Profitability and conservation goals reconciled through biodiversity offsets

Céline Huber, Luc Doyen () and Sylvie Ferrari

Bordeaux Economics Working Papers from Bordeaux School of Economics (BSE)

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.

Keywords: Biodiversity Offset; Bio-economics; No net loss; Sustainability; Minimal time; control; Mangroves (search for similar items in EconPapers)
JEL-codes: C51 C52 C61 D63 O13 Q24 Q32 Q57 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-env, nep-ore and nep-ppm
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Persistent link: https://EconPapers.repec.org/RePEc:grt:bdxewp:2021-19

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