Economics and the conservation of global biological diversity

Abstract

This paper explores the relationship between economics and biodiversity conservation with minimal recourse to jargon, making the issue accessible even to the non-economist. It deals with the concepts of cost and benefit as they apply to biodiversity. Since biodiversity is an area where no clear measure of benefits exists, the process of project selection for a financial mechanism such as the Global Environment Facility (GEF) becomes especially complex. The paper reviews concepts and measures of biodiversity, assesses what is currently known about extinction rates and species loss, and looks at efforts to place a value on biodiversity. It also investigates the question of why biodiversity is being eroded, and argues that the main economic causes of biodiversity erosion are the pressures exerted by population growth to convert available land, and under-investment in biodiversity. It recommends policies that reduce the returns on land conversion by eliminating subsidies and other economic policy distortions; and policies that aim to increase the returns on biodiversity conservation, for example, by conferring and enforcing property rights on those who sustainably manage resources, and by instituting mechanisms to capture the global benefits of sustainable land use. Finally, the paper considers ways in which the GEF might alleviate the problem of under-investment in biodiversity.