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EcoCommerce: Creating Value with Symbiotic Demand

An Antithesis to the Tragedy of the Commons
by Ag Resource Strategies, LLC on 5 February 2014

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Transcript of EcoCommerce: Creating Value with Symbiotic Demand

The "tragedy of the commons" has always been a part of the economy In 1968, Garret Hardin's namesake essay described how individuals would exploit a pastoral commons to meet their self-interests... ...and degrading the natural resources for all. grain
biomass
forage
water soil erosion
sedimentation
soil degradation
biodiversity loss
increase run-off
production instability carbon sequestration
soil fertility
water storage
water filteration
biodiversity
production stability
habitat Positive Externalities Negative Externalities $0 Value for natural capital appreciation $0 Cost for natural capital degradation $ Potential Profit Tragedy of the Economy & Tragedy of the Commons as illustrated in more modern times http://www.ecocommerce101.com/media.htm Positive and negative externalities exist because transaction costs are greater than the expressed value transaction costs are all ex-ante and ex-post costs associated with a trade -
- planning
- assessment
- exchange
- assurance
- monitoring
- liability Exploring Ecosystem Services
ENV 675-660
University of Pennsylvania – MES Program
Spring 2013
Professor Ira Feldman Economy Policy EcoCommerce adding an ecological dimension to the economy Ecology Jobs will emerge at the interface of silo sectors state agencies
institutions local governments
clinics
educator corporations
non-profits/NGOs farmer
student
patient New data, relationships, networks, communications and solutions reside within the [interstitial] space between the silos EcoCommerce & Symbiotic Demand Economy Policy Ecology (c) 2013 Tim Gieseke All Rights Reserved. The economic challenge is the "tragedy of the commons" The challenge with environmental policy is the segregated and narrow view of governance A challenge with ecosystem service market development is measurement and valuation schemes. Tim Gieseke, Ag Resource Strategies, LLC In 2009, the Minnesota Legislators directed the State Ag Department to develop a "reasonable assurance" process for farmers and water quality (TMDLs). watershed biomass shed cheese shed env. liability shed Conclusion:
The existing economic system is not capturing full economic value of natural capital and its outputs.



EcoCommerce creates an integrated market signal that capitalizes on the two essential and seemingly opposing forces; symbiosis of ecology and self-interest of the human economy.



Symbiotic Demand works on the premise that many demanders can simultaneously consume a portion of the whole (ecoservices).



Symbiotic Demand is the antithesis of the "Tragedy of the Commons" Symbiotic Demand works on the premise that many demanders can partake in the costs and values of public goods Public Policy-makers Private Policy-makers Public Practitioners Private Practitioners Legislators
State Gov Corporations Conservation
Agencies Land Managers There are four sectors involved with the governance of land management as illustrated: A solution will shift the governance from Policy-maker to Private Practitioner Ag Resource Strategies, LLC compiled indices that could act as water quality standards. Numerical values were chosen to represent sustainable ecological and economical management outcomes These public and private good market signals are the key to EcoCommerce and create the potential of "Symbiotic Demand"; a new economic concept It was observed that index-based natural resource outcomes can be aligned with production management strategies. ...as these values could be integrated and differentiated within multiple geo-sheds. water quality - 85 index
habitat - 73 index
soil health - 82 index
forage - 6 tons/acre
grains - 156 bushels/acre
meat - 350 pounds/acre Production Portfolio Unlike traditional demand, when the number of demanders increases for a unit (i.e. bushel of corn), the price goes up and one bidder receives the unit. #Demanders Price # of Demanders Price As a Minnesota farmer of corn, soybeans and livestock, I recognized that I am a policy-taker and price-taker.

And therefore, policy and/or market forces need to create: Within this context, Symbiotic Demand changes the economic game 75 80 65 60 85 This pilot project was focused on
[policy] TMDL water quality goals,

but it became obvious the farm's portfolio had broader [ecological] application and
[economic] value... With symbiotic demand, when the number of demanders increases for a unit (WQIndex), the price paid per demander decreases and each bidder receives the unit. 1) Developing metrics for market signals
and "landscape intelligence" 2) Applying Shared Governance models and strategies Areas of study and application for
EcoCommerce and Symbiotic Demand: 3) Evaluating economic theory and application within an expanding and smarter economy* 4)Create financial platforms and support Overcoming the Economic-Ecological-Policy Challenges An economic solution must address:
the negative externalities of the "tragedy of the commons"
the positive externalities of the "tragedy of the economy" Non-point source ecoservices and pollution are directly immeasurable as it pertains to origin and quantity. Whether assessing the farm's 'back 40'... ...or nation's lower 48. Rival Non-rival Excludable Non-excludable private goods common goods public goods club goods A solution must measure the immeasurable and create transactions that bring ecological goods into the economy An Ecological solution that measures the immeasurable to support transactions A Policy solution that addresses a shared governance model An Economic solution that addresses the "tragedy of the commons", soil erosion
sedimentation
soil degradation
biodiversity loss
increase run-off
production instability carbon sequestration
soil fertility
water storage
water filteration
biodiversity
production stability
habitat Negative Externalities $Value $0 Cost recreationists food processors watersheds land owners society loss of production - - rehabilitation costs Tragedy of the Commons utilities food processors Insurers governments Economic Transactions Symbiotic Demand Natural Capital Appreciation Identifying specific roles catered to individual sectors *Smarter Economy would contrast with a Failing Economy**

**A Failing Economy contains significant externalities and hence, a Smart Economy contains relatively few externalities re-evaluate public goods' non-excludable status within sustainability claims and objectives Rival Non-rival Excludable Non-excludable private goods common goods public goods club goods manage the transactions costs of incorporating positive externalities incorporate ecoservice values within a expanding Production Possibility Frontier harmonize ecoservice markets and signals productivity - - liability - - robust ecosystems tgieseke@agresourcestrategies.com http://www.agresourcestrategies.com http://www.ecocommerce101.com For insights into types of vocations related to this topic continue... watershed biomass shed cheese shed env. liability shed Public goods are Positive Externalities created for: This presentation is based on research for and the application of EcoCommerce 101 Governance is weighted toward the top right ... Careers associated land management to generate ecoservice values Since no one entity (government, NGO, corporation or land owner) can afford to pay for each and/or every ecosystem service unit, viable options other than a symbiotic approach seem remote Since centrally-controlled strategies become overwhelmed due to mathematics of permutations, land management strategies are best carried out by individual landowners.
. These extreme values limit the success of centrally-planned systems, but are manageable by individuals in a open-market condition (on a daily basis). The Mathematics of Permutations states, "the number of potential land use patterns is related to the number of fields within a geo-shed raised to the number of land use options." A simple scenario of 3 crop choices, a handful of conservation practices and a 2 or 3 year crop rotation within a watershed of 1000 fields produces an astronomical number of management scenarios Since an entity cannot legitimately make a sustainability claim without the land management data to support the claim, it eliminates free-ridership in corporate, government and NGO sustainability goals. Symbiotic demand addresses major challenges Natural Capital Degradation the value of producing public goods must become economically excludable Since producing a singular unit of anything (such as a farm's WQIndex) cannot be subject to the economies of scale,

the only method to reduce the cost for the demanders is by sharing in the cost of the unit itself. ...while land management outcomes are generated from the bottom left It achieves Micheal Porter's "shared value" concept for corporations in a holistic, business-like manner Since the commons are natural capital, the tragedy falls on the economy and ecology The "tragedy of the commons" is an individual's activity outside a transaction effecting multiple entities with negative externalities Symbiotic Demand is multiple entities engaging within transactions with an individual for a singular, yet shared unit of positive economic value and is opposite to A farm provides multiple goods and services to multiple entities, simultaneously wq index
soil q index
habitat index wq index
soilq index wq index
soilq index
P-index
Adapt-N index wq index
soilq index
habitat index and allows each entity to define sustainability to meet their criteria non-exclusive ecoservices must provide a baseline to support exclusive ecoservice credit markets Allow the financial community to recognize market types Identify sources of value ...and sources of finance In summary, the creation of an ecocommerce market signal




used within symbiotic transactions by a shared governance delivery system





is able to weave critical new values into the existing economic system
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