Valuing Nature: Incorporating Ecosystem Services Into Decision Making. Steve Polasky University of Minnesota & Natural Capital Project

Transcription

1 Valuing Nature: Incorporating Ecosystem Services Into Decision Making Steve Polasky University of Minnesota & Natural Capital Project

2 The Millennium Ecosystem Assessment (2005) Ecosystems and biodiversity are essential for human well-being Ecosystem services as a central organizing principle

3 Introduction Ecosystems provide a wide array of goods and services of value to people ( ecosystem services ) Human actions affect ecosystems and the services they provide The provision of ecosystem services often is not factored into important decisions that affect ecosystems Distortions in decision-making damage the provision of ecosystem services making human society and the environment poorer

4 Introduction How can we mainstream ecosystem services? Factor ecosystem services into everyday decisions by individuals, businesses and governments

5 Three main tasks 1. Understanding the PROVISION 2. Understanding the VALUE 3. Create incentives for sustainable provision: POLICY

6 A research agenda for ecosystem services Policy decisions (1) Incentives Decisions by firms and individuals (3) Nonanthropocentric approaches (2) Actions Other considerations (7) Economic efficiency (5) Biophysical tradeoffs Ecosystems (4) Ecological production functions Benefits and costs (6) Valuation Ecosystem services Polasky & Segerson Annual Review of Resource Economics 1:

7 Outline Should we attempt to value nature through ecosystem services? Intrinsic value and/or ecosystem services? Tools to evaluate ecosystem services Provision: ecological production functions Value: economic valuation methods Policy Examples of integrated analysis of ecosystem services Brief summary thoughts

8 Should We Attempt to Value Nature?

9 Why value nature? Two major arguments used to motivate conservation Intrinsic value of nature Nature has value in and of itself without regard to what it does for people Instrumental value of nature Ecosystem services: nature provide services of value to people

10 Valuation There has been a recent increase in interest and activity among ecologists and economists in defining and quantifying the value of nature Variety of names: Natural capital Value of ecosystem services Green economy Green accounting/ green GDP Inclusive wealth Full-cost accounting

11 Arguments for valuation Mainstreaming argument: need to account for the value of services in decision-making No explicit value may result in a ZERO value being assigned Standard benefit-cost analysis: weigh ALL of the benefits and costs of an action

12 Arguments against valuation Philosophical concerns: Obscures duties and obligations: conservation is a moral/ethical issue Nature is priceless. Attempting to estimate monetary value debases nature Practical concerns: Methods are imprecise and flawed Methods are systematically under-estimate full value

13 Arguments against valuation McCauley 2006 Selling out on nature Nature 443: ecosystem services are rapidly assuming an importance in discussions on conservation that is far out of proportion to their actual utility. Nature has an intrinsic value that makes it priceless, and that is reason enough to protect it.

14 Valuation and/or intrinsic value Pragmatic approach People care about nature for a variety of reasons Material well-being Spiritual/cultural Ethical/moral What matters are decisions What choices will people make? What are the consequences of those choices? How important is conservation of various aspect of nature in relation to other things of value?

15 Ecosystem services 1. Provision: ecological production functions 2. Value: economic valuation methods 3. Policy

16 The Natural Capital Project: Mainstreaming ecosystem services

17 InVEST Integrated Valuation of Ecosystem Services and Tradeoffs Frontiers of Ecology and Environment Feb 2009

18 InVEST Set of computer-based models Biodiversity and multiple ecosystem services Driven by future scenarios Spatially explicit Biophysical and economic outputs Flexible and transferable

19 InVEST Process Stakeholder Engagement Scenarios Change in management, climate, population Biophysical Models Output: Maps Tradeoffs Balance sheets Economic Models

20 Tiered Approach Ti er 1 Ti er 2 Ti er 3 Si mpl e Model i ng r eal i t y Compl ex Dat a r eal i t y Gl obal l y avai l abl e dat a Pr i or i t y set t i ng Det ai l ed si t e speci f i c dat a Payment schemes

21 Methods to evaluate natural capital and ecosystem services More details of approaches to mapping, valuing ecosytem services: Kareiva et al Oxford University Press.

22 Ecosystem services 1. Provision: ecological production functions 2. Value: economic valuation methods 3. Policy

23 Starting point: scenarios Scenarios: set of conditions used as input for the analysis Examples: Land use scenarios: map of what happens where on the landscape Climate change scenarios Population scenarios

24 Ecological production functions Predict the provision of ecosystem services for each scenario Illustrate approach with several ecosystem services Carbon sequestration Habitat for biodiversity

25 Carbon sequestration Accounts for carbon stored in various pools Above-ground biomass Below-ground biomass Soil Litter Harvested wood products Use data on carbon stored by land use and parcel characteristics (e.g., forest type, stand age, soil type ) to estimate carbon storage at each location in a landscape Carbon sequestration is the change in carbon storage

26 Habitat for biodiversity Predict a land use pattern s ability to support viable populations of species Simple version: habitat availability model (amount and quality) Habitat quality a function of what it borders More complex version: species model using three species-specific traits: Habitat compatibility (what counts as habitat) Size (amount of habitat required for a breeding pair) Dispersal ability between suitable patches of habitat

27 Ecosystem services 1. Provision: ecological production functions 2. Value: economic valuation methods 3. Policy

28 Valuation Assuming you want to value nature how do you do it? Market valuation Non-market valuation Revealed preferences methods Stated preference methods Cost-based approaches

29 Market valuation Some ecosystem services, particularly provisioning services, are traded in markets and have observed prices Agricultural crops and timber production Value of agricultural (timber) production: price times yield minus production cost For large supply changes where price changes, use measures of change in consumer and producer surplus

30 Non-market valuation Most ecosystem services are not traded in markets so we do not have market prices Carbon sequestration Habitat for biodiversity Water quality Revealed Preference: use observed choices of people to infer how they value nature Advantage: based on observable behavior for decisions with real consequences Disadvantage: does not work for all values and individuals may not have full information Stated Preference: use survey questions to ask how people value nature Advantage: can ask about any value Disadvantage: response to hypothetical rather than real choice

31 Revealed preference example: using property values to estimate environmental values (Mahan et al. Land Economics 2000) Data on 14,485 home sales for Portland, OR Value of a house depends upon Structural characteristics (e.g., square footage, number of bedrooms, size of lot, age of house ) Neighborhood characteristics (e.g., tax rate, distance to downtown ) Environmental characteristics (e.g., distance to wetland, stream, river, lake, park) Holding other factors fixed, reducing the distance to the nearest environmental amenity by 1,000 feet increases average home value by an estimated Lake: $ Wetland: $ Stream: $258.81

32 Cost-based approaches Both market and non-market approaches estimate benefits (values) Cost-based approaches use data on cost to estimate benefits Because costs are not benefits many economists are reluctant to use cost-based approaches But these methods are popular in estimating value of ecosystem services Replacement cost and avoided damages Marketable permit prices

33 Marketable permit prices Cap-and-trade systems Tradable emissions permits (pollution) Individually transferable quotas (fishing) Price of emissions permit reflects the marginal cost of meeting the cap Only if the marginal cost equals the marginal benefit will the marketable permit price reflect value There is no guarantee that the cap will be set optimally so that marginal cost equals marginal benefit Price will depend on stringency of cap. Example: carbon prices in January 2008 European Exchange: /metric ton (or $30.86/metric ton) Chicago Climate Exchange: $2.30/metric ton

34 Ecosystem services 1. Provision: ecological production functions 2. Value: economic valuation methods 3. Policy

35 Environmental policy How can we provide proper incentives to provide ecosystem services? Problem: most ecosystem services have elements of externalities and public goods Externalities: actions by one directly impact the welfare of another and impact is not reflected by prices in the market Public goods: provision benefits all even those who don t pay to provide it (free-rider)

36 Environmental policy Legal-regulatory approaches Command-and-control regulation Zoning of land use Liability rules Incentive-based approaches Cap-and-trade approaches: marketable emissions permits, individually transferable quotas, tradable development rights Taxes Payments for ecosystem services (PES) Voluntary approaches Information-based approaches: certification, labeling Community negotiation and consensus approaches

37 Taxes versus subsidies Both taxes and subsidies give incentives Advantages of taxes Polluter pays principle Raises revenues (subsidies require additional revenue) Subsidies are hard to remove once in place (become entitlements) Advantages of PES (subsidies) Paying for provision of a public good Politics: more popular to hand out rewards than tax bills

38 Applications of integrated assessment of ecosystem services 1. Willamette Basin, Oregon 2. Minnesota

39 Where to put things? Spatial land management with biological and economic objectives Polasky et al Biological Conservation 141(6):

40 Introduction Analyze effect of alternative land use patterns on Biodiversity Value of agriculture, timber and housing development Biological model: Land use determines pattern of habitat Predict probability of persistence for 267 terrestrial vertebrate species Economic model: Value of agricultural crops and timber harvest are a function of yield, price and production costs Value of rural residential housing: hedonic property price model to predict housing value as function of distance to urban areas and county location Efficiency frontier: find land use patterns that maximize biodiversity score for given economic return

41 Land uses Consider 9 land uses in the Willamette application row-crop agriculture orchard/vineyard Pasture grass seed 45-year rotation managed forestry rural-residential development conservation to create the dominant potential natural vegetation in the parcel conservation to recreate conditions at the time of European settlement in the parcel conservation to maintain 1990 land cover conditions in the parcel

42 Willamette Basin

43

44 Modeling multiple ecosystem services and tradeoffs at landscape scales Nelson et al Frontiers in Ecology and Environment 7(1): 4 11.

45 Modeling multiple services under alternative scenarios Three scenarios of land use / land cover change for the Willamette Basin developed by the Willamette Partnership for Plan trend Development Conservation

46 Modeling multiple services under alternative scenarios Model outputs: service provision and biodiversity Water quality Storm peak mitigation Soil conservation (sediment retention) Climate stabilization (carbon sequestration) Biodiversity (species conservation) Market returns to landowners (agricultural crop production, timber harvest and housing values)

47 Projected land use change in 2050 under the three scenarios

48 Outputs through time

49 Ranking of scenarios depends on set of ecosystem services considered

50 Efficiency of incentives to jointly increase carbon sequestration and species conservation on a landscape Nelson, Polasky et al Proceedings of the National Academy of Sciences 105(28):

51 Efficiency of incentives to provide services Instead of directly controlling land use decisions, the real game is trying to influence decisions of landowners to increase provision of ecosystem services Analysis of incentive programs that pay for enrolling in conservation Use data to built a statistical model of land-use change (NRI land use data 1982, 1987, 1992, 1997) Use the statistical model to estimate parcel-level willingnessto-accept a conservation payment to enroll Simulating the spatial pattern of conservation for a given policy Score the landscape for species conservation and carbon sequestration Compare outcome with the optimal spatial arrangement of conservation (efficiency frontier)

52 Parcels eligible for easement payment Example simulation results for willingness to accept 8,176 manageable parcels in Basin. Detailed data on conditions in each parcel. 3,889 private parcels potentially eligible for easement. WTA for easement Per acre annual payment

53 Policy simulations If conservation payment offered to landowner exceeds WTA then landowner enrolls in the conservation program Consider effects on land-use of five simple conservation payment schemes. Policy scenarios: All: all landowners eligible for payments Native: restrict to land in certain habitat types Carbon: restrict to land that could convert to forest Riparian: restrict to land along riparian corridors Targeted: restrict to land shown by prior analysis to be important habitat for species of concern Run simulations with various budget levels ($1 million, $5 million, $10, million)

54 Comparison of efficiency of policies across policy scenarios (Tier 1)

55 Summary Spatially explicit analysis of multiple ecosystem services and biodiversity conservation Joint provision of services: one landscape, many consequences Tradeoffs among services under alternative management Tools to address three related tasks of Provision Value Policies and scenarios The failure to incorporate the value of ecosystem services in land use planning can result in poor outcomes Low level of ecosystem services Low value of total goods and services from landscape

56 Future challenges (1): quantification Social-ecological systems: dynamic and interconnected Do we understand systems well enough to predict short-term and long-term consequences of management actions on services? Particular challenges Incorporating variability and uncertainty Thresholds and regime shifts

57 Future challenges (2): valuation Do we understand systems well enough to establish payments for ecosystem services? Danger of not tying payments to service provision Case of carbon and tillage practices Importance of cultural, spiritual and aesthetic values

58 Future challenges (3): policy and institutions Distribution of benefits: who benefits and who pays Relationship to poverty alleviation Equity and justice Adaptive governance: designing institutions that learn and adapt to new information and situations

59 Moving ahead We do not know enough BUT We know enough to improve on current performance Pressing need to begin to mainstream ecosystem services into societal decisions The long road rather than the quick fix: Better science to improve understanding Better institutions/policy that reflect values Adaptive process that learns through time

60 Thank you