Government-led mandatory schemes and voluntary market-based instruments must be combined to effectively protect biodiversity, a study published Tuesday said, calling on countries to harness the private sector’s growing interest in engaging on nature positive.

Finnish innovation fund Sitra released analysis exploring how governments can capitalise on the momentum by establishing clear standards and frameworks and providing incentives.

“Some businesses are increasingly taking voluntary action to conserve biodiversity and related ecosystem services,” the study said.

“Governments play a pivotal role in harnessing this momentum and facilitating increased private-sector involvement.”

Sitra highlighted a wide range of actions to promote a more sustainable economy, showcasing different measures from around the world designed to address terrestrial biodiversity loss or protect ecosystems impacted by land use and land-use change.

TWO MAIN WAYS

According to the study, public authorities can promote the economic value of nature in at least two ways: by fostering the polluter pays principle (PPP) and by rewarding the preservation of ecosystem services – defined as the benefits nature provides to humans, such as pollination of food crops, flood mitigation, carbon sinks, and the purification of water and air.

PPP is a mechanism that governments and regulators can use to discourage economic activities that are harmful to nature.

For example, the PPP has been implemented in the UK through the biodiversity net gain (BNG) regulation, which requires developers of construction and infrastructure projects in the country to achieve a net biodiversity improvement of at least 10% compared to the baseline.

“The BNG mechanism has the potential to be the most promising offsetting mechanism developed so far,” the study said.

According to a separate report by the UK government, the biodiversity market potential is estimated to be worth between £135-274 million annually.

Other examples of effective PPP mechanisms mentioned in the study were the German impact mitigation regulation, under which project developers must pay offset costs if their activities have negative effects on biodiversity, and the US wetlands compensatory mitigation rule, which aims to offset unavoidable adverse impacts of development activities on wetlands.

PAYMENTS FOR ECOSYSTEM SERVICES AND VOLUNTARY SCHEMES

Meanwhile, mechanisms that enable the maintenance of ecosystem services have been supported by programmes like Ireland’s Burren Programme.

The initiative aims to conserve, restore, and support species in threatened habitats through economic incentives directed at farmers.

Under the scheme, the government covers up to 75% of the cost for implementing farmers’ nature positive activities, and delivers results-based payments.

“When landowners receive payment for specific activities aimed at preserving nature and ecosystem services, they are incentivised to keep doing so,” the study said.

“Thus, payments for ecosystem services (PES) schemes are conceptually market-based instruments, even when employed by public entities.”

The report also examined voluntary actions put in place by the private sector, including the UK Fair to Nature certification system for farmers, under which every member commits at least 10% of their farmed land to habitats proven to reverse wildlife decline, and corporate initiatives such as those led by Valio and Rudus in Finland.

“A myriad of voluntary or mandatory cases that use economic mechanisms proves that there is a wide-ranging inclination to change behaviour and to increase financing to close the funding gap of biodiversity loss,” the study added.

It is estimated that financial flows required to address biodiversity loss stand at around $720-970 billion per year, with a current estimated gap of $600-820 bln annually.

The 2022 Kunming-Montreal Global Biodiversity Framework cited the reform of harmful subsidies and the mobilisation of the private sector among the targets every signatory country must achieve to bridge the financing gap.

By Giada Ferraglioni – giada@carbon-pulse.com

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