Pricing the Priceless: The Financial Cost of Biodiversity Conservation

Fukang Chen, Minhao Chen, Lin Cong, Haoyu Gao and Jacopo Ponticelli

No 32743, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The pace of biodiversity loss requires drastic shifts in conservation efforts that carry substantial costs. We investigate how the financial market prices such conservation costs exploiting the "Green Shield Action," a major regulatory initiative launched by the Chinese central government in 2017 to enforce biodiversity preservation rules in national nature reserves. We document that, while improving local biodiversity, the initiative led to a significant increase in bond yields for Chinese municipalities with national nature reserves. Evidence suggests that these effects are driven by expected increases in transition costs resulting from shutting down illegal economic activities within reserves and local public spending on biodiversity following the initiative. Overall, our results indicate that investors show little consideration beyond financial payoffs towards endeavors counteracting biodiversity loss.

JEL-codes: G12 Q57 Q58 (search for similar items in EconPapers)
Date: 2024-07
New Economics Papers: this item is included in nep-agr and nep-env
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