This paper analyses the economics of biodiversity conservation in the context of a tropical ecosystem in India, where coffee is the main competitor for land use.Using primary data covering a cross section of coffee growers,the study notes that the opportunity costs of biodiversity conservation in terms of coffee benefits foregone are quite high.Even after including external costs due to wild life damages and defensive expenditures to protect against wild life, the NPVs and IRRs from coffee for all land holding groups were high.The study notes that the external costs accounted for between 7 to 15% of the total discounted costs of coffee cultivation, and smaller holdings proportionately incurred higher external costs as compared to larger holdings. The study also notes high transaction costs incurred by the growers to claim compensation for wild life damages. Notwithstanding these disincentives, the study notes that the local community were willing to pay in terms of time for participatory biodiversity conservation, and they preferred a decentralised government institution for this purpose.
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