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Financial compensation for biodiversity conservation in Ba Be National Park of Northern Vietnam

Abstract:

Terrestrial biodiversity is seriously threatened by an increasing deforestation rate. Financial incentives can stimulate local people to participate in biodiversity conservation. A common approach to derive financial compensation is estimating the opportunity costs arising from the adoption of conservation-friendly land-use practices. Assuming that farmers are risk averse, we used a decision-making under uncertainty approach to derive financial compensation for local people living in and around Ba Be National Park, Vietnam. Moderately risk-averse farmers need US$ 228 ha−1 year−1 financial compensation for the protection of natural forests in the Ecological Rehabilitation and Buffer Zones, whereas the required compensation reaches US$ 334 ha−1 year−1 in the Strict Protection Zone. These compensation payments were derived by comparing financial returns from natural forests with those of the most profitable land-use (maize). Compensation amounts decrease to US$ 130 ha−1 year−1 in the Ecological Rehabilitation and Buffer Zones and to US$ 218 ha−1 year−1 in the Strict Protection Zone, when considering diversification strategy. Derived financial compensations assume that farms comprise 20% croplands and 80% forest. We conclude that compensation amounts vary with farmers’ risk preferences, whether or not diversification strategy is considered, and the level of protection of a given area.