A simple idea to reduce custody costs: transfer funds
All over the world, nature conservation is not always easy for local governments.
When a national government establishes a protected area, for example, the local governments in that area bear a large part of the conservation costs, including the costs of not being able to develop (and tax) the protected lands.
But a growing phenomenon called “green tax transfers” is helping to ease the burden on local governments – and is proving a simple and powerful way to channel funds into conservation.
A study published today in the journal Nature Sustainability represents the first global examination of ecological tax transfers and their potential to promote nature conservation. Conservation News spoke to Jonah Busch, Conservation International economist and lead author of the study, who calls these transfers âthe right idea at the right time,â with important implications for conservation funding around the world.
Question: “Ecological fiscal transfers”: In a few words, what are they?
Reply: Ecological tax transfers are money that the governments of a country send to each other to protect nature. Most often it refers to funds transferred by national governments to local governments.
A: Everyone benefits from the benefits of protecting nature, but the costs of conservation are localized. Restrictions on what you can do with your land have real implications for the ability of local governments to generate income from the tax base. Thus, ecological fiscal transfers (EFT for short) are a way to compensate a local government for the opportunity cost of not developing this land – whether through agriculture or otherwise – and to reward it for the protection of the land. benefits that nature offers to all.
A: Every year, we found that there was around $ 23 billion US per year in EFT – and increasing. It’s happening in five countries – programs started in Brazil and have spread to Portugal, France, China and India. Other countries are also exploring this concept.
Q: How did EFT start in Brazil?
A: EFTs started there as a way to soften a reaction from Brazilian municipalities to the national government, which has established protected areas. The idea was taken up later in Portugal, where there was a backlash against the European Union which launched a network of protected areas there. A similar situation occurred in India with the adoption of a national forest law. In each case, there was a restriction on land use, and EFTs were a way to mitigate the impacts by sending money to affected municipalities.
What is interesting is that while EFTs started out as a way to compensate for conservation that had already taken place, it also became a way to incentivize additional conservation.
Q: So what was important about this study?
A: Two or three things: This was the first global review of all green tax transfer programs, in all countries that have them or are considering implementing them. And it was the first worldwide review of all the academic literature written on this subject.
Q: What surprised you about your discoveries?
A: I was surprised at how big and fast growing EFTs are. The more we looked, the more countries we found where they were now part of the conversation. And even after the document was submitted, we started to hear more countries expressing interest in this concept.
Q: Why do you think it is?
A: I think EFTs are an attractive way for national governments to fund environmental goals without having to raise new tax revenue or ask legislatures to approve new funding from pools of limited resources. With EFT, all a country has to do is take the money that national governments send to state governments anyway and send it for a different reason.
A: The way LFS modifies the transfers governments receive is often quite aligned with poverty reduction goals. States within a country that receive more transfers have more forests or more protected areas, and these tend to be more remote and poorer states. States that receive fewer transfers are more urban and tend to be wealthier. In these urban areas, transfers from national governments represent a smaller part of their income base as they tend to have more sources of income.
Q: Only national governments can implement LFS?
A: In Brazil, state governments have EFTs with local municipalities. And there are also other types of transfers. In China, there are what are called horizontal transfers, where one province will pay another province to protect nature. There are cases where two provinces share a river, and the downstream province pays the upstream province based on the cleanliness of the water – and this is subsidized by the national government. If the water becomes cleaner, the downstream province pays the upstream province; if the water becomes dirtier, the upstream province must pay the downstream province. This creates a pretty strong incentive to keep the river clean.
Q: It makes so much sense. Why is EFT only starting to catch on?
A: There is an opportunity in this. It’s a big year for climate and biodiversity, with countries setting new goals to protect nature and fight global warming later this year. At the same time, budgets are tight – especially with COVID – and EFT is a way to do something green with big bucks without raising taxes or taking money out of something else. It’s the right idea at the right time.
Q: What do you see in the future for EFT?
A: I see more countries trying this and increasing the size of transfers. In countries where this is already happening, I see EFT refining and improving. The research program would examine their effects – do they serve the intended purpose? Are states creating more protected areas or protecting more forests as a result? Are there any unintended consequences? These are some of the questions we ask ourselves.
This study involved 23 co-authors from 15 countries brought together by the Earth Innovation Institute and the Technische-UniversitÃ¤t Dresden, and was funded by the Norwegian Agency for Development Cooperation. Jonah Busch is a climate economics researcher at Conservation International. Bruno Vander Velde is the Senior Director of Communications for Conservation International. Want to read more stories like this? Sign up to receive email updates. Donate to Conservation International.
Cover image: Monte Pascoal National Park, Brazil (Â© Conservation International / Flavio Forner)