The economics of biodiversity

1. The economics of biodiversity source: Green Renaissance/WWF

2. Consumer-Product Diversity Now Exceeds Biodiversity Source: The Onion (satire). Oct. 21, 1998

3. Global development and biodiversity. “Some of the world's least developed countries are located in hotspot areas of high importance for biodiversity. This map displays Human Development Index (UNDP) by country and hotspot regions overlaid on that.” UNEP/GRID-Arendal, Global development and biodiversity, UNEP/GRID-Arendal Maps and Graphics Library, http://maps.grida.no/go/graphic/global-development-and-biodiversity (Accessed 9 March 2010)

4. Haiti/Dominican Republic border: NASA/Goddard Space Flight Center Scientific Visualization Studio (2002-09-25 )

5. The role of economics • Challenge: sustaining biodiversity in the face of increasing • human populations • economic activity • Conservation solutions will come from better understanding and management of both • human affairs, and • biology • Contributions from economics: 1. Estimating value 2. Setting priorities/conservation strategies 3. Designing policy and crafting incentives Image source: http://www-images.warwick.ac.uk

6. 1. Sources of value from biodiversity TEV breakdown for biological systems Derived from Munasinghe (1993) by Landell-Mills and Porras (2002)

7. Sources of value from biodiversity TEV breakdown for forest systems From: Landell-Mills and Porras (2002)

8. Sources of value from biodiversity California Tiger Salamander [status: “threatened”] Source: USFWS Non-use value: Existence values • Interest in biodiversity (endangered species)  focus on a new type of value (existence)  contingent valuation method. • Some issues with survey methods: • Aggregated WTP over many species is “suspiciously high” • Responses may exhibit “embedding effects” (sequencing and nesting of questions; stated WTP for protecting a collection of species might generate estimates similar to the willingness-to-pay for protecting an individual species) • Some respondents object to placing a monetary value on species (moral principle)

9. Sources of value from biodiversity • Use/Non-use value: Option value from future biological prospecting • Species might contain valuable compounds for pharmaceuticals or other products • General consensus: the incentive to conserve biodiversity for bioprospecting purposes is almost certainly too small to offset the opportunity cost of development on its own (Simpson et al. 1996)

10. Sources of value from biodiversity • Indirect use value: Biodiversity and ecosystem services • Values the ecosystem as a whole versus the genes or particular species. • E.g. provision of clean air and water, climate regulation, mitigation of natural disturbances, waste decomposition, maintenance of soil fertility, pollination, and pest control, among other things [Daily (1997)]. • Conceptual model: biodiversity  ecosystem function  ecosystem services  valuation • Challenges: • State of ecological knowledge may be insufficient to say how changes in ecosystem function drive changes in services. • Current state of economic valuations methods may not provide complete or reliable assessments of value.

11. Sources of value from biodiversity • Use value example: net benefits from fisheries harvest • Value of genetic diversity (within species): reliable returns in the face of variable environmental conditions Baskett and Springborn, 2010

12. Production function approach (e.g. valuing (1) genetic diversity, or (2) mangrove habitat Arsenic VSL Pearce et al. (2006, Chp. 6)

13. Bringing ecology into habitat valuation Mumby et al. (2004) Nature

14. Use value of conserving mangrove habitat as measured by net benefits to a fishery (“production function framework”) Harvest, h mortality, μ Coral reef adult pop. N Larvae/juveniles going from reef to sea grass, J(N) S, survivorship of mangrove juveniles Survivorship of direct recruits, S† Seagrass beds Juvenile share directly to reef, 1-W(M) Mangrove, M Juvenile share to mangrove, W(M) Conversion, D (+/-) Sanchirico and Springborn (2011): “How to Get There From Here: Ecological and Economic Dynamics of Ecosystem Service Provision”

15. 2. Strategies to conserve biodiversity What type of goods stem from biodiversity?  What services from biodiversity might be at risk?  What services might be underprovided?

16. 2. Strategies to conserve biodiversity • Positive/negative externalities • Components of biodiversity are often either a pure public good or an open access resource (sometimes globally) • The primary causes of biodiversity decline are thought to be: • habitat loss (terrestrial species); over-harvesting (marine species) • Introduction of invasive species [Wilcove et al. (1998),Wilson (1992), Jackson et al. (2001)].

17. Marine biodiversity and reserves • Challenge: control over-exploitation • Traditional approach: single species management with little account of uncertainty, learning or dynamic ecological effects (largely failed). • Recent: Marine reserves • Goal: prevent overexploitation (versus preventing harmful land conversion for terrestrial species). • Botsford et al. (2001) argue: ~35% of marine ecosystems must be set aside in order to protect Biodiversity (currently only about 0.5% is protected [IUCN (1997), Kelleher et al. (1995)]).

18. Terrestrial habitat protection • Habitat preservation (6.4% of land is in some form of protected areas management [UNDP, 2000]) • Classic question: how can the greatest conservation return be achieved given limited resources? (cost-effective conservation) • Reserve (conservation) site selection problem

19. Cost effective reserve site selection strategies Simple example from Polasky and Solow (1999) with four potential sites, labeled A through D, of which only two can be included in a reserve network. Species, which are labeled 1 through 6, that inhabit each site are listed in the column for that site. Objective: maximize species conserved.

20. Cost effective reserve site selection strategies Strategies: • “greedy algorithm”: start w/site w/most species; pick those that add greatest complement of unprotected species until budget exhausted. • “hotspots”: choose sites w/greatest number of species. • “cost-effective”: choose sites to max. species covered for a given budget Simple example from Polasky and Solow (1999) with four potential sites, labeled A through D, of which only two can be included in a reserve network. Species, which are labeled 1 through 6, that inhabit each site are listed in the column for that site. Objective: maximize species conserved. Hotspots Cost-effect. Greedy

21. Reserve site selection – attending to cost • Dobson et al. (1997): endangered species hotspots occurred largely along the coast of California and in Hawaii. • Spots coincide with real estate hotspots (some of the most expensive real estate in the U.S.) • Ando et al. (1998): choosing sites that are not necessarily the most biologically rich sites but have a high species per dollar ratio is a cost-effective conservation strategy. • resulted in the same number of endangered species in selected sites at one-third to one-half the cost of an approach that included the biologically richest sites regardless of cost.

22. Newbold & Siikamäki (2009) • Prioritizing conservation activities using reserve site selection methods and population viability analysis. • Ecological Applications, 19(7), 1774-1790. • PVA: population viability analysis • salmon stocks • upper Columbia River basin (N. central Wash.) • upstream watershed protection • prioritize watersheds for habitat improvement to reduce pollution loading photo: USFWS

24. Land-use patterns and the biodiversity-economic tradeoff (Polasky et al. 2008) Horizontal axis: “present value of economic activity generated by a land-use pattern” Vertical axis: “number of species expected to be sustained by a land-use pattern” Efficiency frontier : “outlined by solutions shown by diamonds” Point A: the maximum economic returns possible. Point H:the highest biological score found for zero economic returns. Point I: estimates for the biological and economic scores for the 1990 land-use pattern” Polasky, S, E Nelson, J Camm, et al. 2008. Where to put things: spatial land management to sustain biodiversity and economic returns. Biol Conserv 141:1505–24

25. Instruments-Economic incentive based • Market-based • Create/facilitate markets allowing conservation to pay for itself (e.g. ecotourism, bio-prospecting) • Price instruments • payments for ecosystem services (e.g. Costa Rica’s Payments for Environmental Services scheme [carbon, hydro-, biodiversity, beauty]) • direct compensation payments (take private land out of production and put into conservation) • auction contracts for conservation (competitive bidding by landholders for conservation compensation)

26. Instruments-Economic incentive based • Market-based (cont’d) • tradeable property rights • Transferable development rights (cap development and trade rights) • Mitigation banking (Clean Water Act requires mitigation in certain cases of habitat impact from development—developers buy credits from a third party specializing in restoring habitat) [EPA] • Tradeable quotas (for resource extraction) • Developing countries: benefit sharing (provide local communities with a stake in conservation)

27. Conservation (mitigation) banking • gopher tortoise • ESA listing: threatened (USFWS; AL, LA, MS) • drivers: habitat loss, habitat fragmentation, human predation, and declining density • goal: self-sustaining pop • tool: gopher tortoise conservation banks (USFWS 2009; photo: Westervelt Ecological Services)

28. (Westervelt Ecological Services)

29. Other instruments/approaches • Centralized / command and control • Endangered Species Act • Biological reserves • Marine reserves (extraction prohibited) or marine protected areas (regulated for a specific objective) • Framework incentives (Perrings et al. 2009, Tbl 17.1) • Support for voluntary or collective action: • Information provision • Scientific and technical capacity building • Institution-building and stakeholder involvement

30. A new international mechanism: IPBES Perrings et al. (2011, Science): “There is growing consensus that solving problems posed by global environmental change requires coordinated international research, better resourced than in the past, and paying at least as much attention to social science as it does to natural science”

31. A new international mechanism: IPBES • Intergovernmental Platform on Biodiversity and Ecosystem Services (IPBES) • December 2010: UN Environment Programme (UNEP) asked to convene a meeting “to determine modalities and institutional arrangements” of a new assessment body • similar to the Intergovernmental Panel on Climate Change (IPCC) • to track causes and consequences of anthropogenic ecosystem change • in recognition of inability to halt damaging ecosystem change • A potential blueprint for governance: IPBES • From: S. Korean conference June 2010: the “Busan outcome” (Perrings et al. 2011)

32. IPBES • Formally est. April 2012 • independent intergovernmental body open to all member countries of the United Nations • Goals: • Create a body for assessing the state of the planet's biodiversity, its ecosystems and the essential services they provide to society. • Build capacity for the effective use of science in decision-making Source: ipbes.net/about-ipbes.html

33. Four functions identified in the Busan outcome: • “identify and prioritize key scientific information needed for policymakers at appropriate scales,” • “perform regular and timely assessments of knowledge on biodiversity and ecosystem services and their interlinkages, …which should include comprehensive global, regional, and, as necessary, sub-regional assessments and thematic issues at appropriate scales and new topics identified by science,” • “support policy formulation and implementation,” • “prioritize key capacity-building needs to improve the science-policy interface….”

34. Proposed IPBES activities Perrings et al. (2011) • Research: uncovers mechanisms that explain how biodiversity change impacts ecosystem services and human well-being. • Monitoring: records trends in indicators of change. • Assessment (core business of IPBES): reports scientific evidence of change and evaluates mitigation, adaptation, or stabilization options identified by policymakers. • Policy: selects the “best” response. Although the establishment of IPBES means that all of these elements of the process will now be in place, all need to be strengthened if the new body is to discharge its functions effectively. Assessment, however, will be its core business.

35. optional additional slides

36. “The economics of biodiversity” (Polasky et al. 2005) • Strategies to conserve biodiversity • Terrestrial habitat protection • Marine biodiversity and reserves • Introduced (invasive) species • Incentives to conserve and conservation policy • Stephen Polasky, Chris Costello, Andy Solow (2005). “The economics of biodiversity.” Handbook of Environmental Economics, Vol. 3, Chapter 29. Mäler and Vincent, Ed. • Measures of Biodiversity • Relative abundance • Joint dissimilarity • Sources of value from biodiversity • Use value and existence values of individual species • Biological prospecting • Biodiversity and ecosystem services

37. NRC report on valuing Gulf oil spill • “Historically, NRDA (Natural Resources Damage Assessment) has been used to measure losses in ecological terms, such as the number of fish killed or acres of marsh damaged. • A broader "ecosystem services" approach to assessing damage from the spill could "expand the menu" of restoration projects beyond identifying specific ecological damage to a habitat or resource • E.g., wetland area: take into account the value of a wetland in containing storm surges in addition to cataloging the harm to vegetation and wildlife. This could help incorporate long-term, chronic effects of the oil spill into the assessment process Source: http://www8.nationalacademies.org/onpinews/newsitem.aspx?RecordID=13141