The world is witnessing unprecedented rates of biodiversity loss. The services provided by natural ecosystem infrastructure (i.e. biodiversity, forests, aquatic systems, nutrient and carbon cycles) are largely unpriced.

Economic forces at work

This loss of global biodiversity can be explained, in part, by economic forces. Natural resources like timber, food and fuel are valued by markets. In contrast, biodiversity is an un-priced asset. Economic cost-benefit analysis thus makes the extraction of food, fuel and timber from natural landscapes more financially attractive than the conservation of biodiversity. This outcome is appropriate in some cases, but not in others.

Creating a price signal for biodiversity

In the absence of or complementary to pure command and control regulatory frameworks, biodiversity markets have been created to internalize the public cost of biodiversity destruction into private decision making. By allowing market actors to restore land and sell the associated conservation benefits, biodiversity markets better inform economic decision making around land use options. In effect, markets for biodiversity conservation provide a price signal that presents conservation as an economically rational land use option in areas of high biodiversity value - whether fish, wildlife or habitat.

Regulated, quasi regulated and voluntary markets

Like the carbon market, there are both regulated and voluntary markets for biodiversity. Also, like the carbon market, the line here blurs: some voluntary markets are being established to then transition into regulated markets.

Click here for more information on regulated markets.

Click here for more information on quasi regulatory and voluntary markets.