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OP21:Economic Techniques and Methods for (E)Valuation of BGBD
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OP21:Economic Techniques and Methods for (E)Valuation of BGBD



A presentation by Prof. Bustanul Arifin on the Rationale on (E)Valuation of BGBD

A presentation by Prof. Bustanul Arifin on the Rationale on (E)Valuation of BGBD



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OP21:Economic Techniques and Methods for (E)Valuation of BGBD Document Transcript

  • 1. 5/27/2010 Rationale on (E)Valuation of BGBD Economic Techniques and Methods • Economic valuation of ecosystem services (ES) of BGBD is not a panacea to solve the problems of environment and development. for (E)Valuation of BGBD • It is too simplistic to assume that BGBD is degraded because of lack of valuation; nor that forest land-use system is preferred than intensive cropping after valuation is conducted. • Economic valuation is not an end in itself but a tool that can help Bustanul Arifin, University of Lampung, Indonesia lead to sound decisions as there are important social-economic decisions, social economic and political factors affecting land-use decisions. Chinnappa Reddy, Agricultural University of Science, India • Costanza et al. (1997) attempted to value globally 17 ecosystem Jonas Chianu, Asian Development Bank, Morocco services of 16 biomes, including the value of specific ecosystem services like pollination, biological control and food production, despites of being criticized on many grounds. Prepared for BGBD Closing Conference, May 17-21, 2010 in Nairobi, Kenya • However, economic valuation of ecosystem services in BGBD and agriculture has received lower importance due to various reasons, including in this CSM-BGBD projects. Ecosystem Services of Micro-Organism ES of Macro-organism and Meso-fauna Micro-organisms Ecosystem Services ES category Macro organisms Ecosystem Services ES category Legume Nodulating 1. Nitrogen fixation Supporting service Bacteria (LNB) 2. Soil aggregation Supporting service Earthworms 1. Top soil formation Supporting service 3. Enhanced biomass accumulation Provisioning service 2. Nutrient availability Supporting service 4. Congenial micro climate for better root growth Regulating service 3. Reduction in soil erosion Regulating service Mycorrhiza 1. Enhanced P uptake & micronutrients Regulating service 4. Enhancement of decomposition rate Supporting service 2. Enhanced plant biomass Provisioning service 3. Establishment of vigorous seedling growth Provisioning service Termites, ants, Formation & maintenance of soil structure Supporting service 4. Drought resistance Regulating service 5. Control of root pathogen Regulating service beetles and other Water infiltration Regulation service 6. N2- fixation Supporting service mesofauna Nutrient recycling Regulation service 7. Production of growth promoting substances Regulating service Bio-turbation Supporting service Decomposers 1. Nutrient cycling Supporting service Predator on pests Supporting service (saprophytes) 2. Component in food chain Regulating service 1. Low organic matters Regulation service 3. Create eco-friendly environment Regulating service 4. Reduce plant biomass on earth Regulating service Techniques: Total Economic Valuation Methods of Economic Values of ES • Total Economic Value (TEV) is an aggregate of total • Revealed preference methods use value and total non-use value. Different values are – Direct market valuation techniques estimated by applying specific techniques. – Indirect market valuation techniques • TEV = Direct Use Value + Indirect Use Value + Option – Travel cost methods – Hedonic models Value + Bequest and Existence Value • A far as additive nature of TEV one should notes th t As f dditi t f TEV, h ld t that • Stated preference methods – Contingent valuation method (CVM) there might be contradiction or double counting in the – Willingness to pay (WTP) case of ecosystems values as if they exist in isolation – Willingness to accept (WTA) • Thus, not all values of ecosystem services can be – Conjoint (considered jointly) analysis (CA) reduced to economic or monetary terms. There are – Group valuation method (GVM) other types of values that must be recognized such as • Benefit transfer methods ethical, cultural or religious ones. • Others 6 1
  • 2. 5/27/2010 Direct Market Valuation Techniques Indirect Market Valuation Techniques • It usually applies to goods and services that are traded in the market. • Restoration cost- identifies the values of a system as the cost of • Examples N-fixation by BGBD can be valued through this method. replacing/restoring it to its original condition. • Economists usually measure the economic value through the yield boost • Replacement cost-calculates the expenditure to be incurred if the of the cost saving on a particular intervention or new technology. naturally provided service did not exist (soil fertility, water purification) • Techniques: the physical effects of the environmental change or • Opportunity cost-calculate the opportunity cost of foregone ecosystem services are determined first, with the underlying trend or influence of exogenous factors netted out. g development associated with each ecosystem services with preferred • Empirical estimates are based on known production effects, or research options, b comparing costs and/or alternative b fit ti by i t d/ lt ti benefits based field trials or laboratory experiments like LNB, PSM, Mychorriza or • Household production function-estimates consumer behavior based the research trial conducted in the field in the form of production function on the assumption of a substitution or complimentary relationship or response functions. between an environmental services and marketed commodities. • Monetary values are estimated for a given change due to ecosystem Adoption of BGBD technologies, the productivity of the soil has services in the form of physical production effects using the market prices to value change in outputs improved and thereby it commands a price premium of land values. • However, these techniques ignores the concept of consumer surplus; • Some other techniques such as: dose response, averting behavior are Non-use values associated with ecosystem services cannot be estimated no too relevant to value the environmental services of BGBD Travel-Cost Method, Hedonic Method etc Stated Preference Methods for BGBD (relies heavily on hypothetical markets situations and questions) • Travel-cost methods (TCM)--estimates use value of benefits from a recreation site, based on the cost incurred by the individuals for • Contingent valuation method (CVM)--facilitates valuation of accessing and related cost, use values of recreational benefits environmental changes before they occur. from a site are estimated • Willingness to pay (WTP)--expresses the willingness (ability) of • TCM can be used to infer the demand for a recreation site. Using consumers to value the changes of ecosystem services the concept of consumer surplus and fitting regression functions, • Willingness to accept (WTA)--captures for the desires of use values of the recreation site are estimated. In the domain of estimated providers (managers) to value changes of ecosystem services BGBD, TCM can be used-mostly as a well developed forestry and • Conjoint (considered jointly) analysis (CA)-- captures the canopy growth as recreational use value. preferences of ecosystem services over one or some attributes • Hedonic methods--analyzes how the different characteristics of a • Group valuation method (GVM)-- A group of stakeholders is marketed good including environmental quality, might affect the brought together; their values of ecosystem services are elicited price people pay for the good or factor. • Notes: to obtain realistic values, respondents must clearly • HM relies on the proposition that an individual's utility for a good or understand the ecosystem service or quality changes that BGBD service is based on the attributes which it possesses. For BGBD, it is likely to bring about. But, its operational flexibility leads to can be employed advantageously. methodological challenges and susceptible to various types of biases and reliability concerns. The Case of LNB: Direct market valuation Estimated Economic Value of LNB in Indonesia Multipurpose Microbe Fertilizer for Soybean (MMF) Based on Saraswati (1999, 2004) & Syaukat (2004) • Urea saved 100%, Phosphate saved 50% • Soybean production increases by 12.5% Economic Value of MMF = N saved + P saved + Yield Boost Rp 595,800 (US$ 66.2) per hectare Rhizobium Inoculant Technology (RIT) • Based on Sutarwi (1977), Sunarlim (1986), Sunarlim et al. (1993), Saraswati (2004) and Syaukat (2004). N Fixation N-fertilizer saved • In PMK soils (2 ton N, 69 kg P and 50 kg K per ha), amount of N fixated is 63.2 kg/ha or 45.4% of total; Use of LNB • Soybean production increases at 12-15% Improve soil Yield boost effects Economic Value of RIT = N saved + Yield Boost conditions Source: Syaukat (2004) Rp 431,760 (US$ 48) per hectare 2
  • 3. 5/27/2010 Conservation and Enhancement of LNB Estimated Economic Value of LNB in India • Conservation and enhancement of LNB may be accomplished by • Additional techniques: Total Factor Productivity (TFP), to direct manipulation (e.g. re-inoculation with desirable indigenous organisms such as N2-fixing bacteria or agents for biological decompose the change in output due to LNB from other factors control of plant disease) and/or indirectly through manipulation of such as the input use (particularly, fertilizer) and the efficiency of the cropping system (e.g. by choice of plants, the cropping pattern the LNB technology in groundnut production. in time and space, or management of organic inputs) • Rhizobium (LNB) increases yields of groundnut up to 14.18 %. ( ) y g p • The story of Rhizo-plus® could save the use of urea by up to 60%, and the yield can potentially be increased from 1.2 ton per ha to • Increased yield efficiency (cost reduction) by 1.76 % 2.6 - 3.6 ton/ha [Case: Musi Rawas-Sumatra, Siregar et al (2007)]. • Increase net farm income farmers by 55.81 (over non-users) • Agricultural practices which provide good soil protection and maintain high levels of soil organic matter favor higher biodiversity. • Economic value: Rs 1,326 (US$ 28.2) per hectare • Examples include agroforestry systems, intercropping, rotational • TFP of LNB in groundnut outputs is higher than that of inputs farming, conservation tillage, green cover-cropping, and integrated arable-livestock systems. TFP: Measuring Impact of Vermicompost Economic Value of Vermicompost in India • Additional output of crops under vermicompost Description Ginger Banana Coconut (VC) technology is due to: VC per se, input usage, and efficiency of VC technology usage. Technical Efficiency –C1 0.40 -1.78 -0.99 • Total factor productivity (TFP) is a measure used to decompose such factors, i.e. to estimate the (y1*-y1)- (y2*-y2) (31.11) (-31.23) (-22.72) contribution of technologies to additional output. Technical Change – C2 1.23 1.19 1.03 • Output change due to VC = y – y1 ( p g y2 y (A+B+C) ) (y1 y1 ) (y1**-y1*)- VC technology (95.36) (95 36) (20.81) (20 81) (23.76) (23 76) ∆={[y1*- y2] - [y2* - y2]} + [y1** - y1*] + [y2 - y1**] TFP {C1 + C2} 126.47 -10.42 1.04 Input use (y2*-y1**) -2.92 6.29 4.29 Output Change = {TE1 - TE2} + TC + ∆yx (-226.47) (110.42) (98.94) y1 = Yield without VC technology Total change (y2-y1) -1.29 5.70 4.34 y2 = Yield with VC technology y1* = Frontier yield without VC technology. It is * figures in parentheses indicate percent contribution of TFP to total change in output due to VC technology the technically efficient yield (maximum yield) that can be obtained with a given technology. Value of P-Solubilizing Microorganisms in India Economic Value of Mycorrhiza in India • Methods: Soil sampling collected at 15 cm depth from Western • Techniques: Direct economic benefits to farmers, supply of natural source Ghats at 60 days intervals for microbial and chemical analysis. of nutrients to crops and soil thereby reduction in cost of cultivation and • The ecosystem services rendered by P-solubilizing microorganisms increased income, besides providing ecological services and functions. in particular and microorganisms in general is the product of P • Caution: the figures are estimated from small experimental plots which may solubilization, P-mineralization and P-immobilization. have linear bias in either way when projected for a larger scale. • One should note that it is difficult to separate them under field conditions as they operated simultaneously in soil, hence the impact soil Description of Benefits G. G leptotichum G intaradices G. on crop productions. • Techniques: Restoration cost and replacement cost to value the Additional yield at 50% P + micorrihiza 766 1,855 ecosystem attributes, hence providing monetary measures of Additional income @ Rs 3/kg (3*766) Rs 2,298 Rs 5,565 ecosystem values. Savings in P fertilisers @ Rs 20/kg Rs 440 Rs 440 • Marginal analysis to account of market price of fertilizers. • Economic value of P-SM in coffee ranges from Rs 261 to Rs 3,564 Total incremental income (Rs) Rs 2,738 Rs 6,005 (US$ 5.5 to 75.8) per hectare (at a price of Rs.13/kg of P-fertilizer) Yield at control+100 % P, kg/ac 5,861 5,861 3
  • 4. 5/27/2010 Economic Value of Microbial Activity on Nutrient Status Economic Value of BNF (Rhizobia) in Africa under Various Land Use in Western Ghats, India Description 2002 2003 2004 • Techniques: Opportunity cost or replacement cost to value microbial activity • Economic value US$ 84.35 for N and US$ 77 for P for cultivated lands. Area harvested of soybean (million ha) 1.1 1.1 1.2 • This suggests that microbes significantly enhance organic nutrients in soil N-fixed (MT million) 92.1 92.0 95.0 Urea fertilizer saved (MT million) 492.6 492.1 508.0 Nutrients in biomass Annual flux Value of Urea saved (US$ million) 196.8 196.7 203.0 Land L d use (Kg/hectare/year) (K /h / ) (Kg/hectare/year1)* (K /h / Source: FAO production data from 19 African countries C N P C N P Natural forest 7241 858 152 5795 686 122 Economic Value of Rhizobia in the Literature Plantation 5490 538 164 4392 430 131 Grass land 6055 719 141 4844 575 113 • N2 fixed by legumes in developing countries: US$ 6.7 billion (Hardarson et al., 2003) Cultivated field 3398 388 177 2718 310 142 • Brazil, N-fertilizer saving from inoculated soybean: US$ 2.5 billion (Alves et al. , 2003) • SSA N-fertilizer saving from promiscuous soybean: US$ 203 million (< 10%) Mine spoil 1042 134 119 844 107 95 • Enormous potential exist for tropical countries, including Sub-Saharan Africa (SSA) •assuming a biomass turn over time of 1.25y as suggested by Jenkinson and Ladd (1981) for warmer countries. Implications for Food Security in Africa Asante • Expand area under soybean cultivation in Africa, as the total economic value increases 3 percent per year (from Terima Kasih US$ 197/ha in 2002 to US$ 203/ha in 2004) Thank You • Increase yield or N-fixed by selection and breeding – Enhanced capacity to fix N2 (reduce uptake of soil N) Merci – Increased yield of legumes (increase N supplied by LNB) Gracias • Increase yield through proper agronomic practice • Use inoculants Traditional Promiscuous, dual purpose N N N N N<0 N>0 Valuation Frameworks for BGBD Experiment Types of Benefits Data measured for E(valuation) 2. Mycorrhiza Crop yield from Inoculated and Non-Inoculated Types of Benefits Data measured for E(valuation) Crop Improvement by Fields/Plots 1.LNB Crop yield from Inoculated and Non-Inoculated Inoculation with mycorrhiza Kg per ha Crop Improvement by Fields/Plots/Pots Inoculation with LNB Kg per ha P (and other nutrients) gained Content of P (and other nutrients) from above from Mycorrhizal Inoculation yield (and/or whole plant/leaf etc) Nitrogen gained from N content from above yield (and/or whole plant/leaf etc) Kg per ha LNB Inoculation Kg per ha P benefit to subsequent crop Yield and P content (and/or whole plant/leaf q p ( p etc) from different/non-inoculated crops N benefit to Yield and N content (and/or whole plant/leaf etc) from growing on fields with inoculation v non- subsequent crop non-legume crop growing on fields with inoculation vs. inoculation crops in previous season non-inoculation legume in previous season Kg per ha Kg per ha Available P in soils from previous inoculation v N in soils from previous inoculation v non-inoculation non-inoculation crops at start of subsequent crops at start of subsequent season. season. Kg per ha Kg per ha 4
  • 5. 5/27/2010 Types of Benefits Data measured for E(valuation) Types of Benefits Data measured for E(valuation) 3. Earthworm Inoculation 5. N-gained through activity of Gain of N by the crop under Organic Crop Improvement by inoculation Crop yield from Inoculated and Non- decomposer community Conditions i.e. absence of fertiliser in with earthworms (through multiple Inoculated Fields/Plots/Plots present and past seasons; without or pathways including soil structure Kg per ha (preferably) with Organic Matter improvement, stimulation of Management of zero organic matter input microbial activity etc) Kg N per ha in yield or whole plant Water Quality Improvement Q y p Suspended p p particles Chemical analyses [Additional data on amount of N released from OM Input during crop growth period Water Flow Infiltration, drainage valuable] Liters per hour ?? Kg per ha 4. Plant Health 6. Increased soil organic matter To be discussed further Crop Improvement through control Crop yield from infected plants from of pests and diseases through use Fields/Plots/Pots with or without of soil bio-control agents. demonstrated bio-control. 7. Healthy soils To be discussed further Kg per ha Products of BGBD Data measured for E(valuation) (E)Valuation Strategies for Ecosystem Services 1. BIOFERTILISERS Type(s) of inoculum sold. (microbial, e.g.: Rhizobium, Mycorrhiza etc), Prices per unit weight. • Determining the value of the total flow of benefits from ecosystems. How much are ecosystems contributing to economic activity? It is most 2. SOIL STRUCTURE ENGINEERS Type(s) of inoculum sold. often asked at the national level, but can also be asked at the global, (Earthworms, Dung Beetles etc) Prices per unit weight. regional, or local level. 3. SOIL AMENDMENTS Type(s) of biologically modified soil sold • Determining the net benefits of interventions that alter ecosystem (Vermi-Compost,Termite Soils, Ant Soils etc) Prices per unit weight. conditions. Would the benefits of a given conservation investment, regulation, or incentive justify its costs? It differs fundamentally from the 3. BIOCONTROL Type(s) of bio-control agent sold. previous question in that it asks about changes in flows of costs and (eg. Bacillus, Trichoderma, Beauveria etc). Prices per unit weight. benefits, rather than the sum total value of flows. 4. FOOD Type(s) of food sold. • Examining how the costs and benefits of ecosystems are distributed. (Termites, Ants, Earthworms, Mushrooms, Prices per unit weight. Different stake-holder groups often perceive very different costs and Truffles etc) benefits from ecosystems. Understanding which groups are motivated to conserve or destroy an ecosystem, and why, can help to design more 5. BAIT Type(s) of bait sold. effective conservation approaches. (Earthworms, larvae etc) Prices per unit weight. • Identifying potential financing sources for conservation. Valuation can 6. ECOPRODUCTS Type(s) of inoculum sold. help identify the beneficiaries of conservation and the magnitude of the (Insects etc) Prices per unit weight. benefits they receive, and thus help design mechanisms to capture some of these benefits and make them available for conservation. 5