The Conservation Contradiction and Political Remedies∗

This paper discusses a fundamental market failure regarding environmental conservation, and how the problem can be solved by appropriate policies. A "seller" (or owner of a tropical forest) may be motivated to conserve if a "buyer" is expected to pay. The buyer, however, does not find it necessary to pay as long as the seller conserves in any case. This contradiction implies that the forest will gradually decline and the seller has no incentive to enhance the environmental value. However, the forest can be conserved today if suffi cient future funds are credibly pledged, even if these are delayed