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Optimizing provision of ecosystem services using modern portfolio theory

Sergio Alvarez, Sherry L. Larkin and Andrew Ropicki

Ecosystem Services, 2017, vol. 27, issue PA, 25-37

Abstract: Portfolio selection is a flexible tool that can be used to support natural resource decision-making to optimize provision of ecosystem services. The natural resource portfolio literature includes applications in fisheries, forestry, agriculture, spatial planning, invasive pest and disease surveillance, climate change adaptation, and biodiversity conservation, among others. We contribute to this growing literature by proposing a set of essential questions to guide the development and implementation of empirical portfolios for natural resource management that deal with (1) the nature and objectives of the portfolio manager, (2) the definition of assets to be included in the portfolio, (3) the way in which returns and risk are measured and distributed, and (4) the definition of constraints in the programming problem. The approach is illustrated using landings data from the Colombian Pacific, a data limited fishery, to set catch limits in fisheries at the ecosystem level. We also develop a set of constraints in the programming problem to simulate potential policy options regarding resource sustainability and social equity. The resulting efficient catch portfolios can be used to optimize the flow of provisioning ecosystem services from this fishery.

Keywords: Optimization; Portfolio selection; Portfolio constraints; Natural resource management; Sustainability; Fisheries policy (search for similar items in EconPapers)
JEL-codes: Q01 Q20 Q22 Q57 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1016/j.ecoser.2017.07.016

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