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| Tekijä: | Gervigni, R. |
| Otsikko: | Incremental cost in the convention on biological diversity |
| Lehti: | Environmental and Resource Economics
1998 : MAR, VOL. 11:2, p. 217-241 |
| Asiasana: | ENVIRONMENTAL ECONOMICS EXTERNALITIES COSTS |
| Kieli: | eng |
| Tiivistelmä: | The Convention on Biological Diversity stipulates the principle of incremental cost for the international financing of biodiversity conservation. The paper uses some standard tools of partial equilibrium demand analysis to illustrate theoretical solutions to the indeterminacy of the Convention. The allocation of resources resulting from an incremental cost scheme is compared with a domestic optimum', and with a hypothetical global optimum'. Regarding the behaviour of the country hosting biodiversity, a distinction is proposed between quantity-' and transfer-' taking behaviour. The issue of price distortions in the baseline is also addressed. It is shown that both the host country (H) and the Rest of the World (ROW) will have incentives for agreeing on a transfer of resources that entails only partial deduction of domestic incremental benefits. This transfer, despite failing to reach the utilitarian global optimum, still represents a Pareto improvement over the pre-convention status quo. By imposing a particular multiplicative functional form on the utility of both host and ROW, additional results can be obtained. In particular, the optimal transfer implies a clawback factor decreasing with relative income differentials, and incremental cost financing dominates the domestic optimum even when price distortions are present in the host country. If removal of price distortions is a precondition for incremental cost funding, the analysis illustrates the magnitude of incentives necessary for the host to give up the distorted baseline. |
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