1. The Benefits of Ecosystem Services, Environmental Economics and Eco-Compensation Schemes Christian Susan UNIDO Water Management Unit

2. Provisioning Services Ecosystem Services food (including seafood and game), fibre, crops fresh water genetic resources, bio-chemicals natural medicines energy (hydropower, biomass) Regulating Services climate regulation, carbon sequestration air quality regulation water regulation and purification erosion regulation disease regulation hazard regulation pollination, pest regulation

3. Cultural Services Ecosystem Services spiritual enrichment cognitive development reflection recreation, amenity and aesthetic experiences Supporting Services soil formation photosynthesis primary production nutrient cycling water cycling provision of habitat soil formation and retention

4. Sustainable Development ECONOMIC SOCIAL ENVIRON MENTAL inter-generational equity popular participation valuation internalization intra-generational equity employment efficiency growth stability biodiversity/resilience natural resources pollution poverty consultation/empowerment culture/heritage

5. Quantification of Total Economic Value

6. Total Economic Value of Forests USE VALUENON-USE VALUE Direct valuesIndirect values Option valuesExistence values Output that can be consumed directly, such as timber, medicine, food, recreation, non timber forest products, etc Ecological services, such as watershed protection, flood control, storm protection, carbon sequestration, climatic control, etc The premium placed on maintaining resources and landscapes for future possible direct and indirect uses, some of which may not be known now The intrinsic value of resources and landscapes, irrespective of their use such as cultural, aesthetic, bequest significance, etc

7. Quantification of WTP/WTA through markets Quantification of Total Economic Value market price determined by supply and demand direct use value and to certain degree the indirect use value private goods Quantification of WTP/WTA where markets fail most ecosystem services have public goods character no markets exists, not traded in markets “market failure” environmental valuation techniques to derive option and non-use value

8. Environmental Valuation Methodologies Quantification of Total Economic Value

9. Environmental Valuation Methodologies Quantification of Total Economic Value

10. Environmental Valuation Methodologies Quantification of Total Economic Value

11. economic development => environmental damages, reduction of natural capital stock sustainable development: minimize detrimental environmental impacts, offset residual damage by eco-compensation Eco-compensation Eco-compensation, offsets, no net loss, net gain No net loss countries with abundant natural resources, natural capital stock still +/- intact, application of no net-loss => sustainable development Net gain countries, where natural capital drastically reduced, application of net-gain principle => ‘re-balance’ accounts, sustainable development, net gain principle legally binding and transparent rules

12. economic development => environmental damages, reduction of natural capital stock sustainable development: minimize detrimental environmental impacts, offset residual damage by eco-compensation Eco-compensation Eco-compensation, offsets, no net loss, net gain No net loss countries with abundant natural resources, natural capital stock still +/- intact, application of no net-loss => sustainable development Net gain countries, where natural capital drastically reduced, application of net-gain principle => ‘re-balance’ accounts, sustainable development, net gain principle legally binding and transparent rules

13. environmental proxy, value of habitats in non monetary units “currency” used: habitat hectare habitat area [ha] x habitat score = habitat hectare habitat score: comparing habitat and landscape component with a benchmark benchmark: average characteristics of mature and apparently long undisturbed biodiversity and native vegetation benchmarks for each Ecological Vegetation class (EVC) Habitat Hectare Assessment max habitat score = 1 or 100%

14. forests = complex ecosystems, socially and economically valued goods and environmental services age + species composition = crucial determinants of habitat quality to assure no net-loss to overall habitat quality, eco-compensation has to maintain species composition afforestation with fast growing coniferous species can restore the commercial timber value but not the habitat quality afforestation with coniferous species in Great Britain, increase in forest area, loss in biodiversity and negative impact on real estate prices (revealed preference, Hedonic pricing) !!! crucial to assure no net-loss of overall habitat quality: use the species felled for reforestation/afforestation!!! species composition to assure no net loss Eco-compensation, offsets, no net loss, net gain

15. forests take several decades to centuries to develop their full range of habitat functions value of habitat (habitat score) increases over time Eco-compensation ratio to assure no net loss Eco-compensation, offsets, no net loss, net gain

16. equivalence: 0,8 ha*0,5 habitat score=0,4 habitat hectares=0,4 ha*1,0 habitat score habitat score/value increase over time !!! time plays a crucial role in order to assure no net-loss in habitat value !!! if a party causing destruction of forest habitat is committed to take care of reforestation/afforestation until habitat score of area cleared can be achieved => compensation ratio of 1:1 guarantees no net-loss if a party causing destruction of forest habitat is only committed to take care of reforestation/afforestation for a shorter period => compensation ratio has to be increased to guarantee no net-loss if habitat score after 20 years (t20) is 0,2; to compensate for a habitat destroyed (1ha) with a habitat score of 0,8 => compensation ratio of 4:1 required for equivalence => 4 ha need to afforested and looked after for 20 years Eco-compensation ratio to assure no net loss Eco-compensation, offsets, no net loss, net gain

17. BTC/SCP pipelines 248 km length, average width of 53 m on Georgian territory route characterized by very diverse ecological conditions and abundant biodiversity ESIA accepted on conditional basis only; impacts on forest ecosystems have to be evaluated and off-set by adequate eco-compensation measures Goal: restore the equivalent forest habitat, no net loss 141,8 ha forest affected, total value 80,51 habitat hectares eco-compensation ratio for 20,30,40 years care taking period calculated compensation ratio between 1:2,5 up to 1:6,8 Baku-Tbilisi-Ceyhan (BTC) Pipeline Eco-compensation, practical application

18. logical extension of polluter pays principle healthy ecosystems have become scarce inclusion in regulatory framework = pre-requisite for sustainable development EU Natura 2000 areas, Austria, Australia obligation for developers to internalize cost of externalities in Cost-Benefit Analysis, reflection of true costs precondition for future generations to benefit from extremely valuable ecosystem services Eco-compensation, policy application

19. gracias, thank you !!!