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AN INTRODUCTIONTO INNOVATIVEFINANCIAL MECHANISMS
Charlie ParkerHead of Policy
Global Canopy Programme
How to raise $140 billion for natural capital
WHY ARE IFMS IMPORTANT?
• There is currently a shortfall in biodiversity finance
• Traditional forms of finance (ODA, philanthropy) are often seen as not being able to fill the gap
• IFMs can engage with the private sector
• IFMs may internalise the externality of biodiversity loss
BUT
• Political challenges to their implementation
• What do we mean when we are talking about IFMs?
WHAT ARE THE COSTSOF CONSERVATION?
GLOBAL CANOPY PROGRAMME
ACTION TARGET USD BN/YR SOURCE
Expand PA network +30% terrestrial PAs in developing countries
4-13 Bruner et al., 2004
Expand PA network To 15% terrestrial ecosystems 18-27.5 James et al., 2001
Expand PA network To 15% terrestrial ecosystems, 30% marine ecosystems
45 Balmford et al., 2002
ACTION TARGET USD BN/YR SOURCE
Expand PA network +30% terrestrial PAs in developing countries
4-13 Bruner et al., 2004
Expand PA network To 15% terrestrial ecosystems 18-27.5 James et al., 2001
Expand PA network To 15% terrestrial ecosystems, 30% marine ecosystems
45 Balmford et al., 2002
Global biodiversity protection
Conservation and sustainable use of majority of world’s biodiversity
300 IUCN, 2010
Protect all biodiversity outside protected areas
Maintain biodiversity in the human-dominated environment
290 James et al., 2001
Total ecosystem protection
In the context of climate change 355-385 Berry, 2007
WHAT IS THE CURRENT SCALEOF FINANCE?
GLOBAL CANOPY PROGRAMME
IFMS UNDER THE CBD
• Under Decision IX/11B there are six sources of finance for biodiversity– Payment for ecosystem services– Biodiversity offset mechanisms– Environmental fiscal reforms– Markets for green products– Biodiversity in international development finance– Biodiversity in climate change funding
PREVIOUS STUDIES
• Gutman (2003) From Goodwill to Payments for Environmental Services– Presents 52 financing options– Broken down across six sources
• Public• Private not-for-profit• Private for-profit• Payments for environmental products• Payments for environmental services• “You may need less money than you think”
PREVIOUS STUDIES
• Gutman and Davidson (2008) A Review of Innovative International Financial Mechanisms for Biodiversity Conservation– Prepared for COP 9 of the CBD – Presents 61 traditional and innovative financing
options– Broken down across four categories
• Government sources• Voluntary sources• Markets and Businesses• International Payments for Ecosystem Services
THINK PINC
• Prepared for COP 10
• Broken down into three sections:– Generation– Delivery– Institutional
Arrangements
• Presents 18 traditional and innovative mechanisms
GENERATION MECHANISMS
• Based on core CBD principles of adequacy, predictability and timeliness
• Broken down across four criteria– Scale: How much?– Timeframe: When?– Level: At what level?– Market: From where?
GENERATION MECHANISMS
• Based on core CBD principles of adequacy, predictability and timeliness
• Broken down across four criteria– Scale: How much?– Timeframe: When?– Level: At what level?– Market: From where?
• Four options: Direct, Indirect, Other, Non Market
MARKET CRITERIA
• Direct mechanisms– Generate finance directly from the provision of an
ecosystem service or biodiversity – Usually local in scale– Require strong regulation to scale up
• Examples– Forest carbon market, direct PES mechanisms
MARKET CRITERIA
• Indirect mechanisms– Raise finance by tangibly linking the value of
biodiversity and ecosystem services to more traditional markets
– Larger scales are achievable– Require some form of demand side regulation
• Examples– Green commodities (FSC, Shade grown coffee)– Ecotourism– Natural Capital Bonds
MARKET CRITERIA
• Other market mechanisms– Generate finance from markets that are not linked
to biodiversity and ecosystem services– Even larger scales are possible– Politically challenging, requires coordination
• Examples– Maritime or aviation tax or levy, – Financial Transaction (Tobin) tax– Auctioning allowances
MARKET CRITERIA
• Non Market mechanisms– More traditional mechanisms that generate
revenue from non-market sources of finance– Less predictable than other sources of finance– Require political will to scale up
• Examples– ODA– Philanthropy– Subsidy reform
GENERATION MECHANISMS
Direct PES
Cap and trade market
Baseline and credit market
Natural Capital Tax
Direct
User Fees
Bioprospecting
Greening commodities
Natural Capital Bonds
LinkedAviation Tax or Levy
Maritime Tax or Levy
Auctioning of Allowance
Financial Transaction Tax
Levy on Insurance Premiums
OtherDomestic Budget Allocation
Official Development Assistance
Debt-for-Nature Swap
Subsidy reform
Philanthropy
Non-market
…UNDER THE CBD
• Direct PES
Payment for ecosystem services
• Baseline and credit market
Biodiversity offset mechanisms
• Natural Capital Tax• Aviation Tax• Maritime Tax or Levy• Subsidy reform• Insurance Levy
Environmental fiscal reforms
• User Fees• Bioprospecting• Greening commodities• Natural Capital Bonds
Markets for green products
• Official Development Assistance
• Debt-for-Nature Swap
International development finance
• Baseline and credit market
Climate change funding
• Cap and trade market• Auctioning of Allowance• Domestic Budget
Allocation• Philanthropy• Tobin Tax
Other
…UNDER THE CBD
• Direct PES
Payment for ecosystem services
• Baseline and credit market
Biodiversity offset mechanisms
• Natural Capital Tax• Aviation Tax• Maritime Tax or Levy• Levy on Insurance
Premiums• Subsidy reform
Environmental fiscal reforms
• User Fees• Bioprospecting• Greening commodities• Natural Capital Bonds
Markets for green products
• Official Development Assistance
• Debt-for-Nature Swap
International development finance
• Baseline and credit market
Climate change funding
• Cap and trade market• Auctioning of Allowance• Domestic Budget
Allocation• Philanthropy• Tobin Tax
Other
WHAT IS THEFUTURESCALEOFFINANCE?
OTHER
INDIRECT
DIRECT
NON-MARKET
OTHER
INDIRECT
DIRECT
NON-MARKET
ADDITIONAL SOURCES
• What are the new and additional sources of finance?
PAY
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CONCLUSIONS
• There is a shortfall in finance of $ hundreds of billions
• There are a range of mechanisms that are available
• These mechanisms have different levers to scale up – Direct: Regulation– Indirect: Demand– Other Market: Coordination– Non Market: Political will
• To reach finance at scale we need to use all mechanisms.
