Module 5:

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Economic Analysisof Invasive Species
Module 5 valuing ecosystem impacts
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what this module covers

• commonly-used ecosystem valuation techniques
• their application to invasive species
• the limitations of economic valuation

about invasive species
Module 1
understanding the economic causes of invasions
Module 2
impacts of invasive species and ways to address
them
Module 3
defining invasive-relatedcosts benefits
Module 4
valuing ecosystem impacts
Module 5
informing actionsto address invasives
Module 6
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market prices
looks at the market price of ecosystem goods and
services
how much they cost to buy or what they are worth
to sell
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market prices
are particularly useful for valuing the
resources and products that are harvested
directly from ecosystems

• direct on-site impacts on marketed goods
• when invasive species replace other species which
  yield marketed products or resources (for example
  crops, livestock products, timber or fish)
• when invasive species themselves yield marketed
  products or resources (for example crops,
  biofuels, livestock products, timber or fish)

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market prices
local use of wetland resources in Southern Africa

• 10 wetlands on Zambezi River (Angola, Zambia,
  Botswana, Namibia, Zimbabwe, Malawi, Mozambique)
• carried out inventory of economically valuable
  wetland products
• local market survey conducted to find out prices
  for different products
• user survey identified levels and quantities of
  use
• crops, livestock, fish, tourism, fuel,
  handicrafts, construction materials, medicines,
  wild foods worth 145 million/yr or 48/ha

(Seyam et al 2001)
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going beyond market prices

• the reason why policy, market and price
  distortions and failures result in invasions is
  because prices and markets send the wrong signals
  to producers and consumers about the real costs
  and benefits of their actions
• many ecosystem goods and services do not have
  markets
• many ecosystem goods and services are subject to
  markets which are highly distorted or irregular
• in such cases, alternative valuation techniques
  must be applied which do not rely on uncorrected
  market prices

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summary of valuation methods
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effect on production
relate changes in the output of a marketed
goodor service to a measurable change in the
quality of quantity of ecosystem goods and
services
the value of ecosystem services as inputs to
production
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effect on production
can be used to look at the changes in output that
occur when invasive species impact on the
provision of particular goods and services which
are required for offsite or downstream production

• When invasive species
• replace other species which yield marketed
  products or resources which are used as inputs
  for other production processes, such as natural
  pesticides or pollinators, or raw materials
• interfere with natural habitat for species which
  are commercially important offsite such as bird
  and fisheries breeding and habitat
• introduce human, plant or animal diseases and
  pests
• interfere with or choke water supplies which are
  required for downstream irrigation, fisheries,
  hydropower or urban water supplies
• lead to changes in soil fertility, or soil erosion

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effect on production
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effect on production
global agricultural costs of pollinator decline

• looks at 100 food crops which depend on insects
  for pollination
• used dependence ratios quantifying impact lack of
  insect pollinators on crop value
• constructed bioeconomic models using reduction in
  yield, quantity produced and consumed, dependence
  ratio, retail price
• total economic value of insect pollination 153
  billion or 9.4 of total production value

(Gallai et al 2007)
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travel costs
look at the ways in which the value of ecosystem
goods and services are reflected indirectly in
peoples expenditures on travel
the value of ecosystems as recreational or
leisure destinations
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travel costs
can be used to look at the changes in tourism and
recreational earnings which occur when invasive
species make a site less or more attractive to
visitors

• When
• the habitats being invaded are used for
  recreational purposes such as hiking, camping,
  fishing, boating or are considered to have
  particular landscape beauty, which is compromised
  by the presence of invasive species

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travel costs
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travel costs
freshwater recreation in the USA

• Conservation Research Program (CRP) aims to
  mitigate environmental effects of agriculture
• study to ascertain the impacts of improved
  environmental quality on freshwater recreation,
  fishing, hunting and wildlife
• sample of 15,000 respondents from 4 states asking
  about number of visits, travel costs
• combined benefit of CRP actions found to be 35
  million/yr or 2.57/ha

(Feather et al 1999)
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hedonic pricing
look at the ways in which the value of ecosystem
goods and services are reflected indirectly in
the prices of property
the value of ecosystems for quality of life
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hedonic pricing
can be used to look at the changes in property
prices which might occur due to changes in the
landscape wrought by invasives

• When
• the habitats being invaded have particular
  landscape beauty, and are associated with premium
  property prices
• the invasions leads to difficulties accessing
  residential areas, or interferes with the
  provision of utilities such as water supplies

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hedonic pricing
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hedonic pricing
urban wetlands in the USA

• valued wetland amenities in Portland Oregon
  metropolitan region
• data set of 15,000 home sales
• information gathered about property price and its
  structural, neighbourhood and environmental
  characteristics as well as socio-economic
  characteristics of buyer
• wetlands classified, and distance from property
  computed
• found wetland proximity exerted significant
  influence on property values

(Mahan 1997)
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replacement costs
look at the market trade-offs of maintaining
ecosystems for their goods and services via what
it would cost to replace degraded or lost
ecosystem services by alternative means
the value of ecosystem services in terms of costs
saved
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replacement costs
can be used to look at the changes in output that
occur when invasive species impact on the
provision of particular goods and services which
can be replaced by alternative sources

• When invasive species
• replace other species which yield marketed
  products or resources, and these species or
  products have to be sourced from elsewhere or
  replaced by other products
• compromise water quality and supplies, requiring
  alternative sources of water supply or
  purification
• lead to changes in soil fertility, necessitating
  the application of artificial fertilisers
• destroy insects which provided pollination
  services, which have to be replaced artificially
• degrade ecosystems which provided soil erosion
  control services, which have to be replaced by
  artificial soil erosion control structures

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replacement costs
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replacement costs
wetland water quality in Uganda

• Nakivubo swamp in central Kampala
• receives and treats most of citys industrial and
  residential wastewater
• looked at costs of replacing wetland functions
  with on-site treatment plants and new sewerage
  system
• found annual wetland water treatment service
  value of 2 million/yr

(Emerton et al 1999)
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mitigative avertive expenditure
look at the market trade-offs of maintaining
ecosystems for their goods and services via what
it would cost to undertake the actions required
to mitigate or offset the negative effects of
ecosystem service degradation or loss
the value of ecosystem services in terms of costs
saved
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mitigative avertive expenditure
can be used to look at the cost of responding to
or remediating the ecosystem damage or change
that has been caused by invasives

• When
• the invasive species replace important food
  species, requiring drought or famine relief to
  maintain local nutrition and food security
• the invaded ecosystem provided flood attenuation
  services, which require the introduction of
  measures to mitigate or avert the effects of
  flooding on downstream settlements
• the invasive species act as pests or diseases on
  plants, animals or humans, requiring vaccination
  or disease control measures to be set in place
• the invaded ecosystem provided soil erosion
  control services, necessitating the installation
  of silt trapping and sediment removal structures
  downstream

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mitigative avertive expenditure
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mitigative avertive expenditure
wetland flood control in Sri Lanka

• Muthurajawela Swamp in densely-populated urban
  area on coast
• water storage capacity prevents local flooding
• looked at costs of mitigating effects of floods
  through drainage and pumping
• found annual wetland value of 5 million/yr or
  1,750/ha

(Emerton and Kekulandala 2002)
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damage costs avoided
look at the market trade-offs of maintaining
ecosystems for their goods and services via the
costs and losses of the damages arising when
ecosystem services are degraded or lost
the value of ecosystem services in terms of costs
saved
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damage costs avoided
can be used to look at looking at the cost caused
to infrastructure and production when invasives
interfere with the goods and services provided
by a particular ecosystem

• When
• the invaded ecosystem provided flood control
  services, and the consequent increase in the
  incidence and severity of flooding leads to
  damages to houses, roads and agricultural
  production
• the invaded ecosystem provided water purification
  services, and the consequent decline in water
  quality leads to human health impacts
• the invasive species act as pests or diseases on
  plants, animals or humans, leading to increased
  medical expenditures and losses in productivity

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damage costs avoided
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damage costs avoided
invasive alien plants in South Africa

• invasion causes fire risks, and increases
  likelihood of fire damage on Cape Peninsula
• damage also results in soil loss, erosion and
  likelihood of flooding
• looked at costs of fire and flood damage,
  insurance claims, cleanup costs
• costs per fire/flooding event of 150,000
  (cleanup), 150,000 (flood damage), 5.7 million
  (insurance claims), costs of fire fighting (0.5
  million)

(van Wilgen et al 2001)
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contingent valuation
ask consumers to state their preference directly,
rather than looking at the way in which people
reveal their preferences for ecosystem goods and
services through market production and consumption
the value of ecosystem services as perceived by
individuals
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contingent valuation
can be used to look at the non-market values that
people place on ecosystems that run the risk of
invasion, and assessing peoples perceptions of
option values for particular sites, species or
products

• When invasive species
• replaces species, or interferes with an
  ecosystem, which are objects of national
  heritage, special scientific interest, or
  international significance
• replaces species, or interferes with an
  ecosystem, which may have future use values such
  as for hunting, leisure, as a gene pool
• replaces species, or interferes with an
  ecosystem, which people wish to conserve for
  future generations

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contingent valuation
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contingent valuation

• most contingent valuation studies are conducted
  via interviews or postal surveys with
  individuals, but sometimes interviews are
  conducted with groups.
• the two main variants of contingent valuation
  are
• dichotomous choice surveys, which present an
  upper and lower estimate between which
  respondents have to choose
• open-ended surveys, which let respondents
  determine their own bids
• more sophisticated techniques are also sometimes
  used, such as engaging in trade-off games or
  using take-it-or-leave it experiments
• the Delphi technique uses expert opinion rather
  than approaching consumers directly

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contingent valuation
watershed drought mitigation in Indonesia

• focused on water catchment protection services of
  RutengNational Park, Flores
• looked at local farmer WTP for drought mitigation
  services inrelation to rice irrigation water
• asked whether would pay a set annual fee,
  followed up by questions about lower and higher
  fees
• found mean annual stated WTP of2-3/hhold,
  equivalent to 10 of annual agricultural costs,
  75 of irrigation fees, 3 of food expenditures

(Pattanayak and Kramer 2001)
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applicability and relevance
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limits to valuation

• generates useful and convincing information for
  decision-makers and decision-making, and
  highlights costs and benefits that are usually
  ignored, but is
• a means to an end, not an end in itself aim is
  to enable better and more informed decisions
• is inexact based on available knowledge and data
  at a particular time
• not a stand-alone exercise requires a
  multidisciplinary team, not just economists
• partial can never fully value ecosystem services
• not universal certain costs and benefits cannot
  and should not be valued
• not easily transferable most findings are
  specific to area, stakeholder group,
  socio-economic and natural conditions
• often biased studies and their findings are
  heavily influenced by the purposes for which they
  are carried out

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thank you
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summary of valuation methods
stated preference methods
revealed preference methods
marketprices
surrogate market approaches
production function approaches
cost-based approaches
marketprices
travelcosts
contingent valuation
effect on production
replacementcosts
hedonicpricing
mitigative avertive expenditures
damagecosts avoided