This document discusses the economic evaluation of biodiversity and ecosystem services. It begins by introducing key concepts like ecosystems, biodiversity, and ecosystem services. It then discusses how placing monetary values on ecosystem services can help inform better decision making. The document outlines challenges to valuing ecosystem services and different methodologies used, including production function methods, contingent valuation methods, hedonic pricing methods, and travel cost methods. It also discusses classifying the different values of biodiversity and conserving biodiversity for both economic and environmental benefits.

1. Economic
evaluation of
biodiversitySiddhartha Swarup Jena
RAD/10-30
Ph.D. Mol. Bio & Biotech
Presented by:
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2. OutlineOutline
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3. INTRODUCTION
Ecosystem: A dynamic complex of
plant, animal, and micro-organism
communities and the non-living
environment interacting as a
functional unit
Biodiversity: The variability among
living organisms
– Within species & populations
– Between species
– Between ecosystems
Ecosystem services: The benefits
people obtain from ecosystems
The “goods and services of nature”
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4. Contd…
Placing monetary values on ecosystem
services is not an end in itself
The aim is to provide information to make
better and more informed decisions:
- Better meeting targets and goals
- Avoiding costs and losses
- Maintaining/Increasing revenues
- Finding cost-effective means of
complying with obligations and managing
environmental footprints
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5. Biodiversity and Economics
 What are the consequences of losing
biodiversity versus conserving biodiversity?
(costs and benefits)
 What actions can be done, or should be done,
to conserve biodiversity?
(management & policy)
 Documenting the benefits and costs of
conserving biodiversity
– Value of “ecosystem services”
– benefits derived from ecosystems &
biodiversity
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6. Biodiversity and Economics cont..
 Evaluating management & policy
options
– Cost-effectiveness analysis
– Cost-benefit analysis
– Analysis of incentives and institutions
(market failure and policy interventions)
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8. Biodiversity Management to beBiodiversity Management to be
consideredconsidered
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9. Three Challenges to Valuing
Ecosystem Services
Challenge 1
 Understanding ecological systems and how they
contribute to goods and services of value to people
 Understanding how changes in ecosystems lead to
change in the amount of goods and services
produced.
 “Ecological production function”
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10. Challenge 2
 Understanding the contribution of the value of
goods and services produced by ecosystems to
human well-being
Understanding the distributional consequences:
who benefits from ecosystem services?
 “Value of ecosystem services”
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11. Challenge 3
o Integrated analysis:
– Combining ecology (& other natural sciences)
and economics (& other social sciences) in an
integrated assessment
– Focusing integrated assessments on
management/policy relevant questions
o Integration challenge is made easier when
directly focused on a policy/management
relevant question
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12. Steps in aSteps in a
corporate ecosystem servicescorporate ecosystem services
1. Determine scope
2. Identify priority ecosystem
services
3. Analyze trends in priority
services
4. Identify business risks and
opportunities
5. Develop strategies
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13. BIODIVERSITY VALUESBIODIVERSITY VALUES
Valuing biodiversity is mandatory even though it
is really beyond valuation
Three important systems of classification of
values of biodiversity have been proposed till
date.
The 1st
system of biodiversity value
classification breaks the value into number of
components-
Use or non-use
Direct or indirect use
Consumptive or productive use
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14. Component valuesComponent values
1. Total environmental value (TEnV):
A function of primary value and total economic
value. (UNEP, 1995)
Global natural resources are more valuable than
global national products.
2. primary value (PV):
The value of the system characteristics upon
which all ecosystem functions depend.
Called primary value because the structured
ecosystem produces functions which have
secondary value.
Also known as ‘glue’ value.
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15. Contd…Contd…
3. Total economic value (TEV):
Also called Total value (TV)or simply Value (V).
The sum total of all kinds of values attached to
biodiversity minus the primary value
4. Use value (UV):
The value arising from an actual use made of a
given component of biodiversity.
5. Direct use value (DUV):
Economic values derived from direct use or
interaction with a biological resource or resource
system.
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16. Contd…Contd…
6. Indirect use value (IUV):
Economic value derived from the role of
resources and systems in supporting or
protecting activities whose outputs have direct
value in production or consumption.
7. Consumptive use value (CUV):
A type of direct use value which represents the
value placed on a diversity component that is
consumed/enjoyed directly, without passing
through a market.
8. Non-consumptive use value (NUV):
The value which the components/systems of
biodiversity possess in terms of functions or
services offered.
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17. Contd…Contd…
9. Productive use value (PUV):
The value given to a component of biodiversity that
is commercially harvested or is a source for a
commercially harvestable product.
Such items pass through a market.
Ex: Minor forest produce, fruits & seeds, timber,
pharmaceuticals etc.
It is included in national economic statements and
budgets.
10. Non-use value (NUV):
Value relating to safeguarding the existence of
assets, even though not related to their actual use
in a foreseeable period.
Also referred to as Passive use value.
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18. Value ecosystem servicesValue ecosystem services
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19. METHODOLOGIES FOR VALUATION
OF BIODIVERSITY
Recent workers providing methods for
biodiversity valuation are
i. Dixon and Sherman (1990)
ii. Winpenny (1991)
iii. Pearce and Morgan (1994)
iv. UNEP (1995)
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20. 1. Changes in productivity method
Also known as production function method.
Changes in the supply of biodiversity resources
result in changes in the economic value of their
production.
Changes in the supply of resources may occur
for several reasons like habitat changes, loss of
biodiversity components etc.
The production function technique is a natural
complement to cost-benefit analysis.
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21. 2. Contingent valuation method
The basis for this method is what people are willing
to pay (WTP) for increment in biodiversity quality, or
what people are willing to accept (WTA) in
compensation for foregoing such benefits.
The procedure involved are
 Elicit people’s WTP for biodiversity goods or
services.
 Create a hypothetical market situation
 Use the respondents reply to place value on
biodiversity items that are not usually marketed
The resultant valuation is contingent because the
value depends on every individual’s perception of
background factors.
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22. 3. Hedonic pricing method
This method enables explicit valuation of non-
marketable services; viz. soil fertility, scenic
beauty or air quality of a land etc.
The procedure involved are
 Estimate the value of the land
 Estimate econometrically the value
contributed by the chosen service attributes
to the value of the land.
 Work back from this hedonic price equation
to the actual demand curve.
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23. 4. Travel cost method
This method can be used to find only the
recreational value of a landscape.
Procedure followed are
 Collect information on the expenditure incurred
by visitors to the particular site/landscape
 Aggregate the number of visitors by what it
costs them to travel to and from the site
 Estimate travel costs of visitors from distant
places and nearby places.
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24. Uses of PGR
Food
Fodder and forage
Timber
Rattans and canes
Medicinal plants
Ornamentals
Other uses
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25. Conclusion
‘The origin of all wealth came from the bosomThe origin of all wealth came from the bosom
of earthof earth’
which imply the existence of great bondage
between Economics and the earth’s
resources especially, biodiversity.
(Smith, 1776)
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26. References
Krishnamurthy, K.V.; An advanced textbook on
biodiversity- principles and practice. Oxford & IBH
publishing Pvt. Ltd.
www.IUCN/Holcim EVI.ppt
www.advocacy.britannica.com
Biodiversity Conservation and Ecosystem Services;
Stephen Polasky, University of Minnesota. Third
World Congress, Kyoto July 2006
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