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Natural capital market design

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  • Alexander Teytelboym

Abstract

Renewable natural capital—terrestrial and marine ecosystems, fisheries, biodiversity, and fresh water—is in decline around the world, affecting the livelihoods of millions of people. Natural capital market design uses economic theory and analysis to develop practical solutions for maintaining, restoring, and improving natural capital. Many successful natural capital marketplaces (e.g. for emissions reduction, fish harvesting, and wetland restoration) focus on efficient trading of property rights. But many other natural capital markets (e.g. for carbon sequestration offsets, water quality, and water rights) are characterized by heterogeneity and high transaction costs that make trading difficult. We argue that, in order to fix many natural capital market failures, policy-makers should instead pay more attention to the allocation of property rights during marketplace design: this is particularly crucial in many markets for ecosystem services (e.g. biodiversity conservation and watershed protection) which exhibit strong ecological complementarities. We propose several promising designs for natural capital marketplaces which could fairly and efficiently allocate and redistribute property rights over different ecosystems.

Suggested Citation

  • Alexander Teytelboym, 2019. "Natural capital market design," Oxford Review of Economic Policy, Oxford University Press, vol. 35(1), pages 138-161.
  • Handle: RePEc:oup:oxford:v:35:y:2019:i:1:p:138-161.
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    File URL: http://hdl.handle.net/10.1093/oxrep/gry030
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    Cited by:

    1. Sanna Laksá & Daniel Marszalec & Alexander Teytelboym, 2018. "Epic Fail: How Below-Bid Pricing Backfires in Multiunit Auctions," CIRJE F-Series CIRJE-F-1096, CIRJE, Faculty of Economics, University of Tokyo.
    2. Martin Bichler & Douglas Ferrell & Vladimir Fux & Jacob K. Goeree, 2019. "Designing Environmental Markets for Trading Catch Shares," Interfaces, INFORMS, vol. 49(5), pages 324-337, September.
    3. Dieter Helm, 2019. "Natural capital: assets, systems, and policies," Oxford Review of Economic Policy, Oxford University Press, vol. 35(1), pages 1-13.
    4. Wang Bing & K M Safiqul Islam & Md. Miraj Hossen, 2019. "Economic development through the implementation of environment policies:An empirical study from the South-West coastal areas of Bangladesh," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 8(6), pages 292-300, October.
    5. Andreas Nicolaidis Lindqvist & Sarah Broberg & Linda Tufvesson & Sammar Khalil & Thomas Prade, 2019. "Bio-Based Production Systems: Why Environmental Assessment Needs to Include Supporting Systems," Sustainability, MDPI, Open Access Journal, vol. 11(17), pages 1-26, August.

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