Biodiversity and the economic response to COVID-19: Ensuring a green and resilient recovery

Maintain or strengthen regulation on land use, wildlife trade and pollution

The loosening of environmental regulation – temporarily or permanently – may be politically expedient, but it is very likely to exacerbate biodiversity loss and therefore be costly in the long-term. While the unravelling economic crisis may provide an impetus to improve the efficiency of cumbersome permitting and reporting processes, it is vital that any changes made do not weaken (de jure or de facto) their environmental stringency. To avoid future pandemics and other crises, maintaining or stepping-up regulations on land-use change, wildlife trade and polluting activities is critical. Furthermore, by shining a light on the links between human health and biodiversity, the COVID-19 pandemic may have provided a political window of opportunity to tighten regulation. The regulatory changes on wildlife trade in China and Viet Nam are testimony to this. However, it will be important that such regulatory measures are carefully designed and implemented to avoid driving wildlife trade underground and to minimise and address any negative impacts on the livelihoods of vulnerable communities (Roe et al., 2020[69]).

It is equally important to ensure that environmental regulations are effectively enforced. The COVID-19 pandemic and associated lockdown measures have led to reports of increased illegal logging and wildlife poaching in countries in Africa, Asia, and South America due in part to curtailed monitoring and enforcement efforts (and in part to a loss of rural livelihoods) (IUCN, 2020[70]; Waithaka, 2020[71]). Governments face the challenge of ensuring that environmental monitoring and enforcement continues to be financed and conducted during and after the COVID-19 pandemic (while respecting social distancing, travel restrictions and other health measures). In addition to being vital for safeguarding biodiversity and ecosystem services, increased efforts to monitor and deter illegal extraction of natural resources (e.g. timber and wildlife) may provide an important short-term economic stimulus by creating jobs (Strand and Toman, 2010[72]).

Attach environmental conditionality to bailouts to drive sustainability improvements

A significant share of public spending committed as part of COVID-19 response and recovery plans is dedicated to sectors that are associated with a heavy biodiversity footprint, such as agriculture, energy and industry. On the one hand, public spending on these sectors in the absence of environmental considerations risks entrenching or exacerbating pre-COVID-19 unsustainable practices and trajectories, driving further biodiversity loss. This is particularly the case in countries where biodiversity-relevant policies are already weak or poorly enforced. On the other hand, public spending could be an opportunity to pull these sectors onto a more sustainable trajectory.

To safeguard biodiversity and help drive improvements in environmental sustainability, it is imperative that governments keep longer-term policy goals in mind when designing and allocating loans, grants, tax relief and other support for companies. Preferential treatment could be provided to industries or companies that have a neutral or positive impact on biodiversity, or support could be made conditional on companies making commitments to reduce their biodiversity footprint. Some countries have already applied climate conditionality to their stimulus measures. For example, the Austrian government’s bailout of Austrian Airlines is conditional on the company taking action to reduce their greenhouse gas emissions. To receive support from Canada’s Large Employer Emergency Financing Facility (LEEFF), companies must commit to disclosing yearly climate-related reports (Government of Canada, 2020[73]).

Screen and monitor stimulus measures for their biodiversity impacts

Given the large scale of stimulus packages announced, spending decisions could have considerable implications for biodiversity. It is therefore prudent to screen measures for potential biodiversity impacts (positive and negative), prior to their implementation. This would help governments to evaluate the “greenness” of their economic recovery programmes, and to re-consider measures that could potentially have a significant negative impact on biodiversity.

Monitoring and evaluating the effects of implemented measures is also important. Understanding whether stimulus measures have achieved their macroeconomic, employment and environmental objectives, and whether they have had unintended consequences, would allow for adjustments over time and inform the design of future stimulus packages. Despite the importance of screening, monitoring and evaluating stimulus measures, a review by OECD found that very few ex-ante and ex-post assessments of green stimulus packages were conducted following the 2007-2008 Global Financial Crisis (OECD, 2020[74]). To complement countries’ efforts to monitor COVID-19 stimulus measures, the OECD has established a COVID-19 Green Recovery platform, which includes a list of 13 headline environmental indicators covering a number of environmental issues including biodiversity (OECD, 2020[75]).

To effectively screen, monitor and evaluate stimulus measures, countries could also draw on green budgeting initiatives and the EU Sustainable Taxonomy. Green budgeting is about assessing and improving the alignment of budgetary processes and fiscal policies with biodiversity and other environmental objectives. Examples of green budgeting initiatives include OECD’s Paris Collaborative on Green Budgeting, launched in 2017 (OECD, 2020[76]), and France’s development of a green budgeting methodology in 2019 (Green Budgeting: proposition de méthode pour une budgetisation environnementale) (Waysand et al., 2019[77]). The EU Sustainable Taxonomy is a framework under which an economic activity can be considered environmentally sustainable under European financial legislation (Martini, 2020[78]). An economic activity is eligible if it “substantially contributes” to at least one of the six environmental objectives10 while doing “no significant harm” to any of the other objectives. The principles, tools and approaches of these initiatives could be employed and further developed to ensure that COVID-19 recovery spending is consistent with biodiversity objectives.

Set biodiversity spending targets for COVID-19 stimulus measures and recovery plans

Governments could set green targets (or requirements) for their COVID-19 stimulus packages to ensure they support biodiversity and other environmental objectives. For example, the EU requires 30% of the pandemic recovery package the Next Generation European Union (NGEU) and interlinked Multiannual Financial Framework (MFF) to be earmarked for climate protection (i.e. EUR  550  billion over 2021-27), which may also benefit biodiversity by addressing one of the key drivers of biodiversity loss. Similar spending targets could be envisioned for biodiversity. Austria’s COVID-19 response includes EUR 200 million in funding for municipalities to co-finance climate resilience projects, and requires 20% of this to support nature-based solutions. It is important, however, that efforts to increase the volume of biodiversity-positive stimulus measures are accompanied by efforts to reduce the volume of stimulus flowing to biodiversity-harmful activities.

Promote jobs in biodiversity conservation, sustainable use and restoration

Investing in biodiversity creates immediate job opportunities, while safeguarding the natural capital that underpins the economy, human health and well-being. Activities such as ecosystem restoration, reforestation, invasive alien species management and environmental monitoring and enforcement tend to be labour intensive and quick to implement, because worker-training requirements are relatively low and projects often have minimal planning and procurement requirements (Hepburn et al., 2020[79]).

In addition to providing immediate jobs, investment in biodiversity can provide a short and long-term economic multiplier effect. For example, ecosystem restoration in the United States provides direct employment for 126 000 workers and generates USD 9.5 billion in economic output annually, while creating a further 95 000 indirect jobs and USD 15 billion in household spending (BenDor et al., 2015[53]). Furthermore, conservation, restoration and improved management of forests, grasslands, wetlands and agricultural lands could deliver 23.8 gigatonnes of cumulative carbon dioxide emission reductions by 2030. About half of this mitigation potential represents cost-effective climate mitigation, defined as a marginal abatement cost of less than or equal to 100 USD per tonne of CO2 by 203011 12 (Griscom et al., 2017[80]).

Engage businesses and the finance sector for a biodiversity-positive recovery

Businesses and the finance sector have a critical role in delivering a recovery that is sustainable and green. Strategic spending by governments could help to mobilise private finance for biodiversity, for example by improving the risk-return profile of biodiversity projects to attract private finance, and by ensuring publicly procured goods and services come from companies that meet biodiversity criteria.

Further work is required to help businesses and investors measure their impacts and dependencies on biodiversity, and the risks and opportunities these entail. Businesses should integrate biodiversity considerations across all areas of business, e.g. strategy and governance, risk management, due diligence and disclosure. Financial markets must be transparent, and correctly value and account for biodiversity-related impacts and risks. The work of the newly established Taskforce on Nature-related Financial Disclosure could help to achieve this.

With companies redesigning operations and supply chains to address the crisis, now is also a good time to promote the uptake of responsible business conduct (RBC) standards and tools.13 OECD’s Guidelines for Multinational Enterprises (OECD, 2011[81]) and OECD Due Diligence Guidance for Responsible Business Conduct (OECD, 2018[82]) could help guide these efforts. Applying risk-based due diligence to identify and address adverse impacts on biodiversity, would help companies’ to build resilience to current and future supply chain disruptions, and enhance their ability to access finance. Work is underway at the OECD to strengthen the biodiversity component of RBC guidelines.

Reform biodiversity-harmful subsidies

With increased government spending putting further pressure on already strained budgets, it is now as vital as ever that public expenditure is well targeted and efficient. Subsidising activities that undermine the integrity and resilience of ecosystems upon which future economic health depends, is a self-defeating policy. Prior to COVID-19, government expenditure on subsidies harmful to biodiversity was at least five times greater than total spending to protect biodiversity (OECD, 2020[83]). Support for fossil fuels in 77 economies (principally OECD and G20), was USD 478 billion in 2019. Agricultural support potentially most harmful to biodiversity14 was on average USD 112 billion per year for the period 2017-2019, in OECD countries alone (OECD, 2020[84]). Such support is likely to drive further ecosystem degradation, thereby increasing the risk of future pandemics, climate-related disasters and disruption of commodity supply chains.

Instead of incentivising activities that harm biodiversity, governments should redirect subsidies to activities that deliver socio-economic outcomes and have a positive (or at least neutral) impact on biodiversity. For example, governments could provide targeted payments to promote biodiversity and other environmental public goods in agricultural systems; however only a handful of countries adopt these policies and they represent a small share of total support for agriculture (OECD, 2020[85]). Agri-environmental payments have the potential to deliver “win-win” outcomes for both environmental and economic performance, although evidence suggests that their success has been patchy and identifies significant room for improvement (OECD, 2013[86]) (DeBoe, 2020[87]). Similarly, re-directing fisheries support away from policies that incentivise more intensive fishing towards activities that improve the sustainability of fishing operations, could have significant benefits for the environment as well as for fishers’ livelihoods (Martini and Innes, 2018[88]).15 Budgetary support for innovation and the wider enabling environment could also play an important role in making agro-food systems more productive, sustainable and resilient, helping to reduce pressure on ecosystems. Yet only one-eighth of total agriculture support16 goes to agricultural innovation systems, inspection and control systems, and rural infrastructure (OECD, 2020[85]).

Scale up economic incentives for biodiversity

The waiving or reduction of taxes, or deferral of tax payments, has been a key element of many countries’ COVID-19 responses. While reductions in labour taxes to support struggling businesses and maintain jobs during this crisis may be sound policy, reducing biodiversity-relevant taxes is not. It favours polluting companies and facilitates the erosion of biodiversity and ecosystem services upon which the economy, human health and well-being depend. Rather than reducing biodiversity-relevant taxes, countries should increase their application and ensure that their prices accurately reflect the cost of biodiversity loss. Introducing and ramping up taxes on activities that harm biodiversity would deliver dual benefits. Firstly, it would provide a clear economic signal to help drive the transformative changes needed to halt biodiversity loss. Secondly, the additional revenue could help offset increased government spending and reductions in other tax revenue (e.g. labour tax) resulting from the COVID-19 induced economic crisis.

Although biodiversity-related taxes were steadily increasing in number prior to COVID-19, they remain underutilised. A total of 206 biodiversity-relevant taxes were in force at the beginning of 2020, spanning 59 countries. While revenue from biodiversity-relevant taxes was USD 7.5 billion per year (average 2016-2018) in OECD countries, it is less than one percent of total revenue from environmentally-relevant taxes (OECD, 2020[89]), which in turn account for approximately five percent of all tax revenue (OECD, 2020[90]).

Revenue from biodiversity-relevant taxes and other environment-relevant taxes could be used to reduce budget deficits, or it could be re-directed towards green stimulus measures that improve the sustainability of agriculture and other land-use. Colombia and Costa Rica, for example, have implemented carbon taxes whose proceeds are earmarked for conservation activities, such as forest protection, reforestation, agroforestry and sustainable forest management (WEF, 2020[48]). While these schemes were in place prior to COVID-19, they provide pertinent examples of how governments could develop effective response packages that support livelihoods and benefit biodiversity, without increasing the fiscal burden.

Adopt and strengthen the One Health approach

Emerging zoonoses such as COVID-19, and other health threats such as antimicrobial resistance, are linked to the interaction between humans, domesticated animals, wildlife and ecosystems. One Health17 has emerged as a holistic, interdisciplinary approach to address such complex challenges. While there is no universal definition, the One Health Commission defines it as “a collaborative, multi-sectoral, and trans-disciplinary approach – working at local, regional, national, and global levels – to achieve optimal health and well-being outcomes recognizing the interconnections between people, animals, plants and their shared environment” (One Health Commission, 2020[91]). The Manhattan Principles on One World, One Health adopted in 2004 delineate priorities for an international, interdisciplinary approach for combating threats to the health of life on Earth. The Food and Agriculture Organization of the United Nations (FAO), World Organisation for Animal Health (OIE) and World Health Organization (WHO) started collaborative work in 2010 to address risks at the human-animal-ecosystems interface and updated their joint 2008 tripartite guide on zoonoses and other One Health issues in 2019.

While there has been some success in applying the One Health approach (Weerasinghe, 2018[92]), efforts have largely focussed on building links between medical and veterinary disciplines, with less attention given to ecosystems (Barrett and Bouley, 2015[93]) (Cleaveland, Borner and Gislason, 2014[94]) (CBD, 2017[95]). Further integration of ecological, medical, veterinary, climate and broader economic perspectives is an important step in preventing future zoonotic outbreaks (Romanelli et al., 2014[96]). The Convention on Biological Diversity (CBD) provides guidance on how this can be achieved in its 2017 Guidance on Integrating Biodiversity Considerations into One Health Approaches (CBD, 2017[95]). Countries are invited to take further action to integrate biodiversity into the One Health approach by CBD Decision 14/4 Health and Biodiversity, which was adopted by the 14th Conference of the Parties to the CBD in 2018 (CBD, 2018[97]). The cost of investing in ecological measures that can help prevent a pandemic is much less than the cost of a pandemic (Dobson et al., 2020[45]).

Support developing countries to safeguard their biodiversity

Developing and emerging economies will be among the hardest hit socially and economically by the COVID-19 pandemic, with significant implications for biodiversity. Prior to the pandemic, many of these economies were already struggling to finance biodiversity, and were facing rising debt. Total external debt stocks of developing economies and economies in transition had more than doubled from USD 3.5 trillion in 2008 to USD 8.8 trillion in 2018, or from 22% of GDP to 29% (UNCTAD, 2019[98]). As of late 2019, 33 out of 69 countries analysed were classified “in debt distress” or at “high risk” (IMF and World Bank, 2019[99]). The COVID-19 pandemic is exacerbating the situation as countries increase spending to finance health measures, support households and firms, and invest in the recovery, while sources of domestic revenue (e.g. tax revenues) and international development finance wane.18

Official development assistance (ODA) has proven to be a key resource and countercyclical flow (i.e. counteracts fluctuations in the economy) in past crises (OECD, 2020[100]), and could be vital for ensuring the ongoing protection of biodiversity in some developing countries during and after the crisis. Many developing countries are highly dependent on ecotourism revenues for funding biodiversity protection, and these have all but dried up due to travel restrictions (Waithaka, 2020[71]; IUCN, 2020[70]). In the short-term, ODA could be used to help fill the gap where other finance has declined. For example, Germany’s International Climate Initiative (IKI) is implementing a EUR 68 million Corona Response Package that will provide, among other things, financial support for the conservation of nature reserves in IKI partner countries to address the immediate impact of COVID-19 (Platform 2020 Redesign, 2020[101]). In the longer term, ODA could be used to scale up efforts to tackle deforestation and illegal wildlife trade, and to develop new funding models for biodiversity protection that are diversified and therefore more resilient to shocks such as COVID-19.

In the face of impending debt crises, sovereign debt restructuring and debt swaps could present an opportunity to reduce a country’s debt, while also delivering on biodiversity objectives that provide domestic and global benefits. This could be achieved by lender countries offering lower interest rates and principal repayments in return for increasing biodiversity protection (Zadek, 2020[102]). Debt-for-nature swaps, a type of debt restructuring, have existed since the late 1980s. The US government’s debt-for-nature swaps cancelled approximately USD 1.8 billion owed by 21 low- and middle-income nations, and generated USD 400 million for conservation. Debt-for-nature swaps carried out by all other high-income nations totalled USD 1 billion of debt cancelled and generated about USD 500 million for conservation (Sommer, Restivo and Shandra, 2019[103]). While debt-for-nature swaps traditionally focused on terrestrial biodiversity, the first debt-for-nature swap with a marine conservation component was launched in 2016 by the Government of the Seychelles and Paris Club creditors, supported by The Nature Conservancy.

Develop, adopt and implement an ambitious post-2020 global biodiversity framework

The post-2020 global biodiversity framework was due to be adopted in 2020 at the 15th Conference of the Parties to the Convention on Biological Diversity (CBD COP15). However, owing to COVID-19, the conference has been postponed to 2021. The framework is intended to steer action on biodiversity by the public and private sector for the next decade, and bring about the transformative changes in national goals, policies and actions needed to avert biodiversity loss.

Countries will need to work together effectively and efficiently to establish a framework that is fit-for-purpose. This means having an effectively structured and operational framework containing specific, measurable and ambitious targets. Targets should be linked to indicators in order to track progress and enhance the effectiveness of policy interventions. OECD proposes that the framework has a set of headline indicators that are consistent and comparable across countries, and cover the state of biodiversity, the pressures on biodiversity and the actions needed to addresses these and underlying drivers. For further details see “The Post-2020 Biodiversity Framework: Targets, indicators and measurability implications at global and national level” (OECD, 2020[104]) and “OECD submission on the draft monitoring framework for the post-2020 global biodiversity framework” (OECD, 2020[105]).