CBD Distr. GENERAL UNEP/CBD/WS-Incentives/3/2 4 September 2009 ORIGINAL: ENGLISH INTERNATIONAL WORKSHOP ON THE REMOVAL AND MITIGATION OF PERVERSE, AND THE PROMOTION OF POSITIVE, INCENTIVE MEASURES Paris, 6–8 October 2009 Items 3 and 4 of the provisional agenda* ANALYSIS OF RELEVANT INFORMATION ON THE IMPACTS OF POSITIVE AND PERVERSE INCENTIVES Note by the Executive Secretary I. INTRODUCTION 1. In paragraph 6 of decision IX/6, on incentive measures, the Conference of the Parties requested the Executive Secretary to convene an international workshop on the removal and mitigation of perverse, and the promotion of positive, incentive measures, consisting of government-nominated practitioners with balanced regional representation, as well as experts from relevant organizations and stakeholders. The mandate of the workshop is: (a) To collect, exchange and analyse information, including case-studies on, good practices for, and lessons learned from, concrete and practical experiences in identifying and removing or mitigating perverse incentive measures, and in promoting positive incentive measures; and (b) To identify a limited number of good-practice cases from different regions, for consideration by the Subsidiary Body on Scientific, Technical and Technological Advice at a meeting prior to the tenth meeting of the Conference of the Parties, and for review by the Conference of the Parties at its tenth meeting. 2. In paragraph 7 of the same decision, the Conference of the Parties requested the Executive Secretary to compile and analyse relevant information, including analyses and studies from relevant international organizations, such as the Organisation for Economic Co-operation and Development (OECD), on the impacts of positive and perverse incentive measures, to disseminate this information through the clearing-house mechanism of the Convention, and to make it available to the workshop. * UNEP/CBD/WS-Incentives/3/1. .../ In order to minimize the environmental impacts of the Secretariat‘s processes, and to contribute to the Secretary-General‘s initiative for a C-Neutral UN, this document is printed in limited numbers. Delegates are kindly requested to bring their copies to meetings and not to request additional copies. UNEP/CBD/WS-Incentives/3/2 Page 2 3. The present note provides an analysis of the relevant information that was compiled pursuant to this request. By notifications 2009-045 of 1 May 2009 and 2009-070 of 30 June 2009, the Executive Secretary invited Parties, relevant international organizations and stakeholders to submit any relevant information, including analyses and studies, which would be of use for the work of the experts. Submissions were subsequently received from Cuba, Egypt, the European Commission and India as well as from the Food and Agriculture Organization of the United Nations (FAO), the Organisation for Economic Cooperation and Development (OECD), the initiative ―The Economics of Ecosystems and Biodiversity‖ (TEEB), the German League for Nature and Environment, and the Institute for Environmental Decisions of the Swiss Federal Institute of Technology (ETH) Zurich. These submissions are reflected in the present analysis. 4. The complete compilation of relevant information is being provided on a dedicated website at www.cbd.int/incentives/. The website provides a link to the online database on incentive measures, which provides relevant information, collected over the past years, on the reform of perverse incentives and the application of positive incentive measures. The database also contains earlier submissions received from Parties and relevant organizations and initiatives on these topics. Synthesis reports on these earlier submissions were prepared for various meetings of the Subsidiary Body on Scientific, Technical and Technological Advice, and of the Conference of the Parties, and are available at http://www.cbd.int/incentives/documents.shtml. II. PAST WORK UNDER THE CONVENTION 5. According to Article 11 of the Convention, on incentive measures, each Contracting Party shall, as far as possible and as appropriate, adopt economically and socially sound measures that act as incentives for the conservation and sustainable use of components of biodiversity. The Conference of the Parties at its fifth meeting, in 2000, adopted a programme of work on incentive measures which included work on the identification and removal or mitigation of perverse incentives, as well as on positive incentive measures.1 In 2008, the Conference of the Parties undertook an in-depth review of the programme of work at its ninth meeting, and, in paragraph 1 of its decision IX/6, recognized its ongoing relevance. The decision emphasizes that incentive measures should: (a) Contribute to the conservation of biological diversity and the sustainable use of its components and not negatively affect biodiversity and livelihoods of other countries; (b) Contribute to sustainable development and the eradication of poverty; (c) Take into account national and local conditions and circumstances; (d) Be consistent and in harmony with the Convention and other relevant international obligations. 6. In paragraph 4 of the same decision, the Conference of the Parties decided to put more emphasis on, inter alia, amongst others, on methods for assessing the effectiveness of incentive measures, including positive incentive measures and the removal of perverse incentive measures. A. Perverse incentives 7. In past work under the Convention,2 perverse incentives were conceptualized to emanate from policies or practices that induce unsustainable behaviour that destroys biodiversity, often as unanticipated side-effects of policies designed to attain other objectives. Environmentally harmful subsidies are a prime 1 Decision V/15. 2 UNEP/CBD/COP/5/15. /... UNEP/CBD/WS-Incentives/3/2 Page 3 example.3 According to the OECD, an environmentally harmful subsidy can be defined as the result of a government action that confers an advantage to consumers or producers, in order to supplement their income or lower their costs, but in doing so, discriminates against sound environmental practices.4 8. Perverse incentives may also emanate from some laws or regulations governing resources uses. For instance, many countries had, or still have, ―beneficial use‖ rules that require land holders to make productive use of resources such as water or forests. Such rules may under certain circumstances – for instance, an increasing fragility of the resource due to changing climate patterns or a loss of resilience because of biodiversity loss – generate a perverse incentive to continue using the resource in a non-sustainable manner instead of switching to more adapted use patterns.5 Moreover, perverse incentives may sometimes also emanate from environmental regulations, or from measures that were introduced to act as a positive incentive for the conservation and sustainable use of components of biodiversity. 9. At its fourth meeting, in 1998, the Conference of the Parties encouraged Parties, Governments and international organizations to identify perverse incentives and consider the removal or mitigation of their negative effects on biological diversity.6 At its sixth meeting, in 2002, the Conference of the Parties endorsed proposals for the design and implementation of incentive measures as far as they are consistent with Parties' national policies and legislation as well as their international obligations.7 The proposals contain guidelines for selecting appropriate and complementary incentive measures. The guidelines recognize: (a) That the removal of perverse incentives eases pressure on the environment; (b) That the identification of both internal and external perverse incentives and other threats to biodiversity conservation and to the promotion of sustainable use, is essential to the selection and design of incentive measures; and (c) That the removal of perverse incentives may improve economic efficiency and reduce fiscal expenditures. B. Positive incentive measures 10. A positive incentive measure is an economic, legal or institutional measure designed to encourage beneficial activities. 8 Further to a request expressed by the Conference of the Parties at its seventh meeting, the Executive Secretary prepared an analysis of existing and new instruments that provide positive incentives, their interaction with other policy measures, and their effectiveness, including their requirements for successful application, possible limitations and shortcomings. 9 11. At its eighth meeting, the Conference of the Parties recognized that positive incentive measures can influence decision-making by recognizing and rewarding activities that are carried out for the conservation and sustainable use of biological diversity, and are important in achieving the objectives of the Convention and the 2010 biodiversity target, when such positive incentive measures are targeted, flexible, transparent, appropriately monitored and adapted to local conditions. 10 3 See already UNEP/CBD/COP/5/15. 4 See TEEB (2009), adapted from OECD (1998) and OECD (2005). 5 UNEP/CBD/COP/5/15, paragraph 26. 6 Decision IV/10 A, paragraph 1 (f). 7 Decision VI/15, paragraph 1 and annex I. 8 UNEP/CBD/COP/5/15, paragraph 5. 9 Document UNEP/CBD/SBSTTA/11/INF/11. 10 Decision VIII/26, preamble to the second section of the decision. /... UNEP/CBD/WS-Incentives/3/2 Page 4 12. The Conference of the Parties encouraged relevant national, regional and international organizations and initiatives to strengthen mechanisms that build