Pricing the Ecosystem and Taxing Ecosystem Services: A General Equilibrium Approach

35 Pages Posted: 22 May 2007

See all articles by Thomas Eichner

Thomas Eichner

University of Siegen - School of Economic Disciplines

Rudiger Pethig

University of Siegen - School of Economic Disciplines; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: May 2007

Abstract

In an integrated dynamic general equilibrium model of the economy and the ecosystem humans and wildlife species compete for land and prey biomass. We introduce a competitive allocation mechanism in both submodels such that economic prices and ecosystem prices guide the allocation in the economy and in the ecosystem, respectively. We distinguish the scenarios of an open accessible habitat and a privately owned habitat. In both scenarios efficiency requires different corrective taxes/subsidies to internalize consumption services externalities. In the case of an open access habitat additional sources of inefficiency are the divergence of prices for biomass and land in both subsystems. Finally, we determine values of all components of the ecosystem in an efficient steady state with special emphasis on the role and the interplay of ecosystem and economic prices.

Keywords: land, biomass, ecosystem services

JEL Classification: H21, Q28

Suggested Citation

Eichner, Thomas and Pethig, Rudiger, Pricing the Ecosystem and Taxing Ecosystem Services: A General Equilibrium Approach (May 2007). CESifo Working Paper Series No. 1991. Available at SSRN: https://ssrn.com/abstract=988037

Thomas Eichner (Contact Author)

University of Siegen - School of Economic Disciplines ( email )

Hoelderlinstrasse 3
57068 Siegen
Germany

Rudiger Pethig

University of Siegen - School of Economic Disciplines ( email )

Hoelderlinstrasse 3
57068 Siegen
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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