Ecological limits in economic systems: A regeneration-linked constraint mechanism

Abstract

Economic systems depend on the biosphere, but this dependence is not represented as a binding constraint in economic coordination. As a result, economic activity can expand while degrading the ecological systems on which it relies, contributing to persistent ecological overshoot (Dasgupta, 2021). 

This paper introduces a conceptual ecological accounting mechanism in which unit issuance is linked to ecosystem regeneration and economic transactions are associated with a proportional burn reflecting ecological consumption. The mechanism is best understood as a parallel constraint layer that operates alongside existing monetary and fiscal systems. Unlike conventional environmental policies that address externalities after they arise, the proposed mechanism introduces a continuous constraint at the level of transactions, shaping incentives ex ante (Daly, 1996). The paper defines the mechanism, outlines its core constraints, and identifies key areas for further research on implications for ecological accounting, economic coordination, and institutional design. 

The analysis is exploratory and not implementation-ready. Its purpose is to define a mechanism design space, identify key feasibility constraints, and outline testable propositions for further research.

Keywords: Ecological economics, natural capital, ecosystem accounting, environmental accounting, planetary boundaries, Environmental policy, Ecological limits, Sustainable development, Mechanism design

JEL Classification: Q57, Q58, Q54, D62, O44