Bridging the Gap in Biodiversity Finance

"This is not just another plan," said Djoghlaf. "It will be, as recommended by last month's historic New York summit on biodiversity, the overarching coordinated global biodiversity framework of the whole biodiversity family, including the United Nations system."

Four Types of Funding

The Little Biodiversity Finance Book is subtitled "a guide to proactive investment in natural capital (PINC)" to highlight Mitchell's aim of promoting investment in biodiversity even before conservation becomes mandatory. The authors grouped funding sources into four categories:

The first category is the one most of us are familiar with: non-market sources such as domestic government spending, development aid, and philanthropy.  Combined, these are giving us about $30 billion per year already, but that figure isn't likely to rise by 2020. Indeed, the CBD's Global Monitoring Report has found that government finance is relatively flat in both developed and developing countries.

The second category of finance is direct markets for natural capital, these include biodiversity offsets and forest carbon markets. These mechanisms are currently raising just $3-4 billion for biodiversity and ecosystem services, but they can be scaled up significantly through regulation of these markets.

The third group, indirect markets, includes innovative sources of finance such as green commodities and natural capital bonds. These mechanisms, which currently raise around $4 billion per year, could potentially generate $37 billion in 2020.

The final category of mechanisms leverage finance from other markets. These mechanisms are being discussed within development arenas as well as under the climate change discussions and include a financial transaction tax, a levy on aviation or shipping and subsidy reform. They are, however, politically less feasible to implement than other options.

What Do We Have Today?

Adding up all the money flowing today, and drawing on studies provided by Ecosystem Marketplace, including the State of the Forest Carbon Markets report, the State of Biodiversity Markets report, the State of Watershed Payments report and the State of the Voluntary Carbon Markets report), the authors conclude that between $36 billion and $38 billion is being spent on natural capital every year.

"This figure is far higher than previous estimates, which have been around the $10 billion mark," says co-author Matthew Cranford, "but we have accounted for a broader range of activities that encompass such mechanisms as payments for watershed services and other mechanisms to finance natural capital more broadly."

Filling the Gap

At the heart of the The Little Biodiversity Finance Book is an analysis of the different ways to fill this gap. The authors have undertaken an assessment of all the sources of finance for biodiversity and ES and in total they believe that between $62 and $141 billion could be generated annually by 2020, depending purely on the amount of political will behind the effort.

"The trouble is that the CBD and the UNFCCC don't have any mandate to place a tax on financial transactions or on the aviation or maritime sectors," says co-author Charlie Parker. "If these agendas could coordinate their efforts to apply political pressure, however, we may be able to overcome some of the political hurdles."

Some of these mechanisms are being discussed across multiple agendas in Nagoya.

For example a financial transaction tax, or a levy on aviation and shipping are being discussed in development arenas as well as under the climate change discussions. The problem with these mechanisms is that they're politically more difficult to implement than others.

The Next Step

Both Parker and Cranford stress that this is an early attempt to quantify the financing streams, and that we need to get more clarity on the scale of finance both how much is currently being spent and how much is needed.

"It's clear that if we have significant political will, we can reach up to $140 billion of finance per year by 2020," says Parker. "We need to embrace all forms of finance to achieve this target, including ODA, domestic budgets, natural capital bonds, green commodities and other innovative mechanisms."

Steve Zwick is managing editor at Ecosystem Marketplace.

Image CC licensed by Flickr user avlxyz.