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Economics of Biodiversity - Simran Bais & Prerana Singh

Updated: Nov 23, 2021

Critical condition of Biodiversity

Biodiversity is variety and variability of life on earth. Biodiversity is a term of signification which depicts the enormous variations of life on earth. The projects which utilises the assets have a higher rate than how much is naturally produced or even restored at a rate which it depletes, can be characterised as unsustainable. The fragmentation and conversion of natural ecosystem or any other alternatives which sabotage vital ecological functions are the direct economic causes of biodiversity loss. There are some of the activities which percolate negative impact on biodiversity like the use of cataclysmic harvesting and other production techniques.

The degradation of biodiversity is equipped with some reasons which the people tag for. They engage themselves in the activities of environmental degradation because the circumstances either provoked or sometimes even coerce them to do so. Considering the cumulative effects of the factors of market failures and distortions, laws, policies that manages the demand and supply of these bio related resources, sometimes these falsifications and manipulations make it look more profitable to degenerate the natural habitat of plants and animals. These at times comprises mainly of irrational motive which further aggravates the idea of natural destruction among the people.

Way ahead for Economic incentives

Governments usually apply incentive measures to orchestrate the course of action in which economies work. However, it is designed and formulated with the objective of biodiversity conservation. Biodiversity is not just a mere term but the word has a comprehensive signification wherein life is contributed, life begins in terms of interaction with both animate and inanimate objects.

A clear focus on primary reason for the diverse conservation of variety of living creatures is mainly defined as “A specific inducement designed and implemented to influence government bodies, business, non-governmental organisations, or local people to conserve biological diversity or to use its components in a sustainable manner. Incentive measures usually take the form of a new policy, law or economic or social programme.[1]

The substratum for establishing money making incitement in bio-conservation is to impact the people, to make rational decisions in conserving the natural biodiversity on the planet, instead of draining the limited natural resources for their profits. There are various schemes of Corporate Social Responsibility (CSR) in order to maintain and conserve the resources while carrying out the process of economic gains. Development and conservation of resources should go hand in hand, there is a dire need of this correlation. The reason that is sine qua non for conservation of biodiversity is that the government, private organisations, industries are over-consuming and under-conserving the biodiversity in the course of achieving economic gains.

The incentives in the nature of economics can take the shape of wide ranging forms in its journey of biodiversity conservation. The required incentives which are appropriate for particular circumstances can be chosen on the basis of social, political and economic determinants. The bedrock of human economic systems can be formulated on the basis of ecosystem and their diversity. In order to yield income, subsistence and employment unprocessed materials derived from biological resources that are cast-off in the form of inputs into domestic and commercial process. The functions of ecological importance such as pollution regulation, climate control enable economic production and consumption by supplying a reservoir for wastes, residues and perpetuate life supporting functions. We cannot ignore the recurrent fact that biodiversity injects aesthetic pleasures, is a great source of cultural signification for different sects of people and inherently contributes to the quality of life it will not be a misnomer to say that the biodiversity benefits upholds a high economic value. Through the presence of inherent resources, economic growth and heterogeneity can be supported. It purports that it has become necessary to vary the patterns of profitable demand and supply, in order to vary the remunerative signs that are in a way destructive to the intricate sphere of biodiversity.[2]

Fiscal instruments

In order to increase or decrease the consumption and production levels, fiscal measures percolates the effect of raising and lowering the relative prices of different products. They can be further used in the various forms of taxes and subsidy to correct or counteract the disfigured rates in biodiversity and other markets.[3] By the application of fiscal measures relative cost of natural exhaustion of products and technology in queue with the price incurred on the harm caused would dispirit the people and the products in consonance with bio- conservation are encouraged. For further to raise revenues they can also be used as a budgetary tool. An example would be imposing excessive differential tax on the products which deplete biodiversity or providing aid of subsidies to biodiversity-neutral equipment.

Bonds and deposits- another measures

These are used as an instrument of product overcharges which gradually shifts the burden for biodiversity degradation on the head of single maker and purchaser. These sources are inherently applied onto the businesses that play an instrumental role in the peril of depleting such natural resources, and puts a mandate on the person executing such campaign’s to pay a fixed amount before they begin a project which is mainly refundable against the possible damage that can occur in a way by taking advance fee. The down payment provides fund for wrapping entirely the possible damage cost covering the costs and ensures that the manufacturer and customer fills the gap of costs by themselves entirely. In this process examples include aforestation, chemicals degradation and conventional gathering of resources.


The cost and benefits that occur when ecosystem gradually shifts to another regime forms an anchor for the value of adaptability of an ecological community. It is better to introduce a policy that employs a standard approach to address the concerns of uncertainty and ignorance.[4] This approach is anthropocentric in nature and is based on the stimulus for people’s behavioural changes which are brought forward under the name of economic motive. This valuation method of increasing taxes and providing subsidies plays a critical role in generating retail markets for safe guarding and preserving the biodiversity and ecosystem facilities.

[1] (UNEP/Convention on Biological Diversity /COP/3/24). [2] Conservation International Policy Papers, Washington DC (1995) by Bowles, D. Clark and Guerin McManus. [3] Emerton, L., 1999, IUCN, Eastern Africa Regional Office, Nairobi. [4] Barkmann, J., Glenk, ‘Confronting unfamiliarity with ecosystem functions:’, Ecological Economics, Vol. 65, p.48–62.

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