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Economic Valuation of Ecosystem Services and Biodiversity Conservation: a multidisciplinary approach. Paulo A.L.D. Nunes. University Ca’ Foscari of Venice Fondazione Eni Enrico Mattei Euro Mediterranean Center for Climate Change. Contents. Background and motivation

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Economic valuation of ecosystem services and biodiversity conservation a multidisciplinary approach l.jpg

Economic Valuation of Ecosystem Services and Biodiversity Conservation: a multidisciplinary approach

Paulo A.L.D. Nunes

University Ca’ Foscari of Venice

Fondazione Eni Enrico Mattei

Euro Mediterranean Center for Climate Change


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Contents

  • Background and motivation

    • Economic thinking and environmental economics

    • Economic valuation perspective

  • Biodiversity as an environmental resource

    • Economic reasons for economic valuation

    • Integrating ecology and economics


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Contents

  • Millennium Ecosystem Assessment

    • Ecosystems services approach

    • Biodiversity, ecosystems, ecosystems services and human well-being are linked

  • Reflection, and challenges

    • A research agenda for valuing ecosystem services

    • Tasks to mainstream economic valuation in everyday decisions

    • Economic valuation of ecosystems services as a means for biodiversity conservation and poverty alleviation


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Just what is economic thinking?

  • Economics is a social science, human behaviour is at the core of the analysis, we focus on the study of “choices”, individual choices.

  • Choices are disclosed in the allocation of scarce resources (not just traditional commodities) to meet individual economic needs.

    Economics is not simply about profits or money. It applies anywhere constraints are faced, so that choices must be made.

    Economists study how incentives affect people’s behavior.


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Environmental and natural resource economics

Environmental and natural resource economics is the application of the principles of economics to the study of how environmental and natural resources are developed and managed.

  • Environmental resources – resources provided by nature that are indivisible and are affected by the economic system (e.g. biodiversity).

  • Natural resources – provided by nature that can be divided into increasingly smaller units and serve as inputs to the economic system over time (e.g. forests, oil).


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Definition of the total economic value of an environmental resource


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Definition of the total economic value of an environmental resource


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Definition of the total economic value of an environmental resource

The major contribution of environmental economists has been in the area of the valuation of environmental goods and services, i.e. methods for measuring the demand curves for goods for which there are no markets (nonmarket valuation)


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  • Why perform economic valuation

  • Economic valuation perspective


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Why perform economic valuation

  • Cost-benefit-analysis and environmental policy making

    • Excessive pollution

    • Protection of the natural environment

  • Legal claims and natural resource damage assessment

    • Exxon Valdez (CERCLA, NOAA)

  • Environmental accounting (national and firm level)

    • Satellite national accounting system

    • Corporate social responsibility reports


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Economic valuation perspective

Instrumental vs. intrinsic valuation.

Monetary vs. physical indicators.

Direct vs. indirect values.

Alternative perspectives on valuation

Value of levels vs. changes of levels.

Holistic vs. reductionist approaches.

Expert vs. general public assessments.


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All in all…

It is clear that different valuation perspectives can be distinguished based on the above considerations. This means that different angles on the value, and valuation, may in fact be based on different perspectives.

This does not mean that one is right and the other is wrong.

Evidently, it is crucial to know which perspective is being adopted.


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Economic perspective

  • Instrumental perspective

  • Provides a monetary indicator

  • Valuation is operationalized through explicit changes of the environmental status, preferably marginal or small (interpreted as alternative policy scenarios)

    Not a value of an ecosystem!


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Economic valuation perspective


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Economic valuation perspective


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Economic Valuation

***


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Biodiversity as an environmental resource

Biodiversity requires our attention for two reasons. First, it provides a wide range of direct and indirect benefits to mankind, which occur on both local and global scales.

Second, many human activities contribute to unprecedented rates of biodiversity loss, which threaten the stability and continuity of ecosystems as well as their provision of goods and services to mankind.

Consequently, in recent years much attention has been directed towards the analysis and valuation of the loss of biodiversity.


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Biodiversity and Human Welfare

HUMAN WELFARE

SERVICES

THREATS

BIODIVERSITY RESOURCES

ECONOMIC VALUATION


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Complexity of the resource


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Classification of biodiversity economic values


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Applicability


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Review of valuation studies:

Life diversity level

Biodiversity value type

Value ranges

Method(s) selected

Genetic and species diversity

(2=>5)

Bioprospecting

From:

$ 175,000 To:

$ 3.2 million

Market contracts

Single species

From: $5

To: $126

Contingent valuation

Multiple species

From: $18 To: $194

Contingent valuation

Unequivocal support for the belief that biodiversity has a significant, positive social value.

Lack of a uniform, clear perspective on biodiversity as a distinct concept from biological resources.

Available results should be regarded as providing, at best, lower bounds to the unknown value of biodiversity changes.


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Millennium Ecosystem Assessment

  • The Millennium Ecosystem Assessment (MA) was called for by the United Nations Secretary-General Kofi Annan in 2000.

  • Objective of the MA was to assess the consequences of ecosystem change for human well-being.

  • The MA has involved the work of more than 1,360 experts worldwide.

  • Their findings provide a state-of-the-art scientific appraisal of the condition and trends in the world’s ecosystems and the services they provide, as well as the scientific basis for action to conserve and use them sustainably.


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Biodiversity matters and people matter!


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Motivation: stylized fact one


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Motivation: stylized fact two


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MEA: conceptual framework

Source: MEA (2005), adapted.


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MEA: conceptual framework

Climate change

Source: MEA (2005), adapted.


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MEA: conceptual framework

Climate change

Forests systems

Coastal and marine systems

Source: MEA (2005), adapted.


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MEA: conceptual framework

Climate change

Forests systems

Coastal and marine systems

Source: MEA (2005), adapted.


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An illustration:

Culturalservices

Contingent valuation

methods

Market priceanalysis

Regulating

services

Cost Assessments

Provisioning

services


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Monetary valuation approaches

  • Market price valuation mechanisms.These include the value of contracts, as recently signed by the pharmaceutical industry and governmental agencies, and the value of the financial revenues related to the eco-tourism activities focused on the visits to natural areas with high outdoor recreational demand.


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Monetary valuation approaches

  • Non-market valuation methods.These refer to special tools used by the economist so as to retrieve consumer’s preferences for biodiversity benefits, includingContingent Valuation Methods (CVMs)


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What are CVMs?

Valuation technique widely applied by environmental economists (Exxon case)

Aims at tracing the latent demand curve for a non market commodity

The main tool is an on-purpose designed questionnaire

It is a very flexible development


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Potential of CVM Studies

Interview based Technique

Deeply rooted in social studies literature

Gathers a great deal of information on attitudes and preferences

Capable of attaching “economic measures” to non use values

Flexible to other uses, i.e. management options


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Biodiversity, ecosystems, ecosystems services and human well-being are linked

Ecosystem services: ecosystems provide vital goods and services


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Provision of ecosystem services is not often factored into important decisions that affect ecosystems.

Distortions in decision-making damage the provision of ecosystem services making human society and the environment poorer


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Integrating ecology and economics: a research agenda for valuing ecosystem services

Policy

decisions

Decisions by firms

and individuals

(1) Incentives

(3) Non-anthropocentric

approaches

(2) Actions

Other

considerations

Ecosystems

(5) Biophysical

tradeoffs

(7) Economic

efficiency

(4)

Ecological production functions

Benefits

and costs

Ecosystem

services

(6) Valuation

Source: S. Polasky, adapted


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Reflection and challenges:tasks to mainstream economic valuation

  • Improve understanding of the likely consequences of human actions on ecosystems

  • Improve understanding of the impacts of ecosystem change on ecosystem services and biodiversity

  • Improve understanding of the value of these impacts on human welfare

  • Tie understanding of impacts and values to incentives

    • Everyday decisions of individuals, firms and communities

    • Societal policy choices


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Reflection and challenges:tasks to mainstream economic valuation

Integration of distributional objectives in the objective function of the policy maker (other considerations)

The role of the local communities in the management of the resource

The role of the resource in terms of income generation


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Work in progress: BioLAC


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Contact:

[email protected]

Campo S. Maria Formosa

30122 Venezia - Italy

tel+39 | 041 | 27 11 400

fax+39 | 041 | 27 11 461

webhttp://www.feem.it


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Motivation

Jul 16th 2009From The Economist print edition


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