Rewarding landowners and land managers for conserving biodiversity

Land use and land management are key determinants of biodiversity status around the world. Often, land managers are not financially incentivized for decisions which enhance biodiversity, and indeed may be financially penalized by conservation actions, since this often means a reduction in profits from land use. An important aspect of biodiversity policy is thus to consider how to "internalize" the benefits of conservation to landowners so that they are rewarded for undertaking such actions.

Within economics, much attention has been given to the design of such incentive schemes, notably in the specific context of agri-environmental policy, and Payment for Ecosystem Schemes more generally. In this research, we will critically review evidence on the design of such schemes which attempt to reward landowners for increasing biodiversity (or preventing the decrease in biodiversity) on their land.

We will focus on 4 issues which seem to matter greatly for the specific context of biodiversity conservation on farmland. These are (i) how to encourage landowners to participate in a spatially-coordinated way, since we know that such spatial coordination can improve the delivery of biodiversity targets (ii) paying landowners/land managers for the biodiversity outcomes of their management choices, rather than for these management choices themselves (iii) encouraging groups of farmers to participate together rather than individually and (iv) using conservation auctions to improve the efficiency with which public funds are allocated.

A second aspect of the project is to consider the internalization of biodiversity benefits with an alternative policy instrument where funding comes from the private sector, rather than the public sector: tradeable biodiversity offset credits. This mechanism is being trialled in a number of schemes in the UK at present as a means of reducing the conflicts between development such as house building and biodiversity conservation, whilst much global experience exists with the concept.

Biodiversity offset credit schemes reward farmers and other land managers for creating new conservation areas which are designed to "offset" the negative impacts of development on specific measures of biodiversity. These credits can then be sold to developers who are required to offset the negative impacts of actions such as new house building, and trades are regulated by an offset bank to ensure either "no net loss" or "net gain" in a specific biodiversity measure.

The third aspect of the project is to review the literature on what determines farmers' decisions in participate in both agri-environmental schemes and offset schemes, since the extent to which economic incentives are effective in this regard is clearly crucial. Finally, we will draw together a set of recommendations for priorities for future research in this field.