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5.4
REWARDING BENEFITS THROUGH PAYMENTS AND MARKETS
TAX AND COMPENSATION MECHANISMS
TO REWARD STEWARDSHIP
Economic instruments have a central – indeed indispensable
– role to play in valuing nature’s public services
to society (OECD 1999; Bräuer et al. 2006;
Emerton et al. 2006; EC 2007). These services can
be targeted by a range of policy instruments including
levies (5.4.1), intergovernmental fiscal transfers
(5.4.2) and government spending (5.4.3) (Ring 2002).
Fiscal instruments to safeguard ecosystem services
and biodiversity are part of the agenda for
ecological tax reform (Meyer and Schweppe-Kraft
2006; Ring 2008a). Such instruments could be used
more widely to provide incentives for conservation
and to raise funds for conservation (OECD 1999;
Emerton et al. 2006: 39). Such tools are also central
to social policy, including the redistribution of wealth
and income – making them especially suitable for
combining biodiversity and ecosystem conservation
with poverty reduction (OECD 2005; World
Bank 2005).
5.4.1 USING PUBLIC LEVIES TO
STIMULATE CONSERVATION
As highlighted in this report, the value of biodiversity
and many ecosystem services cannot always
be captured by market mechanisms alone.
Economic instruments such as taxes, charges and
fees – as well as targeted exemptions from these instruments
– are a crucial element of the policy
maker’s toolkit and complement regulation (see
Chapter 7), direct payments for services (PES, see
Section 5.1 above) and voluntary approaches from
certification, informal codes of conduct to non-binding
agreements 25 . Economic instruments can provide
strong incentives for more sustainable behaviour
by citizens, businesses and even governments themselves
– if they are well-designed and based on relevant
indicators.
Although land, property and income taxes have
considerable potential to integrate and reward
ecological concerns, they are rarely used for this
purpose. Tax systems can provide a number of options
to reduce existing tax burdens, either through
credits or exemptions. A tax exemption can function
like a PES to reward positive conservation efforts: the
difference is that the PES is a direct payment for a
service whereas the exemption is effectively a nonpayment
(of moneys that would otherwise be due as
tax). Even if the financial outcome is similar, the instrument
design is different and so, often, is public
perception. Some see tax breaks as a form of ‘thanks
for efforts’ that are preferable to payments for services
rendered, although in economic terms they may
be equivalent.
Tax exemptions or credits can be used to reward
landowners who undertake biodiversity conservation
or agree to forego future development in order to safeguard
habitats (Boyd et al. 2000). Such exemptions
take many forms and are found in a range of jurisdictions
(Shine 2005). Familiar examples include conservation
easements and tax incentives for land
donation for conservation (see Box 5.17).
Tax incentives are not limited to gifts of property or
interests therein. In the Netherlands, for example,
savers and investors are exempt from a capital gains
tax if they invest in specified green projects or capital
funds (Box 5.18).
TEEB FOR NATIONAL AND INTERNATIONAL POLICY MAKERS - CHAPTER 5: PAGE 40