Bringing Ecosystem Services into the Real World: An Operational Framework for Assessing the Economic Consequences of Losing Wild Nature

Policy action to halt the global loss of biodiversity and ecosystems is hindered by the perception that it would be so costly as to compromise economic development, yet this assumption needs testing. Inspired by the recent Stern Review on the Economics of Climate Change, the leaders of the G8+5 nations commissioned a similar assessment of the economics of losing biodiversity, under the Potsdam Initiative on Biodiversity. Here, we propose a conceptual framework for such a global assessment which emphasizes several critical insights from the environmental economics and valuation literature: contrasting counterfactual scenarios which differ solely in whether they include specific conservation policies; identifying non-overlapping benefits; modeling the production, flow, use and value of benefits in a spatially-explicit way; and incorporating the likely costs as well as possible benefits of policy interventions. Tackling these challenges, we argue, will significantly enhance our ability to quantify how the loss of benefits derived from ecosystems and biodiversity compares with the costs incurred in retaining them. We also summarise a review of the current state of knowledge, in order to assess how quickly this framework could be operationalized for some key ecosystem services.     

Adapting auctions for the provision of ecosystem services at the landscape scale

Auctions, or competitive tenders, can overcome information asymmetries to efficiently allocate limited funding for ecosystem services. Most auctions focus on ecosystem services on individual properties to maximise the total amount provided. However, for many services it is not just the total quantity but their location in the landscape relative to other sites that matters. For example, biodiversity conservation may be much more effective if conserved sites are connected. Adapting auctions to address ecosystem services at the landscape scale requires an auction mechanism which can promote coordination while maintaining competition. Multi-round auctions, in which bidding is spread over a number of rounds with information provided between rounds on the location of other bids in the landscape, offer an approach to cost effectively deliver landscape-scale ecosystem services. Experimental economic testing shows these auctions deliver the most cost effective environmental outcomes when the number of rounds is unknown in advance, which minimises rent-seeking behaviour. It also shows that a form of bid-improvement rule facilitates coordination and reduces rent seeking. Where the biophysical science is well developed, such auctions should be relatively straightforward to implement and participate in, and have the potential to provide significantly better outcomes than standard ‘one-shot’ tenders.     

Modelling intervention options to reduce GHG emissions in housing stock — A diffusion approach

The building sector is regarded as having one of the highest benefit-cost ratios from greenhouse gas (GHG) emission reduction strategies. However, because of uncertainties around household behaviour patterns, it is very difficult to assess and compare the GHG reduction impacts of different intervention schemes for whole housing stock. Intervention schemes include policy instruments such as incentives or rebates for energy efficient appliances or renewable energy, and regulatory building code requirements for energy efficiency. This paper presents a decision support tool based on mathematical diffusion that evaluates the adoption levels of different schemes or pathways towards reducing GHG emissions in housing stock. It is an extension of the Bass diffusion model that accommodates financial and non-financial benefits, ceilings of adoption and interactions between intervention options. The model capability was tested using a case study of seven suburbs in Brisbane, Australia, comprising of 25,000 houses and units. Estimates of GHG emission reductions to 2019 of a household rebate scheme for solar panels and a rebate scheme for solar hot water compared to a base case of no rebates were presented and analysed. Modelling also allowed identification of important characteristics of adoption trends that could assist policy makers and industry to substantially improve the design of effective intervention options.     

Industry structure and labor market flexibility in the South African manufacturing sector: A time series and panel data approach

This paper presents a joint analysis of labor market flexibility and product market structure. Our investigation confirms earlier results of imperfect competition in South African manufacturing where we find an average mark-up of 50% for the period 1970 to 2004 that is without consistent trend over time. The contribution of the paper is to provide a theoretically grounded means of linking output market conduct to labor market flexibility. We infer the proportion of labor associated with rigidities in the labor market from the mark-up, and find that two thirds of total labor employed in South African manufacturing is associated with rigidities. We find that this proportion falls during the 1980s and rises during the 1990s, suggesting an increase in labor flexibility followed by a decrease.     

Explaining the variation in household recycling rates across the UK

Household waste recycling rates vary significantly both across and within regions of the UK. This paper attempts to explain the variation by using a new data set of waste recycling rates and policy determinants for all of the UK's 434 local authorities over the period 2006Q2 to 2008Q4. Our results suggest that the method of recycling collection chosen by policy makers is an important factor influencing the recycling rate. We also find an inverse relationship between the frequency of the residual waste collection and the recycling rate.     

Business angel early stage decision making

Using 150 interactions between entrepreneurs and potential investors, we study early stage business angel decision making. We show that contrary to the majority of past research that suggests they should, angel investors do not use a fully compensatory decision model wherein they weight and score a large number of attributes. Rather, they use a shortcut decision making heuristic known as elimination-by-aspects to reduce the available investment opportunities to a more manageable size. If an opportunity is diagnosed with a fatal flaw, it is rejected in the first stage of the decision making process, but all opportunities with no fatal flaws do progress beyond that stage.