Biodiversity publications archive

Reimbursing the future: an evaluation of motivational, voluntary, price-based, property-right, and regulatory incentives for the conservation of biodiversity

Biodiversity Series, Paper No. 9
M.D. Young, N. Gunningham, J. Elix, J. Lambert, B. Howard, P. Grabosky and E. McCrone
CSIRO Division of Wildlife and Ecology, the Australian Centre for Environmental Law, and Community Solutions
Biodiversity Unit, Department of the Environment, Sport and Territories, 1996
ISBN 0 642 24429 4


Throughout this report a number of terms are used in ways that have specific meaning. Except where noted, the meaning is as summarised below.

Accreditation – a guarantee that a person has or is meeting a pre-specified standard.

Administrative feasibility – the degree to which an incentive mechanism or instrument can be administered by government using available human and financial resources.

Biodiversity audit – an objective assessment of the degree to which biodiversity conservation objectives are being met. Ideally presented in a form that identifies status, existing threats or pressures and the effectiveness of government responses to those pressures.

Biodiversity prospecting contract – A contract that authorises people to search within an area for genetic and biochemical attributes of possible commercial value, to attempt to develop these attributes into marketable products and then – in return for a royalty payment – market that product. Some contracts involve an initial down payment. The aim of most contracts is to provide direct benefits to those who have maintained the diversity that makes prospecting possible.

Co-management – an administrative system where a group of different stakeholders is brought together to decide jointly how a region or resource will be managed for a period of time.

Compensation for lost property rights – a payment made when a person's rights to use a resource is reduced or removed completely.

Conditional grant – a grant paid on the condition that biodiversity will be conserved and in the case of non-compliance subject to repayment possibly with a penalty.

Conditional resource security – a right to use a resource for economic purposes that may be reduced or forfeited when conditions attached to that right are not satisfied. This mechanism encourages interested parties, such as a mortgagee, to encourage compliance with conditions attached to a lease, permit or other similar property-right.

Conservation covenant – a statement attached to a property right – usually a land title, lease or permit – preventing the owner of that right, and any person who acquires that right in the future, from undertaking an action that may adversely impact on biodiversity.

Conservation easement – a statement attached to a property right – usually in the form of a land title, lease or permit – authorising a third party to use or enjoy attributes of biodiversity value for conservation purposes and requiring any person who acquires that right to allow that third party to continue to use or enjoy that attribute.

Cost internalisation – any mechanism that makes a resource user pay for the cost of any damage imposed on another person, community or the environment.

Cross-compliance – a condition that restricts access to a program to people who meet prespecified conditions not directly associated with that program. Access to drought assistance, for example, might be restricted to those who can demonstrate that they are actively conserving biodiversity.

Debt-for-nature swap – an arrangement whereby debt is forgiven (written off) in return for a commitment to conserve biodiversity.

Dependability – the degree to which a policy instrument ensures that a prestated policy target will be achieved irrespective of changes in technology, price or political circumstance.

Dynamic and continuing incentive – a mechanism that encourages a person to exceed standards set by prespecified policy targets and search for management or technological improvements that will improve resource use through time.

Economic efficiency – a requirement that a prescribed objective is achieved at minimum cost and, also, that no alternative allocation of opportunities to use resources would make at least one person feel better off and no person feel worse off.1

Environmental performance bond – a sum of money lodged with a third party to cover the cost of repairing, offsetting or compensating if environmental damage results from resource use.

Exclusive use-right – a property right that gives its holder the right to collect all legally obtainable profits associated with that right by excluding others from doing the same.

Financially-attractive instrument mix – a combination of incentives whose aggregate effect is to increase the expected net income stream available to a resource user or developer.

First mover problem – the tendency of people to exploit loopholes rather than encourage administrators to fix them.

Fundamental cause of biodiversity loss – a factor that increases pressure on biodiversity values and is due to the structure of an economy or society rather than a policy, market process or property right.

Hypothecation – a commitment to transfer money collected via a tax directly to a body empowered to spend it on prespecified purposes.

Incentive mechanism or instrument – something, introduced by any level of government, that has a positive or negative influence on the way people behave. In this report, incentives are defined to include regulations. They are not restricted to those incentives that increase the money received by resource users.

Legal standing – any person or body recognised in law or by government as having a right to appeal against a decision or formally participate in its formulation.

Leverage – the degree to which the value of government expenditure on biodiversity conservation is supplemented by voluntary contributions in both kind and money.

Management agreement – a contract that results in payment for the completion of work. The contract is usually between government and a land owner but may also be held by a non-government organisation.

Market failure – when market forces encourage resource use and allocation inconsistent with prescribed social objectives.

Mitigation banking – the creation of a fund that enables damage associated with resource use or development to be partially offset by reclaiming, restoring or permanently protecting another area.

Motivational Incentive – a policy or program that changes a person's attitude toward biodiversity conservation and makes them more likely to undertake actions that reduce risks of biodiversity loss or increase biodiversity values.

Non-marketable incremental cost – the marginal cost of improving or maintaining biodiversity values that can not be recovered through market processes because the obligation to maintain them is not contracted via a property right and/or is not expected of all producers.

Offsetting arrangement – investment in reclamation or rehabilitation or the protection of biodiversity in an attempt to replace some of the values lost as the result of a development or resource use.

Perverse incentive – a policy or program not directed at biodiversity objectives but which has an unintended and adverse affect on the conservation of biodiversity.

Polluter-pays principle – people who may or do cause pollution should pay for the full cost of preventing, controlling and minimising the impact of their activities on the environment and other people.

Precautionary mechanism – a standard set to warn resource users and administrators that further change may have serious adverse and possibly irreversible impacts that are not fully understood by scientists.

Precautionary principle – when there is a possibility of serious adverse or irreversible impacts on biodiversity values that can not be predicted or evaluated with scientific certainty, the policy should be designed to avoid adverse impacts and obtain the information necessary to make a more informed decision.

Price-based incentive – an incentive instrument which uses price as the prime means of influencing behaviour.

Property right – a legally enforceable arrangement that empowers a person to use or hold aspects of a resource. The right may be limited in term and conditional upon the performance of certain duties.

Rate rebate – the payment of money to reduce the tendency of some land rating or taxation systems to reduce biodiversity values.

Reimbursement of non-marketable incremental costs – the payment of money to reimburse people for the cost of protecting biodiversity for society in ways not recoverable through market processes.

Revolving fund – a fund used to finance activities, such as the acquisition of property and its subsequent sale with a conservation covenant attached to its title. This approach allows capital to be reused for the same purpose.

Tax credit or rebate – an amount of money that can be deducted from an income tax liability otherwise payable

Threatening process – a physical process, such as land clearing, that increases the probability that biodiversity values at either the local, regional, national or global level will decline.

Transferable property right – a right to use specified resources that can be transferred to another person without having to obtain prior consent. Consistent with prespecified rules, the right may be diminished or expanded when the transfer is registered.

Underlying cause of biodiversity loss – a policy, property right or market process that results in direct pressure on biodiversity values.

User-pays principle – people who use or benefit directly from resource use should pay for the full cost of accessing that resource and maintaining it in a state that encourages use.

Voluntary incentive – an incentive mechanism or instrument that gives those which it seeks to influence the choice of ignoring or participating in the program.

1. Some economists only require that it be theoretically possible for those who feel better off to be able to pay compensation so that no-one feels worse off.