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Profitability and conservation goals reconciled through biodiversity offsets

Author

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  • Céline Huber
  • Luc Doyen
  • Sylvie Ferrari

Abstract

Numerous scientists advocate for the use of Biodiversity Offsets (BOs) as economic instruments to manage biodiversity and ecosystem services in the context of economic development. This study investigates the sustainability conditions of BOs, in the sense of reconciling ecological and economic objectives. It focuses especially on both the timing and pricing of biodiversity offsets in developmentoffset projects. To address this issue, a minimal time control model is proposed, allowing a dynamic and multicriteria approach to be combined through both ecological and economic targets. We rely here on No Net Loss (NNL) and positive Net Present Value (NPV) goals. In particular, we focus on an offset marginal price, called Offset Sustainability Value (OSV), which equalizes the NNL and payback times. We prove analytically how this OSV corresponds to a win-win solution in terms of ecological-economic synergy. We also show that this OSV can be very high compared to the rate of return of the development project,in particular when the biodiversity loss induced by the project is high. More globally, a sensitivity analysis shows the extent to which the economic parameters (such as the marginal revenue and discount rate) and biodiversity parameters impact the OSV. Finally, a numerical application related to mangroves and aquaculture in Madagascar illustrates the analytical findings. In particular, we argue that the current BO price is underestimated for this case study.

Suggested Citation

  • Céline Huber & Luc Doyen & Sylvie Ferrari, 2021. "Profitability and conservation goals reconciled through biodiversity offsets," Bordeaux Economics Working Papers 2021-19, Bordeaux School of Economics (BSE).
    • Handle: RePEc:grt:bdxewp:2021-19
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    File URL: http://bordeauxeconomicswp.u-bordeaux.fr/2021/2021-19.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Biodiversity Offset; Bio-economics; No net loss; Sustainability; Minimal time; control; Mangroves;
    All these keywords.

    JEL classification:

    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q24 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Land
    • Q32 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Exhaustible Resources and Economic Development
    • Q57 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Ecological Economics

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