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Five levels of internalizing environmental externalities: decision-making based on instrumental and relational values of nature

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Some values affected by expected social and environmental impacts of decisions are considered important and are taken into account, others not. These latter, known as ‘decision externalities’, are of two types: unforeseen effects and foreseen impacts beyond the group decision-makers care about. One way to internalize externalities is by altering the financial consequences of impacts expected on those beyond the inner circle of decision-making (the ‘in-group’). Externalities can also be internalized by setting rules (while compensating for opportunities skipped), by co-investment in environmental stewardship, or by accepting moral/ethical accountability as relational rationality, widening the ‘inner circle’ itself. Following up on the hypothesis that instrumental and relational modes of decision-making interface with value types and shape opportunities for internalizing environmental externalities, we reviewed five ways to internalize externalities that coexist across scales, using examples from Indonesia and the Netherlands.

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