Beyond the ‘Either/Or’ of Markets v. Regulations
There are a number of consistent questions that come up in conversations about environmental markets. Are markets an appropriate ‘alternative’ to more traditional regulations? Can compensatory mitigation really make-up for impacts that it ‘enables’?
Rather than being an alternative to regulation, environmental markets are a particular kind of regulatory solution. Necessary development projects can move more quickly at lower cost if credits generated from restoration projects are a legitimate form of compliance with environmental laws. The key point is that compliance credits are entirely the product of regulation: the financial, ecological, and legal standards that define the credit are set by the same government entities that otherwise regulate development.
While there is a necessary tension between economic efficiency and scientific rigor here – credit standards can be set higher or lower to reflect different levels of required planning studies, restoration success criteria, and monitoring – this is not a bad thing. This tension informs regulators about what realistic alternatives exist for the avoidance, minimization, and mitigation phases of project permitting.
As we refine credit standards through experience, we are ‘getting it right’ more often. Both environmental and economic results are better because regulators have compliance options to offer.
As we design and implement environmental market systems, we’re also creating opportunities for capital investment in the environment. ‘Getting it right’ means that the more good they do, the more money they’ll make – and it creates a critically needed alternative to philanthropic or government sources of funding.