Trends and Challenges in Environmental Markets for Sustainable Economic Development

As ecosystems decline and their valuable goods and services become scarce, there is growing interest in developing and utilizing environmental markets. Such markets have the potential to reduce environmental risks, provide incentives for sustainable management and restoration, and generate revenue for conservation efforts. The expansion in environmental markets and private finance is particularly significant for developing countries, which host a considerable proportion of global environmental benefits but lack sufficient funds to finance nature conservation. This review examines three types of environmental markets that are relevant to developing countries: markets for sustainably produced commodities; trade in natural resource credits, such as carbon, biodiversity, and water; and nature-based finance markets for natural and ecological assets. The challenges and opportunities impacting the creation and operation of these markets in developing countries are explored. If the opportunities are to be realized, there is a need for policies that support the economic viability of environmental markets and private finance in developing countries, protect the environment and maintain vital ecosystems, while promoting sustainable economic development. This paper offers a unique contribution to the existing literature by examining the emerging environmental markets, innovative funding approaches for environmental conservation and sustainable management in developing countries, and the policies needed to support them.