Introduction

Perverse incentives emanate from policies or practices that induce unsustainable behavior that destroys biodiversity, often as unanticipated side effects of policies designed to attain other objectives. Such “policy failures” can include government subsidies or other measures which fail to take into account the existence of environmental externalities, as well as laws or customary practice governing resource use. In order to ensure the conservation of biodiversity and the sustainable use of its components, it is therefore important to identify policies and practices that generate perverse incentives and to consider their removal or the mitigation of their negative impacts through appropriate means.

Overview of CBD Activities

The Conference of the Parties stressed the importance of taking appropriate action against those incentive measures that threaten biological diversity. At its forth meeting, the Conference of the Parties encouraged Parties, Governments and international organizations to identify perverse incentives and consider the removal or mitigation of their negative effects on biological diversity . Work on perverse incentive measures, and on ways and means to remove or mitigate their negative impacts on biological diversity, is also included in the programme of work on incentive measures, adopted by the Conference of the Parties at its fifth meeting in 2000.

The guidelines for selecting appropriate and complementary measures, contained in the proposals for the design and implementation of incentive measures that were endorsed by the Conference of the Parties at its sixth meeting, recognize that (i) the removal of perverse incentive eases pressure on the environment, (ii) that the identification of both internal and external perverse incentive and other threats to biodiversity conservation and to the promotion of sustainable use, is essential to the selection and design of incentive measures, and (iii) that the removal of perverse incentives may improve economic efficiency and reduce fiscal expenditures.

At its sixth meeting, the Conference of the Parties recognized that further work has to be undertaken on perverse incentives and ways and means for their removal or mitigation, and requested the Executive Secretary to elaborate proposals for the application of ways and means to remove or mitigate perverse incentives in collaboration with relevant organizations, for consideration by SBSTTA at a meeting prior to the seventh meeting of the Conference of the Parties.

Further to this request, and based on background documentation prepared by the Secretariat, proposals were developed by the second workshop on incentive measures for the conservation and sustainable use of biological diversity, held in Montreal on 3-5 June 2003 with support of the government of The Netherlands. The report of the workshop and the proposals were considered by the ninth meeting of SBSTTA and by the Conference of the Parties at its seventh meeting, held in Kuala Lumpur, Malaysia, on 9-20 February 2004.

The Conference of the Parties encouraged Parties and governments, as appropriate, to use the proposals, annexed to decision VII/18, as voluntary interim guidance to Parties for the application of ways and means to remove or mitigate policies and practices that generate perverse incentives, and to extend their efforts to an examination of new policies with a view to identifying, and avoiding, potential perverse incentives, bearing in mind that perverse incentives include those that negatively affect biodiversity in other countries. Furthermore, Parties and Governments are also encouraged to use, on a voluntary basis, these proposals as further interim guidance in implementing the Addis Ababa Principles and Guidelines for the Sustainable Use of Biodiversity to these principles and guidelines) and, in particular, principles 2 and 3, which address incentive measures.

The Conference of the Parties took note with appreciation of the work of the second workshop on incentive measures and of the Subsidiary Body on Scientific, Technical and Technological Advice. It acknowledged that the proposals contain valuable and useful elements that provide a general framework to address the removal or mitigation of perverse incentives in different economic sectors and ecosystems, but need further refinement and consideration before adoption by the Conference of the Parties. Consequently, the Conference of the Parties requested further work to be undertaken by the Subsidiary Body on Scientific, Technical and Technological Advice. Such further work was undertaken; the proposals remain however not finalized.