Biodiversity, Agriculture and Markets

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Biodiversity, Agriculture and Markets
Paul Ferraro Department of Economics Andrew
Young School of Policy Studies Georgia State
University
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How biodiversity benefits agriculture directly
and indirectly

• Ignore how agriculture affects biodiversity,
  negatively and positively.
• Ignore how important agriculture is for
  preserving biodiversity

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Caveats

• Valuation literature is in its infancy

• Opportunity costs are often poorly quantified
• Tradeoffs, environmental and economic, often
  not clearly characterized
• Little consideration of substitutes (exotic
  species, physical capital and labor)

.but its clear that biodiversity has value for
agriculture.
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Cash on the Table

• Arguments that there are pure private gains to
  protecting biodiversity imply cash on the table
  (endogenous win-win scenarios).

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Biodiversity The Bad

• Menace to Crops, Livestock and Humans

• Local opportunity costs from protected areas

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Genetic Diversity
Library of genetic resources being destroyed
Lost opportunity to improve yields, lower
variances, and adapt to changing environmental
and market conditions.
In situ vs. ex situ conservation
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Food, Fuel and Medical Security

• Source of timber and nontimber forest products

Important safety net and source of supplemental
income for low-income rural people and women
(350 million people).
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Invasive Species

• Trade and migration increases risk of
  invasive species damaging food and fiber
  production

US 97 billion in damages (1906 to 1991). Less
absolute damage in developing nations, but
potentially larger relative damages.
Is biodiversity a friend or foe of invasive
species? Experimental data suggest foe, but
naturally-occurring data suggest friend. Debate
among ecologists.
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Ecosystem Services

• Controversy over definition and valuation

Focus identifying, valuing and connecting
beneficiaries to suppliers
Services are very important for low-input systems
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Pollination

• gt 100,000 invertebrate and gt1000 vertebrate
  species serve as pollinators globally.

Habitat loss is major threat, followed by
pesticide use.
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Pollination

• US Pollinators play a significant role in the
  production of more than 150 food crops.
  Contribution of native pollinators is about 3
  billion (1-14 billion)

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Pollination

• Tropical forests can boost yield and quality of
  nearby coffee plantations (yield increase 20,
  27 fewer poor quality beans, income increase 7
  1714/ha of tropical forest)

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Pollination

• Himalaya regions (Bhutan, China, India, Nepal and
  Pakistan) switch from traditional cereal crops
  to high-value cash crops hindered by lack of
  pollinators.

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Pollination

• Organic farms native bee sufficient robust
  to diseases of imported bees.

Alabama A single bee (H. laboriosa) pollinates
75 worth of berries by visiting nearly 50,000
blueberry flowers in a year.
US Native species more likely to sonicate
flowers increase fruit set by 45 and fruit
weight by 200.
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Control agricultural pests
Predators and parasitoids
US Avoided losses by native species 4.5
billion/year (from native and exotic pests)
Vultures in India traditionally eat livestock
carcasses. Populations declined 95 from
livestock drug.
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Soil Biota (Dung burial)
Insects very efficient at decomposing
waste in livestock operations in pasture/ranges

• Enhance forage palatability
• Recycle nitrogen
• Reduce pest habitat

380 million per year to US livestock industry.
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Grasslands
Biodiversity improves average yield and lowers
yield variance
Observed in experimental and naturally-occurring
data.
But most data on biological outcomes (e.g.,
biomass) rather than economic outcomes.
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Hydrological Services

• Local water supplies (mean and variance)
  drinking water, irrigation, drought mitigation

• Science to date show connections between
  biodiversity/ecosystems and hydrological services
  are conditional rather than universal

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Other Benefits

• Rural Health (control of vector habitat)

• Storm Buffers landslides, floods.

• Biological Insurance Hypothesis more diverse ?
  more resistant and
  resilient

• Aesthetic (for local consumption and tourists)

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Capturing Benefits

• Problem Local Public Goods (often with a
  weakest-link production technology).

Solution Citizens need to (1) recognize benefits
and (2) develop institutions to coordinate human
activities.
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Capturing Benefits

• Problem Regional or Global Public Goods.

Solution Payments for Environmental Services
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Biodiversity as Asset

• Farmers throughout the world are being paid for
  supplying biodiversity and associated ecosystem
  services.

Farmers often have comparative advantage in
supplying biodiversity may be the risk-efficient
land use for such regions.
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Evaluation through Randomized Policy
Experimentssee Ferraro and Pattanayak

• (1) How do we know biodiversity has the economic
  values we believe it has?

(2) How do we know our interventions generate
these values?
USAID in unique position to contribute to science
and development by altering the way in which it
intervenes.