The Economics of Biodiversity Additionality (BIOADD)
Lead Research Organisation:
UNIVERSITY OF EXETER
Department Name: Economics
Abstract
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.
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.
Publications
Howard P
(2023)
US benefit-cost analysis requires revision
in Science
Knoke T
(2023)
Trends in tropical forest loss and the social value of emission reductions
in Nature Sustainability
Tedersoo L
(2023)
Towards a co-crediting system for carbon and biodiversity
in PLANTS, PEOPLE, PLANET
Balmford A
(2023)
The value of impermanent carbon credits
Groom B
(2022)
The Social Value of Offsets
Nesje F
(2023)
Sense and sensitivity: An argument against reporting multiple Net Present Values
in SSRN Electronic Journal
Balmford A
(2023)
Realizing the social value of impermanent carbon credits
in Nature Climate Change
Balmford A
(2023)
Credit credibility threatens forests
in Science
Andersen L
(2022)
Bolivia's Net Zero path: Investment needs, challenges, and opportunities
in Frontiers in Climate
Drupp MA
(2024)
Accounting for the increasing benefits from scarce ecosystems.
in Science (New York, N.Y.)
Description | Integrating finance and biodiversity for a nature positive future |
Amount | £133,650 (GBP) |
Funding ID | NE/X016560/1 |
Organisation | Natural Environment Research Council |
Sector | Public |
Country | United Kingdom |
Start | 01/2023 |
End | 01/2024 |
Description | HM Treasury Biodiversity Working Group |
Organisation | HM Treasury |
Country | United Kingdom |
Sector | Public |
PI Contribution | The biodiversity working group is working on introducing guidance on the value of biodiversity using a cost based approach to valuation. This is precisely what WP1 of BIOADD is trying to, and we are using metrics influenced by the work of the NERC Synthesis project. We have provided the input for the potential guidance and coordinated the working group |
Collaborator Contribution | HMT have hosted the working group and are drafting the guidance. |
Impact | Guidance is being drafted for the Green Book |
Start Year | 2021 |
Description | Kew Gardens Carbon Biodiversity collaboration |
Organisation | Royal Botanic Gardens, Kew |
Country | United Kingdom |
Sector | Charity/Non Profit |
PI Contribution | Frank Venmans and Ben Groom have contributed to a paper coauthored with Alex Antonelli and other academics. |
Collaborator Contribution | We have an academic paper together which looks at how to combine biodiversity with carbon credits using eDNA. |
Impact | An academic paper submitted to the journal Plants, People, Planet. |
Start Year | 2022 |
Description | Bank of France |
Form Of Engagement Activity | A talk or presentation |
Part Of Official Scheme? | No |
Geographic Reach | International |
Primary Audience | Policymakers/politicians |
Results and Impact | Key note to the Bank of France on Biodiversity at an international workshop |
Year(s) Of Engagement Activity | 2022 |
URL | https://www.banque-france.fr/en/frontiers-climate-and-nature-macroeconomics-and-finance |
Description | Dragon Capital - ISPONRE conference on natural capital valuation |
Form Of Engagement Activity | A talk or presentation |
Part Of Official Scheme? | No |
Geographic Reach | International |
Primary Audience | Industry/Business |
Results and Impact | ISPONRE is the Vietnamese Governments environmental ministry research group in environmental economics. Ben Groom as the keynote and provided an overview of the economic value of biodiversity. |
Year(s) Of Engagement Activity | 2022 |
URL | https://www.dragoncapital.com/dragon-capital-vietnam-helps-research-ca-mau-mangroves-and-pu-mat-nati... |
Description | International Swap and Derivatives Association |
Form Of Engagement Activity | A talk or presentation |
Part Of Official Scheme? | No |
Geographic Reach | International |
Primary Audience | Industry/Business |
Results and Impact | Key note at an ISDA seminar on carbon markets and ESG |
Year(s) Of Engagement Activity | 2022 |
URL | https://sg.linkedin.com/posts/isda_isda-esg-carbon-activity-6996416540430450690--b55?trk=public_prof... |
Description | International Swaps and Derivatives Association (ISDA) |
Form Of Engagement Activity | A talk or presentation |
Part Of Official Scheme? | No |
Geographic Reach | International |
Primary Audience | Industry/Business |
Results and Impact | Key note on the problems with the Carbon Offset Market and the potential for Nature Based Solutions. |
Year(s) Of Engagement Activity | 2023 |
URL | https://lv.linkedin.com/posts/isda_isda-esg-forum-2023-in-person-in-new-york-activity-70349746569230... |
Description | Society of Benefit Cost Analysis |
Form Of Engagement Activity | A talk or presentation |
Part Of Official Scheme? | No |
Geographic Reach | International |
Primary Audience | Professional Practitioners |
Results and Impact | Special Session of the SBCA conference Frank Venmans presented the paper "the social value of offsets" Ben Groom presented a paper on Climate Damages. |
Year(s) Of Engagement Activity | 2022 |
URL | https://sbcaec2022.sciencesconf.org/resource/page/id/8 |