putting economic value to nature protection direct and indirect costs and benefits by
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Putting Economic Value to Nature Protection Direct and Indirect Costs and Benefits by Gernot Bäurle [email protected]. Presentation Outline. What is the economic value of nature? How to determine the economic value? How confident can we be about these value estimates? - PowerPoint PPT PresentationTRANSCRIPT
Putting Economic Value to Nature Protection
Direct and Indirect Costs and Benefits
by
Gernot Bä[email protected]
• What is the economic value of nature?
• How to determine the economic value?
• How confident can we be about these value estimates?
• Costs & benefits of nature protection: spatial & temporal
mismatches
• How to reconcile these mismatches?
• Payment for ecosystem services
• Digression: Conservation Finance Alliance
• Conclusions
Presentation Outline
What is the economic value of nature?
Total Economic Value
Use Values
Direct Use Value
benefits from consumptione.g. agricultural products
Indirect Use Value
benefits from ecosystem functionse.g. hydrological regulation
Option Value
benefits from availability for possible future use e.g. gene pool
Non-use Values
Bequest Value
legacy benefits e.g. cultural landscape conservation for future generations
Existence Value
existence benefits e.g. knowledge of existence of wildlife diversity
(OECD 2001, adapted)
How to determine the economic value?
Market Price Approach
by definition, market values tend to reflect actual use and hence ignore non-use values
• Observed market price method • Cost-based Methods - replacement cost - opportunity cost
Revealed Preference Approach
prices revealed in other (surrogate) markets that are affected by the goods/services to be valued
• Travel Cost Method• Hedonic Price Method• Averting Behaviour Method
Stated Preference Approach
willingness to pay (WTP) estimatesused when no (surrogate) market exists (construction of a market)
• Contingent Valuation (direct elicitation of WTP)• Choice Modelling (indirect elicitation of WTP) - choice experiments - contingent ranking - contingent rating - paired comparison
Benefit Transfer
values borrowed from existing studies
(OECD 2002, adapted)
Levels of Confidence in Estimates
(OECD 2001, adapted)
Value Confidence
direct use valuese.g. for agricultural products
high
indirect use valuese.g. for ecosystem services
low – medium
existence/option valuese.g. for a landscape
very low – medium
Costs and Benefits: Place
local national global
costs
benefits
(Balmford & Whitten 2003, simplified)
Costs and Benefits: Time
present future
costs
benefits
Additional problem: How to compare costs and benefits over time?
How to reconcile
spatial and temporal
mismatches?
Ecosystem servicese.g. erosion control,
hydrological regulation
Transfer payments
Protection/restoration of ecosystem servicesthrough sustainable land use
ecosystemcatchment area
National economy
Benefits from ecosystem servicese.g.: •constant water supply•reduction of floods•reduction of siltation of dams
economic benefit, e.g.:•lower maintenance costs•lower water treatment costs
alternative sources of income, compensation for foregonebenefits
rural populationlandowners
private sector,communities, e.g.:
•industry•hydropower plants
•waterworks
Financial incentive
Red
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ts a
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ks
Payment for Ecosystem Services
Payment for Ecosystem Services:example of a tax/levy/surcharge approach
PaymentMechanism
€€ ££
¥¥ $$
Governance Structure
Financing Mechanism
Ecosystem Services
Bene-ficiary
Land user
€€ ££
¥¥ $$
(World Bank 2002, adapted)
Alternatively a market based approach is possible
Conservation Finance Alliance: CF Guide
www.guide.conservationfinance.org
• Economic valuation of nature and nature protection is not an “exact science” • it can be a double edged sword
but it can add depth to decision making when trade-offs are necessary
• A mismatch of costs and benefits of nature protection over time and space exist
Payment for ecosystem services can help to even out this mismatch
In the end nature protection is a matter of societal choice and beyond pure economics.
Conclusions