the economics of ecosystems and biodiversity and the cost of policy inaction prentation by patrick...

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The Economics of Ecosystems and Biodiversity (TEEB) The Cost of Policy Inaction (COPI)Insights into the Sukhdev Report

Patrick ten BrinkSenior Fellow and Head of Brussels Office

TEEB Core Team MemberCOPI Deputy project lead responsible for monetary estimate

Building on the Pavan Sukhdev led TEEB, the Alterra and IEEP led COPI.& building on the work of

TEEB Core team (Pavan Sukhdev, EC, German BMU, EEA, UFZ, IEEP, UoL, IIT)

9 June 2008EEB Seminar

Presentation Structure

1. Objective, ambitions and process of TEEB and inputs (COPI,

Scoping the Science, Workshop)

2. The Urgency of Action

3. Ecosystems and Ecosystem services

4. The Valuation Challenge

5. First phase numbers

6. Next steps / the implications of the

Sukhdev report

ec.europa.eu/environment/nature/biodiversity/economics/pdf/teeb_report.pdf

Note some slides for information / documentation / completeness.

Not all will be shown!

Objectives

Potsdam 2007: meeting of the environment ministers of the G8

countries and the five major newly industrialising countries

“Potsdam Initiative – Biological Diversity 2010”

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

In a global study we will initiate the process of analysing

the global economic benefit of biological diversity,

the costs of the loss of biodiversity and

the failure to take protective measures versus the costs of effective

conservation.

Objectives (TEEB)

The Economics of Ecosystems and Biodiversity - TEEB’s goals are

• To mainstream the economics of ecosystems and biodiversity

• To address the needs of the “end-users” of these economics : policy-makers, local administrators, corporations and citizens

• To review extensively the current state of the science and economics of ecosystems and biodiversity, and recommend a valuation framework and methodology

Source: Pavan Sukhdev, Bonn 2008

Phase 1 was some preliminary scoping work, ground work, some first analysis, clarification as to how to address the wider goals, preliminary identification of experts

and organisations who could contribute to the wider work.

Now that Phase 1 was a success the process (already intense) is intensifying. Involvement from different organisations will be invaluable for the success.

Inputs into the process leading to the TEEB Report

Pavan Sukhdev TEEB Core Team & wider contributions

Expert contribution international participants

The TEEB “Phase 1” – inputs / outputs

� COPI Report ( “The Cost of Policy Inaction : The case of not meeting the 2010 biodiversity target” –Alterra & IEEP, Braat ten Brink et al )

� Synthesis of Evidence (Synthesis of submitted evidence : over 100 papers from the ‘call for evidence’, Markandya et al, FEEM) and the workshop: The Economics of the Global Loss of Biological Diversity 5-6 March 2008, Brussels, Belgium

� Scoping Science Study (“Review of the Economics of Biodiversity loss : Scoping the Science”, A. Balmford et al, Cambridge)

� Forest Biodiversity Valuation (“Study on the Economics of Conserving Forest Biodiversity” –Cambridge, Kontoleon et al)

� European Wetlands Study (“Ecosystem Accounting for the Cost of Biodiversity Losses : Framework and Case Study for Coastal Mediterranean Wetlands” – EEA, Weber et al )

� COP-9 Report ( “Interim Report : The Economics of Ecosystems & Biodiversity”, Sukhdev et al )

TEEB Core Group & contributions from wide range of experts / steering group

http://ec.europa.eu/environment/nature/biodiversity/economics/index_en.htm

The TEEB “Phase 1”: Interim Report

The Urgency for Action

The Ecological Case

Past Losses

�Global Forest Area has shrunk by approximately 40% since 1700. Forests have completely disappeared in 25 countries [1].

�Since 1900, the world has lost about 50%of its wetlands. [2].

�Some 20% of the world’s coral reefs - have been effectively destroyed by fishing, pollution, disease and coral bleaching approximately 24% of the remaining reefs in the world are under imminent risk of collapse through human pressures.[3]

�In the past two decades, 35% of mangroves have disappeared. Some countries have lost up to 80% through conversion for aquaculture, overexploitation and storms.[4]

� rate of species extinction is estimated to be 100 to 1,000 times more rapid than the “natural” extinction rate (MA 2005).

[1] United Nations Forest and Agriculture Organisation, 2001.Global Forest Resources Assessment 2000; United Nations Forest and Agriculture Organisation, 2006 Global Forest Resources Assessment 2005.[2] http://www.ramsar.org/about/about_wetland_loss.htm[3] Wilkinson C., 2004: Status of Coral Reefs of the World: 2004 report [4] Millennium Ecosystem Assessment, 2005: Global Assessment Report 1: Current State & Trends Assessment. Island Press, Washington DC. Detail: Chapter 19 Coastal Systems. Coordinating lead authors: Tundi Agardy and Jacqueline Alder. Original reference: 35%: Valiela et al. 2001; 80% reference: Spalding et al. 1997

THE DEMISE OF GLOBAL FISHERIES

Source: Sea Around Us project

2010

40 %

40 %

20 %

Running down our natural capital

We are fishing down the foodweb – D. Pauly (UBC, Canada)

CBD indicator:Marine Trophic Index

Substitution?

Source: L Braat presentation COP9 Bonn May 2008

Biodiversity loss from 1700 to 2050 accelerates

Poorer Ecosystems

Richer Ecosystems

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

CBD global 2010 target: significantly reducing the rate of biodiversity loss

European Union 2010 target: halting the loss of biodiversity

Rate of Biodiversity Loss


Changes in Ecosystem Services due to loss of Biodiversity

Pristineforest

Degradedland

Extensive use

Plantation

Originalspecies

Fossil fuelsubsidized

Extensive use

Subsistenceagriculture


Level of Biodiversity in the World in 2000Using Mean Species Abundance (MSA) indicator

Remaining MSA in %

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


Level of Biodiversity in the World in 2050One Scenario of the future : OECD/Globio

Remaining MSA in %

� MSA loss from 71% to 60%� Natural Areas decline by 7.5 Million Sq. Km.

2000The Global Loss of Biodiversity


2050The Global Loss of Biodiversity


Ecosystems and Ecosystem services

The Ecosystems in which we live and in which our economies operate provide a range of services that benefits individuals,

society, firms, the economy

Ecosystem Services - The Millennium Ecosystem framework

Source: MEA

Provisioning services: Food & fibre, Water, Fuel …

Regulating services: Climate regulation (local, regional, global);

Water regulation (e.g. flood prevention, runoff …);

Water purification and waste management;

Erosion control; Natural hazards control …

Cultural & Supporting services – ALL

Wetlands

• Coastal wetlands

• Floodplains

• Swaps, bogs, moors …

• Etc.

Provisioning services: Food & fibre, Water, Natural medicines, Fuel (biofuel)

Regulating services:

Water regulation (e.g. flood prevention, runoff);

Erosion control;

Natural hazards control (e.g fire resistance) …

Cultural & Supporting services – ALL

Grasslands & scrublands

• Natural & semi-natural grasslands;

• Agricultural land;

• Steppe;

• Mediterranean scrubland;

• Mountain grasslands.

Provisioning services: Food & fibre, Water, Fuel (biofuel)…

Regulating services: Air quality maintenance;

Climate regulation (local, regional, global) – carbon storage;

Water regulation (e.g. flood prevention, runoff …);

Erosion control

Natural hazards control (e.g. Fire resistance, storm & avalanche protection

Cultural & Supporting services – ALL (recreation, tourism et al)

Forests

• Boreal forest

• Temperate forests

• Mountain forests

• Etc.

By MK based on MA 2005 classification

Different Biomes, different (level) of services

The link between biodiversity, ecosystems, their services, and benefits to mankind…

Function

(eg slow passage

of water, or

biomass)

Biophysical

Structure of process

(eg woodland

habitat or net

primary

productivity) Service

(eg flood

prevention,

harvestable

products) Benefit (value)

(eg willingness to

pay for woodland

protection or for

more woodland,

or harvestable

products)

Source: Building on presentation by Jean-Louis Weber (EEA) presentation at the Workshop: The Economics of the Global Loss of Biological Diversity 5-6

March 2008, Brussels, Belgium

Maintenance and restoration costs

Economic and social values (& market values)

The logic behind current status & trends- ES use, enhancement & trade offs

Enhancement / investment Use Trade offs

Source: L Braat in COPI study - Braat, ten Brink et al. 2008

Land-uses and trade offs for ecosystem services


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

� Production rates, flows and values all vary spatially – so simple benefits transfer misleading

� Services produced and enjoyed in different places – so spatial understanding essential for

interventions to be effective

� Costs and benefits of conserving services accrue in different places – so spatial understanding

essential for interventions to be equitable

t C/ha

ESS service provision and spatial relation Example: carbon storage

Source: Andrew Balmford & Ana Rodrigues 2008 Presentation within the Scoping the Science work

“Net” ecosystem services

• As land is degraded more artificial inputs are needed to get the same provisioning service (eg crops) … with due costs

• Share of ecosystem service drops as soil is degraded.

“production function” changes over time

� Challenge to estimate clearly the value of biodiversity.

� Important as part of an analysis of conversion from one land use to another

� What appear as positive gains from a conversion may well not be.

� Decision making should be based on the right evidence…..

regulation

Energy

Soil protection

-

Freshwater

Climate regulation

Energy

Soil protection

Food

-

Freshwater

Upon closer analysis

Net value less

regulation

Energy

Soil protection

Food

-

Freshwater

Climate regulation

Energy

Soil protection

Food

-

Freshwater

Value – first estimate

The Evaluation Challenge

What should we measure to understand and communicate the problem?

How can we go about doing this?

Monetary Value

Quantitative Review of Effects

Qualitative Review

Non-Specified

Benefits

Increasing up the

benefits

pyramid

Measuring Benefits of Ecosystem services: The Benefits Pyramid

What can be said in what terms and what was explored?

Full range of ecosystem services from biodiversity

Type of benefits; health,

social, income, wellbeing

Quantitative: eg number people

benefiting from wood from forests

Monetary: eg avoided water

purification costs, tourist value

Knowledge gaps The “known-

unknowns” and

“unknown-unknowns”

Interest and evidence

� There are different audiences, and different messages are needed for each.

� Different types of messages have different power and different reach.

Monetary

Quantitative /

qualitative

Level of information Level of press/interest

The overall aim is to get the message across to the (range of) key

audiences – in a manner that is representative of the facts and that

engages interest. Hence, we need to work out how best to combine

monetary and non-monetary information.

Different Measures to represent the monetary and non-monetary benefits.

� The single global number

� Ranges

� Local / national numbers

� Partial aggregations

� 1 locality, 1 service numbersMon-

etary

Quantitative

Qualitative

All

� Indexes (eg living planet index)

� Indices (eg species richness)

� People/population (share) affected

� Species at risk, endangered

� Risk assessments

� Loss of forest cover (ha)

� Aggregates and cases

� Surveys

� Story lines, uniqueness, indispensible

� Hotspots

� Maps

� Critical trends and thresholds

� Stakeholder perceptions

Key Objectives: understanding, representativeness and getting the

message across

Politicians, media,

general public

Economists;

local politicians

Scientists

Policy analysts

All

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

Non

specified

benefits.

Increasing

up the

benefits

pyramid

Ecosystems, land-use and human well-being : the extent of this relationship

Services 1.1 1.2 1.3 1.4 1.5 2.1 2.2 2.3 3.1 3.2 3.3 3.4 3.5

Land cover types Food

Materials

Forest trees-

related

Plant-related

Physical

support

Amenity

Identity

Didactic

Cycling

Sink

Prevention

Refugium

Breeding

Artificial surfaces/

Urban

Arable land &

permanent crops

Grassland & mixed

farmland

Forests & woodland

shrub

Heathland,

sclerophylous veg.

Open space with

little/ no vegetation

Wetlands

Water bodies

Source: Jean-Louis Weber (EEA) presentation at the Workshop: The Economics of the Global Loss of Biological Diversity 5-6 March 2008, Brussels, Belgium

Biodiversity values: Techniques and confidence to calculate the total economic value (TEV)

Use values Non-use values

Direct Indirect BequestExistenceOption

Market

Production Function

Revealed Preference

Stated Preference

Confidence?

Confidence?

Value?

Value?

Source: Alistair McVittie & Dominic Moran presentation at the Workshop: The Economics of the Global Loss of Biological Diversity 5-6 March 2008, Brussels, Belgium

Initially insensitive (eg loss of part of large forest and tourism or recreation) or due to slow

draw down of stock (eg fish) or due to initial substitution possibilities

Relation of Habitat Area, its loss & Ecosystem ServiceIllustration of realities & evaluation challenge

Full area loss

Threshold – eg change of

recreation desitination, of fish

stock collapse for region

Area loss

EV

0 %

Pristine

Linear - eg food or fuel

provision from land,

carbon storage

Exponential decline – eg for

low resilance / fragile

ecosystem or area near a

threshold such as minimum

habitat area for a species.

100%

Elements of the Evaluation challenge

� Risks and Scientific Uncertainty

� Substitutability (or lack of) and irreversibility

� Linear vs non-linear changes / threshold issues

� Some costs only have an effect in future generations

� Inherent biases in the economic valuation system?

� eg greater focus & ease of analysis for commodity prices related valuations

� Biases in the application of valuation - certain priorities and not others?

� eg global issues focus rather than local?

� Data Gaps – how can we work with the gaps before we fill them?

� Ethical issues – anthropocentric approach;

equity, fairness.

� Spatial perspective – provision of service and benefit from service not always in

the same location

� Biases in use of discount rate ?

The Cost of Policy Inaction

L. Braat & P. ten Brink (eds.)

with

J. Bakkes, K. Bolt, I. Braeuer, B. ten Brink, A. Chiabai, H. Ding, H. Gerdes, M. Jeuken, M. Kettunen, U. Kirchholtes, C. Klok, A. Markandya, P. Nunes, M. van Oorschot, N. Peralta-Bezerra, M. Rayment, C. Travisi, M. Walpole.

Wageningen / Brussels, May 2008

Based on the Report to the European Commission, May 29, 2008

COPI Results

Mapping changes : from Biodiversity & Ecosystems to Economic Values

Source: L. Braat & P. ten Brink (eds.)

Change inEconomic

Value

InternationalPolicies

Changein

Land use,Climate,

Pollution,Water use

OECDBaselinescenario

ChangeIn

EcosystemServices

Changein

Biodiversity

Changein

Ecosystemfunctions

Change inEconomic

Value


Changein

Land use,Climate,

Pollution,Water use


ChangeIn

EcosystemServices

Changein

Biodiversity

Changein

Ecosystemfunctions

Change inEconomic

Value


Changein

Land use,Climate,

Pollution,Water use


ChangeIn

EcosystemServices

Changein

Biodiversity

Changein

Ecosystemfunctions

Biodiversity loss from 1700 to 2050 accelerates

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

The total biodiversity loss 2000-2050:All biodiversity of 1,300 million ha converted to asphalt.(about 1.5 times the United States)

73%

62%

COPI Figure 4.4a : Contribution of different pressures to the global biodiversity

loss between 2000 and 2050 in the OECD baseline

Main drivers of 11% Biodiversity Loss over the 50 years to 2050

Source: L. Braat & P. ten Brink (eds.) 2008 COPI

Change of Landuse – across all biomes

0%108.4108.4World Total *

0%0.20.2Artificial surfaces

9%20.819.1Cultivated grazing

626%0.50.1Woody biofuels

44%15.811.0Intensive agriculture

-39%3.05.0Extensive agriculture

70%7.04.2Forest managed

-9%3.03.3Bare natural

-11%58.065.5Natural areas

2000 to 2050

million

km2

million

km2Area

Difference 20502000Actual


Valuation and Ecosystem service losses COPI calculation: A

Annual Loss of economic value of ecosystem services that would have been

available had biodiversity remained at 2000 levels. Estimate for 2050.

2000 2050

Services that would

have been there, had

biodiversity been

halted.Ecosystem

service level

Relative to 2000

2010 2030

A

Losses

continue

into the

future

COPI - Some key results

• The loss of natural areas over the period 2000 to 2050 is 7.5million km2- broadly equivalent to the total area of the Australia.

• When looking at the combined loss of natural and bare natural areas and extensive agriculture the area is equivalent to that of the entire United States of America.

• The loss of welfare in 2050 from the cumulative loss of ecosystem services between now and then amounts to $14 trillion (10^12) Eurosunder the fuller estimation scenario

• This is equivalent in scale to 7% of projected global GDP for 2050.

• The loss grows with each year of biodiversity and ecosystem loss


• In the early years (e.g. period 2000 to 2010) less biodiversity has been lost (than in later years), less land-conversion has taken place, and less damage has occurred due to fragmentation, climate change or pollution. The loss over the period 2000 to 2010 is, however, still substantial.

• For the fuller estimate the welfare losses from the loss of ecosystem services amount to 545 billion EUR in 2010 or just under 1% of world GDP by 2010.

COPI - Some key results (cont.)

•This amounts to around 50 billion Euros extra loss per year, every year – in the early years.

•The value of the amount lost every year rises, until it is around 275bn EUR/yr in 2050.

The loss grows with each year of biodiversity and ecosystem loss.

Land based ecosystems only-7.1%-13938World Total

-0.40%-786Cultivated grazing

0.19%381Woody biofuels

0.67%1303Intensive Agriculture

-0.57%-1109Extensive Agriculture

0.95%1852Forest managed

-7.97%-155678Natural areas

Equivalent to

% of GDP in

2050Billion EURArea

Relative to

2000Relative to 2000

Global COPI - Loss of Ecosystem services from land based ecosystems – all biomes


-6.3%-0.8%

Losses of ESS from natural areas in forest biomes as share

of % GDP

195.5World GDP in 2050 (trillion (10^12) EUR)*

-12310-1552Natural areas

-5.5%-0.7%Losses of ESS from forests as share of % GDP

-10791-1317Forest Total

-1025-133Temperate deciduous forest

-701-47Cool coniferous forest

-1372-190Temperate mixed forest

-2332-249Warm mixed forest

-3362-536Tropical forest

-1999-163Boreal forest

Fuller Estimation

Partial

EstimationForest biomes

Global COPI - Loss of Ecosystem services Forestry biomes

What ESS could already be included (forests)?

Not included - (10 services)

Provisioning services

� Biochemicals, natural medicines,

pharmaceuticals

� Ornamental resources

� Fresh water

Regulating services

� Temperature regulation, precipitation

� Erosion control

� Technology development from nature

� Regulation of human diseases

� Biological control and pollination

� Natural hazards control / mitigation

Cultural services

• Living comfort due to environmental

amenities

Included - (8 services)

Provisioning services

� Food, fiber, fuel

Regulating services

� Air quality maintenance

� Soil quality maintenance

� Climate regulation (i.e. carbon storage)

�Water regulation (i.e. flood prevention,,

aquifer recharge etc.)

�Water purification and waste

management

Cultural services

� Cultural diversity, spiritual and religious

values, educational values, aesthetic and

cultural

� Recreation and ecotourism

A : 50-year impact of inaction B : Natural Capital Loss every year

Lost Welfare equivalentto 5.5 % of GDP (from forest

biomes overall) … or…

Natural Capital Lost fromUSD 1.35 x 10 12 to 3.10 x 10 12

(@ 4% Discount Rate) (@ 1% Discount Rate)

COPI – Forestry Biome Different ways of calculating the loss


Three Hidden Stories of “Discounting”

Cash flow 50

years in the

future

Annual

discount

rate

Present

value of the

future cash

flow

1,000,000 4% 140,713

1,000,000 2% 371,528

1,000,000 1% 608,039

1,000,000 0% 1,000,000

� Inter-generational Equity…

� Marginal Utility of $1 to the Rich vs Poor ….

� Declining Growth Paths …


Valuation and Ecosystem service losses

2000 2050

Services that would have been there, had biodiversity been halted

Ecosystem service level

Population9100 million

GDP (OECD Scenarios) 2.8%/year

GDP, with feedback on economic losses from

biodiversity losses integrated -illustrative

Relative to 2000

Population: 6092 million

GDP: 41.4$ trillion (PPP) (10^12)

GDP/capita: 680$ (PPP)

GDP adjusted for impact of biodiversity loss - illustrative

Source: Patrick ten Brink (IEEP), Leon Braat (Alterra), Mark van Ooorshot (MNP), Matt Rayment (GHK)

Navigation Challenge Ahead

Natural Capital

Physical Capital

Hum

an C

apita

l

Should we set sail on a complex 3-D growth voyage …

… with a simple economic compass ?


Next Steps

� TEEB Phase 1 Launch at Bonn. Phase 2 up to June 2009. Final report COP-10

� Launch led to high level commitment to Phase 2.

� A range of interest from wide set of organisations

� High level Advisory Board

� Core team and wider expert team - being developed

� Contributions from far and wide

� A wide range of tasks expected to be addressed in the work

� Estimation of loss of value from ecosystem & biodiversity losses (global & local)

� Estimation of costs and benefits of action

� Guidance/Toolkit of instruments / policies where benefits valuation may help improve practice – for range of stakeholders (policy makers, to local authorities, to corporations to individuals).

Issues needing exploration (own view)

• Fine-tuning of valuation framework and development of recommended valuation framework

• More valuation of the benefits of ecosystems/biodiversity and the COPI & analysis of the costs and benefits of action

• Risk assessment of different action/inaction strategies/scenarios

• Sectoral analysis: Sector role in drawing down natural capital, sectors benefitting from natural capital, and which sectors have the most potential to improve things?

Issues needing exploration

Broad messages (and areas to explore),

� Rethink today’s subsidies to reflect tomorrow’s priorities;

� eg Fisheries subsidies

� Reward unrecognized benefits, penalise uncaptured costs

� eg PES, liability, PPP

� Share the benefits of conservation;

� eg Benefits sharing

� Measure what you manage.

� Valuation for local decision making to national accounts

� Valuation and role for individuals and corporations.

� TEEB can contribute to processes behind each of the above.

Summary – Implications of the Report

• The beginning of an important process leading to improved appreciation of biodiversity and ecosystems.

• Better understanding of value, and uncosted value

• Engagement by wide group of experts started and more en route / beneficial.

• Opportunity to contribute – integrated into the process, coordinated / communicated and in parallel.

• Foresee significant advance in benefits and cost of biodiversity valuation

• Need complementary tools and indicators

• Better information for better evidenced based decision making(contribution to Beyond GDP related efforts)

• Improving tools and decisions (eg local, regional, national)

• More difficult to make the wrong decisions / inappropriate tradeoffs

• Contribute to thinking, understanding, commitment and tools to help slow/stop biodiversity loss.

Questions ?

London Office28 Queen Anne's Gate

London SW1H 9ABUK

Tel: +44 (0)207 799 2244Fax: +44 (0)207 799 2600

Brussels Office

55 Quai au Foin/Hooikaai

B-1000 Brussels

Belgium

Tel: +32 (0) 2738 7482

Fax: +32 (0) 2732 4004

www.ieep.eu

Thank You Patrick ten Brink

[email protected]

IEEP is an independent, notIEEP is an independent, notIEEP is an independent, notIEEP is an independent, not----forforforfor----profit institute profit institute profit institute profit institute

dedicated to the analysis, understanding and promotion dedicated to the analysis, understanding and promotion dedicated to the analysis, understanding and promotion dedicated to the analysis, understanding and promotion

of policies for a sustainable environment in Europeof policies for a sustainable environment in Europeof policies for a sustainable environment in Europeof policies for a sustainable environment in Europe

TEEB ACKNOWLEDGEMENTS

Source: The Economics of Ecosystems & Biodiversity: Interim Report. Sukhdev et al

for information

Study Authors and Contributors

Study Authors & Contributors (cont.)

the economics of ecosystems and biodiversity and the cost of policy inaction prentation by patrick...

Economy & Finance