Finance for nature: how to improve funding for the protection of biodiversity
Read the policy brief.
The economics of biodiversity are still little understood and the loss of nature, which provides pollination, clean water and other ecosystem services, is often considered to have primarily local economic impact. But nature has an intrinsic value and also has extrinsic value to many parts of the economy. Destruction of nature has global costs because nature loss accelerates climate change by releasing greenhouse gases into the atmosphere, causes water stress and crop failures that reduce food exports, and can force people to move. Some of the consequences are systemic. Others are long term, because potential solutions to human problems contained in intact ecosystems, such as medicines and bio-technologies, are lost to future generations.
The benefits from nature – and particularly biodiversity – do not result in revenue flows that would protect natural capital assets from degradation. The costs of ecosystem destruction are still largely unaccounted for. Finance for biodiversity is very small relative to what is required for its maintenance. Most of the sources are state or public funds, or from private philanthropy. Because biodiversity is complex and has largely been ignored as an economic issue, market mechanisms are still at an early stage of development. Nature still does not appear on many balance sheets, and nor is it integrated into risk assessments across the public and private sectors.
This policy brief summarises the options and outlines the main considerations in finding better ways to value nature. We explain why financial tools are important for biodiversity, give an overview of the range of tools developed to finance ecosystems and assess which would be most suitable to pursue at European Union level. The focus in developing existing and new tools should be on whether they can deliver reliable revenue streams over a long period to maintain the value of natural assets. In the EU, the most impactful immediate means of using financing to protect and restore nature is to defund the damage caused to biodiversity by eliminating nature-harming subsidies, starting with reform of the common agricultural policy.
Listen to Bruegel's podcast The Sound of Economics on Nature on the balance sheet: a financial perspective, with Rebecca Christie, Heather Grabbe and Thomas Viegas, exploring the intersection of biodiversity and economic policy.
Contact: Anton Möller.
This Policy Brief was written with the financial support of the Heinrich-Böll-Stiftung European Union. The analysis and opinions expressed in this Policy Brief do not necessarily reflect the views of the Heinrich-Böll-Stiftung European Union.