The Economics of Biodiversity Additionality (BIOADD)

Lead Research Organisation: University of Exeter
Department Name: Economics


The Dasgupta Review on the economics of biodiversity illustrated the complex and embedded ecology-economy relationships and thereby the fundamental economic and societal value of biodiversity. The Review evidenced the unsustainable path of exploitation biodiversity and made plain the need to manage regeneration of natural capital in the global economy to ensure sustainability. For sustainability to be achieved efficiently requires trade-offs to be made, the relative economic values of biodiversity to be understood, and interventions to be evaluated according to "shadow prices". The UK government's aims in this regard are reflected in domestic (The Environment Act of 2021) and international commitments (e.g. the Kunming Declaration of the COP15 of the Convention on Biodiversity).
Economies must consider their impact on nature, yet biodiversity policy: e.g. Protected Areas (PAs); NBS for climate change mitigation (e.g. reforestation); and agricultural policies, therefore need to account for interactions in the economy, which can conspire to limit the success or additionality of interventions. Leakage, non-compliance, project failure and impermanence, or policy failures, all limit the success of area-based and other policies, questioning their additionality. Particularly prone are NBS to climate change, which can provide cost-effective solutions to net-zero commitments (UK Climate Act), and large gains in biodiversity. To understand the effectiveness of biodiversity policies requires an understanding of the economics of biodiversity additionality. BIOADD will develop the economics of biodiversity additionality from key perspectives.
First, to guide the trade-offs required for sustainability and value biodiversity additionality, BIOADD estimates a Shadow Price of Biodiversity (SPB). Rather than reflecting Willingness to Pay for biodiversity (unreliable and controversial) SPB reflects the costs of meeting a societally determined target for biodiversity, such as net-gain or 30% protected areas, or staying within planetary boundaries. We will apply this theory to: i) Indonesian and Bolivian forests; ii) Nature Based Solutions (NBS) for mitigating climate change, in each case pricing the risk of non-additionality (e.g. failure, impermanence). The SPB will indicate the trade-offs and priorities for biodiversity and how targets can be met at least cost to society by targeting biodiversity rich and low-cost areas.
Second, to understand the baseline against which additionality is measured, BIOADD will analyse the spatial economic factors that determine biodiversity regrowth in secondary forests in the Amazon rainforest, with focus on Bolivia.
Third, in Indonesia, the role of "policy layering": multiple overlapping policies, in hindering or improving biodiversity outcomes in tropical forests will be analysed.
These two case studies will use bespoke spatial data to identify economic and policy drivers of biodiversity additionality.
Finally, together with CarbonPlan, an online tool that will be developed for the carbon offset market to allow different NBS to be valued and compared according to their impacts on biodiversity, the offset carbon emissions, and additionality risks (e.g. failure, impermanence).
The research is important for the UK as it: 1) implements domestic commitments to biodiversity net-gain in the Environment Act (2021) without leakage of biodiversity loss to other countries; 2) addresses how to meet commitments towards biodiversity the 30 by 30 target from the COP15; 3) helps to orientate development assistance towards halting deforestation and guide COP26 commitments on zero-deforestation by 2030; 3) assesses NBS as a potential means of meeting net-zero commitments; 4) illustrates where "free" renewable returns (Dasgupta 2020) from natural capital are most valuable and the economic processes determine them.