Transcript Biodiversity Bargaining Problem Presentation

The Biodiversity Bargain:
Optimal Policy to Internalise
Biodiversity Externalities
Professor Tim Swanson
Hoffmann Professor of Economics
Graduate Institute - Geneva
International Bargaining over
Global Biodiversity
I) The Unique Asymmetries in the
Biodiversity Context
II) The Biodiversity Bargaining Problem –
Supply and Demand of Biodiversity
What is the likely structure of the Global
Biodiversity Bargain that should Result?
Asymmetries in Global Biodiversity
Most biodiversity exists in a relatively small
part of the (developing) world
Very small proportion of global biodiversity
existing in the wealthier (developed) world
Most Biodiversity Exists in
Relatively Small Portion of World
e.g. “Top Ten” Countries with Greatest Diversity
Mammals
Birds
Reptiles
Indonesia (515)
Colombia (1721)
Mexico (717)
Mexico (449)
Peru (1701)
Australia (686)
Brazil (428)
Brazil (1622)
Indonesia (600)
Zaire (409)
Indonesia (1519)
India (383)
China (394)
Ecuador (1447)
Colombia (383)
Peru (361)
Venezuela (1275)
Ecuador (345)
Colombia (359)
Bolivia (1250)
Peru (297)
India (350)
India (1200)
Malaysia (294)
Uganda (311)
Malaysia (1200)
Thailand (282)
Tanzania (310)
China (1195)
Papua N.G. (282)
Source: McNeely et. al. 1990. Conserving the World's Biological
Diversity. International Union for the Conservation of Nature:
Gland,Switzerland.
Locus of Biodiversity
The same outcome results from other ways of
counting biodiversity
e.g. Biodiversity “hotspots” (IUCN)
Or, the “last great refugia” (Amazon, central Africa,
Indonesian rainforests) (Myers)
 There is a great global asymmetry in the
distribution of remaining biodiversity
There is another asymmetry
regarding the locus of biodiversity
Table: GDP per capita in the Diversity-Rich States
Country2003 GDP p.c. (PPP)
Country2003 GNP p.c (PPP)
Tanzania
Uganda
India
Ecuador
China
Papua,NG
Indonesia
Bolivia
Colombia
Brazil
World Average
OECD Average
$
$
$
$
$
600
1400
2900
3300
5000
$ 8,200
$ 26,300
Source: The World Bank 2006. OECD 2006.
$
$
$
$
$
2200
3200
2400
7300
7600
Asymmetry between Suppliers and
Demanders of Bio-diversity
• Developing (lower income) Countries
retain Biodiversity
• Developed (higher income) Countries
demand Biodiversity
 The Biodiversity Bargain must Occur in
the Context of this Fundamental
Asymmetry between hosts and non-hosts
II) The Biodiversity Bargain
Most Supply existing in Developing World – Why?
Most Demand exists in Developed World What?
Solution is to enable D=S
Market Failures
New Payment Mechanisms
Force Generating this Fundamental
Asymmetry in Biodiversity
Conversion as path to development
• Society selected small set of specialised species
(compatible with scale, capital, technology)
• Society diffused the specialised species with
technology embedded within them
• Society displaced existing species with the
specialised, and converted natural habitats to
specialised ones
 Society converged upon 4 great carbohydrate
crops and small number of domesticated
livestock
Conversion- the diffusion of
agriculture (wheat and barley)
Force Generating the Global
Decline in Biodiversity
Conversion has been the process that
generated the observed twin outcomes of
“reduced biodiversity” and “increased
wealth” - selection of different natural
capital portfolio
 Declining marginal costs of conversions
Global Conversion Process – the
State-based Supply of Conversions
Total
Available
Land
Private (State)
Perceived Costs
of Conversion
Global Lands Converted
Externalities and Biodiversity
Decline
The individual making the conversion
decision does not consider the
uninternalised benefits from biodiversity
(local: ecosystem services)
(global: resilience, support to
production system)
 Difference between PMC and SMC in the
cost of the marginal conversion of natural
habitat
Sustainability and Global Costs of
Conversions
Clearly the human world cannot exist in
absence of any biodiversity at all
Considerations of sustainability imply that
the cost of final conversions must go to
infinity
Sustainability - Limits to Global
Decline in Biodiversity
PMC- Individual
and State Incurred
Costs of NH
Conversions
SMCGlobally
Incurred
Costs of
Biodiversity
Decline
PMC
Global Lands Converted
Total
Available
Land
III) Demand for Halt to
Conversions
Demand is the force that should halt the
conversion process
3 Types:
1) Declining demand for standard
commodities
2) Demand for reduced competition on
global markets
3) Demand for internalisation of
externalities of biodiversity
Demand for Diversity –
Declining Terms of Trade for
Standard Commodities
Demand for
goods and
services from
Converted
Habitats
Global Lands Converted
Total
Lands
Available
Globally Optimal
Conversion
Political Economy of Biodiversity
Demand – Distinction between MR
and AR
The individual state receives AR (on Demand curve)
However, the global market for commodities only achieves
MR - the difference lies in the decline in prices accruing
to the previously-converted (developed) countries
 Another cause of Demand for (uncompensated) Halt to
Conversions
Demand for Biodiversity (2) – The
Political Economy of Biodiversity
Demand for G&S
from Converted
Habitats
Total
Lands
Available
Marginal
Revenue
Optimum from N perspective
Globally Optimal
Conversion
Global Lands Converted
Demand for Biodiversity (3) – The
internalisation of the global values
of biodiversity
PMC- State
Incurred
Costs of
Conversions
SMCGlobally
Incurred
Costs of
Biodiversity
Decline
SVBD
Global Lands Converted
Total
Available
Land
The WTP for Biodiversity
Demand for biodiversity encompasses several
objectives of N versus ongoing conversions
•
•
•
loss of natural habitat goods and services
competition in global commodity markets
potential collapse of system based on
conversion and monoculture
Several interacting objectives that could all be
expressed in a market for non-conversion
The Biodiversity Bargaining
Problem
• BBP
• Incremental Costs Contracts as Extreme
Point Solutions
• “Rational Threats”
Centralised Bargaining- The BD
Bargaining Problem
Centralised BargainingFundamental Problem
Simply a restatement of the problems:
1) How does the bargaining surplus get
distributed between N and S?
2) What is the price to be paid to S for
nonconversion?
3) How is the price paid by N determined and
implemented?
 Need for Mechanism to set these prices and
determine distribution of surplus
BBP
• “Incremental Cost Contract” offers the
provider state with any additional or
incremental costs incurred in making the
choice to provide the global public good
 Additional costs are not surplus-based but
based on the “participation constraint” i.e.
the minimum required for participation
BBP
• Moving “conflict points” through unilateral
actions is capable of shifting the frontier
UN
Bargaining frontier 1
U
'
N
U Na1
U a3
U 1a
Bargaining frontier 2
U Na 2
U 2a
U Sa1
U Sa 2
U 'S
US
“Rational Threats”
• A threat to destroy surplus may be a
credible means of shifting the discussion
UN
U*
U
U
*
N
UT
T
N
U Na
U ND
0
Ua
UD
U Sa
U S*
U TS
US
Bargaining over Distribution
Cooperative Bargaining Theory places
Distribution at the Core of the Enquiry
Discussion is Based on Conflict Point – NE
or what would be obtained in absence of
agreement
Result is determined by power, offers, and
threats (credibility)