Week 3.docx

Valuation for Ecosystem services Week 3 1. Millennium Ecosystem Assessment (MA) 2000 Findings: Over the past 50 years, humans have changed ecosystems more rapidly and extensively than in any comparable period of time in human history, largely to meet rapidly growing demands for food, fresh water, t...

Valuation for Ecosystem services Week 3 1. Millennium Ecosystem Assessment (MA) 2000 Findings: Over the past 50 years, humans have changed ecosystems more rapidly and extensively than in any comparable period of time in human history, largely to meet rapidly growing demands for food, fresh water, timber, fiber and fuel The changes that have been made to ecosystems have contributed to substantial net gains in human well-being and economic development, but these gains have been achieved at growing costs in the form of the degradation of many ecosystem services, increased risks of nonlinear changes, and the exacerbation of poverty for some groups of people The challenge of reversing the degradation of ecosystems while meeting increasing demands for their services can be partially met under some scenarios that the MA has considered but these involve significant changes in policies, institutions and practices, that are not currently under way Largest assessment of the health of Earth’s ecosystems: Experts and Review Process Prepared by 1360 experts from 95 countries 80-person independent board of review editors Review comments from 850 experts and governments Governance Called for by UN Secretary General in 2000 Authorized by governments through 4 conventions Partnership of UN agencies, conventions, business, non-governmental organizations with a multi-stakeholder board of directors Defining features: Demand-driven Providing information requested by governments, business, civil society Assessment of current state of knowledge A critical evaluation of information concerning the consequences of ecosystem changes for human well-being Intended to be used to guide decisions on complex public issues Authoritative information Clarifies where there is broad consensus within the scientific community and where issues remain unresolved Policy relevant not policy prescriptive Multi-scale assessment Includes information from 33 sub-global assessments Different ways to use MA findings: Decision-making and Management The framework used – particularly the focus on ecosystem services – helps in incorporating the environmental dimension into sustainable development policy and planning Provides planning and management tools Serves as a benchmark Provides foresight concerning consequences of decisions affecting ecosystems Identifies response options Identifies priorities Assessment, Capacity, and Research Provides a framework and tools for assessment Helps build capacity Guides future research Ecosystem services - The benefits people obtain from ecosystems Provisioning services: The products obtained from ecosystems. food, fibre, fresh water, genetic resources Regulating services: The benefits obtained from the regulation of ecosystem processes. Climate regulation, hazard regulation, noise regulation, pollination disease and pest regulation, regulation of water, air and soil quality Cultural services: The non-material benefits people obtain from ecosystems. spiritual or religious enrichment, cultural heritage, recreation and tourism, aesthetic experience Supporting services: Ecosystem services that are necessary for the production of all other ecosystem services. soil formation nutrient cycling water cycling primary production Consequences of Ecosystem Change for Human Well-being: 2. The Economic of Ecosystems & Biodiversity (TEEB) 2007 Origins and Genesis: Founded on the (MA) concept of ecosystem services for human well-being, under-pinned by biodiversity Focus on underlying economic drivers of ecosystem decline and mainstreaming into economic decisions Fill gap in economic evidence provided by the MA Inspired by the Stern Review’s economic arguments for action on climate change Why valuation makes sense? Existing market signals often lack appropriate consideration of the value of, the damage to, and incentives for, the sustainable use of biodiversity and ecosystem services Understanding the value of ecosystem services can help to: Generate better information about the ‘value’ of nature’s services Identify ‘true’ costs of business as usual Improve decision-making when tradeoffs are necessary and useful information is lacking Provide a basis for policy formation and analysis Set incentives and regulating use Importance (and costs) of maintaining natural capital Value of services often taken for granted: Water supply/regulation: Catskills Mountains $2bn natural capital solution vs $7bn technological solution (pre-treatment plant) Pollination: 30% of 1,500 crop plant species depend on bee and other insect pollination. Value of bees for pollination ~ Eur29 billion to EUR 70 billion worldwide per annum Fish stock existence/productivity: Global market $80bn, 1.2 billion people reliant, stock collapses have major (local/national) implications Flood control services of floodplain: e.g. River Bassee floodplain: ~ 91.5 – 305 million EUR / year Recognise, Demonstrate, and Capture TEEB follows a three-tiered approach towards ecosystem valuation by recognizing, demonstrating and capturing value. This approach helps to make nature more economically visible and ultimately influences key actors to change their decisions and behaviours The TEEB approach: 1. Clearly identify the problem and key stakeholders 2. Clearly identify the ecosystem services to be included in the assessment 3. Select methodology and indicators 4. Conduct a valuation assessment 5. Analyze the distribution of costs and benefits 6. Communicate the results to key stakeholders and build societal support 7. Screen, prioritize, select and implement the economic and policy instruments Why TEEB? Because the economic invisibility of nature is a problem – people will value things with a price tag Because addressing losses requires knowledge from many disciplines (ecology, economics, policy..) to be synthesized, integrated and acted upon Because different decision-making groups (policy-makers, local managers down to citizens) need different types of information & guidance Because successes need be understood, broadcast, replicated and scaled.. 3. Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (IPBES) 2012 Ecosystem Services to Nature’s Contributions to People (2019) Nature’s Benefits to People changed to Nature’s Contributions to People word “benefits” wrongly conveyed the idea that negative contributions from nature towards peoples’ good quality of life would be excluded – disservices from nature different meanings of the word “benefits” in common speech in different languages as well as in the social sciences and the valuation literature represented potential sources of confusion Global trends in the capacity of nature to sustain contributions to good quality of life from 1970 to the present, which show a decline for 14 of the 18 categories of nature’s contributions to people analysed. 4. Common International Classification of Ecosystem Services (CICES) 2013 European Environment Agency – continually modified not to replace other classifications of ecosystem services but to enable people to move more easily between them recognizes that the main categories of ecosystem outputs to be provisioning, regulating and cultural services does not cover the so-called ‘supporting services’ these supporting services are treated as part of the underlying structures, process and functions that characterize ecosystems classifies biotic and abiotic ecosystem outputs Critique of the concept of ecosystem services (ES): Anthropocentric focus and exclusion of the intrinsic value of different entities in nature ES concept is not meant to replace biocentric arguments, but bundles a broad variety of anthropocentric arguments for the protection and sustainable human use of ecosystems Cultural ES category shows overlaps between pure anthropocentric and intrinsic values Economic production metaphor of ES could promote an exploitative human-nature relationship ES concept can be used to reconnect society and nature and can challenge dominant “exploitative” practices Potential to build bridges across the modernization gap between consumers and ecosystems Offers a way to reconceptualize humanity’s relationship with nature ES are used as a conservation goal at the expense of biodiversity-based conservation. planning and executing conservation strategies that are based on ES provision might not safeguard biodiversity, but only divert attention and interest The frameworks by the MA and TEEB have been influential in ES science and communicating to policy-makers Both frameworks have acknowledged overlaps between biodiversity and ES by including biodiversity within the habitat, supporting, and cultural ES-based initiatives aim to broaden biodiversity conservation practices, which can help strengthen arguments and tools for protecting ecosystems ES concept is contested because it comprises economic framing, and ES assessments often involve economic valuation Valuation of ES leads to more informed decisions It helps to raise awareness about the relative importance of ES compared to man-made services The misconception that monetary valuation is the only method to compare ES, and that monetization is included in each ES assessment Although many authors have proposed ways to define ES more consistently, these attempts have been criticised for being impractical, open to interpretation, and inconsistent. ambiguity around the concept, the term ES has become a popular “catch-all” phrase Definitions tend to continuously improve – TEEB, CICES Flexibility inspires transdisciplinary communication The concept for implying that all outcomes of ecosystem processes are good or desirable masks the fact that some ecosystems provide “disservices” to humans, such as an increased risk of diseases “Services” are the research interest Valuation of ecosystem services/disservices: Estimating the monetary or non-monetary value of the ES and EDS Costanza (2014) - raising awareness and interest for a specific ecosystem, accounting for national income and well-being contribution of ecosystems, detailed policy analyses (i.e., to decide on management options), urban and regional land use planning, and payment for ecosystem services Economic (TEEB), Ecological, Socio-cultural Economic Valuation TEEB – challenges of ecosystem valuation: Moral/Ethical challenges: The idea of placing monetary value on ecosystems buys into the free-market system Technical challenges: The difficulty to account for inter-linkages between different ecosystem services Lack of information about the economic value of ecosystem functions and tools for cross-level valuation Dealing with incomplete, inaccurate and/or changing data Systemic challenges can be: 1) Creating new notions of ownership and property rights 2) Lack of mechanisms to promote equity distribution and value aggregation to resources and ecosystem at the local level 3) Fear of having natural resources price tagged, commoditized and traded within a free market 4) Use of the economic value appropriately of ecosystems to re-address market and policy failures TEEB – opportunities of eocystsem valuation: Valuation creates a framework that can help nature’s values become more economically visible and accounted for in decision making If properly used, valuation can contribute to economic accounting and planning creating more effective strategies for natural resource management Valuation of biodiversity can contribute towards alleviating poverty Valuation does not always necessarily mean monetization and have to lead to marketization of nature. It relies heavily on what the policy is at hand Total Economic Value (TEV): The TEV framework is concerned with the eventual impacts on human well-being Almost exclusively focuses more on economic endpoints that can if needed, be measured in monetary terms This framework presents categories of ecosystem benefits, which fit into a standard economic frame of reference Its strength is that all benefits that humans obtain from nature and even the value of nature in its own right (intrinsic value) can be captured by one of the subcategories used in this approach TEV categories of value: The TEV of an environmental asset is the sum of these different value categories: Direct use value: the value derived from the direct extraction of resources or the direct interaction with the ecosystem Indirect use values: values that support economic activity Option use values: preserving biodiversity so that its direct and indirect use values can consumed in the future Non-use values: values that refer to conservation for its own sake e.g. Value of Belize coastal ecosystems TEV assessed the average annual contribution of reef-and mangrove-associated tourism to the national economy of Belize. Tourism Contributing an estimated US$150 million to US 196 $ million to Belize’s economy in 2007 Reefs and mangroves have proven beneficial in protecting coastal properties from erosion, estimated around US$231 million to US$347 million in avoided costs per year Belizean NGOs and local groups have now used these results to advocate tougher fishing regulations and pressure the government to change existing mangrove legislation Approaches to valuing ES: Direct market valuation approaches: use data from actual markets Revealed preference approaches: economic agents or actual behaviour “reveal” their preferences through their choices Stated preferences approaches: simulated markets where values are sought for changes in provision or policy Direct market valuation: 1. Market-based Market price-based approaches Most often used to obtain values for provisioning services Preferences and marginal cost of production are reflected in market price In well-functioning markets, price provides accurate information on value Market is not ‘well-functioning’ if say, for instance, there are distortions caused by government intervention – say taxes or subsidies 2. Cost-based Cost based approaches Costs incurred in recreating an ecosystem service artificially Avoided cost method - costs incurred in the absence of the ecosystem service Replacement cost method - costs incurred by replacing ecosystem services with artificial technologies Mitigation or restoration cost – cost of mitigating effects of a loss of ecosystem services, or the cost of achieving their restoration Appropriate for regulating services cost of storm surge damage without coastal mangroves cost of a wastewater treatment plant in place of wetlands use of hard engineering for flood defence where flood attenuation services are lost due to land use change (e.g. deforestation) 3. Production function Production function approaches Estimates contribution of an ecosystem service to a final commodity Improvement in resource base or environmental quality, i.e. enhanced ecosystem services, lowers costs and prices or increases quantity of goods Requires knowledge of relationships between ecosystems services and valued end points Applicable to regulating and supporting services 4. Limitations Lack of markets for ecosystem services Markets are distorted Replacement cost approach can overstate values Production function approaches have specific problems: Lack of data/knowledge of cause-effect relationships Interactions across ecosystem services increases likelihood of double counting Revealed preference (RP): RP methods are based on observations of individual choices related to an ecosystem service Appropriate for direct and indirect use goods No direct market for a beach view, but there may be a premium in the housing market (or price of a hotel room) for this view Stages Determine existence of surrogate market for ecosystem service Select appropriate RP method Collect market data to estimate demand function Infer value of change in quantity/quality from demand function Aggregate values Discount values where appropriate 1. Travel cost method (TCM) The value of an environmental good is reflected in the time and money people spend getting to it e.g. forests, mountains, fishing sites Based on actual behaviour, mostly used for recreation studies Visitor surveys are used to determine distance travelled to site, values are estimated from cost per mile or per hour spent travelling Travel costs are used to estimate the number of visits made Only direct use values are estimated Appropriate for cultural services TCM practical issues Multipurpose trips: ‘Meanderers’ may visit several sites during a trip ‘Purposeful visitors’ visit only one site Holidaymakers and residents: Holidaymakers may have high overall costs but low site visit costs Residents have lower travel costs, but may in fact value the site highly Some form of weighting required to account for these What costs to include? Total cost of travel, marginal cost of visit, value to time e.g. Nam and Son (1991) Recreational value of the Hon Mun Islands Vietnam Marine Protected Area established in 2001 with US$2m funding over 4 years Proposal to expand port at Nha Trang City with impacts on water quality and marine ecosystems The zonal travel cost model (ZTCM) estimates the annual recreational value of the islands at approximately US$17.9 million 20% loss of the (ZTCM) recreational value that could be expected to result from the proposed port expansion larger than the expanded port’s projected annual revenue of US$3.1 million Port expansion proposal needs to be reconsidered. 2. Hedonic pricing (HP) The value of a good is a function of its characteristics, e.g. house prices (or rents) are determined by a number of attributes: Structural: number of rooms, garden size, garage size, central heating, double glazing… Socio-economic: quality of schools, unemployment rate, local taxes… Local amenities: access to services, transport links, environmental quality… HP practical issues: Values of those not in property market Large amounts of data are required to determine the values of individual attributes, and needs active market Omitted variable bias: important explanatory variables may be missing from data Housing markets tend to be segmented, i.e. several hedonic models may have to be estimated Variables may be correlated, e.g. houses near quarries suffer from both noise and dust Hedonic models often have very complex functional forms e.g. Types of disamenity from landfill: noise, dust, litter, odour, vermin, visual intrusion, perception of risk Housing variables used: bedrooms bathrooms type of house (8 classes) car parking space, single garage, double garage partial central heating, full central heating floor area age (5 classes) Used a GIS database of 592,000 mortgage transactions contained data on house values, characteristics, location 1990 to 2000 period 11,300 landfill sites - 6,100 operational Models estimated separately for counties (sub-regions) to account for differing property markets Hedonic model captured 80% of the variation in house prices, variables had “right” signs Average reduction in house prices of £5,500 within 0.25 miles of landfill and £1,600 between 0.25 and 0.5 miles Average total UK disamenity = £2,483m Between £334,350 and £478,990 per landfill site Between £1.52 and £2.18 per tonne of waste e.g. How are these results used? Inform landfill tax levels - initially £15/tonne for active waste Inform planning decisions Feed into CBA on landfill siting decisions mitigation actions financial costs of alternative sites Potential for compensation? Some evidence of reduction in dis-amenity effects over time Limitations: Market imperfections and policy failures Large, good quality data sets required Expensive and time consuming Omits non-use values Sensitive to assumptions made on relationship between ecosystem service and surrogate market State preference: SP approaches use simulated markets to elicit willingness to pay (WTP) or accept (WTA) values for changes in ecosystem service provision Appropriate for both use and non-use values May be difficult to segregate these value motives from WTP Survey based methods in which respondents are presented with a hypothetical market describing the change in service provision Methods: 1. Contingent valuation method One policy-on scenario compared with Business As Usual (BAU) 2. Choice Experiments Attributes are compared, e.g. ‘visibility in the sea’ Some baseline BAU level for each attribute and this is compared with varying levels (with policy-on) 3. Group valuation Less commonly applied – links valuation with deliberative methods Contingent valuation method (CVM): A hypothetical market is described in which respondents either buy (WTP) or sell (WTA) a specified level of an environmental good or service The values which are elicited are “contingent” on the hypothetical market with which respondents are presented Survey design: Start with focus groups and consultations with stakeholders Decide the nature of the market Determine the quantity and quality of information provided for the good Set allocation of property rights WTP or WTA Determine credible scenario and payment vehicle (tax, donation, price). Choose elicitation method (e.g. dichotomous choice vs. open-ended elicitation method). Survey implementation and sampling Interview implementation: face-to-face, mail, telephone, internet, groups Interviewers: private companies, researchers Sampling: convenience sample, representative and stratified sample Calculate measures of welfare change Open-ended – simple mean or trimmed mean (with outliers removed ) Payment cards/ladders Bidding games Dichotomous choice – estimate expected value of WTP or WTA Technical validation Estimating a bid function Testing the validity and reliability of the estimates produced Aggregation and discounting Calculating total WTP from mean/median WTP over relevant population – for example by multiplying the sample mean WTP of visitors to a site by the total number of visitors per annum. Discount calculated values as appropriate. e.g. Bann (1999) Survey of 300 households’ WTP for mangrove protection in Benut, Malaysia (243 useable responses) e.g. 56% of respondents stated a positive WTP, of those who didn’t 49% gave protest responses, meaning that Payment ladder and dichotomous choice elicitation methods were used The payment ladder asked respondents to tick values they would pay and cross values they wouldn’t e.g. households in three cities adjacent to the PNYCH and assessed the willingness to pay (WTP) for preservation efforts average WTP - US$0.695 per household annually; added to all households in Peru (9 million) 6.255 million dollars annually influences decision-making and public policies focused on conserving forests and biodiversity Choice modelling (CM): Choice modelling (CM) Also referred to as choice experiments (CE) Type of conjoint analysis Survey respondents make choices across environmental goods with varying bundles of attributes Trade-offs between attributes reveals their values Can combine qualitative and quantitative attributes CM issues: Requires specialist statistical design (and software) and sampling resources Choice tasks can be complex Potentially complex analytical task Inclusion of socio-economic and attitudinal variables is not straightforward e.g. Valuing quality changes in Caribbean coastal waters for heterogeneous beach visitors (Beharry-Borg and Scarpa, 2010) Most locals do not snorkel or dive. In order to ensure that the valuation captured both locals and non locals two groups were Identified snorkelers and non snorkelers. Most valuation studies in the Caribbean have focussed on obtaining WTP values for attributes associated with snorkelling and scuba diving There were 9 attributes in the snorkeler subsample and 6 in the non snorkeler subsample plus a cost attribute Cost was described in terms of a contribution cost to an NGO Group Valuation: Combination of stated preference techniques with deliberative techniques Offer a deeper exploration of environmental information, values and preference formation Trade-off of smaller groups versus survey approaches versus more precise values Limitations: Sometimes the only way to capture non-use values Hypothetical nature of the markets: do the decisions correctly reflect real-life behaviour? Divergence between WTP and WTA estimates (theoretically equal) Insensitivity to scope and scale Goods are complex – is there a need for pre-valuation workshops so that respondents can better understand their preferences? Comparison of different appaaches Market-based Advantages Disadvantages Market prices Reflect private WTP Construct financial accounts Easy to obtain Market imperfections and policy failures distort prices Seasonal variations Currency variations Shadow prices Reflect true economic value or opportunity cost to society Complex to derive Require substantial data Considered ‘artificial’ Production function Links ecosystem functions to market values Requires modelling of dose response relationships Complex for multi-use systems Potential double counting Cost based Advantages Disadvantages Mitigation/ restoration costs Useful when valuing particular ecosystem functions Diminishing returns and difficulty in restoring functions Replacement costs Estimates indirect benefits when ecological data not available for estimating damage functions Net benefits of replacement may exceed original function May overstate WTP Avoided damage cost Precautionary principle applied Data or resource limitations may rule out first-best valuation methods Revealed and stated preference Advantages Disadvantages Hedonic pricing Reflects private WTP Based on observed behaviour Data intensive Requires defined surrogate market Travel cost WTP for recreational sites Based on observed behaviour Data intensive Restrictive assumptions about behaviour Sensitive to statistical methods Contingent valuation Can measure non-use value and give estimate of TEV Sensitive to biases in survey design and implementation Choice modelling Simultaneously elicits values for a range of goods and services Complex statistical design and analysis Potential burden on respondents – choice heuristics Ecological valuation Assesses an ecosystem's functional integrity, health, or resilience to sustain life, done by measuring biophysical indicators such as diversity or carbon stock Examining the importance of an organism to an ecosystem or vice-versa and Elucidating the benefits of an ecosystem to call for conservation efforts Barlow et al. (2007) studied the importance of primary, secondary and plantation forests in the Brazilian Amazon for fruit-feeding butterflies Barbier et al. (2011) summarised the benefits that people get from estuarine and coastal ecosystems Socio-cultural valuation Emerging type of valuation that focuses on the non-monetary value of ES and EDS Considers value as a social construction from the cultural contexts of a time and place Brown (1984) - values can be categorised as "held" or "assigned“ "Held values" - modes of conduct (e.g., generosity, courage, obedience) or end-states and qualities (e.g., wisdom, happiness, freedom) which serve as the basis for evaluative judgment "Assigned values" express the importance of an object relative to other objects (Brown, 1984; Sánchez-Fernández & Iniesta-Bonillo, 2007). Values are developed and how things are valued evolves Groups of people share values, and these are often complex, overlapping, conflictual, and positive or negative (Kobryn et al., 2018) Can be accomplished by asking about individual values or allowing people to deliberate and decide on the values (Bullock et al., 2018) Conceptual realm - value can be considered as ideals or long-term viewpoints of the preferable that influence choice and action. A person’s held values represent this realm. Relational - realm represents the preference relationship between a subject and an object value is not an inherent quality of something and is not observable; it is only at the feeling level Object realm - stated relative importance of an object to an individual or group in a specific context not an attribute of the object but its standing relative to other objects observable and can be represented by the assigned values Awareness raising - knowledge of sociocultural values can inform and raise awareness of decision-makers and the public for varying perceptions of ES Priority setting - knowledge of a preferred scenario or a vision for management informs priority setting of the future management; Instrument development - knowledge on management priorities, willingness to pay, or willingness to accept limitations give indication for the feasibility of a new management regime (e.g. management actions, user fees, zoning); These methods include direct market valuation methods (market price–based method, cost-based valuation methods, and production function), indirect market valuation methods or revealed preferences (travel cost method & hedonic pricing method), and Non–market valuation methods or stated preference (contingent valuation methods, Choice modeling methods, and group deliberation) Priorities of Climate Change Risk Assessment 2017 - The accompanying Government Report of the CCRA2 names six priority risk areas: flooding and coastal change; health and wellbeing from high temperatures; water shortages; risks to natural capital; food production and trade; pests, diseases and invasive non-native species.