Raising the bar
06 July 2010 | Article
There are many ways to generate more support for conservation, some well established, others only just emerging. Dr Andrew Seidl explains.
For decades, biodiversity conservation has relied on ‘conventional’ sources of funding, largely governments, NGOs and private philanthropy. But reversing biodiversity loss cannot be done by governments and NGOs alone, it is clear we need to broaden the base of support. One option is to harness the market forces that are often blamed for biodiversity loss. Achieving this requires working with the business community to identify where there is money to be made from sound environmental practices and showing how biodiversity conservation can be a viable business proposition.
Among both the environmental and business communities, there is a growing recognition of the potential to conserve biodiversity on a commercial basis. As public awareness of the biodiversity crisis grows, an increasing number of companies are integrating biodiversity concerns into their operations while others are capitalizing on new markets for green products. Traditionally, the environmental community has focused on identifying and quantifying the damages done to the environment by the private sector. It has followed up with policy recommendations to clean up polluting industries to reduce the ecological footprint of production and require industry to take the full costs of production into account. Increasingly, biodiversity is viewed in a more positive light, creating opportunity for business, improved livelihoods for people, and incentives for stewardship of nature. By getting the prices right, incorporating full costs into the business balance sheet and searching for new opportunities for identifying and capturing biodiversity values, biodiversity conservation and business can be incentive compatible.
Conservation finance calls for fiscal responsibility. One vast pot of potential conservation finance lies in the billions of dollars that are tied up in environmentally harmful or ‘perverse’ subsidies—government fiscal policies that give an advantage to some consumers or producers, but also create unintended incentives to damage the environment. These include agricultural subsidies that destroy forests and deplete water supplies, or fossil fuel subsidies that contribute to climate change. If countries followed the example of New Zealand and greatly reduced their agricultural subsidies, the global footprint of agriculture would be reduced and taxpayers would have billions of dollars of savings to reallocate to other priorities.
Carrots and sticks
Unfettered markets fail to reflect both biodiversity costs and benefits to society. Policies and regulations including environmental taxes, fees and fines that require business and consumers to reduce their environmental footprint are essential to address the costs, but do not create positive incentives for the benefits of biodiversity conservation.
The best solution is to avoid biodiversity loss due to business practice. However, as a second best solution to unavoidable (or very high cost avoidance) biodiversity loss, biodiversity offsets are attracting growing interest in many countries and with many businesses as a way of assigning and accepting responsibility for biodiversity loss by private developers and public sector development, and generating funds for conservation and restoration. Offsets are conservation activities, either regulatory or voluntary, that aim to compensate for the unavoidable harm to biodiversity caused by development projects. Offsets are not just about rehabilitating sites, they can include creating new protected areas, removing invasive species, or creating buffer zones around urban activity. Habitat banking is viewed as a way to pay for future biodiversity offsets. But some conservationists caution that offsets could be used by industry and governments to allow developments to go ahead that are too damaging. As a result, the lack of widely-agreed and credible standards for biodiversity offsets presents the most pressing current challenge to their broader adoption.
Paying a true price
Another area of conservation finance that is gaining ground is Payment for Ecosystem Services (PES). This is based on the idea that natural ecosystems such as forests and wetlands are valuable components of development infrastructure. The cost of providing such valuable attributes of societal well-being should be borne by society at large, not only those who provide for their stewardship. Rather, local stewardship should be remunerated by those who benefit from the ecosystem services. PES schemes pay for a service (or land uses likely to secure that service) and can be local, national or international (IPES). Two prominent examples of IPES are the Clean Development Mechanism (CDM) that operates under the Kyoto Protocol and REDD (Reducing Emissions from Deforestation and forest Degradation) that are being developed as part of the post-2012 climate regime.
Increasingly, companies see profitable opportunities from sowing and capturing nature’s services. Sectors such as nature-based tourism, natural health products, and organic or ‘eco-agriculture’ are experiencing healthy growth and represent significant potential for biodiversity conservation. The growth rate of sustainable or certified products is three to four times greater than the market average. Markets for biodiversity-friendly goods can stimulate the uptake of new production and processing methods that are cleaner and more sustainable but governments need to provide economic incentives to encourage their growth or bridge loans against high future biodiversity value to encourage more comprehensive changes in production practices. Although green business opportunities are becoming increasingly mainstream, it does not take a genius to predict that poverty-reducing innovations and investment in alternative fuels, water-efficiency and biodiversity business loom large as growth industries for the future.
With a multitude of market mechanisms for conservation either already available or in the pipeline, there remains a gap in international biodiversity finance. In response, proposals are being developed for a Green Development Mechanism (GDM), which would enable the private sector to play a greater role in biodiversity conservation.
“Like the Kyoto Protocol’s Clean Development Mechanism, a Green Development Mechanism could enable the supply of an environment service—in this case, biodiversity-protected areas, and in so doing, allow companies and consumers to ‘buy’ certified biodiversity protection,” explains Francis Vorhies who is coordinating the GDM 2010 Initiative.
In July 2010 the study The Economics of Ecosystems and Biodiversity (TEEB) will publish its report for the business community. This will be a major landmark, providing practical guidance on how business can reduce biodiversity risks but also realize the many new and profitable opportunities created by including biodiversity considerations in mainstream business practices.
Some companies are beginning to undertake economic valuations of ecosystems and incorporate them into their operations, thanks to initiatives such as the World Business Council for Sustainable Development’s (WBCSD) Ecosystem Valuation Initiative (EVI), in which IUCN is a partner. These initiatives aim to show that there is a robust business case for sustainable resource management, across a range of business sectors.
Building support for reducing ecosystem degradation and halting biodiversity loss means we need more information and a wider understanding of the benefits of ecosystem services, as well as the full costs of ecosystem and biodiversity conservation.
Dr Andrew Seidl is Head of IUCN’s Global Economics and Environment Programme.