Valuation Methods. Introduction. Robert MAVSAR EFIMED

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1 Valuation Methods Introduction Robert MAVSAR EFIMED

2 Forest goods and services in the EU More than 200 different goods and services were identified in the EU Nevertheless the list is not complete, because of continually changing uses and the importance society ascribes to different forest goods and services

Classification of forest goods and services Many

market/nonmarket) They are compatible and their

Forest Services Resources Industrial Wood Fuel Wood NWFPs

protection Biospheric Biodiversity Climate regulation

3 Classification of forest goods and services Many classification schemes in use (example: functional, market/nonmarket) They are compatible and their application depends on the objectives of classification Forest Services Resources Industrial Wood Fuel Wood NWFPs Ecological Water protection Soil protection Health protection Biospheric Biodiversity Climate regulation Social Ecoturism Recreation Sports Fishing/ hunting Amenities Spiritual Cultural Historical

important non market forest services Importance might differ with scale (local regional vs.

4 Importance of specific non market forest goods and services in the EU Based on the responses to the FORVALUE questionnaire: biodiversity protection, carbon sequestration, recreation and watershed services are the most important non market forest services Importance might differ with scale (local regional vs. national international) and between stakeholders (e.g. forest owner, environmentalist, general public) 5 Importance level

5 Importance of forest goods and services in different countries Source: FORVALUE (2008)

Trends of importance of forest goods and services Based on the responses to the

services is expected to further increase Historical and educational services Health

Fuel Wood Carbon sequestration Climate regulation Recreation Biodiversity protection

6 Trends of importance of forest goods and services Based on the responses to the FORVALUE questionnaire the importance of the majority of non market forest goods and services is expected to further increase Historical and educational services Health protection Air quality regulation Sport Water regulation Aesthetic services Tourism Fuel Wood Carbon sequestration Climate regulation Recreation Biodiversity protection Spiritual and Cultural services Water purification Soil protection CONSTANT IMPORTANCE INCREASING IMPORTANCE

goods and services is unlimited and free for the public Exception are market goods (timber, hunting,

7 Forest ownership structure and public access to forests goods and services in the EU more than 60% of forests in the EU countries are private nevertheless the access to and use of the majority of forest goods and services is unlimited and free for the public Exception are market goods (timber, hunting, some non wood forest products 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% not regulated limited unlimited

8 Problem Goods and services Costs of provision Benefits Provider Externals

9 Content We will try to answer the following questions: Why do we need to value? What do we want to value? How can we value?

10 But before What is the value and what is valuation?

11 Valuation The determination of the value of a good or service 11

12 Value = Price? The value is the maximum amount of money you are willing to pay for a determinate unit of a good. 1 st bottle of water 3 2 nd bottle of water 2 3 rd bottle of water 1

13 The concept of the decreasing marginal value Value of the unit x 2 Value of the unit x 1 h 1 h 2 D x 1 x 2 X

14 Value Use Benefits by using the goods (now or in the future) Example: Forest for recreation Non use Without direct use of goods Example: Animal species preservation

15 Total Economic Value = Use value + Non Use value Use Non use Direct Indirect Option Heritage Existence wood carbon sequestration recreation in the future Preservation of a forest for the future generations Preservation of the Amazonian forests

16 What do we value? We always value changes in quantity or quality of goods and services. The change can only be marginal. (e.g., we cannot determine the value of World s forests (Constanza 1997). Change

17 Discrete change: X 1 X 2 Marginal change: 0 X 1 Value of change from x 1 to x 2 units of X Value of the unit x 1 h 1 h 2 D Value of unit x 2 0 x 1 x 2 X

Valuation methods the concept of the Total

Total Economic Value Non use Direct Indirect

18 Valuation methods the concept of the Total Economic Value has been extensively used to quantify the full value of the different forest goods and services Market prices Use Total Economic Value Non use Direct Indirect Option Existence Heritage Other valuation methods

19 Valuation methods (I) Revealed preferences methods are based on actual observed behavior data Deriving values: directly (e.g. from market prices) indirectly from behavior in surrogate markets, which are hypothesized to have a direct relationship with the ecosystem service of interest (e.g. travel cost method, hedonic pricing method) applicable only for some forest goods and services (e.g. market goods, recreation, aesthetics)

20 Valuation methods (II) Stated preference methods are based on hypothetical behavior data, the value is inferred from people s responses to questions describing hypothetical markets or situations (Contingent valuation method, Choice modeling) applicable to derive economic values for all types of forest goods and services disadvantage is the complexity (expert knowledge) and expensive in application

21 Today s schedule Morning Revealed preference (indirect valuation) methods Stated preference (direct valuation) methods Afternoon Benefit transfer Concluding remarks Practices

Robert MAVSAR EFIMED. Forest Ecosystem Services in the MENA Region: need for further knowledge for sustainable forest governance

Robert MAVSAR EFIMED. Forest Ecosystem Services in the MENA Region: need for further knowledge for sustainable forest governance Robert MAVSAR EFIMED Forest Ecosystem Services in the MENA Region: need for further knowledge for sustainable forest governance Importance of forest Why do we ascribe such a high importance to forests?