This paper provides a synthesis of recent literature dealing with the institutional environment, policy framework, and economic instruments used in policy analysis related to the conservation and sustainable use of biodiversity resources. The paper analyzes the economic consequences of alternative policy options and summarizes the application of these economic issues in the formulation of biodiversity protection policy. The paper also concludes that the proper understanding of underlying institutions and, if needed, institutional reforming procedures are also required to provide appropriate incentive structures for conservation and sustainable use of biodiversity resources. Illustrations of these principles and examples are taken from published accounts of biodiversity policy debates and policy implications.