The Successful Use of Economic Instruments to Foster Sustainable Use of Biodiversity: Six Case Studies from Latin America and the Caribbean*

Executive Summary Introduction The Irreversibility of Extinction The Instability of Preferences The Humble Alternative to Bankrupt Economics Case Studies Existence [Non-amenable to a case study approach] Ecotourism Case 1: The optimal price of park admission, Costa Rica Case 2: The Marine Park, Saba, Netherlands Antilles Environmental Services: Case 3: The Ecological VAT, Parana, Brazil (Value Added Tax) [Imposto sobre Ciculacao de Mercadorias e Servicos Ecologico - ICMS Ecologico] Sustainable Agriculture Case 4: Centro Fatima, Pastaza, Ecuador Extractivism Case 5: The Sea Turtle Conservation Project, Reserva de Usos Multiples en Barra de Santiago (The Multiple Use Reserve at Barra de Santiago), El Salvador Bioprospecting Case 6: The Impossibility of a Successful Case without a Cartel Conclusions and Recommendations Endnotes 1 - 14 Additional Information a - f References EXECUTIVE SUMMARY INTRODUCTION The Samuelsonian equation for the optimal allocation of public goods is a theoretical construct for the conservation of biological diversity. The policy implication of the equation is straightforward: one aggregates all the simultaneous values generated from biological diversity and recommends conserving habitat until the cost of the last hectare conserved just equals the incremental aggregate value. Nevertheless, a fundamental theoretical problem exists in the methodology: preferences are unstable over human generations and any recommendation based on currently observed preferences may turn out to have underestimated the values resultant from the preferences of future generations. This shortcoming does not escape conservationists. To the extent it is routinely ignored, economic theory itself has fallen into disrepute. For example, the distinguished biologist Professor E.O. Wilson states flatly that contemporary economics is bankrupt. The humble alternative to bankrupt economics recognizes the incommensurability of biological diversity and hopes only to internalize the externalities of protected habitats. The physical scope of these protected areas should be determined not by economic criteria but by safe minimum standards the precautionary principle. Six distinct categories of value can be simultaneously generated from conservation: existence, ecotourism, environmental services, sustainable agriculture, extractivism, and bioprospecting. Seldom will any one of the six be sufficient to justify the opportunity costs of the seemingly more profitable activities that would exterminate biological diversity. The challenge for conservation is to create a package of sustainable activities that in total can alleviate the economic and political pressures to relax or abandon safe minimum standards