To halt and reverse nature loss, economic incentives must swiftly be aligned with global biodiversity goals. This OECD report provides strategic guidance on scaling up biodiversity-positive incentives – policy instruments that reward environmentally beneficial actions and make harmful ones more costly. It examines an array of economic incentives for biodiversity, including subsidies, payments for ecosystem services, environmental taxes, fees and tradable permits, biodiversity offsets, and emerging biodiversity credit approaches. Drawing on experiences worldwide, the report highlights key challenges and opportunities for scaling up these incentives effectively and equitably. It offers policy makers and practitioners ten recommendations to support the implementation of Target 18 of the Kunming-Montreal Global Biodiversity Framework.
Scaling Up Biodiversity‑Positive Incentives
Abstract
Executive summary
Biodiversity is essential to human well-being, societal resilience and economic prosperity. All economic activities depend on nature, making biodiversity loss a serious macroeconomic and financial risk. Yet, biodiversity’s decline is accelerating. Wildlife populations have shrunk by 73% since 1980, and around one million animal and plant species now face extinction. Ecosystem degradation threatens critical services, such as pollination, water purification and climate regulation.
Addressing this crisis requires urgent, co-ordinated action. The Kunming-Montreal Global Biodiversity Framework (KMGBF) sets a roadmap to halt and reverse biodiversity loss by 2030. Among its 23 targets, Target 18 requires governments to reduce harmful incentives and scale up positive incentives for the conservation and sustainable use of biodiversity. This report focuses on the incentives that are positive for biodiversity, offering good practice insights to increase their scale and effectiveness.
Biodiversity loss reflects a fundamental market failure: many of nature’s benefits are unpriced or undervalued. Biodiversity-positive incentives help correct this by integrating environmental costs and benefits into economic decisions. These instruments include taxes or fees on pollution and natural resource use, biodiversity-positive subsidies, payments for ecosystem services (PES), tradable permits, biodiversity offsets and a more recently conceptualised instrument, biodiversity credits.
Scaling up these incentives is not only central to Target 18 but can also support many other KMGBF targets. For example, fiscal incentives in South Africa are expanding protected areas (Target 3), while pesticide and plastic taxes in Denmark and Türkiye are reducing pollution (Target 7). Tradable permits promote more sustainable fisheries in countries such as Iceland and New Zealand, while PES in Costa Rica and Ireland incentivise more sustainable forestry and agriculture practices (Target 10).
By changing the relative costs of harmful and beneficial activities, biodiversity-positive incentives are also critical for aligning and mobilising financial resources for biodiversity (Targets 14 and 19). Some, such as subsidies, PES and biodiversity credits, directly channel finance to biodiversity. Others, such as taxes and fees, reduce harm and financing needs while generating revenue that can potentially fund biodiversity. In the OECD alone, biodiversity-positive taxes raise over USD 10.6 billion annually and have room to grow.
Despite political commitments, uptake of biodiversity-positive incentives remains limited. For example, most countries lack biodiversity offset regulations, while biodiversity-positive subsidies constitute a very small fraction of government subsidies. Among 54 major agricultural economies, only 0.6% of budgetary support for farmers targets environmental outcomes. Long-established instruments such as taxes and tradable permits are not widely used to address biodiversity loss.
Improving effectiveness is also crucial. Evidence shows biodiversity-positive incentives can reduce deforestation and pollution, protect terrestrial, freshwater and marine species, and restore ecosystems. However, variable outcomes highlight the need for more consistent use of good practices in incentive design and implementation. Increased effectiveness will also foster the necessary credibility and trust for achieving scale.
Drawing on experiences worldwide, the report highlights key challenges and opportunities for scaling up biodiversity-positive incentives effectively and equitably. It offers instrument-specific insights and ten cross-cutting recommendations to deliver on Target 18 of the Kunming-Montreal Global Biodiversity Framework.
1. Set clear objectives and adopt robust, well-aligned metrics: Defining clear policy objectives increases certainty and transparency, while facilitating effective incentive design and performance evaluation. Robust metrics and measurement approaches are key for ensuring projects align with their stated objectives and outcomes.
2. Engage stakeholders early and seek equitable outcomes: Early and sustained engagement with landowners, communities, indigenous peoples and others is vital for designing effective incentives. Meaningful engagement boosts participation rates (e.g. in subsidy schemes), enhances compliance, and promotes equitable processes and outcomes.
3. Address uncertainties and manage adaptively: Incentives should account for ecological and economic uncertainties (e.g. precautionary caps in tradable permits; biodiversity offset multipliers) and be managed adaptively to respond to new information and changing conditions.
4. Require projects to demonstrate additionality: Biodiversity-positive incentives must generate benefits beyond what would occur without them. This is critical for fulfilling their potential and maintaining confidence. Non-additionality in payment schemes is inefficient, while lack of additionality in biodiversity offsets could lead to net biodiversity losses.
5. Assess and mitigate leakage and substitution risks: Incentive design must mitigate the risk of displacing harmful activities or replacing one damaging practice by another. This demands improved risk assessment and extending monitoring beyond interventions where risk is high. Whole-property enrolment and collective approaches in PES, material-neutral taxes, and broader policy coherence may help mitigate risks. Addressing global leakage is particularly challenging, requiring international co-ordination, and sustainable supply chains and consumption.
6. Enhance transparency and verification: Transparency and verification are crucial for credible, efficient and effective incentives. Tools like public registries can improve access to key information, such as permit allocations, offset calculations and credit transactions. Verification mechanisms (e.g. independent audits) help ensure incentives are delivering on their stated goals and outcomes.
7. Strengthen compliance and enforcement: Effective monitoring is crucial for identifying non-compliance and should be accompanied by enforcement mechanisms with proportionate penalties and remedial actions. Often, penalties are too weak to deter violations. Key challenges include insufficient financial and human resources, data limitations and lack of legal capacity. Technological advances can reduce the cost and increase the effectiveness of monitoring.
8. Strategically and efficiently use public resources: Increasing public biodiversity spending is vital and need not strain budgets. Redirecting harmful subsidies and boosting revenues from biodiversity-positive taxes and fees can free resources while reducing finance needs. Public funds can catalyse private finance by covering upfront costs and mitigating risks, though care is needed to avoid crowding out private capital or subsidising private profits. For direct payments, spatial targeting, rate differentiation and results-based approaches can increase cost effectiveness.
9. Reinforce other biodiversity policies and promote policy coherence: Other policies influence the scalability and effectiveness of biodiversity-positive incentives. Water quality regulations have helped drive corporate PES, while robust environmental impact assessments are critical for effective biodiversity offsets. Coherence across environmental, fiscal and sectoral policies is critical for minimising constraints on biodiversity-positive incentives and realising policy co-benefits.
10. Leverage development co-operation: Development co-operation can support piloting of new biodiversity-positive incentives and help scale existing ones – working at both project and policy levels. It can enhance institutional and technical capacity, facilitate knowledge sharing and ultimately increase recipient countries’ ability to mobilise domestic biodiversity finance.
