Environmental policy analysis and instruments for biodiversity conservation: A review of recent economic literature

Recently, as evidenced by the United Nations' Conference on Environment and Development (UNCED) held in Rio de Janeiro in 1992, and the subsequent Convention on Biological Diversity, the concern for biodiversity conservation has been increasing worldwide. The UNCED recommended the integration of conservation and sustainable use of biodiversity into all national and international economic decision-making. However, it is still not clear what institutional arrangements and policy instruments provide adequate incentives to all stakeholders, and effectively promote conservation and sustainable use of natural resources, including biodiversity. Results from traditional approaches to regulation and government intervention are ambiguous. Policy-makers are not yet sure what government, the private sector, or local communities can do to preserve an optimum level of biodiversity in a region. This paper provides a synthesis of recent literature dealing with the institutional environment, policy framework, and economic instruments used in policy analysis related to the conservation and sustainable use of biodiversity resources. The major focus of the study is on the economic aspects of the biodiversity resource management problem.

The paper analyzes the economic consequences of alternative policy options. It is recognized by scientists and policy-makers from all sectors that failure to properly understand the economic aspects of biodiversity resources, and failure to reflect the social value of biodiversity resources in the market arena are some of the major reasons for the present worldwide crisis. Therefore, it is useful for experts from all disciplines to understand the economic ramifications of biodiversity preservation.

In this context, this study synthesizes the major economic issues and related policy options of biodiversity conservation including:

i.) opportunity cost of conservation programs,

ii.) valuation of biodiversity resources,

iii.) the public good nature of biodiversity resources,

iv.) societal preferences and inadequate information,

v.) safe minimum standards, and

vi.) institutions embodying the property rights and incentive structures needed for the sustainable use of biodiversity.

These issues lie at the heart of the present worldwide debate over biodiversity protection. This paper summarizes the application of these economic issues in the formulation of biodiversity protection policy. The paper also concludes that the proper understanding of underlying institutions and, if needed, institutional reforming procedures are also required to provide appropriate incentive structures for conservation and sustainable use of biodiversity resources. Illustrations of these principles and examples are taken from published accounts of biodiversity policy debates and policy implementations.