Bundling of Ecosystem Services in Conservation Offsets: Risks and How They Can Be Avoided

Conservation offsets are increasingly used as an instrument to conserve biodiversity and ecosystem services on private lands. Bundling ecosystem services (ES) in the market transactions saves costs but implies that only the bundle of ES is conserved while individual ES may decline. This paper presents a simple model analysis of a conservation offset scheme to identify conditions under which bundling can lead to such undesired declines. As it turns out, these are favoured by rarity of the ES as well as a positive correlation between their abundance and the cost of their conservation. A market rule is proposed that is able to avert undesired ES declines. Rather than on sums or means of ES, this market rule focuses on the least abundant ES. Systematic variation of model parameters shows that this trading rule is most effective in those cases where the likelihood of undesired ES losses is highest.

Pricing and Efficiency in the Market for IP Addresses

We consider market rules for transferring IP addresses, numeric identifiers required by all computers connected to the Internet. Transfers usefully move resources from lowest- to highest-valuation networks, but transfers tend to cause socially costly growth in the Internet's routing table. We propose a market rule that avoids excessive trading and comes close to achieving social efficiency. We argue that this rule is feasible despite the limited powers of central authorities. We also offer a framework for reasoning about future prices of IP addresses, then explore the role of rentals in sharing information about the value of IP address and assuring allocative efficiency. (JEL D47, D82, D85, L86)