GEF Session 13 Valuing Biodiversity – Use and Non-use Values and Their Economic Measurement John A. Dixon The World Bank Institute Ashgabad, November 2005

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity Questions What are the principle economic values/uses associated with biodiversity conservation? What economic valuation techniques can be used to estimate these monetary values? What values cannot be estimated in economic (monetary) terms?

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity The Total Economic Value approach

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity The Total Economic Value (TEV) Approach and Biodiversity Includes both Use Values and Non-Use Values Use values include direct use (both consumptive and non-consumptive), indirect use, and option values Non-use values include bequest values and existence values The TEV is the sum of all of these values but in the case of biodiversity, much of the value may lie in the Indirect Use or Non-use portion

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity Identifying types of uses and values for biodiversity Direct-use Values: hunting, direct- consumption (e.g. collection of berries, mushrooms, herbs, plants) are all “consumptive uses”; whereas observing, photography, or ecotourism are all “non- consumptive uses” Indirect-use Values: ecosystem services such as pollination, habitat for other species, sustaining food chains, other uses are indirect-use values

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity Identifying different types of economic values for biodiversity (continued) Non-use Values include Option values, Bequest values and Existence values (all usually measured using CVM) Unknown values include the value of genetic material (e.g. a new cure for cancer or AIDS) Valuation is easiest for Direct-use values, quite difficult for Indirect-use values, and very difficult for Non-use values

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity Economic Values are People- dependent! Remember, there are few or no economic values that are NOT directly linked to human uses or desires, and People often do not understand what the real question is. Therefore, market-values may be poor reflections of ecosystem values or pure biological uniqueness! –But… Markets and prices often drive government and private actions!

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity Valuing Direct-Use Values (both consumptive and non-consumptive) Direct uses – hunting, fishing, hiking, photography, tourism/ecotourism, cultural/ historical, scuba diving and other uses are often the easiest to value and the largest single item in a TEV calculation. –Data can be presented at a financial level (e.g. how large is the economic sector dependent on ecotourism), or at a broader social welfare level – usually by measuring the consumers’ surplus or economic rents generated. The former is easier to calculate, the latter is more difficult.

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity Valuing Indirect-Use Values Largely composed of ecosystem services such as –Ecosystems such as wetlands, lakes, deserts, forests –Shoreline protection; water filtration –Pollination –Changes in hedonic prices –Climatic effects (perhaps)

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity Valuing Non-Use values Non-use values – including Option, Bequest and Existence values, are usually always measured using some form of CVM. Cultural values may be very important in non-use values (e.g. Lake Sevan in Armenia) Values may be small per person (a few dollars), but large when aggregated (as in Armenia) Note: –Non-use values are usually harder to “sell” to decision makers, but –For some types of biodiversity (e.g. the panda, the blue whale) non-use values account for almost ALL of the economic value measured in a TEV calculation.

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity Selecting the appropriate valuation technique (again)

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity “valuing” the non-measurable Some uses or values associated with biodiversity are impossible to measure. These may include the following: –Unknown genetic material –Global life support services (an infinite value) –Cultural or religious values (e.g. in Hawaii, the native Hawaiians “value” the sea and the “aina”, the land, very highly)

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity “valuing” the non-measurable – cont’d Suggestions solutions: –Avoid Extinction!! –Use of the concept of Safe Minimum Standards to preserve ecosystems and their biodiversity –Creative use of financing to preserve/ protect scarce ecosystems and scarce biodiversity

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity What is the TEV of Biodiversity? – no one really knows! As economists always say “It Depends”!!!! It depends on The numbers and types of uses and users The values associated with each use National vs global values The scarcity and uniqueness of the resource Final Caution: Be very careful in using the benefit transfer approach (for biodiversity or for “hard to value” resources)

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity A BAD example of benefit transfer due to the “Big Lie” problem: Estimates of Soil Erosion Rates 1.A results reported for El Salvador – 140 t/ha – came from measurements on one plot, for one year (Flores Zelaya, 1982). 2.A widely reported result for Europe - 17 t/ha/yr. for Europe (source: Pimental, 1995) – is used over and over again in the literature. Where does this estimate for Europe come from ?? RateArea Covered Source Barrow (1991) 10-25BelgiumLal (1989) 10-25BelgiumWRI (1986) 10-25Central Belgium Richter (1983) 10-25Central Belgium Bollinne (1982) Not stated12 plots in Sauveniere Field experiments

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity Another BAD example of benefit transfer: value of the Whooping Crane in the US The Whooping Crane, protected in a small nature refuge in Texas, was the subject of a CVM study of WTP by local residents; The results were modest -- $1 or $2 per person per year. This amount was then multiplied by the entire population of the US (over 250 million people) to get an aggregate value of $100s of millions per year! Pars pro Toto!

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity The problem of “pars pro toto: When asked their WTP to protect any single endangered species (e.g. the whale, the panda, a big-horned sheep, the sturgeon, the whooping crane) common responses in the US are about $5-$10 per person per year.

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity For example, WTP for preservation of endangered species (1990 $US per person per year) USA Bald eagle12.4 Emerald shiner4.5 Grizzly bear18.5 Bighorn sheep8.6 Whooping crane1.2 Blue whale9.3 Dolphin7.0 Sea otter8.1 Humpback whale40-48 (w/o info) (w. info) Norway Brown bear, wolf, wolverine15.0

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity “Pars pro Toto” (cont’d) When asked their WTP to protect ALL endangered species in the world, the responses are about $10 to $15 per person per year! WHY? – the “embedding” problem created by the interviewer asking the wrong question

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity The “Pars pro Toto” Problem Only partial information is provided The wrong question is asked WTP for all endangered species WTP for any single species

GEF Caspian EVE 2005/UNDP and WBI John A. Dixon, Valuing Biodiversity Practical Guide to Valuation of Biodiversity Start with the most direct uses – both consumptive and non-consumptive Carefully consider ecosystem services (especially when they relate to marketed goods and services such as pollination, water supply, land protection,…) Value non-use values with care and caution; avoid