Conserving tropical biodiversity via market forces and spatial targeting

The recent report from the Secretariat of the Convention on Biological Diversity (2010) Global Biodiversity Outlook 3 acknowledges that ongoing biodiversity loss necessitates swift, radical action. Protecting undisturbed lands, although vital, is clearly insufficient, and the key role of unprotected, private land owned is being increasingly recognized. Seeking to avoid common assumptions of a social planner backed by government interventions, the present work focuses on the incentives of the individual landowner. We use detailed data to show that successful conservation on private land depends on three factors: conservation effectiveness (impact on target species), private costs (especially reductions in production), and private benefits (the extent to which conservation activities provide compensation, for example, by enhancing the value of remaining production). By examining the high-profile issue of palm-oil production in a major tropical biodiversity hotspot, we show that the levels of both conservation effectiveness and private costs are inherently spatial; varying the location of conservation activities can radically change both their effectiveness and private cost implications. We also use an economic choice experiment to show that consumers' willingness to pay for conservation-grade palm-oil products has the potential to incentivize private producers sufficiently to engage in conservation activities, supporting vulnerable International Union for Conservation of Nature Red Listed species. However, these incentives vary according to the scale and efficiency of production and the extent to which conservation is targeted to optimize its cost-effectiveness. Our integrated, interdisciplinary approach shows how strategies to harness the power of the market can usefully complement existing--and to-date insufficient--approaches to conservation.