environment. After a prologue arguing that self-interest can and should be harnessed to provide ecosystem services, it provides a number of tales of entrepreneurs, activists, researchers, and government officials trying to determine whether working with nature might provide two types of greenery. The continuing theme is that, if protecting the environment can pay for itself, then environmental quality need not rely on government intervention; the power of the private marketplace will provide the benefits.

Daily and Ellison eagerly encourage the idea that protecting the environment can be profitable. As any introductory economics course will teach, a good, including the environment, becomes more valuable if it becomes scarcer and demand for it increases. This work argues that markets can bring together those with increasing demand for protecting the environment and those with the means to provide that protection. Daily and Ellison want people everywhere to explore the potential of these markets.

Economists have long argued that markets can be used to reduce the costs of environmental protection. If willing buyers and willing sellers can make a deal, then all parties are better off, or they would not have made the deal. The New Economy of Nature shows some exciting examples of people trying to apply the principle that markets can provide win-win solutions to novel situations. For instance, if Defenders of Wildlife benefits from reintroducing wolves to Yellowstone National Park, but neighboring ranchers face the cost of the wolves reducing their sheep or cattle herds, then a win-win solution can be created if Defenders is willing to compensate the ranchers for killed livestock. The ranchers earn their income, and the wolves can stay in Yellowstone.

The stories in this book tell of dealmakers who seek to turn ecosystem services into profit opportunities. New York City, for instance, found that buying development rights to protect its watershed was less expensive than building a filtration plant; in addition, limiting development protected habitat and open space, which provided additional benefits. In Costa Rica, an orange juice producer sought an environmentally friendly way to dispose of huge quantities of waste pulp; biologist Daniel Janzen suggested that it be used as fertilizer to restore a biodiversity reserve from a cattle pasture to its original status as a dry deciduous forest. The result was less expensive disposal and a renewed ecosystem. Globally, those who emit carbon dioxide, which contributes to climate change as it builds up in the atmosphere, might be induced to pay landowners to grow forests, which can act as carbon sinks and offset the effects of those emissions. Another idea includes a Conservation Exchange, in which people interested in protecting the environment would buy shares in providing ecosystem services.

The stories in this book are both inspirational and cautionary. In fact, while the tone of the book is highly enthusiastic about possible win-win situations, most of the examples either have not yet happened or have faced significant obstacles. Watershed protection in New York ran into opposition from communities that resented limits on their growth opportunities. The orange pulp disposal deal in Costa Rica was blocked by the government, perhaps over concerns over disease spread, or perhaps due to opposition from competitors in orange juice production. The Conservation Exchange never got off the ground. Can these markets ultimately succeed in protecting our planet? While the authors appear very optimistic, they admit the difficulties inherent in this approach.

Economists argue that environmental problems arise from market failure --from the inability of markets to address environmental goods adequately. Ecosystem services are "public goods"--goods whose use by one person does not affect their use by another. Public goods are typically under-provided compared to what is socially desirable, due to free riding on other people's efforts. In many of the stories here, there are some private benefits associated with the public goods, and the hope is that the private benefits are enough to pay for the private costs, with the public good as a bonus. The public benefits are nevertheless likely to get the short shrift. For instance, everyone on the planet benefits if biodiversity is protected, regardless of how much an individual contributes to the benefits by, for instance, buying shares in the Conservation Exchange. If everyone receive the same benefits regardless of who buys shares, then I may not buy any; I will hope that somebody else buys shares instead. If many people feel the same way, then it would be remarkable that any biodiversity gets protected.

The traditional economic remedy for provision of public goods has been government supply. Revenues from taxing the public can be used to provide these goods, and the enforceability of government taxation means that nobody can free-ride. While Daily and Ellison seem to hope that markets for ecosystem services might lead to less need for government, a careful look at their case studies shows that many could not happen without it. Development rights in the Hudson River watershed were purchased by the City of New York; the possibility of substantial carbon dioxide markets relies on passage by national governments of an international treaty that would limit greenhouse gas production; an innovative plan to protect the city of Napa, California, from flooding by protecting the ecosystem services of the floodplain required the agreement and involvement of federal, state, and local agencies. Although governments do not always act in the public interest in the way that economists expect of them, private markets are likely to suffer from market failures that lead to environmental problems in the first place without government regulation

The prime audience for The New Economy of Nature is likely to be those who care about environmental issues and seek innovative solutions to them. For this audience, the book is both a wonderful call to arms and a potentially serious danger. The authors' excitement over the possibility of non-governmental, no-cost, market-based solutions to environmental problems will rally its readers to pursue these approaches, and every innovative win-win solution to an environmental problem deserves to be celebrated and repeated. At the same time, it implies that these approaches might suffice to protect our planet. The insight from economic theory--that markets cannot adequately address the "public goods" aspects of environmental problems--has not gone away in the new economy, as the case studies in this book in fact demonstrate. The authors do not ignore these difficulties, but they seem to want to believe that in private-markets, everyone-gains solutions are just around the corner, if the entrepreneurs find the right formula. Their theme, closely related to free market environmentalism, implicitly emphasizes the limitations of government action over the benefits government can provide. While there is no question that government activity has sometimes caused environmental problems (e.g., the traditional engineering solutions to flooding in the Napa Valley, provided by the U.S. Army Corps of Engineers, may have contributed problems as much as they solved them), any number of environmental laws shows the ability of government to act in a positive fashion. The Nature Conservancy's private efforts to protect ecosystems, as truly laudable as they are, pale in comparison to the ecosystem services of federal and state parks and forests.

Markets are very powerful, and markets for environmental goods deserve greater development. There can be win-win solutions out there. At the same time, neither market failures nor their consequences should be ignored or considered out of date. Solving environmental problems will typically involve real tradeoffs, with real winners and losers. Readers of The New Economy of Nature will be inspired to the power of markets, but the book would benefit from ensuring better that those readers understand the problems and limitations of markets as well.

Gloria E. Helfand

Associate Professor of Environmental Economics

University of Michigan

430 E. University Ann Arbor, MI 48109

(734) 763-3243

ghelfand@umich.edu

Gloria E. Helfand received her Ph.D. in Agricultural and Resource Economics from the University of California at Berkeley (1988). She served on the faculty of the University of California at Davis before coming to the University of Michigan in 1996. She conducts research on regulatory approaches to pollution control and a variety of issues in environmental policy.
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Author:Helfand, Gloria E.
Publication:Endangered Species Update
Article Type:Book Review
Date:Mar 1, 2003
Words:2067
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