A critique of proposals for biodiversity conservation through market mechanisms

A critique of proposals for biodiversity conservation through market mechanisms

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By Elizabeth Bravo

Payment for environmental services is the most developed mechanism and has been in operation for some years. Whoever sells and buys "environmental services" is marketing what nature has done for millions of years (such as the ability to photosynthesize, retain and store water, be the habitat for pollinators, etc.).

Faced with the unstoppable destruction of biodiversity, the need to continue and increase the exploitation of natural resources, especially in places rich in biodiversity, and as an opportunity for the financial sector to extend its tentacles to previously unthinkable places and sectors of the economy , it has been proposed to introduce market instruments in the conservation of biodiversity.

Companies, governments and even the Convention on Biological Diversity are promoting these new conservation models, directing their efforts especially to the countries of the South, where most of the planet's biodiversity is concentrated, and where there are also resources such as minerals, water, or simply land that could be used for the development of the real estate sector or monocultures.

Its proponents argue that these mechanisms facilitate the collection of funds for conservation and that they are more efficient than regulations or other public policies that states may dictate.

These market initiatives have already been applicable for several years in the United States and Europe, where there is little biodiversity and, above all, where there are no traditional indigenous populations that depend on it. The implications in the countries of the South are totally different, due to the special relationship that communities have with their environment.

The following is a review of what these mechanisms mean, what they consist of, and what dangers they pose to society and nature. The different modalities proposed or being executed could be grouped into two systems:

  • Payment of environmental services.
  • Transferable or negotiable licenses and permits.

Payment of environmental services.

Payment for environmental services is the most developed mechanism and has been in operation for some years. It should be noted that nature is not a provider of environmental services.

These were conceived as a way to bring nature's cycles, functions, components, or structures to market. By categorizing them as services, they can be bought, sold, subject to appropriation, usufruct, privatized, titled, and so on. In this case the incentive lies in the payment.

Whoever sells and buys "environmental services" is marketing what nature has done for millions of years (such as the ability to photosynthesize, retain and store water, be the habitat for pollinators, etc.).

The mode of payment for environmental services has in many cases been regulated by the State, which has also been one of the buyers of environmental services. Others have been private companies.

Those who promote these new mechanisms consider that a limitation of “environmental services” is that they are considered public goods, since this would create restrictions on the way in which that market should function.

Both the invention of environmental services, the conversion into merchandise and the awarding of prices, as well as the free intervention of private companies, are part of a neoliberal economy applied to nature.

This has a direct impact on the territories and the collective rights of the peoples since the use that they have traditionally given it would be restricted and they would be transferring these rights to a third party.

Environmental services payment auctions.

In this case, an initial price is established for an environmental service, from which it is auctioned. The promoters of this model say that the advantage is that the price of the service is left to free competition and not as happens when there are bilateral negotiations or when they are done through the State.

The commitment of the States in this instrument would be:

  • Regulate bids.
  • Establish to what extent information about the environmental service to be auctioned can be shared.
  • How bidders will be involved.

In this model, the state can also be one of the buyers. With this purely neoliberal modality, competition would be created between the owners of the land —who can ask for less and offer a better environmental service—, devaluing nature, and tacitly putting their work as caretakers of nature as one more component of the market.

This “reveals the true opportunity cost” with which the promoters of this mechanism believe that the conservation objectives can be achieved at the lowest price.

Similarly, in practice there is a real loss of territory by its original users, whose ownership of the “environmental services” that “offer” their territories would go to the companies, local governments or financial speculators who won in the auction, all regulated by the forces of the free market.

Transferable or negotiable licenses or permits.

Better known by its “cap-and-trade” name, the “cap-and-trade” mechanism has been applied to the sulfur dioxide market in the United States and to the carbon market globally. Now he wants to apply it to the conservation of biodiversity.

What is done is to artificially create a market to reduce the cost of imposing the limit on the development of an infrastructure work, a mining or oil exploitation project, and so on.

Like the “cap and trade” applied to the carbon market, which allows buying and selling air pollution permits, the “cap and trade” applied to biodiversity allows the exchange or trade with transferable exploitation rights.

The cap is designated by the State, through a prior assignment of permits, which in fact means an appropriation and privatization of lands or public or community resources.

The proponents of these models consider that not everything can be left to the market and that the State must take an active role:

  • Creating markets.
  • Supporting and promoting the market.
  • Establishing public policies to make the model work.
  • Regulating independent investors.

Compensation for loss of biodiversity.

It proposes that if biodiversity is reduced by a development work (for example a highway, mining or oil activities or of another nature), this loss can be compensated with actions carried out in another place or at another time. For example conserving or rehabilitating a degraded place). These schemes would also make it possible to combine "conservation credits" with carbon sequestration schemes, rounding off the business.

They are systems of “resource-for-resource exchange”, without major considerations, in which the destruction or reduction of a resource needs to be compensated by an “equivalent” alternative. An example is that of wetland banks, ecosystem banks, or species banks.

This system is used when any net loss of a resource, species or natural habitat is not accepted, the same that can be compensated through the restoration of alternative and “equivalent” places to the one that has suffered the damage or that implies disappearance or deterioration. .

Compensation for the loss of biodiversity can be of two types:

  • Conservation banks.
  • Tradable development rights.

According to its creators, through this instrument the objectives of biodiversity conservation can be achieved at lower prices. What is traded are rights for development units that can be damaged in exchange for another unit where conservation or rehabilitation activities of biodiversity are carried out.

In this mechanism, a hierarchy of environmental mitigation is not needed, but a guarantee of the amount of the undertaking (density of the infrastructure to be developed). “Tradable development rights” are based on a limit to the total area of ​​development that can be allowed in an area identified for its conservation value.

For example, we have an area that will be intervened by a development project A and an area that will serve to compensate for the loss of biodiversity B. The owner of location B renounces to develop his property and sells to the owner of location A his rights, to compensate the responsibility for exceeding the development limit imposed by the State.

An official from the Río Tinto company says about these mechanisms:

We seek to have a “net positive impact” on biodiversity. Our goal is to minimize the impacts of our business and contribute to the conservation of biodiversity to ensure that our presence benefits the region. An operation achieves a “net positive impact” if the loss of areas with biodiversity value is less than the areas restored or compensated over a period of time. (cited in Ecometrica, s / f)

The development and compensation areas are measured with satellite images. The degree to which an area is pristine is measured, and if necessary, an ecological assessment can be made.

One way to assess how pristine an area is is to use a normative scale. An example from the Amazon biome is presented in the following table.

What about the communities that live in this place? Where does an open pit mine, or an oil station located in the middle of the Amazon, come into this scheme?

Conservation Banks.

It is a purely speculative mechanism for the conservation of biodiversity.

There are specialized entities or companies that create or restore natural areas that contain perfectly identified “natural assets”, assuming responsibility for their maintenance in a good long-term state of conservation.

In return, they receive "credits" that are granted to them by recognized regulatory agencies. These "credits" can then be sold to promoters who must compensate for the damage derived from development projects, to other ecologically "equivalent" natural areas. It is a kind of futures market for conservation credits.

The first marketable asset reserve banks were established in the United States in 1983 by the Fish and Wildlife Service to offset the impacts of Department of Transportation projects.

Given that there is a group of established companies and speculators who are going to profit from the biodiversity banks, in reality these instruments do not stop the destruction of biodiversity, but rather promote its destruction.

The role of the State. As we have seen, despite the fact that the central proposal on which these mechanisms are based is that the market be the invisible arm through which conservation projects are implemented, they assign the State some commitments, roles and responsibilities:

  • Create markets for the conservation of biodiversity.
  • Define the rights that are acquired with these new models (which are independent of the rights related to the ownership of the land or its lease). This is a fundamental aspect to create financial flows.
  • Establish limits to the area to be developed.
  • Establish limits to the buyer of the rights that are generated from these market mechanisms.


These mechanisms have already been applied in the carbon market (widely criticized by the international community), where what is commercialized is a single product: carbon, although “equivalences” are created with other greenhouse gases. Trying to apply the same mechanisms to biodiversity is just as absurd but much more complex, because biodiversity includes a large number of aspects ranging from genes to ecosystems, and ultimately means life itself.

In an effort to tabulate biodiversity, criteria such as the number of endangered species in an area are used (for example, if they are on the IUCN red list of endangered organisms), or if the area it is pristine. In this way, a monetary value is assigned to the biodiversity that will be compensated, traded, transferred or auctioned in the conservation credit market.

Among the most important aspects to take into account when criticizing these proposals is that they limit biodiversity to a list (very small indeed) of paradigmatic or endangered species, and that a habitat is important because it is pristine. It is also ignored that there is a deep interaction between human communities and nature that could be called biodiversity, but if we collect the contribution made by Andean societies, we can call it Pachamama; and that the destruction of a portion of this Pachamama is not solved by preserving a portion in some other place (remote or not), since there are many deeper things involved, such as the spiritual and material survival of a society.

Elizabeth bravo - April 26, 2012 - Biodiversity - Apr 2012 -


  • Ecométrica s / f Normative Biodiversity Metric. A tool for assessing organisational biodiversity performance. Power Point presentation.
  • Europac Spain. 2010. Innovative financial mechanisms for the conservation of biodiversity.
  • Vant, Arild. et. al., “Can markets protect biodiversity? An evaluation of different financial mechanisms ”. Noragric Report 60. Norway. June 2011

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