Exploiting hysteresis in coordination incentives for cost-effective biodiversity conservation

Abstract Conservation payment schemes, typically spatially homogenous, are widely used to induce biodiversity-friendly land use. They can also address habitat fragmentation if a bonus is added to the homogenous base payment when conservation measures are implemented next to other conserved lands. However, if conservation costs differ spatially, the spatial aggregation of habitat can be costly, and the cost-effective generation of contiguous habitats is an issue. Here we use a stylised agent-based simulation model to demonstrate that land-use induced by agglomeration bonus schemes can exhibit hysteresis, meaning that the amount and aggregation of conservation is to some extent resilient to changes in payment levels. This suggests that staggered payment schemes in which a relative large bonus is used to establish a habitat network and lowered afterwards to a level sufficient to sustain the habitat network, may be more cost-effective than a scheme with a constant bonus. We show that low base payments and relatively high bonuses can create hysteresis, and staggered payments based on this design principle can—especially at high spatial variation of conservation costs and long-term time preference in the decision maker—generate cost-effectiveness gains.