Oliver Deke Institute for World Economics (IfW) Kiel

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Oliver DekeInstitute for World Economics (IfW)
Kiel

• Supply side externalities in markets for genetic
  resources

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Motivation

• Markets for genetic resources

• Genetic resources show different economic
  properties than other natural resources
• uncertain value and non-rival use of genetic
  information
• Instrument for biodiversity conservation (CBD)
• natural areas withheld for a supply of genetic
  resources
• other ecosystem services jointly provided as
  public goods.

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Motivation (2)

• Issues in genetic resources
• markets ? common property resources
• property rights
• design of (intellectual) property rights for a
  sustainable (in-situ) supply of genetic
  information
• equitable sharing of benefitsaccess and benefit
  sharing-regulation
• contribution to biodiversity conservation

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Structure of the talk
gtgtTo what extent can trade with genetic
resources induce conservation?

• Empirical evidence
• Theoretical modelling framework
• Solving for the equilibrium
• Numerical simulation
• Summary Outlook

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Empirical evidence

• market prices and traded quantities?
• anecdotal evidence on trade with genetic
  resources
• variety of arrangements yet limited data
• economic studies indirect prices gt users WTP
  for a single species or for access to habitats
• low WTP (0-20 US per ha, e.g.) gtgt small
  revenues gtgt insufficient incentives for private
  conservation!
• different properties of genetic resources and
  its usesgtgt different results (max. of 9177 US
  per ha, e.g.)
• gtgt different (at least no unambiguous)
  implications!

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Theoretical framework (1)
extent of conservation
market structure
ecological conditions
costs and revenues

• Theoretical background Simpson et al.(JPE,1996)
  SSR

Monopsony only one RD firm
Boundaries of habitats?? boundaries of land
properties Externalities among landowners
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Theoretical framework (2)

• (N) landowners parcels of identical size
• land use decision conservation ? conversion
• exogenous payoff (?) from conversion
• firms WTP for access to a conserved parcel
• value of a collection of species (SSR)
• how many species? how dispersed across conserved
  parcels?
• gt impact from externalities the more parcels
  are conserved the more species are preserved.
• gt even distribution every species in each
  conserved parcel.

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Theoretical framework (3)
exp.payoff value of x species - cost of
compensation
max.number of contracts
participation constraint
value of x species
species within a parcel
strong ecological stability
weak ecological stability
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Solving for the equilibrium
strong ecological stability

• the collection of genetic resources is completed
  before any noticeable impact results from the
  conversion in adjacent places.
• payoff-maximum for the RD firm conclude not
  more than one contract, any additional parcel
  would preserve only redundant species.
• Condition for (n1)

exp. value of a single GR gt cost of testing
share of cost of compensation
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Solving for the equilibrium (2)
weak ecological stability

• immediate ecological adjustments due to
  conversion in parcels adjacent to the contracted
  bioprospecting area.
• firm may not be able to extract all the species
  that have existed in the total area at the
  point of time when the contract was concluded
• - unless more than one landowner is
  compensated for his costs of conservation.
• equilibrium condition for an interior solution

value of a marginal conserved parcel cost of
compensation
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Solving for the equilibrium (3)
weak ecological stability - variant

• unpredictable ecological adjustments gt thresholds
  
• if not enough parcels are conserved, no species
  with promising genetic information will survive.

• conserving a marginal parcel has two effects
• more species will exist their survival will
  become more likely

• modified equilibrium condition for an interior
  solution

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Numerical simulation

• define the value of genetic information V in
  relative terms of the costs of conservation ?

• for parameter values, numbers from existing
  studies

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Summary

• market-induced extent of conservation
• impact of ecological sensitivity (in terms of
  externalities among parcels that come into
  question for bioprospecting)
• benchmark with no externalities
• modest extent of conservation due to
  non-rivalry and homogeneous parcels.
• when externalities prevail
• the higher the relative value of genetic
  information the more natural areas are allocated
  to conservation.
• when externalities and thresholds prevail
• it is optimal to conserve not all or very large
  areas.

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Outlookfuture research

• stylized ecological modeling (homogeneity)
• gtheterogeneity of parcels
• market structure - monopsony
• gtcompetitive demand competition in research
• no investment costs of conservation
• gtland use decision when sunk investment prevail
• static framework
• gtdynamic aspects firms incentives for
  long-term conservation in the presence of
  non-rivalry

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Thank you for your attention!