UW Aquatic & Fishery Sciences Quantitative Seminar

Sandor Toth

UW, Natural Resource Informatics

ECOSEL: A New Market for Forest Ecosystem Services

ECOSEL is a voluntary market that matches willing sellers of forest ecosystem services with willing buyers. Multi-objective optimization is used in conjunction with a public good subscription mechanism to generate and market management alternatives that lead to Pareto-optimal bundles of ecosystem services on a piece of forestland. ECOSEL allows the public to subscribe to the competing alternatives by means of a web-based bidding platform. The management alternative that attracts the highest total of bids over the associated opportunity cost (a.k.a., threshold cost) wins the auction. The landowner is legally bound to implement the winning plan for a profit that arises between the proceeds and the costs of the plan. I provide a few examples of how ECOSEL can be used in practice and show how the mechanism can bypass the problem of additionality and minimize free riding. I will also report on a series of experimental auctions that were used to test the design of the mechanism to maximize social surplus and seller revenues.