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.