Through an enhanced appreciation of the value of biodiversity and ecosystems, it is becoming more apparent that investing in nature can make good economic sense. Using economic incentives to support the financing of conservation will inevitably play a significant role in the greening of the world economy, as governments, companies, and individuals increasingly recognize that such investments are critical for their well-being and survival.
In recent years, a variety of innovative approaches to conservation finance have been developed and tested. The global market for carbon credits represents the most widespread form of such payments. With increasing attention being played to the role played by ecosystems in regulating the climate, this market could potentially become a significant means of financially supporting the conservation of forests and other carbon-rich ecosystems. Several governments and businesses are already contributing substantial amounts of funding to conservation in order to reduce emissions from deforestation and forest degradation (REDD). In the coming years, stronger commitments by leading governments and companies to reduce their greenhouse gas emissions could become a major source of financing for biodiversity conservation, provided the appropriate institutional frameworks are in place and that equitable benefit sharing systems are applied.
Alongside the growth of carbon markets, payments for water quality and flow regulation are also becoming increasingly common. The city of New York, for instance, invested in environmentally-friendly watershed management activities in the upper catchment area in order to preserve the quality of its drinking water. When considering the alternative installation and maintenance of a water treatment facility, this environmental investment represented cost savings of some US$ 3-5 billion. Similar schemes involving such Payments for Ecosystem Services (PES) are developing around the world.
Although less common, direct investments in biodiversity are also becoming increasingly popular. Markets are being used to channel investments towards the preservation of habitats and species through innovative banking and offsetting schemes, such as the Business and Biodiversity Offset Programme (BBOP). While such efforts are still at an experimental phase, they could potentially become a new source of conservation finance. Another means of using market forces to support conservation is through certification and eco-labeling schemes, such as those implemented by the Forest Stewardship Council (FSC) for timber, and the Rainforest Alliance for agricultural commodities such as tea, coffee and cocoa.
