ECOSEL: An Auction Mechanism for Forest Ecosystem Services

This paper describes the foundations of a market mechanism that was designed to stimulate more efficient provisions of forest ecosystem services to society. The proposed tool is a competitive multi-unit public goods subscription game of incomplete information. A conceptual and mathematical characterization of the game is followed by an illustrative example where Pareto-efficient bundles of timber, carbon and mature forest habitat services of a real forest are used in a simulated bidding game. Attractive features of the mechanism include the use of multi-criteria optimization to ensure only the most cost-efficient bundles of ecosystem services are offered for bidding, and that it does not rely on regulatory control or on complex valuation exercises that are otherwise needed in alternative methods such as the cap-and-trade scheme.