AARES Workshop 13 th of February, 2007 Queenstown, New Zealand

1. Evaluating the management of invasive species: A role for non-market valuation and benefit transfer AARES Workshop 13th of February, 2007 Queenstown, New Zealand John Rolfe Central Queensland University

2. Key reasons for protection • Protection of industry (agricultural) base • Many pests and diseases can cause widespread losses in industry • Protection of biodiversity • Both species loss and impacts on ecosystems • Protection of human health • Diseases, pollen, animals

3. The economics of prevention and control • Industry impacts • Introduced species will cause • Agricultural losses • Impacts on rural communities • But private incentives for control are often weak • ‘cascading’ externalities means that lack of control impacts on other farmers • Case for central control to avoid widespread private losses

4. The economics for control and prevention – 2 • Biodiversity impacts • Introduced species will cause biodiversity losses • Public values for maintaining biodiversity justify investment of public funds in control • Species on public lands • Many ‘points of invasion’ on public lands • Public health arguments

5. The economics of control in biodiversity Values Costs of control Net value of production impacts may be added Value of biodiversity Intensity of incursion

6. Bioeconomic modelling • Dynamics of prevention/control measures & outbreaks of invasive species are more complicated • Biological growth behaviour is non-linear • Feedback loops with prevention & control measures • Threshold effects • Ecosystem impacts • Range of bioeconomic models in use / needed to provide suitable information about costs of invasive species and the control costs

7. Combining production and biodiversity issues Values Costs of control Averted agricultural and biodiversity losses Intensity of incursion

8. Weighing up the costs and benefits • Benefits of maintaining biodiversity difficult to estimate • Mostly associated with indirect and non-use values • Need to be assessed with specialist techniques • Sometimes there are other costs to consider • Impacts of biological controls • Heritage, cultural impacts

9. The precautionary principle • Values that population holds for protecting biodiversity will support both • Introduction of ‘trump’ rules - SMS • Values • Use of extended cost-benefit analysis should generate much the same outcome as support for SMS

10. Value taxonomy – coral reef example

11. Non – market valuation techniques • Revealed preference techniques • Travel cost method • used for recreation impacts • Hedonic pricing • used for housing/lifestyle impacts • Averted expenditure techniques • Often used to estimate the value of indirect use benefits • Storm protection benefits of mangroves

12. Contingent behaviour • Extensions to travel cost method • Ask people about planned changes in behaviour to different scenarios • Allows estimates of value for changed environmental conditions

13. Non-market valuation techniques 2 • Stated preference techniques • Contingent valuation • Choice modelling • These are capable of estimating non-use values • Key techniques to use in relation to values for biodiversity • But often complex, expensive and time consuming to apply

14. Benefit transfer • The transfer of values from one case study to another policy situation • Most studies focused on particular issues, and are not designed to transfer to other situations • Values may be sensitive to characteristics • Populations involved • The way the tradeoffs are framed • The scope at which the issue is pitched • The scale of the tradeoffs

15. Key mechanisms for benefit transfer • Point – total value • Total value from a previous study • Point – marginal value • Value per unit transferred • Benefit function transfer • Function allows adjustments for site and population differences • Bayesian transfer • A range of previous and current results can be integrated

16. Three main approaches to benefit transfer • ‘The Prospector’ – searches for suitable previous studies and transfers results across • ‘The Systematic’ – designs a database of values suitable for benefit transfer • ‘The Bayesian’ – combines both a review of previous studies with potential data gathering

17. Examples of the Prospector • A number of studies conducted in the Fitzroy dealing with water allocation and riparian development issues • Results have been transferred to other policy issues dealing with vegetation, water development, protection of cultural heritage

19. Values for vegetation and waterways over time

20. Examples of the Systematic • Windle and Rolfe (2007) developed a broad data base of NRM values in Qld • Identify the values for improvements in 3 key areas of the investment plans for regional groups • Healthy vegetation • Healthy waterways • Healthy soils • Identify sensitivity to regional issues • Identify sensitivity to framing issues

21. Regional choice set example

22. Summary of values

23. Some issues • These examples of a benefit transfer approach are difficult to relate to many invasive species issues • Often issues are more specific and it is unclear how general values can be applied • Unclear how values are set when elements of risk and uncertainty are present

24. Dealing with the ‘specific to general’ tradeoffs • A benefit transfer application will rarely satisfy ‘ideal’ conditions • Identical site characteristics • Identical population characteristics • Identical policy and tradeoff situations • Better to think of a BT application as a filtering mechanism • Identify if there are major differences between benefits and costs, or • Identify if more detailed analysis needs to be applied.

25. Dealing with the risk and uncertainty issues • Issues of risk and uncertainty often ignored in stated preference studies • Very difficult to communicate these alongside information about attributes and alternatives in choice sets • But two key components of non-use values are related to these issues • Option Value • Quasi-option value

26. Some evidence of larger option values • Qld surveys for BT database on soils, waterways, veg. • Asked to rated a series of questions representing use and non-use values - From 1 most to 5 (least important) • Percentage of respondents scoring values with a “1” or”2”

27. Values for water reserve

28. Results at different reserve levels show values of being cautious

29. Applying option values to water resource allocations • Brisbane households would pay $6.59 annually to reserve each 1% of water in the CNM system • There was 4% currently unallocated • Over 20 years and 300,000 households, present value is $78M with discount rate of 8% or $59M with 12% discount rate • Approximately double if count rest of Qld • If 4% were to be allocated = 40,000 ML • At value of $300/ML, total value = $12M

30. Evidence for quasi-option values • Donaghy et al (2004) asked households about WTP for a 5 year moratorium on release of GMOs • Significant values estimated • Median and mean WTP estimates of $220 and $386 per household • Respondents did value opportunity to delay introduction of GMO’s • Positive and significant income variable suggests that as income increases so does quasi-option values • Confirms that quasi-option values exist

31. Implications of including option values:assessing invasive species control • There is evidence that community caution about future impacts flows into option values and quasi-option values • Expect this to also apply to issues dealing with invasive species • Just focusing on existence values may not be comprehensive

32. Implications for standard use of Cost Benefit Analysis • Particularly for agricultural products, the evaluation typically compares net potential production losses with the costs of prevention or control • But prevention and control costs typically funded publicly • This analysis may fail to include: • Existence values for biodiversity impacts • Option and quasi-option values • Values associated with potential social impacts

33. Some policy implications • Important to assess non-use values for biodiversity impacts in same context as agricultural ones • Stated preference techniques can be used for this • Not enough attention paid to option values • Inclusion of option values may lead to more cautious assessments • Invasive species • Greenhouse gases • Water development • May reassess the way we deal with agricultural imports and quarantine

34. The risks in importing tourists and products Values Benefits of imports Potential agricultural costs Option values Potential loss in existence values Probability of incursion

35. Final comments • In relation to dealing with invasive species, it may be very important to assess: • Existence values • Option and Quasi-option values • However • It may be difficult to assess values, • Few studies currently exist • More systematic data may be required • Better skills required to integrate these types of assessments into economic analysis