A presentation held by mr Pavan Sukhdev, UNEP, at Stockholms kulturhus at the seminar "How do we valule nature?" on the 9th of May 2012.

1. 9th May, 2012
Stockholm
The TEEB Perspective on Valuation
Pavan Sukhdev
McCluskey Fellow 2011, Yale University
Founder & CEO, GIST Advisory
Study Leader, TEEB

2. Why Valuation, Why TEEB ?
3.In a world driven by economic rationale, the economic invisibility of
nature is a problem.
1. Because addressing losses requires knowledge from many
disciplines (ecology, economics, policy) to be synthesized,
integrated and acted upon.
3. Because different decision-making groups (policy makers, local
managers, businesses, citizens) need different types of
information and guidance.
5. Because successes need to be understood, broadcast, replicated
and scaled.

3. How Long Has The Problem Been Known ?
 “Diamond-Water” Paradox …
 An Inquiry into the Nature and Causes of the Wealth of Nations
Adam Smith, 1776
 “I believe that the great part of the miseries of mankind are brought upon
them by false estimates they have made of the value of things.”
Benjamin Franklin, 1706-1790

4. Why the Obsession with “Big Global Numbers” …
• Costanza et al, 1997, Nature : Natures services in aggregate worth
$18-$61 Trillion per annum, average $ 38Trillion ($24 Trillion oceans, $
14 Trillion land biomes..)
• Balmford et al, 2002, Science : Marginal benefits of conserving 15%
of land ($1.1-$1.3 Trillion) and 30% of oceans ($3.3-$3.9 Trillion)
exceed costs of conservation ($ 45 billion) by a factor of 100:1
… when we know decision-making does not take
place at a “Global” scale ?

5. The TEEB Perspective on Valuation
Norms,
Regulations
Regional Plans & Policies
Legislations
Recognizing Economic
Value Certification Mechanisms
PA Evaluation
Demonstrating
Value PES
Markets
Capturing
Value
Ch.5 Ch.4 Ch.3 Ch.3

6. Case Study: Integrating ecosystem services into
land use plans in Baoxing County, Sichuan, China
REGIONAL PLANS
An ecosystem service mapping and modelling
tool (InVEST) used to plan development zones
that avoid areas of high ecosystem service
provision and conservation importance
Developments were reconsidered by local
government officials during the making of the
next Baoxing County Land Use Master Plan
2010 where mapping had highlighted that
activities were planned in areas of several
critical ecosystem services

7. Case Study: Tubbataha Marine Park, Philippines
UNESCO World Heritage site, contains 396 species of corals & has higher
species diversity per square meter than the Great Barrier Reef
LEGISLATION
After 1998 Bleaching incident –
Stakeholders meeting held and “No-
take” areas agreed. Later, President
passed the Tubbataha Reefs Natural
Park Act in 2010 (10 mile buffer zone
around the no-take marine reserve) thus
increasing Park by 200%
•10% annual increase in live coral cover
•Fish biomass is four-folds better than
the average healthy reef

8. Case Study: Kampala Wetland
Services provided by the Nakivubo swamp include natural water purification
and treatment & supporting small-scale income activities of slum dwellers
P. A. EVALUATION (Nakivubo designated a part of
the city’s greenbelt zone)
Ecosystems services provided by
the swamp equal USD 1 million
-1.75 million / year
If the swamp is converted then
additional investment into a
sewage treatment plant would be
required with running costs of
over USD 2 million / year

9. Case Study: ‘Satoyama’ Landscapes, Japan
75-100% reduction in pesticides, traditional winter flooding rice farming
adopted and White Stork rice and other certified products sold at a
“premium”
PES
2003-2007: farmers paid 40,000 JYen per 1,000m2 of rice
paddies. Currently granted 7,000 JYen per 1,000m2 by Toyo-oka
City.
CERTIFICATION
Rice sold at 23 % higher rate for reduced pesticide use and 54 %
more for organic farming
• White Stork habitat increased from 0.7 ha in 2003 to 212.3
ha
• Extinct in 1971, now has over 40 breeding pairs
Konotori no Mai / Flying
• 1 billion JPY annually in tourism, & municipal income raised Oriental White Stork

10. TEEB Perspective : Key Themes…
• Valuation decision itself has ‘trade-offs’ that need to be
recognized ..… “Long-term Concerns” matter
• Valuation is a human institution.. “Who values?” matters
• Valuation must have a defined purpose….. “Why value?”
matters
• Valuation has ethical implications.. “Uncertainties & Risks”
• Discounting implies ethical choices… “Equity” matters

11. Trade-offs of Valuation

12. Long-term Concerns about Valuation
Biodiversity & ecosystems are multi-dimensional, contested and
context specific, but valuation promotes a universal notion of the
natural environment.
3. RISK : By placing values on nature we change existing concepts of ownership
and property
• Nature risks becoming a commodity that can be traded in markets for
dollars or traded-off in policy (“commodity fiction”)
• RISK : As values have not been previously defined the process of valuation
changes how we appreciate nature
• Individual preferences can outweigh consensus building and collective
decision making
• Are we constructing markets that are set up to fail?

13. Long-term Implications of Valuation
The critique of valuation is both institutional and psychological:
3.Cultural and social anthropology suggests flaws in the structural and
institutional outlook of economic valuation.
• Different cultural approaches to human-environment relationships
4.The psychological viewpoint considers that valuation ignores the internal
origins of human behaviour.
• Economics inconsistently applies psychological theories to explain
behaviour and to champion rational choice
• Economics focuses on the outcome of decisions not the process
• Empirical studies of behaviour do not back up economic theories of
preference

14. Long-term Implications of Valuation
• It has been argued that economics divorces the emotions underlying
choices from the utility of choice outcomes
• Developments in behavioural economics suggests that people’s
judgements and choices are more intuitive than rational
• Theories of choice that ignore emotions such as pain of loss and the regret
of mistakes are unrealistic and may not maximise utility
• Policy and actions are therefore sub-optimal

15. Long-term Implications of Valuation
• There is on-going debate about attaching new forms of property rights to
nature and culture
• Linked to the expanded use of protected areas has been in the granting of
resource rights to ‘traditional’ indigenous groups and rural populations
• It is often assumed that such groups have inherent knowledge that allows
them to act as ‘stewards of nature’
• Such policies significantly change the relationships within and between
groups over the rights to control, exclude and exploit resources

16. Long-term Implications of Valuation
• Conversely, ‘traditional’ knowledge can be consider vital to understanding
the value of biodiversity
• Such knowledge of the use and management of resources is necessary to
obtain the value of medicinal plants, crop varieties, forest resources etc.
• Bio prospecting seeks to exploit this knowledge with the ‘promise of selling
biodiversity to protect it’
• Benefits have often not been realised with conflicts flourishing
• Resources and knowledge are appropriated by ‘powerful corporations’
• Biodiversity and knowledge are no longer ‘common heritage’

17. The Challenges of Valuation:
Ecosystems, Biodiversity & Level of
Analysis

18. Complexity & Functional Inter-dependencies
Underlying Valuations
• Economic valuation is a complex, spatial and institutional cross-scale problem
• Values of ecosystem services differ with changing ecological features and
differing beneficiaries
• Local residents and visitors may value a site for its recreational direct use
value at a local scale
• Because of its high biodiversity the same site may have option, bequest and
existence values at a global scale
• Importantly, efforts to conserve ecosystems at the local level (e.g. protected
areas) may lack the scope to control pressures on surrounding land

19. Complexity & Functional Inter-dependencies
Underlying Valuations
• The risk (as observed in the Amazon, 30% PA) is that islands of protected
ecosystems are surrounded by increasingly intensive land use that in turn
threatens the integrity of those protected areas
• Valuation may be limited to valuing resource at one level whilst neglecting
other levels vital to long term sustainability
• The challenge is to create institutions that can integrate the management of
protected and non-protected areas
• Valuation needs to function as part of a larger process that can value flows
and connectivity between ecosystems and informs adaptive management

20. How to Choose how to Value
• Society is composed of a variety of members having non-identical interests
and values – which valuation method should be used?
• Ashby’s (1952) ‘Law of Requisite Variety’ states that any regulatory system
needs as much variety in the actions it can take as exists in the system it is
regulating
– i.e. complex environmental systems can’t be reduced to simple valuation
questions
• Further, placing values on the environment is a cognitively demanding task –
people adopt simplistic choice heuristics
• Consequently value responses might be hard to interpret

21. How to Choose how to Value
• Decisions about complex
ecosystems and biodiversity
require methods that capture
this complexity and value
plurality
• Public engagement should be
able to capture the same level
of complexity as the system it
aims to conserve

22. How to Choose how to Value
• O’Connor and Frame (2008) propose two thresholds beyond which
assessing trade-offs or monetary choice is inappropriate
o Either estimation is scientifically difficult; or
o The implied trade-off is deemed morally inappropriate

23. How to choose how to value
• Clear & Stated Purpose : Different parameters, assumptions, values
appropriate for different purposes (eg : GAISP : For green accounting ?
For calculating PES rewards ? For setting compensatory payments ?)
• Whose Valuation ? Segments of society will have differing interests
and values – which valuation method should be used?
• Not Too Simple ? Ashby’s (1952) ‘Law of Requisite Variety’ states that
any regulatory system needs as much variety in the actions it can take as
exists in the system it is regulating (i.e. complex environmental systems
can’t be reduced to simple valuation questions)
• Not too Complex ? Placing values on the environment is a cognitively
demanding task – people adopt simplistic choice heuristics

24. How to choose how to value
• Clear & Stated Purpose : Different parameters, assumptions, values
appropriate for different purposes (eg : GAISP : For green accounting ?
For calculating PES rewards ? For setting compensatory payments ?)
• Whose Valuation ? Segments of society will have differing interests
and values – which valuation method should be used?
• Not Too Simple ? Ashby’s (1952) ‘Law of Requisite Variety’ states that
any regulatory system needs as much variety in the actions it can take as
exists in the system it is regulating (i.e. complex environmental systems
can’t be reduced to simple valuation questions)
• Not too Complex ? Placing values on the environment is a cognitively
demanding task – people adopt simplistic choice heuristics

25. Example : Valuation of Forest Land for Compensatory
Payments, by Central Empowered Committee,
Supreme Court of India, 2006
23 (i) for non-forestry use / diversion of forest land, the NPV may
be directed to be deposited in the Compensatory Afforestation
Fund as per the rates given below:-
(in Rs.)
Eco-Value Very Dense Dense Open
class Forest Forest Forest
Class I 10,43,000 9,39,000 7,30,000
Class II 10,43,000 9,39,000 7,30,000
Class III 8,87,000 8,03,000 6,26,000
Class IV 6,26,000 5,63,000 4,38,000
Class V 9,39,000 8,45,000 6,57,000
Class VI 9,91,000 8,97,000 6,99,000

26. Example : Valuation of Forest Land for Compensatory
Payments, Central Empowered Committee,
Supreme Court of India, 2006
(iii) “the use of forest land falling in National Parks / Wildlife Sanctuaries
will be permissible only in totally unavoidable circumstances for
public interest projects and after obtaining permission from the Hon’ble
Court. Such permissions may be considered on payment of an amount
equal to ten times in the case of National Parks and five times in the case
of Sanctuaries respectively of the NPV payable for such areas.”

27. How to Choose how to Value
• The choice of valuation method will define the outcome of the valuation
process:
o Private good elements versus CPR and public good elements of ecosystems
o Simple versus complex systems
o Individual and egoistic versus social side of human behaviour and
rationality
o Instrumental versus communicative type of human interaction
• The how of valuation may be more important than the value we estimate

28. For Example….
Courtesy : Yann-Arthus Bertrand, GoodPlanet

29. How Certain are we? Is there Scientific Proof ?
Amazon Rainforest
“Water Pump”
Evapo-transpiration puts 20
billion tonnes of water into
the atmosphere daily, some
of which falls as rain in the
Rio Plata Basin…
(Global Canopy Programme
& Canopy Capital Ltd, 2008)

30. Valuation as a “Feedback Mechanism”

31. Valuation as a Feedback Mechanism
• Despite the forgoing criticisms of valuation it retains an important role in
calling attention to the value of biodiversity and ecosystem services in the
face of competing forces for resource use
• By applying values to nature, market forces can be confronted and incentives
for beneficial resource use change created
• In the long run, will the environment be internalised into economic thinking?
• Valuation therefore provides feedback in a system where production,
consumption etc. are distanced from the environment

32. Valuation as a Feedback Mechanism
• However, there may exist a critical time-lag in the valuation feedback
mechanism
• As values are an outcome of existing institutional, cultural and social
constructs then adaptation to environmental change is required
• As ecosystems are degraded and biodiversity lost, attitudes and values
towards nature will change, but the time-lag may be long
• Are there opportunities to ‘tunnel’ through the environmental Kuznets
curve?
• Is there a role of feelings and ethics to shorten this time-lag in the absence of
more objective evidence?

33. Checklist : “Is your valuation…..”
• Marginal : Marginal costs, Marginal benefits
• Context- Specific : Was the purpose of valuation defined beforehand ?
And was the valuation used for the right policy and human context ?
• Location Specific : Which biomes where, delivering which ecosystem
services, to which beneficiary population, where ?
• Scenario Based : What are the policy drivers of change at the margin ?
• Modeled with Care : If actual costs and benefits not available, were
benefit transfer and scaling up of values done with care ?

34. • TEEB is not about “Selling Mother Nature”
• TEEB is not some simple-minded cost-benefit-based
stewardship model for the whole Earth
• TEEB is about preventing the economic invisibility of
Nature from leading to bad policies & trade-offs
• TEEB is about recognizing, demonstrating, capturing
and rewarding the benefits that ecosystems and
biodiversity provide to society in general and to poor
people in particular

35. Not the TEEB perspective on Valuation…

36. Thank You
www.teebweb.org
www.teeb4me.com