Desmarais Global Finance Research Centre (DGFRC) Seminar: Lin William Cong

Lin William Cong

Cornell University

Unintended Consequences of Biodiversity Conservation

Date: Friday, October 4, 2024
Time: 10:30-11:45 am
Location: Bronfman Bldg. (1001 Sherbrooke St. West), Room 340

All are cordially invited to attend.

Abstract:

Biodiversity conservation stands as one of the most urgent and pivotal challenges facing humanity today. Yet it often incurs substantial economic or financial costs and brings fortuitous benefits beyond policymakers and environmentalists consider. I describe two cases where such conservation efforts have increased public financing cost or advanced science. In the first case that I briefly summarize, we investigate how financial markets price the risks biodiversity transition costs induce, exploiting the "Green Shield Action,” a major regulatory initiative launched in China in 2017 to enforce biodiversity preservation rules in national nature reserves. While improving biodiversity, the initiative led to significant increases in bond yields for municipalities with these reserves. The effects are driven by increases in local governments' fiscal risk due to expected increases in transition costs resulting from shutting down illegal economic activities within reserves and additional public spending on biodiversity. Investors show little non-financial consideration towards endeavors counteracting biodiversity loss.

In the second case, which is the main focus of the seminar, we examine the first strict seasonal fishing ban along the Yangtze River in 2003 has since successfully preserved fishery resources as originally intended. Its broader socioeconomic implications, however, remain unknown. Exploiting the setting with a difference-in-differences design, we provide the earliest causal evidence of how local biodiversity conservation policies affect scientific research, which hinges on having abundant and diverse natural resources as research materials. Specifically, the ban is estimated to spur an increase, other things being equal, in quality research inquiry about Yangtze River fish (funded programs doubling and funding amount more than tripling), with scientific outputs manifold greater in both quantity (publications more than tripling) and impact (i.e., citations more than quintupling and related books, patents, awards, and media coverage all increasing). We demonstrate that the relative increase in biological research materials drives the result, rather than other attention-based or policy-based channels. We conclude that preserving nature is not only an ecological duty but also a strategic investment in the future of science and innovation.