The conversion of biodiversity-rich land and ecosystem services

Abstract

Abstract Biologically diverse land provides ecosystem services to the agricultural sector. The paper develops a general equilibrium model with overlapping generation to explain the long-run dynamics of land conversion. Inclusion of ecosystem services in the production process imposes a limit to the growth of agricultural production. The market’s inability to value ecosystem services generated from biodiversity-rich land leads to inefficient use of biodiversity-rich land. In any period, the amount of land developed in the South depends on the relative size of the younger generation compared to the size of maximum available land. The absence of asset market for old-age savings, low land-clearing costs and low discount rates cause loss of biodiversity-rich land. Tools like land development fees or land taxes and market creation through payment for ecosystem services can conserve the biodiversity.