Valuation of Forest Functions (from stakeholders perspectives) nfp module 3, day 1, hours

Why valuation in this module on financial strategies? zValuation at the base of our model zNo investment in forests and no payment for forest goods and services without an implicit or explicit valuation of the forest

Objective of this session zImproved understanding of the importance of ecosystem’s functions for valuation of natural resources zImproved understanding of the economic valuation by stakeholders within a decision-making context

Example of valuation zMenkhaus & Lober used the Travel Cost Method to estimate the value that US ecotourists assign to the Monteverde Cloud Reserve in Costa Rica. zThis tool estimates the value of recreational amenities by using the travel expenditure (in terms of time and money) needed to reach the recreational site. zThey arrived at a total annual US ecotourism value of USD 4.5 million. Values such as this can be used to calculate (and revise) entrance fee charges that more adequately reflect the ecotourism benefit for the area. zThis study arrived at an average entrance charge of USD 40, which is considerably higher than the USD usually charged in national parks in Costa Rica.

Valuation of Forests Ask yourself the question: zHow would you value a forest? zAre you thinking as a person? For the Government? As a stakeholder? zAre you complete in your valuation?

Key issues to begin with zNatural Resources zForests and Water zEcosystem approach zProblem of Undervaluation zCommon Property Resource Management

Valuation of Functions zFunctions zStakeholders zValues

A. Stakeholders of high importance and high influence: B. Stakeholders of high importance and low influence: High IMPORTANCE C. Stakeholders of low importance and high influence: D. Stakeholders of low importance and low influence: High INFLUENCE Low Stakeholders’ classification

Economics and Environment zEconomics is the science on choices to be made by people who are faced with scarcity in their resources. zWe must sacrifice one thing for another, chose. zIn environmental economics the situation is rather specific: yWe deal with issues that are hard to compare. yVisualisation in monetary terms not always possible with environmental values. yFor that reason different techniques have been developed to try to overcome this difficulty.

Valuation of Functions zWhat is Valuation? zWhy Valuation? zValuation in the context of economic analysis

Valuation of Functions Functions zDefinition zCategories of Functions

Valuation: Functions Production functions: zFunctions that are based on the provision by nature of a variety of resources. zExamples: food/agriculture, fish, energy,…

Valuation: Functions Regulation functions: zFunctions that are provided by the capacity of ecosystems to regulate essential ecological processes and life support systems. zExamples: climate, habitat for birds, animals, storage, pollution…

Valuation: Functions Carrier functions: (also known as habitat functions): z Functions that are provided by ecosystems through space and a suitable substrate or medium for the systems itself as well as for many human activities. zExamples: drinking, recreation,….

Valuation: Functions Information functions: zFunctions, which do not involve a physically measurable effect or output from an ecosystem, but contribute to human well-being by their importance for religion, culture or individual well-being. zExamples: cultural or artistic information, educational and scientific information, aestetic, spititual,…

Valuation: Stakeholders Stakeholders zDefinition zLevel of interaction yGlobal and international yNational yRegional yLocal off-site yLocal on-site zIndividuals may fit in more than one group

Valuation: Values Values zDefinition zTypes of Values

Total Economic Value Non-Use ValueUse ValueOption Value Direct Use Indirect Use Existence Bequest Examples Ecosystem services Medicinal value of animals and plants Amenity values Examples Harvesting Fishing Tourism Examples Individual species‘ right to exist (ethical value) Examples WTP to secure use for other members of current generation WTP to secure use for members of future generation (vicarious value) Examples WTP to secure a potential personal future use

Valuation = F <> S -> V zFunctions <>Stakeholders  Value zValue  Market value (monetary)  non-market but quantifiable  valuation tools  not quantifiable  Multi Criteria Analysis

Valuation tools zMarket price or shadow price zHedonic pricing method zTravel cost method zProduction function approach zRelated goods approach zConstructed market techniques (Contingent Valuation Method, WTP) zCost based valuation