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Enhancing Environmental Services Markets: Strategies for Sustainable Consumption

This policy proposal explores solutions to address market failures in environmental services (ES) consumption. By establishing ombudsman services, regulating corporate behavior, and incentivizing stewardship schemes, the aim is to encourage sustainable consumption. Key questions on pricing, allocation, and consumer behavior are raised, questioning the efficacy of markets and the role of individuals in supporting ES. The proposal suggests promoting ES clubs and subsidizing eco-friendly products as potential strategies to bridge the gap between free-rider and market deficits. Improving information systems and third-party validation are highlighted to tackle reliability issues. The focus is on creating a framework that empowers citizens to make informed choices for a more sustainable future.

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Enhancing Environmental Services Markets: Strategies for Sustainable Consumption

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  1. So what for policy? • Fix ‘market failures’ • – through ombudsman services to police corporate greed and misbehaviour, and ensure competition • To provide for ‘non-market’ goods and services – especially associated with the environment • But how? Through legislation and regulation? • Or through incentives (stewardship schemes etc.) • Or?? • Key questions: How much to pay, for what, and how, and to whom?

  2. For what?

  3. How much? Citizens “vote” for more/ better ES. ‘cheap talk’ – markets working? Won’t pay the price? Marketsworking Y Consumers buy more ES? Y N A thought experiment – supposing that we had ‘reliable’ data on Votes, WTP and actual spending on ES, would we expect these three to say the same thing?

  4. How much? Citizens “vote” for more/ better ES. ‘cheap talk’ – markets working? Won’t pay the price? Marketsworking Y Consumers buy more ES? Y N N Others don’t (free rider problem)? Y Free rider deficit > market deficit? Free-Rider deficit: the difference between the sum of individual WTPs and the sum of WTPs conditional on other people also paying for ES. Market deficit: the cost of providing the (additional) ES. N Marketsworking

  5. How much? Citizens “vote” for more/ better ES. ‘cheap talk’ – markets working? Won’t pay the price? Marketsworking Y Consumers buy more ES? Y N N Others don’t (free rider problem)? Y Free rider deficit > market deficit? N Y Marketsworking Encourage/Promote ES clubs OR, as a last resort, subsidise consumption of Env. friendly products

  6. How much? Citizens “vote” for more/ better ES. ‘cheap talk’ – markets working? Won’t pay the price? Marketsworking Y Consumers buy more ES? Y N N N N Labels are unreliable? Info. is inadequate? Others don’t (free rider problem)? Y Y Y Free rider deficit > market deficit? Improve 3rd party validation Improve Info. & Comm. Systems N Y Marketsworking Encourage/Promote ES clubs OR, as a last resort, subsidise consumption of Env. friendly products

  7. How much? Citizens “vote” for more/ better ES. ‘cheap talk’ – markets working? Won’t pay the price? Marketsworking Y Consumers buy more ES? Y N N N N N N Labels are unreliable? Info. is inadequate? Others don’t (free rider problem)? Other things more important? Too much effort? Y Y Y Y Y Y Free rider deficit > market deficit? Improve 3rd party validation Improve Info. & Comm. Systems N Y Marketsworking Marketsworking Marketsworking Encourage/Promote ES clubs OR, as a last resort, subsidise consumption of Env. friendly products

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