economic valuation of ecosystem services and biodiversity conservation: a multidisciplinary approach...
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Economic Valuation of Ecosystem Services and Biodiversity Conservation: a multidisciplinary approach
Paulo A.L.D. Nunes
University Ca’ Foscari of Venice Fondazione Eni Enrico Mattei
Euro Mediterranean Center for Climate Change
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Contents
Background and motivation
Economic thinking and environmental economics
Economic valuation perspective
Biodiversity as an environmental resource
Economic reasons for economic valuation
Integrating ecology and economics
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Contents
Millennium Ecosystem Assessment
Ecosystems services approach
Biodiversity, ecosystems, ecosystems services and human well-being are linked
Reflection, and challenges
A research agenda for valuing ecosystem services
Tasks to mainstream economic valuation in everyday decisions
Economic valuation of ecosystems services as a means for biodiversity conservation and poverty alleviation
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Just what is economic thinking?
Economics is a social science, human behaviour is at the core of the analysis, we focus on the study of “choices”, individual choices.
Choices are disclosed in the allocation of scarce resources (not just traditional commodities) to meet individual economic needs.
Economics is not simply about profits or money. It applies anywhere constraints are faced, so that choices must be made.
Economists study how incentives affect people’s behavior.
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Environmental and natural resource economics
Environmental and natural resource economics is the application of the principles of economics to the study of how environmental and natural resources are developed and managed.
Environmental resources – resources provided by nature that are indivisible and are affected by the economic system (e.g. biodiversity).
Natural resources – provided by nature that can be divided into increasingly smaller units and serve as inputs to the economic system over time (e.g. forests, oil).
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direct usevalue
recreation benefitse.g. sight-seeing, fishing, swimming
TOTALUSEVALUES
indirectuse value
ecosystem functional benefitse.g. watershed protection, timber production
ECONOMICVALUE
optionvalue
safeguard of use benefitse.g. pharmaceuticals, future visits
NONUSEbequestvalue
legacy benefitse.g. habitat conservation for future generations
VALUES existencevalue
existence/intrinsic benefitse.g. knowledge of continued protection ofwildlife diversity
adapted from Pearce and Moran (1993)
Definition of the total economic value of an environmental resource
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direct usevalue
recreation benefitse.g. sight-seeing, fishing, swimming
TOTALUSEVALUES
indirectuse value
ecosystem functional benefitse.g. watershed protection, timber production
ECONOMICVALUE
optionvalue
safeguard of use benefitse.g. pharmaceuticals, future visits
NONUSEbequestvalue
legacy benefitse.g. habitat conservation for future generations
VALUES existencevalue
existence/intrinsic benefitse.g. knowledge of continued protection ofwildlife diversity
adapted from Pearce and Moran (1993)
Definition of the total economic value of an environmental resource
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direct usevalue
recreation benefitse.g. sight-seeing, fishing, swimming
TOTALUSEVALUES
indirectuse value
ecosystem functional benefitse.g. watershed protection, timber production
ECONOMICVALUE
optionvalue
safeguard of use benefitse.g. pharmaceuticals, future visits
NONUSEbequestvalue
legacy benefitse.g. habitat conservation for future generations
VALUES existencevalue
existence/intrinsic benefitse.g. knowledge of continued protection ofwildlife diversity
adapted from Pearce and Moran (1993)
Definition of the total economic value of an environmental resource
The major contribution of environmental economists has been in the area of the valuation of environmental goods and services, i.e. methods for measuring the demand curves for goods for which there are no markets (nonmarket valuation)
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1. Why perform economic valuation2. Economic valuation perspective
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Why perform economic valuation
Cost-benefit-analysis and environmental policy
making Excessive pollution Protection of the natural environment
Legal claims and natural resource damage
assessment
Exxon Valdez (CERCLA, NOAA)
Environmental accounting (national and firm level)
Satellite national accounting system Corporate social responsibility reports
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Economic valuation perspective
(1) Instrumental vs. intrinsic valuation.
(2) Monetary vs. physical indicators.
(3) Direct vs. indirect values.
Alternative perspectives on valuation
(4) Value of levels vs. changes of levels.
(5) Holistic vs. reductionist approaches.
(6) Expert vs. general public assessments.
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All in all…
It is clear that different valuation perspectives can be distinguished based on the above considerations. This means that different angles on the value, and valuation, may in fact be based on different perspectives.
This does not mean that one is right and the other is wrong.
Evidently, it is crucial to know which perspective is being adopted.
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Economic perspective
Instrumental perspective
Provides a monetary indicator
Valuation is operationalized through explicit changes of the environmental status, preferably marginal or small (interpreted as alternative policy scenarios)
Not a value of an ecosystem!
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Economic valuation perspective
Biology description of the
system (e.g. indicators) identification of threats
Economics
economic valuation economic policy
theory
Communities
general international legal regime implementation and control at regional and sectorial level
Scenarios formulation
Policy instruments
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Economic valuation perspective
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Economic Valuation
***
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Biodiversity as an environmental resource
Biodiversity requires our attention for two reasons. First, it provides a wide range of direct and indirect benefits to mankind, which occur on both local and global scales.
Second, many human activities contribute to unprecedented rates of biodiversity loss, which threaten the stability and continuity of ecosystems as well as their provision of goods and services to mankind.
Consequently, in recent years much attention has been directed towards the analysis and valuation of the loss of biodiversity.
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Biodiversity and Human Welfare
HUMAN HUMAN WELFAREWELFARE
BIODIVERSITY BIODIVERSITY RESOURCESRESOURCES
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Complexity of the resource
Levels of biodiversity
Types of diversity Physical expression
Gene Genes, nucleotides, chromosomes, individuals
Species Kingdom, phyla, families, genera, subspecies, species, populations
Ecosystem Bioregions, landscapes, habitats
Functional Keystone process species, ecosystem resilience, and ecological services
Source: Turner et al. (1999).
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Biodiversity
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Human welfare
Species
Ecosystem
2 6
3
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Classification of biodiversity economic values
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2 => 5 Genetic and speciesdiversity
Inputs to productionprocesses (e.g.pharmaceutical andagriculture industries)
CV: +TC: -HP: +AB: +PF: +Contracts: +
1 => 4 => 5 Natural areas andlandscape diversity
Provision of natural habitat(e.g. protection of wildernessareas and recreationalareas)
CV: +TC: +HP: -AB: -PF: +Tourism revenues: +
1 => 6 Ecosystem functions andecological services flows
Ecological values(e.g. flood control, nutrientremoval, toxic retention andbiodiversity maintenance)
CV: -TC: -HP: +AB: +PF: +
3 Nonuse of biodiversity Existence or moral value(e.g. guarantee that aparticular species is keptfree from extinction)
CV: +TC: -HP: -AB: -PF: -
Biodiversityvalue category
Economic valueinterpretation
Biodiversitybenefits
Degree of applicability of theeconomic valuation methods
Applicability
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Genetic and species diversity
(2=>5)
Bioprospecting From: $ 175,000
To: $ 3.2 million
Market contracts
Single species From: $5To: $126
Contingent valuation
Multiple species
From: $18 To:
$194
Contingent valuation
Life diversity level
Biodiversity value type
Value ranges Method(s) selected
Review of valuation studies:
Unequivocal support for the belief that biodiversity has a significant, positive social value.
Lack of a uniform, clear perspective on biodiversity as a distinct concept from biological resources.
Available results should be regarded as providing, at best, lower bounds to the unknown value of biodiversity changes.
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Millennium Ecosystem Assessment
The Millennium Ecosystem Assessment (MA) was called for by the United Nations Secretary-General Kofi Annan in 2000.
Objective of the MA was to assess the consequences of ecosystem change for human well-being.
The MA has involved the work of more than 1,360 experts worldwide.
Their findings provide a state-of-the-art scientific appraisal of the condition and trends in the world’s ecosystems and the services they provide, as well as the scientific basis for action to conserve and use them sustainably.
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Biodiversity matters and people matter!
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Motivation: stylized fact one
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Motivation: stylized fact two
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Source: MEA (2005), adapted.
MEA: conceptual framework
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Source: MEA (2005), adapted.
Climate change
MEA: conceptual framework
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Source: MEA (2005), adapted.
Climate change
Forests systemsCoastal and marine systems
MEA: conceptual framework
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Source: MEA (2005), adapted.
Climate change
Forests systemsCoastal and marine systems
MEA: conceptual framework
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Marineecosystem goods
and services
Market priced benefits
Un-market priced benefits
Fisheries products
CO2 Recreation Nonuse valuesEco-tourism
Provisioning services
Regulatingservices
Culturalservices
Market priceanalysis
Cost Assessments
An illustration:
Contingent valuation methods
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Monetary valuation approaches
Market price valuation mechanisms.These include the value of contracts, as recently signed by the pharmaceutical industry and governmental agencies, and the value of the financial revenues related to the eco-tourism activities focused on the visits to natural areas with high outdoor recreational demand.
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Monetary valuation approaches
Non-market valuation methods.These refer to special tools used by the economist so as to retrieve consumer’s preferences for biodiversity benefits, including
Contingent Valuation Methods (CVMs)
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What are CVMs?
Valuation technique widely applied by environmental economists (Exxon case)
Aims at tracing the latent demand curve for a non market commodity
The main tool is an on-purpose designed questionnaire It is a very flexible development
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Potential of CVM Studies
Interview based Technique Deeply rooted in social studies literature Gathers a great deal of information on attitudes and
preferences Capable of attaching “economic measures” to non use values Flexible to other uses, i.e. management options
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Biodiversity, ecosystems, ecosystems services and human well-being are linked
Ecosystem services: ecosystems provide vital goods and services
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Provision of ecosystem services is not often factored into important decisions that affect ecosystems.
Distortions in decision-making damage the provision of ecosystem services making human society and the environment poorer
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(1) Incentives
(2) Actions
Ecological production functions
(6) Valuation
(3) Non-anthropocentric approaches
Other considerations
Benefitsand costs
Decisions by firms and individuals
Policy decisions
Ecosystems
Ecosystem services
(7) Economicefficiency
(5) Biophysical tradeoffs
(4)
Integrating ecology and economics: a research agenda for valuing ecosystem services
Source: S. Polasky, adapted
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Reflection and challenges:tasks to mainstream economic valuation
1. Improve understanding of the likely consequences of human actions on ecosystems
2. Improve understanding of the impacts of ecosystem change on ecosystem services and biodiversity
3. Improve understanding of the value of these impacts on human welfare
4. Tie understanding of impacts and values to incentives
Everyday decisions of individuals, firms and communities
Societal policy choices
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Reflection and challenges:tasks to mainstream economic valuation
5. Integration of distributional objectives in the objective function of the policy maker (other considerations)
6. The role of the local communities in the management of the resource
7. The role of the resource in terms of income generation
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Work in progress: BioLAC
Position
paper
Methodological
paper
Empirical application
papers
Turtles as ecosystem engineers in the LAC
Policy/management insights
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Motivation
Jul 16th 2009From The Economist print edition