Ecosystem markets, exchanges of nature's various services, are on the rise. By assigning an economic value to services such as erosion control and clean water, these approaches allow countries to use the "invisible hand" of commerce to protect biodiversity, habitats, and water supplies.
With biodiversity banks, for example, landowners who cannot legally develop their property because of the presence of an endangered species or a wetland can collect payments or "credits" if their land is conserved. The landowner can sell these credits to developers who need to offset development that occurs elsewhere where similar habitats are found.
Some US$3.4 billion of regulated biodiversity offset transactions occur each year, the group Ecosystem Marketplace estimated last year. Biodiversity markets are projected to reach $4.5 billion by 2010.
With water markets, governments typically cap the level of degradation allowed in a given area and allocate...