1Webinar series. Module 4. 7th June 2013NBSAP Capacity building SeminarsWebinar # 2: Economic approaches to incorporating ...
Webinar series. Module 3. 7th June 2013I. Why monetary valuation of BD & ESSII. Economic approaches to demonstrate the val...
Webinar series. Module 3. 7th June 2013 In some cases, physical data on the state, functions and services from natureis e...
Webinar series. Module 3. 7th June 2013 Exploring the economic value of ecosystem services is just an additional wayof as...
Webinar series. Module 3. 7th June 2013 Monetary estimates have proved to be an important additional evidencebase in part...
Webinar series. Module 3. 7th June 2013II. Economic approaches to demonstrate thevalues – monetary valuation6
Webinar series. Module 3. 7th June 2013II. Overview of the main monetary valuationapproaches & methods7Revealed preference...
Webinar series. Module 3. 7th June 2013observed values in actual markets Assessment of data from existing markets (i.e. ...
Webinar series. Module 3. 7th June 2013 A variety of market valuation approaches (marketprices, replacement costs, avoide...
Webinar series. Module 3. 7th June 2013 Applicable primarily to the goods with already establishedmarkets => Useful to es...
Webinar series. Module 3. 7th June 2013II.B. Revealed preference methods11 revealed values in actual markets Directly ob...
Webinar series. Module 3. 7th June 2013 Combination of travel cost & contingentvaluation methods used to estimate value o...
Webinar series. Module 3. 7th June 2013 Used for recreational services, but also can work for someregulating services (e....
Webinar series. Module 3. 7th June 2013Stated preference approaches; hypotheticalmarket creation: Simulation of market de...
Webinar series. Module 3. 7th June 2013 Yellowstone national park (US): CVM of park visitorsto assess wolf direct use (wi...
Webinar series. Module 3. 7th June 2013Also called ‘discrete choice experiments’ - this is still stated preference approac...
Webinar series. Module 3. 7th June 2013 Uses formal methods of deliberation to express valuesfor environmental change in ...
Webinar series. Module 3. 7th June 2013 Obtaining consistent & precise ecosystem valuation can beexpensive and time consu...
Webinar series. Module 3. 7th June 2013• Benefit transfer needs to take due account ofsite/country/habitat differences and...
Webinar series. Module 3. 7th June 2013 Approach monetary assessments with a sense of proportionality: Rapid assessment ...
Webinar series. Module 3. 7th June 2013 Ultimately, what matters is that the approach chosen is fit for purpose:• Policy ...
Webinar series. Module 3. 7th June 2013IV. Valuation in revised NBSAPs: France22 France’s National Strategy forBiodiversi...
Webinar series. Module 3. 7th June 2013IV. Valuation in revised NBSAPs: Switzerland232012 Biodiversity Strategy: A sectio...
Webinar series. Module 3. 7th June 2013 Demonstrating values of ecosystems in economic terms => increasedawareness & impr...
Webinar series. Module 3. 7th June 2013=> The TEEB initiative’s website hasbecome a key resource on the Economics ofecosys...
www.ieep.eu@IEEP_euIEEP is an independent not for profit institute dedicated to advancingan environmentally sustainable Eu...
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Economic approaches to incorporating biodiversity & ecosystem services values: Monetary assessments

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This presentation was given as part of a webinar on the different approaches to incorporate the economic value of nature into decision-making and more specifically in revised National Biodiversity Strategies and Action Plans (NBSAPs). This module focuses on the role of Monetary assessments and introduced participants to the different approaches and methodologies that exist to assess the montary values of biodiversity and ecosystem services.

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Economic approaches to incorporating biodiversity & ecosystem services values: Monetary assessments

  1. 1. 1Webinar series. Module 4. 7th June 2013NBSAP Capacity building SeminarsWebinar # 2: Economic approaches to incorporating valuesModule #3Monetary assessmentsLeonardo MazzaEnvironmental Economics Programme, IEEPPatrick ten BrinkSenior Fellow and Head of Brussels Office, IEEP7 June 2013
  2. 2. Webinar series. Module 3. 7th June 2013I. Why monetary valuation of BD & ESSII. Economic approaches to demonstrate the values:A. Direct valuation methodsB. Revealed preference methodsC. Contingent valuation methodD. Choice modelling methodE. Deliberative monetary valuationF. Benefits/Value transferIII. Choosing the approachIV. Commitments relating to valuation in NBSAPsV. Summary and conclusionsPresentation’s structure2
  3. 3. Webinar series. Module 3. 7th June 2013 In some cases, physical data on the state, functions and services from natureis enough to demonstrate the values of biodiversity & ecosystems Where community or citizen preferences are clear & heard, this can also besufficient to safeguard or invest in biodiversity Approaches have proved insufficient to halt biodiversity loss. In practice:• Policy-makers have attributed a too low or no value to ecosystems/nature• badly informed decisions about whether to conserve or convertecosystems• loss of biodiversity, ecosystems & their services; unacceptable trade-offs• significant human, social and economic lossesTo get a full picture decision-making needs to be based on a wider picture basedon a mix of qualitative, quantitative and monetary approaches and information.I. Why demonstrate the values of nature in monetaryterms?3
  4. 4. Webinar series. Module 3. 7th June 2013 Exploring the economic value of ecosystem services is just an additional wayof assessing the role and importance of nature. Monetary analysis: translating qualitative (non numerical data) & quantitativedata (numerical data) into monetary units; to help to inform decision makingas part of a wider evidence base. Some dimensions of the anthropocentric/ economic rationale for natureconservation are best expressed in monetary termsDemonstrations of the values of ecosystems in decision-making:• Critical for attracting policy interest/attention• To demonstrate the need for action• To promote political and public support for action• To clarify policy response, e.g. policy instrument choice & designI. Why demonstrate the values of nature in monetaryterms?4
  5. 5. Webinar series. Module 3. 7th June 2013 Monetary estimates have proved to be an important additional evidencebase in particular for:• policy development (e.g. cost-benefit analysis of different policyoptions) and implementation,• design and use of policy instruments (e.g. spatial planning and zoningchoices also involving establishment of protected areas; payments forecosystem services schemes),• land use conversion decisions (e.g. permitting decision and associatedconsultation process),• informed investment choices (e.g. for restoration, sustainablemanagement, and new investment for ecosystem based solutions).I. Why demonstrate the values of nature in monetaryterms?5
  6. 6. Webinar series. Module 3. 7th June 2013II. Economic approaches to demonstrate thevalues – monetary valuation6
  7. 7. Webinar series. Module 3. 7th June 2013II. Overview of the main monetary valuationapproaches & methods7Revealed preferenceapproaches Stated preferenceapproachesDirect methods  Direct market valuation Restoration/replacementcosts Avoided costs, productionfunction based Contingent valuationIndirect methods  Protection expenditure andpreventative behaviour Travel costs Hedonic pricing Choice modelling / experimentmethods contingent classification,comparisons in pairs Economic values for ecosystem services may be estimated:• directly for the site and issues in question, or may• use values already developed in other studies of a similar ecosystem & context in which avaluation has been done. Method known as ‘benefits transfer/value transfer method’.Approaches & methodsinvolve: the use of availablemarket prices toobserve/calculatevalues, the careful use ofmethods to revealvalues, methods whichrequire values to bestated by thosebenefitting=> Each category has its weaknesses & strengths.
  8. 8. Webinar series. Module 3. 7th June 2013observed values in actual markets Assessment of data from existing markets (i.e. prices, costs,and quantities) = actual preferences and incurred costs byindividualsTwo most common techniques:a) market price based: price of goodsb) cost-based: estimation of the costs incurred if an ecosystemservice would have to be recreated by artificial means (regulatingservices: e.g. for water purification or water retention)II.A. Direct valuation methods8
  9. 9. Webinar series. Module 3. 7th June 2013 A variety of market valuation approaches (marketprices, replacement costs, avoided damages) wereused to value a range of direct and indirect valuesfrom the That Luang Marsh (outskirts of the City ofVientiane in Lao). Ecosystem services (including rice cultivation, capturefisheries, flood protection or wastewater purification)provided by the march estimated at around under$US 5 million annually. Important evidence as drainage plans were beingdrawn up; renewed interest in sustainablemanagement of wetlands after study - to achievea balance between flood protection and deliveryof the services from the marsh.II.A. Example of uses of the direct valuation method9Source: Gerrard (2004); TEEBcase by P. Gerrad (2010)
  10. 10. Webinar series. Module 3. 7th June 2013 Applicable primarily to the goods with already establishedmarkets => Useful to estimate many use-values Most often used approaches to obtain the value ofprovisioning services, as they are often sold in markets (e.g.agricultural products) HOWEVER, if market is distorted prices not a reliable estimate& may need to be adjusted (where possible) Little help for estimating indirect use values (e.g. climateregulation) and any non-use values (e.g. cultural services)II.A. Applicability of direct valuation methods10
  11. 11. Webinar series. Module 3. 7th June 2013II.B. Revealed preference methods11 revealed values in actual markets Directly observing individual’s choices in existing markets related toecosystem services being valued. Economic agents‘reveal’ their preferences through their choicesTechniques:a) Travel cost Method (TC): Looking at people’s travelling expensesfor going to a site/ecosystem (i.e. direct costs + opportunity costs); forrecreation value, tourism value, value of waterb) Hedonic Pricing (HP) approach: Environmental characteristics(property features) are reflected in property prices; i.e. positive increasein prices for being near attractive nature
  12. 12. Webinar series. Module 3. 7th June 2013 Combination of travel cost & contingentvaluation methods used to estimate value ofthe Hanauma Bay Nature Preserve (Hawaii).Travel cost method considered three types of expenditures (1)actual costs of transportation; (2) costs related to the traveltime; & (3) the local expenditures. Valuation study was an important input for thesubsequent setting of reef damage penalties,as it served as a measure to determine thepossible loss from degradation. Meta-analysis of hedonic pricing studies fromthe US estimated that an increase in theprobability of flood risk of 0.01 in a year isassociated to a difference in transaction priceof an otherwise similar house of –0.6%.II.B. Example of uses of the revealed preference method12Source: TEEBcase by P. v. Beukering and H. Cesar (2010)
  13. 13. Webinar series. Module 3. 7th June 2013 Used for recreational services, but also can work for someregulating services (e.g. flood protection) Requires rather complex statistical analyses (i.e. data + resources) High data demand, and reliance on assumptions on the relationshipof the ESs and the surrogate market Again, the market imperfections might distort the valueestimationsII.B. Applicability of the revealed preference method13
  14. 14. Webinar series. Module 3. 7th June 2013Stated preference approaches; hypotheticalmarket creation: Simulation of market demand for aecosystem good/service: surveys onestimating monetary values associated withhypothetical changes in ecosystem serviceprovision Way of getting people to be explicitabout their willingness to pay (e.g. for cleanerwater, species protection) (or willingness to acceptcompensation (e.g. for the reduction or loss of ESS)II.C. The contingent valuation method14
  15. 15. Webinar series. Module 3. 7th June 2013 Yellowstone national park (US): CVM of park visitorsto assess wolf direct use (wildlife viewing) & existencevalues; wolf reintroduced as valuation revealedincreased visitor expenditure would by far outweighlosses in hunter benefits (reduced hunter expendituredue to additional livestock losses) US government agencies can sue for damage toenvironmental resources. Estimating damagesrelying on CVM allows to also recover non-use andexistence values. Contingent valuation surveys usedfor the assessment of the damages from the ExxonValdez oil spillII.C. Example of uses of the contingent valuation method15 technique widely used by US government departments when performingCBA of projects impacting on the environment
  16. 16. Webinar series. Module 3. 7th June 2013Also called ‘discrete choice experiments’ - this is still stated preference approachrelying on a hypothetical market creation Alternative to more familiar valuation techniques People choose from a ‘menu of options’ with differing levels of ecosystemservices and differing costs Respondents indicate their order of preference & values are inferred fromtrade-offs people make Today increasingly relies on computer-administered/web-based surveysApplicability: This method seems to be ideally suited to informthe choice & design of multidimensional policiesII.D. The choice modelling method16
  17. 17. Webinar series. Module 3. 7th June 2013 Uses formal methods of deliberation to express valuesfor environmental change in monetary terms Principle:• Individuals are provided with detailed info aboutthe issues, discuss & deliberate• They learn about the issue + are encouraged tounderstand issue beyond their personal welfare Deliberative approaches can:• stimulate citizen involvement• increase information on ecosystem services• Process itself results in greaterlegitimacy/ownershipII.E. Deliberative monetary valuation methods17
  18. 18. Webinar series. Module 3. 7th June 2013 Obtaining consistent & precise ecosystem valuation can beexpensive and time consuming the‘value/benefits transfer’ method: approach thatminimises the cost and time of valuing of environmentalcosts and benefits values of one site are ‘transferred’ to another; e.g.estimating economic values in the study location (e.g. asite in the Netherlands) by using values already developedin other studies (e.g. from a site in the UK).II.F. Benefits/Value transfer method18
  19. 19. Webinar series. Module 3. 7th June 2013• Benefit transfer needs to take due account ofsite/country/habitat differences and make appropriateadjustments, where possible (e.g. to take account of differencesin income per capita)• When differences between the study site & the literature siteare too great value/benefits transfer is not robust/applicable• values used for a benefit transfer may change over time (e.g.carbon prices)• The broader the base of studies from which values can betaken, the more likely it will be a robust techniqueII. F. Drawbacks of using the benefits transfer method19
  20. 20. Webinar series. Module 3. 7th June 2013 Approach monetary assessments with a sense of proportionality: Rapid assessment upfront to identify real needs, i.e. right focus and level ofdetail/ precision/ robustness required A rapid assessment framework should pursue three objectives:1) obtain a general view of the full range of services provided by asite/ecosystem2) give guidance on how to interpret first-stage results & communicate them3) help identify which ecosystem services could be selected for further in-depth analysis and most appropriate the methods in light of constraints In a nutshell, which approach to choose will depend on:• the scale/ significance of the decision• the type(s) of benefit(s) being measured• the time & resources available (some approaches particularly time & resourceintensive) + Available skillsIII. Choosing the approach20
  21. 21. Webinar series. Module 3. 7th June 2013 Ultimately, what matters is that the approach chosen is fit for purpose:• Policy Making, e.g. impact assessment of different policy options –approximate estimates of value of ESS sometimes enough – e.g. if clearthat benefits are much larger than costs (or vice versa) => robust order ofmagnitude can suffice• Instrument Design – eg PES, REDD+, ETS – greater precision needed toget the design right (e.g. what level of payments, defining additionality & conditionality)• In compliance checking – as precise an answer as possible is needed asverifiability crucial to functioning (e.g. performance under PES/REDD)• In project and permit assessment – as precise an answer as possible isneededIII. Choosing the approach21
  22. 22. Webinar series. Module 3. 7th June 2013IV. Valuation in revised NBSAPs: France22 France’s National Strategy forBiodiversity 2011-2020:• recognises that links betweenbiodiversity loss & poverty,degradation of health & well-beinghave been demonstrated• Highlights benefits frombiodiversity;• Points to the increasing costsresulting from the degradation ofthe biosphere• concludes that promotingbiodiversity should not be seen asan additional cost but an investment Strategic goal A: “show thatbiodiversity provides essential serviceslinking it to health, food, employment,the economy, quality of life, leisure,sports and cultural activities”so “eachone (…) is aware of his/herdependence on the services providedby biodiversity & this awarenessinforms their decisions andbehaviour” Relevant targets (a selection):• include biodiversity in economicdecision-making;• turn biodiversity into a driver fordevelopment;• develop & organise mainstreamingof biodiversity concerns in alleducation and training courses
  23. 23. Webinar series. Module 3. 7th June 2013IV. Valuation in revised NBSAPs: Switzerland232012 Biodiversity Strategy: A section dedicated to the importanceof biodiversity to society direct use values as well as options,heritage & existence values mentioned “economic values” of BD outlined:highlights different ecosystemservices; links the provision of theseservices to biodiversity; most important services delivered bycertain types of ecosystemshighlighted The links between the economy (valuecreation) and biodiversity are alsomade explicit in a section dedicated toactions for biodiversity taken to datein specific sectors.Relevant targets and commitmentsStrategic objective: by 2020, theservices provided by ecosystems areidentified and quantified in order forthem to be “integrated in themeasurement of well-being as indicatorsthat complement GDP as well as theimpact assessment or regulations”.As regards actions the Strategy pointsto a catalogue of 23 ecosystem servicesthat are particularly useful to the Swisspopulation that has already beenprepared.Action Plan to determine specificmeasures still under development
  24. 24. Webinar series. Module 3. 7th June 2013 Demonstrating values of ecosystems in economic terms => increasedawareness & improved evidence for better informed decisions Which approach/technique is best will depend on the ecosystem servicesbeing valued and the wider context Proportionality of approach used & fitness for purpose considerationsimportant Valuation best applied for assessing the consequences of changes resultingfrom alternative management options; Where no method for monetization exists, important to neverthelessidentify all significant changes in ESS Learning by doing/ from others - key for realising road map and reachingobjectives/create solid foundation for improved policyV. Summary & conclusions24
  25. 25. Webinar series. Module 3. 7th June 2013=> The TEEB initiative’s website hasbecome a key resource on the Economics ofecosystems and biodiversity. Providesinformation on the main TEEB Studyreports, published since 2010=> The CBD Technical Series no. 28 focuseson the issue of economic Valuation andexplores the tools and methodologies=> Social and Economic Benefits ofProtected Areas: an Assessment Guide:aims to do so by synthesising wide-rangingglobal evidence on benefits provided by PAsand providing concrete, step-wise andpractice-oriented guidance on how toidentify asses and communicate the variousbenefitsV. Further reading25
  26. 26. www.ieep.eu@IEEP_euIEEP is an independent not for profit institute dedicated to advancingan environmentally sustainable Europe through policy analysis,development and dissemination.Contacts: Leonardo Mazza: lmazza@ieep.euPatrick ten Brink: ptenbrink@ieep.euThank you for your attention!

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