Session 13 Valuing Biodiversity – Use and Non-use Values and Their Economic Measurement

1. Session 13Valuing Biodiversity – Use and Non-use Values and Their Economic Measurement John A. Dixon johnkailua@aol.com The World Bank Institute Ashgabad, November 2005

2. Questions • What are the principle economic values/uses associated with biodiversity conservation? • What economic valuation techniques can be used to estimate these monetary values? • What values cannot be estimated in economic (monetary) terms? Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity

3. The Total Economic Value approach Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity

4. The Total Economic Value (TEV) Approach and Biodiversity Includes both Use Values and Non-Use Values • Use values include direct use (both consumptive and non-consumptive), indirect use, and option values • Non-use values include bequest values and existence values The TEV is the sum of all of these values but in the case of biodiversity, much of the value may lie in the Indirect Use or Non-use portion Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity

5. Identifying types of uses and values for biodiversity • Direct-use Values: hunting, direct-consumption (e.g. collection of berries, mushrooms, herbs, plants) are all “consumptive uses”; whereas observing, photography, or ecotourism are all “non-consumptive uses” • Indirect-use Values: ecosystem services such as pollination, habitat for other species, sustaining food chains, other uses are indirect-use values Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity

6. Identifying different types of economic values for biodiversity (continued) • Non-use Values include Option values, Bequest values and Existence values (all usually measured using CVM) • Unknown values include the value of genetic material (e.g. a new cure for cancer or AIDS) • Valuation is easiest for Direct-use values, quite difficult for Indirect-use values, and very difficult for Non-use values Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity

7. Economic Values are People-dependent! • Remember, there are few or no economic values that are NOT directly linked to human uses or desires, and • People often do not understand what the real question is. • Therefore, market-values may be poor reflections of ecosystem values or pure biological uniqueness! • But… • Markets and prices often drive government and private actions! Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity

8. Valuing Direct-Use Values (both consumptive and non-consumptive) • Direct uses – hunting, fishing, hiking, photography, tourism/ecotourism, cultural/ historical, scuba diving and other uses are often the easiest to value and the largest single item in a TEV calculation. • Data can be presented at a financial level (e.g. how large is the economic sector dependent on ecotourism), or at a broader social welfare level – usually by measuring the consumers’ surplus or economic rents generated. The former is easier to calculate, the latter is more difficult. Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity

9. Valuing Indirect-Use Values • Largely composed of ecosystem services such as • Ecosystems such as wetlands, lakes, deserts, forests • Shoreline protection; water filtration • Pollination • Changes in hedonic prices • Climatic effects (perhaps) Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity

10. Valuing Non-Use values • Non-use values – including Option, Bequest and Existence values, are usually always measured using some form of CVM. Cultural values may be very important in non-use values (e.g. Lake Sevan in Armenia) • Values may be small per person (a few dollars), but large when aggregated (as in Armenia) • Note: • Non-use values are usually harder to “sell” to decision makers, but • For some types of biodiversity (e.g. the panda, the blue whale) non-use values account for almost ALL of the economic value measured in a TEV calculation. Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity

11. Selecting the appropriate valuation technique (again) Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity

12. “valuing” the non-measurable • Some uses or values associated with biodiversity are impossible to measure. These may include the following: • Unknown genetic material • Global life support services (an infinite value) • Cultural or religious values (e.g. in Hawaii, the native Hawaiians “value” the sea and the “aina”, the land, very highly) Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity

13. “valuing” the non-measurable – cont’d • Suggestions solutions: • Avoid Extinction!! • Use of the concept of Safe Minimum Standards to preserve ecosystems and their biodiversity • Creative use of financing to preserve/ protect scarce ecosystems and scarce biodiversity Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity

14. What is the TEV of Biodiversity? – no one really knows! • As economists always say “It Depends”!!!! It depends on • The numbers and types of uses and users • The values associated with each use • National vs global values • The scarcity and uniqueness of the resource • Final Caution: Be very careful in using the benefit transfer approach (for biodiversity or for “hard to value” resources) Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity

15. A BAD example of benefit transfer due to the “Big Lie” problem: Estimates of Soil Erosion Rates • A results reported for El Salvador – 140 t/ha – came from measurements on one plot, for one year (Flores Zelaya, 1982). • A widely reported result for Europe - 17 t/ha/yr. for Europe (source: Pimental, 1995) – is used over and over again in the literature. Where does this estimate for Europe come from ?? Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity

16. Another BAD example of benefit transfer:value of the Whooping Crane in the US • The Whooping Crane, protected in a small nature refuge in Texas, was the subject of a CVM study of WTP by local residents; • The results were modest -- $1 or $2 per person per year. • This amount was then multiplied by the entire population of the US (over 250 million people) to get an aggregate value of $100s of millions per year! Pars pro Toto! Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity

17. The problem of “pars pro toto: • When asked their WTP to protect any single endangered species (e.g. the whale, the panda, a big-horned sheep, the sturgeon, the whooping crane) common responses in the US are about $5-$10 per person per year. Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity

18. For example, WTP for preservation of endangered species (1990 $US per person per year) Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity

19. “Pars pro Toto” (cont’d) • When asked their WTP to protect ALL endangered species in the world, the responses are about $10 to $15 per person per year! • WHY? – the “embedding” problem created by the interviewer asking the wrong question Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity

20. The “Pars pro Toto” Problem • Only partial information is provided • The wrong question is asked WTP for all endangered species WTP for any single species Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity

21. Practical Guide to Valuation of Biodiversity • Start with the most direct uses – both consumptive and non-consumptive • Carefully consider ecosystem services (especially when they relate to marketed goods and services such as pollination, water supply, land protection,…) • Value non-use values with care and caution; avoid Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity