Economic instruments for biodiversity conservation

Biodiversity loss has become a global concern. We now realise that biodiversity directly affects our well-being, providing various services (esthetical values, goods, fibres, spiritual, regulation of climate, of illnesses, of air and water quality, protection against erosion, etc.). However, biodiversity is now eroding at an alarming rate and habitat loss/conversion, climate change, nutrient loading, surexploitation, and invasive species have been identified as the main causes of this increasingly rapid biodiversity loss. One reason why biodiversity loss is still widespread is that markets generally fail to incorporate the total value associated to biodiversity (especially non-market values), which generates externalities and lead to what is known as market distortions. This will often lead to unsustainable practices and discourage long term investments favouring natural resources conservation. With the internalisation of all externalities, the market can achieve its role and allocate resources efficiently. This can be done using economic instruments. Among the economic tools that can be used in biodiversity-related issues there is establishing property rights, market creation and enhancement, charges, fiscal instruments, financial assistance, liability systems and environmental funds. Economic instruments have the potential to induce changes in behaviour in a cost-effective manner, they are also flexible tools that are recognized to increase the efficiency of environmental management, they generate financial resources, create incentives for investments, and stimulate private agents to engage in environmental protection. Although economic instruments can be effective and flexible mechanisms, strong limitations have been identified for their application in developing countries. Among these constraints there are problems linked to the difficulty of valuing biodiversity, institutional constraints, lack of inclusion of local communities, ideological resistance, administrative complexity and limited application in the context of threatened species. Although transfer of technological and financial support could help to resolve some institutional problems, other problems such as corruption can be much more difficult to address. The challenge is thus to develop an integrated strategy that includes short-term direct conservation actions with longer term strategies oriented toward sustainable development. If one takes a look at the specific case of the north-eastern Brazilian Atlantic forest, biodiversity conservation represents a major challenge. Effectively, the original cover has been reduced to 2% due to forest conversion for sugarcane production and forest lies on the private lands of sugarcane companies. Protection of biodiversity and associated ecosystem services thus require commitment of commodity producers, as well as direct investments in conservation. Economical instruments can be used to incite private companies to engage in conservation activities. Examples of how economic instruments could be used include environmental certification and eco-labelling of companies engaging in conservation projects, charge schemes such as pesticide and fertilizer charges, tax deductions offered to companies that engage into reforestation or conservation activities, etc. Although application of economic tools can be strongly limited by institutional factors, they have a strong potential to stimulate conservation actions. Perhaps, economic instruments must thus be implemented as part of a global strategy that will include both short-term direct actions and longer term initiatives. This would include educational programs, economic instruments, and direct payments into a comprehensive strategy we would also work at reinforcing institutional frameworks