Eco-certification and the commoditization of ecosystem services

The environmental consequences of current land use include loss of healthy soils, water, landscapes and atmosphere1. Consequences for ecosystem services, however, vary widely depending on how commodities are produced2,3. This variation is represented in the ‘management swing potential’4 as the difference between ‘best’ and ‘worst’. Negative side-effects on ecosystem services beyond those of direct relevance for the farm tend to be externalities to the decision making, as long as they are not priced in the farmgate price that a farmer receives.
As discussed in chapter 15, command-and-control is a classical government intervention to reduce externalities and reduce the expected benefit flows for modes of production that don’t respect the rules—but only if rules are enforced or become internalized into norms of behaviour6. While there is likely to be public support for rules that prevent major disturbance of relevant ecosystem services in a country, a command-and-control system fails to incentivize producers who reduce negative (or contribute to positive) externalities beyond the legal requirements.