Biodiversity and economics
Management of Biodiversity
The making of plans to manage biodiversity for the global good is the most important challenge of nature conservation. This section provides a global view of the ways in which management of wildlife could be integrated with the management of human economic development.
Management systems aimed at maintaining ecosystems include:-
protected areas;
integrated land-use planning;
zoning systems, and regulations on permissible activities.
Management systems aimed at sustaining wild species in their natural habitats include:-
controls on harvesting or trading;
enhancement of stocking rates;
and habitat manipulation.
All of these require research and monitoring to ensure that the technologies are effective. In addition, various off-site (ex situ) techniques are available, including: captive breeding or propagation programs in zoos, botanical gardens, hatcheries, and game farms; seed and pollen banks; microbial culture collections; and tissue culture collections. The latter are most suitable for maintaining diversity of agricultural species and varieties.
Biodiversity as a Public Good
The resources of forests, savannahs, and seas fall into several broad categories. Economists distinguish non-renewable natural resources such as oil, coal, gold, and iron from renewable resources such as forests, animals and grasslands; the renewable resources are inexhaustible when managed appropriately. Both non-renewable and renewable resources can be privately, communally, or governmentally owned and managed. They are also generally recognised to have market value, although market values do not always reflect their true scarcity or aesthetic value to society.
Much more difficult for economists and resource managers to deal with are environmental resources, which are "public goods" based on the functioning ecosystem; these include such things as the provision of clean air, functioning watersheds, biodiversity, and scenic beauty. While these environmental resources provide valuable services to people, they seldom have market prices assigned to them.
Renewable natural resources and environmental natural resources yielding important public goods characteristics can be considered together as "biological resources," being based on genes, species, and ecosystems which have actual or potential value to people. These biological resources are the physical manifestation of the globe's biodiversity, which simply stated is the variety and variability among living organisms and the ecosystems in which they occur..
As the non-renewable resources are gradually consumed, the renewable biological resources are likely to increase in importance and nations which have maintained their rich endowments of biodiversity may well have a significant advantage over those whose biological resources have been depleted. A fundamental point to bear in mind is that effective systems of management can ensure that biological resources not only survive, but in fact increase while they are being used, thus providing the foundation for sustainable development.
A particular challenge comes from the fact that the areas with the greatest biodiversity are frequently those with the fewest economic means to implement conservation programs. Most of the biologically richest nations have low per capita income. For example, Zaire and Burma have only 1% of the per capita income of the USA and Switzerland).
Within most countries, the greatest biodiversity tends to be found in the most remote regions, where habitats are least affected by modern influences. For these biologically rich but economically poor nations and regions, using their resources to generate income for their (typically increasing) populations has first priority. Problems arise when these resources are abused through mismanagement rather than nurtured through effective management.
Since future consumption depends to a considerable extent on the stock of natural capital, conservation may well be a precondition for economic growth. Conservation is certainly a precondition for sustainable development, which unites the ecological concept of carrying capacity with the economic concepts of growth and development. But instead of conserving the rich resources of forest, wetland, and sea, current processes of development are depleting many biological resources at such a rate and reducing them to such low population levels that they are rendered essentially non-renewable.
Development agencies are becoming concerned about the depletion of these species and ecosystems, with the growing awareness that development depends on their maintenance. The over exploitation of biological resources is providing the major new development challenge of the late 20th Century. How can the process of change be managed so that biological resources can make their best contribution to sustainable development? Which economically attractive land uses are compatible with the conservation of biodiversity? What economic incentives are available to promote conservation instead of over-exploitation?
In seeking answers to such questions, those responsible for planning and implementing the process of sustainable development already have sufficient technology to manage these resources far better than is being done today. Ample guidelines exist for the management of biological resources, but political will has been insufficient to ensure the effective implementation of these guidelines.
The fundamental problem is that more people earn greater immediate benefits from exploiting biological resources than they do from conserving them. To the extent that resource exploitation is governed by the perceived self-interest of various individuals or groups, behaviour affecting maintenance of biodiversity can best be changed by providing new approaches to conservation which alter people's perceptions of what behaviour is in their self-interest.
Since self-interest today is defined primarily in economic terms and conserving biodiversity is part of the process of sustainable development, the decision makers with the appropriate power and resources to influence the development process-statesmen senior civil servants, planners, corporate directors, development assistance agencies, forest-based enterprises, and so on-are most likely to generate enthusiasm for policies which promote conservation through the means of economic inducements.
Economic Obstacles
Effective environmental management can ensure that biological resources not only survive, but in fact increase while they are being used. This is the foundation for sustainable development, and for stable national economies. Human decision-making is inevitably based on economic thinking, irrespective of whether it is labelled as such. It is therefore important to demonstrate the benefits of linking economics more explicitly with the conservation of biodiversity.
The fundamental constraint is that some people earn immediate benefits from exploiting biological resources without paying the full social and economic costs of resource depletion; instead, these costs (to be paid either now or in the future) are transferred to society as a whole. Further, the nations with the greatest biodiversity are frequently those with the fewest economic means to implement conservation programs. They need to use their biological resources to generate income for their growing populations, but problems arise when these resources are abused through mismanagement rather than nurtured through effective management.
Other major economic obstacles to conservation include:
biological resources are often not given appropriate prices in the marketplace;
social benefits of conserving biological resources are often intangible, widely spread, and not fully reflected in market prices. Therefore, the benefits of protecting natural areas are, in practice, seldom fully represented in cost-benefit analysis;
the species, ecosystems, and ecosystem services which are most over-exploited tend to be the ones with the weakest ownership;
the discount rates applied by current economic planning tend to encourage depletion of biological resources rather than conservation;
conventional measures of national income do not recognise the drawing down of the stock of natural capital, and instead consider the depletion of resources, i.e., the loss of wealth, as net income.
Assessing the Value
In order to compete for the attention of government decision makers, conservation policies first need to demonstrate in economic terms the value of biodiversity to the country's social and economic development. Approaches for determining the value of biological resources include:
assessing the value of nature's products-such as firewood, fodder, and game meat-that are consumed directly, without passing through a market;
assessing the value of products which are commercially harvested, such as timber, fish, ivory, and medicinal plants;
assessing indirect values of ecosystem functions, such as watershed protection, photosynthesis, regulation of climate, and production of soil.
Some biological resources can be easily transformed into revenue through harvesting, while others provide flows of services which do not carry an obvious price-tag. However, an ecosystem which has been depleted of its economically-important species, or a habitat which has been altered to another use, cannot be re-built out of income. The costs of re-establishing forests, or reversing the processes of desertification, can far exceed any economic benefit from over-harvesting, or otherwise abusing biological resources. The environmental costs of depletion need to be estimated in terms of the time and effort required to restore resources to their former productivity.
Assessing values and costs of protecting biological resources provides a basis for determining the total value of any protected area or other system of biological resources. Since the value of managing biological resources can be considerable, conservation should be seen as a form of economic development. Since biological resources have economic values, investments in conservation should be judged in economic terms, requiring reliable an credible means of measuring the benefits of conservation.
Economic Incentives
Resource exploitation is governed by the perceived self-interest of various individuals or groups. Therefore, conservation behaviour may be encouraged by providing new approaches to conservation which alter people's perceptions of what behaviour is in their self-interest. Since self-interest today is defined primarily in economic terms, conservation needs to be promoted through the means of economic incentives.
An incentive for conservation is any inducement which is specifically intended to incite or motivate governments, local people and international organisations to conserve biodiversity.
A perverse incentive is one which induces behaviour which deplete biodiversity.
A disincentive is any inducement or mechanism designed to discourage depleting of biodiversity.
Together incentives and disincentives provide the carrot, and the stick, for motivating behaviour that will conserve biological resources.
Direct incentives-either in cash or in kind-are applied to achieve specific objectives, such as improving management of a protected area. Indirect incentives do not require any direct budgets biological resource conservation, but require integrating into existing policies.
Incentives are used to divert land, capital, and labour towards conserving biological resources, and to promote broader participation in work which will benefit these resources. They can:-
smooth the uneven distribution of the costs and benefits of conserving biological resources;
mitigate anticipated negative impacts on local people by regulations controlling exploitation;
compensate people for any extraordinary losses suffered through such controls, and reward the local people who 'provide' nature for larger public.
Incentives are clearly worthwhile when they stimulate activities which conserve biological resources, at a lower economic cost than that of the economic benefits received.
To function effectively, incentives require some degree of regulation, enforcement, and monitoring. They must be used with considerable sensitivity if they are to attain their objectives, and must be able to adapt to changing conditions.
"Perverse Incentives"
Economic incentives have had far more effect on overexploiting biological resources than conserving them. In most parts of the tropics, the opening of forest areas is supported by powerful economic incentives, such as state-sponsored road-building programs, which facilitate access to markets. Further, resettlement of poor people in the remote forested areas made accessible by new roads is often politically preferable to genuine land reform, which involves the redistribution of existing agricultural lands. Governments have often instituted these perverse incentives for important political or social reasons, and the impact on the environment is often a side effect.
Incentives to convert forests and other wilderness to agricultural uses were once appropriate when biological resources were plentiful. Now the process is reaching its productive limits (and indeed has exceeded them in many places). A major step in moving from exploitation to sustainable use is for governments to review the impacts of all relevant policies biological resources. Based on the policy review, governments should eliminate or at least reduce policy effects that favour environmentally unsound practices, discriminate against the rural poor, reduce economic efficiency, and waste budgetary resources. Overcoming the damage caused by perverse incentives will require new incentives to promote conservation, applied at a series of levels and in a number of administrative areas.
Incentives at Community Level
Biological resources vary considerably from place to place, depending on such factors as soil, rainfall, and history of human use. For the people living in or near the forests, plants and animals provide food, medicine, hides, building materials, income, and the source of inspiration; rivers provide transportation, fish, water, and soils; and coral reefs and coastal mangroves provide a permanent source of sustenance and building materials.
Depending on these resources, rural people have often developed their own means of managing a sustainable yield of benefits. Biological resources are often under threat because the responsibility for their management has been removed from the people who live closest to them, and transferred to government agencies located in distant capitals. But the costs of conservation still typically fall on the relatively few rural people who otherwise might have benefited most directly from exploiting these resources. Worse, the rural people who live closest to the areas with greatest biodiversity are often among the most economically disadvantaged-the poorest of the poor.
Under such conditions, the villager is often forced to become a poacher, or to clear national park land to grow a crop. Changing this behaviour requires first examining government resource management policies to determine how they may stimulate a villager's poaching and encroachment. Economic incentives designed to reverse the effects of these policies may provide the best means of transforming an exploiter into a conservationist.
Appropriate measures may include:-
assigning at least some management responsibility to local institutions; - strengthening community-based resource management systems;
designing pricing policies and tax benefits which will promote conservation of biological resources;
introducing a variety of property rights and land tenure arrangements.
These measures may serve to rekindle traditional ways and means of managing biological resources which have been weakened in recent years.
Which members of a population have their access to biological resources enhanced and which members have it restricted by government policies is of profound importance in determining whether the resources will make a sustainable contribution to society. People living in and around the forests, wetlands, and coastal zones, rather than governments, often exercise the real power over the use of the biological resources, so they should be given incentives to manage these resources sustainably at their own cost and for their own benefit.
National Incentives
The biological resources which support the community are also of considerable interest to the nation and the world. Further, incentives at the local community level are likely to require considerable support from compatible policies at the national level. Biological resources do not occur only in wilderness, and economic incentives may also be used more generally throughout the country to encourage settlement patterns and production systems that are directed at the sustainable use of the resources of forest, savannah, wetland, and sea. The specific policies required at the national level will depend on what is required at the community level to conserve biological resources.
Sustainable development requires co-ordination among a number of policies and levels. This is not as easy as it sounds. Many conservation problems are due to divided responsibility among different organisations, leading to fragmentation, poor co-ordination, conflicting directives, and waste of human and financial resources. This can only be overcome by examining the impact of decisions in one sector on the ability of another sector to depend on the same resources. In most cases, the optimal balance point where the benefit of considering secondary impacts is overtaken by the cost of doing so requires very broad considerations, beyond the current practice of taking the narrow view.
International Support
Biodiversity is a public good, and species and ecosystems in one part of the world can provide significant benefits to distant nations. Indeed, some experts believe that far greater benefits from conserving native gene pools, especially in the wilds of the tropics, will be gained by wealthy temperate nations than the often poverty-stricken nations doing the conservation. Further, much of the depletion of biodiversity over the past 400 years or so has been caused by powerful global forces, primarily driven by markets in colonial, and then industrial, countries. Because the international community as a whole benefits from conservation, it should contribute to the costs of conserving biological resources.
An important means is through the provision of economic incentives from the temperate nations to the tropical ones. These can include direct incentives such as grants, loans, subsidies, debt swaps, and food; and indirect incentives such as commodities agreements, technical assistance, equipment, and information. Development assistance often contains a package of such incentives, including both direct on-the-ground projects and very abstract incentives such as peer pressure and public image.
Funding Incentives
Governments seldom have sufficient capital or labour to manage their nation's biological resources in an optimum way. Conservation programs are usually implemented through resource management agencies who need sufficient and reliable sources of support to implement an effective, long-term incentives scheme.
Some incentives involve little more than an administrative decision or regulation, such as the enactment of a law or monetary policy action, while others involve agreements or co-operation with international agencies. In many developing countries, large externally-supported development projects can often include elements which support incentives for conserving biological resources. Community development activities may already be in progress in communities located near areas important for conserving biological resources, in which case conservation can be incorporated with little additional cost.
Additional innovative funding mechanisms for supporting incentives include:-
tax deductibility for donations of cash, land, or services;
charging entry fees to protected areas; returning profits from exploiting biological resources to the people living in the region;
implementing water use charges for the water produced by a protected area; - building conditions into extractive concession agreements;
seeking support from international conservation organisations;
and considering "conservation concessions," similar to those for forestry or mining.
The threats to biological resources have such profound implications for humanity that governments must take decisive action, and accept that some additional investments will be required. But sustainable development of biological resources will likely be far less expensive than rehabilitation programs, and most conservation efforts have proven cost-effective on traditional economic grounds.
Guidelines
Action is required at the strategic level, where governments establish national and international objectives for addressing on a broad front the fundamental problems of degradation of biological resources.
At the tactical level, specific actions are required to address specific problems.
Guidelines are required to promote the survival of the optimum biodiversity, and to suggest ways and means for ensuring that biological resources make their most useful contribution to sustainable development. The objectives of the guidelines include the following:
to provide mechanisms by which biological resources can continue to support the process of sustainable development.
to assist those who are designing, implementing, or evaluating projects which affect biodiversity to incorporate appropriate economic incentives into their projects.
to provide all agencies concerned with biodiversity- including international organisations, development agencies, government agencies, and non-governmental organisations (NGOs)- with guidelines on how to incorporate economic methods into their efforts to conserve biodiversity.
to help generate additional funding to supplement dwindling public funds for government and private agencies involved in conservation of biodiversity.
to stimulate the creation of ways and means by which conservation of biological resources can be essentially self-financing (especially for key protected areas).
Guidelines are intended to provide practical advice for the formulation of policies for the sustainable development of biological resources, and for the conversion of policy into practice through specific project interventions. They cannot provide definitive answers to every situation, because each setting has its own characteristics. Factors which will affect how economic incentives and disincentives are applied in a particular case include:
the specific nature of the local or national economy;
the number, size, and influence of factors depleting biological resources;
the nature of the biological resource and its response to disturbance and exploitation;
the relative strength of local institutions;
the technical alternatives available to counteract depletion of biological resources;
and the authority of the control agency.