Course for RSPO CB Forum

1
Biodiversity The Big Challenge

• Course for RSPO CB Forum Workshop No. 3

• What is the value of ecosystem services?

2
Biodiversity
What it is, what it is worth, what is happening
to it, and what to do about it
Objectives

• Key concepts related to sustainability,
  biodiversity and ecosystem services.
• The value of biodiversity, what is happening to
  ecosystem services, understanding habitat loss
  and fragmentation, and the importance of scale.

3
What have we seen in Lessons 1 to 3of relevance
to the value of biodiversity and ecosystem
services

• Sustainable development is an almost universally
  accepted goal
• Environmentally sustainable development requires
  that critical resource stocks and ecological
  functions are safeguarded
• Maintaining the flow of ecosystem services
  require intact systems which retain their
  structure and diversity

4
What have we seen in Lessons 1 to 3of relevance
to the value of ecosystem services

• A functional definition of capital in general is
  "a stock that yields a flow of valuable goods or
  services into the future
• Biodiversity is important because it supports
  ecosystem processes and the provision of services
  vital to our society and human well-being
• All our activities, including the global economy,
  are made possible thanks to the diversity of
  services that nature provides

5
The value of things
Not all that is very useful commands a high value
(water, for example) and not everything that has
a high value is very useful (such as a diamond)
Adam Smiths Wealth of Nations
(1776) (Paraphrased by TEEB 1)
1 EC GFEM. 2008. The economics of ecosystems
biodiversity.
6
Land use transitions versus GDP
Protected/ recreational
Restoration/ rehabilitation
Urban
100
Proportion in the landscape
Frontier clearings
Subsistence agriculture small-
scale farms
Intensive agriculture
?
Natural ecosystems
Time (stages in land use transitions)
Natural ecosystems
0
Subsi-stence
Intensi-fying
Pre-settlement
Frontier
Intensive
Future
Modified from Foley et al., 2005. Global
consequences of land use. Science 309570-574, 22
July 2005.
7
Changing paradigms

• The ecosystem services paradigm has enhanced our
  understanding of how the natural environment
  matters to human societies
• Societys most fundamental assets include
  natural physical human social and
  intellectual capital

However

• Despite growing recognition of the importance of
  ecosystem functions and services, they are often
  taken for granted and overlooked in planning and
  decision-making

8
What are ecosystem services?
What is Biodiversity ?
Setting the stage for biodiversity
Biodiversity Life on Earth

• BioD underpins ecosystem services

Modified from Pereira, H.M. and Cooper, H.D.
2006. Towards the global monitoring of
biodiversity change. TRENDS in Ecology and
Evolution. Vol. 21, No. 3, March 2006.
9
A closer look at examples of ecosystem functions,
processes, and flow of services
From De Groot et al. 2002. A typology for the
classification, description and valuation of
ecosystem functions, goods and services.
Ecological Economics 41393-408.
10
A closer look at examples of ecosystem functions,
processes, and flow of services
From De Groot et al. 2002. A typology for the
classification, description and valuation of
ecosystem functions, goods and services.
Ecological Economics 41393-408.
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Total Economic Value
Use Value
Non-Use Value
Extractive Forest Wildlife Fish Agricultural Fora
ge Medical Genetic Energy Water supply Water
transport Non-extractive Recreation Landscape Res
earch Education
Shoreline protection Storm protection Sediment
regulation Nutrient retention Water quality
maintenance External support of
fish/habitat Groundwater discharge Microclimat
ic stabilization Carbon sink
Biological and genetic diversity Uniqueness Herita
ge
Habitat Species
Modified from Spurgeon, 2002. Rehabilitation,
conservation and sustainable utilization of
mangroves in Egypt. http//www.fao.org/docrep/007
/ae212e/ae212e00.HTM
12
Valuing a single ecosystem service
In 1996 New York City invested US1 - US1.5
billion in natural capital expecting savings of
US6 US8 billion over 10 year This means an
expected Internal Rate of Return of 90-170 in a
payback period of 4 7 years How on Earth did
that come about?
Chichilnisky G Heal G. 1998. Economic returns
from the biosphere. Nature 391 (6668), pp.
629-630.
13
Valuing a single ecosystem service

• Watersheds 5,000 km2
• Before high quality water, now housing
  development and runoff from roads and
  agriculture a threat
• In 1996 NYC two options
• Filtration system
• 2-6 billion
• 300 million p.a.
• Protect watersheds

From NRC, 2004. Valuing ecosystem services -
toward better environmental decision-making.
National Research Council. National Academies
Press.
14
Valuing a single ecosystem service

• 1997 Watershed Memorandum Agreement
• Federal, state, local authorities, and NGOs
• NYC spend 250 million during 10-year buying
  undeveloped land (willing sellers)
• NYC Investment plan
• Thorough monitoring includes status of freshwater
  biodiversity

From NRC, 2004. Valuing ecosystem services -
toward better environmental decision-making.
National Research Council. National Academies
Press.
15
Valuing a single ecosystem service

• New York Citys water supply
• Despite regulations and comprehensive framework
  uncertainties exists in sustaining long-term high
  quality drinking water
• Provision through natural processes rather than
  human engineering offered estimate of value of
  restoring ecosystem service
• Replacement costs for natural processes providing
  clean water estimated to 2-6 billion (4,000 to
  12,000 per hectare)
• Relative specific policy question meant that
  currently available economic methods of ecosystem
  service valuation was sufficient to provide an
  estimate

From NRC, 2004. Valuing ecosystem services -
toward better environmental decision-making.
National Research Council. National Academies
Press.
16
Valuing a single ecosystem service

• New York Citys water supply
• Obtaining a precise estimate of value of
  provision of clean water through watershed
  conservation difficult because
• Filtration versus watershed protection provide
  same level of water quality and reliability?
• No guarantee that protecting watershed continues
  to be successful
• Replacement cost can only be used when
  alternatives exists to provide same service and
  least-cost applies (i.e. service will still be
  demanded)
• Value of providing clean water is only partial
  measure of the value of ecosystem services
  provided by watersheds
• Replacement cost is rarely a good measure of the
  value of an ecosystem.

From NRC, 2004. Valuing ecosystem services -
toward better environmental decision-making.
National Research Council. National Academies
Press.
17
The value of everything
Multiple services in multiple ecosystems

• What is the value of natures life support
  services?
• Some 30 ecosystem services referred to in
  scientific literature
• In 1997 an international team of economist valued
  17 services from 16 ecosystems including
• Wetlands
• Forests
• Grasslands
• Estuaries
• Other marine and terrestrial ecosystems

Costanza et al., 1997. The value of the worlds
ecosystem services and natural capital. Nature
387 254-260..
18
The value of everything
Multiple services in multiple ecosystems
Costanza et al., 1997. The value of the worlds
ecosystem services and natural capital. Nature
387 254-260..
19
The value of everything
How did they do it?

• Estimated productivity of a hectare (ha) for each
  ecosystem type for each service and a willingness
  to pay estimate for the service
• Multiplying these estimates generated a per ha
  value of the ecosystem service for each ecosystem
  type
• Summed all services to establish a value per ha
  for each ecosystem type
• Finally, multiplied this per-ha value by the
  number of ha of each ecosystem type and summed
  across ecosystem types to derive the total value
  of ecosystem services

Costanza et al., 1997. The value of the worlds
ecosystem services and natural capital. Nature
387 254-260..
20
The value of everything
The bottom line

• The annual value of ecosystem services for the
  earth ranged from 16 trillion to 54 trillion,
  with a mean estimate of 33 trillion. This value
  was notably higher than the value of global GDP
  (Gross Domestic Product) at the time (18
  trillion) i.e. almost twice the size.

Global Gross National Product US 18 trillion
Global Ecosystem Services US 33 trillion
1994 prices
Costanza et al., 1997. The value of the worlds
ecosystem services and natural capital. Nature
387 254-260..
21
The value of everything
What did people say?

• Meaningless exercise since the true value of
  ecosystem services is infinite given that our
  economies would soon collapse without them

• Simple multiplication of a physical quantity by
  unit value cannot be done in natural systems
  since they do not follow linear relationships
• The approach assumes that ecosystem service
  production is scale-free
• In one sense, it was a correct approach towards
  complete accounting. However, present
  understanding and methods is unlikely to
  accomplish it anytime soon

Sustainable Development
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Conclusions

• The valuation of ecosystem services is an
  evolving discipline which requires the
  integration of ecology and natural sciences with
  economy.
• Examples of approaches and interdisciplinary
  studies that provide such integration indicate
  successful beginnings
• The ability to generate useful information about
  the value of ecosystem services varies widely for
  case studies 1
• For some policy questions, enough is known about
  ecosystem service valuation to help in
  decision-making.

1 NRC, 2004. Valuing ecosystem services - toward
better environmental decision-making. National
Research Council. National Academies Press.
23
Conclusions
Our constraints in supporting decision-making
with reliable ecosystem values may arise from

• Insufficient ecological knowledge/information to
  estimate
• The quantity of ecosystem services produced or
• How ecosystem service production would change
  under alternative scenarios
• Existing economic methods may be unable to
  generate reliable and uncontroversial estimates
  of value for the provision of various levels of
  ecosystem services
• Lack of integration of ecological and economic
  analysis.

1 NRC, 2004. Valuing ecosystem services - toward
better environmental decision-making. National
Research Council. National Academies Press.
24
Conclusions

• Studies that focus on valuing a single ecosystem
  service show promise of delivering results that
  can inform important policy decisions
• Even when the goal of a valuation exercise is
  focused on a single ecosystem service, a workable
  understanding of the functioning of large parts
  or possibly the entire ecosystem may be required
• Valuation of a single ecosystem service is easier
  than valuating multiple services. However, the
  interconnections among services may make it
  necessary to expand the scope of the analysis.
• Ecosystem processes are often spatially linked,
  especially in aquatic ecosystems
• The value of ecosystem services depends on
  underlying conditions.

1 NRC, 2004. Valuing ecosystem services - toward
better environmental decision-making. National
Research Council. National Academies Press.
25
Recommendations 1

• There is no perfect answer to questions about the
  proper scale and scope of analysis in ecosystem
  services valuation.
• Estimates of value should be placed in context.
• Concerted efforts should be made to overcome
  existing institutional barriers that prevent
  ready and effective collaboration among
  ecologists and economists regarding the valuation
  of terrestrial, freshwater and marine ecosystem
  services.
• Existing and future interdisciplinary programs
  aimed at integrated environmental analysis should
  be encouraged and supported.

1 NRC, 2004. Valuing ecosystem services - toward
better environmental decision-making. National
Research Council. National Academies Press.
26
Value of ecosystem servicesCase Studies 1

• Single ecosystem service
• Providing clean drinking water (p. 132)
• Drinking water from ground water (p. 137)
• Valuation of fish production provided by coastal
  wetlands and estuaries (p. 141)
• Provision of flood control services (p. 143)
• Valuing multiple ecosystem services
• Fish production, irrigation waters, navigation,
  flood control, and clean drinking water (p. 146)
• Upstream vs. downstream water use (p. 149)
• Food production, recreational fishing, and
  provision of drinking water from lakes (p. 151)

1 NRC, 2004. Valuing ecosystem services - toward
better environmental decision-making. National
Research Council. National Academies Press.
27
Value of ecosystem servicesCase Studies 1

• Valuing ecosystems
• Oil spill (p. 154)
• Restoration of water resources (p. 156)
• Multiple services in multiple ecosystems (p. 159)

1 NRC, 2004. Valuing ecosystem services - toward
better environmental decision-making. National
Research Council. National Academies Press.