Importance of Economics for WWF South Africa

Transcription

1 Importance of Economics for WWF South Africa Manisha Gulati WWF SA Energy Economist Living Planet Conference 2012 Erinvale Estate Hotel, Somerset West Michel Roggo / WWF-Canon

2 Economics relates to every aspect of our daily lives Importance of Economics Economics is about much more than money, inflation, and supply & demand. Economics is about choice & the impact of these choices on the structure and behaviour of society Economics is about decision making in everyday life o Households: what goods and services to buy o Firms: what goods and services to produce, how to produce them and in what quantities o Governments: investment, spending, trade, etc. Economics is about the allocation of scarce resources among alternative desirable ends

3 Importance of Economics Economics is a science Characteristics of a science require rigor, consistency, and mathematics Economics displays all these characteristics Economics as a field is a science in that all claims about reality must ultimately be rooted in empiricism, and models & paradigms must be falsifiable & eventually tested against reality Like science, in the long-run economic paradigms and methodologies are judged by their ability to explain the real world. Economics is interrelated with the study of business, law, accounting, politics, sociology, history, land and property management, engineering.the list is endless!

4 It fits easily in a scientific world And explains what we observe in reality Importance of Economics Science can identify options and innovations that are now or could become technologically feasible Economics can assess possible consequences of actions for the production, consumption, and incomes of groups of people, regions, and countries Economics is often the ultimate arbiter of policy choices, because it seems to offer something the other sciences do not: a framework capable of valuing the consequences of different choices with a single metric

5 Importance of Economics The reality is that economics triggered the Arab Spring The other factors just followed Tunisia where it all started 2010 drought in Russia forced suspension grain exports 3 months later, a man set himself on fire in Tunisia over rising bread prices Egypt which took it to another level Since the days of Gamal Abdel Nasser, Egypt has had subsidized bread Population growth then surging grain prices in 2000s Rapidly rising oil use but amount extracted each year declining Cross-subsidies from oil to bread no longer affordable; food imports put more pressure First protests in Tahrir square Arab Spring lessons from economics Long term economic failure in a model of development that is financed through external windfalls & rests on inefficient forms of intervention & redistribution Economies based only on oil, aid & remittances; no alternate revenue streams & no private sector development

6 Can WWF SA afford to ignore economics? The answer lies in what we do & how What does WWF do? Secure the integrity of SA s ecological assets Ensure ecosystem services underpin social & economic well being Build climate resilience What is WWF s role in the above? Serving as an informed and independent voice in policy debates Identifying, articulating, & evaluating current policy issues, proposals & programs Transforming ideas & emerging problems into policy issues Providing a constructive forum for the exchange of ideas & information between key stakeholders in the policy formulation process Challenging the conventional wisdom and business as usual How does WWF fulfill its role? Research, Analysis, Advocacy, Outreach Importance of Economics

7 Importance of Economics Rhino Conservation Is it possible without Economics?

8 Enforcement may be a necessary but not sufficient condition for conservation Existing conventional law enforcement measures may not be the best way to address the problem of rhino poaching, even if they are intensified Importance of Economics Intensified enforcement may be counterproductive, as it may simply drive up the black market price of rhino horn raising the incentives for poaching Economics may provide important insights

9 Economic principles may have some relevance to rhino conservation Trade-offs: Value of live rhinos vs value of dead rhinos Allocation of scare resources: Rhinos compete with humans & other species for scarce resources: territory, food & water Supply & Demand: How much resources at which end? Can cost effectiveness of demand reduction approach be assessed? Is it easier to assess potential net benefits & results of supply side interventions? Property rights: Rights to benefit from resources such as rhinos & obligations to pay the costs can play a critical role in determining how humans manage & use them Importance of Economics

10 Importance of Economics Rhino poaching is driven by economic forces Understanding risks, rewards & incentives can be key Poaching takes place when the expected return from poaching is greater than the expected return from the best alternative activity Economics of Poaching Potential to reduce poaching by managing returns or costs Intensified enforcement can provide higher returns, thereby incentivizing poaching Expected Returns Costs Reduce incentives for poachers, if not remove them altogether Appropriately structured legal horn trading regime may reduce incentives, reduce price of horn & generate resources to reinvest in conservation Price of rhino horn Return from alternative activities Direct costs Risks (detection, capture, punishment)

11 The importance of Economics Conserving Ecosystems The role of Economics Living Planet Conference November 2012

12 Degradation of ecosystems can be explained through economics Most ecosystems are public goods associated with the problems of open access & overuse Willingness to pay for ecosystem services is generally not captured because of a lack of markets in these services Ecosystems are destroyed because market signals subsidies, taxation, pricing and state regulation, land tenure & use rights make it a logical & profitable thing to do Failure to account for the full economic values of ecosystems & biodiversity has been a significant factor in their continuing loss & degradation Importance of Economics

13 Conservation depends on how we define the problem Economics can help Ecology & economic interface: Goods vs Service, Externalities vs Inputs affecting flow of goods & services Allocation of finite ecosystem: Between economic production & production of life sustaining ecosystem goods & services Economic value of ecosystems: Direct use, In-direct use, non-use Distribution of ecosystem resources: Who is entitled to ownership of ecosystem goods and services? Distribution of ecosystem goods and services: Among different beneficiary groups spatially & over time periods Importance of Economics

14 Conservation efforts will depend on the good or service being assessed & the beneficiary Value of wetlands goods & services Importance of Economics Value of agro-ecosystems goods & services Tables are illustrative not exhaustive

15 Importance of Economics As will the level and nature of measures, incentives & impacts...making economics an important factor New York City s Options Build new water treatment facilities Pay land-owners in Catskill mountains to improve farm management techniques & prevent run-off waste & nutrients into water bodies Water Conservation Source: TEEB (2010) Costs o Capital - US$ 6 bn to US$ 8 bn o O&M US$ 300 mn to US$ 500 mn per annum Impact: Doubling of water bills Costs: US$ 1 bn & US$ 1.5 billion Impact: Increase in water bills by 9%

16 The importance of Economics Low Carbon Economic Development Its about Economics

17 If it weren t for the economics of green technologies, we wouldn t be having this discussion Climate change poses risks to humanity: costs & impacts Importance of Economics It costs to mitigate these risks - In some form or another, whatever policies are put in place, someone, somewhere & at sometime, will have to pay for those policies Mitigation provides benefits to future generations by avoiding dangerous levels of climate change. We pay the price now, but the benefit comes later Need to develop policies that would promote the necessary mitigation but at the lowest or most efficient overall cost to the community

18 Importance of Economics And if you still believe science alone has promoted action against climate change, have you wondered How until the Stern Report, climate change was seen as an environmental issue... Then it became a mainstream issue. Why did this happen? The Stern report turned climate change from being an environmental and moral issue into an economic issue Risks from climate change estimated at an average 5-10% loss in global GDP, with poor countries suffering costs in excess of 10% of GDP Costs of mitigation of around 1% of GDP

19 Importance of Economics To conclude, WWF s work cannot ignore the Economics WWF cannot expect stakeholders to support the fabulous causes that WWF represents - just because there is a fabulous cause o The cause has to make economic sense to them If WWF goes to stakeholders with a moral imperative, there will be appeasement o If WWF wants action, WWF must go with an economic answer to an economic problem The causes WWF represents are profoundly economic. o There is just the need to remind stakeholders of that economic reality over & over again o And for that WWF cannot do without economics

20 Importance of Economics Thank you , WWF. All photographs used in this presentation are copyright protected and courtesy of the WWF-Canon Global Photo Network and the respective photographers.