The Economic Value of the Upper

Tuul Ecosystem

L. Emerton, N. Erdenesaikhan, B. de Veen, D. Tsogoo,

L. Janchivdorj, P. Suvdaa, B. Enkhtsetseg, G. Gandolgor,

Ch. Dorjsuren, D. Sainbayar, A. Enkhbaatar.

introduction to the study

• Traditionally, economic calculations do not include environmental values

• They present incomplete (or even incorrect) information to decision-makers

• Under-valuation can lead to decisions being made which:

− miss opportunities to generate economic benefits

− result in activities that impose economic costs

• Environmental valuation aims to overcome these problems

background

• First ever application of environmental valuation techniques in Mongolia

• Objective – to improve understanding about the value of the environment to Mongolia’s economy

• Looked at the ecological, hydrological and economic impacts of ecosystem conservation and ecosystem degradation in the Upper Tuul watershed

aims

international examples

Biome Area(million ha)

Global value($ trillion/yr)

Open ocean 33,200 8.381

Coastal 3,102 12.568

Tropical forest 1,900 3.813

Temperate forest 2,955 0.894

Grass/rangelands 3,898 0.906

Tidal marsh/mangroves 165 1.648

Swamps/floodplains 165 3.231

Lakes/rivers 200 1.700

Cropland 1,400 0.128

Total 51,625 33.268

the value of the world’s ecosystems

Costanza, R., d'Arge, R. de Groot, R. Farber, S., Grasso, M., Hannon, B., Limburg, K., Naeem, S., O’Neill, R.V., Paruelo, J., Raskin, R.G., Sutton, P. and M. van den Belt 1997. “The value of the world's ecosystem services and natural capital”. Nature 387: 253-260

the degradation of

biodiversity and ecosystems

means that each year the

world loses natural capital

worth between €1.35 and

€3.19 trillion

the global costs of biodiversity loss

European Community. 2008. The Economics of Ecosystems and Biodiversity. An Interim Report.

forest watershed values in the USA

every $1 invested in watershed

protection can save anywhere

from $7.50 to nearly $200 in

costs for new urban water

treatment and filtration facilities

national income accounts in Norway

detailed physical environmental

accounts (linked to national

income accounts) show the

relationship between economic

activities and the depletion of

renewable and non-renewable

natural resources

hydropower dam in Kenya

valuation of biodiversity and ecosystem

costs of dam construction (US$ 47

million NPV) meant that government and

donor changed the design option

wetland conservation in Sri Lanka

valuation of flood control,

wastewater treatment and

downstream fisheries benefits of

Muthurajawela Marsh (US$

2,500/ha) used to justify higher

budget for wetland conservation

oil spill liabilities in the USA

valuation of biodiversity

impacts of Arthur Kill oil spill

used as the basis for

reaching court settlement on

damages (US$ 11 mill)

the Tuul River Basin

Ulaanbaatar

Gorkhi-Terelj NP

Khan Khentii SPA

ecosystem services & values

land use in the Upper Tuul

Erdene winter grazing area tourist ger camp close to Tuul River Bridge

split firewood Siberian pine nuts

herding

Nalaikh Erdene All herdersValue of livestock production (Tug mill/year)

Milk 100.21 1,026.99 1,127.19Wool 0.98 9.71 10.69Cashmere 109.54 294.97 404.51Airag - 29.29 29.29Hides 77.21 - 77.21Hay 53.95 313.24 367.19Large stock 223.39 472.61 696.01Smallstock 266.66 382.32 648.98All production 831.94 2,529.13 3,361.07

herding

tourism

Number Bednights Gross revenues (Tug mill)

Ger camps 156 683,575 17,570.38

Hotels 6 67,111 5,972.91

Guest houses 1 9,302 130.23

Wooden houses 2 11,783 312.25

Children's camps 5 94,055 611.36

Government resorts 5 20,263 -

Sanatoria 5 43,399 -

Total 180 929,488 24,597.13

tourism

timber & firewood

Harvest (m3/year) Market value (Tug mill/year)Timber Firewood Timber Firewood Total

Legal cutting 643 4,384 38.58 87.68 126.26

Illegal cutting 606 4,114 22.73 82.28 105.01

Household structures 2,046 - 76.73 - 76.73Total 3,295 8,498 138.03 169.96 307.99

timber & firewood

non-timber forest products

Average harvest

(kg/hh/year)

Average price

(Tug/kg)

Total value (Tug mill/yr)

Home Sale Total

Fruits & berries 25 2,750 17.05 2.33 19.39

Wild vegetables 7.5 1,500 3.17 3.17

Pine nuts 47.5 1,500 11.07 3.18 14.25

Medicinal plants 2.5 5,000 0.43 0.43

Total 31.72 5.51 37.24

non-timber forest products

Local households

Outsidebusinesses

Local Government Total

Tourism 433.00 24,164.12 268.44 24,597.13Herding 3,361.07 - 221.25 3,361.07Timber 76.73 61.31 9.65 138.03Firewood 109.12 60.84 19.48 169.96Non-timber forest products 37.24 43.16 - 77.22

Total (Tug mill/year) 4,017.16 24,329.43 518.82 28,343.40

the value of upstream land & resource use

water in Ulaanbaatar

water in Ulaanbaatar

Apartments 53%

Livestock 1.8%

Houses 0.3%

Businesses 11%Industries 3%

Institutions 3,5%Crops 1.9%

Ger settlements 2.2%

Power plants 24%

water in Ulaanbaatar

J F M A M J J A S O N D

m3

mill

ion

4.25

4.50

4.75

5.00

> 60 million cubic metres

impacts of ecosystem change

gully erosion and garbage in Terelj burned forest in Bugatiin am

dense tourism by Turtle Rock land sub-division in Gachuurt

scenario modelling for the Upper Tuul

little or no budget

few conservation measures

environmental regulations and laws

unenforced

rapid and large-scale land conversion and

ecosystem degradation

low budgets

weak conservation and enforcement of

regulations

unlicensed land and resource uses continue

tourism and settlement continue to spread into

protected areas

sufficient budgets

effective protected area zoning and management

environmental regulations enforced

land and resource uses developed at

ecologically sustainable levels

Gradual Deterioration ConservationNo Protection

25 year time-frame

Ecological Change Hydrological Change Economic Change

0%

20%

40%

60%

80%

100%

Forest Grassland Bare & built-up land

land use change

Gradual deterioration Conservation

63%

23%

14%

54%

28%

18%

2005 2030

63%

23%

14%

59%

25%

16%

2005 2030

63%

23%

14%

46%

33%

21%

2005 2030

No protection

Average runoff (m3/s)

Mean of annual maximum floods

(m3/s)

Mean of annual low flows (m3/s)

Current 18.7 123.6 9.2Year 25 – no protection 19.7 136.2 4.5Year 25 – gradual deterioration 19.7 121.4 8.4Year 25 - conservation 19.1 101.2 11.6

hydrological change

No protection

Conservation

Gradual deterioration

changes in ecosystem valuesTu

g bi

llion

Tug

billio

nTu

g bi

llion

25456585

105

25456585

105

2005 2010 2015 2020 2025 2030

25456585

105

Tug 1,243 bill

Tug 1,370 bill

Tug 1,293 bill

Present Value (Tug billion)

No protection Gradual deterioration Conservation

Tourism 246.16 242.26 238.47Pasture 32.64 32.37 32.34Non-timber forest products 1.04 0.91 0.89

Timber 1.34 1.34 1.24Firewood 2.78 2.78 2.17Upper Tuul land & resource uses 283.96 279.68 275.11

Ulaanbaatar water availability 959.01 1,013.53 1,095.31

Total upstream & downstream value 1,242.97 1,293.21 1,370.42

changes in ecosystem values

findings & conclusions

economic returns to conservation

conservation has the potential to generate water, land and resource benefits over 25 years with a NPV of Tug 1,370 billion

by 2030, the Upper Tuul ecosystem will be generating ecosystem services worth Tug 55 billion a year more than if it were not protected

if the Upper Tuul ecosystem continues to be degraded, the loss of water, pasture and forest values will cost the Mongolian economy between Tug 400 billion and Tug 655 billion over the next 25 years

every Tug 1 invested in conservation over the current situation would generate additional economic benefits of Tug 15 each year

more than 3,000 local people and businesses depend on the land and resources of the Upper Tuul, and more than a million people and

industries in Ulaanbaatar depend on its water

management implications

ecosystem degradation is not just a biological or ecological concern, it also has serious economic and development consequences

there is a strong development rationale to investing in conservation

it is a high priority to ensure that sufficient fundsare allocated to managing Khan Khentii Strictly Protected

Area and Gorkhi-Terelj National Park

there is an urgent need to set in place financial and economic incentives for sustainable land

and resource use in the Upper Tuul watershed

investments in ecosystem conservation shouldform a core part of future water sector funding

Thank You