Transcript The Economics of Biodiversity

What is biodiversity:
Def. U.N. 1992 Convention on Biological
Diversity:
The variability among living organisms from all
sources including, inter alia, terrestrial, marine
and other aquatic ecosystems and the ecological
complexes of which they are part; this includes
diversity within species, between species and of
ecosystems.
Three levels; eco-systems, among species,
within species.
4/8/2016 Environmental Economics – International Issues: Biodiversity by Mads Greaker
What happens to biodiversity?
A synthesis of different sources suggests (OECD 2002, Pearce
1998, Barbier, Burgess and Folke 1995):
The number of species presently living in the biosphere is not
known; 1.75 million different species are described
Regarding estimates of the total number the consensus appears
to be in the region of 12,5 – 13,5 million species
2,6 species can disappear each year without diversity loss
Documented species loss since 1600 is 2,8/year
However, species-area relationships in tropical forests suggest
>1000 species loss per year (very low end!)
Current rate of extinction is comparable to those extinctions
that took place during the so-called periods of evolutionary
crisis (65 mill. & 250 mill. years ago)
Two key terms:
Ecosystem function
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Refers to the processes going on in eco-systems;
photosynthesis, nitrogen take-up, energy production and
conservation
Relationship with biodiversity ambiguous (Tilman and
Downing, 1994, in Heal, 2001, positive relationship)
Ecosystem resilience
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refers to ability to restore function after stress
e.g. ”green revolution” lead to increased output, but higher
variability (Anderson and Hazell, 1989 in OECD 2001)
higher biodiversity -> higher resilience
The economic value of
biodiversity:
Total economic value (TEV)
Instrumental value
"well-being"
preferences
Direct value
Use value
- viewing wild animals
Option value
Indirect value
Existence value
Renewable resources
(ecosystem function)
- fishing
- farming
Insurance
(ecosystem resilence)
Are TEV captured in markets?
Activity
Type of value
Institutional requirement
Ecotourism
Use value
Local property rights
Sustainable forestry
Renewable resource
Property rights/Low
discount rates
Bioprospecting
Option values
Local property rights/
intellectual property rights
Carbon storage
Renovation service
International agreement
on climate change
Ecosystem resilience
Pure public good; nonrival and non-excludable
International agreement
on bio-conservation
Answer: Deforest!
Deforestation app. 0,8 % per annum (FAO, 1993)
Ecotourism: Option and existence values are not appropriated,
local property rights often not implemented
Sustainable forestry: open access exploitation -> nutrient
mining (Barbier, Burgess and Folke, 1994)
Bioprospecting: Pharmaceutical companies’ willingness to pay
for conservation seems to be greatly overstated (Simpson,
Sedjo and Reid, J. of Political Economy, 1996)
Market cannot capture the indirect services like; the insurance
value of ecosystem resilience, watershed protection, scientific
information etc.
Lack of international agreements (U.N. Convention on
biodiversity insufficient)
Causes of bio-diversity loss:
Single species are driven to extinction one by one
due to an open-access regime or high discount rates
(Pearce, 1998)
More and more of the base resource, land, being
converted to non-conservation uses
Market failures; alternative uses of land appears to
be much more profitable than conserving biodiversity
Institutional failures; ill-defined property rights,
subsidies to non-conservation activities
Policy intervention is needed!
Biodiversity and sustainable
development
Mechanisms generating uncertainty are not
well understood i.e. ecosystem resilience
Hence, comparison of benefits and costs very
difficult!
Need for introducing safe minimum standards
Randall and Farmer (1995) ...endangered
species, subspecies, undisturbed amenities
and ecosystems are preserved intact unless
the cost of doing so are intolerably high.
Shifts the burden of proof
A tale of Easter Island
Supported a great palm forest approximately 37 000 years old
First Polynesians arrived ca. 400 A.D. (estimated to be about
40)
Forrest essential: nesting place for birds (food), provided canoes
for fishing/tools/fire wood etc.
Population wealthy; ample time to other activities like carving
and statues
1722, first contact with Europeans
There was a poor population of about 3000
There were no forest left
However, there were a big amount of enormous statues (= 270
tons)
Resource and population
dynamics
Open-access regime
Myopic decision
making; cost of harvest
= gain from harvest
Criteria for sustainable
forestry not in use
The higher volume of
standing trees, the less
costly harvesting
Population growth
increases with forest
harvesting
The more people, the
higher the harvest
Using your wealth
instead of the return on
your wealth
Over-shooting (”Dutch
disease”)
Is Easter Island relevant for
us?
Brander and Taylor employ a Malthusian Population
Dynamics, today different?
Further, open-access resource, better institutions
today?
On Easter Island, 5% decrease in forest over a
typical lifetime (40 years)
The 40-60 year mature time exceed life expectancy
However, current deforestation rate is 32% per 40
years
The major environmental problems exceed our life
expectancy
Conclusions:
There is a question of how much can be done by improving
local institutions
Ecosystem resilience is hard conceptualize in economic terms
Measures of existence- and option values are controversial
Moral values are not included in TEV
On the other hand, safe minimum standards also has its
problems;
 Where to put the SMS – easier with species than with ecosystems?
 The need for SMS may be exaggerated
 SMS seems to place a disproportionate high burden on
developing countries
Need for international agreement with measurable targets – not
just intentions