This document discusses methodological issues for incorporating natural resource management (NRM) and environmental impacts within impact assessments for the Australian Centre for International Agricultural Research (ACIAR). It proposes a framework that: 1. Identifies how agricultural research and development (R&D) outcomes can impact ecosystems and potential ecosystem services. 2. Collects data on the value of ecosystem services from other studies using benefit transfer methods. 3. Applies these values to estimated biophysical impacts from R&D to assess the economic magnitude of environmental impacts, both on-farm and off-farm. The framework is intended to maintain consistency with economic surplus measures used in impact assessments, while incorporating additional NRM and environmental

1. Including NRM and environmental
impacts within ACIAR impact
assessments
Methodological issues
September 2012
David Pearce
WorldFish NRM Workshop, Penang
www.TheCIE.com.au

2. Themes
Concerned with incorporating NRM/environment
within extended BCA framework, as used for
ACIAR IAS
MDB Plan major influence on thinking
Maintain consistency with surplus measures
■ But not precluding other measures
2

3. 3

4. 4

5. Channels of impact
R&D OUTCOMES
(Assuming adoption etc)
Environmental effects
Mediated through farm FARM
ENVIRONMENT behaviour (Or processor etc)
Environmental benefits
Feed back to farm
Ecosystem services
OTHER USERS INCREASE PRODUCTIVITY,
REDUCE COSTS etc
NON
MARKET MARKET MARKET OUTCOMES
Valuation Market
methods models
ECONOMIC SURPLUS ECONOMIC SURPLUS
BENEFIT COST ANALYSIS
5

6. Agricultural ecosystem inputs and 1
outputs
Ecosystem service inputs
• Biological pest control
• Pollination
• Water (quantity and quality)
• Soil structure and fertility
• Nutrients
INPUTS
Agricultural systems
OUT PUTS
Ecosystem dis-services Ecosystem services
• Loss of biodiversity and habitat • Mitigation of greenhouse gases
• Chemical contamination • Carbon sequestration
• Pesticides poisoning • Landscape management
• Greenhouse gas emissions
• Salinity
• Watershed effects
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7. Final ecosystem services
Final ecosystem servicea Principal related goods
Production of crops, plants, livestock, fish, etc (wild and Food, fibre, energy, genetic resources, industrial inputs, fertiliser, avoidance of climate stress,
domesticated) b recreation and tourism, physical and mental health, ecological knowledge, etc
Production of trees, standing vegetation and peatb Timber, avoidance of climate stress, energy, noise regulation, recreation and tourism, etc
Production of wild species diversity including microbes b,c Natural medicine, disease and pest control, genetic resources, wild food, bio-prospecting,
recreation and tourism, physical health, ecological knowledge, etc
Production of water quantityb,c Potable water, industrial use of water, flood protection, energy, recreation and tourism,
physical health, ecological knowledge, etc
Regulation of the climatec Avoidance of climate stress, physical and mental health, ecological knowledge, etc
Regulation of hazards; related vegetation and Coastal protection, erosion protection, flood protection, avoidance of climate stress, physical
other habitatsc and mental health, ecological knowledge, etc
Breakdown and detoxification of wastec Pollution control, waste removal, waste degradation, physical and mental health, ecological
knowledge, etc
Purification processesc Clean air, clean water, clean soils, physical health, ecological knowledge, etc
Generation and maintenance of meaningful places; socially Recreation and tourism, physical and mental health, ecological knowledge, etc
valued landscapes and waterscapesd
a As noted previously, other inputs (for example manufactured capital) may in some occasions be required to combine with final ecosystem services in the production of
goods. Relating the final ecosystem services to the MA (2005) nomenclature
b ‘Provisioning’ services.
c ‘Regulating’.
d Cultural services. ‘Supporting’ services relate to primary ecological services.
Source: I. J. Bateman et al, Economic Analysis for Ecosystem Service Assessments, Springer Press, p.185
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8. Total economic value (TEV) and its
components
TOTAL ECONOMIC VALUE
Use values Option values Non-use value
Direct use Indirect use Future New info Bequest Existence
direct and from value value
indirect use avoiding
irreversible
loss
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9. Overview of the sort of estimation
that may be required
ON-FARM OFF-FARM
MARKETED • Can use conventional surplus • Observe outcomes where markets
techniques exist for environmental ‘goods’
• Likely to be rare for most • Likely to increasingly be the case for
environmental effects carbon sequestration
NON-MARKETED • Use production function type • Revealed preference techniques
approach where environmental goods can be
linked to other marketed goods (e.g.
• Need to understand the production travel cost method, hedonic pricing)
relationship between environmental
‘good’ and farm output • Stated preference techniques in
cases where no market information is
available (e.g. contingent valuation,
choice modelling)
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10. Geographic scope of effects
Local Global
Change in Within farming Within neaby Broadly within
Ecosystem service system farming systems regional economy Nationally Globally
Carbon storage X
Biodiversity X X
Water quality X X X
Soil quality X X
Salinity X X
Air quality X X
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11. Valuation techniques
Valuation where direct market transactions cannot be
Valuation where direct market transactions cannot be
observed (or may be highly distorted)
observed (or may be highly distorted)
Revealed preference technique Stated preference technique
Non-market environmental characteristics implicit Direct questioning of values
in market transaction
‘Use’ values Includes ‘non-use’ values
Travel Hedonic Production Contingent Choice Contingent
costs pricing function valuation modelling behaviour
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12. From ecosystem processes to human
values
ECOSYSTEMS ECOSYSTEMS SERVICES HUMAN WELLBEING
Non-use
• Biophysical structures and • Provisioning • Values derived from
processes • Regulating ecosystem services
Use (Alone or in combination
• Habitat
with other inputs)
• Ecosystem functions • Cultural
Other human generated inputs (for example labour, produced capital) and institutions
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13. How R&D may impact ecosystem
services
1 3 6
ECOSYSTEMS ECOSYSTEMS SERVICES HUMAN WELLBEING
Non-use
• Biophysical structures and 2 • Provisioning • Values derived from
processes • Regulating 5 ecosystem services
• Habitat (Alone or in combination
Use with other inputs)
• Ecosystem functions • Cultural
4
7
Other human generated inputs (for example labour, produced capital) and institutions
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14. Categories of R&D impact for
ecosystem services
1. Direct impact on 2. Change in 3. Change in volume 4. Improved
ecosystems knowledge of link ecosystem productivity in use
between ecosystem services of ecosystem
and service services as a
productive input
Ecosystems Ecosystem services Human wellbeing
5. Increased understanding 6. Direct increase in
of the relationship human wellbeing
between ecosystem
services and human
wellbeing
7. Changes in policy related to ecosystems
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15. Output related Input related Knowledge or policy
Impact 1. Decrease in emissions of Reduced withdrawal of
various kinds (smoke, resources from
Impact of changes
chemicals, processing ecosystems (water, for
induced by R&D on
effluent) may directly example) will affect
underlying ecosystems
impact functioning of ecosystem function.
themselves.
ecosystems.
Impact 2. The relationship between
ecosystems and potential
Change in knowledge
ecosystem services is
about the relationship
complex. R&D may
between underlying
improve basic scientific
ecology and potential
understanding of these
ecosystem services
relationships.
Impact 3. Increase in the volume of
the ecosystem service
Change in the ‘volume’
(such as increased
or ‘quality’ of
carbon sequestration)
ecosystem services.
may result from
production changes
related to R&D.
Impact 4. Increased production efficiency in the use of
ecosystem services may result in releasing
Improved productivity in
environmental resources for other uses
the combination of
capital and other inputs
with ecosystem
services
Impact 5. The link between
ecosystem services and
Increased
human wellbeing is an
understanding of the
issue of ongoing scientific
relationship between
exploration.
ecosystem services and
human wellbeing.
Impact 6. Reduced emissions of
various kinds may directly
Direct increases in
improve human well being
human well being
(reduced smoke for
example).
Impact 7. Institutional structures and
policies have a direct
Changes in policy
influence on the full
broadly relating to
ecosystem service chain.
15 ecosystems.

16. Frequency of impact categories for ACIAR
projects
41%
24%
20%
11%
3% 2%
0%
1. Impact on 2. Change in 3. Change in 4. Improved 5. Increased 6. Direct 7. Changes in
underlying knowledge: volume of productivity in understanding: increase in well policy
ecosystem ecology to ecosystem use of ecosystem being
ecosystem service ecosystem service to
service services wellbeing
Based on desktop analysis of 356 ACIAR projects considered to have some NRM impact
Shares apply to 260 of these projects where extended BCA was considered necessary
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17. Testing which ecosystem services to
use
Ecosystem Contribute to goods Four tests to identify values
services which people value and avoid double counting
Provisioning • Production of crops, • Food and fibre, 1. Would beneficiary in
services plants, livestock, fish, recreation, inputs principle be willing to
etc pay for an increase in
• Production of trees, the service rather than
vegetation, peat go without?
• Production of water • Water for household and
quantity industrial use
• Production of wild • Medicine, disease and
species diversity pest control 2. Are the outputs of the
ecosystem service prior
to any combination with
human labour, capital or
technology?
Regulating • Climate regulation • Avoid climate stress
services • Hazard regulation • Coastal protection,
erosion protection, flood
prevention
• Breakdown of waste • Pollution control, waste 3. Would the beneficiary be
removal, clean air and willing to pay for an
soils increase in the service
assuming all other
• Purification processes
ecosystem services and
outputs were held
constant?
Cultural • Generation of • Recreation, tourism,
services meaningful places physical and mental
health 4. Only benefits of final
• Socially valued services (satisfying 1 to
landscapes and 3) should be counted an
waterscapes aggregated
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18. A structure for identifying ecosystem
service value
UTILITY FUNCTION PRODUCTION FUNCTION
Ui (X, Y(X, Z)) Ecological P i (H, X, Y(X, Z))
outcome indirectly
valued through a
Ecological function Human m ade
outcome (X) both inputs
directly and
indirectly valued
h = {X, Y, Z } is a set of biophysical outcomes that may serve as ecosystem services if they satisfy four tests:
Test 1: ‘It is valuable ?’
Is the beneficiary willing to pay for an increase in ‘h’ rather than go without? Is:
dU dP
>0 OR >0
dh dh
Test 2: Is h the output of an ecological system prior to any combination with human labour, capital or
technology? An output that combines biophysical outcomes with other factors of production is
not an ecosystem service.
Test 3: Is the bene ficiary wil ling to pay for increases in h assuming that all other ecosystem outputs are
held constant? For example:
dU dP
> 0 for Y fixed and Z fixed AND > 0 for Y fixed and Z fixed
dX dX
BUT
dU dP
= 0 Y fixed and X fixed AND = 0 for Y fixed and X fixed
dZ dZ
SO
Z is not a final ecosystem servic e
Test 4: Are the ecosystem services to be counted and aggregated across beneficiaries all final services?
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19. Levels of benefit transfer
How many differences between situations are controlled for:
1. No differences Single point For example, $X per person transferred
(average) estimate to new situation
2 Single value Marginal value which varies in For example, site size, $X/ha/person
difference one dimension transferred to new situation
3. Multi-value A value function with argument For example, Value = f (char1, char2,
difference based on a number of situation …) transferred to create new values
characteristics with arguments from new situation
4. Pooled information ‘Meta analysis’ to provide Values transferred according to
statistical value function different characteristics
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20. Environmental values from forestry
research
Type of value Indirect use value Existence value
Detail Water regulation Carbon sequestration Biodiversity
Values adopted $30/ha 37 – 97 t/ha $30 – $50/ha
(range $20 – $40 $5/t CO2 (range $25 – $75)
Valuation approach Benefit transfer from Quantity basal on Benefit transfer from
other studies biophysical studies other studies
Price derived from
market transactions
and damage estimate
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21. Information collection and analysis:
proposed steps
1
Understand biophysical impacts
(the marginal impacts related to the successful adoption of the R&D, either on-farm or off-farm)
2
Identify changes in potential ecosystem services
(marketed on non-marketed, on farm or off farm?)
3
Consider institutions and Look for Look for
markets environmental payments related markets
4
Collect data on ecosystem values suitable for benefit transfer
(meta-analysis where available, otherwise most suitable similar situation)
5
Apply values to biophysical impact from the R&D
Assess magnitude of impact (relative to other economic impacts)
6
Decide on additional analysis
(magnitude of effect, prospects for success non market studies)
7
Complete BCA
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22. David Pearce
Executive Director
+61 2 6245 7800
dpearce@TheCIE.com.au
www.TheCIE.com.au