UK perspective: role of economics in biodiversity policy EEA Workshop on biodiversity and economics 5 October 2006 Helen Dunn, Defra, UK

Overview 1.Key challenges and use of economics in policy 2.Economic valuation of benefits 3.Application to specific policies 4.Ecosystem-based approach

Key Policy Challenges Halt the loss of biodiversity by 2010 Protect designated sites: SSSIs, SACs, NNRs Integrate biodiversity considerations into policy across government Develop strategic & holistic approach to natural environment policy

Defra and key partners Across Defra – environment and natural resource protection EBG working group on economics and funding: Natural England, RSPB, Forestry Commission, Joint Nature Conservation Committee, Defra

Use of economics in policy 1.Policy Appraisal and Design Valuation of benefits e.g. Uplands Farming Quantifying costs e.g. UK BAPs Impact Assessments e.g. Marine Bill Economic Instruments e.g. agri-environment schemes 2. Guidance Incorporating non-market values and biodiversity into RIAs 3. Develop Evidence Base

How can we value environmental goods and services? Market Valuation Approaches Demand Curve Approaches Revealed Preference Methods Stated Preference Methods Benefit Transfer Non-Demand Curve Approaches Usually based on using ‘surrogates’. These give ‘costs’ or ‘prices’ rather than true ‘values’. Examples include Replacement Cost; Restoration costs; Preventative Expenditures Issues in valuing biodiversity

Developing methods for valuing biodiversity (Christie et al, 2004) Aims : Assess whether it is possible to attain meaningful values for complex goods such as biodiversity Develop a cost effective framework to value biodiversity changes. Objectives : To value attributes of biological diversity To value biodiversity programmes To examine benefits transfer

Developing methods for valuing biodiversity (Christie et al, 2004) Total Economic Value WTP for habitat recreation programmes and avoidance of biodiversity loss due to housing developments CambridgeshireNorthumberland Habitat Recreation £12.3 million p.a.£6.2 million p.a. Avoid loss of Biodiversity £10.1 million p.a.£4.8 million p.a.

Developing methods for valuing biodiversity (Christie et al, 2004) Lessons learnt - Is it possible to value complex goods? Yes, but is challenging Requires careful design (expert reviews, public FG) and information presentation The way experts and the public view biodiversity is different, therefore need to ‘translate’ expert views for study Generally, methods are robust and may be repeated. BT failed, therefore cannot directly transfer values to other areas of the UK. Valuation workshops may provide a relatively cheap way of applying these results to other areas of the UK.

Application to specific policies UK BAPs: costing, valuing Marine Bill – Impact Assessment Agri-environment schemes: Environmental Stewardship, Review of Uplands Support

Application to specific policies: costing UK BAPs UK BAPs Contain targets and actions for species and habitats Include 45 HAPs and 391 SAPs Original costing Completed in 1998, required updating Did not fully cost all the actions, particularly widespread species Costing Work 2006 Focused on costs of achieving targets Selected samples of high/low cost SAP to estimate SAP costs Calculated management costs per hectare for different HAPs For widespread species SAPs, modelled necessary landscape change through take-up of agri-environment schemes and estimated cost

Application to specific policies: Costing UK BAPs Comments The funding gap arises largely from the previously un-costed widespread species. Although there is still potential for funding shortfalls for some plans as well as an overlap between AES and funding of some HAPs Model estimates to meet widespread species target requires a 80% take up in ELS No assessment of cost-effectiveness of measures to achieve targets Total Costs 2004UKEngland SAP Costs£22 m£14 m HAP Costs£321 m£208 m Widespread Species Cost£260 m£198 m Total BAP Costs£600 m£420 m Current BAP Funding£300 m£200 m Estimated BAP Funding Gapc. £300mc. £220 m Cost Estimates

Application to specific policies: Impact Assessment Marine Bill Values for selected goods and services provided by UK marine biodiversity (Beaumont et al 2006) Good/ServiceMonetary Value (p.a. UK £ 2004) MethodUnder/Over estimate Link to Biodiversity (1) – high (5) Food Provision £513 millionMarketUnder3 Leisure & Recreation £11.8 billionMarketOver3 Disturbance prevention & alleviation £0.3 billionAvoidanceUnder4 Bequest & Existence £0.5 – 1.1 billion Contingent Valuation Under5

Application to specific policies: Uplands agri-environment schemes Policy Context New ERDP programme: opportunity to reallocate funding and match payments to services provided. Develop Evidence Base Primary valuation of different attributes of Uplands, affecting: Landscape, recreation and tourism benefits Cultural values Biodiversity through habitat provision

Application to specific policies: Uplands agri-environment schemes Outcomes Provided evidence that targeting funding  increased environmental value Results from the uplands valuation work used in the RIA for the consultation paper Economic evidence combined with expert assessment in decision making process

Developing a natural environment strategy Current Policy Framework Complex and fragmented Difficult to deal effectively with cross-cutting issues, e.g. environmental limits and cumulative effects Objectives for new framework Join up policy-making on soil, air, water and biodiversity to form an integrated policy framework based on Ecosystem Approach Capture values of environmental assets to incorporate into policy making Guidance for policy-makers to ensure ecosystem services are taken into account

Pathway for changes to ecosystems impacting on human welfare

Issues in valuing ecosystem services Measuring and valuing ecosystem services – significant challenges Significant evidence gaps in causal chain linking a change in ecosystem and ecosystem services to impacts on human well being Consideration of temporal and spatial issues are important Choice of valuation approaches? Dealing with uncertainty, irreversibility, non linearities?

Ecosystem-based approach Defra commissioned a set of research studies split into 2 phases to inform development of strategic policy using an ecosystem approach Six scoping studies completed under Phase I 1.Inventory and assessment of natural resources 2.Defining and identifying environmental limits for sustainable development 3.Valuing our natural environment 4.Pressures on natural resources 5.Natural resource policy framework analysis 6.Future trends project

Ecosystem-based approach Phase II projects build on the evidence gathered in Phase I and focus on the key policy objectives 1.Inventory study on natural environment data 2.England’s terrestrial ecosystem services and the rationale for an ecosystem-based approach 3.An assessment of the economic value of England’s terrestrial ecosystem services 4.4 case studies to develop tools and methodologies to deliver an ecosystem-based approach