Biodiversity as insurance: aligning economic stimulus packages with long-term nature conservation goals. A Corona Sustainability Compass blog by Jasper Meya

This blog is from the Corona Sustainability Compass initiative.

The International Day for Biological Diversity, commemorated in May, reminds us that 2020 is a crucial milestone for global biodiversity conservation. To seize this opportunity, economic recovery programs should systematically take into account the value of biodiversity and initiate a nature-compatible development path.

The man-made emptying of the world

Humanity is emptying the natural world. 25% of all animal and plant species are threatened with extinction (IPBES 2019). 75% of global wetlands have already been lost (IPBES 2019). Globally, insects on land have declined by 24% over the last 30 years (van Klink 2020). In Germany, once widespread bird species of the agricultural landscape, such as the lapwing, have declined by almost 90% in the last 24 years (Gerlach al. 2019).

The super year of biodiversity

2020 is a decisive political year for whether humanity will bend the biodiversity curve. In autumn, the heads of state and government in Kunmings, China, wanted to set new global biodiversity targets for 2030, which should pave the ground to meet the stated vision of the Convention on Biological Diversity to live in harmony with nature in 2050 (CBD 2020). The EU Commission has announced a new EU biodiversity strategy as a core component of the Green Deal.

However, in the past, nature conservation has not lacked good political goals but rather their effective implementation and, in particular, the necessary financial resources. Despite ambitious global nature conservation targets for 2020 (so-called Aichi targets), the overall state of global biodiversity has continued to deteriorate. In Germany and the EU, nature conservation is “blatantly underfinanced” (SRU 2017). The far-reaching structural, transformative change needed to reverse the trend in biodiversity decline (IPBES 2019) requires enormous public spending. Accordingly, the zero order draft for global biodiversity targets after 2020 reminds states to provide adequate financial resources for implementation (CBD 2020).

Biodiversity conservation as an insurance

The accelerating biodiversity change is an economic risk. With the degradation of ecosystems, the vast majority of nature’s contributions to human well-being are diminishing (IPBES 2019). While the value of single market goods, such as agricultural and forestry products, has increased since 1970, public goods, such as soil quality and diversity of pollinating insects, have decreased. At the World Economic Forum 2020 in Davos, participants identified the loss of biodiversity and the degradation of ecosystems as one of the five greatest risks for the global economy in the coming decade (WEF 2020).

The massive exploitation of nature is neither sustainable nor economically efficient. Ecosystems represent assets (‘natural capital’) which, depending on their condition, contribute to human well-being. As a result of global economic growth, natural capital relative to produced capital has become increasingly scarce in recent decades. Many goods and services from nature are being consumed faster than ecosystems regenerate. A new interim report commissioned by the UK government shows that the rate of regeneration (or equivalently: the own rate of return) of natural capital is higher than the rate of return on produced capital (Dasgupta Review 2020). From an economic perspective, the continuing accumulation of produced capital at the expense of natural capital – driven by incomplete markets and private profits – marks a strong societal mismanagement of capital stocks (Dasgupta Review 2020). In other words, investing in natural capital by conserving nature is currently money well spent.

Biodiversity contributes to the stability of ecosystems and thereby ensures the supply of goods and services from natural capital. Spending money on biodiversity conservation is thus a contribution to a natural insurance (cf. Augeraud-Véron et al. 2019; Quaas et al. 2019). The dramatic economic consequences of the corona pandemic indicate how much nature conservation can pay off as crisis prevention. The risk of virus transmission from wild animals to humans tends to increase the further humanity interferes with nature, upsets the balance of ecosystems and causes several individuals of one species to live in a confined space (BMU 2020, IPBES 2020). Against the background of climate change, the biodiversity of ecosystems will become even more important for their stability and performance.

Transformative change and fiscal reform

The economic stimulus packages discussed these days could provide a springboard for restoring ecosystems and biodiversity, implementing existing nature conservation legislation and adapting managed ecosystems to climate change. Economic efficiency requires to systematically consider the value biodiversity has for society and economy when taking public investment decisions in other sectors (as the Aichi-Ziele already require). To achieve the global 2030 biodiversity targets, it will be crucial to link today’s long-term investments to nature conservation criteria.

The high public credit take-up will be followed by a new debate about public taxes and expenditures. This could open a window of opportunity for fiscal reforms to systematically internalize biodiversity values into private decision making by pricing biodiversity-damaging behavior and financially rewarding the provision of biodiversity-related public goods. Cornerstones of such a biodiversity fiscal reform could be: (i) The pricing of pesticides and chemical fertilizers; (ii) An ecological financial transfer scheme between jurisdictions; and (iii) The allocation of public money in sectors relevant to nature conservation, such as forestry and agricultural policy, exclusively for public (ecosystem) services.

Dr. Jasper Meya is environmental economist and works as senior researcher at the Biodiversity Economics Group, German Centre for Integrative Biodiversity Research (iDiv) and the Department of Economics, Leipzig University. In his research he studies how to account for economic inequalities in environmental policy making or how to measurement the economic value of biodiversity and natural capital. He serves as contributing author for the Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES).

Photo by Ana Martinuzzi on Unsplash