Bringing the economics of biodiversity into policy and decision-making: A target and cost-based approach to pricing biodiversity

TL;DR

This paper introduces the Target and Cost Analysis (TCA) approach to incorporate biodiversity into public policy by pricing it based on meeting specific conservation targets, inspired by carbon pricing models.

Contribution

It develops a novel framework for valuing biodiversity through shadow prices aligned with government targets, enabling informed trade-offs in public spending decisions.

Findings

TCA operationalized at different scales and metrics.

Biodiversity pricing aligns with international cost-benefit guidelines.

Supports policy decisions balancing biodiversity and other public interests.

Abstract

Given ongoing, human-induced, loss of wild species we propose the Target and Cost Analysis (TCA) approach as a means of incorporating biodiversity within government appraisals of public spending. Influenced by how carbon is priced in countries around the world, the resulting biodiversity shadow price reflects the marginal cost of meeting government targets while avoiding disagreements on the use of willingness to pay measures to value biodiversity. Examples of how to operationalize TCA are developed at different scales and for alternative biodiversity metrics, including extinction risk for Europe and species richness in the UK. Pricing biodiversity according to agreed targets allows trade-offs with other wellbeing-enhancing uses of public funds to be sensibly undertaken without jeopardizing those targets, and is compatible with international guidelines on Cost Benefit Analysis.