Economics: Making it profitable to protect nature

Market mechanisms, asset valuations, commodities: How do these concepts relate to environmentalism?

Traditionally, they haven’t. But at EDF, we’re harnessing one of the most powerful forces in the modern world — the pursuit of profit — for the common good.

How: By helping craft markets in which investors, inventors and entrepreneurs have an economic incentive to protect the environment. 

Case study: acid rain

Problem: Sulfur dioxide from coal-fired power plants was creating harmful acid rain several decades ago. Traditional regulation would have simply directed every plant owner to cut pollution by a specific amount in a specific way, an expensive and often ineffective solution.

Solution: Our experts proposed a cap-and-trade approach that required overall sulfur emissions be cut in half, but would let each company decide how to do it. Power plants that cut their pollution more than required could sell the extra allowances.

Outcome: Cap-and-trade was so effective and affordable that The Economist magazine called it the “greatest green success story of the decade.”

Expanding market-based solutions

Since this first historic success, we’ve expanded our efforts to help create new market mechanisms that account for the impact to our environment.

Today, economic solutions cut across most of our work. Market solutions can:

• reduce climate pollution using carbon markets
• curb deforestation using a method known as REDD+
• slow overfishing using fishing rights
• protect habitat using habitat exchanges

If we can make conservation profitable, people will find ways to make it happen.

Daniel Dudek, Ph.D. EDF Vice President, China

Support practical solutions

We are environmental problem-solvers who believe that economic prosperity and environmental stewardship can go hand in hand.

If you share our vision for change, the most effective way to support these and other market-based success stories is by joining our monthly giving program, the EDF EcoPartners. 

As an EcoPartner, you’ll receive special quarterly reports that will keep you informed of our progress.