Module 2: understanding the economic causes of invasions Economic Analysis of Invasive Species

2 what this module covers 1.identifying the economic factors that lead to invasions 2.using policy analysis matrices to trace the economic causes of invasions 3.linking invasions to changes in human wellbeing about invasive species Module 1 understanding the economic causes of invasions Module 2 impacts of invasive species and ways to address them Module 3 defining invasive-related costs & benefits Module 4 valuing ecosystem impacts Module 5 informing actions to address invasives Module 6

Economic Analysis of Invasive Species 3 how economic conditions and forces prompt invasions most of the processes which result in invasions are economically motivated, for example: –use of exotic species for production, consumption and trade –conversion and fragmentation of habitat –liberalisation and deregulation of markets –expansion in the trade of goods and services –increasing mobility of people and things

Economic Analysis of Invasive Species 4 direct & indirect economic causes direct economic causes indirect economic causes each has different drivers and manifestations, involves different processes, originates from the action (or inaction) of different groups, and requires different responses

Economic Analysis of Invasive Species 5 direct economic causes: –production and consumption activities which themselves introduce, establish and spread potentially invasive species indirect economic causes –underlying economic, livelihood, market, price, policy and institutional conditions that permit or encourage people to behave in particular ways direct & indirect economic causes

Economic Analysis of Invasive Species 6 introduction establishment spread naturalisation invasion direct & indirect economic causes direct economic causes introduction of species for commercial purposes e.g. aquaculture, seeds, crops, livestock, food, biofuels introduction of species for control purposes e.g. biocontrol, landscape restoration introduction of species for lifestyle and aesthetic purposes e.g. pets, ornamental plants, aquariums unintentional or accidental introductions e.g. contaminated imports, hitch-hikers in freight or luggage, ballast water, dumping indirect economic causes forces and conditions which determine trade, production and consumption practices and preferences e.g. expanding travel & trade, globalisation, subsidies to production, trade and investment incentives, market demand and consumer preferences, low fines, high reliance of economy on imports forces and conditions which determine land and resource use practices and preferences e.g. high reliance of economy on particular productions sectors, incentives to clear land and replace native species, price support to exotic monocrops, unclear institutions and property rights, lack of budgets and funding to conservation

Economic Analysis of Invasive Species 7 invasives as externalities the positive or negative consequence of an economic activity that is experienced by unrelated third parties, that is not reflected in the price of the goods or services being produced and for which no compensation is paid or received externality

Economic Analysis of Invasive Species 8 invasives as externalities introduction of water hyacinth into garden ponds imposes external cost aesthetic benefits, improvement in land values INSTIGATOR OF ACTION choking of wetland, leading to loss of ecosystem services HOST ECOSYSTEM decreased fish catch, increased floods, declining water quality, difficulties in access OTHER RESIDENTS

Economic Analysis of Invasive Species 9 policy, market & price failures policy failure economic policies and instruments encourage behaviour which lead to the spread of invasives, thereby incurring social and economic costs markets and prices fail to allocate resources to their most efficient use: market transactions, and the prices they are based on, do not incorporate the broader social and economic costs of invasives market failure price failure

Economic Analysis of Invasive Species 10 economic policy and market failures result in invasions lead to a situation where: –the prices and profits that people face as they carry out their economic activities do not internalise the full costs of invasions to the wider economy (or the risk of invasions occurring) –there are for the most part no economic incentives (or requirements) for individuals or companies to make decisions based on the likelihood of invasions occurring, or of these costs being incurred to them

Economic Analysis of Invasive Species 11 direct & indirect economic causes private costs and benefits social costs and benefits do not equate to encourage producers, consumers and traders to behave in particular ways that are profitable or beneficial to them but which incur costs and losses to other groups, individuals and the economy

Economic Analysis of Invasive Species 12 invasives as externalities the positive or negative consequence of an economic activity that is experienced by unrelated third parties, that is not reflected in the price of the goods or services being produced and for which no compensation is paid or received externality invasions are usually the external effects of market transactions market prices do not reflect full social and economic costs associated with invasions costs and losses are felt by wider economy, not by the person who causes the invasion no penalty/compensation is levied for damages caused

Economic Analysis of Invasive Species 13 invasives as externalities in many ways invasives show the characteristics of “typical” economic externalities, and should be treated as such in analysis and measures key difference: –“normal” externalities only continue as long as source activity does –invasions, once set in motion, are self-perpetuating and often their impacts increase over time means that many of the financial and economic instruments usually designed to address environmental externalities are less suited to invasives the positive or negative consequence of an economic activity that is experienced by unrelated third parties, that is not reflected in the price of the goods or services being produced and for which no compensation is paid or received externality

Economic Analysis of Invasive Species 14 using policy analysis matrices to identify environmental effects thorough analysis of the direct and indirect causes of invasions is a key step in economic analysis policy analysis matrices provide a useful tool for this Action Impact Matrix: originally developed to show relationships between economy-wide policies and the environment can be simplified and adapted for invasives

Economic Analysis of Invasive Species 15 applying policy analysis matrices to invasives Step 1 list key issues relating to invasives and identify direct causes Key issues Direct causes Introduction and spread of potentially invasive species Cultivation of exotic crops Issues relating to the introduction, establishment and spread of potential invasives Hitch-hiker species coming in with seed and food shipments Spread of potentially invasive species Road and boat transport of exotic species between sites Invasion of species Loss of biodiversity and ecosystem services Issues relating to the resilience of human and natural systems to invasions Intensive monocropping High use of agro-chemicals

Economic Analysis of Invasive Species 16 applying policy analysis matrices to invasives Step 2 describe underlying economic conditions or motivations Cultivation of exotic crops Issues relating to the introduction, establishment and spread of potential invasives Hitch-hiker species coming in with shipments Road and boat transport of exotic species Loss of biodiversity and ecosystem services Issues relating to the resilience of human and natural systems to invasions Intensive monocropping High use of agro-chemicals Direct causes Underlying economic conditions High consumer demand High producer profitability Promotion of cash crop cultivation Reliance on imported inputs High consumer demand High producer profitability Promotion of cash crop cultivation Reliance on imported inputs Clearance of natural vegetation for monocrop farming

Economic Analysis of Invasive Species 17 applying policy analysis matrices to invasives Step 3 identify economic policies and instruments which set particular economic conditions and motivations Issues relating to the introduction, establishment and spread of potential invasives Issues relating to the resilience of human and natural systems to invasions High consumer demand Clearance of natural vegetation for monocrops Underlying economic conditions Economic policies or instruments Subsidies to retail price of crop for consumers Price support to cash crop farmers Subsidies and preferential credit for cash crop production Export tax exemption for cash crops High input and export taxes for alternative native crops Import duty exemption for agricultural sector inputs Over-valued exchange rate making imports relatively cheaper Subsidies to retail price of crop for consumers Price support to cash crop farmers Subsidies and preferential credit for cash crop production Export tax exemption for cash crops High input and export taxes for alternative native crops Import duty exemption for agricultural sector inputs Over-valued exchange rate making imports relatively cheaper Lack of clear property rights over natural ecosystems Requirement that farm land is cleared to establish ownership Relatively lower taxes on agricultural land than forest Low budget allocations to conservation agencies Lack of clear property rights over natural ecosystems Requirement that farm land is cleared to establish ownership Relatively lower taxes on agricultural land than forest Low budget allocations to conservation agencies High producer profitability Promotion of cash crop cultivation Reliance on imported inputs

Economic Analysis of Invasive Species 18 linking invasions to changes in human wellbeing ultimately, invasives are of concern because they impact on human wellbeing invasives take over space that generates economically valuable goods and services we are concerned with levels and degrees of invasion: incremental costs and benefits to humans

Economic Analysis of Invasive Species 19 ECOSYSTEM SERVICES Supporting Nutrient cycling Soil formation Primary production … Provisioning Food Fresh water Wood and fiber Fuel … Regulating Climate regulation Flood regulation Disease prevention Water purification … Cultural Aesthetic Spiritual Educational Recreational … Security Personal safety Secure resource access Security from disasters Basic material for good life Adequate livelihoods Sufficient nutritious food Shelter Access to goods Health Strength Feeling well Access to clean air & water Good social relations Social cohesion Mutual respect Ability to help others Freedom of choice and action Opportunity to be able to achieve what an individual values being and doing CONSTITUENTS OF WELL-BEING Adapted from Millennium Ecosystem Assessment 2005 which results in changes in impact on the provision of invasions understanding, assessing and acting on invasives in the light of the changes in ecosystem services and human wellbeing they give rise to economic analysis

Economic Analysis of Invasive Species 20 linking invasions to changes in human wellbeing concern for human wellbeing provides the context for economic analysis it involves: –pinpointing the economic causes of invasions –assessing their economic impacts –finding tools to help in addressing invasives in order to ensure outcomes which are economically beneficial, and positive in human wellbeing terms

Economic Analysis of Invasive Species 21 thank you