ecological and economic foundations: key messages

The Economics of Ecosystems & BiodiversityThe Economics of Ecosystems & Biodiversity

Ecological and Economic Ecological and Economic Ecological and Economic Ecological and Economic

Foundations: Key MessagesFoundations: Key MessagesFoundations: Key MessagesFoundations: Key Messages

Dr Dr Dr Dr PushpamPushpamPushpamPushpam Kumar, Coordinator, TEEB D0Kumar, Coordinator, TEEB D0Kumar, Coordinator, TEEB D0Kumar, Coordinator, TEEB D0

and and and and and and and and

Chief, Ecosystem Services Economics Unit , Chief, Ecosystem Services Economics Unit , Chief, Ecosystem Services Economics Unit , Chief, Ecosystem Services Economics Unit ,

DEPI, UNEPDEPI, UNEPDEPI, UNEPDEPI, UNEP

The Economics of Ecosystems & Biodiversity

Key Messages:Key Messages:Key Messages:Key Messages:

1.1.1.1. Framework Framework Framework Framework

2.2.2.2. MethodologyMethodologyMethodologyMethodology2.2.2.2. MethodologyMethodologyMethodologyMethodology

3.3.3.3. Challenges Challenges Challenges Challenges

from ecologyfrom ecologyfrom ecologyfrom ecology

4.4.4.4. Challenges Challenges Challenges Challenges

from from from from

economicseconomicseconomicseconomics

5.5.5.5. Ways Ways Ways Ways

forwardforwardforwardforward

6.6.6.6. RecommendeRecommendeRecommendeRecommende

d actionsd actionsd actionsd actions


Ecosystems & Biodiversity (1 Human well-being (1

BENEFITS & VALUES

Social(wellbeing)

Economic(welfare)

Ecological structures &processes

(photosynthesis,nutrient cycling,food-chain

Functions (2Production-biomassRegulation-water regulat.Habitat - requirements

Provisioning-FoodRegulating-Flood prev.

Services

Indicators

Socio-cultural(eg. human wellbeing indices)

Economic(eg. prices, GDP)

Habitat-Nursery

1: Framework Revisited1: Framework Revisited1: Framework Revisited1: Framework Revisited

Ecological(sustainability)

food-chain dynamics, etc.)

- requirementsInformation-landscape

ExternalDrivers (eg Climate

change

2) subset of ecosystem processes & componentsthat is directly involved in providing the service

Cultural-Recreation

Biophysical(eg. resilience)

wellbeing indices)

Indirect drivers (1: Demography, Technology, Economy, etc

-Nursery

Governance and Decision making

1) The four bold-lined, brown filled boxescoincide with the overall MA-Framework

Aggregation of values for decision support:-Trade-off analysis

(incl. CBA, MCDA)- Accounting Systems

(eg SEEA)

Direct drivers (1

• Land-use (change)• Habitat destruction• Pollution & disturb.• Resource use, etc

Addressing needs ofdifferent actors

TEEB-reports:• (Inter)national policy

makers (D1)• Local policy makers/

administrators(D2)• Producers/Businesses (D3)• Consumers/Citizens (D4)


Functioning - Resilience - Structure

Core ecosystem processese.g. water cycling

insurance value

2.1: Ecosystems 2.1: Ecosystems 2.1: Ecosystems 2.1: Ecosystems and Valuation: Perspectiveand Valuation: Perspectiveand Valuation: Perspectiveand Valuation: Perspective

economic value of the ecosystem

Ecosystem functionse.g. water provisioning, purification, regulation

Ecosystem service benefitse.g. water for households, industry and irrigation

output value

Insurance and output value as part of the economic value of the ecosystem


RESILIENCE

Insurance value

USE

VA

LU

AT

ION

/ A

CC

OU

NT

ING

V

AL

UA

TIO

N /

AC

CO

UN

TIN

G

SU

BJ

EC

TS

UB

JE

CT

CO

NC

EP

TU

AL

C

ON

CE

PT

UA

L

AP

PR

OA

CH

AP

PR

OA

CH

PHYSICAL COST

Physical consumption/

change

Preference-based aproaches / Monetary valuation

Output value

Biophysical approaches

SOCIAL JUSTICENON-USE

2.2: Methodological outline for valuation2.2: Methodological outline for valuation2.2: Methodological outline for valuation2.2: Methodological outline for valuation

Regime shift

analysis

Adaptive cycles

PanarchiesRisk

analysis

RESILIENCE VALUE

USE VALUE

Market analysis

Cost methods

Production function

Market analysis

Cost methods

Hedonic pricing

Contingent valuation

Replacement, mitigation

and avoided cost methods

Contingent valuation

Contingent election

VA

LU

AT

ION

/ A

CC

OU

NT

ING

V

AL

UA

TIO

N /

AC

CO

UN

TIN

G

SU

BJ

EC

TS

UB

JE

CT

ME

TH

OD

S /

M

ET

HO

DS

/

TO

OL

S /

MO

DE

LS

TO

OL

S /

MO

DE

LS

Group and deliberative

valuation

Joint analysis

Embodied Energy

Analysis

Exergyanalysis

Emergyanalysis

Material flow analysis

Input-Output a

Ecological footprint

Land-cover flow

DIS

CIP

LIN

AR

Y

DIS

CIP

LIN

AR

Y

FR

AM

EW

OR

KF

RA

ME

WO

RK

PROBABILITY OF FLIPS

DIRECT USE

INDIRECT USE

OPTION OR CUASI-OPTION

LEGACYEXISTENCEALTRUISM

MATERIALS/

SURFACE/

LANDCOVER

ENERGY /

EXERGY /

EMERGY

INDUSTRIAL ECOLOGY/ TERMODYNAMICS

RESILIENCE THEORY

POLITICAL SCIENCE

NEOCLASICAL ECONOMICS / MARKET THEORY / CHREMATISTICS

DEONTOLOGICALVALUES

LEXICOGRAPHIC PREFERENCES

NON HUMAN VALUES

NON-USE VALUE


Driver 1

Driver 2

Linear

Nonlinear

Biodiversity

Environmental change

3:Challenges from ecosystem science3:Challenges from ecosystem science3:Challenges from ecosystem science3:Challenges from ecosystem science

Non-linearity causes compounding uncertainly in ecosystem service provision when environmental changes drive

biodiversity loss

Ecosystem services

Biodiversity

Service 1

Service 2


Regulating

ecosystem

services

B

provisioning services can increase to quite high levels before regulating services decline

C

3.1: Trade 3.1: Trade 3.1: Trade 3.1: Trade offsoffsoffsoffs

Provisioning ecosystem services

Potential trade-offs between provisioning services and regulating ecosystem services

increase in provisioning services produces a rapid loss of regulating services

A

with increases in provisioning services regulating services linearly decrease

Source: Ch2, TEEB 2010

The Economics of Ecosystems & BiodiversityThe Economics of Ecosystems & BiodiversityIn

cre

asi

ng

sys

tem

co

mp

lexi

ty

eco

syst

em

, sc

ale

s, n

o.

of

act

ors

Legend: predominant

type of value

appreciation

Capturing

Monetary valuations with

low reliability and of

doubtful pertinence

4.1: Challenges from economics science4.1: Challenges from economics science4.1: Challenges from economics science4.1: Challenges from economics science

Incr

ea

sin

g s

yste

m c

om

ple

xity

eco

syst

em

, sc

ale

s, n

o.

of

act

ors

Value plurality

Commodity-

type values

Ethical/cultural

convicitons

Demonstrating

Recognising

Monetary valuations

robust and useful

Source: Ch4, TEEB 2010


4.2: Valuation Methodologies: UnValuation Methodologies: UnValuation Methodologies: UnValuation Methodologies: Un----

realized Pitfallsrealized Pitfallsrealized Pitfallsrealized Pitfalls• Economic value of ecosystem services - assessed in terms of

financial sacrifices people would make for it, or economic/physical

trade-offs. E.g. CVM studies- while valuing for large or small

landscape, value remains the same, implying people are valuing the

idea of conservation & not the object in question.idea of conservation & not the object in question.

• People do not express utility or even think in economically logical

way. People make statements about their personal & collective

values- to define who they are through the causes they support

(Ritov & Kahneman, 1997).

• Behavioral foundation of rationality (e.g. different motivations can

underlie behavior in different spheres of life )


Positional + Reciprocal Positional + Reciprocal Positional + Reciprocal Positional + Reciprocal GoodsGoodsGoodsGoods

Positional goods or values Positional goods or values Positional goods or values Positional goods or values --------marked by marked by marked by marked by equivalentequivalentequivalentequivalent----exchange exchange exchange exchange principleprincipleprincipleprinciple---- one of quione of quione of quione of qui----propropropro----quid transactionsquid transactionsquid transactionsquid transactions

4.3: Questionable assumptions4.3: Questionable assumptions4.3: Questionable assumptions4.3: Questionable assumptions

principleprincipleprincipleprinciple---- one of quione of quione of quione of qui----propropropro----quid transactionsquid transactionsquid transactionsquid transactions

Reciprocal goods and valuesReciprocal goods and valuesReciprocal goods and valuesReciprocal goods and values–––– are are are are relational conception of human relational conception of human relational conception of human relational conception of human transactions driven not only by definitive exchange relationships; transactions driven not only by definitive exchange relationships; transactions driven not only by definitive exchange relationships; transactions driven not only by definitive exchange relationships; also contingent upon social relations, moral dispositions and also contingent upon social relations, moral dispositions and also contingent upon social relations, moral dispositions and also contingent upon social relations, moral dispositions and individual idiosyncrasiesindividual idiosyncrasiesindividual idiosyncrasiesindividual idiosyncrasies.


5: Ways forward5: Ways forward5: Ways forward5: Ways forward

� Discourse based valuation

Come up with a consensual societal value of scarcity indicators,

derived through participatory process

� Methodological pluralism (besides economics and ecology, � Methodological pluralism (besides economics and ecology,

behavioral sciences, social anthropology are necessary)

� Interdisciplinary collaboration.Individual’s identification with nature, capriciously changing preferences and dynamic

learning, ecological identity are important concepts in valuation

• Joint appraisal of positional and relational goods would

an ideal beginning.


6. Lessons and Recommended Actions6. Lessons and Recommended Actions6. Lessons and Recommended Actions6. Lessons and Recommended Actions

1. Indicators like GDP are distorted and does not reflect the

changes in the level of welfare

2. Growth accounting does not incorporate ecosystem services

leading to erroneous sense of gain / losses

10/25/2010 12

3. Drivers like Trade and Investment impacting the Ecosystems

have far reaching impact for society

4. Missing Links of Sectoral Policies causing unsustainable policies

ecological and economic foundations: key messages

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