At a loss with biodiversity loss?

by Raji Jayaraman

Photo credit: AP Photo/Kent Gilbert

Scientists estimate that 1 in 6 bee species are extinct and 40 percent are at the verge of extinction due to habitat loss and pesticide use. The consequences are dire. Bees are major pollinators of food crops. Their extinction would threaten the earth’s ecosystem, and food chains upon which we all depend. Many of us already know this since bees have the dubious distinction of being extinction celebrities. But bees are only one part of the calamitous biodiversity loss the world has suffered in the last five decades. The World Wildlife Fund and the Zoological Society of London estimate, for example, that between 1970 and 2018, there was an average 69% decline in wildlife populations across the globe, and an 83% decline in global freshwater species. Scientists believe we are in the throes of a mass extinction (earth’s sixth), with species dying out at several hundred-fold their expected rate thanks to human activity.

Declines in biodiversity pose an existential threat to life on earth. We rely on biodiversity for our food, air, water, medicine, and almost everything else that we need to sustain humanity. Yet most people don’t even know what biodiversity means, let alone what to do about it. Definitions are a good place to start. According to the Convention on Biological Diversity, biodiversity refers to the “variability among living organisms from all sources including, inter alia, terrestrial, marine and other aquatic ecosystems and the ecological complexes of which they are part; this includes diversity within species, between species and of ecosystems.” 

As a lay person, the only clarity this definition adds to the word itself is that biodiversity is complicated. Its complexity–arising from the scale and diversity of species, their interconnectedness, lack of data, and spatial as well as temporal heterogeneity–makes biodiversity a very difficult problem to model. There are 8.7 million species on earth. What happens when one of the 42,000 that feature on the IUCN’s red list of species threatened with extinction goes extinct? How much do we even know about any of them? What are the ripple effects of species extinction on the intricate web of life, locally, globally, today, and tomorrow?

Where does one even begin to tackle biodiversity loss? The problem of climate change is instructive in this regard. It too poses an existential threat but, although we have a long way to go, addressing climate change is on our radars in a way that biodiversity loss is not. A major reason is that, although it too is a complex system, climate change  boils down to an applied physics problem. This (plus human ingenuity) has allowed us to model climate change with frightful alacrity since the 1970s. The same cannot be said of biodiversity which, as its name suggests, deals with biological systems whose complexity are of an order of magnitude higher that of non-biological systems.

The contrast in the degree of complexity between these two environmental problems is reflected in their causes.  If you were to ask, “What causes biodiversity loss?”, the answer would be a laundry list. UNEP attributes it to five main drivers: changes in land and sea use (farming and urbanization in particular), climate change (which affects fragile ecosystems), pollution (especially from chemicals and waste), direct depletion of natural resources (including deforestation), and invasive alien species (which overrun native species). The breadth of this list is staggering, and its constituent elements form the very foundations of the modern economy.

Ask the analogous question for climate change and the answer would be, “emissions”. This one-word answer doesn’t make tackling climate change easy. But it does mean that there exists a theoretical solution, which is to reduce the stock of atmospheric greenhouse gases. Even better, this solution lies within the realm of feasibility. We know what it takes to reduce this stock—carbon sequestration and reduced fossil fuel consumption. We can measure emissions and global temperature rises, which means that we can set targets and track our progress towards achieving them. And to top things off, fossil fuel substitutes not only exist, but they are also increasingly affordable.

Of course, just because solutions exist in theory does not mean that they play out in practice. Humans are not deliberately trying to increase global temperatures or drive species to extinction. Both are by-products of human activity. When I chop down a swath of old growth forest to expand my farm, I am considering only my private benefits–my own profits. I am not accounting for the fact that deforestation threatens endemic bromeliads and reduces the planet’s absorption of greenhouse gases. To use the language of economists, these social costs are “negative externalities” of my farming activity. People tend to overlook the negative externalities of their decisions. They need additional incentives, which compel them to account for these externalities. What form do these incentives take?

There are two types of instruments in the public sector toolkit for dealing with negative externalities: price policy, and quantity regulation. Price policies consist of taxes. The basic idea is that taxes drive up the price of undertaking an activity that causes a negative externality, and this gives people an incentive to do less of it. We see this policy instrument in action each time we go to the gas pump: carbon taxes mean that the price you pay is much higher than what it costs companies to supply the gas. When prices increase, demand typically falls. When the price at the pump is high, we tend to purchase less gas, drive less often and, as a by-product, emit less CO2 into the atmosphere.

For taxes to be an effective instrument in curbing negative externalities, you need to know what activity to tax, and how high the tax should be to reflect the cost imposed on society by that activity. In the case of climate change, the answers to these questions are relatively straightforward. We know that climate change is caused by emissions, so we want to tax activities that generate emissions, most obviously, the consumption of fossil fuels. We also have a pretty good idea of what the costs imposed by these activities on society are, so (although current taxes are arguably too low), we have some idea of what these tax rates should be. These criteria are much harder to satisfy in the case of biodiversity loss, for the reasons mentioned earlier: the activities that cause it are wide-ranging and we don’t have a good grasp of the costs it imposes. This means that, although there may be some obvious candidates for activities to tax in local contexts, the generic use of taxes to fight biodiversity loss has formidable practical challenges.

The second policy instrument for curtailing negative externalities is quantity regulation. Price regulation indirectly affects the quantity of the externality produced through prices. Quantity regulations directly manage the amount of the externality produced. In the case of climate change, quantity regulation essentially involves setting a cap on the emissions companies are permitted to produce, and then allowing companies to trade in various types of “emissions markets” to comply with limits imposed on them. For example, in a cap-and-trade system governments may issue CO2 permits to companies, and then allow them to trade these permits in carbon markets: companies that exceed their CO2 cap can buy permits from companies that don’t exceed their caps. Alternatively, companies that emit too much CO2 may buy carbon credits, which offset the company’s carbon emissions by, say, by restoring mangroves in Indonesia.

Implementation problems seriously compromise the effectiveness of emissions markets, including cap-and-trade and carbon offsets. These practical drawbacks are important, but at least markets exist and could, in principle, work to combat climate change. One reason emissions markets exist is that climate change is a function of the total stock of atmospheric greenhouse gases and as far as the atmosphere is concerned, my tonne of CO2 emissions is the same as your tonne. This means that emissions like CO2 are tangible commodities that can be traded in a market, at the going rate.

It is hard to imagine what an analogous market would look like for biodiversity. Its complexity means that it doesn’t have an analogue to emissions, which can be cut up into homogenous, interchangeable pieces that can be readily traded. The negative externalities generated by biodiversity loss are heterogeneous, unique, and difficult to measure, and it is hard to build a market for a product you can’t even define.  

Taxes are difficult and markets may not work to curb biodiversity loss, but there is another promising candidate in the quantity regulation toolkit, which has nothing to do with prices or markets. This tool is direct quantity restrictions. We saw an extreme form of this tool in action in the fight against climate change in 1987, when the world banned ozone-depleting chemicals including chlorofluorocarbons (CFCs) as part of the Montreal Protocol. Outright bans are not a standard tool in the economic policy kit.  Although deeply unpopular at the time, that ban has been critical in averting potentially catastrophic consequences of climate change.

The world is slowly coalescing around quantity restrictions as a potential solution to the problem of biodiversity loss. In December 2022, the United Nations Biodiversity Conference (COP15) in Montreal concluded with roughly 190 nations signing on to the goal of “30 X 30”—a pledge to protect 30 percent of land and sea by 2030. The devil will be in the details, but it’s an incredibly promising step for two reasons.

First, it represents a unified idea coming from a field whose structure has mirrored its subject: scientists working on biodiversity tend to study different species within narrowly defined ecosystems, each with their unique characteristics. The contrast to climate science couldn’t be starker. Climate scientists have been raising their voices (almost) in unison for over a quarter century now: we’re at COP27 and counting. The IPCC puts out yearly reports sounding the alarm. They’ve come up with catchy phrases like “global warming” and “net zero”. Biodiversity’s zingy new slogan, “thirty-by-thirty” is indicative of a new—more coherent and cohesive—voice and policy vision among natural scientists to combat biodiversity loss. The IPBES even put out its first global assessment in 2019. Things are looking up.

Second, quantity restrictions are the only policy tool I can think of that may be both feasible and effective. As with markets, quantity restrictions to protect biodiversity can take many forms, ranging from outright bans in access to limits on use. Bans may be a blunt policy instrument but, as the case of CFCs showed, when properly enforced they can be remarkably effective. To be clear, the 30X30 goal is not an enforceable ban. It is a pledge to protect land and sea. A “pledge” is not a binding commitment and “protect” is a double-edged sword, leaving room for both careful nuance and callous abuse. The success of 30X30 will rest on what is protected, how it is  protected, and how this protection is financed. Still, given the urgency of the problem following decades of stasis, it is a promising start.