Public goods from private land by PtB of IEEP 1 feb 2010

Public Goods from private land Ecosystem services and PES Patrick ten Brink TEEB for Policy Makers Co-ordinator Head of Brussels Office Institute for European Environmental Policy (IEEP) Workshop: Public Goods from Private Land RISE and CEPS 1 Place du Congres, Brussels 1 February 2010 1

Presentation overview 1. Introduction to TEEB ambitions and process and approach 2. Ecosystem services, decision making, public goods & trade-offs 3. Ecosystem services & PES 4. Key issues 5. Comment on the Presentation of the RISE Report

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 TEEB Climate Issues Update Strömstadt September 2009. TEEB for Policy Makers Brussels 13 Nov. 2009 Oct. 2010

TEEB for Policy Makers report - launched 13 November 2009 - The Global Biodiversity Crisis • Coral reef emergency • Deforestation • Loss of public goods… Measuring what we manage • BD & ecosystem service indicators • Natural capital accounts • Beyond GDP indicators et al Available Solutions • PES water, PES – REDD+ • Markets, GPP • Subsidy reform • Legislation, liability, taxes & charges • Protected Areas • Investment in natural capital et al http://www.teebweb.org/ Responding to the value of nature

Critical issues The values of biodiversity and ecosystems are missing • Many not known (but this is changing); widespread lack of awareness • Values are not taken systematically into account in assessments and decision making • They are generally not integrated into the economic signals, into markets – the economy is therefore often not part of the solution (some exceptions: PES) Inappropriate incentives; misinterpretation of right solutions, insufficient evidence base at policy makers’ finger tips and weaker public support for action There is not enough political will or conviction or awareness of benefits/cost to launch due policies (market based or otherwise) Biodiversity loss continues – eroding natural capital base without realising its value … Sub-optimal provision of public goods from private land

Ecosystem Services Public Goods and Private Goods Provisioning services • Food, fibre and fuel Market values • Water provision Potential Market values • Genetic resources – eg water supply PES; -eg ABS Regulating Services Potential Market values • Climate /climate change regulation – eg REDD & water purification PES • Water and waste purification - Avoided cost of purification • Air purification • Erosion control Social value – health, wellbeing • Pollination • Biological control Opportunity cost: Lost output or cost of alternative service provider Cultural Services • Aesthetics, Landscape value, recreation and Market values : eco-tourism tourism • Cultural values and inspirational services Social value – identity et al Supporting Services • Soil formation + Resilience - eg to climate change

Ecosystem Services Public Goods and Private Goods Some ecosystem services are Private goods - eg food and wood provisioning Others are pure public goods - eg climate regulation / climate change mitigation, genetic diversity, health and wellbeing, cultural identity, spiritual value Others public goods with private aspects - eg water purification, landscape value and eco-tourism, recreation, genetic knowledge, • Vittel PES case: payments by Vittel to farmers to change land-use practice to secure quality for bottled water • PES for forest / watershed management for (clean) water provision – USA, Mexico, New Zealand • Ecotourism – fast growing market • Genetic knowledge – bioprospecting and medicines; links to traditional knowledge and access and benefits sharing (ABS) • Contribution to maintaining public good of current climate – REDD+ PES Need to understand different opportunities for land use and implications for public and private goods / gains. Need to take value into account in decision making Need for public policy for public goods.

Taking account of public goods …can change what is the “right” decision on land/resource use US$ Based only on private gain, the “trade- Shrimp Farm /ha/yr off” choice favours conversion….. Mangroves $12,392/ha 10000 $9632/ha After Adding Storm Public protection 5000 Benefits From mangroves $1220/ha Fishery $584/ha nursery $584/ha private profits private private 0 profits profits Net of public less costs of subsidies restoration needed after 5 years If public wealth is included, the “trade-off” choice changes completely….. -ve $11,172/ha Source: Barbier et al, 2007

Land-uses and trade offs for ecosystem services 1natural Climate regulation 2 extensive Climate regulation Food Energy Food Energy Soil Soil protection protection Freshwater Freshwater Climate regulation Food Energy Upon closer analysis - Net value may be less Energy Soil protection Freshwater 3 intensive Source: Ben ten Brink (MNP) presentation at the Workshop: The Economics of the Global Loss of Biological Diversity 5-6 March 2008, Brussels, Belgium.

Increasing rewards for ecosystem services provision through PES Intensive land use Biodiversity ‘friendly’ land use Eg Private optimum Eg social optimum Cultural Potential new Services income from (eg tourism) different To date ‘unpaid’ CS Regulating payments for RS ecosystem services (eg ecosystem PS services water quality) BENEFITS services Additional PS (other products, pollination) Income (Paid) Benefit to from provisioning Income from land user - Services (PS) Opportunity cost - provision original Income foregone to landowner products in services (eg farm or forest products) (in absence of PES) existing markets Cost to population COSTS of pollution Social Benefit = Private benefit + public good (ESS) – pollution costs

PES: payment levels and opportunity costs Payment levels vary widely in practice • Costa Rica, PSA: for forest conservation US$ 64 per ha/yr in 2006. Portela & Rodriguez 2008; Pagiola 2008 in Wunder & Wertz-Kanounnikoff 2009; • Mexico’s PSA-H: for preservation of cloud forest US$ 40 per ha/year; for other tree-covered land US$ 30 per hectare/year Muñoz-Piña et al. 2007. • Vittel mineral water, France Perrot-Maître 2006; Wunder and Wertz-Kanounnikoff 2009 – Ave. payments are EUR 200 ha/year over a five year transition period and – up to 150,000 EUR per farm to cover costs of new equipment. – Contracts are long-term (18-30 years), – with payments adjusted to opportunity costs on a farm-by-farm basis. PES will be able to address the opportunity costs in some cases – but often not in the ones where opportunity costs are very high Trade implications important where relate to traded goods (eg Ag) PES link to income foregone not full opportunity costs

Ecosystem services – at what level are the benefits felt ? Action locally leads to local, to national & to global benefits. Mainly local benefit Mainly global benefit Biochemicals & pharmaceuticals 5 Climate / climate change Pollination / seed dispersal 4 regulation Water and air purification & 3 Genetic / species diversity waste management maintenance 2 Natural hazards control (fire, 1 Biodiversity flood) 0 Erosion control Ecotourism & recreation Food/Fibre/Fuel Education, art & research Water (quantity) Cultural & amenity values Additional national benefit What are the policy implications > Funding? PES?

PES and the Polluter Pays Principle (PPP) Reducing emissions/impacts example farming & PES No emissions No impact (i.e. within assimilative capacity of ecosystem) Costs born by society PES ? (eg pollution impacts) Environmental target (practical /politically feasible PES to farmers to help pay for environmental optimum at the time) PES ? measures to meet objectives / targets beyond legislative requirements Private solution with legal requirements PPP Costs of measures borne by (‘reference level’) farmer – eg Polluter Pays Principle (partly implemented) Private Optimum (in absence of legal requirements) Self-damaging (Damage) Costs to farmers practice and society No control

Issues Q of principle/instrument name: Reducing emissions/impacts “PES” if Public goods; “Subsidy” is avoiding public bad (eg pollution impacts) ? No emissions Only PES for public goods ? No impact Q of practicality: Are there PES ? enough funds available for widespread use of PES ? Environmental target To what extent would savings / value PES ? of greater public goods pay for it? Private solution with Q of principle : Would raising the legal requirements reference level not allow for greater (‘reference level’) PPP provision of goods, (& avoidance of Private Optimum bads) and hence make less Self-damaging requirement for PES? - use of practice standards, liability, enforcement etc No control Q of social custom or responsibility : public goods often created without payment (eg traditional practice, social custom); risks of moving to money based system?

Public goods on private land Key Issues • Without payments for public goods – many public goods will be lost • Some public goods can be addressed via PES – important tool, good potential, but not the only tool and many complicating factors (eg international dimension) • Not all public goods will be able to be the focus of payments for service; • & potential for payments has its limits - budgets • Complementary effort needed to avoid loss of public goods - regulation, property rights, subsidy reform, charges/taxes, liability, voluntary codes, social norms etc • Balance between PES and PPP, principle and pragmatism • Removing harmful subsidies reduces need for PES • Thin (& moving) line between PES and subsidies – important for budgets & governance • Decision making needs to factor in private and public goods and bads – look at the whole chessboard. • Major effort needed for reform of support/pricing to ensure optimal use of natural capital • Cannot do without public policy for public goods – fundamental rationale for role of government. Focus on private optimum will not lead to social optimum.

Thank you For full TEEB for Policy Makers report – see TEEB website http://www.teebweb.org/ Patrick ten Brink, ptenbrink@ieep.eu IEEP is an independent, not-for-profit institute dedicated to the analysis, understanding and promotion of policies for a sustainable environment in Europe 3/18/2010 17

TEEB for Policy-Makers What issues are covered /chapters on the web Part I: The Global Biodiversity Crisis and Framework for Policy Response Ch1 The global biodiversity crisis and related policy challenge Ch2 Framework and guiding principles for the policy response Part II: Measuring what we Manage: Information & Tools for Decision-Making Ch3 Measuring to Manage our Natural Capital Ch4 Recognised the Value of Biodiversity Part III: Solutions: Instruments and measures Ch5 Rewarding benefits of Ecosystems and Biodiversity Ch6 Reforming Subsidies Ch7 Incorporating the costs of ecosystem and biodiversity loss Ch8 The Value of Protected Areas Ch9 Direct Investments in natural capital and ecosystem restoration Part IV: Synthesis Ch10 Conclusions and recommendations Available on http://www.teebweb.org/

Public goods from private land by PtB of IEEP 1 feb 2010

by Patrick ten Brink of the Institute for European Environmental Policy

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Public goods from private land by PtB of IEEP 1 feb 2010 Presentation Transcript