Market-based instruments for ecosystem services

The concept of ecosystem services is useful but also rather controversial. In part, this controversy relates to what is sometimes called the “commoditization” of ecosystemservices (Muradian and Rival, 2012; see also the introduction of this book). Many peoplefeel that the benefits that nature provides us with should not be conceptualized as“services” comparable to those supplied by traditional markets (e.g. the legal servicesof a lawyer or the financial services of a bank). Nevertheless, many environmental economists have observed that market mechanismscan play an important role in balancing the “supply” and “demand” of ecosystemservices. For example, farmers respond to subsidy schemes that offer them a fair rewardfor environment-friendly practices and consumers with “green” preferences tend to buyecolabeled products.

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