The market facilitates the sale of multiple environmental services such as nutrient mitigation and biodiversity gain

Exeter’s environmental expertise makes Bristol Avon Catchment Market a world-first

Nature-based projects that help the environment will be incentivised through an innovative new online market.

The Bristol Avon Catchment Market is the first in the world to apply a two-sided market that facilitates the sale of multiple environmental services such as nutrient mitigation and biodiversity gain, all through a single settlement mechanism designed by University of Exeter Business School researchers.

It means organisations such as house builders or water companies will be able to play their role in protecting important environmental areas by purchasing verified environmental credits.

And it gives landholders such as farmers a financial incentive to undertake nature-based projects including developing wetlands, planting woodlands or converting farmland into meadows.

Researchers from the University of Exeter Business School’s Land, Environment, Economics and Policy Institute (LEEP) and Economics Department worked together with stakeholders to design the market, which draws on the work of Nobel prize-winning economist Lloyd Shapley and ensures landholders get fair payments for the projects they deliver, and buyers pay a fair price for the environmental credits the projects generate.

The market settlement process is known as the Lindsay Mechanism, after Dr Luke Lindsay, who is part of the Exeter research team that also includes Dr Ben Balmford and Professor Brett Day.

The Lindsay Mechanism makes it easier for landholders to sell nature-based projects to the market, and ensures that landholders can benefit from the different environmental services that their projects deliver.

The Mechanism also makes it easier for businesses to meet their environmental goals by allowing them to bid only for the environmental services that they need.

Any surplus created in the market is shared equitably between market participants.

Catchment markets are a unique way for organisations and landholders to help the environment while tackling social problems such as the housing crisis, according to Dr Lindsay. 

“We’re taking some ideas from academic research and applying them to the real world to solve an important social problem,” Dr Lindsay explained.

“When a house builder, for example, builds new houses this increases pollution in the rivers, but having landowners such as farmers undertake projects on their land such as developing wetlands, planting woodlands or converting farmland into meadows can offset this pollution.

“Our settlement mechanism matches together organisations and landholders in the optimum way, allowing houses to be built and the environment to be protected by deciding how much organisations have to pay the landholders to fairly divide up the benefits from this trading.”

The Bristol Avon Catchment Market is being delivered through a collaboration between Avon Wildlife Trust and Wiltshire Wildlife Trust – who will work with landholders to ensure environmental credits deliver nature recovery were it is most needed – and market operator EnTrade, which will ensure the market generates fair prices for buyers and sellers through a user-friendly trading platform.

Guy Thompson, Managing Director of Entrade, said: “The market design experts from Exeter University have created a robust and high-integrity settlement mechanism that can be used to unlock investment in nature.”

Date: 3 August 2022

Read more University News