What Conservation Finance avenues exist?
In a recent blog I talked about funds being at threat due to Brazil's poor management of the burning Amazon. Government payments for environmental outcomes on public land (like the Amazon) are important, but just one type of conservation finance. I wanted to come back with a list of the major types of conservation finance, which is an important part of our work at Box Forest. Here it is. In 2020, I'll be working on a couple of projects in the field and I'll report back.
Conservation philanthropy - Individual and business supporters donate money to not-for-profit organisations with an environmental purpose. Well known. Tax deductible. Limited by scarcity of private funds and diversion of resources into fundraising.
Public land management for conservation - Public agencies manage areas primarily for conservation purposes, and fund environmental staff and works. Landcare, Friends groups and sponsors can contribute. Well known. Taxes at work. Limited by scarce public funds and tension with anti-environment uses such as logging.
Public land environmental goods - Government Business Enterprises and agencies that generate goods like water and recreation, on public land, pay for environmental goods, such as revegetation in water catchments to reduce sediment. Modest take-up. Limited by narrow mandate, difficulty proving economic benefit of environmental goods, and lack of commercial incentives. Should be bigger.
Private land environmental goods - Government pays land-holders (including by tax incentives) to manage land to improve on- and off-site environmental outcomes, such as fencing creeks from livestock. Modest. Limited by indifference to environmental goods from developers and rural ”leaders”; difficulty capturing the benefits; and poor incentives.
User pays – fees for user rights go to upkeep - Government charges for use of scarce resource eg fishery quotas, and puts the funds towards conserving impacted resources. Environmental impact bonds. Modest. Risk of over-allocating resource (logging, fisheries) and under-charging to “protect jobs” (logging, irrigation).
Good business-as-usual - Business minimizes damage and funds rehabilitation. Clearing weeds, filling in holes, disposing of waste, planting shelterbelts, installing or buying renewables. Well known. Vulnerable to poor waste disposal practices etc. Incentives for success and penalty for failure often insufficient.
Offset schemes - A business impacting the environment in one place can pay other land managers to offset the impact in another place, at a lower price than the full charge to pollute. Certificate schemes. Economically sound but hard to administer. Eg water trading scheme is expensive and open to rorts. Carbon trading worked so was repealed by anti-environment government.
Government funding to industry - Government tenders to find the best environmental outcome for available funds. Various grant schemes for agriculture, renewables, rural development. Current policy. Expensive, rewards large polluters, handouts for easy gains.
Revenue from conservation - People pay for a good environmental setting – country holidays, attractive sub-divisions, eco-tourism, experiences. Well known. Requires little government funding. At risk from negative externalities.
Voluntary covenants or set-asides - Land managers voluntarily limit the extractive uses allowed on their land, spend own funds on environmental goods. Developers do a good job because they want to and/or see it as good business. Very promising but a tiny percentage of land management. 100% effectiveness as no intermediaries or trading required. Hard to systematize.