Valuation Of Biodiversity

Cape Buffalo in Kenya. MARTIN HARVEY / ALAMY

Biodiversity valuation is a topic we link to from time to time, so we thank Zach St. George for this article’s contribution to our understanding:

Pricing Nature: Can ‘Biodiversity Credits’ Propel Global Conservation?

Backed by the UN, an alliance of conservationists and policymakers is devising new ways to finance the preservation of biodiversity by placing economic values on ecosystems. Some analysts say such schemes have the potential to boost conservation, but others are skeptical.

In 2009, as global financial markets shuddered, David Dorr became interested in the possibility of putting a price on nature. Dorr is a Cayman Islands-based global macro trader, attuned to what he calls the “butterfly effect” of geopolitics and other international forces on financial markets. The economic crisis, Dorr had realized, paled beside the looming environmental one. “Nature, holy shit, is in severe crisis,” Dorr recalls thinking. The existential threat to humanity posed by environmental degradation was “something that’s gonna touch every asset class.”

Dorr knew about carbon credit schemes, in which people, governments, or companies pay for the storage or removal of carbon from the atmosphere to offset their greenhouse gas emissions. But he wanted something broader, a way to judge the value of nature not in an extractive sense, nor by the so-called ecosystem services that nature could provide, but by its own inherent value.

It has taken longer than Dorr expected, but his vision, if not yet a reality, is now at least widely shared. Scientists, conservationists, and policymakers around the world are working to develop what they call biodiversity credits. While varied in detail, these credits are alike in their purpose: attaching economic value to the preservation or restoration of ecosystems.

In broad outline, it works like this. Companies developing biodiversity credits identify a threatened habitat and form a partnership with the owners of that land. The company or a third party then conducts a biological survey to establish the habitat’s baseline condition, using factors like species richness, ecological integrity, and water quality. The company then devises a plan for improving habitat and protecting it over a given stretch of time, usually a decade or longer.

At given intervals, perhaps every year or two, the company, or the third party, monitors its progress. If the habitat has met the agreed-upon goals of improvement, it generates a biodiversity credit, which someone else can buy. Revenues from the credit are split between the landowner and the biodiversity credit developer…

Read the whole article here.

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