Economic tools in ecosystem management

Economic tools in ecosystem management Kristin Magnussen Sweco Norge Kristin.Magnussen@sweco.no Foto: Mareano/Havforskningsinstituttet

Outline of my presentation: What is meant by ecosystem services? TEEB :The Economics of of Ecosystem Services and Biodiversity An Example: Description of different ecosystem services and examples from the Barents Sea Lofoten area Valuation of ecosystem services examples of valuation challenges (methods, data etc. etc) interdiciplinary dimension in valuation of ecosystem services How can these tools be used now and towards 2030? 2

Background An earlier project with the aim to give a simplified description of the marine ecosystem services in the Barents Sea Lofoten and the value of these services An early attempt to describe and assess the broad variety of ecosystem services and their value in the Barents Sea Lofoten area The main emphasis was on description and assessment of the goods ande services that are normally not described and valued. Little work has been carried out in Norway on this topic up till now Our work is a small part of the international work currently carried out in order to improve the description and understanding of ecosystems and their importance and values, e.g. in UNEP and EU (Millennium Ecosystem Assessment; MEA and The Economics of Ecosystems and Biodiversity; TEEB). Marine areas are even less described, assessed and valued than terrestrial areas 3

ECOSYSTEM SERVICES: The benefits people obtain from ecosystems (Millennium Ecosystem Assessment) BENEFITS are broadely defined: - Use values and non-use values - Present and future - Preservation of nature for ourselves and future generations 4

ECOSYSTEM SERVICES: Classification: SUPPORTIVE ECOSYSTEM SERVICES are those that are necessary for the production of all other ecosystem services, such as primary production, production and nutrient cycling REGULATING ECOSYSTEM SERVISES are the benefits people obtain from the regulation of ecosystem processes, including regulation of greenhouse gases, regulation of floods, water purification PROVISIONING ECOSYSTEM SERVICES are the products people obtain from ecosystems such as fish and shellfish, genetic resources, oil and gas CULTURAL ECOSYSTEM SERVICES are the nonmaterial benefits people obtain from ecosystems such as recreational and aesthetic services 5

Figur x Sammenhengen mellom økosystemtjenester og menneskenes velferd. Kilde: Naturvårdverket (2009). 6

Figur x Påvirkninger som medfører endringer i økosystemtjenester 7

Vedlikeholds- og restaureringskostnader Økonomiske og sosiale verdier (noen ganger markedsverdier) Biologisk struktur eller prosess (for eksempel leveområde eller netto primærproduksjon) Samlet belastning fra ulike kilder/politikkområder Funksjon (for eksempel langsom avrenning, eller klimagassregulering) Tjeneste (for eksempel matproduksjon, eller høstbare produkter) Nytte (verdi) (for eksempel pris for fisk, eller betalingsvillighet for beskyttelse av marine områder ) Belastninger Mellomprodukter Sluttprodukter

TEEB (The Economics of Ecosystems and Biodiversity) approach to: 1) Recognizing value: involving identification of ecosystem services and their welfare effects reflecting a plurality of values, one of which may be monetary 2) Demonstrating value: assessing the costs and benefits of biophysical changes resulting from alternative management options, higlighting tradeoffs, and seen as the principal role of economic valuation 3) Capturing value: involving the evaluation and introduction of mechanisms that incorporate values of ecosystems into decision-making, through incentives and price signals 9

Figur 2. Illustrasjon av beslutningskriterier. Nytte (?kr) Ikke prissatt Nytte Prissatt nytte Ikke prissatt nytte Prissatt nytte Ikke prissatt nytte Kostnader Kostnader Kostnader Alt 1 Alt 2 Alt 3 Kostnad kr 10

Monetary valuation Monetær: for eksempel unngåtte kostnader til vannrensing, verdi av matforsyning, verdi av lagring av karbon Quantitative assessment Kvantitativ: for eksempel kubikkmeter renset vann, tonn lagret karbon, andel av befolkningen som blir berørt av tap av matforsyning Qualitative assessment Kvalitativ: Omfang og viktighet av økosystemtjenester fra ulike økosystemer, og kunnskapshull The total amount of ecosystem services supported by biodiversity

Value Willingness-to-pay The population s WTP for an increase in quality or quanitity of (an) ecosystem service(s) is called TOTAL ECONOMIC VALUE (TEV) of this CHANGE. TEV consists of several parts: Use value (direct and indirect) Option value Non-use value (existence and bequest values) (Quasi option value) 12

Table 1: Methods for economic valuation of environmental goods Indirect Direct Revealed Preferences RP Travel Cost Method TCM Hedonic Price Method HPM Market prices Replacement Costs RC Avoidance Costs AC Stated Preferences SP Choice Experiments CE Contingent Valuation CV 13

Supporting ecosystem services Maintenance of biogeochemical cycling Primary production Maintenance of food web dynamics Maintenance of biodiversity Maintenance of habitat Maintenance of resilience 14

Regulating ecosystem services Climate and atmospheric regulation Sediment retention Mitigation of eutrophication Biological regulation Regulation of hazardous substances 15

Provisioning services Provision of food fit for consumption; fisheries, aquaculture, health products etc. Provision of inedible goods; fish for fodder, oil and gas Provision of genetic resourses; wild samon genes as a genepool for aquaculture Provision of marine resources for the pharmaceutical, chemical and biotechnological industry (marine bioprospecting) Provision of ornamental resources Provision of energy; wave and tidal power Provision of space and waterways; for transport and space for wind power etc. 16

Provisioning services; some monetary values Fisheries: First hand value of fish from the management area: ca. 7 billion NOK (2009) + gross production value in fish processing in the three northern counties: ca.7,5 billion per year Aquaculture: First hand value: ca. 6 billion per year + processing Genetic resources and resources for pharmaceutical, chemical and biotechnnological industry: Potentially large values: One example is an enzym in cod liver worth 25 mill NOK per gram. Important area for Norwegian Research and Development, among other examples: establishment of Mabcent in Tromsø 17

Cultural Services: o Enjoyment of recreational activities o o o o o Enjoyment of scenery Contribution to science and education Maintenance of cultural heritage Inspiration for art and advertisement The legacy of the sea 18

Cultural services: Recreation and tourism Tourism: Gross product in tourism in the 3 northern counties: ca. 6 billion NOK per year Staying overnight in Lofoten- Vesterålen Senja- region (2009): 643 000 paid overnight stays (ca.1/4 og all overnight stays in northern Norway (Finmark, Troms and Nordland)) Recretion: Fishing: Estimated ca. 1 million fishing days for local population in 3 northern counties; Recreation value (local population) estimated to 270-800 mill NOK per year + recreation value for tourists Hunting of sea birds: Estimated recreation value (locals): 100 000 2 mill NOK/year Bird watching, recreation by the coast and sea, sea safari, paddling, snorkling etc. American studies estimate recretion values per activity day by the sea/coast to 50-800 NOK (depending on activity and quality of area/activity) 19

Cultural services: Aesthetic values Use values and non-use values People value scenic views e.g. compare the prices for house/cabin with/without sea view In Denmark: Investigated people s valuation of moving new wind mills further away from the shore Results indicate that there are large values attached to moving the wind mills far out in the sea so that they could not be seen from shore. The further away from the shore, the more people are willing to pay. Average willingness-to-pay was ca. 400; 800 og 1000 NOK per household per year for moving the wind mills 12; 18 og 50 km from the shore respectively, compared to 8 km The results indicate that people value the preservation of nice scenic views and to avoid installations that change the aesthetic view 20

Cultural services: Cultural heritage and identity Probably high values related to cultural heritage and identity Difficult to value in monetary terms Use and non-use values Use values: For example: basis for tourism, museums etc. Non-use values: In Sweden estimated people s willingness-to-pay for preservation of culturally important fisheries Norway: For example Lofoten s more than 6000-year history with settlements, fisheries and hunting and the interaction between nature and cultural history - is documented in several books and documents 21

Cultural services: Legacy of the sea Non-use values of preserving the sea for the future These services are not valued in monetary terms for the Barents Sea Lofoten. However, use and non-use values for preservation of coast and sea with good water quality is estimated in other Norwegian (and foreign) areas. Studies indicate that people highly value and are willing to pay for the preservation of marine areas with good environmental quality for themselves and future generations even if they do not use the areas themselves. 22

Example of estimation the value of improved water quality Average willingness-to-pay (WTP) for specific water quality improvement in the North Sea was estimated to approximately NOK 1000 per Norwegian household per year in 1992 Corresponds to approximately Long-term NOK 1460 effects kroner i 2010 (using consumption price index) WTP was higher for users than for non-users Non-use value was approximately 50-60 % of total WTP Aggregation indicate total WTP for the Norwegian population is approximately NOK 3,2 billion per year 23

Ecosystem services, welfare and valuation Some challenges to consider: Uncertainty and lack of knowledge about the natural scientific effects (particularly lack of quantified data) Lack of valuation studies Spatial explicitness Valuation methods in general (particularly for non-use values) (new studies and benefit transfer) - Valuation of marginal changes Functions and services End products (goods and services) and intermediate products (goods and services) Substitution and/or complementarity between goods and services Non-linearities and tresholds 24

Tabell 6.1. Støttende og regulerende tjenester: Forenklet oversikt over økosystemtjenester, type verdier de representerer, aktuelle økonomiske verdsettingsmetoder og forekomst av eksempler på bruk for marine områder. Kolonnen helt til venstre viser hvilket kapittel tjenesten er beskrevet i. Tabellen er ikke uttømmende mht. type verdi og verdsettingsmetoder, men peker på viktige/ typiske verdier/metoder Beskrevet i Tjeneste Type verdi Aktuelle økonomiske Eksempler/kommentarer kapittel verdsettingsmetoder 5.3 Støttende tjenester 5.3.1-5.3.7. Vedlikehold av biogeokjemiske sykluser, primærproduksjon, vedlikehold av næringsnettdynamikk, vedlikehold av biodiversitet, vedlikehold av habitater/leveområder, vedlikehold av resiliens 5.4. Regulerende tjenester 5.4.1. Klimatisk og atmosfærisk regulering (for eksempel CO 2 - binding) 5.4.2 Tilbakeholdelse av sedimenter (sedimentretensjon) 5.4.3 Regulering av eutrofiering (overgjødsling) Ikkebruksverdi; grunnlag for andre tjenester Bruksverdi (indirekte), ikkebruksverdi; grunnlag for andre tjenenester Oppgitte preferanser (Kan synliggjøre grunnlag for andre tjenester ved PFM*) Erstatningskostnader (skyggeprosjekt); sparte kostnader til rensing; Oppgitte preferanser (for ikke-bruksverdiene) Ingen øk. verdsetting foreligger for Barentshavet. For Norge: - Ikke-bruksverdier av forbedret vannkvalitet som del av totalverdi; -Verdsatt det å unngå skader på marine og kystøkosystemer av oljesøl vha et bedre oljevernberedskapsprogram.spania; verdsatt skader etter oljetankeren Prestige; USA: verdsatt skader etter oljetankeren Exxon Valdez i Alaska. Kan regne på tonn CO 2 bundet i havet*skadekostnad per tonn (for eksempel CO 2 - kvotekostnad),men obs på kapasitetsgrense Ikke beregnet for Norge Norge: Betalingsvillighet for vannkvalitetsforbedring i Nordsjøplanområdet. Tilsvarende for Østersjøen, Storbritannia m.fl. 5.4.4 Biologisk regulering Ingen norske; noen svenske eksempler finnes 5.4.5 Regulering av skadelige stoff (for eksempel miljøgifter, Norge: Betalingsvillighet for fjerning av miljøgifter i Grenlandsfjordene. olje, søppel) * PFM = produksjonsfunksjonsmetoden (jf. kapittel 5.3.7.2) (PFM dekker kun bruksverdi; ikke ikke-bruksverdi) 25

Tabell 6.2. Produserende økosystemtjenester: Forenklet oversikt over økosystemtjenester, type verdier de representerer, aktuelle økonomiske verdsettingsmetoder og forekomst av eksempler på bruk for marine områder. Kolonnen helt til venstre viser hvilket kapittel tjenesten er beskrevet i. Tabellen er ikke uttømmende mht. type verdi og verdsettingsmetoder, men peker på viktige/ typiske verdier/metoder Beskrevet i kapittel Tjeneste Type verdi Aktuelle økonomiske 5.5. Produserende tjenester 5.5.1 Produksjon/forsyning av mat for menneskelig konsum 5.5.2 Ikke-spiselige produkter, inkludert olje og gass verdsettingsmetoder Eksempler/kommentarer Bruksverdi, Markedspris Beregnet førstehåndsverdier for fiske og oppdrett. Oftest bruttoverdier som oppgis. Bruksverdi, opsjonsverdi, 5.5.3 Genetiske ressurser Bruksverdi, opsjonsverdi, Kvasiopsjonsverdi 5.5.4 Ressurser for farmasøytisk, kjemisk og biotekn. industri 5.5.5 Dekorative ressurser (for eksempel skjell og selskinn) 5.5.6 Energiforsyning fra havet (unntatt olje og gass) Bruksverdi, opsjonsverdi, Kvasiopsjonsverdi Bruksverdi, opsjonsverdi 5.5.7 Areal og vannveier Bruksverdi, opsjonsverdi Markedspris/ erstatningskostnad Markedspriser, oppgitte preferanser Markedspriser, oppgitte preferanser Markedspriser Eks.: Lodde til fôr, petroleumspotensial vurdert. Ellers potensielt viktige, men foreløpig ikke verdsatt Potensielt store, men vanskelig å verdsette Potensielt store, men ikke verdsatt. Implisitt vurdert gjennom midler til FoU. Relativt lite utbredt, ikke verdsatt Bruksverdi Markedspriser Lite utbredt i dag, potensielt viktig Markedspris for alternativ bruk av areal Kun verbalt beskrevet i Norge, kostnader oppstår ved arealkonflikter. 26

Tabell 6.3. Kulturelle økosystemtjenester: Forenklet oversikt over økosystemtjenester, type verdier de representerer, aktuelle økonomiske verdsettingsmetoder og forekomst av eksempler på bruk for marine områder. Kolonnen helt til venstre viser hvilket kapittel tjenesten er beskrevet i. Tabellen er ikke uttømmende mht. type verdi og verdsettingsmetoder, men peker på viktige/ typiske verdier/metoder Beskrevet Tjeneste Type verdi Aktuelle økonomiske Eksempler/kommentarer i kapittel 5.6. Kulturelle tjenester 5.6.1. Rekreasjon og turisme 5.6.2 Estetiske verdier 5.6.3 Vitenskap og utdannelse 5.6.4 Kulturell arv og identitet 5.6.5 Inspirasjon til kunst og reklame 5.6.6 Havets testament Bruksverdi, opsjonsverdi ikkebruksverdi, Bruksverdi og ikkebruksverdi Bruksverdi, opsjonsverdi, ikkebruksverdi kvasiopsjonsverdi Ikkebruksverdi Bruks- og ikkebruksverdi Ikkebruksverdi verdsettingsmetoder Markedspris/TKM/oppgitte preferansemetoder Oppgitte preferanser/tkm for tilreisende; oppgitte preferanser/hp for fastboende Erstatningskostnader, implisitt verdsetting i form av bevilgninger til FoU Oppgitte preferanser Markedspriser Oppgitte preferanser TKM= transportkostnadsmetoden, HP=eiendomsprismetoden, BV = Betalingsvillighet Mange eks. for rekreasjonstjenester; fiske, jakt. Ofte bruttoprodukt (eller -produksjons)verdier for turisme Få studier av estetikk med overførbarhet til hav i Norge; mest aktuelt: BV for å få vindmøller lenger til havs i Danmark Vanskelig å verdsette i kroner. Kun implisitt verdsetting i form av bevilgning til FoU Vanskelig å verdsette fullt ut i kroner. Norge: Verbal beskrivelse. Sverige: BV for bevaring av kulturelt viktig fiske Ikke prissatt, kun verbal beskrivelse Norge: Ikke-bruksverdi som andel av total betalingsvillighet knyttet til vannkvalitet i Nordsjøplanområdet. 27

How can these tools be used? (1) Marine areas provide us with several goods and services that are important for human welfare and well-being Many of these are hardly valued in monetary terms and many of them are difficult to value Goods and services without any price tag should be part of economic analysis of projects in marine areas, otherwise important values could be excluded from the decision making process Work so far is first and foremost a contribution to the definition and clarification of conceps, translation of natural science research to economic language and a start/suggestion for further research: How to improve our understanding of the marine ecosystems contribution to human welfare? Lots of work is going on in this area (TEEB, Nordic TEEB, Baltic Sea initiatives, Vad kan havet ge oss?, Norwegian TEEB ++, Grønn vekst etc.) 28

How can these tools be used? (2) Marine areas are even less assessed and valued than terrestric ecosystems At present our knowledge can be used mainly to start recognizing the values of marine areas Enhanced work in this area is taking place and will take place in the years to come, and may be more and more important in demonstrating values: assessing the costs and benefits of biophysical changes resulting from alternative management options, higlighting trade-offs etc. And capturing value: involving the evaluation and introduction of mechanisms that incorporate values of ecosystems into decision-making, through incentives and price signals 29

Conclusion The TEEB approach and valuation of ecosystem services of marine areas has just started for practical purposes This approach should be part of future ecosystem based management of the marine areas 30

Thank you for your attention! Kristin.Magnussen@sweco.no 31