Abstract
The previous chapter investigated how the demand for private goods of biodiversity can jointly contribute to the safeguarding of public good-like ecosystem services. In the following, I study instruments and arrangements that directly address the public goods of biodiversity. In this context, I assume that human land use essentially influences and determines the extent of biodiversity and size of ecosystem services. Accordingly, a major instrument to secure the supply of public goods of biodiversity is the designation of protected areas, i.e., natural areas that remain close to their natural state and undisturbed by human use (van Kooten and Bulte 2000: 311). Frequently, the exclusion and control of human disturbance is vital for the ongoing provision of sensitive but valuable ecosystem services.
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References
A related but ecologically and socioeconomically more integrated framework concept is the ecosystem approach, which pays particular attention to the maintenance of supportive ecosystem services (SCBD 2004; WRI 2000).
A specific form of price-based regulation is the removal of perverse subsidies (Goeschl and Lin 2004).
Furthermore, initiatives have been started, for example, in the United Nations framework. This is the UNESCO Man and Biosphere (MAB) Programme (Mulongoy and Chape 2002).
The UNESCO Man and Biosphere Programme (MAB) also addresses protected areas according to a listing approach (World Network of Biosphere Reserves). Nevertheless, in contrast to the other regimes, the MAB network is not governed by an international agreement and does not have its own transfer mechanism (Matz 2003). For this reason, the program is not investigated any further here.
Figures for international giving for biodiversity conservation by Asian foundations can hardly be identified (OECD 2003c).
The figure is based upon 1996 dollars and considers a global network of protected areas covering 1.3 billion hectares (James et al. 1999b).
In order to verify whether designated protected areas are representative of a specific region and whether global biodiversity is well captured in the global network, scientists involved in conservation planning use extensive local data and conduct global gap analyses (SCBD 2004).
A biome is a hotspot if it hosts 0.5 percent of global plant species diversity on its area (Myers et al. 2000).
One may argue that within strictly protected areas, no private goods can be produced since nearly every human use is excluded. However, note that according to the IUCN Guidelines on Protected Area Management (IUCN 1994), tourism services are compatible with protected areas of Categories II and III, which are sometimes included in a broad definition of strict protection.
Several official and nongovernmental studies have evaluated the operations of the GEF and its financing of environmental protection. The GEF itself regularly commissions an Overall Performance Study (UNEP/ CBD 2002). These evaluations have addressed multiple issues. Criticism has, inter alia, concerned the lack of a definition of an overall protection strategy and the selection of projects that have resulted in this regard. Furthermore, local communities that have been affected by project actions have participated insufficiently in the planning and implementation of the projects, which is said to finally limit the effectiveness of the project investment. As a consequence, there is evidence of increasing private sector involvement in the projects of the recent GEF periods. In this context, there are also calls to make the GEF project cycle procedures less complex; i.e., to streamline procedures and make them more transparent.
The data on GNI per capita are taken from the WDI 2004 database (World Bank (2004)). For the classification, the income limits as presented for the 2004 classification are used.
For any level of conservation between the domestic optimum and the global optimum, the donors are only willing to make a transfer for conservation if the value of the additional benefit they receive exceeds the value of the transfer. Likewise, the resource country only agrees to extra conservation efforts if the transfer exceeds the resulting net incremental cost, i.e., the incremental expenditures to attain the extra conservation minus the incremental domestic benefits that are generated by this (Cervigni and Pearce 1995).
Methodologically, this is achieved through the use of a dual approach to the resource country’s welfare maximizing problem (Cervigni 1998).
Two basic schemes are distinguished (Cervigni 1998). Either ROW asks for the level of conservation that is to be implemented and the host country claims the conditional transfer, i.e., it behaves as a quantity taker, or ROW offers a conditional transfer menu and the host country chooses its optimal level of conservation (transfer-taking behavior).
The United States only paid 60 percent of their commitment in the GEF-2 replenishment but increased their commitment in the GEF-3 replenishment by more than 16 percent. In another case, the arrears of Argentina and Egypt in the GEF-1 replenishment were cleared after negotiations with the GEF trustee (GEF 2003).
Especially the time series of the relevant variables are too short. This data set, which consists of about 35 donors participating in the various replenishments, is not sufficient to perform two-stage least square estimations, as do the other studies on private public good provision (Khanna 1993; Sandier and Murdoch 1990).
Amore precise way of modeling is to define the public good as B, and conservation costs as C(B) with dC/dB > 0,d2C/dB2 τ;> 0. When assuming that the GEF funds are used in a cost-effective way, and developing countries are only compensated for their net incremental conservations costs, it holds Σg i = G = C(B) (Barrett 1994a). Solving for B, a utility function, can be defined that also satisfies strict quasi-concavity, i.e.,
With respect to the provision prices, studies analyze whether there are possibilities to “trade” public goods (Jack 1991; Boyer 1988; Kemp 1984; Kiesling 1974): when the supply costs of an international public good differ between countries, they may “trade” in that they become specialized according to their comparative cost advantage. Analogously to trade with private goods, a country that receives spill-ins may provide transfer payments to increase the production of the public good in other countries instead of producing the public good on its own. Depending upon the technology for the public good provision, trade can alternatively refer to countries that purchase inputs abroad for the domestic production of the global public good.
To put it differently, if a Lindahl equilibrium is established as a self-enforcing outcome, truthful revelation of the valuation is the dominant strategy for each of the participating countries. However, it is supposed that in many cases of (international) collective actions that are comparable to the finance of the GEF, revelation of the true benefits is indeed a problem. The theoretical research in this respect focuses upon the design of the mechanism for financing public goods under which the truthful revelation of valuations (benefits) is an “equilibrium” outcome. A mechanism that satisfies this requirement is the Clarke-Groves mechanism (Mas-Colell 1995: 876ff.; Siebert 2005: 89ff.).
It turns out that if the ratio of exclusive benefits to total benefits increases, the Nash outcome approaches the Pareto-efficient outcome (Sandler and Hartley 2001).
When considering a two-country model with two public goods that are produced with constant-returns-to-scale technology and with countries that make constant expenditures on public goods, international coordination leads to an allocation where each country becomes completely specialized in the production of the public good it has an comparative advantage in. As compared to the situation without coordination, in the case of cooperation and shared responsibilities, the utility levels for both countries, as well as the total supply of both public goods, increase (Boyer 1988).
Note that a prerequisite for efficient allocation in this regard is that there are no third countries that receive benefits from the provided public goods without making any contributions (Jack 1991).
The model represents an application of a seminal paper on the self-enforcement of international agreements (Barrett 1994b). This paper provides a more detailed description of the structure and intuition of the model discussed here.
Renegotiation-proofness is a solution concept for repeated games to describe stable equilibria (Farrell and Maskin 1989). There are several nuances in stability concepts that are related to several criteria that have to be fulfilled (Pearce 1992; Bergin and MacLeod 1993).
A stable agreement satisfies the following requirements: profitability, i.e., it is beneficial for a donor country to join the agreement and provide the agreed contributions to the fund; participation, i.e., no country that participates has an incentive to leave the agreement; and compliance, i.e., no participating countries will deviate from the terms of the agreement (Finus 2004).
The authors name the four conditions of this solution concept. Since one of them is redundant and another is satisfied trivially, i.e., does not impose an additional restriction, the equilibrium conditions are reduced to the following two: first, the discounted sum of utilities in the case of defection in one period is smaller than that in the case of cooperation in all periods and, second, the discounted sum of utilities from investing in a return to cooperation after punishment has been inflicted is greater than the utility from continuing with noncooperation (Itaya and Yamada 2002).
In two subscenarios, the authors also consider CES preferences and quasi-linear preferences. While in the latter case, income inequality does not have an impact upon the results, numerical simulations for the CES case generally confirmed the findings of the Cobb-Douglas case (at least for a wide range of parameter values). In addition, the authors discuss the impact if the punishment is expanded to more than one period. It is concluded that it would become even more difficult to obtain cooperation (Itaya and Yamada 2002).
To determine appropriate differentials in contributions, the principles of equal sacrifices can serve as underlying concepts. However, not all of these principles necessarily imply a relationship of a progressive scale (Musgrave 1993).
The economic intuition for this result is the following: suppose that by definition, the high income countries place a relatively higher absolute value upon the collective good (Olson and Zeckhauser 1966). Then, each country makes contributions to the provision of good in order to satisfy its own demand. To determine the size of the contribution, the marginal cost of supply is equated with the individual marginal benefit. Since external benefits for the other countries are not taken into account and the individual marginal benefit is decreasing, each country has an incentive to stop making contributions before the Pareto-optimal output of the good is attained. Since, by definition, low income countries derive a lower value from the good, they have a comparatively lower incentive to contribute and stop investing before the high income countries. As a result, there is disproportionate burden sharing (Sandler 1992: 54ff; Olson and Zeckhauser 1966).
In order to describe the contributions, I take data from various official documents (GEF 2002c, 2003, 2004b) (see Section 4.4.1).
While calculating the Spearman rank correlation is less complicated, there is no explicit definition in economic terms. The Kendall τ in turn is defined in terms of the probability of observing concordant and discordant pairs (of ranks). In most cases, the values of the Spearman and the Kendall rank correlation are very close and, therefore, lead to the same conclusion (Conover 1971).
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(2008). Preserving Biodiversity as a Global Public Good: Protected Areas and International Transfers. In: Environmental Policy Instruments for Conserving Global Biodiversity. Kieler Studien - Kiel Studies, vol 339. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-540-73748-3_4
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DOI: https://doi.org/10.1007/978-3-540-73748-3_4
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