Data and code from: Spatial selection undermines flood protection in U.S. wetland markets

Wetland mitigation markets aim to offset environmental damage by allowing
developers to purchase credits from previously restored wetlands. We test
whether wetland credits traded in these markets offer equivalent flood
protection benefits. Using newly developed, high-resolution estimates of
wetland flood protection for 915 wetland markets within the continental
U.S., we document a likely decline in flood-protective value due to
wetland loss over the 1985 to 2021 period. Consistent with standard models
of urban economic geography, wetlands lost to development exist near prior
developed areas and therefore provide relatively high levels of downstream
flood protection compared to wetlands created in compensation--on average
4.1 times as much, though in some cases up to 78 times. We document a high
concentration of lost flood protection in Florida. While wetland markets
may succeed in preserving total wetland acreage, they may systematically
fail to preserve downstream flood protection services. More generally,
this suggests that designing environmental markets to preserve complex
bundles of spatially heterogeneous ecosystem services while still allowing
meaningful compliance flexibility may be challenging.