What is an "Environmental Market" anyway?

Last week, here at SP we launched “Environmental Markets in Canada: 2013”, our second annual survey of Canadian environmental markets. We looked at 52 environmental markets in the areas of air & carbon; water; and biodiversity & habitat, in order to estimate the total value of environmental markets in Canada.

Since then, Michelle has blogged about why we should care about environmental markets in Canada (Coles Notes version: It’s not where they are, it’s where they’re going), but you’re likely not alone if you’re still wondering “what’s an environmental market anyway?”.

We’re so glad you asked! It’s not an easy concept to explain, so we’ve used some words and some pictures to help.

Different organizations use the term “environmental market” to mean different things, and there’s no generally agreed definition. At SP, when we say environmental market, we include markets that place a value on protecting nature – or a cost on degrading it. That includes things like carbon emission allowance markets (like in Québec), water allocation trading markets, habitat conservation programs, and more. There are lots of nuances to this definition and the report explains this in full with lots of concrete examples if you’d like to really dig into it.

This diagram shows that environmental markets aim to improve environmental outcomes, but they work in two different ways – by either placing a cost on environmental degradation or by valuing good environmental stewardship.