EU Member States are increasingly using market-based instruments such as taxes, subsidies or tradable permits to conserve Biodiversity. Ecologic has been commissioned by DG Environment to analyse the current use of Market Based Instruments (MBIs) like taxes, fees and charges to protect biodiversity. Based on this, Ecologic collaborated with its project partners in preparing a report that evaluates the success and failure of these instruments and assesses their potential for wider use in different contexts in the future. The report is available for download.

Market Based Incentives (MBIs) are becoming increasingly popular in the political debate on future strategies for biodiversity conservation. The reasons are twofold: (1) MBIs offer policy-makers new cost-efficient ways to reach conservation objectives using less financial resources, since MBIs use market forces to achieve their objectives. (2) actual procedures to protect biodiversity, many of them command and control approaches (CAC), suffer an increasing lack of acceptance. Hence MBI can achieve results beyond these traditional approaches. Examples of market-based instruments already in place include trading schemes for fishing quotas, agri-environmental schemes, eco-labelling and taxes.

The objective of this report has been to investigate:

• which MBIs are used for biodiversity conservation;
• in which conservation areas are they applied most often and where they are especially useful;
• what the challenges associated with the use of MBI in the field of biodiversity conservation are?

It does this by reviewing the current literature and databases, as well as consulting expert judgements about MBIs in use in the Member States of the EU and other countries, with particular emphasis on successful and promising examples.

MBI in use

Within this study ca. 200 examples of applied market based incentives were analysed. The analysis shows that price-based instruments are more common than quantity based ones. The most frequently applied instruments belong to the group taxes, fees and charges, followed by subsidies and tradable permits. In the majority of cases, MBIs are applied in the field of habitat and ecosystem conservation, and to lesser extent in species conservation.
The experience gathered from the use of MBIs demonstrate that there is no single instrument preferred over others, but rather many different promising cases exist. When properly designed and used in the right context, MBIs offer advantages compared to command and control approaches regarding cost-savings as well as acceptance by stakeholders.

Nevertheless, the implementation of MBIs and the creation of a working market remains a challenge. In general, taxes, fees and charges may be viewed as regulatory approaches to limit external damage to biodiversity, while subsidies and eco-labelling are useful market based instruments to foster the provision of biodiversity assets.

The final report for this project by Ingo Bräuer, Rainer Müssner et al. is now available for download [pdf, 520 KB, English].

The project is the 11th specific agreement under the Framework contract with the European Commission, DG Environment on economic analysis in the context of environmental policies and sustainable development.

The European Commission builds amongst others on the results of this project in its Green Paper on the use of market-based instruments for environment and energy related policy purposes.

Ingo Bräuer presented the project results at the ENVECO 21 meeting on 25 April 2006 in Brussels.

Keywords: Markt Based Incentives, economic evaluation, biodiversity conservation, Europe

Sponsor: European Commission, DG Environment
Partners: Institute for Environmental Studies (IVM),  Institute for European Environmental Policy (IEEP – UK and Belgium), Institute for Environmental Policy, p.b.c.(CEI), GHK (UK)
Team: Rainer Müssner, Ingo Bräuer, Katrina Marsden, Benjamin Görlach
Duration: 22.12.2005 until 21.04.2006
Project number: 1750-11

Last update:01.08.06