Economic analyses of nature must somehow define the “environmental commodities” to which values are attached. We articulate principles to guide the choice and interpretation of nonmarket commodities. We describe how complex natural systems can be decomposed consistent with “ecological production theory,” which, like conventional production theory, distinguishes between biophysical inputs, process, and outputs. We argue that a systems approach to the decomposition and presentation of natural commodities can inform and possibly improve the validity of nonmarket environmental valuation studies. We raise concerns about interpretation, usefulness, and accuracy of benefit estimates derived without reference to ecological production theory.

Environmental economists invest in measuring the value of the environment but put less effort toward integrating that value directly into the economy. Experimental economists evaluate the performance of mechanisms to fund public goods but in some cases offer limited insight into practical implications for developing markets. This discussion presents initial insights into applying mechanisms for private provision of public goods based on demand-side values rather than regulatory-based market incentives such as cap-and-trade policies. Consideration of mechanisms to generate revenue inspires field tests that could direct experiments using threshold public goods and Lindahl's framework toward applications that transform value into revenue.

Water-quality trading is an area of active development in environmental markets. Unlike iconic national-scale air-emission trading programs, water-quality trading programs address local or regional water quality and are largely the result of innovations in water-pollution regulation by state or substate authorities rather than by national agencies. This article examines lessons from these innovations about the “real world” meaning of trading and its mechanisms, the economic merits of alternative institutional designs, utilization of economic research in program development, and research needed to improve the success of environmental markets for water quality.

Sustainability science is an emerging field directed at advancing sustainable development. Informed by recent scholarship and institutional experiments, we identify key roles for economists and encourage their greater participation in this research. Our call to collaborative action comes from positive experiences with the Sustainability Solutions Initiative based at the University of Maine, where economists collaborate with other experts and diverse stakeholders on real-world problems involving interactions between natural and human systems. We articulate a mutually beneficial setting where economists’ methods, skills, and norms add value to the problem-focused, interdisciplinary research of sustainability science and where resources, opportunities, and challenges from science bolster economic research specifically and land/sea grant institutions broadly.

In this article, research on the application of science to policy issues is reviewed and applied to economic science. Economists who want their professionally credentialed economic research to have an impact on public policy are advised to consult with policy decision-makers in framing their research questions and throughout the research process, thus assuring that the resulting findings will be relevant. A minimal degree of bias in framing, conducting, and presenting research complements a high degree of relevance for the results, allowing economic research to make a difference.

Stated preference scenarios often provide information on intermediate biophysical processes but omit information on the resulting final services that provide utility. This may cause respondents to speculate about the effects of intermediate outcomes on their welfare, leading to biased welfare estimates. This work clarifies distinctions between intermediate and final ecosystem services within stated preference valuation and develops a structural model by which to infer respondents’ speculations when a final ecosystem service is omitted. The model also derives implications for welfare estimates. Methods and results are illustrated using an application of choice experiments to fish restoration in Rhode Island's Pawtuxet watershed.

The mix of public and private land ownership within the Adirondack Park often leads to conflict between development and conservation interests. We explore the effects of the Adirondack Park Agency's classifications on property values through hedonic analysis while simultaneously controlling for environmental and recreational amenities. Results show that lands in the park classified for moderate-intensity use sell at a premium of up to 7 percent while lands in more restrictive classes are discounted. There is also evidence that decreasing the impact of humans by one unit increases property values by approximately 2 percent.

We examine challenges and opportunities involved in applying ecosystem services to public land management with an emphasis on national forests in the United States. We review historical forest management paradigms and related economic approaches, outline a conceptual framework defining the informational needs of forest managers, and consider the feasibility of its application given the types of ecological information typically available and the expanding set of services considered in management decisions. Economists can make their work more relevant to managers by broadening their focus to include qualitative approaches and more directly and effectively collaborating with managers and natural scientists.

Lifestyle landowners value land for its amenities and ecological characteristics and could play an important role in managing and conserving native vegetation in multifunctional rural landscapes. We quantify values of ecosystem services captured by owners of rural lifestyle properties in Victoria, Australia, using a spatial hedonic property price model. The value of ecosystem services provided by native vegetation is maximized when that vegetation occupies about 40 percent of the area of a lifestyle property. Since the current median proportion of native vegetation is 15 percent, most lifestyle landowners could benefit from increasing the area of native vegetation on their properties.

Producing biomass energy requires much land, and effects of biomass production on ecosystem services could greatly affect total biomass energy cost. This study estimates switchgrass production cost in western Massachusetts at three levels: private production cost, private cost plus social cost of nitrogen fertilizer externalities, and those costs plus the social opportunity cost of foregone forest ecosystem services. Values for nitrogen externalities and forest ecosystem services estimated with benefit transfer suggest that social cost is much greater than private switchgrass production cost. The benefit-transfer estimates are only first approximations, but conclusions are robust to a large range of values.

The cost-effectiveness of total maximum daily load (TMDL) programs depends heavily on program design. We develop an optimization framework to evaluate design choices for the TMDL for the Potomac River, a Chesapeake Bay sub-basin. Scenario results suggest that policies inhibiting nutrient trading or offsets between point and nonpoint sources increase compliance costs markedly and reduce ecosystem service co-benefits relative to a least-cost solution. Key decision tradeoffs highlighted by the analysis include whether agricultural production should be exchanged for low-cost pollution abatement and other environmental benefits and whether lower compliance costs and higher co-benefits provide adequate compensation for lower certainty of water-quality outcomes.

We use a stated choice experiment to estimate household willingness-to-pay for a program providing incentives to private forest land owners in the Red Hills region of southwest Georgia and northwest Florida. The estimated values of various program attributes inform a landscape analysis that identifies high-priority private forest land that could be targeted for conservation incentives. Households report an increase in utility from the program when it explicitly identifies a target ecosystem-service priority. Also, inclusion of stated preference values in the prioritization plan highlights a potential scarcity effect that has important implications for conservation targeting.

This study spatially quantifies hydrological ecosystem services and the production of ecosystem services at the watershed scale. We also investigate the effects of stressors such as land use change, climate change, and choices in land management practices on production of ecosystem services and their values. We demonstrate the approach in the Beaver River watershed in Rhode Island. Our key finding is that choices in land use and land management practices create tradeoffs across multiple ecosystem services and the extent of these tradeoffs depends considerably on the scenarios and ecosystem services being compared.