Systems linking people and nature, known as social-ecological systems, are increasingly understood as complex adaptive systems. Essential features of these complex adaptive systems – such as nonlinear feedbacks, strategic interactions, individual and spatial heterogeneity, and varying time scales – pose substantial challenges for modeling. However, ignoring these characteristics can distort our picture of how these systems work, causing policies to be less effective or even counterproductive. In this paper we present recent developments in modeling social-ecological systems, illustrate some of these challenges with examples related to coral reefs and grasslands, and identify the implications for economic and policy analysis.

This paper develops a methodology for including ecosystem services in a wealth accounting framework. Accounting for ecosystems and their services leads to adjusting net domestic product (NDP) for the direct benefits provided by the current stock of ecosystems but not for their indirect contributions in terms of protecting or supporting economic activity, property and human lives. When ecosystems are irreversibly converted for economic development, NDP must be further modified to reflect any capital revaluation that occurs with the current conversion of ecological capital to other land uses. The risk of collapse also requires adjustments to NDP, as any capital revaluation associated with ecosystem conversion must be adjusted for this risk, and the discounted minimum value of ecosystems associated with collapse must be subtracted from NDP. These various contributions of ecological capital to wealth accounts are illustrated with the example of mangroves in Thailand over the period 1970–2009.

This paper investigates firm incentives for developing environmentally clean technologies in a simple two-country model with international oligopoly and lack of regulatory commitment, and compares the incentives under price and quantity regulations with and without policy cooperation between governments. We examine whether policy coordination (choices of policy instruments or policy harmonization) encourages environmental innovation when firms have strategic innovation incentives that may influence future regulation. In a case where policies are non-cooperatively set by governments, quantity regulations yield a greater static benefit for countries; however, dynamically, price regulations encourage more innovation than quantity regulations when environmental damages are not so large. Under both price and quantity regulation regimes, cooperative policy harmonization necessarily enhances net benefits in each country, whereas it discourages firms' innovation incentives when environmental damages are not so small.

The European Union (EU) is now discussing a legislation proposal to ban illegal timber from the EU market. We use the ICES model to estimate the reallocation of global demand and timber imports following the EU legislation. We aim to assess the economic impacts and measure the potential emission reduction resulting from the introduction of this policy. Results show that an EU ban targeting only log imports is not effective in reducing illegal logging, but its main effect is the removal of illegal logs from international markets. Additionally, the unilateral EU ban increases secondary wood production in illegal logging countries as their exports become relatively more competitive. Through this mechanism, part of the banned illegal timber will re-enter international trade flows ‘hidden’ as processed wood. Extending the ban to timber processed products eliminates this effect and reinforces direct carbon emissions reduction from logging activities.

A choice experiment was applied to measure the existence value of an endemic moss. We assessed value separation, embedding or warm glow and ‘ethical’ motivations. We exemplify our application by valuing an inconspicuous moss endemic to Chile's sub-Antarctic region. The choice experiment was administered to a sample of local residents of Navarino Island (southern Chile). The design isolates the existence value by requiring respondents to make simultaneous tradeoffs between moss existence value, five other biodiversity-related values and income changes. Insensitivity to scope was addressed by using degrees of extinction risks. We predominantly use a willingness-to-accept design of the payment vehicle to avoid protest responses. A meaningful marginal value for the existence of an endemic species for Navarino island residents was documented. The design, based on varying degrees of extinction risk, avoided a strong effect of warm glow. No protest responses motivated by ethical concerns were encountered.

This paper presents the analysis of a choice experiment designed to estimate willingness-to-pay (WTP) to mitigate damages caused by invasive plant species in a rural community of Nepal. In order to address the cash constraints problem in a subsistence economy, two payment attributes, labour contribution and membership fee, were included in the choice sets. The results reveal that rural farmers have significant WTP for forest management activities, in terms of both cash and labour contributions. The results also suggest that rural farmers value their time in this context at a different rate from the current wage rate.