Market Failure and Biodiversity Loss

The approach adopted by the Convention on Biological Diversity (CBD) involves a focus on the functional relationships and processes within ecosystems. Within this approach sustainable forest management is integrated with multiple scale action, intersectoral cooperation, and cognizance of the beneficiaries of the flows of ecosystem services (CBD, 2008a).

While under a holistic approach the benefits of ecosystems are more likely to be taken into account in making development decisions, ecosystem and biodiversity benefits are not priced in markets. The comprehensive capture of these unpriced benefits and their translation into financial benefits for the inclusion in decision-making is almost impossible by conventional economic analysis. Even if some of the economic benefits of biodiversity are estimated, the more certain and concrete utilitarian values intrinsic in 'development' are likely to continue to outweigh them.

There is a distinct spacial disjunct between the benefits and the costs of conversion of forests. High intrinsic values for biodiversity are manifest in the populations of industrialized countries, far from communities in tropical forests who need to raise their incomes by substituting agriculture for biodiverse forest. Moreover, the social values held in developed countries are not being adequately translated into incentives for developing country governments or local communities to conserve their forest (UNEP, 2007).

Given the unknown long-term effects of losses of ecosystems (the full manifestations of the loss of wild populations may not play out for decades) together with the irreversible nature of losses of species, a precautionary approach is called for in the setting aside and protection of ecosystems and forested areas. An outstanding feature in forest management globally in the last 20 years is the rate of increase in protected areas, which was over 22 000 million hectares in the last 20 years, and currently stands at 115 000 million hectares. Effective management and enforcement of regulations are, however, variable. Moreover, protected areas are characterized by fixed boundaries that will prevent the migrations necessary by biodiversity at higher latitudes and altitudes to cope with global warming.

This brings into focus the need for conservation outside protected areas (UNEP, 2007).

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