9/4/2009 1

The Economics of Ecosystems and Biodiversity (TEEB)

Measuring Natural Capital TEEB approach and Working insights

Rome G8+5 Legislators ForumItalian Chamber of Deputies

12th- 13th June 2009

Patrick ten Brink

TEEB D1 Co-ordinator

An initiative of the G8+5, BMU (D) & the

European Commission Supported by

Defra (UK), UNEP, OECD, CBD Secretariat, VROM, EEA, UFZ, IUCN, Univ. Liverpool,

IEEP & experts from across the world

The Economics of Ecosystems and Biodiversity (TEEB)

Building on and borrowing from the work & insights of the wider TEEB team

and contributors of supporting studies, call for evidence and other contributions

TEEB overview

1. TEEB genesis, aims and ambitions

2. Approach to valuing natural capital

3. From value to policy tools

� Incentive schemes

� Subsidies

� Protected areas & other investment in green infrastructure

� Regulation

� Policy instrument mixes

4. From value to priorities

TEEB’s Goals

1. Demonstrate the value to the economy, to society/individuals and wider environment – what we have & what we risk losing.

2. Underline the urgency of action, benefits of action (opportunities)

3. Show how we (can) take into account the value of ecosystems and biodiversity in our decisions and choices,

4. Identify / support solutions

� New instruments,

� Support wider use of good existing tools (eg in other countries),

� Help make existing tools realise their potential;

� Help provide information to reform “bad ones”

5. Address the needs of policy-makers, local administrators, business and citizens (the “end-users”)

Source: adapted from Pavan Sukhdev

9/4/2009 4

The Process for TEEB Phase 2

Inputs from Science and Economics experts through the Call for Evidence, participation in Working Groups, etc

D0

2008 2009 2010

Continuous involvement of End-User Groups

D4

D3

D2

D1

Science & Economics Foundations

TEEB for Policy-Makers

TEEB for Citizens/Consumers

TEEB for Business

TEEB for Administrators

End-U

ser O

utr

each

CB

D C

OP10 N

agoya, Japan

CB

D C

OP9 -

Bonn, G

erm

any

D0

D4

D3

D2

D1

Scenarios and models for exploring future trends in biodiversity and

ecosystem services - CEC

Update / Additional analysis

9/4/2009 5

The D1 (Policy Level) TEEB Report: (The “wireframe”)

turned into questionsD1

Ch Questions being addressed

1 Why is there Urgency for Action to address biodiversity loss?

2 Who can take up the biodiversity challenge; what tools can help ?

3 What should we measure to ensure a proper stewardship of our natural capital?

4 What tools work, what needs and opportunities are there for their use?

5 What policy instruments can help & how to make markets give the right signals?

6 Can we save money and avoid the destruction of biodiversity?

7 What instruments and market signals can help ensure that the polluter pays ?

8 What role do Protected Areas play and how to we help them meet their promise?

9 What package of instruments and responses do we need?

TEEB overview

1. TEEB genesis, aims and ambitions

2. Approach to valuing natural capital

3. From value to policy tools

� Incentive schemes

� Subsidies

� Protected areas & other investment in green infrastructure

� Regulation

� Policy instrument mixes

4. From value to priorities

Fiber

Food

Spiritual & religious

Freshwater

Genetic resources

Climate regulation

Water purification

Disease regulation

Flood/Fire regulation

Recreation & tourism

Aesthetic

Economic Value ($)

Economic Valuation

Difficult or impossible

Easy

?

?

?

?

?

?

?

?

?

?

?

Ecosystem services public goods & difficulty of valuation

Source: Jeffrey A. McNeely, Chief Scientist, IUCN-The World Conservation Union from presentaion: FUNDING MECHANISMS FOR BIODIVERSITY. 27

July 2006 Inter-American Development Bank Workshop on Biodiversity Loss

How does the value of ecosystems and biodiversity help policy makers?

Economic values provide information / evidence to demonstrate:

� Importance/Value (and costs) of maintaining natural capital

� Opportunities from investments in natural capital

� Cost of degradation and loss – past and future

� Cost of risks & “what if” scenarios

� Value of early action

� Value of policy synergies

� Understanding social implications

� Needs for & design of economic instruments

Note one does not always need extensive valuation to reach the necessary

understanding or progress with instruments. For example for Payments for

Environmental Services (PES), negotiation can also do the job.

Importance/Value (and costs) of maintaining natural capital

Value of services often taken for granted:

� Water supply/regulation: Catskills Mountains $2bn natural capital solution

vs $7bn technological solution (pre-treatment plant)

� Pollination: 30% of 1,500 crop plant species depend on bee and other insect

pollination. Value of bees for pollination ~ Eur29 billion to EUR 70 billion

worldwide per annum.

� Fish stock existence/productivity: Global market $80bn, 1.2 billion people

reliant, stock collapses have major (local/national) implications

� Flood control services of floodplain: eg FR River Bassee floodplain: ~ 91.5 –305 million EUR / year

Importance/Value (and costs) of maintaining natural capital

Value of services: existing, growing and new markets

Existing markets :pharmaceuticals : ~ US$640 billion a year, of which around 25 to 50 percent is derived from genetic resources.

Agricultural seeds: ~$30bn

Growing markets: biotrade: natural cosmetics ~ $7 billion in 2008; Organic

agriculture ~ €30.8 billion in 2006; FSC certified forests ~ 7% of the world’s

productive forest, in 81 countries, with a value ~ US$20 billion

Ecotourism: again $billion industry, growing fast, with significant employment

Biomimicry: growing part of architecture, engineering etc

Opportunities from investments in natural capital

Cost effective measures

- eg water regulation (Catskills), carbon storage – maintenance of peat lands, protected areas, prevention / early response to invasive alien species (IAS), biomimicry (boxfish inspired car, 30% more efficient)

Benefits of restoration

eg wetlands and flood control; mangroves, fish breeding groups

Benefits of protected areas

eg multiple: food variety reservoirs for future food security

Benefits of other green infrastructure

eg city climate change adaptation (cooling from green cover)

Biodiversity loss From 1700 to 2050

Poorer Ecosystems

Richer Ecosystems

Source: building on Ben ten Brink (MNP) presentation at the Workshop: The Economics of the Global Loss of Biological Diversity 5-6 March 2008, Brussels, Belgium.

73%

62%

(1) Economic size of losses (COPI 1 study)

A : 50-year impact of inaction or ‘business as usual’

B : Natural Capital Loss every year

Welfare losses equivalent to 7 % of GDP, horizon 2050

Natural Capital Lost : AnnuallyEUR 1.35 x 1012 to 3.10 x 1012

(@ 4% (@ 1%

Discount Rate) Discount Rate)

3. TEEB Phase 1 results

Sou

rce

: B

raa

t&

ten

Brin

k(E

ds.,

20

08

): C

ost

of

Po

licy

Ina

ction

A. Do we have a measurement problem?

B. The way we currently measure biodiversity and ecosystem services

C. Better macro economic and societal indicators

D. GDP of the Poor

E. More Comprehensive National Income Accounting

Measuring What we Manage: Towards Proper Stewardship of Our Natural Capital

Range of opportunities to take natural capital into account

• Biodiversity indicators: needs for measurement/monitoring, modeling and targets.

• Ecosystem services indicators important for instrument design (PES, REDD)

• Ecological footprints valuable for policy targets and communication

• Critical importance of ecosystem services to the poor – refocus poverty policy?

• National policy makers with more comprehensive national income accounts

TEEB overview

1. TEEB genesis, aims and ambitions

2. Approach to valuing natural capital

3. From value to policy tools

� Incentive schemes

� Subsidies

� Protected areas & other investment in green infrastructure

� Regulation

� Policy instrument mixes

4. From value to priorities

Incentive Schemes: Rewarding the (unrecognised) value of ecosystems and biodiversity

� Payments for Environmental Services (PES) – potential to build on experiences of

water purification, carbon storage et al. Economics underlines the potential. Need for

upfront ecosystem service assessments, conditionality, participation, monitoring & governance.

� PES-REDD – potentially high value new instrument offering synergies between

biodiversity and climate change (see later speaker)

� Access and Benefits Sharing (ABS) – negotiations

� Other compensation measures (tax breaks, transfers) and direct payments to secure

benefits

� Markets (organic, biotrade, natural cosmetics, FSC, MSC etc) – being

“mainstreamed”. Need for support for certification of producers in 3rd countries.

� Green public procurement – making use of market demand (PP 14% of EU GDP). A tool

that can help green the product cycle – leading counties to show the way.

9/4/2009 17

Subsidies: Aligning Today’s Subsidies to Tomorrow’s Priorities

OECD: €33.6 bn (Myers and Kent) – incl. irrigationWater

World: €179-230 bn/year – of which EHS €130-175 bn (EEA) Transport

IEA: $310 billion in the 20 largest non-OECD countries in 2007

(IEA, 2008)

Energy

World: USD 15-35 billion (UNEP, 2008)Fisheries

OECD: €204 bn a year (in 2005-7) (OECD 2008)

Biofuels OECD: €10-12 bn in 2006 (OECD 2008)

Agriculture

OECD/ worldSector

We are fishing down the foodweb – D. Pauly (UBC, Canada)2010

40 %

40 %

20 %

1950

TEEB overview

1. TEEB genesis, aims and ambitions

2. Approach to valuing natural capital

3. From value to policy tools

� Incentive schemes

� Subsidies

� Protected areas & other investment in green infrastructure

� Regulation

� Policy instrument mixes

4. From value to priorities

9/4/2009 19

TEEB for Policy MakersSome working recommendations

The North has a major responsibility to act and provide resources; the South cannot escape the responsibility of protecting forest and other resources but cannot do so alone. A shared project. Institutions must rise to this.

� We have limited time; 10 years(?) to reverse trends;

� Combined strategy / policy synergies - biodiversity & climate (+water, food);

� Public investment on large scale (PAs, restoration, green infrastructure)

� New and better working markets are needed and better economic signals

� Regulation still critical part of toolkit to reduce pressures

� Subsidy reform – critical to save money, reduce impacts

� Priority areas: Fisheries, Forestry, Agriculture, Biomass, Coral reefs

9/4/2009 20

Making the markets signals work better

� The cost and price signals in the economy need to reflect the benefits of ecosystems and biodiversity. There are

� Opportunities for payments to reward benefits of ecosystems and biodiversity (PES, REDD, Markets, GPP)

� Opportunities and needs for reforming subsidies so that they reflect tomorrow’s priorities (fisheries, agriculture, bio fuels et al)

� Needs for a range of measures to make the polluters pay(legislation, restoration, liability, compensation)

� Engage the power of the government, consumers and the supply chain (green public procurement, certification)

9/4/2009 21

Solutions – a Toolkit; which portfolio of instruments will work for you?

Policy Instruments

� New instruments (eg REDD)

� Support wider use of good existing tools

�Market based: eg PES, resource charges, fine/compensation, markets, GPP

�Regulation: waste water treatment, air pollution control, standards et al

� Help make existing tools realise their potential (eg EIA, SEAs, PAs);

� Help provide information to reform “bad ones” (eg harmful subsidy reform)

Information: Better information to measure to Manage Natural capital.

� From ecosystem indicators & footprints, to valuation of natural capital, to more encompassing macro indicators, GDP of the poor, to more comprehensive national accounts

New investments (eg green infrastructure, restoration, PAs, green new deal investments)

Instruments and measures Contributions to natural capital

Past degradation

Predicted future loss of natural capital (schematic)

2009 2050

No net loss from 2009 level / halting biodiversity loss

Opportunities/benefits of ESS

Investment in natural capital +ve change

Alternative natural capital

Development path

Avoided loss eg by regulation

Investment in natural capital: PAs

Restoration

Other green infrastructure

Markets: certification & GPP

Economic measures: PES, REDD, fines

measurement & evidence-based policies

Better governance/implementation of law

Subsidy reform `

9/4/2009 23

Thank You

What measures do you see as offering the greatest potential? Practical Roadmap?

& looking forward to your questions and feedback

Patrick ten Brink

ptenbrink@ieep.eu

IEEP is an independent, notIEEP is an independent, notIEEP is an independent, notIEEP is an independent, not----forforforfor----profit institute dedicated to the profit institute dedicated to the profit institute dedicated to the profit institute dedicated to the

analysis, understanding and promotion of policies for a analysis, understanding and promotion of policies for a analysis, understanding and promotion of policies for a analysis, understanding and promotion of policies for a

sustainable environment in Europesustainable environment in Europesustainable environment in Europesustainable environment in Europe

24

• TEEB for Policy Makers: ptenbrink@ieep.eu

• Further information and Call for Evidence: www.teebweb.info

• Contact Scientific Coordination: teeb@ufz.de

• Further contributors:

Thank You!

25

Annex

Supporting / backup slides

TEEB’s Genesis and progress

“Potsdam Initiative – Biological Diversity 2010”

1) The economic significance of the global loss of biological diversity

TEEB Interim Report @ CBD COP-9, Bonn, May 2008

Strömstad 7-9 September

Ecosystem Services - The Millennium Ecosystem framework

Source: MEA

Mapping changes : from Biodiversity & Ecosystems to Economic Values

Source: L. Braat & P. ten Brink (eds.)

Change inEconomic

Value

Policies Nat. Reg. Loc. Int.

Changein

Land use,Climate,Pollution,Water use

(Human)Drivers

ChangeIn

EcosystemServices

Changein

Biodiversity

Changein

Ecosystemfunctions

Natural Drivers

The link between biodiversity, ecosystems, their services, and

benefits to mankind…& economics

Function

eg 1: slow

passage of water

eg 2: biomass

Biophysical

Structure of process

eg 1: woodland

habitat

eg 2: net primary

productivity) Service

eg 1: flood

prevention

eg 2: harvestable

products

eg 3: carbon

storage

Benefit (value)

eg 1: avoided costs of

impacts

eg 2: for more woodland

harvestable products

eg3: value of carbon

capture and storage

Source: Building on presentation by Jean-Louis Weber (EEA) presentation at the Workshop: The Economics of the Global Loss of Biological Diversity 5-6

March 2008, Brussels, Belgium

Maintenance and restoration costsAlso investments in green

infrastructure – PAs, watersheds, urban environment.

Economic and social values – some market values or to be market values, some risk, some non market

values

Natural Capital

Monetary Value

Quantitative Review of Effects

Qualitative Review

Non-Specified

Benefits

Increasing up the

benefits

pyramid

Measuring Benefits of Ecosystem services

Answers are needed at all levels

Full range of ecosystem services from biodiversity

Type of benefits; health benefits

from clean air, social benefits

from recreation, income from

products, security, wellbeing.

Quantitative: eg level of service,

number people benefiting from

wood from forests, # of avoided

health impacts; number of visitors

Monetary: eg avoided water purification

costs, avoided flood damage, tourist

value, value of medicines /

pharmaceuticals from natural products

Knowledge gaps The “known-

unknowns” and

“unknown-unknowns”

Source: P. ten Brink: presentation at March 2008 workshop Review of Economics of Biodiversity Loss, Brussels

The BenefitsPyramid

9/4/2009 31

Structure and content being developed continuously taking into account insights & suggestions –detailed wireframe on http://ec.europa.eu/environment/nature/biodiversity/economics/pdf/d1.pdf

The D1 (Policy Level) TEEB Report: Structuring the issues The “wireframe”

D1

Ch Title

1 The Biodiversity Policy Challenge

2 Policy Responses: Actors and instruments

3 Measuring to Manage our Natural Capital

4 Evaluation Tools that (can) Integrate the Value of Biodiversity

5 Policies to Reward (unrecognised) Benefits of Ecosystems and Biodiversity

6 Aligning Today’s Subsidies to Tomorrow’s Priorities

7 Policies to Address the Losses of Biodiversity

8 Protecting areas, ecosystems, habitats and species

9 Using the whole Policy Toolkit to address the challenge

9/4/2009 32

Policy instrument mixes – an example

Oil Spills: following Exxon Valdez – policy response: a combination of instruments:

• Technical Regulation: requirement for double hulled ships - 79% of all oil

tankers criss-crossing the globe are now of double-hull design

• Regulatory constraints: single hulled ships not allowed in EU waters.

• Economic incentives: responsibility for clean up fines and compensation payment for damage - The cleanup effort cost the company $2.5 billion alone, and Exxon was forced to pay out $1.1 billion in various settlements. A 1994 federal jury also fined Exxon an additional $5 billion for its "recklessness,"

• Criminal charges: risk of charges for negligence, jail sentences

Policy response: a needed response to an unfortunate “window of opportunity”