Our Uncommon Heritage: Conservation incentives and payments for ecosystem services

Externalities and public goods revisited The causes of the market failures behind the decline in ecosystem services reported by the MA have already been identified. Chapter 5 paid special attention to the differences in the problem of externality at the national and international scales. At the national scale it was noted that the failure of market prices to signal the scarcity of environmental resources, and the failure of markets to supply public goods, are both problems that can be resolved by government action. The fact that national governments have sovereign power makes it possible to address market failures directly by allocating property rights and by extending the legal protection of species or habitats on private lands. It also makes it possible to develop nationally funded incentive schemes such as the US biodiversity offset and banking programs considered in some detail later in this chapter (Madsen, Carroll and Moore Brands 2010). It makes it possible to establish national agencies with responsibilities for the provision of environmental public goods such as habitat for rare and endangered species, clean water, environmental health protection, and so on. The fact that national governments have sovereign authority over the land and people within national jurisdiction means that they are able to cut the Gordian knot of open or ill-defined access. At the international level, however, both externalities and the supply of environmental public goods are altogether more difficult to address. There is no supranational sovereign authority capable of assigning property rights or levying the taxes needed to fund the provision of public goods.