Using incentive mechanisms to conserve biodiversity

Article, 15 July 2015

How and what incentives work to conserve biodiversity and ensure positive sustainable development outcomes?

Men sit in a wooden boat in Sumatra.

“If it pays, it stays” is an old catch-phrase that has been used to summarise the importance of generating incentives for local communities, private sector organisations, or even government agencies to invest in biodiversity conservation.

Biodiversity is often un-priced and un-valued. This often results in a “market failure” since there is little incentive for those using or affecting biodiversity to take it into account in their decision making. In economics parlance, the incentives need realigning to ensure development is based on the sustainable use of resources.

One way to do this is by regulating the use of biodiversity – for example by banning the trade in certain species. However, a lack of enforcement and political will often means such regulatory activities are not effective. Regulation needs to be complemented by policy measures which provide incentives to actors to conserve biodiversity and promote sustainable development.

Incentive mechanisms are increasingly being tried out in developing countries to address the conservation of biodiversity and provision of ecosystem services – that is services that ecosystems provide. Examples of incentives include:

  • payments for environmental service schemes, in which natural resource users are paid to conserve natural resources or manage them more sustainably. Read a briefing on marine and coastal ecosystem services.
  • conservation enterprise and certification of ‘biodiversity-friendly products’, the production of which conserves key species and habitats while improving the livelihoods of people
  • ecotourism that is either community-based, or involves benefit-sharing to give local communities a stake in conserving critical habitats and species. Read about a completed project in Srepok Wilderness Area, Cambodia.

These mechanisms have mostly concentrated on creating incentives for biodiversity conservation rather than compensating those affected by biodiversity loss. But interest is also growing in ‘biodiversity offsets’ which seek to compensate communities for the unavoidable negative impacts of development projects on biodiversity at one site, for example from establishing a mine or building a road, through conservation actions aimed at restoring or reducing threats to biodiversity at another site.

With all types of incentive and compensation mechanisms the rules governing their operation will be critical for determining their social impact, in particular in determining who participates, who benefits and who loses out. In some cases the rules will be locally determined but in others, such as REDD+, a scheme to reduce carbon emissions from forest loss or degradation, the rules agreed at the international level will set the framework for further rule-setting at the national level. A better understanding of the social implications of the rules set at international, and/or national and local levels in order to better design these mechanisms in future is needed.   

To address this we are working in a number of areas including:


Essam Yassin Mohammed (, senior researcher (environmental economics), Sustainable Markets Group