1

Public Goods from private land Ecosystem services and PES

Patrick ten BrinkTEEB for Policy Makers Co-ordinator

Head of Brussels OfficeInstitute for European Environmental Policy (IEEP)

Workshop: Public Goods from Private LandRISE and CEPS

1 Place du Congres, Brussels1 February 2010

1. Introduction to TEEB ambitions and process and approach

2. Ecosystem services, decision making, public goods & trade-offs

3. Ecosystem services & PES

4. Key issues

5. Comment on the Presentation of the RISE Report

Presentation overview

TEEB’s Genesis and progress

“Potsdam Initiative – Biological Diversity 2010”

1) The economic significance of the global loss of biological diversity

TEEB Interim Report CBD COP-9, Bonn, May 2008

TEEB for Policy Makers Brussels 13 Nov. 2009

TEEB Climate Issues Update Strömstadt September 2009.

Oct. 2010

TEEB for Policy Makers report- launched 13 November 2009 -

The Global Biodiversity Crisis• Coral reef emergency• Deforestation • Loss of public goods…

Responding to the value of nature

Available Solutions• PES water, PES – REDD+

• Markets, GPP

• Subsidy reform

• Legislation, liability, taxes & charges

• Protected Areas

• Investment in natural capital et al

Measuring what we manage

• BD & ecosystem service indicators

• Natural capital accounts

• Beyond GDP indicators et al

http://www.teebweb.org/

Critical issues

The values of biodiversity and ecosystems are missing

• Many not known (but this is changing); widespread lack of awareness

• Values are not taken systematically into account in assessments and decision making

• They are generally not integrated into the economic signals, into markets – the economy is therefore often not part of the solution (some exceptions: PES)

Inappropriate incentives; misinterpretation of right solutions, insufficient evidence base at policy makers’ finger tips and weaker public support for action

There is not enough political will or conviction or awareness of benefits/cost to launch due policies (market based or otherwise)

Biodiversity loss continues – eroding natural capital base without realising its value

… Sub-optimal provision of public goods from private land

Ecosystem Services Public Goods and Private Goods

Provisioning services• Food, fibre and fuel• Water provision • Genetic resources

Regulating Services• Climate /climate change regulation• Water and waste purification • Air purification • Erosion control• Pollination• Biological control

Cultural Services • Aesthetics, Landscape value, recreation and

tourism• Cultural values and inspirational services

Supporting Services• Soil formation

+ Resilience - eg to climate change

Market values

Potential Market values– eg REDD & water purification PES

- Avoided cost of purification

Potential Market values– eg water supply PES; -eg ABS

Opportunity cost: Lost output or cost of alternative service provider

Market values : eco-tourism

Social value – identity et al

Social value – health, wellbeing

Ecosystem Services Public Goods and Private Goods

Some ecosystem services are Private goods - eg food and wood provisioning

Others are pure public goods - eg climate regulation / climate change mitigation, genetic diversity, health and wellbeing, cultural identity, spiritual value

Others public goods with private aspects - eg water purification, landscape value and eco-tourism, recreation, genetic knowledge,

• Vittel PES case: payments by Vittel to farmers to change land-use practice to secure quality for bottled water

• PES for forest / watershed management for (clean) water provision – USA, Mexico, New Zealand

• Ecotourism – fast growing market

• Genetic knowledge – bioprospecting and medicines; links to traditional knowledge and access and benefits sharing (ABS)

• Contribution to maintaining public good of current climate – REDD+ PES

Need to understand different opportunities for land use and implications for public and private goods / gains.

Need to take value into account in decision making

Need for public policy for public goods.

Shrimp Farm

private profits less

subsidies

Net of public costs of restoration needed

after 5 years

private profits

Mangroves

0

10000

US$/ha/yr

private profits

5000

If public wealth is included, the “trade-off”choice changes completely…..

$584/ha

$1220/ha

$9632/ha

$584/ha

-ve $11,172/ha

$12,392/ha

Source: Barbier et al, 2007

After AddingPublicBenefitsFrom

mangroves

Based only on private gain, the “trade-off” choice favours conversion…..

Taking account of public goods…can change what is the “right” decision on land/resource use

Fishery nursery

Storm protection

Land-uses and trade offs for ecosystem services

Source: Ben ten Brink (MNP) presentation at the Workshop: The Economics of the Global Loss of Biological Diversity 5-6 March 2008, Brussels, Belgium.

Energy

Soil protection

Food

regulation

Energy

Soil protection

Food

-

Freshwater

Soil protection

Food

Climate regulation

Climate regulation

Energy

Freshwater

1natural extensive

3 intensive

Freshwater

Energy

Soil protection

Food

Climate regulation

Energy

Soil protection

Food

-

Freshwater

Soil protection

Climate regulation

Climate regulation

Freshwater

2

3

Freshwater

EnergyEnergy

Upon closer analysis

Net value may be less

Increasing rewards for ecosystem services provision through PES

(Paid) Benefit to land user -provision

services (eg farm or forest products)

Intensive land use

Cost to population of pollution

To date ‘unpaid’ecosystem services PS

RSCS

Cultural Services

(eg tourism)

Biodiversity ‘friendly’ land use

Regulating services (eg water quality)

Potential new income from different

payments for ecosystem services

Additional PS (other products,

pollination)

COSTS

BENEFITS

Opportunity cost -Income foregoneto landowner

(in absence of PES)

Income from original

products in existing markets

Income from

provisioning Services (PS)

Social Benefit = Private benefit + public good (ESS) – pollution costs

Eg Private optimum Eg social optimum

PES: payment levels and opportunity costs

Payment levels vary widely in practice

• Costa Rica, PSA: for forest conservation US$ 64 per ha/yr in 2006. Portela & Rodriguez 2008; Pagiola 2008 in Wunder & Wertz-Kanounnikoff 2009;

• Mexico’s PSA-H: for preservation of cloud forest US$ 40 per ha/year; for other tree-covered land US$ 30 per hectare/year Muñoz-Piña et al. 2007.

• Vittel mineral water, France Perrot-Maître 2006; Wunder and Wertz-Kanounnikoff 2009

– Ave. payments are EUR 200 ha/year over a five year transition period and

– up to 150,000 EUR per farm to cover costs of new equipment.

– Contracts are long-term (18-30 years),

– with payments adjusted to opportunity costs on a farm-by-farm basis.

PES will be able to address the opportunity costs in some cases – but often not in the ones where opportunity costs are very high

Trade implications important where relate to traded goods (eg Ag)

PES link to income foregone not full opportunity costs

Ecosystem services – at what level are the benefits felt ?

What are the policy implications > Funding? PES?

0

1

2

3

4

5

Biochemicals &

pharmaceuticalsClimate / climate change

regulation

Genetic / species diversity

maintenance

Biodiversity

Ecotourism & recreation

Education, art & research

Cultural & amenity valuesWater (quantity)

Food/Fibre/Fuel

Erosion control

Natural hazards control (fire,

flood)

Water and air purification &

waste management

Pollination / seed dispersal

Mainly local benefit

Additional national benefit

Mainly global benefit

Action locally leads to local, to national & to global benefits.

PES and the Polluter Pays Principle (PPP)

Private Optimum (in absence of legal requirements)

Private solution with legal requirements

(‘reference level’)

Environmental target (practical /politically feasible environmental optimum at the time)

No impact (i.e. within assimilative capacity of ecosystem)

No emissions

Costs of measures borne by farmer – eg Polluter Pays Principle (partly implemented)

PES to farmers to help pay for measures to meet objectives / targets beyond legislative requirements

Self-damaging practice

(Damage) Costs to farmers and society

Reducing emissions/impactsexample farming & PES

No control

PES ?

PES ?

PPP

Costs born by society

(eg pollution impacts)

Issues

Private Optimum

Private solution with legal requirements

(‘reference level’)

Environmental target

No impact

No emissions

Self-damaging practice

Reducing emissions/impacts

No control

PES ?

PES ?

PPP

Q of principle/instrument name: “PES” if Public goods; “Subsidy”is avoiding public bad (eg pollution

impacts) ?

Only PES for public goods ?

Q of practicality: Are there enough funds available for widespread use of PES ?

To what extent would savings / value of greater public goods pay for it?

Q of principle : Would raising the reference level not allow for greater provision of goods, (& avoidance of

bads) and hence make less requirement for PES? - use of

standards, liability, enforcement etc

Q of social custom or responsibility : public goods often created without payment (eg traditional practice, social custom); risks of

moving to money based system?

Public goods on private land Key Issues

• Without payments for public goods – many public goods will be lost

• Some public goods can be addressed via PES – important tool, good potential, but not the only tool and many complicating factors (eg international dimension)

• Not all public goods will be able to be the focus of payments for service;

• & potential for payments has its limits - budgets

• Complementary effort needed to avoid loss of public goods - regulation, property rights, subsidy reform, charges/taxes, liability, voluntary codes, social norms etc

• Balance between PES and PPP, principle and pragmatism

• Removing harmful subsidies reduces need for PES

• Thin (& moving) line between PES and subsidies – important for budgets & governance

• Decision making needs to factor in private and public goods and bads – look at the whole chessboard.

• Major effort needed for reform of support/pricing to ensure optimal use of natural capital

• Cannot do without public policy for public goods – fundamental rationale for role of government. Focus on private optimum will not lead to social optimum.

3/18/2010 17

Thank you

For full TEEB for Policy Makers report – see TEEB website

http://www.teebweb.org/

Patrick ten Brink, ptenbrink@ieep.eu

IEEP is an independent, not-for-profit institute dedicated to the analysis, understanding and promotion of policies for a sustainable environment in Europe

TEEB for Policy-Makers What issues are covered /chapters on the web

Part I: The Global Biodiversity Crisis and Framework for Policy Response

Ch1 The global biodiversity crisis and related policy challenge

Ch2 Framework and guiding principles for the policy response

Part II: Measuring what we Manage: Information & Tools for Decision-Making

Ch3 Measuring to Manage our Natural Capital

Ch4 Recognised the Value of Biodiversity

Part III: Solutions: Instruments and measures

Ch5 Rewarding benefits of Ecosystems and Biodiversity

Ch6 Reforming Subsidies

Ch7 Incorporating the costs of ecosystem and biodiversity loss

Ch8 The Value of Protected Areas

Ch9 Direct Investments in natural capital and ecosystem restoration

Part IV: Synthesis

Ch10 Conclusions and recommendations

Available on http://www.teebweb.org/