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Economic evaluation of biodiversity
Siddhartha Swarup JenaRAD/10-30Ph.D. Mol. Bio & Biotech
Presented by:S S Jena
OutlineOutline
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INTRODUCTION Ecosystem: A dynamic complex of
plant, animal, and micro-organism communities and the non-living environment interacting as a functional unit
Biodiversity: The variability among living organisms
– Within species & populations
– Between species
– Between ecosystems Ecosystem services: The benefits
people obtain from ecosystems
The “goods and services of nature”S S Jena
Contd…
Placing monetary values on ecosystem services is not an end in itself
The aim is to provide information to make better and more informed decisions:
- Better meeting targets and goals
- Avoiding costs and losses
- Maintaining/Increasing revenues
- Finding cost-effective means of
complying with obligations and managing
environmental footprintsS S Jena
Biodiversity and Economics
What are the consequences of losing biodiversity versus conserving biodiversity? (costs and benefits)
What actions can be done, or should be done, to conserve biodiversity? (management & policy)
Documenting the benefits and costs of conserving biodiversity
– Value of “ecosystem services”
– benefits derived from ecosystems &
biodiversity S S Jena
Biodiversity and Economics cont..
Evaluating management & policy options
– Cost-effectiveness analysis
– Cost-benefit analysis – Analysis of incentives and institutions (market failure and policy interventions)
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Biodiversity Management to be Biodiversity Management to be considered considered
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Three Challenges to ValuingEcosystem Services
Challenge 1
Understanding ecological systems and how they contribute to goods and services of value to people
Understanding how changes in ecosystems lead to change in the amount of goods and services produced.
“Ecological production function”S S Jena
Challenge 2
Understanding the contribution of the value of goods and services produced by ecosystems to human well-being
Understanding the distributional consequences: who benefits from ecosystem services?
“Value of ecosystem services”
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Challenge 3
o Integrated analysis: – Combining ecology (& other natural sciences) and economics (& other social sciences) in an integrated assessment – Focusing integrated assessments on management/policy relevant questions
o Integration challenge is made easier when directly focused on a policy/management relevant question
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Steps in a Steps in a corporate ecosystem services corporate ecosystem services
1. Determine scope
2. Identify priority ecosystem services
3. Analyze trends in priority services
4. Identify business risks and opportunities
5. Develop strategies
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BIODIVERSITY VALUESBIODIVERSITY VALUES
Valuing biodiversity is mandatory even though it is really beyond valuation
Three important systems of classification of values of biodiversity have been proposed till date.
The 1st system of biodiversity value classification breaks the value into number of components-
Use or non-use
Direct or indirect use
Consumptive or productive use
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Component valuesComponent values
1. Total environmental value (TEnV): A function of primary value and total economic
value. (UNEP, 1995) Global natural resources are more valuable than
global national products.
2. primary value (PV): The value of the system characteristics upon
which all ecosystem functions depend. Called primary value because the structured
ecosystem produces functions which have secondary value.
Also known as ‘glue’ value.S S Jena
Contd…Contd…
3. Total economic value (TEV): Also called Total value (TV)or simply Value (V). The sum total of all kinds of values attached to
biodiversity minus the primary value
4. Use value (UV): The value arising from an actual use made of a
given component of biodiversity.
5. Direct use value (DUV): Economic values derived from direct use or
interaction with a biological resource or resource system.
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Contd…Contd…
6. Indirect use value (IUV): Economic value derived from the role of
resources and systems in supporting or protecting activities whose outputs have direct value in production or consumption.
7. Consumptive use value (CUV): A type of direct use value which represents the
value placed on a diversity component that is consumed/enjoyed directly, without passing through a market.
8. Non-consumptive use value (NUV): The value which the components/systems of
biodiversity possess in terms of functions or services offered.
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Contd…Contd…
9. Productive use value (PUV): The value given to a component of biodiversity that
is commercially harvested or is a source for a commercially harvestable product.
Such items pass through a market. Ex: Minor forest produce, fruits & seeds, timber,
pharmaceuticals etc. It is included in national economic statements and
budgets.
10. Non-use value (NUV): Value relating to safeguarding the existence of
assets, even though not related to their actual use in a foreseeable period.
Also referred to as Passive use value.S S Jena
Value ecosystem servicesValue ecosystem services
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METHODOLOGIES FOR VALUATION OF BIODIVERSITY
Recent workers providing methods for biodiversity valuation are
i. Dixon and Sherman (1990)
ii. Winpenny (1991)
iii. Pearce and Morgan (1994)
iv. UNEP (1995)
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1. Changes in productivity method
Also known as production function method.
Changes in the supply of biodiversity resources result in changes in the economic value of their production.
Changes in the supply of resources may occur for several reasons like habitat changes, loss of biodiversity components etc.
The production function technique is a natural complement to cost-benefit analysis.
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2. Contingent valuation method
The basis for this method is what people are willing to pay (WTP) for increment in biodiversity quality, or what people are willing to accept (WTA) in compensation for foregoing such benefits.
The procedure involved are Elicit people’s WTP for biodiversity goods or
services. Create a hypothetical market situation Use the respondents reply to place value on
biodiversity items that are not usually marketed The resultant valuation is contingent because the
value depends on every individual’s perception of background factors.
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3. Hedonic pricing method
This method enables explicit valuation of non-marketable services; viz. soil fertility, scenic beauty or air quality of a land etc.
The procedure involved are
Estimate the value of the land
Estimate econometrically the value contributed by the chosen service attributes to the value of the land.
Work back from this hedonic price equation to the actual demand curve.
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4. Travel cost method
This method can be used to find only the recreational value of a landscape.
Procedure followed are
Collect information on the expenditure incurred by visitors to the particular site/landscape
Aggregate the number of visitors by what it costs them to travel to and from the site
Estimate travel costs of visitors from distant places and nearby places.
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Uses of PGR
Food Fodder and forage Timber Rattans and canes Medicinal plants Ornamentals Other uses
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Conclusion
‘The origin of all wealth came from the bosom The origin of all wealth came from the bosom of earthof earth’
which imply the existence of great bondage between Economics and the earth’s resources especially, biodiversity.
(Smith, 1776)
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References
Krishnamurthy, K.V.; An advanced textbook on biodiversity- principles and practice. Oxford & IBH publishing Pvt. Ltd.
www.IUCN/Holcim EVI.ppt www.advocacy.britannica.com Biodiversity Conservation and Ecosystem Services;
Stephen Polasky, University of Minnesota. Third World Congress, Kyoto July 2006
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