A NEW MARKET INSTRUMENT FOR SUSTAINABLE ECONOMIC AND ENVIRONMENTAL DEVELOPMENT ROGER I. C. HANSELL 1* , TIMOTHY M. HANSELL 2 and ADAM FENECH 3 1 Institutefor Environmental Studies, University of Toronto, Toronto, Ontario, Canada; 2 Programa Integral en Salud, Waslala, RAAN, Nicaragua; 3 Central Region, Meteorological Service Canada, Downsview, Ontario, Canada ( * author for correspondence, e-mail: roger.hansell@utoronto.ca) Abstract. The regenerative capacity of ecosystems provides a regulatory basis for sustainable eco- nomic growth and development. A natural valuation of an ecosystem’s services will arise in a market for developmental rights in the ecosystem using a unit of tradable ‘right’: E-Scrip. The amount of e-scrip needed for a development may be set by Environmental Assessment. The capacity of the ecosystem to regenerate with developmental pressure may be represented by an independent trader or Factor Proxy for the Environment who provides e-scrip to the market. Keywords: biomes, economics and ecosystems, environmental assessment, e-scrip, factor proxy for the environment, markets in development rights, sustainable development 1. Introduction Readers of An Introduction to Ecological Economics (Costanza et al., 1997) or Environmental Economics (Turner et al., 1993) and the papers in this issue of En- vironmental Monitoring and Assessment will be struck by three generalities: First the Environment provides services which are essential for the continued existence of a growing human economy; Second, economic development damages the En- vironment; Third, the Environment has the innate ability to restore its own growth capacity. These relationships establish a natural rate of growth for development and the Economy. In this paper we observe that to attain sustainability we must limit the growth of economic development (by this we mean ‘on the ground’ physical plant and its pollution byproducts) to the rate of growth in the capacity of the ecosystem to repair and regenerate. For a wider sense of the human implications of these ideas we refer to Mostafa Kolba (2001). These relationships also establish a method of valuation of the environment’s services if we can establish a way for the capacity for environmental self-repair to be incorporated into a market for economic developmental rights. As an eco- nomic market functions to regulate prices, so an ecosystem functions as a market in which the essential services are maintained and regulated by mechanisms such as biological competition, predation and symbiosis in what may be an analogue of Environmental Monitoring and Assessment 86: 203–209, 2003. © 2003 Kluwer Academic Publishers. Printed in the Netherlands.