Biodiversity Valuation

Biodiversity: How do we assign value to it?

Economic Educational Ethical Aesthetic Scientific

What good are they?

Perlman and Adelson (1997)

I. Kellert Classification of Human Values of Nature (1993)

• Developed values “rooted in human biology” and shaped by “experience, learning, and culture”. Rooted in the human psyche and emotionally based.

1. U.S. National Park entry fees are relatively cheap. Around $10-$20/vehicle. What would you be willing to pay in dollars to enter the average park?

2. Assume you have graduated and have an actual salary suitable for your degree. What would you be willing to pay in the proportion of your salary (%) to ensure that: • National Parks could be ecologically and infrastructurally maintained • That there is abundant wildlife that provides non-consumptive (e.g.

wildlife watching) and consumptive (e.g. hunting, fishing) opportunities. 3. How much in U.S. dollars would you donate to save the following endangered species: • Siberian tiger • Hammerhead shark • Sumatran rhino • Desert pupfish • California sand fly

• How can one put a price $$$$$ on biodiversity? • This is a major problem for con bios. • What are the Pros and Cons of framing the

value of biodiversity in traditional economic terms?

Perlman and Adelson (1997)

A fundamental challenge of conservation biologists is to ensure that all economic costs and benefits are understood and considered when making decisions that impact biodiversity.

• Ecological Economics – transdiscipline between ecology and economics that

develops understanding across these 2 fields; integrates traditional economic valuation methods with ethics, ecology, environmental science, and sociology

– end goals are: • sustainable use of natural resources • development of improved valuation methods • design better public policies related to environmental issues

and conservation

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Economically Valuating Biodiversity: Some Arguments

PRO

Gov and Corporate decisions are often made in dollar terms

Natural resources are often undervalued; green accounting can often help incorporate damages, future values and losses of a given activity

Arguments for the protection of biodiversity are often strengthened by ecological economics

CON

Attempts to assign a dollar value to nature and benefits derived from it are inappropriate and potentially corrupting

How do we assign monetary value to parts of nature that have no obvious or easily quantifiable benefit, or who’s potential benefits to humans have not been identified?

What is the dollar value of human experience in nature?

If the monetary values of some components of nature are readily identifiable, why do humans engage in short-sighted, wasteful, unsustainable, and therefore destructive activities?

Companies, individuals, etc. that are involved in ecologically destructive

activities can reap enormous economic benefits, but seldom bear the full cost of doing business. Why? What happens to let responsible persons and corporations “off the hook”?

Gulf oil spill 2010 Clear-cutting in Congo, Africa

Basic Tenets of Classic Economics

• Economic agreements are voluntary/free-exchanges in that each party makes a transaction to improve his/her own self-interest

• The collective sum of these transactions is positive and allows for a prosperous society…the “invisible hand” that guides the market

• All costs and benefits are borne by the participants in each transaction Adam

Smith

Problems with Classic Economics

• Often all costs/benefits are not incurred by participants but instead are borne by other individuals and society at-large. These hidden costs are referred to as: (Externalities) – Externalities that fail to maximize the net benefits to

society, such as when resources are misallocated in a way that benefits a few at the expense of the larger society, can lead to market failure

Negative Externalities are often associated with environmental damage to Open Access Resources (also referred to as the “commons” owned by all or none, but freely available to all = air, water, soil) that leads to the tragedy of the commons (gradual loss of resource(s) to all members of society) and market failure.

No regulations = then typically people, industries, and governments can use and abuse the common resource which leads to gradual loss of value to everyone.

Market failure also occurs on Regulated Common Property (e.g. national forests, fisheries, etc.), when improperly regulated.

If the true costs of many environmentally harmful activities were internalized they would not be economically feasible and thus not occur.

Evaluation Development Projects • To assess true impact of activities, we must evaluate costs of

projects before they proceed. • Cost-Benefit Analysis (CBA):

– weighs pros and cons, typically in monetary units. – The assumption is that if the positive benefits (values-derived) outweigh

the negative ones, then one may proceed. – Monetization: converting unconventional biodiversity values into

monetary units is often an important step in the CBA process Example of CBA – EIA (Environmental Impact Assessment) is a typical CBA required of

all federal agencies before they undertake an activity that can impact the environment…under the NEPA (National Environmantal Policy Act (1969). Each agency must develop an Environmental Impact Statement that is evaluated before proceeding with that activity.

CBA Example

Problems with CBA Discounting often throws wrench into CBA process. Discounting refers to lowering the current value of resources because they won’t be used until sometime in the future…natural resources are notoriously deeply discounted in CBAs. In other words, economists often will use discount rates to assign a lower current value to resources or materials that could be used in the future, the reasoning being that better to use now and have or invest than leave resources unused. Perverse Subsidies basically government giving subsidies to encourage an activity to make it economically feasible where otherwise it wouldn’t be. Unpredictable Costs – the uncertainty in the extent and magnitude of potential costs may loom large in decision-making…sometimes better to follow the precautionary principle and first do no harm.

• GDP – Gross Domestic Product Calculation– seldom accounts for environmental costs of economy – Alternative Indices include:

• Index of Sustainable Economic Welfare (ISEW) • Environmental Sustainability Index (ESI; see slide 15)

• Cornucopianism (Myths of Perpetual Growth): resources are infinite in amount or in regenerative potential; but doesn’t this violate the laws of physics that matter is neither created nor destroyed (e.g. law of conservation of energy)? How does thinking this way apply to renewable vs. non-renewable natural resources? – Classic economists often counter-argue that we can sustain growth through

technological innovation. Essentially this is a gamble assuming these what-ifs will occur and adequately fulfill the needs of human societies.

• Steady-state economics – new discipline focuses on sustainability rather than perpetual growth of economies.

Problems with Classic Economics

ESI and Global Competitiveness

Total Economic Valuation of Biodiversity

Perlman and Adelson (1997)

Direct Use Values (items that are directly consumed)

• Typically divided into consumptive use values and productive values – Consumptive Use Values – locally consumed goods typically not

found in commercial marketplace; meats (bushmeat), local fisheries, firewood, construction materials, medicines.

– Productive Use Values – resources also harvested from wild but sold in national and international markets for consumption; timber, medicinal plants (e.g. gingko, ginseng), fish, furs, wild fruits/veggies, fibers, gums, resins, etc.

• An option value is a direct use value that considers the future use or value of a resource. – Bioprospecting (examples of use and success)

• Biopiracy (examples of exploitation of people and cultures)

• Can be thought of as the value of biodiversity that provides both present and future economic benefits but are not harvested or damaged during use per se; – usually occurs outside of the mainstream of economic

consideration, although much economic benefit provided; – typically considered public goods, and occur in commons areas.

• More specifically, most indirect use values are Nonconsumptive Use Values (NCUV) – Ecological services provided by biodiversity that are not

consumed in the typical sense (e.g. ecological services such as nitrogen fixation by bacteria).

– Although hard to define and quantify, estimated at nearly $40 trillion, or about 3x world’s collective economies

Indirect Use Values

Types of NCUV • Amenity value: Recreation and ecotourism

Ecotourism (what are pros and cons of this?) • Ecosystem productivity • Carbon sequestration • Protection of water and soils • Water treatment and nutrient retention • Climate regulation • Species relationships • Environmental monitoring • Education and scientific value

Non-Use or Passive Values

• Existence value - is a non-use value of what people are willing

to pay or sacrifice to prevent extinction of species and ecological communities); this has often been measured as willingness-to-pay (WTP) units. Basically, how much is one willing to pay to keep a species around, perhaps even if you never “use” it and derive direct benefits from it.

• Beneficiary or Bequest value is your willingness to pay or delay or reduce resource consumption to protect biodiversity for children and future generations