The Benefits of Ecosystem Services, Environmental Economics and Eco-Compensation Schemes

1. The Benefits of Ecosystem Services, Environmental Economics and Eco-Compensation Schemes Christian Susan UNIDO Water Management Unit

2. Provisioning Services Ecosystem Services • food (including seafood and game), fibre, crops • fresh water • genetic resources, bio-chemicals • natural medicines • energy (hydropower, biomass) Regulating Services • climate regulation, carbon sequestration • air quality regulation • water regulation and purification • erosion regulation • disease regulation • hazard regulation • pollination, pest regulation

3. Cultural Services Ecosystem Services • spiritual enrichment • cognitive development • reflection • recreation, amenity and aesthetic experiences Supporting Services • soil formation • photosynthesis • primary production • nutrient cycling • water cycling • provision of habitat • soil formation and retention

4. efficiency • growth • stability Sustainable Development ECONOMIC • intra-generational • equity • employment • valuation • internalization SOCIAL ENVIRON MENTAL • inter-generational equity • popular participation • poverty • consultation/empowerment • culture/heritage • biodiversity/resilience • natural resources • pollution

5. Quantification of Total Economic Value

6. Quantification of Total Economic Value Quantification of WTP/WTA through markets • market price determined by supply and demand • direct use value and to certain degree the indirect use value • private goods Quantification of WTP/WTA where markets fail • most ecosystem services have public goods character • no markets exists, not traded in markets • “market failure” • environmental valuation techniques to derive option and non-use value

7. Quantification of Total Economic Value Environmental Valuation Methodologies

8. Quantification of Total Economic Value Environmental Valuation Methodologies

9. Quantification of Total Economic Value Environmental Valuation Methodologies

10. Eco-compensation, offsets, no net loss, net gain Eco-compensation • economic development => environmental damages, reduction of natural capital stock • sustainable development: minimize detrimental environmental impacts, offset residual damage by eco-compensation No net loss • countries with abundant natural resources, natural capital stock still +/- intact, application of no net-loss => sustainable development Net gain • countries, where natural capital drastically reduced, application of net-gain principle => ‘re-balance’ accounts, sustainable development, net gain principle legally binding and transparent rules

11. Eco-compensation, offsets, no net loss, net gain Eco-compensation • economic development => environmental damages, reduction of natural capital stock • sustainable development: minimize detrimental environmental impacts, offset residual damage by eco-compensation No net loss • countries with abundant natural resources, natural capital stock still +/- intact, application of no net-loss => sustainable development Net gain • countries, where natural capital drastically reduced, application of net-gain principle => ‘re-balance’ accounts, sustainable development, net gain principle legally binding and transparent rules

12. Habitat Hectare Assessment • environmental proxy, value of habitats in non monetary units • “currency” used: habitat hectare • habitat area [ha] x habitat score = habitat hectare • habitat score: comparing habitat and landscape component with a benchmark • benchmark: average characteristics of mature and apparently long undisturbed biodiversity and native vegetation • benchmarks for each Ecological Vegetation class (EVC) max habitat score = 1 or 100%

13. Eco-compensation, offsets, no net loss, net gain species composition to assure no net loss • forests = complex ecosystems, socially and economically valued goods and environmental services • age + species composition = crucial determinants of habitat quality • to assure no net-loss to overall habitat quality, eco-compensation has to maintain species composition • afforestation with fast growing coniferous species can restore the commercial timber value but not the habitat quality • afforestation with coniferous species in Great Britain, increase in forest area, loss in biodiversity and negative impact on real estate prices (revealed preference, Hedonic pricing) !!! crucial to assure no net-loss of overall habitat quality: use the species felled for reforestation/afforestation!!!

14. Eco-compensation, offsets, no net loss, net gain Eco-compensation ratio to assure no net loss • forests take several decades to centuries to develop their full range of habitat functions • value of habitat (habitat score) increases over time

15. Eco-compensation, offsets, no net loss, net gain Eco-compensation ratio to assure no net loss • equivalence: 0,8 ha*0,5 habitat score=0,4 habitat hectares=0,4 ha*1,0 habitat score • habitat score/value increase over time !!! time plays a crucial role in order to assure no net-loss in habitat value!!! • if a party causing destruction of forest habitat is committed to take care of reforestation/afforestation until habitat score of area cleared can be achieved => compensation ratio of 1:1 guarantees no net-loss • if a party causing destruction of forest habitat is only committed to take care of reforestation/afforestation for a shorter period => compensation ratio has to be increased to guarantee no net-loss • if habitat score after 20 years (t20) is 0,2; to compensate for a habitat destroyed (1ha) with a habitat score of 0,8 => compensation ratio of 4:1 required for equivalence => 4 ha need to afforested and looked after for 20 years

16. Eco-compensation, practical application Baku-Tbilisi-Ceyhan (BTC) Pipeline • BTC/SCP pipelines 248 km length, average width of 53 m on Georgian territory • route characterized by very diverse ecological conditions and abundant biodiversity • ESIA accepted on conditional basis only; impacts on forest ecosystems have to be evaluated and off-set by adequate eco-compensation measures • Goal: restore the equivalent forest habitat, no net loss • 141,8 ha forest affected, total value 80,51 habitat hectares • eco-compensation ratio for 20,30,40 years care taking period calculated • compensation ratio between 1:2,5 up to 1:6,8

17. Eco-compensation, policy application • logical extension of polluter pays principle • healthy ecosystems have become scarce • inclusion in regulatory framework = pre-requisite for sustainable development • EU Natura 2000 areas, Austria, Australia • obligation for developers to internalize cost of externalities in Cost-Benefit Analysis, reflection of true costs • precondition for future generations to benefit from extremely valuable ecosystem services

18. gracias, thank you !!!