Market Economy and Biodiversity Besides the complications related to measuring and trading units of highly heterogenous biodiversity services, marketbased programs for habitat conservation also raise concerns about additionality, leakage, permanence, and verification – four different issues that must be addressed to achieve real, long-term conservation gains relative to business-as-usual conditions (Wunder, 2007) Additionality relates to projects targeting land that would likely remain undeveloped even without the conservation program; in such a situation, the program has yielded no ‘‘additional’’ environmental gains Many projects have focused on remote, sparsely settled areas to date because of limited funds and reluctance to displace land uses contributing to economic development (Barnes et al., 2006) Because the opportunity cost of land is equal to the net present value of the stream of future earnings it is expected to generate, land that is likely to remain undeveloped well into the future has a low net present value, making it less costly to preserve – but also less threatened Projects targeting these areas divert resources away from sites where they might have more of an impact Market-based programs can be designed with selection criteria that reflect the likelihood of land conversion to increase additionality Even if conservation initiatives successfully preserve natural ecosystems on sites that would likely be converted to other uses, leakage – the displacement of extractive activities to other undeveloped land – can weaken aggregate conservation outcomes (Chomitz, 2002; Wunder, 2007; ICMM, 2005) It would little good to secure the preservation of one tract of pristine ecosystem if, by doing so, development pressure were simply diverted to the next-most-advantageously located tract of pristine ecosystem Preventing leakage (also sometimes called ‘‘slippage’’) is particularly difficult when considering habitats that produce commodities such as timber and minerals that are exchanged in international trade Any reduction in supply from the market could induce an increase in the price the product commands in international trade, which will, in turn, attract more supply from other sources The elasticity of demand for harvested products is an important determinant of leakage; less leakage will occur when demand is elastic, while more is expected when demand is relatively inelastic Fortunately, empirical evidence to date suggests that hectare-for-hectare leakage is unlikely (though biodiversity loss could still be high without complete leakage if activities are displaced from lessto more-diverse land) For example, an empirical study of the Conservation Reserve Program in the US found that for every 100 acres of land enrolled in the program, 20 acres of noncropland was converted to agricultural production (Wu, 2000) Permanence is another critical feature of conservation programs that might be in conflict with a market-based approach The very flexibility of market-based conservation programs could become a drawback if such programs simply delay species extinction for one or two decades because land is eventually converted Setting firm aggregate conservation targets and structuring contracts to apply longterm and allow the option to be renewed can help address this issue Monitoring and verification are also key implementation issues, given the remoteness of many conservation activities 153 and the difficulty in measuring them Aggregate conservation targets will have little meaning if land use practices and species survival outcomes cannot be credibly assessed Technologies such as satellite-based monitoring can be helpful for verification in remote areas, and programs can be structured to provide payments only after certain commitments have been fulfilled by the sellers of conservation services Equity and development concerns present a different set of challenges from applying market-based approaches to biodiversity conservation As is true in transactions for pure private goods, market signals lead to the most efficient outcome – the greatest overall monetary benefit at the lowest cost, given the preexisting distribution of resources But such outcomes may not ensure the well-being of the worst-off members of society or foster a level playing field For instance, fishery ITQs have confronted whether to auction off rights to the highest bidder, freely allocate them to fishers based on historical harvests, or distribute them using some other approach This initial distribution of property rights has large implications for who reaps the benefits and bears the costs of the program, even though it does not affect the total monetary benefits and costs to society of instituting a catch share system In cases where conservation projects help local people establish secure property rights (whether to fish harvests, land, or other valuable resources), they can facilitate economic gains for host communities while improving environmental outcomes by shifting land or oceans away from an open access regime For instance, devolving control over wildlife habitat to local communities encouraged economic development through sustainable resource management and ecotourism in Zimbabwe’s CAMPFIRE program (Frost and Bond, 2008) Similarly, control over use rights to tracts of Guatemala’s Maya Biosphere Reserve has allowed local communities to reap gains through sustainable forest management (Avery and Southgate, 2002) When property rights are unaffected by PES or other market mechanisms, economic benefits experienced by communities are not expected to be appreciably different under conservation than other resource uses if payments cover but not exceed true opportunity costs Indeed, community welfare could even decrease if outsiders pursue property rights to key resources in anticipation of payments Even if the communities directly involved benefit, conservation projects could have regressive outcomes by taking land out of production and raising the costs of commodities on which the poor spend disproportionately more of their incomes If conservation induces substantial land use changes, some of the changes in the prices of agricultural products, wages, and other affected commodities that result could exacerbate inequality (Zilberman et al., 2008; Ross et al., forthcoming) Recent surges in global food prices in response to higher fuel prices, biofuel production, and demand from expanding economies suggest that potential food and resource price effects of large-scale conservation programs should be scrutinized Food prices are expected to remain high over the coming decade (von Braun et al., 2008) Food security is, of course, an absolutely vital concern of many people in developing countries This is particularly true of those who barely sustain themselves at the margins of imperiled ecosystems Conversely, fishery catch shares that increase the amount of biological resources available for direct human use through more