Opportunities and constraints of tradable permits for biodiversity conservation

Background and Goal of Study Economic development poses a continuing challenge for biodiversity conservation. In recent years, market-based instruments such as tradable land-use permits have gained increasing attention as flexible instruments to mitigate the conflict between economic development and conservation. We present results from the project EcoTRADE, funded by the European Science Foundation, that investigates the applicability of tradable permits to biodiversity conservation. Materials and Methods The EcoTRADE project performs conceptual analyses, evaluation of existing policies and modelling to gain better understanding of permit markets for conservation. Conceptual analyses reveal the key parameters that determine the functioning and efficiency of a permit market. We evaluate existing policies similar to tradable permits from an economic point of view. Using models, we analyze how spatial habitat connectivity can be influenced by trading rules, how spatial and temporal habitat network properties affect species viability and how trading rules affect the cost-effectiveness of a market. Selected Results and Conclusions Permit markets involve trade-offs. E.g., they must function economically, requiring sufficient market activity, but ecological requirements may restrict trading opportunities. Policies in the US and Germany have shown that permit markets can lead to improvements, both economically and ecologically. Key properties of dynamic networks include the total area of cohesive habitat, its spatial connectivity, the development time and the proportion of network area that changes annually. The ecological model identifies the spatial and temporal constraints of spatially shifting habitat patches across landscapes. The ecological-economic model shows that spatial connectivity can be generated through a permit market, but the cost-effectiveness of a trading rule depends on the properties of the target species and the behaviour of the market participants