Economics of Biodiversity loss.

Biodiversity or biological diversity refers to the variability among living things, their ecosystem and ecological processes that separates them. In general, it is simply nature’s variety. Despite its very obvious importance and value such as:
1. Biological resources provide the basis of life on earth, any extinction of a species brings out irreversible loss.
2. Contributes to our material well-being both in terms of consumption and production of materials. Example, sources of food; all our foods come from other organisms, 70%plants and 30% animals. Other uses include; industrial use, educational value and cultural values.
3. Biodiversity also plays an important role in ecological and ecosystem values. Trees and other plants play an important role in maintaining a CO2 and O2 balance in other words keep global warming in check and provide free oxygen for us. Japan has up to 67% forest cover and this helps the country to deal with natural disasters such as earthquakes. Variation of species in an area will also provide useful data which can be used to indicate/determine any environmental changes and their consequences.
4. Another importance of biodiversity is its aesthetic value. The natural environment is pleasing to the eye; all the wildlife, landscapes, habitats are all breathe taking and unique.
Biodiversity is constantly on the decline. The underlying causes of the decline are rooted in the expansion of the human society. Unsustainable economic development results in pollution and habitat loss, the greatest causes of biodiversity loss.

There lacks a balance between development and conservation; one of the factors that has led to this is poor policies, which encourage the direct conversion of natural resources into economic assets. There are regions that are seen or regarded to be of least economic value (example, semi-arid and arid areas which cannot support large agricultural farms) and as a result are neglected. The people in these areas are left with the least development and management creating a recipe for environmental degradation. Apart from this, the areas are also used as wastelands rather than investments and the people are hence displaced from the resources and environment they depended on, creating the current problem of Ecological refugees.

Development at the expense of biological assets is one way to look at it; conversion of natural resources for economic gain is another way that results in biodiversity decline. Example, land clearance for farming or industries results in economic gain but also habitat loss and hence species decline or in cases of human-wildlife conflicts, extinction. Another way to look at it is through over exploitation of resources which results in habitat loss, pollution and environmental degradation. Example, the current state of Kenya’s polluted rivers and lakes, declining forest cover. forest destruction.
Institutional failures also result in the decline, in that, the institutions in place do not look at the ecosystem as a whole and hence do not encompass conservation in development plans and goals. For there to be appropriate policies the institutions in place should first be correct.

To ensure sustainable development, environmental valuation has to be considered. Environmental valuation is important to determine the impact of human activities on the environment. It is a way to measure the preference of people for economic value over environmental care or vice versa. The result is given in monetary terms so as to enable comparison between environmental values and development values.

Environmental damage shows up as cost to the nation as it impacts on the gross national product (GNP) resulting in losses.

For projects, policies and programs, environmental impact assessment is very necessary in order to account for the environmental impacts. These impacts are additional costs and benefits that should be added/adjusted into the accounts.

Since economic activities involve use of energy and resources to make products and later generation of wastes, the national income needs to account for the depreciation of natural capital stock and also include cost of cleaning the environment. (Clean development mechanisms)

Environmental valuation also takes into account irreversible damage like extinction of species and therefore takes into account intergenerational concerns. This will clearly show what is being sacrificed and at what cost.

Apart from valuation, incentive structures can be put in place to reduce loss. These include;
Including taxes to land conversion, example, a grazing tax will discourage ownership of large unsustainable herd of cattle hence reduce overgrazing.

Increasing land reserves. This is simply preservation of land, especially degraded lands to allow for regeneration and restoration. It can also apply for resources such as rivers.

 Providing alternatives to habitat conversion as a source of livelihood.

 Develop and encourage green innovations and technologies that increase output per unit of developed land, in order to ease pressure and conserve the remaining part of the land/environment hence protecting biodiversity.

Economic growth does not necessarily have to lead to degradation and biodiversity loss; it all depends on the level of inequalities in the society as a result of development. It also depends on the type of technology used in the extraction of resources and methods of production. Sustainability has to be the guiding principle.

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