1. Joint Nature Conservation Committee
6. Values and externalities

2. External and non-market effects
Externalities – an impact (positive or negative) on anyone not party to a given economic transaction
Non-market impacts - fall outside market systems. Hence no market price is available

3. Terminology and jargon
Fish factory
Fish
Waste

4. Various dimensions of economic value
Total and Marginal Economic Value
Financial and economic value
Producer and consumer surplus
Use and non-use value
Direct and indirect values
Market and non-market value
Costs and benefits

5. Total versus marginal values
Total Values
Demonstrating value of biodiversity
Revising national income accounts
Marginal Values
Influencing policies and projects
Assessing biodiversity impacts of non-biodiversity investments
Determining liability for biodiversity loss
Setting charges, taxes and fines
Setting priorities for conservation within limited budget

6. Marginal approach often better for influencing policy
MPA implementation
Benefits of
management
Net benefits
Net benefits
from coastal
from coastal
Benefits
with MPA
ecosystem
ecosystem
Benefits
without MPA
Costs of
management
Cost of MPA
Time
Time

7. Total Economic Value (TEV)
Use values
Non-use values
Direct use
Indirect use
Option value
Bequest value
Existence value
Example:
Timber
Tourism
Drinking water
Example:
Coastal protection
Water purification
Carbon sequestering
Example:
Genetic materials
Biodiversity
Clean soils
Example:
Avoided damage from climate change
Example:
Rare species
Indigenous rights
Warning for using TEV:
Different management regimes result in different flows of benefits.
If ecosystem are not sustainably managed, future benefits decline.
At large scales, observed prices unlikely to be applicable.
Rare to lose all ecosystem services.

8. Use Value
Direct Use Value: Value from direct human use of natural resources.
Extractive Use Value e.g. timber, fisheries
Non-Extractive Use Value e.g. recreation, tourism, education
Indirect Use Value: Ecological functions that indirectly provide support and protection.
e.g. erosion and flood protection, water purification, carbon sequestration

9. Non-Use Value Value based on intangible human benefits.
Existence Value: Value from simply knowing that nature exists e.g. charismatic species
Option Value: Value from retaining options that may arise in the future e.g. medical discoveries
Bequest Value: Value from conserving nature for future generations

10. Producer and consumer surplus (1)
willingness to pay
price
0.5 cost
2.0 is my ‘benefit’
(consumer surplus)
2.5 is his ‘profit’
(producer surplus)
Economic value is: = 4.5

11. Producer and consumer surplus (2)$
quantity
demand CS
supply Q* P* PS

12. Financial and economic value
Not directly observable
willingness to pay
price
0.5 cost
2.0 is my ‘benefit’
(consumer surplus)
Financial value = 3.0
2.5 is his ‘profit’
(producer surplus)
Directly observable
Economic value = 4.5

13. Example 1: TEV of world’s ecosystem services
US$33 trillion (US$16-54 trillion a year)
Hugely controversial
Variation in values across different sites
Estimates of average value based on marginal changes
Exceeds total global economic income
Not policy focused
Costanza et al. Nature. (1997)

14. Example 1: TEV of world’s ecosystem services (2)
Grasslands $ /ha/yr
Open ocean $ /ha/yr
Coral reefs $ /ha/yr
Tropical forests $ 2,007/ha/yr Lakes/rivers $ 8,498/ha/yr
Wetlands $ 14,785/ha/yr

15. Example 2: Conservation or Conversion?
TEV of managing ecosystems sustainably often higher than TEV of converted ecosystems.
Benefit-cost ratio of global programme for conservation = 100:1
Habitat loss costs US$250 billion per year
Balmford et al. Science. (2002)

16. Example 2: Conservation or Conversion? (2)

17. Coastal Biodiversity protection 2% 7% Amenity 8% Fishery 3% Tourism
Example 3: Economic value of Coral Reefs in Guam
Coastal
Biodiversity
protection 2% 7%
Amenity 8%
Fishery 3%
Recreation
Tourism 7%
73%
Annual values of coral reefs in Guam amount to US$127 million, equivalent to 7% of GDP.

18. Example 3: Economic value of Coral Reefs in Guam (2)
Spatial Distribution of Economic Values
Fish
 economic value
Threats
map
Tourism
Protect
Amenity
overlay
Biodiv.
Priority intervention areas

19. Assignment Identify the main economic values of your project.
In doing so, do consider using the following categorisations:
Costs & benefits
Use & non-use values
Direct & indirect values
Local & global values
Market & non-market values
Internal & external effects