Application of Economic Valuation Methodologies in the Guinea Current LME

Applications of Economic Valuation
Application of Economic Valuation
Methodologies in the Guinea Current LME
Presentation by:
Eduard Interwies, InterSus - Sustainability Services

2
Aim of the
presentation
 Presentation of a practical example of
performing a valuation: Guinea Current
LME;
 Description of the methodology used,
also dealing with data
gaps/uncertainties;
 Discussion of the "added information" of
such a project for policy decision making.
2nd African Regional Targeted Workshop for GEF IW Projects & Partners

3
Project
background
 Aimed at providing a first, “rough”
estimate of the ES value in the GCLME
(including non-use values!) – no time-consuming
surveys etc.
 Even if data/time/budget limitations:
“just do it”
 National socio-economic experts
together with international consultant
did the work
 Project conducted for UNIDO & the
GCLME Regional coordination Unit;
duration approx. 1 year (2010)
 [included work done on relevant, generic
economic instruments for LME
conservation]

4
The 16
GCLME
countries
ANGOLA, BENIN, CAMEROON, CONGO, CONGO
D.R., COTE DÍVOIRE, EQUATORIAL GUINEA, GABON,
GHANA, GUINEA, GUINEA-BISSAU, LIBERIA,
NIGERIA, SAO TOME AND PRINCIPE, SIERRA
LEONE, TOGO

5
Structure of
presentation
 Role of economic evaluation of ES in LME
conservation [brief!]
 General steps of economic evaluations
and application in GCLME.
• Identification of ES.
• Evaluation: methods and tools.
• Boundaries: gaps and uncertainties.
 “Added Value” of evaluations for decision
making.

6
Role of
economic
evaluation of
ES in LME
conservation
 Coastal & marine ecosystem goods &
services: crucial role in supporting the
livelihoods of people & national
economies.
 Yet: Millennium Ecosystem Assessment
(2005) reports marine ecosystems
around the world deteriorating, and with
them the capacity to support human
well-being.
 Losses of 50 billion $/year (World Bank
2009/FAO 2011)!
 Without the right policies, some
ecosystems are likely to be
damaged/degraded beyond repair.

7
Role of
economic
evaluation of
ES in LME
conservation
 From an economic perspective, marine
and coastal ecosystems should be
treated, counted and invested in as
elements of development infrastructure
— as a stock of facilities, services and
equipment which are needed for the
economy to grow and society to develop
and function properly!
 In the past, the importance of ecosystem
(services) for socio-economic systems
has mostly been ignored (market failure).
 Failure to do so can have incur far-reaching
economic costs.

8
Role of
economic
evaluation of
ES in LME
conservation
SO: economic evaluation of ES can play a
crucial role - provide evidence for public
benefits that are not reflected in private
goods and services.
 Additionally, economic valuation can play
a very important role in the identification
of concrete measures and development
strategies.
 And: evaluation of damages through
natural hazards/protective values of
coastal ecosystems possible!

9
Identification
of ES - general
 Several Definitions of ES:
• “benefits humans derive from nature”
(MA 2005).
• “the direct and indirect contributions of
ecosystems to human well-being” (De
Groot et al. 2009).
• “the aspects of ecosystems utilized
(actively or passively) to produce human
well-being” (Fisher et al. 2009).
 Different frameworks for categorizing ES
and/or benefits derived:
• Millenium Ecosystem Assessment; TEEB-Report;
TEV; CICES.
• …in the end, the question is…

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Identification
of ES
back

11
Identification
of ES
back

12
Identification
of ES
back

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Identification
of ES
back

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Identification
of ES
• .
Brils & Harris, 2009 ; © illustraties.nu

15
Identification
of ES - general
Important!
 not only from a theoretical
perspective: “harmful activities” could
be justified through the ESA – e. g.
comparing benefits of hydropower
(money!) with costs (losses in
habitats, for example), the result may
be: it is beneficial, even from an ESA
angle!
 Therefore: lot of discussion, e.g. in
CICES about energy provision, and the
provision of anorganic resources (e.g.
water…)
 Sub-soil assets: are not ES!

16
Identification
of ES - GCLME
 In the GCLME study, we used the MEA-Framework
for general classification,
and the TEV to get an overview of
benefits…
 …of the following ecosystems:
1) Costal Ecosystems: Mangroves and
Coastal lagoons.
Other wetlands, sea-grass beds and
sandy beaches: excluded because of
lack of data.
2)Marine ecosystems.
 We deliberately did not consider
mineral resources as ES!
More detailed

17
Identification
of ES -
exclusion of
sub-soil
assets
Mineral resources are not ES, because:
 ES concept focuses on benefits
derived from processes and
interactions between organisms in
the ecosystem, i.e. on a functioning
ecosystem. The provision of oil and
minerals, that needed millions of years
to form, exceeds the scope of this
assessment and is completely
independent of the ecosystem
functions.
 Sub-soil assets just share the same
area with ecosystems, but are not
part of them/do not depend on their
functioning!

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Evaluation:
methods and
tools –
general/
GCLME
• Many different methodologies “available…
• Important in GCLME study mainly benefit
transfer, replacement cost and market prices.

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Evaluation:
methods and
tools - GCLME
 Benefit Transfer: a cost-effective method,
and possible to apply in regions with data
limitations (but with many uncertainties
involved – we´ll get to that later).
 Replacement Costs Approach: for indirect
benefits, if no data on revealed
preferences are available.
 Market Prices. Revealed preferences,
mainly for provisional services (i.e.
“products”).
 An overview:

20
Evaluation:
methods and
tools - GCLME
• .

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Use values –
general
More
More
More
More
More
More
More
More

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Use values –
fisheries
 Fisheries: market prices of fish landings,
adapted in the following:
• A 20%-reduction to accomodate
sustainable levels of fishing.
• The value of nursery services from
mangroves is also subtracted, to avoid
double-counting.
back

23
Use values –
timber and
non-timber
products
back
 Timber and non-timber products
 Two-fold approach: benefit transfer
(studies from South Asia), and market
prices generated by BDCP (2007), using
shadow prices.

24
Use values -
tourism
 Tourism: data availability problems, and
not benefit transfer possible - instead, as
a first step we collected all information
available via the national experts,
national tourism statistics and the World
Tourism Organization (WTO), especially
regarding
a) the relative importance of tourism for
the economy of a certain country (%
share of GDP), and
b) the relative importance of the coastal
region for the tourism industry of a
certain country (% share of guest nights
at coast, or similar data).
back

25
Use values –
carbon
sequestation
 Carbon Sequestration: benefit transfer
using studies from South Asia.
 One of the studies used carbon prices as a
reference, the results were adapted to
reflect current prices.
 Similar results, and the mean value is
83,5 US$/ha/a.
back

26
Use values –
coastal
protection
 Coastal protection: combined approach
of replacement costs and benefit transfer.
 Two projects for comparison: Keta Sea
Defence (Ghana), and five stone jetties
between Gounoukopé and Aného, Togo.
 Unit Value Transfer using five studies
(Mangrove areas of South Asia), adapted
to price levels.
back
 Therefore, the mean value for the
ecosystem service ―coastal
protection/erosion control was
calculated as the reference value:
465.9 US$/ha/a.

27
Use values –
sewage
treatment
 Sewage treatment: Benefit Transfer,
using other studies (Uganda and South
Asia).
 Calculating the mean value of the two
almost congruent results, the value for
the ecosystem service “sewage
treatment” in the GCLME is assumed to
be at 23.5 US$/ha/a.
back

28
Use values –
drinking
water
 Drinking Water: Benefit transfer, using a
studies from South Asia.
 The study site closely resembles the
mangrove/coastal ecosystems assessed
in this study. Hence, the only adjustment
to be taken is again to adjust the value to
West African price levels, use the above
stated ratio of 0.36 between West Africa
and Sri Lanka. Therefore, the adjusted
value of coastal ecosystems in the GCLME
for the ecosystem service “drinking
water” according to the Unit Value
transfer amounts to 5.2 US$/ha/a.
back

29
Use values –
fish nursery
 Fish nursery: two-fold approach.
 World Bank: 0,7 t/fish per hectare
mangroves (values calculated using
Ukwe/BDCP 2007): 8470 US$/ha/a, too
high, because this number exceeds the
total fishery income!
 Emerton/Kekulandala: „nurseries
contribute 10% to fisheries“, resulting in
828 US$/ha/a.

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Non-use value
- general
 Very difficult task…due to several
reasons:
• Highly subjective values.
• Methodologies suffer from
uncertainties and statistical problems
(e.g. embedding effect).
• Benefit Transfers therefore not useful.
 Meta-analyses: useful, but variations
are still great (i.e. Woodward/Wui
2001: average value for biodiversity is
17,000 U$/ha/a, but the median value
is at 15 US$/ha/a, indicating how huge
the statistical spread of the data is).
 Nevertheless, we proceeded…

31
Non-use
values -
biodiversity
 For biodiversity, two-fold approach
based on two numbers from the COPI-Report,
and on international valuation
exercises, especially meta-analyses.
 Figure 1: COPI projects a 17% loss in
GDP for Africa till 2050 (3.15 Trillion
Euro) – for West Africa, this would be
725,5 Billion Euro.
 Figure 2: 0,7% of use values is
attributed to “non-use biodiversity”,
meaning 10,3 U$/ha/a (terrestrial
ecosystems) and 0,4 U$/ha/a (marine
ecosystems).
• Meta-Analysis: average value of 28
US$ ha/a (Brander 2006).

32
Non-use
values – other
values
 Similar to the non-use value of
biodiversity, cultural and scientific
uses are also highly related to the
specific context of region and/or
situation. Each culture in the world
attaches specific non-use values to
ecosystems, and these preferences
will greatly vary in terms of what has
a value and what not. As a result, a
numeric Benefit Transfer is not
feasible!
 Partial solution: also to use “shares”,
like for biodiversity. Emerton/
Kekulandala: cultural values amount
to 0,7% of use values (same number
as COPI for biodiversity).

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Summary of
results
 …we tried to demonstrate the value of
the GCLMEs ecosystems for human
wellbeing, social welfare and economic
growth. This value is expressed in
monetary units, and the resulting figures
are quite impressive:
 the GCLME ecosystems generate a yearly
TEV of around 16.5 bn. US$, excluding
tourism, which has a high potential for
welfare generation in the area, and
 excluding mineral extraction as well.
 Furthermore, the destruction of one
hectare of mangrove ecosystems today
amounts to an economic loss of at least
32 000 US$!

34
Boundaries:
gaps and
uncertainties
 However, the results come with several
uncertainties, which could not be avoided
due to data limitations regarding the
following topics:
• General methodological issues.
• Data gaps & Assumptions.
• Benefit Transfers.
--> Assumptions are presented very
transparently
--> Of course, improvements needed in the
future!

35
Boundaries:
general
methodo-logical
issues
 Replacement cost approach: cost of
avoided damage or substitutes matches
the original benefit – under- or
overestimation likely.
 Market prices: change every so often –
benefits also?
 Double-counting: we took care of it for
fish nurseries and fisheries, but what for
other issues – it is always difficult to
avoid.
 Carbon prices: also vary a lot – is such a
price a good basis for comparison?

36
Boundaries:
data gaps &
assumptions
 Data limitations were immense: both
regarding the values of ES/benefits and
the “physical” data (i.e. how many
hectares, how much fish etc.).
 Assumptions were needed to close such
gaps, i.e.:
• …that each hectare of ecosystem equals
another ha of the same ecosystem.
• Figures for “sustainable level of
fisheries”, or the link between nurseries
and fish availability…
• Figures from the COPI report regarding
non-use values
 These are all “educated” guesses, but still
guesses!

37
Boundaries:
benefit
transfers
 In addition to these general issues, the
methodology of Benefit Transfer has a lot
of uncertainties:
• No two ecosystems are really alike,
especially regarding the local importance
or value.
• The BT itself also rests on methods with a
lot of uncertainties, and then the results
are transferred…
 For a “global” estimation (like for the
whole GCLME), that might still be ok, but
for small areas/local scale: difficult.

38
Boundaries:
gaps and
uncertainties
 To sum up, the report gave a first
estimation of the value of ecosystem
services in the GCLME. It was recognized,
however, that due to a lack of both
qualitative and quantitative information
in some study areas, the estimations
presented need to be improved through
either specific studies covering
ecosystem services in the GCLME region
itself, or the advance of scientific
methodologies to evaluate non-use
values.

39
Added value
for decision
making
 The long-term development goals for
GCLME are:
1) Recover and sustain depleted
fisheries;
2) Restore degraded habitats; and
3) Reduce land and shipbased pollution
by establishing a regional management
framework for sustainable use of living
and non-living resources in the GCLME.
 How can economic evaluation help?

40
Added value
for decision
making
 As said before: From an economic
perspective, marine and coastal
ecosystems should be treated, counted
and invested in as elements of
development infrastructure — as a stock
of facilities, services and equipment
which are needed for the economy to
grow and society to develop and function
properly!
 In the past, the importance of ecosystem
(services) for socio-economic systems
has mostly been ignored (market failure).
 Failure to do so can have incur far-reaching
economic costs – and an
inclusion of ES can open whole new
perspectives!

41
Added value
for decision
making
 For this, policy makers first need to be
aware of the uncertainties that
evaluation exercises always have (and
will have).
 For researchers, this means we have to
communicate these very clearly, and not
to promise exactness.
 In this case, however, it is a powerful tool
for various decision-making situations…

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Added value
for decision
making:
 …transporting the message that the
destruction of ecosystems does not
“come for free”.
 …conducting the analysis of trade-offs on
a better basis.
 …preparing the selection of measures
(i.e. between different options).
 …supporting the communication with
stakeholders and experts.
 …and many more.

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Thank you very much for your
kind attention!

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