Equity over efficiency: a problem of credibility in scaling resource-based compensation?

Bargaining a net gain compensation agreement between a marine renewable energy developer and a marine protected area manager

“…For the above reasons, the present paper regards value-to-value and/or value-to-cost approaches as more appropriate concepts to assess compensation since these accommodate the capturing of non-biophysical criteria by measuring individuals' willingness to trade resource loss for resource gain [51].…”

“…This makes the MPA manager the 'claimant' in case of compensation [5,6]. The assumptions of Gastineau (2014) [18] and Cole (2013) [51] could hold in the case where all or part of the developer's compensation costs would be shifted to the consumer through their adaptation in energy prices.…”

“…(1) and (2) assume that income and cost of compensation do not affect the compensation payment and society's utility before and after compensation. Although Gastineau (2014) [18] and Cole (2013) [51] incorporate income and the social opportunity cost for compensation in their analysis. This makes more sense when compensation is demanded and borne at the individual level.…”

“…More precisely, "the private opportunity cost (of the developer) assumption inherent in EA is based on an a priori assumption about property rights as it assumes that public users of the damaged resource own the resource and thus the original "endowment" is an uncontaminated environment. A reduction in 'their' environmental quality is compensated for by the polluter" [51]. This holds for MPAs since society has property rights, such as management and exclusion rights through its representation by the MPA manager who has the authority to determine how, when and where consumptive use of resources may take place, and whether and how the structure of a resource may be transformed.…”

“…The EA scaling approach focuses on finding the compensating variation (CV), which is the theoretically correct measure for returning society to its 'without injury' utility level [51] and is reflected by the minimum amount that the manager is willing to accept (WTA) to prevent a utility decrease caused by the damage [7]. In order to facilitate the present analysis and since the focus is given on how society's utility changes in respect to the environmental change (negative and/or positive), utility here is assumed to only be a function of society's value of the environmental services (instead of the individual's value) which is derived from the injured and the restored resources (after the compensatory measure took place), where the interim loss from damage is covered from CV [52].…”