values & assesment and mbis for biodiversity ptb of ieep teeb 2 feb 2010

Integrating Economic Values into Policy Assessment &

Using Economics-based Policy Instruments for Biodiversity and Ecosystem services

Patrick ten BrinkTEEB for Policy Makers Co-ordinator

Head of Brussels OfficeInstitute for European Environmental Policy (IEEP)

Trondheim Conferences on BiodiversityGetting the biodiversity targets rights – working for sustainable

developmentTrondheim, Norway, 1-5 February 2010

Presentation overview

Part A: Integrating Economic Values into Policy Assessment and Decisions

Part B: Using Economics-based Policy Instruments for Biodiversity and Ecosystem services

“I believe that the great part of miseries of mankind are brought upon them by false estimates they have made of the value of things.”

Benjamin Franklin, 1706-1790

“There is a renaissance underway, in which people are waking up to the tremendous values of natural capital and devising

ingenious ways of incorporating these values into major resourcedecisions.”

Gretchen Daily, Stanford University

Integrating Economic Values into Policy Assessment

Ecosystem Services

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

Regulating Services• Climate /climate change regulation• Water and waste purification • Air purification • Erosion control• Natural hazards mitigation• 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

Many services from the same resource

Important to appreciate the whole set of eco-system services

Ecosystem Services - multiple benefits from ecosystems

Ecosystem Services and awareness of values


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





Market values – known and generally taken into account in decision making on land use decisions

Value long ignored, now being understood

Value oft appreciated only after service gone

Rarely values calculated

Value often overlooked

Value historically oft overlooked; priv. sector exceptions

Sometimes value implicit in markets

Decision making is biased towards short term economic benefits as the (long-term) value of ecosystem services is poorly

understood.

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

Different “best option” for different parties

Logging industry “best option”

Local community “best option”

Valuation can clarify the best option; local/public policy/action needed to secure community best option

Understand trade-offs in choices:

Land-uses & 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

Valuation and policy making:from valuing natural assets to decisions

To underline the value of natural assets & help determine where ecosystem services can be provided at lower cost than man-made technological alternatives

e.g. water purification andprovision, carbon storage, flood control

Conservation / restorationInvestment decision

e.g. New Zealand – Te Papanui Park - watere.g. USA-NY – Catskills-Delaware watershede.g. Saltillo City, Mexico – Zapaliname mountains e.g. Venezuela and PAs to avoid sedimentatione.g. Vietnam and restoring/investing in Mangroves

- cheaper than dyke maintenance

Political and public support for action

Inform Instrument design

To set entrance fees for national parks(via insights on WTP)

e.g. Biebrza National Park, Polande.g. diving fees in marine reserves in the Philippines, Antilles..

Create Political support for new (fiscal) instruments

e.g. UK landfill tax, building on valuation of damage of using landfills for waste disposal.

To communicate the need for and influence the size of payments for ecosystem services (PES).

Valuation can be useful for municipalities setting up PES for activities leading to clean water provision

&

at international/national level in discussions on design and future implementation of REDD (reducing Emissions from Deforestation and

Degradation) and REDD+

Instrument ChoiceInstrument design


Importance of understanding the spatial relationship of ecosystem, services provision and beneficiaries

Partially forested watershed: different relations for population areas in the vicinity

Populated areas benefiting from fuller flow of services from Forest A

Forest in wider watershed

Populated areas in watershed not benefitting from river related flow of services

Populated areas benefiting from services, but also directly impacting the ecosystem and its services (positively or negatively)

Flow of ecosystem services via river – from source

ecosystem to beneficiaries

Source: Adapted from Balmford, A., Rodrigues, A. (University of Cambridge), Matt Walpole (WCMC), ten

Brink, P., Kettunen, M. (IEEP) & Braat, L. and de Groot, R. (Alterra) REVIEW ON THE ECONOMICS OF

BIODIVERSITY LOSS: SCOPING THE SCIENCE. May 2008

Improve legislative design and implementation


Inform impact assessment of Proposed legislation & policies

Creating and improved evidence base

�Valuable for new marine legislation in UK: establishment of Marine Conservation Zones on the basis of ecosystem service benefits

� Impact assessment within European Commission - change around 2/3rds of policies for the better & often low-cost investment (Evaluation Partnership 2007; Jacobs 2006)

�Valuable for EU Water Framework Directive

Inform land-use decision - Creating and improved evidence base

– eg India: Floodplain between Yamuna River and Delhi.

Choice: convert floodplain / embankment plan or not

Evidence showed that ecosystem benefits exceeded opportunity costs of conversion.

>> Delhi government halted embankment plan of Yamuna until further order

- e.g. Opuntia scrubland in Peru

Choice: maintain scrubland or move to agriculture?

Analysis of value of provisioning services (e.g. fruit and cochineal), regulating services (nursery and refugium services), erosion control and supporting services (soil formation)

>> even if only some of the intangible benefits considered, the value of the scrubland

higher than direct revenues from agriculture.

Avoid socially less good investment decisions


Evaluate damage to natural resources to determine appropriate compensation,

e.g. under liability regimes in the US and the EU – Exxon Valdez, Erika

e.g. Indian Supreme court: compensation payments for forested land conversion

Court rulesCourt rulings


Expect increasing attention in future?

MonetaryValue

Quantitative Review of Effects

Qualitative Review

Full range of ecosystem services from biodiversity

Type of benefits; health, social, income, wellbeing

Quantitative: e.g. number people benefiting from wood from forests

Monetary: e.g. avoided water purification costs, tourist value

Knowledge gaps

Source: P. ten Brink, March 2008, revised

Values and valuation:Answers needed at all levels

Seeing the whole picture – timescales for benefits

To address short-term bias - important to understand the timescale of benefits

• A review of 112 studies in 80 MPAs (marine protected areas) : fish populations, size & biomass all

dramatically increased inside reserves, allowing spill-over to nearby fishing grounds (Halpern 2003).

• Eight years after designation of Kenya’s Mombasa Marine National Park, fish catches around the park had reached three times the level of those further away (McClanahan and Mangi 2000)

• For other MPAs, benefits after 5, even after 3 years.

Help demonstrate the sense of the measures

• to those facing potential impacts on activities

• to wider benefits to society

Identifying and Implementing transition

measures to address short-term needs

critical for stock recovery phase.

http://hattoriforth.typepad.com/.a/6a00d83549e5d069e20120a6ebb5b0970b-800wi

Part A SummaryIntegrating Economic Values into Policy Assessment

� Under-valuing biodiversity and the ecosystem services it supports hascontributed to the loss of natural capital

� Historically, many values have been invisible

� Increasingly values are understood and available

� Increasing use in policy assessment and policy choices.

� Real world effects – on policies, instruments, investments, results.

More steps are needed to appreciate and respond to the value of nature

The whole picture of benefits and costs need to be appreciated – the here and now, the over there and over time, the private and public

…always better to look at the whole board…is this enough to work out what to do?

Policy ambitions and alternative pathway...a simplified schematic…

Past loss/ degradation

Predicted future loss of natural capital (schematic) – with no additional policy action

2010 2050

Halting biodiversity loss

Opportunities/benefits of ESS

Restoration / Investment in natural capital +ve change

Alternative natural capital

Development path

What measures can

contribute to progress?

`

No net loss from 2010 level

End of Part A: Integrating Economic Values into Policy Assessment

Q: Your practical experiences: (how) has the value of nature helped you choose implement which measures ?

Q: Where do you see valuation as offering the greatest potential for policies?

Presentation overviewPart B: Using Economics-based Policy Instruments

for Biodiversity and Ecosystem services

The Global Biodiversity Crisis

Responding to the value of nature

Available Solutions• Rewarding benefits: PES, REDD+, ABS, tax relief & fiscal transfers, Markets, GPP

• Subsidy reform

• Addressing losses : Regulation legislation, liability, taxes & charges, offsets, banking

• Protected Areas

• Investment in natural capital et al

Measuring what we manage

http://www.teebweb.org/

Ecosystem Services Public Goods and Private Goods


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





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

Creation of markets, development of pricing mechanisms one set of solutions

to level the economic playing field

Tools that reward the provision of ecosystem services and promote the greening of supply chains, include:

• Payments for Ecosystem services (local, national, international) PES

• Access and benefits sharing (ABS)

• Tax based mechanism and public compensation mechanisms

• Green markets and fiscal incentives (Certification, premia markets, GPP)

+ investment in natural capital (conservation/restoration/new green infrastructure)

Rewarding Benefits through payments & markets

Payments for Ecosystem Services (PES)

• PES offer considerable potential to raise new funds for biodiversity or to use existing funding more efficiently.

• Both the public and private sectors can play a role in establishing PES in different contexts.

• PES have proven to be a highly flexible tool, providing both direct and indirect rewards for various ecosystem services and biodiversityconservation at a range of different scales (496 hectares in an upper watershed in northern Ecuador) to much larger scales (e.g. 4.9 million hectares of sloping farmland reforested in China.

Payments for Ecosystem Service (PES): PES can be defined as a voluntary transaction where a well-defined ecosystem service (ES) (or land-use likely to secure that service) is « bought » by at least on ES

buyer from at least one ES provider, if and only if the ES provider secures ES provision (conditionality) (adapted from Wunder 2005)

PES – Practice: Payments for Specific Ecosystem services

PES: payments to ensure the provision of a specific service

• Managing forest & agricultural land to ensure water quality - New York (Catskills-Delaware watershed); Saltillo city, Mexico (Zapalinamé mountains),

• To cleanse coastal waters in Sweden

• to protect groundwaters in many European countries and parts of Japan

• Carbon storage/sequestration via farm management is rewarded in New Zealand and via forest management in Costa Rica and Uganda &REDD+

• PES are also used to tackle external threats that could undermine service provision e.g. for removal of invasive alien species through South Africa’s Working for Water Programme

PES for provision of multiple services from a given area

• Costa Rica’s PSA (Pagos por Servicios Ambientales) supports a bundle of

four services - carbon sequestration, hydrological services preserving biodiversity and landscape beauty.

• PES schemes to combine improved groundwater quality with increased

biodiversity are found in e.g. Germany and Bolivia (Los Negros watershed)

• PES schemes primarily for biodiversity conservation include the

Bushtender programme (Victoria, Australia) and the US Conservation

Reserve Programme.

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.

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

Other or complementary measures needed.

Tax and compensation measures

Tax breaks and other compensation mechanisms offer an important ‘thanks’ and incentives for efforts.

Considerable potential to integrate and reward ecological concerns in land, property and income taxes

They are only rarely used for this purpose.

�Tax incentives for conservation easements and ecological gifts in North America By 2005, land trusts held conservation easements on over 2.5 million hectares (6.2 million acres)

�Canada: The Ecogift Programme (introduced in 2001). Tax benefits to owners of ecologically sensitive land if they donate it (fully or partially) to specified recipients to manage sustainably / conserve the natural habitat.

�The Netherlands, savers and investors can obtain exemption from a capital gains tax if they invest in specified green projects or capital funds.

Access and Benefits sharing

Countries benefited little from genetic resources sourced from their territory.

A fairer and more efficient regime is needed that can establish clear rights for local people, encourage the conservation of genetic resources in situ and facilitate discoveries and their application across a range of sectors.

Ecological Fiscal Transfers in Brazil – ICMS Ecologico

Q: Where else could this be applied ? Post 2013 EU regional funding / Cohesion policy ?

Greening Markets

Market (niches) for products & services demonstrating conservation benefits:

� products with reduced direct impacts on biodiversity, due to adoption of more efficient or low-impact production and processing methods

�e.g. for reduced impact forestry - FSC, PESC certified timber

� e.g. for fisheries, MSC certification;

� products with reduced indirect impacts on biodiversity as a result of decreased

pollution load

� e.g. biodegradable detergents – eco-labelled products

� products and services based on the sustainable use of ecosystem services and biodiversity

�e.g. ecotourism or biotrade.

These are less and less “niches”; and more and more “mainstreamed”

Green Public Procurement

Green Public Procurement (GPP) means that public purchasers take account of environmental factors when buying products, services or works. A product or service can only qualify as ‘green’ if it goes beyond what is required by law and beyond the performance of products commonly sold in the market.

� GPP rapidly developing since the early 2000s;

� Now being mainstreamed by environmentally ambitious governments.

� EU: government purchases alone exceeds 1,500 bn EUR/year,16% of EU GNP.

� European Commission proposed to MS - by 2010, 50% of purchasing should be GPP.

� The Netherlands: nat. government intends to purchase 100% green by 2010, with levels of 50 to 75% for local and regional governments.

� Many other large economies – including Japan, China, New Zealand, Korea and the US –also have formal policies in place that stimulate GPP

Major tool for greening the supply chain; direct link (demand side pull) to certification of products and services (supply side)

Subsidy reform

- increase share of the “good” subsidies

still relevant, targeted, effective, positive impacts, few negative effects

- remove/reform the “bad" subsidiesno longer relevant, waste of money, important negative effects

- reform the “ugly” subsidiesbadly designed – eg inefficient, badly targeted, potential for negative effects

Source: building on Sumaiia and Pauly 2007

Examples of EHS

Coal mining direct transfers,

little liability for damage

Water useNon resource pricing

FishingGrants, guarantees, tax

exemptions + no liability for damage to sea bed et al

Energy: oil spillsOnly partial liability /

compensation for damage

AgricultureDirect payments + no liability for eutrophication damage et al

Source: www.wisebread.com

Source: Guardian

Source: http://srforums.prosoundweb.com/

Source: www.treehugger.com

Source: www.oilism.com

Deforestation No resource costs, no

compensation for damage or loss of ESS / public goods

Subsidies come in different shapes and forms:

• Direct transfers of funds (e.g. fossil fuels, roads, ship capacity) or potential direct transfers (e.g. nuclear energy and liability)

• Income or price support (e.g. agricultural goods and water)

• Tax credits (e.g. land donation/use restrictions)

• Exemptions and rebates (e.g. fuels)

• Low interest loans and guarantees (e.g. fish fleet expansion/modernisation)

• Preferential treatment and use of regulatory support mechanisms (e.g. demand quotas; feed in tariffs)

• Implicit income transfers by not pricing goods or services at full provisioning cost (e.g. water, energy) or value (e.g. access to fisheries)

• Arguably also, implicit income transfer by not paying for pollution damage (e.g. oil

spills) and other impacts (e.g. IAS, damage to ecosystems)

• Some are “on-budget” (visible in government budgets) others “off-budget” (not accounted in national budgets) – transparency varies

People may mean different things when talking of subsidies; what are formally considered subsidies also depends on context (e.g. state aid, WTO)

Aggregate subsidy estimates for selected economic sectors

Over $ 1 trillion per year in Subsidies

Most sensible use of funds? Or potential for reform?

Yet reforming EHS > potential benefits

• Reduce the use of resource intensive inputs, thus saving resources (for society/the economy now and for future generations) & causing less pollution

>> Lesser pressure on the nature capital stock

• Increase competitiveness by exposing subsidised sectors to competition and supporting future competitiveness by resource availability

• Level the playing fields / fix market distortions by making resource prices reflect resource value, and making polluters pay for their pollution.

• Overcome technological ‘lock-in’ whereby alternative, less established, and possibly more environmentally-friendly, technologies and practices are

unable to compete on an equal basis with the subsidised sector

>> Move to a more resource efficient economy

• Enable governments to divert budget to other areas (e.g. education, poverty, PES, energy saving)

>> Good governance in a time of crisis

Addressing losses through pricing

taxes/charges/fees and fines+liability and compensation

Instruments to make the full costs of loss visible and payable

Taxes & polluter pays principle

Incentive effect & revenue raising effect

Pesticides tax: 20 SEK/kg (in 2002) 65 % reduction in use (Sjöberg, 2007)

Fertiliser taxes or taxes on excess nutrients: Decrease in product use 20-30% in

the Netherlands, 11-22% in Finland, 15-20% in Sweden & 15% in Austria. (Ecotec 2001)

Plastic bag tax: Ireland (2002). 33 cents per bag at checkout. Plastic bag consumption dropped by 80% from 1.2 billion to 230 million bags in the first year, generating tax revenues (US$ 9.6 million) earmarked for a green fund.

Landfill tax: UK £1 billion of contributions paid from landfill operators to env. projects

…also energy taxes, carbon taxes, NOx, SOx taxes, range of product taxes etc

Effect comes from both price signal and choice of revenue use

Big or small – successes generate confidence to copy the instrument

Charges / taxes for raising revenues

Mexico increased gasoline tax by 5.5% in October 2007. 12.5% of proceeds will go tosupport investments in the env. sector, including PA management (Gutman & Davidson 2007);

Bonaire National Marine Park (BNMP), Antilles: BNMP dive tags US $ 25 in

2005: + entrance fees. (Slootweg and van Beukering et al. 2008; Stinapa Bonaire 2009)

USA, duck hunters - required to purchase Federal Duck Stamps. 98% ofrevenue ($50 mn/yr) goes directly to the purchase/lease of wetlands. (www.fws.gov/duckstamps).

Entrance fees for the Galapagos Islands 100$ for international tourists; Revenues

(> US$3 mn/yr) to improve the management of the National Park (Vanasselt, 2000)

Water abstraction charge: Australia - for the Murray River basin; revenues

earmarked for wetland restoration and salt interception schemes (Ashiabor 2004);

Water abstraction charge: Germany - some revenues to farmers to help change

farming practice – for lesser nitrogen in water/cleaner drinking water + biodiversity gains in extensive farms. Link to PES

Reforestation charge in Liberia: 5US$/m3 of logged wood, reinvested

Charges & full cost recovery

Water pricing:

e.g. Many EU Member States (e.g. Netherlands, UK) have moved towards full cost recovery for water; significant changes in water pricing for most newer Member States

In the Czech Republic, water pricing gradually increased from €0.02/m3 before 1990 to €0.71/m3 in 2004. Between 1990 and 1999, water withdrawals decreased by 88% (agriculture), 47% (industry) and 34% public water mains).

Waste: e.g. Korea: volume based waste fee: 1994 to 2004: 14% reduction in municipal waste

Greater application of full cost recovery in many countries (water, waste, energy)

Gradual transition important to address affordability/social concerns

Fines and penalties

Far too often not set at levels to be real economic incentives as profits of illegal activity can be much higher. e.g.

• Trade in wildlife species

• Illegal timber

• Poachers

• Illegal fishing practices

Need more than economic incentives…

Trading systems

Not just CO2 and Sulphur trading - also

ITQs (individual tradable quotas) and fisheries in New Zealand: rebuilt stock and some of very few to achieve conservation target of less than 10% stock collapse

Tradable water use quotas in Zhangze City, China

Minle County: irrigation districts allocated water rights certificates, reducing water used for irrigation

Tradable development rights in Montgomery county - by 2008 50,000ha of prime land preserved.

Habitat banking: USA, Australia.

Offsets (no net loss+) to Habitat Banking

� When appropriately designed and effectively regulated, offsets and biodiversity banks can be efficient market-based instruments that help businesses compensate for the residual unavoidable harm from development projects.

� Over 30 countries now require some form of compensation for damage to biodiversity or have established programmes requiring offsets.

� Legal requirements for offsets include Brazil, South Africa, Australia and the United States (Bean et al. 2008; Carroll et al 2007).

� United States: More than 400 wetland banks have been established, creating a market for wetland mitigation worth more than $3 billion/year.

� 70+ species banks; can trade between $100mn & $370mn in species credits/yr. (Bayon 2008; DECC 2009)

What instrument portfolio do you see as helping promote the alternative natural capital development pathway ?

Past loss/ degradation

Predicted future loss of natural capital (schematic) – with no additional policy action

2010 2050

Halting biodiversity loss

Opportunities/benefits of ESS

Investment in natural capital +ve change

Alternative natural capital

Development path

Regulation

PAs

Restoration

Investment in natural capital: green infrastructure

Economic signals :

PES, REDD, ABS (to reward benefits)

Charges, taxes, fines (to avoid degradation/damage:

Subsidy reform (right signals for policy)

Better governance

`

Sustainable consumption (eg reduced meat)Markets, certification/logos & GPP

Agricultural innovation

No net loss from 2010 level

Patrick ten BrinkTEEB for Policy Makers Coordinator

[email protected]

TEEB for Policy Makers report

http://www.teebweb.org/

Major funders:

TEEB Contributors include:

Thank you

values & assesment and mbis for biodiversity ptb of ieep teeb 2 feb 2010

Education

valuing natural

integrating

full cost

water abstraction

based policy

natural capital

ten brink

policy assessment