Market-based instruments for biodiversity and ecosystem services: A lexicon

Although market-based instruments (MBIs) gained prominence in discourses and practice in the field of biodiversity conservation and provision of ecosystem services, their definition and underpinning theory still are unsettled matters. A review of MBIs - including payments for ecosystem services, taxes and subsidies, mitigation or species banking, certification, etc. - clearly shows that this label encompasses an extremely diverse array of instruments. Their only shared characteristic might be the attribution of a price to nature, yet in different ways and not necessarily in conjunction with economic valuations of the benefits/impacts associated with biodiversity and ecosystem services. Their links with markets are often loose, at least contrasted if not questionable in many cases. This pleads for a better lexicon of such a large collection of policy instruments in order to better inform policy making. This lexicon is based on the links between MBIs, economic theory, and markets. It includes six generic categories: regulatory price signals, Coasean-type agreements, reverse auctions, tradable permits, direct markets, and voluntary price signals. As a matter of illustration, "Payments for Ecosystem Services" refer to various instruments in the literature and in practice. Depending on the context they could fit in all of our categories but one, so that we wonder if the term itself is not emptied of any useful meaning at least from an operational perspective. Last, the diversity of MBIs with regard to their functioning and links with markets seems to disqualify any general statement, be it in favour or against their development. In particular, MBIs as a whole cannot be said to be cost-efficient, risky, inequitable, or capable of revealing information to reach a social optimum and better environmental management. (C) 2012 Elsevier Ltd. All rights reserved.