Stay by thy neighbor? Social organization determines the efficiency of biodiversity markets with spatial incentives

TL;DR

This paper investigates how social organization and spatial incentives influence the efficiency and cost of biodiversity markets, emphasizing the importance of accounting for ecological externalities across property boundaries.

Contribution

It introduces an agent-based model to analyze the effects of spatial metrics, incentive design, and social interactions on land use decisions in conservation markets.

Findings

Incentive design significantly affects spatial land use patterns.

Social interactions among landowners influence market costs.

Properly accounting for spatial externalities improves market efficiency.

Abstract

Market-based conservation instruments, such as payments, auctions or tradable permits, are environmental policies that create financial incentives for landowners to engage in voluntary conservation on their land. But what if ecological processes operate across property boundaries and land use decisions on one property influence ecosystem functions on neighboring sites? This paper examines how to account for such spatial externalities when designing market-based conservation instruments. We use an agent-based model to analyze different spatial metrics and their implications on land use decisions in a dynamic cost environment. The model contains a number of alternative submodels which differ in incentive design and social interactions of agents, the latter including coordinating as well as cooperating behavior of agents. We find that incentive design and social interactions have a strong influence on the spatial allocation and the costs of the conservation market.