Managing the risks of ecosystem services market

Abstract

Environmental governance is undergoing innovation in the use of market instruments, including payments for environmental services. As it is in nature, in society change (such as commercial or policy innovation) brings the risk of failure or of unanticipated consequences. Good governance requires intelligent precautions against what can go wrong. In investment markets governance safeguards such as competition and market regulation manage the risk that private gains accrue to the ruthless at the cost of the innocent, or that inexperience or incompetence lead to high public and private costs. For environmental markets risk safeguards are under developed. This paper explores the risk dimension of payments for environmental services, and suggests that systematic risk governance could make it more likely that these innovations will serve the public interest.