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Pavan Sukhdev Stockholm May 9th

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A presentation held by mr Pavan Sukhdev, UNEP, at Stockholms kulturhus at the seminar "How do we valule nature?" on the 9th of May 2012.

A presentation held by mr Pavan Sukhdev, UNEP, at Stockholms kulturhus at the seminar "How do we valule nature?" on the 9th of May 2012.

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  • 1. 9th May, 2012Stockholm The TEEB Perspective on Valuation Pavan Sukhdev McCluskey Fellow 2011, Yale University Founder & CEO, GIST Advisory Study Leader, TEEB
  • 2. Why Valuation, Why TEEB ?3.In a world driven by economic rationale, the economic invisibility ofnature is a problem.1. Because addressing losses requires knowledge from many disciplines (ecology, economics, policy) to be synthesized, integrated and acted upon.3. Because different decision-making groups (policy makers, local managers, businesses, citizens) need different types of information and guidance.5. Because successes need to be understood, broadcast, replicated and scaled.
  • 3. How Long Has The Problem Been Known ? “Diamond-Water” Paradox …  An Inquiry into the Nature and Causes of the Wealth of Nations Adam Smith, 1776 “I believe that the great part of the miseries of mankind are brought upon them by false estimates they have made of the value of things.” Benjamin Franklin, 1706-1790
  • 4. Why the Obsession with “Big Global Numbers” …• Costanza et al, 1997, Nature : Natures services in aggregate worth $18-$61 Trillion per annum, average $ 38Trillion ($24 Trillion oceans, $ 14 Trillion land biomes..)• Balmford et al, 2002, Science : Marginal benefits of conserving 15% of land ($1.1-$1.3 Trillion) and 30% of oceans ($3.3-$3.9 Trillion) exceed costs of conservation ($ 45 billion) by a factor of 100:1 … when we know decision-making does not take place at a “Global” scale ?
  • 5. The TEEB Perspective on Valuation Norms, Regulations Regional Plans & Policies Legislations Recognizing Economic Value Certification Mechanisms PA Evaluation Demonstrating Value PES Markets Capturing Value Ch.5 Ch.4 Ch.3 Ch.3
  • 6. Case Study: Integrating ecosystem services intoland use plans in Baoxing County, Sichuan, ChinaREGIONAL PLANSAn ecosystem service mapping and modellingtool (InVEST) used to plan development zonesthat avoid areas of high ecosystem serviceprovision and conservation importanceDevelopments were reconsidered by localgovernment officials during the making of thenext Baoxing County Land Use Master Plan2010 where mapping had highlighted thatactivities were planned in areas of severalcritical ecosystem services
  • 7. Case Study: Tubbataha Marine Park, PhilippinesUNESCO World Heritage site, contains 396 species of corals & has higherspecies diversity per square meter than the Great Barrier ReefLEGISLATIONAfter 1998 Bleaching incident –Stakeholders meeting held and “No-take” areas agreed. Later, Presidentpassed the Tubbataha Reefs NaturalPark Act in 2010 (10 mile buffer zonearound the no-take marine reserve) thusincreasing Park by 200%•10% annual increase in live coral cover•Fish biomass is four-folds better thanthe average healthy reef
  • 8. Case Study: Kampala WetlandServices provided by the Nakivubo swamp include natural water purificationand treatment & supporting small-scale income activities of slum dwellersP. A. EVALUATION (Nakivubo designated a part of the city’s greenbelt zone)Ecosystems services provided bythe swamp equal USD 1 million-1.75 million / yearIf the swamp is converted thenadditional investment into asewage treatment plant would berequired with running costs ofover USD 2 million / year
  • 9. Case Study: ‘Satoyama’ Landscapes, Japan75-100% reduction in pesticides, traditional winter flooding rice farmingadopted and White Stork rice and other certified products sold at a“premium”PES2003-2007: farmers paid 40,000 JYen per 1,000m2 of ricepaddies. Currently granted 7,000 JYen per 1,000m2 by Toyo-okaCity.CERTIFICATIONRice sold at 23 % higher rate for reduced pesticide use and 54 %more for organic farming• White Stork habitat increased from 0.7 ha in 2003 to 212.3 ha• Extinct in 1971, now has over 40 breeding pairs Konotori no Mai / Flying• 1 billion JPY annually in tourism, & municipal income raised Oriental White Stork
  • 10. TEEB Perspective : Key Themes…• Valuation decision itself has ‘trade-offs’ that need to be recognized ..… “Long-term Concerns” matter• Valuation is a human institution.. “Who values?” matters• Valuation must have a defined purpose….. “Why value?” matters• Valuation has ethical implications.. “Uncertainties & Risks”• Discounting implies ethical choices… “Equity” matters
  • 11. Trade-offs of Valuation
  • 12. Long-term Concerns about ValuationBiodiversity & ecosystems are multi-dimensional, contested andcontext specific, but valuation promotes a universal notion of thenatural environment.3. RISK : By placing values on nature we change existing concepts of ownershipand property • Nature risks becoming a commodity that can be traded in markets for dollars or traded-off in policy (“commodity fiction”)• RISK : As values have not been previously defined the process of valuationchanges how we appreciate nature • Individual preferences can outweigh consensus building and collective decision making • Are we constructing markets that are set up to fail?
  • 13. Long-term Implications of ValuationThe critique of valuation is both institutional and psychological:3.Cultural and social anthropology suggests flaws in the structural andinstitutional outlook of economic valuation. • Different cultural approaches to human-environment relationships4.The psychological viewpoint considers that valuation ignores the internalorigins of human behaviour. • Economics inconsistently applies psychological theories to explain behaviour and to champion rational choice • Economics focuses on the outcome of decisions not the process • Empirical studies of behaviour do not back up economic theories of preference
  • 14. Long-term Implications of Valuation• It has been argued that economics divorces the emotions underlying choices from the utility of choice outcomes• Developments in behavioural economics suggests that people’s judgements and choices are more intuitive than rational• Theories of choice that ignore emotions such as pain of loss and the regret of mistakes are unrealistic and may not maximise utility• Policy and actions are therefore sub-optimal
  • 15. Long-term Implications of Valuation• There is on-going debate about attaching new forms of property rights to nature and culture• Linked to the expanded use of protected areas has been in the granting of resource rights to ‘traditional’ indigenous groups and rural populations• It is often assumed that such groups have inherent knowledge that allows them to act as ‘stewards of nature’• Such policies significantly change the relationships within and between groups over the rights to control, exclude and exploit resources
  • 16. Long-term Implications of Valuation• Conversely, ‘traditional’ knowledge can be consider vital to understanding the value of biodiversity• Such knowledge of the use and management of resources is necessary to obtain the value of medicinal plants, crop varieties, forest resources etc.• Bio prospecting seeks to exploit this knowledge with the ‘promise of selling biodiversity to protect it’• Benefits have often not been realised with conflicts flourishing• Resources and knowledge are appropriated by ‘powerful corporations’• Biodiversity and knowledge are no longer ‘common heritage’
  • 17. The Challenges of Valuation:Ecosystems, Biodiversity & Level of Analysis
  • 18. Complexity & Functional Inter-dependenciesUnderlying Valuations• Economic valuation is a complex, spatial and institutional cross-scale problem• Values of ecosystem services differ with changing ecological features and differing beneficiaries• Local residents and visitors may value a site for its recreational direct use value at a local scale• Because of its high biodiversity the same site may have option, bequest and existence values at a global scale• Importantly, efforts to conserve ecosystems at the local level (e.g. protected areas) may lack the scope to control pressures on surrounding land
  • 19. Complexity & Functional Inter-dependenciesUnderlying Valuations• The risk (as observed in the Amazon, 30% PA) is that islands of protected ecosystems are surrounded by increasingly intensive land use that in turn threatens the integrity of those protected areas• Valuation may be limited to valuing resource at one level whilst neglecting other levels vital to long term sustainability• The challenge is to create institutions that can integrate the management of protected and non-protected areas• Valuation needs to function as part of a larger process that can value flows and connectivity between ecosystems and informs adaptive management
  • 20. How to Choose how to Value• Society is composed of a variety of members having non-identical interests and values – which valuation method should be used?• Ashby’s (1952) ‘Law of Requisite Variety’ states that any regulatory system needs as much variety in the actions it can take as exists in the system it is regulating – i.e. complex environmental systems can’t be reduced to simple valuation questions• Further, placing values on the environment is a cognitively demanding task – people adopt simplistic choice heuristics• Consequently value responses might be hard to interpret
  • 21. How to Choose how to Value• Decisions about complex ecosystems and biodiversity require methods that capture this complexity and value plurality• Public engagement should be able to capture the same level of complexity as the system it aims to conserve
  • 22. How to Choose how to Value• O’Connor and Frame (2008) propose two thresholds beyond which assessing trade-offs or monetary choice is inappropriate o Either estimation is scientifically difficult; or o The implied trade-off is deemed morally inappropriate
  • 23. How to choose how to value• Clear & Stated Purpose : Different parameters, assumptions, values appropriate for different purposes (eg : GAISP : For green accounting ? For calculating PES rewards ? For setting compensatory payments ?)• Whose Valuation ? Segments of society will have differing interests and values – which valuation method should be used?• Not Too Simple ? Ashby’s (1952) ‘Law of Requisite Variety’ states that any regulatory system needs as much variety in the actions it can take as exists in the system it is regulating (i.e. complex environmental systems can’t be reduced to simple valuation questions)• Not too Complex ? Placing values on the environment is a cognitively demanding task – people adopt simplistic choice heuristics
  • 24. How to choose how to value• Clear & Stated Purpose : Different parameters, assumptions, values appropriate for different purposes (eg : GAISP : For green accounting ? For calculating PES rewards ? For setting compensatory payments ?)• Whose Valuation ? Segments of society will have differing interests and values – which valuation method should be used?• Not Too Simple ? Ashby’s (1952) ‘Law of Requisite Variety’ states that any regulatory system needs as much variety in the actions it can take as exists in the system it is regulating (i.e. complex environmental systems can’t be reduced to simple valuation questions)• Not too Complex ? Placing values on the environment is a cognitively demanding task – people adopt simplistic choice heuristics
  • 25. Example : Valuation of Forest Land for CompensatoryPayments, by Central Empowered Committee,Supreme Court of India, 2006 23 (i) for non-forestry use / diversion of forest land, the NPV may be directed to be deposited in the Compensatory Afforestation Fund as per the rates given below:- (in Rs.) Eco-Value Very Dense Dense Open class Forest Forest Forest Class I 10,43,000 9,39,000 7,30,000 Class II 10,43,000 9,39,000 7,30,000 Class III 8,87,000 8,03,000 6,26,000 Class IV 6,26,000 5,63,000 4,38,000 Class V 9,39,000 8,45,000 6,57,000 Class VI 9,91,000 8,97,000 6,99,000
  • 26. Example : Valuation of Forest Land for Compensatory Payments, Central Empowered Committee, Supreme Court of India, 2006(iii) “the use of forest land falling in National Parks / Wildlife Sanctuaries will be permissible only in totally unavoidable circumstances forpublic interest projects and after obtaining permission from the Hon’bleCourt. Such permissions may be considered on payment of an amountequal to ten times in the case of National Parks and five times in the caseof Sanctuaries respectively of the NPV payable for such areas.”
  • 27. How to Choose how to Value• The choice of valuation method will define the outcome of the valuation process: o Private good elements versus CPR and public good elements of ecosystems o Simple versus complex systems o Individual and egoistic versus social side of human behaviour and rationality o Instrumental versus communicative type of human interaction• The how of valuation may be more important than the value we estimate
  • 28. For Example…. Courtesy : Yann-Arthus Bertrand, GoodPlanet
  • 29. How Certain are we? Is there Scientific Proof ? Amazon Rainforest “Water Pump” Evapo-transpiration puts 20 billion tonnes of water into the atmosphere daily, some of which falls as rain in the Rio Plata Basin… (Global Canopy Programme & Canopy Capital Ltd, 2008)
  • 30. Valuation as a “Feedback Mechanism”
  • 31. Valuation as a Feedback Mechanism• Despite the forgoing criticisms of valuation it retains an important role in calling attention to the value of biodiversity and ecosystem services in the face of competing forces for resource use• By applying values to nature, market forces can be confronted and incentives for beneficial resource use change created• In the long run, will the environment be internalised into economic thinking?• Valuation therefore provides feedback in a system where production, consumption etc. are distanced from the environment
  • 32. Valuation as a Feedback Mechanism• However, there may exist a critical time-lag in the valuation feedback mechanism• As values are an outcome of existing institutional, cultural and social constructs then adaptation to environmental change is required• As ecosystems are degraded and biodiversity lost, attitudes and values towards nature will change, but the time-lag may be long• Are there opportunities to ‘tunnel’ through the environmental Kuznets curve?• Is there a role of feelings and ethics to shorten this time-lag in the absence of more objective evidence?
  • 33. Checklist : “Is your valuation…..”• Marginal : Marginal costs, Marginal benefits• Context- Specific : Was the purpose of valuation defined beforehand ? And was the valuation used for the right policy and human context ?• Location Specific : Which biomes where, delivering which ecosystem services, to which beneficiary population, where ?• Scenario Based : What are the policy drivers of change at the margin ?• Modeled with Care : If actual costs and benefits not available, were benefit transfer and scaling up of values done with care ?
  • 34. • TEEB is not about “Selling Mother Nature”• TEEB is not some simple-minded cost-benefit-based stewardship model for the whole Earth• TEEB is about preventing the economic invisibility of Nature from leading to bad policies & trade-offs• TEEB is about recognizing, demonstrating, capturing and rewarding the benefits that ecosystems and biodiversity provide to society in general and to poor people in particular
  • 35. Not the TEEB perspective on Valuation…
  • 36. Thank Youwww.teebweb.orgwww.teeb4me.com