7th GEF Biennial International Waters Conference in Barbados Presentation on role of valuation of ecosystem services by Eduard Interwies

1. The role of valuation of ecosystem
services for decision making &
Methods of Economic Valuation
Eduard Interwies
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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2. Outline
Decision making and ecosystem services
valuation – general considerations
Valuation of Ecosystem Services
- Ecosystem Services – concept &
classification.
- Different methodologies for ES evaluation.
Decision making and ES valuation – specific
thoughts
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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3. Background
Paradigm shift from sectoral to ecosystem-oriented
management approaches:
Economic perspective: treat, count & invest in
water/marine/coastal ecosystems (ES) as elements of
development infrastructure - as a stock of facilities, services
& equipment needed for economic growth & for society to
develop & function
So: maintain & improve ES to meet both today’s needs &
those of intensifying demands & pressures in the future —
just like any other component of infrastructure.
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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4. Background
If one does not value ecosystems when taking decisions on
allocating land, water & marine resources and investment funds:
far-reaching economic costs possible…
In the past, ecosystem values – or the benefits of Ecosystem
Services (ES) - have been almost ignored in decision-making.
Reason: failure of markets that often do not to assign an
economic value to the public benefits of ES, but attribute value
to the private goods and services, which production may lead to
ecosystem damage.
 Let s get a better picture of ES values & move towards better
decision-making!
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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5. ES & Decision making
A variety of socio-economic factors need to be considered
when taking policy decisions:
 Economic growth needs/related investments;
 Livelihood & distributional aspects
 Costs and benefits of specific policy decisions
 Cost-Benefit/Multi-criteria-analysis etc….
 BUT ALSO: how does a decision influence the
functioning of ES and the related values…
 So, valuation of ES is ―only‖ one part of socio-economic
considerations for policy making! Important also for TDASAP process
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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6. Valuation of Ecosystem
Services
…can help to address:
•
•
human well-being & ES
trade-offs between ES, conservation and other
priorities
• a reduction of uncertainty: decision making is often
based on estimates, scenarios & incomplete
knowledge; valuation is an additional factor in the
attempt to gain the most complete picture
• evaluate interactions of ES with other determinants
of human well-being
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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7. Valuation of Ecosystem
Services
Economic valuation of ES assesses both:
- the immediate economic gains („benefits―) of
ecosystems (raw materials, food, clean water etc.)…
―provisioning services― or ―direct and indirect use
values―;
- …but also benefits that are difficult to evaluate in
monetary terms (landscape beauty, optional use for
future generations, existence of biodiversity etc.).
―option values and non-use values―
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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8. Valuation of Ecosystem
Services
The classification into „provisioning services―,
„regulating services― etc. was developed initially in
the Millenium Ecosystem Assessment (MA 2005),
and slightly adapted/changed in the TEEB Report
(De Groot et al. 2009)
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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9. Classification
of ES
according to
the TEEB
Report:
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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10. Valuation of Ecosystem
Services
The classification into use and non-use values stems from
the TEV (Total Economic Value) framework:
“The concept of the total economic value is a method of
creating a single monetary metric that combines all activities
within an LME [or river basin] and to express the levels of each
activity in units of a common monetary measure, such as US
dollars.”
(Hoagland et al. 2006)
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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11. Evaluation of Ecosystem
Services
First Meeting of the Socio-Economiceconomic valuation, Bridgetown, 26-27 Oct2013, Dakar
IWC7: pre-workshop on and Trade Working Group (SET WG), 16-18 September 2013
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12. Valuation of Ecosystem
Services
Generally, economic valuation of ES assesses the values
derived from the existence and functioning of the relevant
ecosystems!
Therefore:
 To be excluded/not an ES: extraction and mining of mineral
resources/oil.
As – contrary to the idea of Ecosystem Services - the impact of
extraction activities deteriorates the quality of ES and endangers
their long-term provision!
Of course, such activities have to be considered when
performing a socio-economic assessment of an LME/RB
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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13. Methodologies for valuing ES:
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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14. Focus here
Methods used in the ES-valuation in the CCLME
(ongoing – together with FAO) and GCLME
(completed – with UNIDO)
Both studies aim at presenting a first rough estimation
(“Just do it”!) of the value - for human
wellbeing, social welfare and economic growth - of
the Ecosystem Services provided by the
Canary/Guinea Current Large Marine Ecosystem s
marine and coastal ecosystems…
Thus: do not what until all information is available
(will never be…) but start with what is
there, clearly indicating limitations and assumptions
as well as main future work needed…get better
over time!
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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15. Key Methodologies
* Market Prices
* Damage Avoided/Replacement Costs
* Benefit transfers (also from studies based on the
Contingent Valuation Methods/CVM)
Of course: if one does a more detailed/specific study
for a ―hotspot‖/specific issue, then also other methods
become relevant (travel cost, choice experiments etc.)
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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16. Market price method
•
Applicable to direct use values
• The value is an estimate from the price in
commercial markets.
• Constraints: market imperfections (subsidies, lack
of transparency) which distort the market
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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17. Damage cost avoided &
replacement cost methods
• Applicable to indirect use values (e.g. coastal
protection, erosion & pollution control, water
retention etc.)
• Estimated by calculating the costs that would occur
for building necessary infrastructures to replace the
service (e.g. treatment plants) or by calculating the
estimated damage of a hazardous event (storm).
• Main constraint: assumption that cost of avoided
damage or substitutes match the original benefit;
external circumstances may change the value of the
original expected benefit, leading to under- or
overestimates. Therefore: use with caution
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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18. Contingent Valuation Method
•
•
Applicable e.g. to Tourism and Non-Use values
Important ―for it s own‖, but also in Benefit
Transfers, see below
• Asking people directly how much they would be
willing to pay for specific environmental services.
Often the only way to estimate the non-use values.
It is also referred to as a ―stated preference method‖
• Various sources of possible bias in the interview
techniques. Plus: would people actually pay the
amounts stated in the interviews? Nevertheless, it is
one of the few ways to assign monetary values to
non-use values of ecosystems that do not involve
market purchases.
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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19. Benefit Transfer
A transfer of valuation results from a specific „study
site‖ to a different „policy site―
Advantages:
• Cost- and labor-efficient (if no resources for various
own surveys)
• Compensates (partly) fragmentary data availability
Constraints:
• Great number of uncertainties/inaccuracies:
situations are never identical
• Dependability on quality of study site work
• Unit value estimates can quickly become outdated
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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20. Benefit Transfer
Nevertheless: often best/only solution at hand, since lack of
data/specific studies, so important for first rough
estimations!
Steps:
Step 1: Identification of existing relevant data of other
studies.
Step 2: Checking of transferability of this data:
- analysis of features and qualities of services.
- analysis of the quality of the study to be used.
Step 3: Adjusting the data to the policy site:
- calibration with existing data of the policy site (i.e.
income level etc.).
Step 4: Calculation of the values of ES
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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21. Linking results of first ES valuations
to decision making
Upfront: ―just‖ with an ES valuation study, it is not possible to
make detailed decisions how the LME/River Basin needs to be
developed/which projects to do, and which not
But it is possible to understand:
* which ecosystems have been underestimated in the past in regard
to their social and economic benefits and
* that activities, which at a first glance appear to be economically
profitable, provoke not only environmental damage but also cause
significant economic loss.
 Therefore, a first valuation exercise will help to identify explicit
and also hidden trade-offs in the use of ES and other (economic)
activities – and thus support decision making!
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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22. Linking results to decision making
• Since 1990ies: increasing importance of valuation studies
• BUT: progress in practical application/use of results in
natural resource use planning & decision making hasbeen
slow;
• Some possible reasons:
• practical integration of such valuation studies is a complex
process - combined with a general lack of understanding &
knowledge regarding the importance of ES
• various methodological issues e.g. for the valuation of
(mostly) non-market benefits jeopardize the credibility
of/trust in this work!
• Studies often being ―desk top‖ – little participation &
ownership…
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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23. Linking results to
decision making
More specific,‖ hot-spot‖ oriented valuation studies will possibly
be used more directly?
Overall (Berkes et al. (2007)):
"Resource management is at a crossroads. Problems are
complex, values are in dispute, facts are uncertain, and predictions
are possible only in a limited sense. The scientific system that
underlies resource management is facing a crisis in legitimacy and
power. Top-down resource management does not work for a
multitude of reasons, and the era of expert-knows-best decision
making is all but over―
Possible ways ahead: participation for ―quality & ownership‖; less
quantitative, more qualitative results?
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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24. Thank you!
Contact: interwies@intersus.eu
IWC7: pre-workshop on economic valuation, Bridgetown, 26-27 Oct 2013
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