TEEB Incentive Measures by Patrick ten Brink of IEEP Stromstadt 7 September Final


Published on

Presentation on TEEB Incentive Measures by Patrick ten Brink of IEEP at the Swedish presidency event in Stromstadt 7 September

Published in: Business, Technology
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

TEEB Incentive Measures by Patrick ten Brink of IEEP Stromstadt 7 September Final

  1. 1. Incentives and Financing to integrate the value of biodiversity and ecosystems into our economies Working insights from TEEB Patrick ten Brink TEEB for Policy Makers Co-ordinator Head of Brussels Office Institute for European Environmental Policy (IEEP) Session: 5.3 Financing and incentives Vision for Biodiversity Beyond 2010: People, Ecosystem Services & the Climate Crisis Strömstad, Sweden 7th September 2009 Building on and borrowing from the work & insights of the wider TEEB team and contributors of supporting studies, call for evidence and other contributions 9/10/2009 1
  2. 2. 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
  3. 3. Presentation overview 1. The (missing) values of biodiversity and ecosystems to the economy 2. Instruments to integrate these values Instruments to reward benefits: PES, ABS et al Instruments to avoid damage/overuse Who benefits and who should pay - eg PAs Environmental Harmful Subsidies Policy Coherence and instrument mix 3. (Realising) Potential Annex: Background: Aims and process of TEEB Supporting / Background slides
  4. 4. The (missing) values of biodiversity and ecosystems to the economy Market signals do not fully take into account the value of ecosystems & biodiversity Climate regulation: carbon stored in trees, soils, wetlands; Natural hazard management and adaptation to climate change They often do not reflect the damage to ecosystems/biodiversity, losses of services: Land conversion (tropical forests to palm oil based biofuels), Degradation costs (eg water pollution, soil degradation) They rarely offer appropriate incentives for the sustainable use of natural resources Forest products (timber et al), agricultural products Water use (re groundwater depletion), soil mining and erosion Without prices to reflect the true value (or damage) & without other mechanisms to take value (damage) into account, it is no surprise that we have a socially inequitable and economically inefficient use of ecosystems and their biological resources. There have been a range of successes to learn from, & many opportunities for action.
  5. 5. Why are these values missing from the market? Public goods or quasi public goods with no “automatic, natural” markets - eg fish and open seas. Property rights (ownership, use, access) limitations Policy gaps – lack of policies to ensure appropriate pricing: full cost recovery, polluter pays, user pays Implementation failure - eg lack of full implementation of WFD & full cost recovery Governance failure – eg lack of coherence, verifiability, enforceability and trust Information failure - lack of information on services (eg hydrological, carbon storage), and on their on value and links to ecosystem components; lack of product information (eg labelling/certification) Transaction costs – eg for PES schemes, certification for products In some cases markets don’t exist (yet), in others they can be difficult to access, in others they can have significant imperfections/flaws. These are generally solvable (in principle). …but not in all cases are markets the answer, and fixing the market (eg via improved market signals) will take time and only get us so far
  6. 6. Ecosystem services public goods & difficulty of valuation Spiritual & religious ? Economic Aesthetic ? Valuation Flood/Fire regulation ? Difficult or impossible Disease regulation ? Water purification ? Climate regulation ? Freshwater ? Genetic resources ? Recreation & tourism ? Fiber ? Easy Food ? Economic Value ($) 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
  7. 7. Values historically overlooked by market signals...now available TEEB Climate Issues Update (TEEB, 2009)
  8. 8. Natural capital is a foundation of the economy and wellbeing – often outside of the market The Economy Final Demand The Foundations (intermediate demand) Man made capital Fixed capital stock: factories, Sectors of the economy Exports transport infrastructure, • Primary sectors (agriculture, forestry, fisheries, mining) Human capital • Food & drink Government Learning, health, happiness • Textiles Outputs Inputs • Wood & Paper Business Social capital • Petro Chemicals Social cohesion, trust, judiciary, • Manufacturing civic society, education, health Services • Services (eg water supply, services, social services etc waste, insurance) Other demand • Tourism Natural capital • etc Households • biodiversity and ecosystems • other “natural resources” Impacts Outputs from one sector • investment • depletion = intermediate inputs to another • damage
  9. 9. Biodiversity loss: Running down our natural capital... by not taking value of nature fully into account 73% 62% Richer Ecosystems Poorer 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.
  10. 10. 1. The (missing) values of biodiversity and ecosystems to the economy 2. Instruments to integrate these values Instruments to reward benefits: PES, ABS et al Instruments to avoid damage/overuse Who benefits and who should pay - eg PAs Environmental Harmful Subsidies Policy Coherence and instrument mix 3. (Realising) Potential Annex: Background: Aims and process of TEEB Supporting / Background slides
  11. 11. Economic Incentives and the Economy Pricing inputs Pricing outputs and use: Market Creation Full cost recovery and resource pricing Product Pricing & User charges Eg ITQs for fisheries eg water pricing; land conversion fees Eg fertiliser and pesticides tax Eg certification Markets for inputs: habitat banking Foundations: Capital stocks Man made Capital Human Capital Sectors of the Final Social Capital economy Demand Outputs Inputs Natural capital Public sector • biodiversity and ecosystems Private sector Forests; Agricultural lands; Seas, Households Intermediate inland waters, wetlands; Coral Exports consumption reefs and mangroves; Protected Areas; Other green infrastructure; Soil; Ecosystems, species, habitats, genetic materials • other “natural resources” Externalities Pricing for pollution, damage / liability: Payments for resource use & ecosystem services (PES) Fines, charges, fees, compensation requirements Eg fishing licence, PES for water, REDD for forests
  12. 12. 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. PES-REDD+ – potentially high value new instrument offering synergies between biodiversity and climate change Access and Benefits Sharing (ABS) – negotiations up to COP 10 Other compensation measures (tax breaks, transfers) and direct payments to secure benefits Markets (organic, biotrade, natural cosmetics, FSC, MSC etc) – being “mainstreamed”. Emerging? Markets: habitat banking, Future market? link REDD to ETS schemes ?
  13. 13. Market Signals to avoid degradation / loss of ecosystems and biodiversity Resource charges – to reflect full cost recovery principle and also resource value – eg water pricing under WFD, stumpage fees for trees. Pollution taxes and charges– to make the polluter not the society pay – eg NOx tax, COD charges. Product taxes / charges – to incentivise users to use less – eg pesticides, fertilisers, plastic bags, batteries, fish tackle Licenses – to raise revenue and in some cases restrict access - eg fishing licences, tourism fees. Fees and fines – to discourage non compliance – eg pollution, damage. Liability and compensation - to encourage responsibility – eg avoid oil spills. Habitat Banking – to make meeting “no-net-loss” commitments more economically efficient. Green public procurement – making use of market demand (PP 14% of EU GDP) to encourage lower impact (production/use/disposal) products.
  14. 14. Instruments to respond to ecosystem service benefits & create revenue for biodiversity Protected areas lead to a wide range of ecosystem service benefits, yet there is a financing gap, despite the benefits very often being (far) greater than the costs. Can new effort on instruments to reward the benefits be the answer? Appreciation of the ecosystem services benefits should lead to instruments Benefits Paying costs to protect nature / invest in natural capital should that help raise revenues safeguard / create benefits Funding Costs Funding Pays for the costs of protecting nature / restoration / new investments in natural capital But who should pay whom with which instruments ? Note: global expenditure for PAs ~ totals between US$6.5 and 10 billion annually (Gutman and Davidson, 2007). An expanded protected area network covering 15% land & 30% of sea estimated to cost ~ $45 billion p.a. That expanded PA system would deliver goods and services with a net annual value greater than $4.4 trillion (Balmford et al. 2002). In Chapter 8 TEEB for Policy Makers, forthcoming, November 2009.
  15. 15. Who benefits, who should pay? Eg Protected Areas 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?
  16. 16. Environmental Harmful Subsidies: Aligning Today’s Subsidies to Tomorrow’s Priorities Sector OECD / World Agriculture OECD: €204 bn a year (in 2005-7) (OECD 2008) Biofuels: €10-12 bn in 2006 (OECD 2008) Energy IEA: $310 billion in the 20 largest non-OECD countries in 2007 (IEA 2008 ) Fisheries World: USD 15-35 billion (UNEP 2008) Manufacturing OECD: €33.5 bn in 1993 (OECD) Transport World: approx. €179-230 bn/year, of which EHS €130-175 bn (EEA 2005) Water OECD: €33.6 bn , incl. irrigation (Myers and Kent 1998) Often large sums on outdated objectives: distorting markets and trade; creating non-level playing field for biodiversity/ecosystems; often big impacts on 40 % ecosystems & biodiversity Policy coherence: subsidy reform and provision of positive incentives 40 % – Reforming subsidies will free up funds – Removing harmful subsidies will decrease the funding need for positive incentives (as20 % you don’t need to compensate the perverse effects with positive incentives) 1950 2010 We are fishing down the foodweb – D. Pauly (UBC, Canada)
  17. 17. Policy coherence and instrument mix We need more than incentives to address the problem – we need a coherent policy mix 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 9/10/2009 17
  18. 18. A further example: REDD+ A New instrument of major potential for both climate and biodiversity Challenges: policy coherence, multiple objectives, implementation & governance REDD+ : Reducing Emissions from Deforestation and forest Degradation Potential for carbon: REDD could lead to a halving of deforestation rates by 2030, cutting emissions by 1.5–2.7 Gt CO2/year (Eliasch 2008) Cost: halving deforestation estimated to cost $17-33bn/year by2030 (Eliasch 2008) with long term benefits of $3.7billion Cost-effectiveness of measures: from a few EUR/tCO2e for reforesting agricultural used peatlands, to ~10EUR/tCO2 for reduced deforestation, to manmade CCS of 20-50 EUR/tCO2e of (Mckinsey 2008). Value of ecosystem services. Carbon storage: ave ~2000$/ha/yr; Other ecosystem services: ave ~ 4000$ha/yr (TEEB 2009, working numbers) – “co-benefits” to carbon in REDD Information needs and governance: carbon storage/sequestration data/monitoring; carbon- biomass natural capital accounts; wider ecosystem accounts; understanding opportunity costs, ensuring rule of law and coherence of policies, engagement of peoples Who pays / what format: from projects, to funds, to market links (eg to carbon markets). Need for north south transfers 9/10/2009 18
  19. 19. Coherence example #3: Addressing the Marine Fisheries challenge Underperforming natural asset, biodiversity impacts, increasing risk of fisheries collapse – to address this requires a coherent comprehensive set of instruments and measures Market based / incentive instrument – Quotas and ITQs; (Reforming) subsidies; Fishing licenses/fees Regulation – on activities; on equipment/capacity; on products; on ecosystem conversion MPAs - Designation, implementation and financing of a system of Marine protected areas Planning: coastal zone management; spatial planning Management practice: adoption of marine management practices / ecosystem approach Information based: Product labelling and market certification; science based policy making Investment in Restoration of mangroves and coral reefs; investment in MPAs Capacity building – for products certification, monitoring, inspection and enforcement… Monitoring & Enforcement: ensure credible/good governance
  20. 20. 1. The (missing) values of biodiversity and ecosystems to the economy 2. Instruments / Incentives to integrate these values Instruments to reward benefits: PES, ABS et al Instruments to avoid damage/overuse Who benefits and who should pay - eg PAs Subsidies Policy Coherence and instrument mix– eg oil spills and REDD+ 3. (Realising) Potential
  21. 21. Instruments and measures Contributions to natural capital Opportunities/benefits of ESS No net loss from 2009 level Past loss/ Investment in natural capital +ve degradation Halting biodiversity loss change ` Regulation Better governance Economic signals : PES, REDD, ABS (to reward benefits) Charges, taxes, fines (to avoid degradation/damage: Alternative natural capital Subsidy reform (right signals for policy) Sustainable consumption (eg reduced meat) Development path Markets, certification/logos & GPP Agricultural innovation Investment in natural capital: green infrastructure Predicted future loss of natural capital Restoration (schematic) – with no additional policy action PAs 2009 2050
  22. 22. 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 PAs, direct investment, EIA, SEA Help provide information to reform “bad ones”: eg harmful subsidy reform Information: Better information - 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 PAs, green infrastructure, restoration, green new deal investments And how can we make these happen ? 9/10/2009 22
  23. 23. EU vision in 2010 goal setting? …relating to incentives/economics… EU a key biodiversity driver in the international context New Green Global Deal for biodiversity Commitment via incentives and financing to take the value of ecosystems and biodiversity into account EU responsibility and engagement for biodiversity in the world’s biodiversity rich, economically poor county. Further support to Copenhagen and post Copenhagen – mitigation and adaptation. EU to support REDD at Copenhagen as a stepping stone to further development of incentives measures for wider ecosystem services Investment in adaptation and restoration/ecological infrastructure- resiliance+ EU needs to lead by example - new instruments and financing and investing in natural capital (PAs and wider green infrastructure)
  24. 24. Thank You What do you see as the potential for incentive measures? What targets are ambitious but achievable? Governance challenges and solutions? What could be a Practical Roadmap? Patrick ten Brink ptenbrink@ieep.eu not-for- IEEP is an independent, not-for-profit institute dedicated to the analysis, understanding and promotion of policies for a sustainable environment in Europe 9/10/2009 24
  25. 25. Presentation overview 1. The (missing) values of biodiversity and ecosystems to the economy 2. Instruments / Incentives to integrate these values Instruments to reward benefits: PES, ABS et al Instruments to avoid damage/overuse Who benefits and who should pay - eg PAs Subsidies Policy Coherence and instrument mix– eg oil spills and REDD+ 3. (Realising) Potential Annex: Background: Aims and process of TEEB Supporting / Background slides: content
  26. 26. 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
  27. 27. TEEB – Final Report June 2010 TEEB D0: Ecological and Economic Foundations TEEB D1: TEEB for International and National Policy-Makers TEEB D2: TEEB for Local Policy- Makers and Administrators TEEB D3: TEEB for Business TEEB D4: TEEB for Citizens
  28. 28. TEEB D1: TEEB for International and National Policy-Makers Part I: Introduction Ch1 The Biodiversity Policy Challenge Ch2 The Policy Responses: Actors and instruments 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 Policies to Reward (unrecognised) Benefits of Ecosystems and Biodiversity Ch6 Aligning Today’s Subsidies to Tomorrow’s Priorities Ch7 Policies to Address the Losses of Biodiversity? Ch8 Protecting areas, ecosystems, habitats and species Ch9 Direct Investments in natural capital and ecosystem restoration Part IV: Recommendations / Road map to Nagoya and beyond Ch10 Using the whole Policy Toolkit to address the challenge
  29. 29. The Process for TEEB Phase 2 2008 2009 2010 Nagoya, Japan Inputs from Science and Economics experts through the Call for Evidence, participation in Working Groups, etc CBD COP9 - Bonn, Germany TEEB Ecological and Economic Foundations D0 D0 End-User Outreach TEEB for National and International Policy-Makers D1 D1 D2 TEEB for Local Policy-Makers and Administrators D2 D3 D4 TEEB for Business D3 CBD COP10 TEEB for Citizens D4 Continuous involvement of End-User Groups
  30. 30. TEEB timeline 2008 2009 2010 TEEB Phase I TEEB Phase II Sep 09 TEEB Nov 09 Spring / Final TEEB May 08 Interim report Climate Issues D1 for Summer 2010 synthesis & (CBD COP9, Bonn) Update policy D2, D3 & D4 publications (Strömstad) makers CBD COP10 (Oct 2010, Nagoya, Japan)
  31. 31. TEEB Climate Issues Update Coral reef emergency Forest carbon for climate mitigation National accounting for forest carbon Ecosystem investment for climate adaptation See Pavan’s presentation on 8 Sept.
  32. 32. Ecosystem Services - The Millennium Ecosystem framework Source: MEA
  33. 33. Mapping changes : from Biodiversity & Ecosystems to Economic Values (Human) Drivers Change Change in in Change Economic Natural Land use, in Change Value Drivers Climate, Biodiversity Pollution, In Water use Ecosystem Services Policies Change Nat. Reg. in Loc. Int. Ecosystem functions Source: L. Braat & P. ten Brink (eds.)
  34. 34. The link between biodiversity, ecosystems, their services, and benefits to mankind…& economics Maintenance and restoration costs Natural Capital Also investments in green infrastructure – PAs, watersheds, urban environment. Biophysical Economic and social values – some market values or to Structure of be market values, some process risk, some non market eg 1: woodland Function values habitat eg 1: slow eg 2: net primary passage of water productivity) Service eg 2: biomass eg 1: flood prevention eg 2: harvestable Benefit (value) products eg 1: avoided costs of eg 3: carbon impacts storage 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
  35. 35. Ecosystem Services across land-uses: Trade-offs of conversion 1natural Climate regulation 2 extensive Climate regulation Food Energy Food Energy Soil Soil protection protection Freshwater Freshwater Climate regulation Landuses within Biome Natural areas Food Bare natural Forest managed Energy Extensive - Intensive Cultivated and managed areas, woody biofuels Cultivated land, grazing area Artificial surfaces and associated Soil protection Freshwater 3 intensive areas Source: Ben ten Brink (MNP) presentation at the Workshop: The Economics of the Global Loss of Biological Diversity 5-6 March 2008, Brussels, Belgium.
  36. 36. Measuring Benefits of Ecosystem services Answers are needed at all levels Non-Specified Monetary: eg avoided water purification Benefits costs, avoided flood damage, tourist value, value of medicines / Increasing up the pharmaceuticals from natural products benefits Monetary Value pyramid Quantitative: eg level of service, number people benefiting from wood from forests, # of avoided The Benefits Quantitative Review of Effects health impacts; number of visitors Pyramid Type of benefits; health benefits from clean air, social benefits Qualitative Review from recreation, income from products, security, wellbeing. Knowledge gaps Full range of ecosystem services from biodiversity The “known- unknowns” and “unknown-unknowns” Source: P. ten Brink: presentation at March 2008 workshop Review of Economics of Biodiversity Loss, Brussels
  37. 37. (1) Economic size of losses (COPI 1 study) A : 50-year impact of inaction or B : Natural Capital Loss every year ‘business as usual’ Source: Braat & ten Brink (Eds., 2008): Cost of Policy Inaction Welfare losses equivalent Natural Capital Lost : Annually to 7 % of GDP, horizon 2050 EUR 1.35 x 1012 to 3.10 x 1012 (@ 4% (@ 1% Discount Rate) Discount Rate) 3. TEEB Phase 1 results
  38. 38. Payments for Environmental Services (PES) and the Polluter Pays Principle (PPP) Reducing emissions/impacts example farming & PES Zero emissions Zero impact (within assimilative capacity) Costs born by society (env impacts) Environmental target (practical /politically feasible Government pays PES to help env optimum at the time) PES? farmers pay for measures to meeting targets/objectives beyond legislative requirements Legal requirements (“reference level”) Costs of measures borne by farmer – eg Polluter Pays Farmer Economic Principle (partly implemented) Optimum Self-damaging practice (Damage) Costs to farmers No control – “full damage” and society
  39. 39. ETR – Scope for future ? Where do biodiversity and ecosystem related fiscal instruments fit? Past - Present Short Term Medium Term Long Term Developments & Lessons Planning horizon Strategic Thinking Visions for the Future PL DK LT HU SE CY EL ES BE IE IT EU Presidencies MS own policy or Enhanced Enhanced OMC? Legislation? OMC 2? Process copying other MS cooperation? cooperation 2? policies Possible scenarios 2050 Tax level A B C labour Source: Bassi S and P ten Brink 52.6 50.1 50.1 labour capital 19.1 22.2 21.6 capital 30? 30%? Today cons. 15? 28.5 28 27.8 6.7%consumption 15%? 6.7? Small? ETS allowances 39 7 6.7 Env tax Env Tax 1995 2000 2005 2008 2009 2010 2011 2012 2013 2014 2020 2050