Global biodiversity loss is accelerating, posing severe risks to economies, businesses and societal well-being. Addressing this challenge requires ambitious policies, consistent financing and co-ordinated action. This chapter makes the case for scaling up biodiversity-positive incentives, which is a key commitment under the Kunming-Montreal Global Biodiversity Framework and a critical lever to help deliver multiple other targets. The chapter presents the economic rationale for scaling up biodiversity-positive incentives and global trends in the use of these instruments.
Scaling Up Biodiversity‑Positive Incentives
Delivering on Target 18 of the Global Biodiversity Framework
Abstract
Human activities are driving accelerated declines in global biodiversity. These declines threaten business, economies and societal well-being.
The Kunming-Montreal Global Biodiversity Framework (KMGB) sets a global mission to halt and reverse biodiversity loss by 2030. Achieving this mission will require targeted policies, finance and action that are ambitious and effective.
Scaling up biodiversity-positive incentives – a key commitment under Target 18 of the KMGBF – is crucial. These incentives include biodiversity-positive taxes, fees, subsidies and tradable permits; payments for ecosystem services; and biodiversity offsets and credits.
Well-designed incentives influence producer and consumer choices by making harmful activities more costly and rewarding more sustainable practices. By promoting conservation, sustainable use and restoration of biodiversity, these instruments contribute to multiple KMGBF targets and broader policy goals.
Biodiversity-positive incentives are an important part of biodiversity finance strategies. They can help to align fiscal and financial flows with biodiversity goals and targets, mobilise private finance and generate revenue for governments. They are instrumental in efficiently delivering on Targets 14 and 19 of the KMGBF.
Biodiversity-positive incentives are often underutilised, despite their critical role in addressing biodiversity loss and prior political commitments to expand their application. There is substantial potential to both scale up these incentives and enhance their environmental effectiveness, to better contribute to biodiversity goals and targets.
The rapid decline in biodiversity – the variety of life on Earth – is among the top perceived global risks facing society (WEF, 2025[1]). Ecosystems provide critical life-supporting services, including the provision of food and clean water, but also largely invisible services such as regulation of the climate and hydrological cycles, protection from flooding and other hazards, nutrient cycling, water filtration and pollination. Biodiversity also holds cultural, recreational and spiritual values (OECD, 2021[2]). All economic activities depend on – and affect – biodiversity (Dasgupta, 2021[3]). Declines in biodiversity therefore poses macroeconomic and financial risks, while threatening the health and well-being of both current and future generations (OECD, 2021[2]).
Despite increasing awareness of biodiversity’s importance and some conservation successes (Langhammer et al., 2024[4]; Simkins et al., 2025[5]), policy responses have been insufficient in aggregate to halt and reverse global biodiversity loss. Biodiversity loss is accelerating rapidly, with the current rate of species extinction estimated to be 35 times faster than the natural background (pre-human) rate in the last million years (Ceballos and Ehrlich, 2023[6]). Alarmingly, around one million plant and animal species are threatened with extinction in the coming decades (IPBES, 2019[7]). Since 1970, the average population size of vertebrates (mammals, birds, reptiles, amphibians and fish) shrunk on average by 73% (WWF, 2024[8]), with negative implications for ecosystem function, productivity and resilience (Cardinale et al., 2018[9]; Oliver et al., 2015[10]; Valiente‐Banuet et al., 2014[11]). During the same period, the provision of fourteen out of eighteen assessed categories of ecosystem services also declined (IPBES, 2019[7]). The main drivers of biodiversity’s decline are land/sea-use change (e.g. agricultural expansion), exploitation of natural resources (e.g. timber, fish), climate change, pollution and the spread of invasive alien species (IPBES, 2019[7]).
With the adoption of the Kunming-Montreal Global Biodiversity Framework (KMGBF) under the UN Convention on Biological Diversity, governments renewed their commitment to tackle biodiversity loss through ambitious and effective policies. Biodiversity-positive incentives – economic incentives that discourage activities harmful to biodiversity or encourage activities beneficial to biodiversity – are a critical part of the policy response. The biodiversity-positive incentives covered in this report include biodiversity-positive subsidies and payments for ecosystem services, biodiversity-positive taxes, fees and tradable permits, biodiversity offsets and biodiversity credits (Table 2.1).
This chapter introduces biodiversity-positive incentives in the context of the KMGBF, outlines the role of positive incentives in halting and reversing biodiversity loss, and presents trends in the use of these instruments. It intends to provide background and rationale for the report.
1. There is no consensus on what constitutes a biodiversity credit. Depending on interpretations biodiversity credits could be mandatory, voluntary, or both, and based on the polluter pays principle or user pays approach.
Source: Elaborated by the authors.
At the 15th Conference of the Parties to the Convention on Biological Diversity (CBD COP15) in 2022, signatories to the CBD adopted the KMGBF. The framework adopts a vision of a world living in harmony with nature where “by 2050, biodiversity is valued, conserved, restored and wisely used, maintaining ecosystem services, sustaining a healthy planet and delivering benefits essential for all people.” Its mission for 2030 is “[to] take urgent action to halt and reverse biodiversity loss to put nature on a path to recovery for the benefit of people and planet [...]” (CBD, 2022[12]).
The KMGBF has four long-term goals for 2050 and 23 action-oriented global targets to be achieved by 2030. Target 18 explicitly refers to biodiversity-positive incentives, calling for Parties to both “eliminate, phase out or reform incentives, including subsidies, harmful for biodiversity,” and to “scale up positive incentives for the conservation and sustainable use of biodiversity” (Box 2.1). As biodiversity-positive incentives can generate revenue and mobilise finance for biodiversity (Section 2.2), they can support efforts to achieve Target 19 of the KMGBF on resource mobilisation. Furthermore, by sending price signals to producers and consumers across various sectors, positive incentives are key to integrating biodiversity and its multiple values into decision-making and aligning activities, fiscal flows and financial flows with the goals and targets of the framework. They are therefore also instrumental for achieving Target 14. More generally, biodiversity-positive incentives can be leveraged to achieve many of the other targets (e.g. Target 7 on pollution, Target 10 on enhancing sustainability in agriculture, aquaculture, fisheries and forestry, and Target 16 on sustainable consumption choices) and all four of the KMGBF’s long-term goals.
Targets for which positive incentives are most directly relevant
Target 18: Identify by 2025, and eliminate, phase out or reform incentives, including subsidies, harmful for biodiversity, in a proportionate, just, fair, effective and equitable way, while substantially and progressively reducing them by at least 500 billion United States dollars per year by 2030, starting with the most harmful incentives, and scale up positive incentives for the conservation and sustainable use of biodiversity.
Target 19: Substantially and progressively increase the level of financial resources from all sources, in an effective, timely and easily accessible manner, including domestic, international, public and private resources, in accordance with Article 20 of the Convention, to implement national biodiversity strategies and action plans, by 2030 mobilizing at least 200 billion United States dollars per year, including by (among other things):
(d) Stimulating innovative schemes such as payment for ecosystem services, green bonds, biodiversity offsets and credits, benefit-sharing mechanisms, with environmental and social safeguards.
Target 14: Ensure the full integration of biodiversity and its multiple values into policies, regulations, planning and development processes, poverty eradication strategies, strategic environmental assessments, environmental impact assessments and, as appropriate, national accounting, within and across all levels of government and across all sectors, in particular those with significant impacts on biodiversity, progressively aligning all relevant public and private activities, fiscal and financial flows with the goals and targets of this framework.
Note: Emphasis added to denote links to positive incentives.
Source: (CBD, 2022[12]), Kunming-Montreal Global Biodiversity Framework, https://www.cbd.int/doc/decisions/cop-15/cop-15-dec-04-en.pdf.
Governments’ commitment to adopt positive incentives for biodiversity is not new in the CBD. Aichi Target 3 under the CBD 2011-2020 Strategic Framework for Biodiversity stated:
By 2020, at the latest, incentives, including subsidies, harmful to biodiversity are eliminated, phased out or reformed in order to minimize or avoid negative impacts, and positive incentives for the conservation and sustainable use of biodiversity are developed and applied, consistent and in harmony with the Convention and other relevant international obligations, taking into account national socio-economic conditions.
Despite political commitments and the potential for these types of policy instruments to help address the multiple pressures on biodiversity loss, as well as their ability to generate new sources of revenue (that can also be channelled back into biodiversity), these instruments are often underutilised. In its assessment of progress towards Aichi Target 3, the fifth Global Biodiversity Outlook concluded that “Overall, little progress has been made over the past decade [...] in developing positive incentives for biodiversity conservation and sustainable use [...]” (SCBD, 2020[13]). Indeed, the uptake of such instruments has slowed (Section 2.3).
An initial step that countries can take is to translate Target 18 of the KMGBF into their National Biodiversity Strategies and Action Plans (NBSAPs) and the targets therein. According to the CBD Online Reporting Tool, 52 parties had submitted NBSAPs by June 2025 while 132 had submitted targets (some preliminary) (CBD, 2025[14]). Strengthening data on the use of biodiversity-positive incentives, for example through the OECD PINE database, would facilitate peer learning and efforts to track progress towards KMGBF Target 18.
Biodiversity loss partly results from market failure, which is when the allocation of goods and services is inefficient, leading to a loss in social welfare. For biodiversity, market failures arise because the diverse range of benefits that ecosystems provide are not fully captured by market prices. Ecosystem services, such as climate regulation, nutrient cycling, pollination, and even many cultural and recreational benefits, are unpriced or only partially priced in markets. As a result, their value (cost or benefit) is not reflected in the economic decisions that affect them.
An externality is an unintentional cost (i.e. a negative externality) or benefit (i.e. a positive externality) arising from the production or consumption of goods and services that affects third parties and is not reflected in market prices (Barbier, 2022[15]; Dasgupta, 2021[3]). For instance, when a company clears a forest for timber or agriculture, it can affect evapotranspiration (the source of rainfall), nutrient cycling and the provision of freshwater to downstream communities. When these social costs are not accounted for in market prices, a negative externality arises. An example of a positive externality is when a landholder provides habitat for bees that pollinate the crops of neighbouring farms, without being economically rewarded (Dasgupta, 2021[3]). Because the costs and benefits associated with ecosystem services are external to the decision-making process of individuals or firms, they often go uncompensated in the market and therefore tend to be underprovided.
Other causes of market failure that lead to a divergence between private and social net benefits include imperfect information (e.g. on the inherent benefits of biodiversity), the public good characteristics of biodiversity (i.e. non-excludable and non-rival in their consumption), and a lack of well-defined property rights. Given the free market's inability to adequately protect biodiversity, government intervention is necessary to mitigate biodiversity loss. Such interventions can take the form of regulations, such as zoning laws, protected areas and quality or quantity restrictions, economic instruments (i.e. positive incentives) – the focus of this report – and information or voluntary instruments.
Biodiversity-positive incentives provide price signals to producers and consumers to behave more sustainably. They help to “internalise” the external costs (e.g. pollution) or benefits (e.g. carbon sequestration) in the economic calculus of those responsible. In other words, they can lead individuals or companies to account for not just the private costs (or benefits) of an activity but also the societal ones.
Economic theory promotes positive incentives for biodiversity due to their potential to be cost-effective, flexible and dynamic (Dasgupta, 2021[3]; Panayotou, 1995[16]). They can be more cost-effective than command-and-control regulations, encouraging conservation and sustainable use of biodiversity at a lower total cost to society. For example, a cap-and-trade system on phosphate emissions allows companies with lower abatement costs to sell excess permits to companies with higher abatement costs, leading to an overall reduction of emissions at lower total cost. Incentive-based instruments are flexible as they allow those regulated to find the most economically viable way to achieve biodiversity goals, rather than dictating specific actions. They are dynamic because they provide continuous incentives to achieve biodiversity objectives more efficiently.
Biodiversity-positive incentives are also important for biodiversity financing. They can help to align fiscal and financial flows with biodiversity goals and targets (KMGBF Target 14) and mobilise finance for biodiversity (KMGBF Target 19) in three, interconnected ways discussed below: alignment and indirect mobilisation, direct mobilisation and public revenue generation.
First, by changing the relative costs of activities, products and companies, positive incentives can help shift harmful financial flows – aligning them with biodiversity objectives – and indirectly mobilise biodiversity finance. For example, biodiversity-positive taxes may increase investment in research and development (R&D) and innovation as companies seek cost-effective solutions for minimising their tax burden (OECD, 2010[17]). Additionally, subsidies (e.g. tax credits; grants) may explicitly promote R&D and innovation for biodiversity objectives (e.g. Biodiversa+ European Biodiversity Partnership (Biodiversa+, 2024[18]).
Second, some positive incentives function as biodiversity financing mechanisms, directly mobilising finance. For example, subsidies are a key mechanism for disbursing public funds in favour of biodiversity. Payments for ecosystem services, biodiversity offsets and biodiversity credits can mobilise and deliver private finance for activities that promote biodiversity. PES in ten countries1 alone mobilise an estimated USD 10.1 billion per year (OECD, 2021[19]), while biodiversity offsets mobilise at least 6.9 billion per year globally (predominantly in the US) (Chapter 6) (Deutz et al., 2020[20]).
Furthermore, by providing a revenue stream from actions to conserve and restore biodiversity, PES and biodiversity offsets can help unlock investment in biodiversity from the financial sector. Wetland mitigation banks in the US, for example, have already helped secure investment in biodiversity projects from angel investors and private equity firms through to institutional investors (e.g. pension funds, insurance companies) (Chapter 6).
Third, a different subset of positive incentives (i.e. taxes, fees and auctioned tradable permits) can generate revenue for government. Revenues from biodiversity-related taxes generate at least USD 10.6 billion per year globally in government revenue in the OECD2 (OECD, 2023[21]). The objective of a tax and fee could be to change behaviour, generate revenue or both. However, there are trade-offs between optimising incentives to change behaviour and generating revenues. For example, if a tax is effective in changing behaviour, the tax base diminishes over time, potentially reducing the revenue generated (Criqui, Jaccard and Sterner, 2019[22]). This is exemplified by the Costa Rican PES programme which depends on fossil fuel tax revenues that have been declining due to behavioural change (Chapter 3). Policy makers should consider these trade-offs to improve incentive design and avoid unsustainable financing strategies (Chapter 4).
Governments have various options for redistributing the revenue generated by taxes, fees and auctioned tradable permits (OECD, 2005[23]). They can: i) retain the revenue within the general budget to pay for additional public spending or to improve fiscal balances; ii) use revenue to compensate for the distributive impact of the taxation or pricing measure (e.g. through a payment to individuals or businesses); iii) reduce social security contributions or existing taxes, for example labour taxes or taxes on property dedicated to restoring and protecting biodiversity (see examples in Chapter 3); iv) “earmark” revenue for a dedicated environmental fund or purpose, separate from the rest of the budget.
Various governments earmark revenues from environmental taxes, fees and tradable permits for activities that support biodiversity (Chapters 3 and 4). For example, several countries earmark a portion of protected area entrance or tourism fees for national park management (e.g. Botswana, Nepal, New Zealand, US) (Chapter 4). In Costa Rica, revenues from a fuel tax are earmarked for the National Forest Fund that finances the country’s PES scheme, thereby delivering both climate and biodiversity benefits, while in Ecuador, several PES schemes are partly funded by fees levied on water users (Chapter 3). Both the Costa Rican and Ecuadorian examples illustrate how incentives are important for achieving both target 14 (i.e. by contributing to alignment of tax revenues and fiscal outlays with biodiversity objectives) and target 19 (i.e. as a mechanism to mobilise biodiversity finance). Despite its potential benefits for biodiversity, the practice of earmarking remains a topic of divided opinion (Box 2.2).
Arguments for earmarking:
Promotes greater transparency on where budget is allocated and can therefore also help to garner increased public support.
Ensures a sustainable source of finance (e.g. water taxes in Mexico used to finance national PES programme).
Provides incentives for effective collection of taxes/fees (e.g. in Protected Areas, as the revenue is then re-injected to those same areas).
Arguments against earmarking
Bypasses or pre-empts the annual budgets and thus affects the fairness of the budgetary process through which departments compete on an equal footing for funds.
Pre-assignment of claims on the budget shifts the locus of accountability and responsibility for efficient resource allocation to the managers of specific programmes or agencies
Creates a precedent, giving rise to claims of other government agencies to have their own earmarked funds. This leads to fragmentation of the budget and complicates fiscal policy implementation.
Can generate issues of rent-seeking by public agencies.
Can create inefficiencies in public expenditure.
If it can be demonstrated that the advantages of earmarking outweigh the risks, then earmarking may be justified but should have clear objectives, be timebound and monitored. Earmarking should then only be continued if it demonstrates value-added in relation to its stated objectives.
Source: (OECD, 2013[24]), Scaling-up Finance Mechanisms for Biodiversity (and references therein). (OECD, 2025[25]), Recommendation of the Council on Good Practices for Public Environmental Expenditure Management.
Through its Policy Instruments for the Environment (PINE) database, the OECD collects quantitative and qualitative information on the use of policy instruments relevant to the environment, including those that are relevant to biodiversity. The PINE database currently includes data from 145 countries, of which 102 countries implement at least one biodiversity-positive instrument. The data show that the number of countries with biodiversity-positive incentives has roughly tripled since 1980 (Figure 2.1). According to the PINE data, as of 2024, at least 70 countries have active biodiversity-positive taxes, 75 have biodiversity-positive fees, 25 have tradable permit schemes and 34 countries have biodiversity-positive subsidies. Since 2022, the PINE database also collects information on payments for ecosystem services (PES) and on biodiversity offset programmes. While the data are not complete, the PINE database indicates that at least 28 countries have PES and at least 9 have biodiversity offsets, as of 2024.
The total number of active biodiversity-positive economic instruments increased most rapidly from 1990-2010; since then, the number of instruments has increased more slowly (Figure 2.2). Globally, the PINE database suggests that biodiversity-positive fees (301) and taxes (227) are the most prevalent active instruments. The PINE database counts 240 biodiversity-positive subsidies, 51 payments for ecosystem services schemes, 34 biodiversity-positive tradable permit schemes and 17 biodiversity offset programmes (Figure 2.2).
Note: An additional 8 countries have taxes, 9 have fees, 1 has a payment for ecosystem service and 1 has biodiversity-positive subsidies but these are not shown in this figure as starting dates for these instruments are unknown
Source: (OECD, 2024[26]), OECD PINE database accessed 27 August 2024.
Note: An additional 46 taxes, 61 fees, 1 biodiversity offset, 1 tradable permit, 2 payments for ecosystem services, and 71 biodiversity-positive subsidies are in force but are not shown here as their start date is unavailable (referred to as “Total”). 16 inactive instruments with unknown start date are not reflected in the figure.
Source: (OECD, 2024[26]), OECD PINE database accessed 27 August 2024.
Biodiversity-positive incentives are most common in primary sectors. The agriculture, forestry and fishing sectors account for 31% of biodiversity-positive incentives, while water supply, sewerage, waste management and remediation activities account for 12% (Panel A of Figure 2.3). The manufacturing sector and transportation and storage sector also feature significantly, accounting for 8.2% and 7.9% of all biodiversity-positive incentives, respectively. Smaller shares are seen for sectors such as electricity, gas, steam and air conditioning supply (4.6%), and arts, entertainment and recreation (3.4%).
Within the agriculture, forestry and fishing category, 38% of biodiversity-positive incentives are applied to fishing and aquaculture (Panel B of Figure 2.3), and 34% to crop and animal production, hunting and related services. Forestry and logging account for the remaining 28%.
Note: Sectoral coverage is defined following the ISIC sector codes. ISIC codes for 27.8% of the incentives are currently not available in the database.
Source: OECD PINE database accessed 27 August 2024.
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