GEP5: Biodiversity

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GEP5 Biodiversity

• The problem Sources, mechanisms and consequences
• International biodiversity policy
• Giant pandas and ecotourism
• Elephants, ivory and trade

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Biodiversity

• There are about 14 (2-100) million species, about
  1.7 million of which are described
• About .4 (.04-1.1) of the species goes extinct
  each year
• This is 50-100 times the natural rate
• In 50 years time, 18 (4-41) is gone
• In 100 years, 33 (4-66) is gone

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Biodiversity -2

• Proximate causes
• Land use change
• Exploitation
• Exotic species
• Homogenisation of agriculture
• Pollution
• Climate change

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Biodiversity -3

• Ultimate causes
• Expansion of human society
• Poverty and underdevelopment
• Deliberate choice
• Inappropriate policy, policy failure
• Institutional failure

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Biodiversity -4

• The consequences of a decline in biodiversity are
  not clear-cut
• There are ethical arguments Humans do not have
  the right to destroy creation
• There are aesthetic arguments Diversity is
  pretty
• There are utilitarian arguments Diverse systems
  are more robust there may be unknown benefits
  hiding in the woods
• The last two do not cut much wood

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J.M.L. Santos (1998), The Economic Valuation of
Landscape Change, Cheltenham Edward Elgar.
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Biodiversity -5

• Why is biodiversity an international problem?
• Biodiversity is concentrated in the poor tropics,
  concern about biodiversity is concentrated in the
  rich temperate zone
• The two are not unconnected There are good
  reasons why hot implies poverty
• Temperate zones squandered much of their natural
  beauty so as to grow rich
• The poor want to emulate this

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Ecotourism

• The crucial problem of biodiversity is that those
  who value the resource, do not control it and
  that those who control the resource, do not value
  it
• One way of reversing this is ecotourism
• Ecotourism is travel, holidays, recreation with
  the purpose of enjoying natural beauty
• Ecotourism is on the rise, now clearly recognised
  as a valuable nice market

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International Tourism
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The Giant Panda

• The Giant Panda is
• one of the worlds most
• valuable species, e.g.,
• as a mascotte for the
• World Wide Fund for
• Nature

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The Giant Panda -2

• The Giant Panda is one of the worlds most
  endangered species with about 1,000 animals still
  living in the mountains of Sichuan, China
• The main reason is loss of habitat to humans
• In the last 30 years, 30 of Sichuan forests have
  disappeared
• To protect the Panda, the Chinese government
  designated nature reserves

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Wolong Reserve

• The Wolong Panda Reserve is the most important
  reserve
• Reserves imply restrictions on the activities of
  local communities
• People in Wolong are poor they engage in
  livestock, agriculture and gathering wood
  products, making an income of about 1 a day
• The Wolong Reserve has taken away about 40 of
  their agricultural land
• In return, there is ecotourism

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Tourism Revenues 1994
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Wolong Reserve -2

• About 250,000 is received per year, for 200,000
  hectare, say 1/ha
• About 55 is spent on the park, about 5 flows to
  the locals
• This is about 0.05/ha, while subsistence makes
  about 1/ha
• Little wonder that the locals do not cooperate
  with the reserve, and in fact continue to
  deteriorate it

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Wolong Reserve -3

• Is this necessary?
• Estimates suggest that the reserve can handle
  about 150,000-180,000 tourist per year (3 to 4
  times as much as current), and up to 44,000 in
  the core area (0 at the moment) the Panda would
  still outnumber humans by a factor of 2
• So, tourist numbers and revenues can go up
  without ecological damage

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Wolong Reserve -4

• Prices can go up too
• People are willing to pay an entrance fee of 24
  rather than the current 7, and would be happy to
  pay for a four-star hotel instead of the current
  one-star hotel
• There is also a high-value part of the market,
  prepared to pay some 1,200 for a two-day stay in
  the core area
• For visible local participation, add 10

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Wolong Reserve -5

• Furthermore, tourists (6 million in 1995) are
  prepared to pay 12-14 as an airport tax this
  includes tourists who have not been with the
  pandas
• In total, the annual revenue of Wolong Reserve
  could amount to 450/ha (1 at present)
• If the locals get 4 (as they do now), that would
  be 18/ha, compared to 1/ha for subsistence
  farming

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Ecotourism -2

• The story is the same everywhere
• Ecotourism is sold cheap this sometimes implies
  that there are too many tourists who care too
  little
• Ecotourism brings only a meagre return, only a
  fraction of which is paid to the locals
• As a consequence, locals have little interest in
  preserving this source of income

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Biodiversity Policy

• CITES Convention on International Trade in
  Endangered Species of Wild Fauna and Flora
• Negotiated in 1973, entered into force in 1975
  (18 members) now 152 signatories
• Appendix I species Need both an export and an
  import permit, signed by both the Scientific and
  Management Authorities The SA checks species
  survival the MA checks i.a. commercial use and
  specimen well-being

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Biodiversity Policy -2

• Appendix II species Need an export permit,
  signed by both the Scientific and Management
  Authorities The SA checks species survival the
  MA checks i.a. specimen well-being
• Appendix III species Need an export permit,
  signed by the Management Authority The MA
  checks i.a. specimen well-being

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Biodiversity Policy -3

• App I Gorilla, Chimpanzee, most whales, cheetah,
  panda, otter, lion, tiger, some bear, elephants,
  rhino, ostrich (Sahel), most eagles
• App II Most monkeys, most dolphins, wolves,
  other bear, Southern African elephant (limited),
  flamingoes, hawks, falcons
• App III Some mongoose, armadilloes, bats,
  squirrels, martens, weasels, antelopes, ducks,
  walrus

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African Elephants

• Populations fell from 1.2 million (mid 70s) to
  600,000 by 1988, less today
• In 1989, the African elephant was upgraded to
  CITES App I, and populations started to increased
  again, though not by enough to lift the trade ban
• In 1997, elephants in Southern Africa were put in
  App II again, mainly because populations there
  are large and growing, and a nuisance to people

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African Elephants -2

• What effect does a trade ban has on legal
  activities?
• Consider a social planner trying to determine the
  optimal stock size
• This problem can be solved using the Maximum
  Principle, the continuous time version of the
  Lagrange method

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African Elephants -3

• The first order conditions are
• The elephant population should be maintained at
  that level where the growth rate of the shadow
  value of an elephant equals the opportunity cost
  of not culling, which equals the discount rate
  minus the growth rate plus the normalised costs

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African Elephants -4

• The first order conditions are
• Differentiating to time and equating

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African Elephants -5

• In the steady state, this reduces to
• With a trade ban, the harvest is worthless
• The optimal steady state stock follows from
  equating the marginal benefits of tourism with
  the marginal costs of agricultural damage

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(No Transcript)
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African Elephants -6

• How does poaching enter into this?
• On the one hand, a trade ban reduces supply,
  increases price it also increases transaction
  costs, reducing the net price to the producer,
  perhaps driving up the price further
• Poaching is an uncertain business, there is
  little reason to maintain the stock as other
  poachers may get at it and youre not necessarily
  around to cull later
• Legal ivory is a cover for illegal ivory

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African Elephants -7

• How does poaching enter into this?
• On the other hand, legal trade provides a steady
  source of income for local hunters and hence an
  incentive to protect (if the discount rate is
  appropriate)
• There are also revenues for the government and
  hence an incentive to protect, as well as the
  revenues to do so

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Some Conclusions

• So, if nature yields a revenue, that revenue can
  be reaped without damage, and that revenue can be
  reaped by those who conserve nature, ecotourism
  can help conserve biodiversity
• If nature yields a revenue, that revenue can only
  be reaped with damage, and that revenue can be
  reaped by those who conserve nature, trade may
  help conserve biodiversity, but need not