Ecological and Economic Foundations: Key Messages Kumar; Chief, Ecosystem Services EconomicsUnit, UNEP The Economics of Ecosystems and Biodiversity Ecological and Economic Foundations:

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Pushpam Kumar;Chief, EcosystemServicesEconomics Unit,UNEP

The Economics ofEcosystems andBiodiversity


Ecological and EconomicFoundations: Key Messages

Dr Pushpam Kumar

Chief, Ecosystem Services Economics Unit Division of

Environmental Policy Implementation (DEPI),

United Nations Environment Programme (UNEP)

And

School of Environmental Sciences

University of Liverpool

The Economics of Ecosystems & Biodiversity





“Potsdam Initiative – Biological Diversity 2010”

1)The economic significance of the global loss of biological diversity

Importance of recognising, demonstrating & responding to values of nature

Engagement: ~500 authors, reviewers & cases from across the globe

InterimReport

India, Brazil,Belgium, Japan &

South AfricaSept. 2010

TEEBSynthesis

CBD COP11Delhi

NationalTEEBWork

SectoralTEEBworkEt al.

Rio+20Brazil

ClimateIssuesUpdate

G8+5Potsdam

TEEB End UserReports Brussels

2009, London 2010

CBD COP 9Bonn 2008

Input toUNFCCC

2009

BD COP 10 Nagoya, Oct 2010

TEEBBooks

Ecol./Env.Economicsliterature

TEEB: Genesis, Aims and Progress





The Economics of Ecosystems & Biodiversity

Key Messages:1. Framework2. Methodology3. Challenges from

ecology4. Challenges from

economics5. Ways forward6. Database7. Ways forward8. Recommendations





1: Framework Revisited

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Ecosystems & Biodiversity (1 Human well -being (1

BENEFITS & VALUES

Ecological(sustainability)

Social(wellbeing)

Economic(welfare)

Ecologicalstructures &processes

(photosynthesis,nutrient cycling,food -chaindynamics, etc.)

Functions (2

Production-biomassRegulation-water regulat .Habitat- requirementsInformation-landscape

ExternalDrivers(eg Climate

change

2) subset of ecosystem processes & componentsthat is directly involved in providing the service

Provisioning

-Food

Regulating-Flood prev.

Cultural-Recreation

Services

Indicators

Biophysical(eg . resilience)

Socio -cultural(eg . humanwellbeing indices)

Economic(eg . prices, GDP)

Indirect drivers (1: Demography,Technology, Economy, etc

Habitat

-Nursery

Governance and Decision making

1) The four bold -lined, brown filled boxescoincide with the overall MA -Framework

Aggregation of valuesfor decision support:-Trade -off analysis

(incl. CBA, MCDA)- Accounting Systems

(eg SEEA)

Direct drivers (1

• Land -use (change )• Habitat destruction• Pollution & disturb .• Resource use , etc

Addressing needs of

different actorsTEEB -reports :

• (Inter)national policymakers (D1)

• Local policy makers /administrators(D2)

• Producers/Businesses (D3)• Consumers/Citizens (D4)





2.1: Ecosystems and Valuation: Perspective

economicvalue of

theecosystem

Functioning - Resilience - Structure

Core ecosystem processese.g. water cycling

Ecosystem functionse.g. water provisioning, purification,

regulation

Ecosystem service benefitse.g. water for households, industry and

irrigation

outputvalue

insurancevalue

Insurance and output value as part of the economic value of the ecosystem





2.2: Methodological outline for valuation

Regimeshift

analysis

Adaptivecycles

Panarchies

Riskanalysis

RESILIENCEVALUE

Insurancevalue

USEVALUE

Marketanalysis

Costmethods

Productionfunction

Marketanalysis

Cost methods

Hedonicpricing

Contingentvaluation

Replacement,mitigation

and avoidedcost methods

Contingentvaluation

Contingentelection

VA

LU

AT

ION

/A

CC

OU

NT

ING

VA

LU

AT

ION

/A

CC

OU

NT

ING

SU

BJE

CT

SU

BJE

CT

ME

TH

OD

S/

ME

TH

OD

S/

TO

OL

S/

MO

DE

LS

TO

OL

S/

MO

DE

LS

Group anddeliberative

valuation

Jointanalysis

CO

NC

EP

TU

AL

CO

NC

EP

TU

AL

AP

PR

OA

CH

AP

PR

OA

CH

EmbodiedEnergy

Analysis

Exergyanalysis

Emergyanalysis

Material flowanalysis

Input -Output a

Ecologicalfootprint

Land -coverflow

PHYSICALCOST

Physicalconsumption/

change

Preference -based aproaches / Monetary valuation

Output valueD

ISC

IPL

INA

RY

DIS

CIP

LIN

AR

Y

FR

AM

EW

OR

KF

RA

ME

WO

RK

Biophysicalapproaches

PROBABILITYOF FLIPS

DIRECTUSE

INDIRECTUSE

OPTION ORCUASI-OPTION

LEGACYEXISTENCEALTRUISM

MATERIALS/

SURFACE/

LANDCOVER

ENERGY /

EXERGY /

EMERGY

INDUSTRIAL ECOLOGY/ THERMODYNAMICS

RESILIENCETHEORY

POLITICALSCIENCE

NEOCLASICAL ECONOMICS / MARKETTHEORY / CHREMATISTICS

SOCIAL JUSTICE

DEONTOLOGICALVALUES

LEXICOGRAPHICPREFERENCES

NON HUMANVALUES

Source: G ómez-Baggethun, deGroot, et al. in progress

NON-USEVALUE





3: Challenges from ecosystem science

Driver 1

Driver 2Nonlinear

Linear

Biodiversity

Environmental change

Ecosystem services

Biodiversity

Service 1

Service 2





3.1: Trade offs

Regulatingecosystemservices

Provisioning ecosystem services

increase in provisioning services producesa rapid loss of regulating services

A

with increases inprovisioning servicesregulating serviceslinearly decrease

B

provisioning servicescan increase to quitehigh levels beforeregulating services decline

C

Source: Elmqvist and Maltby et al Ch2,TEEB 2010





4.1: Challenges from economics science

Legend:predominant type ofvalue appreciation

Capturing

Demonstrating

Recognising

Ethical/culturalconvicitons

Commodity-type values

Incre

asin

gsys

tem

com

ple

xity

ecosys

tem

,scale

s,no.

ofacto

rs





5: Valuation Database:Information Organised and Explained

DescriptorsMore than 1300 valuation studies

Location name

Latitude /Longitude

Country name with socio economiccontext

Purpose and assumption of valuation

Valuation method

12 main ecosystem types; with 43 sub-categories

22 Ecosystem Services; 53 sub-categories

Representative data source

Peer reviewed Literature

Grey Literature

TEEB 1 / COPI 1 no online version (?)

CI - www.consvalmap.org/

ESD / ARIES – esd.uvm.edu [butcurrently offline]

NV&F -www.naturevaluation.org [casebase]

EVRI - www.evri.ca

EnVAlue -www.epa.nsw.gov.au/envalue/

Valuebase Swewww.beijer.kva.se/valuebase.htm





6: Valuation Methodologies: Un-realized Pitfalls

• Economic value of ecosystem services - assessed in terms offinancial sacrifices people would make for it, oreconomic/physical trade-offs. E.g. CVM studies- whilevaluing for large or small landscape, value remains thesame, implying people are valuing the idea of conservation& not the object in question.

• People do not express utility or even think in economicallylogical way. People make statements about their personal &collective values- to define who they are through the causesthey support (Ritov & Kahneman, 1997).

• Behavioral foundation of rationality (e.g. differentmotivations can underlie behavior in different spheres oflife )





7: Ways forward

Methodological pluralism (besides economics and ecology,

behavioral sciences, social anthropology are necessary)

Interdisciplinary collaboration.Individual’s identification with nature, capriciously changing preferences and

dynamic learning, ecological identity are important concepts in valuation

Discourse based valuation

Come up with a consensual societal value of scarcity

indicators, derived through participatory process

Joint appraisal of positional and relational goodswould an ideal beginning.





8: Lessons and Recommended Actions

1. Indicators like GDP are distorted and does not reflectthe changes in the level of welfare

2. Growth accounting does not incorporate ecosystemservices leading to erroneous sense of gain / losses

3. Drivers like Trade and Investment impacting theEcosystems have far reaching impact for society

4. Missing Links of Sectoral Policies causingunsustainable policies

Ecological and Economic Foundations: Key Messages Kumar; Chief, Ecosystem Services EconomicsUnit, UNEP The Economics of Ecosystems and Biodiversity Ecological and Economic Foundations:

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