When an economic value is placed on environmental assets, there can often be a backlash against pricing what many people see as priceless. Yet economic valuation continues to grow in the environmental management space for one good reason. It works. As this New York Times article shows, from North America to Africa, conservationists are using new markets to achieve environmental goals.
Markets work through allocating scarce resources to their most efficient use. Normally this mechanism fails for environmental assets as they don’t have a market price. Putting a price on forests, water, or even clean air, allows for the use of market-based instruments. This ensures these resources will only be used where they add the most value. These market-based instruments have been successfully used around the world for everything from carbon trading to habitat restoration.
In Australia, water markets have been successfully developed to trade scarce water resources, with significant positive environmental outcomes. Extending this approach to new markets such as the sharing economy will help continue these positive achievements.
Continued technological innovation from big data to cryptocurrencies will provide new information and ideas that can be leveraged to keep improving environmental management and increase the use of markets to drive conservation efforts.
This insight was written in response to the article ‘Using the Airbnb Model to Protect the Environment’ by Seema Jayachandran which first appeared on nytimes.com on 29 December 2017.