An auction mechanism for the optimal provision of ecosystem services under climate change

David J. Lewis, Stephen Polasky

Research output: Contribution to journalArticlepeer-review

5 Scopus citations

Abstract

The provision of many ecosystem services depends on the spatial pattern of land use across multiple landowners. Even holding land use constant, ecosystem service provision may change through time due to climate change. This paper develops an auction mechanism that implements an optimal solution for providing ecosystem services through time with multiple landowners who have private information about the net benefits of alternative uses of their land. Under the auction, each landowner has a dominant strategy to truthfully reveal their private information. With this information a regulator can then implement the optimal landscape pattern, which maximizes the present value of net benefits derived from the landscape, following the rules of the auction mechanism. The auction can be designed as a subsidy auction that pays landowners to conserve or a tax auction where landowners pay for the right to develop. Our mechanism optimizes social adaptation of ecosystem management to climate change.

Original languageEnglish (US)
Pages (from-to)20-34
Number of pages15
JournalJournal of Environmental Economics and Management
Volume92
DOIs
StatePublished - Nov 2018

Bibliographical note

Funding Information:
Lewis gratefully acknowledges funding support from the USDA National Institute for Food and Agriculture (# 2017-67023-26275 ), the USDA Forest Service Pacific Northwest Research Station (# 14-JV-11261955-059 ), and the National Oceanic and Atmospheric Association (NOAA), National Centers for Coastal Ocean Science (# NA11OAR4320091A ). We are grateful to comments from seminar participants at the AERE Summer Conference (2015), the AERE sessions at the WEAI Annual Conference (2016), the University of Tennessee, Penn State University, the University of Minnesota, and Oregon State University. We are also grateful for comments from two anonymous reviewers and the editor, Till Requate.

Publisher Copyright:
© 2018 Elsevier Inc.

Keywords

  • Asymmetric information
  • Auctions
  • Climate change adaptation
  • Conservation planning
  • Ecosystem services
  • Irreversibility
  • Land use
  • Option value
  • Spatial modeling
  • Truthful mechanism

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