Differentiated vs. homogeneous payments for biodiversity conservation — Microeconomic theory and systematic literature review

Abstract

Differentiated payments are discussed as a means to increase allocative efficiency in biodiversity conservation. Yet, homogeneous payments are less demanding in terms of information and foster competition. We set up a microeconomic model to characterize conditions on social biodiversity conservation objectives and conservation costs such that homogeneous payments would implement an efficient allocation of conservation efforts, both for input-based and output-based payments. We show that the efficiency of homogeneous payments depends on assumptions about the social biodiversity benefits. Assumptions on conservation cost are relevant for differentiation of payments only if the regulator strives for price discrimination to minimize conservation payments; for example by means of auctions or tenders. In a systematic review of the literature on payments for biodiversity conservation, we assess to which extent the literature has been imposing such assumptions, and conclude that most studies specify biodiversity objectives such that homogeneous payments would implement efficient biodiversity conservation.