Overview of Ecosystem Services Quantification and Valuation Approaches

Transcription

1 Gretchen Greene, Ph.D. and Mark Rockel, Ph.D. Senior Natural Resource Economists, ENVIRON Overview of Ecosystem Services Quantification and Valuation Approaches

2 Overview of Ecosystem Services Quantification and Valuation Approaches Bringing the quantitative value of ecosystem service changes into economic decision-making Separate Three Types of Activities: Taking Stock: Estimating Values for Entire Natural Capital Stock Environmental Accounting Creating Markets: Bringing more nonmarket goods and services into the market system Evaluating Tradeoffs: Strategies that consider marginal changes, and employ interdisciplinary teams using a variety of different tools to make decisions that impact the natural environment

3 Overview of Ecosystem Services Quantification and Valuation Approaches Introduction Overview of Approach Examples Summary

4 Overview of Ecosystem Services Quantification and Valuation Approaches Introduction Framework Pros and Cons History

5 Introduction Framework Ecosystem structure & function Ecological production function Human actions (policy environment) Economic valuation function Ecosystem goods and services Values from National Research Council 2005

6 Introduction: Framework Economic Value Types Market Values Timber Commercial Fishing Agriculture Emerging Ecosystem Service Markets Wetland Banks Carbon Markets Water Quality Trading Air Quality Markets Non-Market Values Direct Use Recreation Education Subsistence Indirect Use Value Habitat Flood Projection Passive Use Value Religious/Cultural Nonuse/Existence Value Option

7 Introduction: Framework MEA Service Types

8 Introduction: Framework Valuation Techniques Travel cost method Hedonic pricing Contingent value/ choice/conjoint analysis Benefit transfer Averting behavior/ avoided cost Ecosystem service market prices

9 Introduction Pros and Cons of Valuing Ecosystem Services Case for Stewardship Manage assets/liabilities Public planning/investing Prevent damage/degradation Environmental accounting Establish payments for ecological services Case against Commodification of nature Difficult, lack of agreement May not work (may do more harm than good) Free market environmentalism

10 Introduction: Economic Value History Travel cost suggested late 1940s Harold Hotelling recommends federal government use travel costs as a proxy for the value of national parks to the nation Methods evolve through 1970s Travel Cost Method (TCM) Contingent Valuation Method (CVM) Hedonic Property Values Benefit cost analysis (Principles & Guidelines) 1983 Public decision making including values for improving/degrading environmental quality Framework still used today (baseline, change from, monetary value estimate for nonmarket goods) Free market environmentalism 1991

11 Introduction: Economic Value History Environmental accounting 1990s Wasting Assets (Repetto et al., 1989) U.N. Recognizes need for satellite system to the System of National Accounts (SNA), 1993 Valdez blue ribbon panel 1995 Panel defines protocols for use and application of different methodologies like CVM Ecosystem services ? Millennium assessment 2003 Geo Spatial Modeling

12 Valuation of Ecosystem Services to Support Decision-Making Overview of Approach

13 Overview of Approach: Ask Key Questions Goal of analysis Scale Geographic Demographic Temporal Gains, losses or status quo? Economic, ecologic or both? Ex-ante or ex-post?

14 Services (%) Overview of Approach: Establish Baseline 100% Pristine condition service level Baseline service level given anthropogenic sources/industrialization Net change in ecosystem services with decline and rebound over time 0% Adverse impact Time

15 Overview of Approach: Understand changes from baseline

16 Overview of Approach: Evaluate with/without change Wunder 2007 Figure 1. Three different payments for environmental services scenarios: (a) static, (b) deteriorating, and (c) improving servicedelivery baseline. Dotted lines show de facto service delivered with ES ; solid lines show counterfactual baseline without ES. Additionality is the incremental service delivered through PES vis-`a-vis the counterfactual baseline.

17 Overview of Approach: Aggregate through time Year Value Compound/ Discount Factor Adjusted Value 1997 $515, $757, $537, $766, $537, $744, $548, $736, $550, $718, $104, $132, $102, $125, $102, $122, $102, $118, $102, $115, $102, $111, $102, $108, $102, $105, $102, $102, $102, $99, $102, $96, $102, $93, $102, $90, $102, $87,791 Total Value in 2010 $ $5,232,420

18 Overview of Approach: Benefit Cost Analysis Present value (PV) of the stream of net social benefits over the relevant time horizon: PV NB = Σ i (B i C i )/(1+r) i i = 1, 2,, n. (B i C i ) = net social benefit i years from present r = discount rate (see next slide) PV = (future value)/(1+r) i n = end period of total time horizon (years from present)

19 Overview of Approach: Benefit Cost Analysis Would you rather have $10,000 now or in 1 year? (Raise hands for now) Would you rather have $9,900 now or $10,000 in 1 year? (Raise hands) Would you rather have $9,800 now or $10,000 in 1 year? (Raise hands) Would you rather have $9,500 now or $10,000 in 1 year? (Raise hands) $9,000 now? $8,500 now? $7,500 now?

20 Methods: Benefit Cost Analysis PV is inversely related to discount rate Discount rate (%) Present value of $100 to be received in 50 years 0.5 $ $ $ $ $ $0.01

21 Valuation of Ecosystem Services to Support Decision-Making Examples Habitat Equivalency Analysis (HEA) Decision Making without Monetary Units Payments for Ecosystem Services (PES) Services of Floodplain Shellfish Aquaculture Working toward Nutrient Trading Market Traditional Use Study Subsistence Use Traditional Ecological Knowledge (TEK) Lost Income

22 Example 1: HEA (Draft) Table 1: Acres of Habitat and Baseline Quality Footprint Mitigation Plan A1 (ACRES) Mitigation Plan A2 (ACRES) Habitat Acres Lost to Terminal Footprint Baseline Quality of Acres Lost Enhanced (+) Restored (+) Created (+) Converted (-) Enhanced (+) Restored (+) Created (+) Converted (-) Upland Conifer/Hardw ood Upland Herbaceous Upland Scrub/Shrub Wetland Conifer/Hardw ood Wetland Herbaceous Wetland Scrub/Shrub Open Water (Ponds) Shallow Water Conifer/Hardw ood Shallow Water Herbaceous Shallow Water Shrub/Scrub Shallow Water (River/Beach) % % % % % % % % % % %

23 A1 Converted Example 1: HEA (Draft) Table 2: Assumptions for Mitigation Plan A1 Habitat A1 Enhancement Assumptions A1 Restoration Assumptions A1 Creation Assumptions Upland Conifer/Hardwood Years to Recovery Baseline Quality Endpoint Quality Percent Success Years to Recovery Baseline Quality Endpoint Quality Percent Success Years to Recovery Baseline Quality Endpoint Quality Percent Success 10 67% 100% 90% % 90% % 90% 73% Upland Herbaceous 5 50% 100% 50% % 50% % 50% 79% Upland Scrub/Shrub 3 33% 100% 90% % 90% % 90% 76% Wetland Conifer/Hardwood 10 67% 100% 90% % 90% % 90% 79% Wetland Herbaceous 5 33% 100% 50% % 50% % 50% 79% Wetland Scrub/Shrub 3 67% 100% 90% % 90% % 90% 79% Open Water (Ponds) 1 79% 100% 90% % 90% % 90% 79% Shallow Water 10 67% 100% 90% % 90% % 90% 82% Conifer/Hardwood Shallow Water Herbaceous 5 50% 100% 50% % 50% % 50% 82% Shallow Water Shrub/Scrub 3 67% 100% 90% % 90% % 90% 82% Baseline Quality Shallow Water River 1 82% 100% 82% % 82% % 82% 82%

24 Example 1: HEA (Draft)

25 Example 2: Payments for Ecosystem Services Carson River Watershed payments to farmers for floodplain preservation Simulated flooding with development (HEC-RAS) Estimated water quantity savings (Attenuation) Estimated reduced speed of flood event; increased warning time Results: 13 AFY; 18 AFY 181 cfs; 319 cfs 1 2 hours $300 - $1900 per year PES

26 Example 3: Shellfish Aquaculture Excessive contributions of inorganic nitrogen (ammonia and nitrate) is recognized as the primary cause of degraded water quality, hypoxia, habitat loss and biodiversity in our nation s coastal ecosystems (NOAA 2009) Shellfish help to mitigate for these excessive nutrient contributions through harvest

27 Example 3: Shellfish Aquaculture Oyster Restoration Is Worth Every Penny Saturday, August 15, 2009, Washington Post Editorial Page Excerpt: For one acre, a restored wetland costs $55,000; sediment remediation is over $1 million; and a 1 1/2 -foot oyster reef is $40,000. Moreover, the secondary benefits of this investment include foraging ground and nursery habitat for blue crab, the most valuable fishery in the Chesapeake Bay; over 900 pounds per acre annually of valuable fish such as sheepshead and black sea bass; improved water quality; and, production of larvae that settle on commercial and private fishing grounds. One waterman in the Great Wicomico stated that he harvested 400 bushels of oysters from his private lease in 2008, more than any other time over the past 30 years.

28 Example 3: Shellfish Aquaculture Based on replacement cost, Burke (2009) to estimates the value of nitrogen removal resulting from oyster aquaculture. One annual oyster harvest for 2010 totaled 5,400,000 oysters, estimated to sequester and remove between 972 and 2,808 tons of nitrogen. Using the value estimates from Burke, this suggests that the value of removing nitrogen from the farm water is between $8,916 and $257,400 per year.

29 Example 3: Shellfish Aquaculture

30 Example 4: Traditional Use Study Analyzing the ES losses to Indigenous population from the disruption of lands. Traditional use involves indigenous cultures using the functions and processes of ecosystems. of natural resources. Involves performing a primary survey in order to collect communities impact of the impact related to the road Mapping resources and geospatial analysis Developing monetary value estimate for settlement purposes

31 Example 4: Traditional Use Study Summary of Economic Losses Category Impact per Unit Total Historical Losses Total Future Losses Total Losses Passive and Non-Market Values Traditional & Community Values Subsistence Value Lost Income $4.21 per hectare per person per year $733 per hectare $12,862,325 $2,738,140 $15,600,465 $9,497,413 $2,018,611 $11,516,024 Non-Timber Forest Products $38.85 per unit sold $896,982 $93,888 $990,870 Timber Stumpage $2.36 per cubic meter $53,438 - $53,438 Total Economic Impact $23,310,158 $4,850,639 $28,160,797

32 Summary Appropriate ecosystem service quantification tool depends on nature and scale of problem Ecosystem Service Quantification Topics Include Taking Stock How much is it worth in $$? Creating Markets Getting ecosystem services into the traditional monetary economic system Evaluating Tradeoffs Variety of tools using $$ and other metrics Need a big toolkit Quantification is interdisciplinary