Can Markets Protect Biodiversity? An Evaluation of Different Financial Mechanisms

There is an increasing anxiety that the international community is not making sufficient effort to halt the loss of biodiversity. Currently, new ways are sought to increase the financial basis for biodiversity protection. At the 10th Conference of the Parties (COP) to the Convention on Bio-logical Diversity (CBD) in Nagoya in 2010, it was decided to invite the Parties “… to submit information concerning innovative financial mechanisms that have potential to generate new and additional financial resources as well as possible problems that could undermine achievement of the Convention’s three objectives”.

This report is a response to this demand. The aim has been to examine the opportunities and limi-tations of the most discussed market-based instruments and financial mechanisms within the conservation debate. While the analyses are general, there is some specific emphasis on issues of relevance for developing countries. The report is divided into three parts. The first part contains a general evaluation of market-based mechanisms, their foundations and demands. The second part is oriented towards an analysis of experiences, with some key examples of present market oriented systems, mainly payments for ecosystem services (PES) and the associated system of conservation trust funds. In the last part we look at several mechanisms that may be considered more experimental – at least in a developing country context. These include PES procurement auctions, habitat banking and ecological fiscal transfers. The potential to reform subsidies is also included in the analysis.