Valuation of Ecosystem Services in Support of Regulation

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1 Valuation of Ecosystem Services in Support of Regulation Valerie Sexton Sr. Economist, Environment Canada ACES & Ecosystem Markets Conference December 12, 2012

2 Need to improve decisions related to the environment Regulatory and policy decisions can have important implications for ecosystems and the economy need to be made in a more rigorous manner Benefits of ecosystem services (ES) need to be given full consideration to balance other economic considerations Above allows for better tradeoffs to be made between competing demands related to the environment A matter of Policy and Regulatory Excellence 2

3 Why does ES valuation matter for these decisions? Healthy ecosystems are foundations of healthy economies. To develop policies and programs that ensure the viability of ecosystems while supporting sustainable development and the needs of human societies we must: Establish the ES physical baseline (quantity/quality); Document the functional benefit of ES to society; and Assess the economic value of EG&S to society Costs for replacing ES can be unacceptably high and in some cases not possible 3

4 Environmental regulation decisionmaking process in Canada Cabinet Treasury Board/Privy Council Office Sponsoring Department (EC) Different Streams: CEPA Air Contaminants, Chemicals, etc. SARA Species at Risk and Habitat Protected Areas Proposed Parks & National Wildlife Areas 4

5 Where does ES value fit in this process? Sponsoring Department (EC) responsible for developing a Regulatory Impact Analysis Statement (RIAS) Cost Benefit Analysis (CBA) Data Collection/Studies Instrument Choice Regulation 5

6 Cost Benefit Analysis Treasury Board prefers regulations be of net benefit to Canadians (i.e., B>C). Ecosystem Services economic values influence decision-making by their inclusion in CBAs: show the magnitude of what you are giving up if they are not sustainably managed or protected CBA also shows regional and stakeholder distribution of net benefits (costs). 6

7 What is economic valuation? Any good or service will hold a variety of values for society Locally, regionally and nationally. Valuation helps to frame trade-offs in monetary terms so they may be compared using the same unit of measurement Some values will show up in market measures such as GDP (e.g., tourist spending on accommodations). Other values are equally important, but are not reflected in markets (e.g., value of caribou & habitat). 7

8 The Total Economic Value Approach The Total Economic Value approach recognizes that ES can have a value for many reasons, often simultaneously 8

9 Steps in valuing ES 9

10 Role of Economic Analysis Directorate (EAD RAVD) at Environment Canada Use benefits (values) generated for each ES to give most complete picture of total costs and benefits possible Qualitative when cannot estimate value Compare net costs or benefits of options for policy intervention in CBA Incorporate into overall assessment e.g., RIAS 10

11 Examples of Regulatory Analysis Done by RAVD CEPA Examples Light & Heavy Duty Vehicle Regs Wastewater Systems Effluent Regs Base Level Industrial Emissions Requirements Regs SARA Examples Species Listings Polar Bear, Peary Caribou 11

12 Types of ES valued by RAVD Air Quality Improvements (visibility, production changes) Food and Fuel Species and Protected Area (existence) Recreation and Tourism Carbon Storage Water Quality Improvements 12

13 Increasing Demands for ES Valuations and related work Frameworks and methodologies to support national accounting: Measuring Ecosystem Goods and Services (Canada) UN SEEA Group Environmental Assessments in Canada Megaprojects that will have important economic, environmental and social impacts Prosperity Mine Churchill Falls Dam 13

14 Areas of work going forward Improvement of understanding between dose-response functions Building Water Quality/Quantity Valuation Model: WQ 2 VM Updating or expanding modules of Air Quality Valuation Model: AQVM2 Generation of primary data WTP study to reduce exposure risks from toxic chemicals in the environment and human health Increasing number of valuation studies and participation in Environmental Valuation Reference Inventory ( 14

15 Conclusion Increasing uptake of the idea of including ES in regulatory and other analyses in EC and other depts Still some methodology and data challenges, but with continued effort can be ameliorated Questions? 15

16 APPENDIX 16

17 Edehzhie Proposed Protected Area The Government of Canada gave temporary protection to the Edehzhie Candidate Protected Area in 2002 under the NWT Protected Areas Strategy. Edehzhie is located in the Dehcho region of the NWT, with an area of 25,224 km2. It is located north of the Mackenzie River and is surrounded by six communities with 4,500 inhabitants in Edehzhie Candidate Protected Area Working Group (EWG) has submitted a final recommendation that 57% (14,249 km2) of the original proposed Edehzhie area be considered for the establishment of a permanent protected area. Study looks at this recommended area. 17

18 Edehzhie Preliminary Results Table 1: NPV of Benefits for Status Quo and Alternative Scenario Over 30-year Period Benefit/Cost (in million $) SQ (Development) Protection (No Development) 8% 3.50% 0% 8% 3.50% 0% Net Benefits of Mining Tourism Existence Waterfowl Caribou Carbon Cost - O&M of Protection NPV of Benefits and Costs Note: Mining probabilities for zinc/lead and diamond are respectively 50% and 60 18

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