Transcript Slide 1

Economic Analysis
of Invasive Species
Module 6:
informing actions
to address invasives
what this module covers
1.
2.
3.
4.
5.
6.
2
addressing invasives through
management interventions
tools for weighing up invasive
costs and benefits
incorporating the time
dimension
dealing with risk and
uncertainty
distinguishing between
financial and economic values
designing economic and
financial instruments to tackle
invasives
about
invasive species
Module 1
understanding the economic
causes of invasions
Module 2
impacts of invasive species
and ways to address them
Module 3
defining invasive-related
costs & benefits
Module 4
valuing
ecosystem impacts
Module 5
informing actions
to address invasives
Module 6
Economic Analysis of Invasive Species
typology of management
interventions
steps to invasion
interventions
aims
examples
interventions targeting the steps to invasion
introduction
prevention
stopping introductions
quarantine, blacklists, inoculation,
trade/import bans, land use restrictions
eradication
destroying or removing
a new invasion
physical removal, chemical eradication,
biocontrol
containment
stopping a new invasion
from further spreading
confinement of the species,
phytosanitary controls, border checks
management
restoration
of established invasions
of affected ecosystems
periodic clearance, burning,
revegetation/repopulation with native
species, landscape restoration

establishment

naturalisation/spread

invasion
interventions targeting ecosystem resilience
biodiversity conservation; protected areas; sustainable land and resource management; … etc. …
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Economic Analysis of Invasive Species
management interventions as
public goods
public good
a good whose benefits can be provided
to all people at no more cost than that
required to provide it for one person
the benefits of a public good are indivisible,
and people cannot be excluded from
enjoying them
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Economic Analysis of Invasive Species
management interventions as
public goods
• control and management of
invasives displays many of the
characteristics of a public good
• weak incentives for individuals to
take action to control invasives
• is one of the reasons that the
market cannot be relied upon to
deal with invasives
• and some form of public
intervention or collective action is
required
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Economic Analysis of Invasive Species
using economics to inform
decision-making
• economic analysis provides important information to assist
decision-makers to arrive at rational, beneficial and effective
decisions on invasives
• includes justifying taking action to address invasives, as well as
choosing the “best” option for managing them
• decision-making involves considering trade-offs, and weighing up
relative costs and benefits
• economic criteria an important factor in decisions
• requires that the marginal benefits of action are at least equal to
the marginal costs it gives rise to
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Economic Analysis of Invasive Species
weighing up invasive costs and
benefits
benefits
costs
a number of woody plants from various parts of
the world were introduced into South Africa for
dune stabilization, tannin extraction and
firewood
as a result of the introduced species, South Africa's
highly-endemic Cape Flora is under serious threat.
Watersheds are becoming less productive,
potentially causing a huge increase in water prices
the Triclad flatworm Platydemus manokwari, is a
successful predator of the giant African snail
Achatina fulica, so it was transported as a
biological control agent to the Pacific
the Triclad flatworm has become established on
Guam, Saipan, Tinian, Rotar, and Palau and now
poses a serious threat to the native gastropod fauna
of the Pacific region
the meso-American tree Prosopis juliflora was
introduced to the Thar Desert of India for
checking soil erosion, reducing the dryness of
the desert air, giving shelter to several species
of wild animals, and providing legumes which
are relished by wild as well as domesticated
animals. It meets 85 percent of firewood
demands of rural people.
while Prosopis juliflora has been a boon to people
in the Thar Desert who need firewood and fodder, it
overwhelms other flora in the area, thereby
reducing the range of products available to local
people and reducing biodiversity
(McNeely 1996, 2001)
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Economic Analysis of Invasive Species
cost-benefit analysis
• Most commonly-used decision-making framework for
comparing economic and financial trade-offs
• Judges alternative courses of action by comparing their
costs and benefits
• Presents three basic measures of worth:
– Net Present Value (should be positive, and the higher the
better)
– Benefit:Cost Ratio (should be greater than one, and the
higher the better)
– Internal Rate of Return (should be above the discount rate,
and the higher the better)
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Economic Analysis of Invasive Species
cost-benefit analysis
control of Ruffe, Great Lakes USA
• controls include the use of
toxins, trawling and ballast water
management
• cost-benefit analysis carried out
for proposed 11 year control
programme
• total costs $13.5 million
• benefits to commercial and sport
fisheries calculated for 50 year
period
• present value of between $119
million and $1 billion
(Leigh 2003)
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Economic Analysis of Invasive Species
cost-effectiveness analysis
• sub-set of CBA in which a particular outcome is
taken as given
• seeks to identify the least-cost means of achieving
that goal
• particularly useful where benefits are
unquantifable or where a specific goal has already
been set
• involves calculating all costs and comparing NPVs
of different alternatives
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Economic Analysis of Invasive Species
cost-effectiveness analysis
Control of Oyster Drills, Willapa Bay USA
•
accidentally introduced: cause
harm by preying on small oysters
•
goal of preventing established
invaders from continuing to
increase
•
manual removal the only control
technology
•
CEA to judge best timing of
intervention
•
showed that targeting adult phase
is most cost effective option
(Buhle et al 2005)
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Economic Analysis of Invasive Species
multi-criteria analysis
• economic and financial measures only one of many criteria
used to weigh up decisions
• multi-criteria analysis deals with situations where decisions
must be made taking into account multiple objectives which
cannot be reduced to a single dimension
• integrates monetary and non-monetary indicators to reach
decisions
• usually clustered into three dimensions: social, economic,
ecological
• monetary values and CBA measures can be incorporated
alongside other criteria
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Economic Analysis of Invasive Species
multi-criteria analysis
examples of the use of MCA
• comparing different options
in Scheu Creek, Australia in
order to take account of
conflicting stakeholder views
• evaluating the environmental
impacts of the adoption of
GMOs on wildflowers
• analyse trade-offs among
conflicting objectives for
controlling feral pigs in
Hawaii
(Qureshi and Harrison 2001, Aslaksen and Ingeborg Myhr 2007, Maguire 2004)
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Economic Analysis of Invasive Species
the time dimension: modelling the
trajectory of invasions
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•
invasive species typically show an unusual, and hard to predict, trajectory
•
time taken to move from introduction to invasion varies greatly, as does
progressions from one stage of invasion to another
•
hard to judge what the impacts on ecosystem services will be
•
depends on species, state of ecosystem, utilisation of species
•
determining spatial and biophysical trajectories requires detailed scientific
data and models
•
costs and benefits will vary considerably, at different times in the same
place, and between different places
•
as time goes by, management and control efforts (as well as economic
impacts) tend to become higher and higher
Economic Analysis of Invasive Species
the time dimension: using a
discount rate
• time a key factor in economic analysis
• need to incorporate a sufficiently long time frame
• need to be able to express future costs and benefits as a
single measure of value which can be compared between
different options being considered
• use discounting: essentially the inverse of comparing a
compound interest rate
• accounts for the fact that money invested elsewhere could
yield a return, and that people generally prefer to enjoy
benefits now and costs later
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Economic Analysis of Invasive Species
the time dimension: using a
discount rate
• usually based on the
opportunity cost of capital
• high discount rate reflects
strong preference for future
consumption
V = value being discounted
t = time being considered
R = discount rate
$1,000
$900
$800
$700
$600
• the higher the discount rate
applied, the less weight given
to future costs and benefits
• controversy over projects
which show high initial costs,
but yield long-term benefits
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$500
$400
$300
$200
$100
$0
0
5
10
15
20
25
years
20% discount rate
Economic Analysis of Invasive Species
10% discount rate
5% discount rate
risk & uncertainty
risk
uncertainty
some idea of what the
likelihood is of an event
occurring
little is known about future impacts
probabilities can be assigned
value of possible outcomes
can be known
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no probabilities can be
assigned to different outcomes
range of possible values
can be estimated, but no
probabilities can be attached
Economic Analysis of Invasive Species
risk & uncertainty
risk
uncertainty
risk can be dealt with by
treating as a cost and
incorporating numerical
probabilities into analysis
uncertainty is much more
difficult to cope with
requires a general policy of
caution and precaution
calculate expected values for
the costs and benefits of
different courses of action,
outcomes or options
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Economic Analysis of Invasive Species
factoring in risk and uncertainty
sensitivity analysis
risk-benefit analysis
decision analysis
tests the effects of
changing key variables
focuses on prevention of
events carrying serious risks
e.g. discount rate, prices, levels
of impact, exchange rate,
management costs
inversion of normal CBA
weights expected
values by attitudes to
risk, to give expected
utilities
provides range of
possible values for net
benefits of action
starts by presuming no
action and then assessing
the costs of inaction as the
likelihood of risk occurring
highlights which variables
benefit of inaction is the
the NPV is most sensitive saving in costs of preventive
to changes in
measures
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Economic Analysis of Invasive Species
assesses decisionmakers’ preferences,
judgements and tradeoffs to obtain weights
factoring in risk and uncertainty
control of invasive weeds in Australia
• decision model designed to
determine whether to eradicate or
do nothing, when weeds first
discovered
• net benefits measured relative to
do-nothing option
• simulations used to derive
probability distributions of costs
• identifies “switching points”:
– Invasion size at which is no longer
optimal to attempt eradication, but
containment may be an option
– invasion size at which it becomes
optimal to apply no form of control
(Cacho et al 2008)
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Economic Analysis of Invasive Species
financial and economic analysis
financial
analysis
economic
analysis
examines the effects of projects,
programmes and policies on costs
and benefits to the private returns
accruing to a particular individual
or group
examines the effects of projects,
programmes and policies on costs
and benefits to society as a whole
values measured at market prices,
as outflows or inflows to a
particular individual or group
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values measured at their “real” cost or
benefit to the economy, usually
omitting transfer payments and
valuing all items at their opportunity
cost to society
Economic Analysis of Invasive Species
internalising externalities and
correcting market distortions
• economic policy, price and market failures are the root
causes of invasions
• economic and financial instruments attempt to reverse,
overcome or correct for these failures
• they internalise the (social/economic) externalities of
invasives into the prices, profits and costs people face as
they go about their business
• they make sure that the full costs of invasives, and the full
benefits of their control, are incorporated into policies,
markets and prices
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Economic Analysis of Invasive Species
internalising externalities and
correcting market distortions
category
description
examples
charges
and fees
measures which rationalise prices and improve markets for
goods and services which utilise/depend on invasive species
or to alternative products and technologies, or develop
markets in quotas or permits which relate to invasives
ballast water fees,
tradeable permits
fiscal
instruments
budgetary measures which apply taxes and subsidies to the
goods and activities which utilise or depend on invasive
species or to alternative products and technologies
investment taxes,
product taxes,
preferential credit
bonds and
deposits
measures which require the provision of monetary security
when economic activities are carried out which involve
invasive species, refundable against any damage occurring
as a result of that activity
performance bonds,
damage bonds,
import deposits,
restoration deposits
trade
measures
measures whose justification is primarily to guard against
invasives but which take the form of trade instruments
import tariffs and quotas,
export taxes, trade bans, ecoduties, border tax adjustment
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Economic Analysis of Invasive Species
(Emerton 2001)
internalising externalities and
correcting market distortions
• Most based on “polluter pays” principle
• Most instruments have dual purpose:
– Changing incentive structures to motivate particular behaviour
– Raise funds to cover the costs of a third party undertaking
invasives control, compensation, mitigation or remedy
• unique characteristics of invasives mean that some of the
economic and financial instruments that are conventionally
used to deal with environmental externalities only have
limited applicability
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Economic Analysis of Invasive Species
instruments which have been
recommended for invasive control
• invasion risk tariffs for exporters
• damage bonds against repair
costs
• assurance bonds for importers of
new species
• fees on travel and trade activities
that might cause invasions, to
create fund
• packages of insurance and
bonding requirements
• tradable risk permits on cargo
vessels
(Perrings et al 2005a, Thomas and Randall 2000, Perrings 2000, Jenkins 2001 & 2002, Horan & Lupi 2005)
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Economic Analysis of Invasive Species
thank you
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Economic Analysis of Invasive Species