Environnment and

Sustainability
Economics of
Biodiversity

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Biodiversity
Biodiversity is all the different kinds of life you’ll find in one area—
the variety of animals, plants, fungi, and even microorganisms like
bacteria that make up our natural world. Each of these species and
organisms work together in ecosystems, like an intricate web, to
maintain balance and support life. Biodiversity supports everything
in nature that we need to survive: food, clean water, medicine, and
shelter.

WWF, 2022

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 Biodiversity
• Biodiversity is the diversity of living organisms, which is assessed by considering the diversity of
species, the diversity of genes within each species, and the organization and distribution of
ecosystems.
• Biodiversity is defined by the Convention on Biological Diversity as "the variability among living
organisms from all sources including, inter alia, aquatic ecosystems and the ecological complexes of
which they are part: this includes diversity within species as well as diversity within ecosystems" (art.
2).

• The concept of biodiversity thus concerns all the components and variations of the living world.
Scientists distinguish three levels of organization:
• ecological diversity (ecosystems);
• specific diversity (species);
• genetic diversity (genes).

• Another essential and constitutive component of biodiversity are the interactions within and between
each of these three levels of organization.
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Biodiversity: some web resources
• Qu'est-ce que la biodiversité ? (ofb.gouv.fr)
• Page d'accueil | Nature France
• Biodiversité - Écosystèmes — Agence européenne pour l'environneme
nt (europa.eu)
• IPBES Home page | IPBES secretariat

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An example…
Conservation status of habitats under the EU Habitats Directive
At the EU level, only 15 % of habitat assessments have a good conservation
status, with 81 % having poor or bad conservation status. Grasslands, dunes, and
bog, mire and fen habitats show strong deteriorating trends, while forests have
the most improving trends.

The EU is not on track to meet the 2020 target of improving the conservation
status of EU protected species and habitats. At the EU Member State level, the
majority of assessments indicate a low number of habitats with a good
conservation status. Intensive agriculture, urban sprawl and pollution are the
top reported pressures to habitats.

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(cont.d)

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 Biodiversity loss
• The main cause of the loss of biodiversity
can be attributed to the influence of
human beings on the world's ecosystem

• Escalating human population is a major

cause of biodiversity loss

• Most of the biodiversity loss has happened

post Industrial Revolution through human
activities
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Biodiversity: finance and economics
• More recent field than economics of climate change

• The financial sector is asked to measure its footprint on biodiversity

• For financial institutions, addressing biodiversity risk is now a question of
sound financial risk management. Leading banks, investors and insurers are
setting biodiversity targets, as a first step to reduce their risk exposure.

• Failure to address biodiversity loss will risk $$44 trillion in global value add
(equivalent to half global GDP) in sectors dependent on nature.

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Biodiversity: finance and economics
• The economy’s relationship with nature is twofold, where economic
and financial risks can emerge from impacts and dependencies on
biodiversity and ecosystem services.
• This poses nature-related physical and transition risk, which are
material for sectors of the real economy and indirectly for the
financial sector, given the current and expected trends of nature loss.

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A framework with many diffusion patterns

Source: An Overview of Nature-Related Risks and Potential 10

Policy Actions for Ministries of Finance 2022
…and different evaluation approaches

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The economics of biodiversity
The Economic Case for Protecting
Biodiversity Geoffrey Heal NBER
Working Paper No. 27963 October
2020

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Biodiversity as an Asset

• Biodiversity is an asset which provides a flow of

services that are crucially important. • Biodiversity is an asset that
doesn’t depreciate. Built capital
• Some of these services can be valued at least
partly, as in the case of the carbon capture and
does, as does human capital:
storage services of forests, or the plant natural capital generally doesn’t.
pollination service of insects, birds and bats, or
the bioprospecting services of biodiversity
hotspots, or the insurance role of plant
biodiversity. • Biodiversity loss is often
• The numbers are approximations and are also irreversible. Once a species is
very partial estimates of biodiversity’s economic
contribution, because for every contribution that extinct, we can’t recreate it, and
can be measured and converted into a dollar everything associated with it
value, there are many that cannot.
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The economics of Biodiversity (G. Heal)
• A crucial point that emerges from looking at cost-
benefit studies of biodiversity conservation is that
• There are costs to biodiversity
it is easy to underestimate the benefits, as they loss that we can describe but
are often unknown or estimated only with very
large uncertainly.
about whose magnitude we are
• Because of the uncertainty about the exact value highly uncertain (although we
of the benefits of biodiversity conservation, have lower bounds), and there
studies sometimes omit them.
are potentially other costs
• But this is equivalent to setting them to zero, and
whatever the benefits are, they are not zero. about which we currently know
• The correct approach is to work out the possible nothing – there are partly
range of values, from minimum to maximum
values, and then evaluate conservation projects
known unknowns, and
using all the values in the range and seeing how completely unknown
sensitive the overall picture is to the value
assumed.
unknowns.
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Market failures and Biodiversity
• A natural question is: given the immense
value of biodiversity to human societies,
why do we allow it to be destroyed?
• Why do institutions such as the market
not capture the value of biodiversity?
• Markets do a good job of valuing many
things that are clearly much less
important to us than biodiversity, so why
don’t they do this with biodiversity too?
Need for policy intervention
• Even though biodiversity is of critical
economic importance, we cannot rely
on markets to conserve it
• It has characteristics of both public
goods and external benefits, which
means that much of its value escapes
the market, and market-based
decisions inherently lead to the
destruction and loss of biodiversity
• The ownership of biodiversity is
generally unclear
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The economics of Biodiversity
Sir Parta Dasgupta
• The Economics of Biodiversity:
The Dasgupta Review – Headl
ine Messages
“While humanity has prospered
immensely in recent decades, the
ways in which we have achieved such
prosperity means that it has come at
a devastating cost to Nature.
Estimates of our total impact on
Nature suggest that we would
require 1.6 Earths to maintain the
world’s current living standards.”
https://youtu.be/IGuxjIFtW4E
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