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Restoring the commons: optimizing the restoration of natural assets

Author

Listed:
  • Jarmo Jääskeläinen

    (University of Helsinki)

  • Pauli Lappi

    (University of Helsinki)

Abstract

This paper analyzes the optimal restoration of natural assets, including, for example, degraded ecosystems and biodiversity, contaminated sites, and lost carbon stocks. The focus is on dynamic allocation of a fixed budget, where the decision maker chooses the timing and level of restoration investments for each stock. The decision maker is able to rely on both costly restoration investments and on natural regeneration processes in restoration planning. We characterize the properties of any optimal solution to the dynamic allocation problem, including related waiting and investment rules, and derive conditions for when it is optimal to rely on both natural restoration processes and active, but costly, restoration. We also illustrate the model by applying it to the allocation of biodiversity restoration funds in Europe.

Suggested Citation

  • Jarmo Jääskeläinen & Pauli Lappi, 2025. "Restoring the commons: optimizing the restoration of natural assets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 80(4), pages 989-1039, December.
    • Handle: RePEc:spr:joecth:v:80:y:2025:i:4:d:10.1007_s00199-025-01649-1
    DOI: 10.1007/s00199-025-01649-1
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    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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